After a 30-year career as a business leader working for Intel and Google, I know the importance of acting as an entrepreneur within the walls of Fortune 100 technology companies. Known as intrapreneurs, these leaders invent from within the walls of an established business. Today, as the CEO of a rapidly growing medical technology startup, I am squarely in the space of entrepreneur. My experience has taught me that an entrepreneur’s probability of success hinges on three factors: The first is an idea that is disruptive, visionary, and delivers efficiency. The second element is a solid business plan that can be put to the test in the context of a business strategy. The third is gaining the capital to make your idea and business plan a success. In detail, here are the three elements that an entrepreneur needs to succeed.
The idea: Visionary, disruptive, and efficient
Visionary: The first component to a successful startup is the idea. As the founder, one needs to create a vision of the future–a future that is transformed thanks to your invention. Some say all truly great leaders are visionaries, a term that evokes thoughts of a supernatural ability to see into the future. I believe a visionary is not really a psychic, rather someone who can see the inevitable before everyone else. It is a process of connecting existing dots that foreshadow an inescapable conclusion. The dots must first be identified, then connected in a way that predicts the future outcome. With the outcome solidly in view, you must have the confidence and courage to act upon the vision while rallying your stakeholders to join you. As an entrepreneur your stakeholders include venture capitalists, industry luminaries, future employees, potential customers and more.
Disruptive: Beyond visionary, it is also important to have an idea that is disruptive, meaning it will significantly alter normal operation. The disruption of technology self-disrupts, a prime example being how the cell phone disrupted PCs. However, the disruptive nature of technology can be seen across all sectors: Tesla’s success disrupted the gas engine in the auto industry; telemedicine is disrupting healthcare, accelerated by COVID-19; and robotics has disrupted the industrial industry, the extreme example being an Amazon warehouse.
Efficient: In 1865, William Jevon, in the context of coal burning factories, declared that investments to make a resource more efficient would not reduce demand for the resource. In fact, it would do just the opposite: Improving efficiency triggers an increase in the rate of consumption of the resource. It may seem counter-intuitive, but with efficiency new usages are uncovered, new applications are invented, and the barriers of entry are lowered. This path for invention is evident in the three biggest IPOs of the 2021: Rivian, the electric pickup truck company; Coupang, an e-commerce store in South Korea; and DiDi Global, a ride sharing app in China. None is visionary or disruptive, but simply deliver proven efficiency to a new market using an existing visionary and disruptive idea.
The business model: Feasible, desirable, profitable
The second element of entrepreneurial success is a robust business plan. The path to success will be difficult to navigate without a business strategy that spans feasibility, desirability, and profitability.
Feasible: Can you move your invention from idea to product? Can you do it in time, before competitors emerge and your funds run out? Who do you need for your product to successfully enter the market, and can you convince them to join your ecosystem? Who is in your value chain, and do you know they will embrace you? What is in it for them? If they do not benefit, you should assume they will invest in blocking you.
Desirable: Is there a real market, and do you have proof the market demand exists? What gives you the confidence? What needs to be true for the market to desire your invention? If the market already exists, who are the incumbents and is your product desirable enough to replace them? How many end customers have you spoken with? The lack of direct customer feedback is a frequent gap with entrepreneurs. Entrepreneurs should not size their own market, but seek independent analysis for accuracy and credibility.
Profitable: Does the business model enable a path to profitability? How does your product cost and operational expense track with revenue? How complex is your business model? How dependent is your business model on others behaving as you believe they will behave? What will competitors do to ensure you never reach profitability? What elements do you control and what don’t you control?
Capital access: Team, invention, market
The last element required on the path to entrepreneurial success is obtaining the money needed to pursue the idea. My experience has taught me that three straightforward things are needed to gain investment: a brilliant team, a transformative invention, and a huge target market.
Team: VCs often say, “we will invest in a bad idea if the founder is brilliant.” The premise being that if the founder is brilliant, the product does not matter, because the founder will see the flaws, pivot, and find a new path to success. Successful founders keep a pulse on the industry and are quick to identify changes, connect the dots, and predict new outcomes. They also have the courage to act. To be successful, a founder cannot be so enamored with the original strategy and invention that they fail to adapt.
Invention: The second requirement for capital allocation is the invention itself. There are many questions the VCs will ask, and those questions require a thoughtful, believable, and decisive answer: Is the invention novel? Do you have intellectual property, and have you protected it? Is there a sustainable competitive differentiation? Who is your competition and why will you win? Do you have a moat that protects your idea (and hence protects their investment in you)?
Market: The third consideration is the market. The quantification of the market and its growth rate must be believable. Sizing your own TAM is hard for an investor to take seriously. Ideally, you have proof of the market and demand for your product through customer testimonial or proof of concepts. Is the market you are addressing big and growing? Is there opportunity for market expansion and for adjacent products that open new markets, new revenue streams and new customers? Does the business model provide minimal resistance to adoption, or is it just too complex?
Thomas Edison’s view on invention is: “I have not failed. I have just found 10,000 ways that will not work.” Course correction is inevitable. Rapid market changes, inherent risk, and external and internal forces all require entrepreneurs to adjust, adapt, and pivot. Success is not guaranteed, but failure is infinitely avoidable.
Diane M. Bryant is chair and CEO of NovaSignal, a medical technology and data company focused on diagnosis of brain health. Prior, she served as the COO of Google Cloud after working 32 years at Intel and rising there to group president of Intel’s Data Center Group.