Rotman: Questions Every Entrepreneur asks, answered

Question 1: “I’ve built my business, I’m making a profit, now people are telling me I have to go global. Where’s the playbook for that?”

Why go global?

Small Market: Canada’s domestic market is relatively small, so expanding internationally can enhance growth potential.

Misconceptions about “Going Global”:

Most businesses aren’t truly global; they typically operate in just a few foreign markets.

Even global brands (Facebook, LinkedIn) aren’t universally active everywhere.

No universal playbook:

  • Expansion strategies depend heavily on the product/service.
  • Standardized products (e.g., medical devices): Easier to scale globally due to uniform application.
    • Example: Hospitals globally use medical devices similarly, simplifying market entry.
  • Consumer-oriented or culturally sensitive products require a market-specific approach.
    • Example: Marketing or launching services/products needs to be adapted to local consumer preferences.

Question 2: “What does a venture capitalist do and how is that different from an angel investor? Should I just apply to Shark Tank?”

Angel Investors:

  • High-net-worth individuals, typically former/current entrepreneurs.
  • Invest due to personal interest, experience, and mentoring startups.
  • Less structured, more personal, less formal.

Venture Capitalists (VCs):

  • Institutional investors managing funds from various sources.
  • Highly structured, formalized investment process.
  • Profit-driven, require high returns.
  • May replace management to boost returns.

Shark Tank (TV Show):

  • Similar to Angel investors (high-net-worth individuals investing personal funds).
  • Beyond funding, offers publicity and marketing exposure.
  • Many businesses appear without securing funding but benefit from exposure.

Question 3: “What’s the biggest mistake new businesses face as they look to grow?”

Three common mistakes:

  1. Insufficient cash flow:
    – Growth requires significant cash; companies often underestimate necessary working capital.
     
  2. Not being selective about new customers:
    – Not all customers align with company strategy; taking unsuitable customers can distract resources and dilute focus.
     
  3. Neglecting HR/interpersonal issues:
    – Rapid growth introduces complexities (e.g., new senior hires causing internal friction).
    – Many growing companies introduce a formal HR function to manage complexity at this stage.

Question 4: “I’ve asked an AI tool to create my business plan. What could go wrong?”

  • AI-generated plans lack critical hands-on insights.
  • Entrepreneurs relying on AI miss important learning opportunities regarding customer and market interactions.
  • Over-reliance on AI might lead to misunderstanding the complexities of running a business.
  • AI should assist, not replace, entrepreneurial thinking and practical market validation.

Question 5: “What’s the biggest mistake new businesses face as they look to grow?”

There isn’t a single “biggest mistake,” but several common ones:

  • Cash flow mismanagement.
  • Not choosing appropriate customers strategically.
  • Ignoring or mismanaging human resources/interpersonal dynamics.
  • Introducing formal HR becomes critical at growth stages to handle interpersonal conflicts professionally.

Question 6: “My business isn’t profitable after 5 years—is it time to quit?”

No fixed rule on profitability timing.

  • Examples (e.g., Dropbox took 10+ years to reach profitability).

Assess:

  • Investor interest/support.
  • Personal fulfillment and motivation.
  • Long-term vision viability.
  • If lacking external investor interest, founder motivation, or personal satisfaction, reconsider continuation.

Question 7: “How do you even start a business if your passion isn’t directly business-related (e.g., watching old TV shows like Friends)?”

  • Starting a business demands substantial work beyond passion alone.
  • While passion helps sustain effort, businesses often emerge from solving real-world problems or market opportunities.
  • Passion in leisure activities doesn’t automatically translate into a successful business unless paired with market demand or viable monetization strategies.

Question 8: “Do you need to be in Silicon Valley to succeed?”

  • Silicon Valley advantages include deep digital-tech expertise and strong networks.
  • Successful businesses emerge globally; Silicon Valley isn’t mandatory.
  • Key factors in location choice:
    • Personal network strength.
    • Proximity to target customers.
    • Availability of skilled talent.
  • Toronto, for instance, offers talent, growth opportunities, and lower competition than Silicon Valley.

Question 9: “Can anyone be an entrepreneur, or is it personality-dependent?”

  • No single “entrepreneurial personality” required.
  • Successful entrepreneurs share traits that apply broadly:
    • Persistence.
    • Strong work ethic.
    • Resourcefulness.
    • Effective interpersonal skills.
  • Traits common to entrepreneurs—discipline, resilience, creativity—are also valuable across professions.

Summary of Key Insights:

  • Global Expansion: Tailor your approach; no universal playbook exists.
  • Investors: Angels are less structured/personal, VCs formal/profit-driven, Shark Tank primarily visibility and angel-style funding.
  • Growth Mistakes: Cash flow, selective customer acquisition, HR management are crucial growth-stage concerns.
  • AI in Entrepreneurship: Use cautiously as a tool, not as a substitute for market learning and strategic thinking.
  • Profitability Timeline: Evaluate beyond a rigid timeline; profitability can take longer.
  • Starting a Business: Passion is beneficial but insufficient alone; practicality and market opportunities matter more.
  • Location: Not limited to Silicon Valley; choose based on talent, customers, and network.
  • Entrepreneurial Traits: Successful entrepreneurship depends more on consistent behaviors than personality types.

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