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Monday, May 23, 2011

Ten reasons to start a company; ten reasons not to

from Megan Lisa Jones





LinkedIn valued at over $8 billion; Facebook at over $70 billion and star of a movie. Start up conferences and competitions. Rich valuations and venture capitalists throwing money at early stage companies. So not 2009. And, as Iíve argued before, not 1999.

Are we seeing a bubble? Sure, we probably are. But that doesnít mean that itís either a good or bad time to start a company.

I have my biases. When funding is scarce and hope for innovation low engineers are cheaper and available. The alternative career paths arenít as bright. Smart people are willing to create opportunity because the downside is so low.

Now, with start ups hot again Iím hearing about bidding warsÖfor engineers and tenuous or incomplete business plans. So much money is going into social networking and other Internet or wireless consumer options but the more capital rich (technology rich; and excluding clean tech) start ups are seeing tighter money.

Ignore it all. Thatís my advice. Great companies will always be great companies. If you arenít aiming to start a great company why take the risk of starting your on. Itís rarely easy. And, marginal companies will benefit more from a boom than will great companies (but it wonít be enough for them to prosper though they may stumble along). Google wasnít a boom time baby and they are doing just fine; ditto Facebook.

Some argue that the Web 2.0 companies were born out of the NASDAQ crash of 1999 and 2000. Smart, ambitious, talented and creative people found themselves unemployed and in a bad economy. So they started companies.

But some absolutes do exist. So, below, Iíve listed my top ten reasons to start a company and top ten reasons not to start one.

Ten reasons to start

1. You have an idea that fits the basic criteria: large and growing market; something proprietary; clear way to monetize; partners that compliment your skills; and an industry with long term potential ($1 billion plus if you want to raise venture money).

2. You can both handle and afford risk: financially, personally and professionally.

3. You can live with uncertainty and long hours.

4. You like the industry and area/service/product youíll be pitching.

5. And you have a passion for it.

6. You need a job. (better to create something of value than job hunt).

7. You bring concrete skills or connections to building the business. Youíve done your homework researching the industry, competitors, competing industries, product, market and anything else you can imagine.

8. Others, whose business judgment you respect, have validated your idea.

9. A hobby is already in the process of developing into a business.

10. You want to build a great company and are willing to make sacrifices to do it.

Ten reasons not to start

1. An idea you have seems to make sense; but you havenít researched it fully.

2. Every one else seems to be doing it and making a lot of money.

3. You want Mark Zuckerbergís life and heís just a kid.

4. You want to make a lot of money. Fast.

5. Youíve discovered the next category killer idea (why does this one never seem to work out).

6. You need a job. (And donít know what else to do).

7. If not now, never. Your career has stalled.

8. You hate your boss, industry, company or spouse.

9. You want an easier or more flexible schedule.

10. You want the prestige associated with being a founder.

The basic consistency of the above points is that start ups are never easy. Assess why youíre doing it and what advantages you bring to the table. If they measure up, take the associated risks and build something great. Anything less may not be worth the work and stress involved.

Megan Lisa Jones is an investment banker who works primarily with companies in the digital media, technology, gaming and other emerging industries. Her experience includes time with Lazard Freres, Needham & Company and Merrill Lynch. Her investment banking blog is at www.ibla.us; and she released a novel, Captive, in late 2010 (www.meganlisajones.com). This was also published on her blog.


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