Ages ago I told readers they were welcome to submit questions. I get a couple of questions a week and usually work them into posts. One that caught my attention this week and hit home was whether it’s best as an entrepreneur to:
1- launch a project while at your existing job to minimize risk
2- launch with outside financing from the get-go, even from existing colleagues.
3- launch ASAP with no outside financing
I won’t get into the details of the person’s situation, but this was a reader who works at a large enough company with interests in various niches of online media. She’s saved enough money to be able to go a couple of months without salary and develop her idea.
So, here goes:
Option 1 seems least risky but in fact is extremely risky because even if you work on your own time, your employer can come back and accuse you of stealing company data or working on company time. This might be a moot concern if your idea has nothing to do with your employer but many new media firms do operate in various spheres so be careful.
While it seems less risky, it is in fact the riskiest thing you can do. When I was at my old job, I developed a search engine, which was really not at all competitive to my employer’s operations. I even talked about it quite openly to ensure no one thought I was hiding, the company knew about it (they also monitored employees’ every move) so that was not an issue.
When I launched WatchMojo.com, I did so after I left because like my old company it was content, too. Of course, even a drunk donkey would tell you that a video site with content for both genders is not the same as a men’s T&A magazine publishing text content… but I digress, the point is, companies and senior management are extremely greedy and reckless in their territoriality (even though when the shoe’s on the other foot they’ll turn a blind eye).
So generally speaking, while 1 seems like a safe thing to do, I don’t advise it, at all. Financially it’s challenging, but who said entrepreneurship was easy.
Option 2 seems like a smart strategy too, but you should always leave a company without burning bridges. Analogously, you should avoid thorny situations. When you start a company, failure is not an option (to you) but not succeeding is always a likelihood. So imagine if - god forbid - you wanted to return. What then? If you accepted money from colleagues or supervisors and your idea flopped, that’s not an enviable situation.
Of course, if people want to back you, you should not turn them down too long either… my recommendation is to simply bide your time and tell others you’re getting your house in order and will follow up shortly. It’s always easier to negotiate when you have an existing product or property. Not only will you have an easier time showcasing your vision but you’ll strike a more favorable deal with investors. It’s also common sense, if someone is willing to invest in you today, they’ll probably invest tomorrow, the week after or the money after that, too.
Sure, they might forget about you in 3 to 6 months, but even then, there doesn’t seem to be a shortage of money, just ideas, smart entrepreneurs and hard working employees. So if you can, I suggest, go for route 3:
Option 3 is definitely not easy but if you can hold out for a few months, you should. You get more leverage and don’t waste time convincing people. It also depends what you are doing, after all. If you need $1M to build a beta, you might not have this luxury, but even if you can get a working prototype on the cheap, do it. Another variable, of course, is what you are doing. In my case, I’m a media guy first and foremost. I use technology because it changes media. VCs are largely IT guys looking to win in a media and advertising space so it makes pitching to VCs somewhat unique… but the point is, the further an investor is to your project, the harder time they’ll have understanding what you do, why you do it, and how they can make money off of it.
All in all, I’m not sure if option 3 works for everyone, but with cheap hardware, open source software and lots of options to raise minimal funds, it just might be the best way to scale your vision.
Oh, one more thing, you can build up the most impressive contact list in the history of business, but once you leave your job understand your old contacts might not put much stock in you, sans company letterhead.
More question? email me at ash@mojosupreme.com.
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WatchMojo NewsletterI wonder what the kamikaze bloggers have to say about this: the USAToday.com’s traffic fell by anywhere from 10 to 40% after it took a turn towards, well, whatever the turn was about.
As I was saying, I wonder what the people I respect and read, mind you, but people who seem hellbent on thinking that all newspapers need is a dash of citizen-this and user-generated-that would say to that.
Newspapers have bigger macro issues, it’s not by opening up the USAToday.com and making it into a faux MySpace that traffic or revenue will pick up.
When I pick up an actual newspaper, the last thing I want is UGCrap.
If you combine data on which categories get the most advertising dollars across how ad dollars are allocated by segment, you get the following, top table is as broken down by percentage, bottom table is US allocation, in Millions of Dollars.
Admittedly, the assumption that ad dollars are spent proportionally by categories across types is wrong, but still… with such large numbers and sample size, I’m not even sure of that…
Say what you want about Henry Blodget, but the man can identify facts and figures and tell a good story,
US advertising revenue at 4 big online media companies–Google (GOOG), Yahoo (YHOO), AOL (TWX), and MSN (MSFT)–grew by $1.3 billion in Q2, or 42%.
US advertising revenue at 15 big television, newspaper, magazine, radio, and outdoor companies (Time Warner, Viacom, CBS, etc.) shrank by $280 million in Q2, or 3%.
Put differently, U.S. advertising revenue at all 19 companies increased 8% year over year in Q2, to $13.8 billion ($55 billion annualized). The online portion of this pie grew from $3 billion to $4.2 billion (23% share to 30% share). The offline portion, meanwhile, shrank from $9.9 billion to $9.6 billion (77% share to 70% share). The online companies, in other words, picked up 7 percentage points of market share in a single year.
Other fun facts:
Within our company set, the only traditional media business that grew U.S. advertising year-over-year in Q2 was Outdoor (up 13%). Meanwhile:
Read more here.
