I’ve always wanted to start companies and build businesses. But as someone that lives in Silicon Valley, the only path I really took seriously for starting a business was to raise money, build a product, and scale, scale, scale.
One of the biggest lessons I learned as a tech entrepreneur who has founded and sold more than one company is that not every business, not every entrepreneur should build a venture backed company.
I know for a fact my next company is going to be venture backed… but…
In this episode, I’m going to talk about as an Entrepreneur, the three different kinds of businesses you can build, and how to pick the right one for YOUR entrepreneurship journey.
Picking the Right Idea
In my last episode about starting companies, one of the key things I asked you to think about when figuring out the idea for your business was to choose how much you want your business to generate. Do you want it to generate $10kmonth, $100kmonth, $1m/month, $1b?
Businesses exist and come in all shapes and sizes. Outside of Silicon Valley, there are wildly profitable software companies that exist and they never took a drop of funding.
There are businesses that churn out double digit growth and then there are businesses that grow exponentially and IPO in 7 years.
The 3 Types of Businesses I Love
So as you think about your entrepreneurial journey, I want you to think about three different kinds of businesses and the right one for you.
- E-Commerce leveraging Amazon, Facebook and other networks
- SaaS organic growth
- SaaS hyper growth
How to Pick the Right Type of Business
If you’re an entrepreneur and you don’t have a TON of deep tech knowledge, building E-commerce businesses are a great way to get in. They’re great because there are a ton of tools available out there, there are white-labelled products you can re-sell, digital goods that you can easily create with some help, and then it becomes a game of solving a unique need in the market. I know a ton of entrepreneurs that make millions a year purely focused on e-commerce, digital goods and services.
Often times, these get dubbed as a lifestyle business in Silicon Valley, and I think people are being silly when they do that. Some of the e-commerce entrepreneurs I know often lead better and more fulfilling lives than their venture backed “non-lifestyle” business counterparts.
The next two type of businesses I love are SaaS businesses. Usually these are software businesses that are sold as products with some services and that have really high margins and solve a unique problem in the market.
How Big of a Business Can It Be?
When it comes to software businesses, I always ask entrepreneurs two things:
- How much money is being spent yearly in this problem space right now?
- How much of that do you want to own?
If #1 and #2 lead a massive multi-billion number, and I can see how they can get there, then you’ve got a hyper scale SaaS idea in your hands.
If #1 is not that big and pretty niche, and #2 is a high number, then you’ve got a seriously awesome organic growth business number in your hands.
And if the market is not that big, and you don’t want to own much of it, you might just have a bad idea in your hands and a big slog ahead.
Building a hyper scale SaaS business is the Silicon Valley dream. But it’s not the only way to entrepreneurship and massive wealth creation.
Just like how I know tons of entrepreneurs who are making millions on E-Commerce, I also know entrepreneurs that are running boutique SaaS businesses with a globally distributed team, very little funding and just printing money.
In Conclusion
So as you figure out your idea, as you figure out the type of business you want to build, think through these three options.
On the next episode, I’ll be talking more about bootstrapping vs fundraising and some more factors to think about for your business.