Placeholder Image

Subtitles section Play video

  • Not all businesses are created equal.

  • The guys that started Airbnb, or the guys that started Slack- set out to build a multi-billion

  • dollar company that would IPO or get acquired for an insane amount of money.

  • Those are the entrepreneurs that we (mostly) hear about, and that we look up to, and that's

  • fine.

  • Who doesn't want to build a business that transforms the world?

  • But the story of how they built their businesses doesn't necessarily apply to everyone.

  • Not all businesses are Amazons.

  • Not all businesses are Facebooks or Twitters.

  • While these companies started in garages and dorm rooms, they were able to raise multiple

  • rounds of venture capital (mostly from Silicon Valley investors) and were able to fuel their

  • exponential growth because they were tackling an insane marketing opportunity- with a new,

  • nonexistent or highly innovative approach.

  • The problem we often see is that many small businesses try to follow the exponential-growth-VC-funded

  • approach, simply because it's the stuff that we hear about, and we assume 'that's the way

  • things work.'

  • It's not.

  • I like to draw a line here- between the blockbuster, unicorn- Silicon Valley-type of startup, and

  • the smaller startup, the company that could become a $10-20 or even $50 million company. But not a $1 billion unicorn.

  • There are different rules for each one of them: from fundraising, type of investors,

  • recruiting team, and co-founders...

  • Terminology is confusing here.

  • They are both startups.

  • They are both small businesses, at some point- but I'm just going to call these group startups,

  • and these group small businesses- and get on with the video.

  • So this is starting a small business vs. starting a startup.

  • We are dealing with this reality check today.

  • We started Slidebean as the 'startup' kind of company.

  • If you don't know us, we are an AI-powered presentation platform.

  • We built an algorithm that turns this bunch of images and text, into this fully designed slide.

  • Back in 2014, we felt the presentation market was up for the taking.

  • We thought we had what it took to take PowerPoint down: aspiring to 500,000,000 PowerPoint users

  • worldwide.

  • It's not that simple.

  • We saw a lot of similar companies, with excellent and smart founders, fail at this attempt of

  • being the next PowerPoint.

  • We have a cool product, an incredible follower base- over 400,000 people watch or read our

  • content every month- but we are by no means that company we set out to build- which can

  • make you feel like you failed as a founder.

  • On the other hand, we've generated millions of dollars in revenue, out of a company that

  • three guys started in good old San Jose, Costa Rica, and by a lot of measures that is a fantastic

  • achievement.

  • The message I am trying to bring here is- we should be more aware of the companies we

  • are starting, and understand the paths we can take to get them to where we want them

  • to be.

  • By the way, a small but influential group of entrepreneurs have started talking about

  • the success stories of 'small businesses' in the tech space, to shed some light on the

  • entrepreneurs that don't make headlines but have been able to build multi-million dollar

  • companies that employ dozens and sometimes hundreds of people.

  • You should look into the Startup Therapy Podcast and the Baremetrics blog.

  • Big fan of both of them.

  • Here are some characteristics that can help you determine the type of business you are

  • creating:

  • Some examples- Are you providing a service that requires

  • humans, meaning, employees on payroll?

  • Then you are probably on this side because you will need to scale your staff to scale

  • your revenue, and that usually leads to thinner margins and slower growth.

  • The startup category of business is usually software or tech-related.

  • That means that once the software is built, millions of people can use it without requiring

  • a proportional amount of employees.

  • If you are replacing an existing manual process with tech, then you might be on your way to

  • the unicorn type of business- but you need to be aware how much money can be made with

  • this, which will dictate your business size.

  • Investors putting money on the startup kind of business, at the earliest stage, expect

  • a 10x return of their investment.

  • That is if you raise $500,000 at a $5MM valuation which represents 10% of the company, in exchange for those $500K

  • they will expect your business to be worth $50MM within 5-7 years.

  • It doesn't need to be $50MM in sales, but someone must value it at $50MM, either a new

  • round of investors or a potential buyer.

  • If that metric is not met, then the investors are not getting the money they expected out of this investment.

  • That's another difference; these investors expect you to sell the business, liquidate

  • assets so that they can get their money back quickly.

  • They'll prefer that to the alternative: collect a percentage of your dividends over years

  • or decades.

  • Doing an IPO, or initial public offering- which means listing the business on a stock

  • exchange is another way for investors to get their money back- but IPOs are reserved mostly

  • for large, $100M+ companies.

  • It's critical that you understand your own business category so that you don't waste

  • time approaching the wrong type of investor.

  • If you are starting a development services company, or a growth marketing consulting

  • firm, for example, you should not waste time looking for startup-type investors.

  • Again using the term 'startup' as I defined it earlier on.

  • In those cases, you probably want an executive type of co-founder, that brings the capital

  • and the client network for say, 50% of the company.

  • You are equal partners; you provide the talent and manage operations.

  • That relationship is totally doable.

  • You may also look for friends and family funding.

  • It might be possible to raise $100,000 from people that you know, and that believe in

  • you- but defining the right business size will set the right expectations as to the

  • risks and potential rewards of their investments.

  • What you definitely don't want, is raising a multi-million dollar seed round only to

  • find you couldn't scale as fast as you expected.

  • On one end, you might have a smaller-than-expected business that employs a few people and generates

  • some profits and could continue to operate happily, but on the other hand, you have a

  • group of unsatisfied investors pressuring you to grow more.

  • Whatever route you choose, make sure is something you love doing.

  • You'll be doing it day and night for years- and it will become a significant part of your

  • life and your professional career.

  • Chances are, if you succeed, you'll be associated with the company you built forever, in one

  • way or another.

  • Alright, so as always, if you want to take our product for a spin- you may sign up with

  • the link below.

  • The first 25 people to sign up will get a free 3-month period on the platform.

  • Also- if you become a Slidebean subscriber or if you already are one, I have free office

  • hours available for our users, so just ping our team and they'll provide you with access

  • to my calendar.

  • Thanks a lot for watching- see you next week.

Not all businesses are created equal.

Subtitles and vocabulary

Click the word to look it up Click the word to find further inforamtion about it