The “Pitfalls” on the Road of Early-Stage Entrepreneurship

Early Stage Entrepreneurship is a Process Of Continuous Trial and Error

Nowadays, entrepreneurship has been excessively mystified by many people, who believe that it’s a shortcut to “becoming CEO, marrying a belle with good education and a steady income, and arriving at the peak of life”. However, entrepreneurship is full of various pitfalls and it’s a process of continuous trial and error. In our daily meeting with the entrepreneurs, we have witnessed the continuous effort of many early-stage entrepreneurs and we have summarized some pitfalls that startup companies are easily susceptible to. We hope to share our experience with more entrepreneurs so that early-stage entrepreneurs can avoid mistakes at the strategy level and go farther and farther on the road of entrepreneurship.

Staying focused is extremely important and the trade-off is essential.

I have had contact with more than one start-up companies, which do A business and add B business. At the same time, they think they also do C business. The CEOs usually believe that given the logic and correlation among several businesses, the simultaneous operation of several businesses is feasible. However, when they engage in the businesses, they will find that the companies focus on many different businesses can hardly develop a large user base, and can hardly do all the businesses well. Therefore, it’s essential to prioritize the businesses by means of step-after-step verification. It should also be evaluated according to the resources and capacity of the company. Branching out into different fields at the same time may disperse the resources of the company and cause many management problems. The result is that the company plans to do everything, but cannot do anything well;

As to the problem of trade-off, let’s have a look at the trade-off between A business and B Business. There are not many competitors in A business, but the market size is not that exciting. In B Business, there is an imaginably tremendous market. However, the winner will take all. If the company cannot become No. 1 or No. 2, it will die. The competition is extremely fierce. Under such circumstances, the entrepreneur should honestly evaluate the capacity of himself and his team to see whether the capability of the team is sufficiently outstanding and whether the product development capability, user-obtaining capability, operation capability and financing capability are strong enough. A company can survive and operate well only by doing things that it’s good at. In fact, if B business is well operated, it still has the value of being acquired. True, it’s not worthwhile for the entrepreneurs to have too ambitious goals;

Recently, a friend in VC community told me he would start a business and he selected a less conspicuous niche market from the standpoint of VC investment. I was somewhat curious that with his insight he could have failed to see the areas with the greatest investment potential. According to his explanation, it’s pointless to choose an area with the greatest investment potential. Although the team members are extremely outstanding, an opportunity that best matches the resources of the team and an opportunity of quick trial and error as well as steeling and tempering are required. The areas with the greatest investment potential require rich experience of entrepreneurship, huge quantity of resources, and cumulative connections. So they decide to begin with this project. If it’s well operated, it can be sold. If not, they can try other opportunities. It’s important that the team can gain valuable experience and capacities through it. If entrepreneurship is done for several times consecutively, sufficiently rich experience and resources will be accumulated. Under such circumstances, the probability of success in selecting an area with the greatest investment potential will be higher;

Simply for the sake of publicity? Do not be too naïve.

Today, all the people are talking about Internet thinking and everything has been moved online. Many industries are involved in the price war in the hope that the products can be sold without charges or at low prices. But it does not pay off if charging no money or giving the customer subsidy is simply for the sake of publicity.

First, you must see whether the users have a persistent and robust demand for your products. Some demand is of very low frequency. What is the significance of subsidizing such a demand? Subsidies may give the users a positive experience in high-frequency and strong demand, and the users will come back to you for similar need. You also need to see whether you have competitive edge in the competition arena. Otherwise, the users will take the subsidies and go away. What you’re doing amounts to charity and giving away money. This problem must be analyzed from the several dimensions of the consumers’ decision. The free model possibly begins with 360. The users of 360 basically seldom leave the product. It has established barriers of competition;

In addition, the subsidies should be dispensed when your products have upgraded the user experience of the consumers. If the solved product problems are not that pertinent, or among the numerous competitors your products are not good enough, your products are too much homogenized or are of low frequency in use, and if the number of users is small, and it’s not possible to earn much money now and in the future, what is the use of subsidies? Sometimes the demand is a false demand. Without subsidies, the customers would rather run a mile than use your product.

The entrepreneur community is in a fickle state. Both valuation and investment opportunities with the greatest return are not that important. Honestly ask yourself: as an entrepreneur, what do you hope to achieve in your life? If you strive only for the sake of wealth and enjoyment after making money, you cannot go too far. Once an entrepreneur who has impressive overseas educational background asked me: what should I do in my entrepreneurship? I could only give him a helpless smile.

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