We asked Bauer he if would elaborate on the details of what happened, maybe share some insights and lessons learned with the pure candor that he’s known for. Following is the third segment [part 1 & part 2] of our interview as part of the Entrepreneur 2 Entrepreneur series:
What advice do you have for tech other entrepreneurs pursuing big and risky things?
Before I can answer that, I need to say something that isn’t said nearly enough. Chances are very good if you’re an entrepreneur seeking investment you’re not pursuing something big and risky enough to justify investment. What you’re calling a startup is really just a new business – the modern day equivalent of a 1950s local grocery store, barbershop or car dealership. I’m not knocking your pursuit. I just want to bring some clarity to the situation and hopefully convince you to go bigger – much bigger. Build what you’re thinking of currently after you’ve failed going bigger a few times. Or maybe don’t because you’ve made it with your bigger idea.
So here is my advice depending on your category of startup. Remember, don’t bullshit yourself on what category you’re in (see previous answer).
If you’re building the modern day equivalent of a 1950s local grocery store, barbershop or car dealership:
Good for you. Get the thing built as quickly and cheaply as possible, start charging right away, get profitable and don’t look back. This business development process has been proven to work over and over again. Don’t feel bad you didn’t make it on the front page of Hacker News or ring the bell at the NYSE. That shit is all external praise and building a business like this is about internal satisfaction. If you need some money to get started, try friends and family. If you take angel money, keep it small and try to do it as a note/loan to be repaid.
If you’re building the modern day equivalent of a 1950s local grocery store, barbershop or car dealership but only to cash out:
Move to Silicon Valley and roll the dice. I am sort of knocking on Silicon Valley here but the reality is you can’t recreate what’s there here. We have a different game here in MN with different rules. I use to bitch about MN investors all the time because they didn’t do things like Silicon Valley investors. Now I bitch about entrepreneurs who use to bitch like me and MN investors that try to be like Silicon Valley investors. I think that’s an improvement. The reality is, there are investment problems in MN on both the investor and entrepreneur sides. That said, the investors have done their job in that they’re funds are full. I don’t believe entrepreneurs have delivered on the ideas suitable for MN investment.
If what you want to build will either change the world or just blow up in your face taking out many people around you:
What you need is a great team. Don’t worry about getting a prototype done or where you’re going to get funding right away. Just take your idea and get a great team around it. This is a big idea right? So you’ll need a larger team of diverse skill sets. You’ll need a CEO (maybe that’s you, maybe not), CFO, lead engineer, head of sales, lead designer and someone with rich domain knowledge. This will take sometime to find the right people so don’t feel bad if it takes many and many months. What you need from these people is just a commitment to help you put together a prototype and if funding comes through, to join up. I assure you many a talented and bored person is at 3M, Cargill, Boston, Medtronic, Olson, etc just dreaming of working on something that means something. Go find them. Getting the team together will get you an investor meeting.
Having the prototype will materialize your vision in a form the investor to see. Your prototype will need to be stellar as you’re going to be asking for a lot of money make this startup go. You don’t want something that’s going to make an investor start to ask questions about your execution ability. It doesn’t need to be feature complete but the key features need to be completed perfectly. Spend the time and money to build a great prototype. You don’t get investor meeting redo’s.
The final big piece you need is the research and numbers to meet the investors due diligence. Don’t skimp here. It can take months to put this together. Your business model is based on a number of assumptions. Call those out and build out reports that let investors play with those assumptions. A big and risky idea has a lot of moving parts and there are revenues/costs for each part. Make sure to show them. You have to show you know everything about the market and how to execute here.
What’s next for Matt Bauer?
I’m going to build a flying car for Peter Thiel. I’m already recruiting the team and I expect it to take some time to get the prototype done.
While that’s incubating I’m doing consulting in areas related to hardware and software. If you’re interested in my help, please contact me. I also plan to do some teaching on the business, management and engineering of hardware and software. There aren’t enough people out there that can do all the mechanical, electrical and software engineering themselves. Let a lone the business and sales stuff. I’d like to change that.