With the cost of starting a web business dropping to almost zero until you start to incorporate the barrier to entry into the market is very low. However, the barrier to success increases exponentially as market competition heats up. The key success factor to succeeding in a highly competitive market place IMHO is people and in the case of a start-up the founders. Therefore if the founders are the key to success then what attributes should they have? Is business acumen a requirement?
Ben Yoskovitz makes some great points about “The death of the business founder”. The premise is that in the early stages all you need to succeed is technical talent. There is merit to this argument and in the earliest stages of formation this is probably valid. However, as you progress from MVP to customer development the need for business and marketing skill increases dramatically. In the first year of a start-up the technical requirement likely exceeds the business requirement, but after MVP the need for business acumen becomes the key success factor.
One of my favourite essays is Paul Graham’s “How to be silicon valley”. This quote is from early in the essay:
“I think you only need two kinds of people to create a technology hub: rich people and nerds”
This is in reference to what made Silicon Valley such a great technology hub and hive of successful start-up activity. At face value one could imply that all you really need then is “nerds and money” to be successful. This tends to validate the point that Ben made above. However, the money Paul Graham is referring to is “smart” and “active” money. The money in fact comes complete with business acumen, connections and is usually an active participant in the process or the third founder. Here is another quote:
“Startup investors are a distinct type of rich people. They tend to have a lot of experience themselves in the technology business. This (a) helps them pick the right startups, and (b) means they can supply advice and connections as well as money. And the fact that they have a personal stake in the outcome makes them really pay attention.”
Dharmesh Shah recently wrote a great article at On-Startup titled “The Magical Founding Team Mix For Web Startups”. This is perhaps the closest to my original hypothesis that you need both technical and business acumen for a successful web start-up. Dharmesh list 4 key roles in the start-up; Developer, Designer UX / UI, Inbound Marketing and Sales. When you look at the roles and descriptions there are two business and two technical roles on the dream team. In most start-ups the founders where many hats and in a two person start-up the business founder (inbound marketing and sales) the technical founder (Designer and Developer) and each founder would have two hats.
IMHO business acumen is an essential skill set for at least one of the founders in a start-up. I guess the question you need to ask yourself is “are you building a web app or a web business”. If you want to sell $2.99 apps on the web then two technical founders will work just fine. If you want to build a web business then business skills are required whether as a business founder or active, smart hands on money with business acumen. Since most start-ups I know are bootstrapping or self funding the business founder is a must have.
- Ian Graham