Sunday, December 14, 2008

The Theory of OOMAAT - One Order of Magnitude at a time


        Every day, entrepreneurs dream that they can create the next
        big company. They have a dream of putting the right project
        together which will grow to be the next Google, Facebook or
        Myspace.  And every day, many potential entrepreneurs work
        hard on their project, but make less progress than they need
        to succeed.

        Let's go run a marathon tomorrow! For most of us, running a
        marathon would take preparation and planning. Not doing
        that preparation only leads to pain and trouble. Potentially
        serious trouble.

        In the same way, starting a new company can be like running a
        marathon. A successful company is a complicated coordination
        of many different components. The creation of a winning team
        is something that takes some skill and experience. Most
        investors want to fund teams with a full compliment of
        experience. Most business don't get big without external
        funding. So for you to engage external funding, you need to
        have experience. How do you get experience getting funded, if
        you have not been funded before?


        As many technologists, marketing and finance people are being
        given an opportunity to leave big companies and find something
        else to do, some are thinking that they will do a startup.
        Because they come from a big company context, they jump right
        back into that context not realizing that at a small company,
        you don't have teams of other people to rely on. You get to do
        everything.

        Rather than jumping into the next $1B opportunity of our
        dreams with one big bite, let's explore the question of how we
        can take small pieces of the process and build the skills
        incrementally.

        I am calling this idea OOMAAT: One Order of
        Magnitude At A Time.  Instead of trying to create a huge
        company when you have $100 in your pocket, look at an effort
        that will allow you to grow that $100 to $1000 in, say, 30
        days. What would you need to do in order to accomplish this?

        By thinking out how to start smaller companies that are
        bite-sized efforts, you gain several advantages. First, you
        reduce the risk of failure. By starting many small companies
        with smaller amounts of effort, you waste less time and
        resources on your failed companies and the experience you gain
        will be very helpful to you on the next business. If you
        structure your efforts in the same area, the clients that you
        gather for one business will be interested in the next
        business. Thirdly, the efforts to start the smaller businesses
        will give you more ability to connect with others who are
        starting businesses and help you see the potential partners
        you will need for your next business.

        So... How much money can you put on the table today that you
        can afford to loose in order to start a business? Cut it in a
        third as a way to keep your powder dry. Now, Given that amount of
        money, what could you do in a fixed amount of time to increase
        it:

                   Amount                 Time             Target
              $100                      1 month                 $1K
              $1K                       3 months               $10K
              $10K                      6 months              $100K
              $50K                      1 year                  $500K
              $100K                     1.5 years               $1M
              $500K                     3 years                 $5M
              $1M                        2 years                 $10M
              $5M                        5 years                 $50M

        In this Blog, I will explore a collection of ideas
        to create OOMAAT-style startups. We will look at:
   characteristics of investors,
   skills that make a difference to the success of entrepreneurs, and
   experiments in trying to build businesses in the OOMAAT Model.

        Come join the experiments and let me know how things fare for you.


   

1 comment:

tixrus said...

Hey am I the first commenter! Finally some intelligent blogging about starting a business. FYI it seems to have a little bit of formatting problem.