The Unfair Advantage Book Note

Good news for those who think they don't have the advantages it needs to be an entrepreneur.

Success in the startup world is not simply awarded to the hardest workers. It is awarded to those who develop and use their Unfair Advantages.

To get that momentum, growth and subsequent success in your startup, you need to have strong unfair advantages as your foundation.

Most startups fail not because they can’t build a product, but because they can’t get enough customers and/or users.

Oversimplification of hard work = success is not only misleading, it can be downright confusing when you don’t know what to work hard on.

Working hard, while never a bad thing, is not really the magic thing that leads to great inventions or successful outcomes.

Your Unfair Advantages can’t easily be copied or bought. Your set of Unfair Advantages is unique to you.

Always partner up with somebody with unfair advantages that balance out yours.

As a company grows and employs more people, and systemises itself as an entity, the impact of the founders diminishes.

Competitive advantages are to businesses what Unfair Advantages are to individuals and early-stage startups.

MILES Framework. They are: Money, Intelligence and Insight, Location and Luck, Education and Expertise, Status

For startups and small businesses, success is not just about MBA frameworks and strategies. It’s not about being better, faster and cheaper – those aren’t real unfair advantages, because they’re not sustainable.

If you’re very high on neuroticism, entrepreneurship is not likely to be something you’d enjoy, as it is very stressful and filled with uncertainty.

If you are not able to imagine the future with your organisation, there is really little reason to continue moving forward.

The main thing to consider if you don’t have the unfair advantage of Money is to build a business that doesn’t have a high startup cost, and doesn’t need to burn much money before it becomes profitable.

It’s even better if you’re the target customer yourself. This automatically gives you deep insight into their experience.

There’s nowhere better to start in gathering information than by getting out there and talking to all the people your product will involve and serve.

To develop your Intelligence and Insight, you have to:

Cultivate your curiosity.
Ask more questions.
Do more experiments.
Be more interested in how people feel, and the emotional impact things have on them.
Notice when people say something is a pain to do, or is inconvenient. These are goldmines for valuable insights
Be more aware of your own emotions and moods, and don’t let them dictate your actions.

You need a bit of naive optimism to become a startup founder.

Location can give you access to capital (investors and venture capital firms tend to cluster in startup hubs) and to highly skilled talent, and so much more.

Being too early or the first to market is bad because you have to educate your potential users and customers about the benefits. Educating the market is a very costly marketing exercise, which makes it very challenging.

Before you launch, it’s always worth asking yourself if you are positioned – both physically and online – where you need to be in order to give your business the best chance of success.

For whatever reason, going to a private school seems to work to increase the chances of a more prosperous future life.

For most entrepreneurs or startup founders, especially non-technical founders who want to raise funding, formal education is an unfair advantage mainly for signalling, status and networking purposes.

Status, then, is also about power, because with higher social status comes more prestige, honour and respect, and therefore increased influence.

Status is your perceived ability to add value.

If you look and sound like a middle- to upper-class young, white, nerdy hacker guy, and then they find out you’ve dropped out of Harvard, you’re more likely to get investment for your startup idea.

If you wore formal business attire to your meeting with the bank to get a bank loan, it might increase your chances of getting one. If you wore the same clothes in Silicon Valley, you’d probably be less likely to get investment.

In order to increase your chances of success, in your founding team you need somebody who has the technical Education and Expertise, and somebody who has the Intelligence and Insight to find a gap in the market (in other words, an unfulfilled need) and to be able to commercialise and carry out the marketing and sales required to get some traction.

Although a completely innovative idea can move entire industries forward in leaps and bounds, the risk to the early movers is much higher. They often have to be the ones to educate the market about the product (or service), which can be very expensive.

In the internet age, when a lot of the barriers to launching a startup have come down, going first can be a disadvantage. The giants can simply rip off your idea and implement it as a feature.

The biggest mistake is having a ‘solution’, a product, then looking for a problem for it to solve.

If you don’t have some kind of unfair advantage in the industry in which you intend to do business, then that particular startup idea and target market might not be the right fit for you.

Startup success isn’t just about choosing the right idea; it’s about choosing the right idea for you.

It is exponentially more difficult to succeed in your startup as a solo founder. In fact, we’d strongly discourage you from attempting a startup all by yourself. Most human endeavours, business included, are achieved in teams.

In a startup founding team, what you need is a creator, a communicator and (often) a technician.

Lifestyle startups can stay perpetually bootstrapped in most cases (except if they’re particularly capital-intensive and require large assets such as machinery or property/land), whereas hyper-growth startups usually do need investment. But even most hyper-growth startups should aim to bootstrap, at least at the beginning.

You may have created a solution for a problem that doesn’t really exist, or for a problem the customers don’t perceive as a problem, or for a small problem that the customer is not motivated to solve.

Beware of falling in love with your idea before you have any feedback from prospective customers/users.

Growth hacking is after there is solid product–market fit, which means your product is so attuned to what customers want that it’s starting to spread by word of mouth.

When speaking with investors, keep in mind a few things that put them off and avoid the following:

‘We are building an app, website or MVP’ – try to have it already built.
‘We don’t have competitors’ – suggests you just haven’t researched enough.
‘We are going to be worth £10 million in month 6’ – don’t go crazy with your valuation.
‘Hurry, we are closing our round now’ – creating false scarcity will just irritate people.
Complicated pitchdecks with 30 slides – this is too much.
‘We haven’t tested any of our ideas yet’– test them!
‘Co-founding teams need big salaries’ – they want their investment spent on marketing and product development.
‘We just need money – not your help’ – investors want to feel useful beyond just cash.