First mover curse (and other pitfalls) for fresh entrepreneurs

With the startup environment getting more attention in recent years, Momentum Works sees more hackathons or startup bootcamps sprouting up across the region. Some are run by big corporates themselves, others by universities and organisations.

Usually, it’s a 48 (or 36, or 72) hour programme where individuals from all walks of life (students, entrepreneurs corporate workers with a startup itch) are given the tools and guidance to turn an idea into a pitch or a prototype product.

This product is then presented to a panel of judges from the entrepreneurial ecosystem – and go through a “shark tank” like interrogation to see if their product plan will make it in the real world.

The folks at Momentum Works have been judges to a few of these programmes. It is always interesting to hear the new ideas that people are passionate about – and even more interesting the justifications on why their idea will lead to the next unicorn!

Coming from a team that has seen a lot of companies boom and bust – we will always be keen to hear the idea, but will also want to understand more about the management team, the business plan as well as the implementation plan.

Below are some of the pitfalls that we usually remind wide-eyed entrepreneurs to be aware of:

1. Being first in the market

Introduce a new idea to the market is novel, but the danger is that a lot of time and effort will be spent to to educate the public.

If the barrier of entry is low, a competitor can swoop in to leverage on the hard work that you have done.

An example is Foodpanda – the first major mobile food delivery marketplace in the region. The company had to spend a lot of time, effort and cost educating F&B owners why it made sense to pay a commission for food delivery services. In addition to that, it had to also train the cashiers and the kitchen staff to use a system which was at that time quite alien.

Once the F&B owners were used to the idea (as well as the system), Deliveroo and Uber Eats (now known as GrabFood) came in and ate into Foodpanda market share.

The valuation proposition is: “Now you know how to work with delivery platforms, do you want another choice to make more money?”

As simple as that.

2. Just solving the “tip of iceberg” problems

We hear so many wannabe entrepreneurs coming up to us with ideas such as resolving the manpower issues for education/ running errands etc , introducing “new” customer reward systems, or marketplaces for “unique” merchandises.

We usually ask “why is there such a problem?”

The answers usually reveal more underlying problems – but their product is intended to only address the tip of the iceberg. These business plans will usually not withstand the scrutiny of investors because these are just like sticking a band-aid on a big gaping wound.

Moreover, competitors can easily find a loophole to steal your ‘advantage’. To be sustainable, we think one needs to go deep, understand the process and ecosystem, and find out the root causes of the problem and find a way to solve those.

Products that succeed are usually the ones really solving fundamental problems.

3. Boxing your ideas in

Whilst the phrase “think out of the box” is now officially a cliche – many wannabe entrepreneurs are still developing a solution within the box.

They limit the potential of their products to perceived rules set by the society and what they currently see.

One classic example is in the ride-hailing industry. Back in 2012 a few companies were considering launching motorbike-hailing services (instead of car-hailing) in Jakarta. This is because if you have been to Jakarta – you will know how bad the traffic is there.

Most of the big ride-hailing companies then rejected the idea because the financials pointed to a loss making business.

Only Go-Jek went ahead with the motorbike hailing plan in 2015, because it could see the potential that the drivers could bring. Today, Go-Jek has more than 400k drivers in Jakarta. They not only ferry customers around the city, but also help customers run errands, deliver food, parcels and also deposit money.

Grab and Uber later realised they were missing a big opportunity right under their nose and started catching up. But at least if you look at the current market share, Go-Jek is far ahead.

4. Neglecting the implementation

Not having a strong team or a robust enough implementation plan is a big red flag in our books. We have seen so many great ideas fail because the founders did not have the resources or the willpower to follow through.

Momentum Works’ mantra is “ideas are great but strong implementation is the key to success.” In the startup world, you never know whether an idea or a plan will work. All founders have to test and (fast) iterate.

If the implementation is strong, the founders can know that it was the idea that needs fixing and can iterate. If the implementation team is weak, the founder will not know whether it was the idea or the execution that needs fixing – and this can be the downfall of the company.

5. Giving up before you have exhausted ALL your avenues

In these startup bootcamps, there will be only one winner. For the rest of the participants – does that mean that they should go back to the corporate world?

Momentum Works says Hold on (if you can)!

We feel that a bootcamp is akin to one VC pitch. Founders – no matter whether they won or not – should reassess the judges comments, the questions asked and whether they want to refine their ideas, their strategies, their positioning or their presentation. Remember, many many startups have to go through dozen of pitches before they land their first investment (Momentum Works included).

Finally – as we usually like to remind any founders – investors come in all shapes and shades, with different risk appetite, passion and mission in life.

Just because one investor did not buy into an idea, it does not mean your idea is doomed and nobody else will bet on it.

Good luck!