Once he became an entrepreneur, IEEE Member Allan Tear says he never wanted to get a “real job” again. He had been working in the telecom industry for eight years when he was asked to help start a new venture within his company. That experience was rewarding enough to persuade him to set out on his own in the late 1990s. Later, with four ventures under his belt, Tear helped launch Betaspring, in 2009. At the time it was among the first 10 startup accelerators in the world, providing funding and mentorship to entrepreneurs.
So far, Betaspring has invested in 91 companies, raising more than US $65 million to do so. This year, the firm rolled out RevUp, a program that supports small but already profitable companies that aspire to expand their revenues. “We want to invest in companies as they grow,” Tear says. In addition to money, Betaspring provides guidance to help founders tackle challenges they’ll inevitably face, such as hiring employees and retaining customers.
When Tear launched Betaspring, he knew he was taking a risk, he says, “but as an entrepreneur, you get accustomed to taking chances.” He had been successful and had learned from his experiences. And with technology becoming more affordable and with the free resources on the Web, such as information on how to incorporate a business, he says he was confident that Betaspring could help others be successful too.
This month The Institute asked Tear to explain what he looks for when he decides to invest in a new venture, and what he believes is required for a new company to flourish.
IT TAKES A TEAM
As a would-be investor, the first thing Tear considers is not the idea for a new product or service but the team behind it. “We want people who can figure things out as they go, can absorb new information quickly, and are doggedly committed,” he says. “Their startup ideas will change,” meaning that what they think they’re going to do is often not what they end up doing. “Sometimes it’s a small shift from their original plan, and sometimes it’s enormous,” he says.
Tear says most new ideas he sees are bad. He recommends that would-be entrepreneurs bounce their concepts off other entrepreneurs before embarking on their ventures or pitching investors. In particular, he discourages people from asking family and friends for feedback. That can result, he warns, in “false positives.”
“They don’t want to hurt your feelings, so they’ll tell you it’s a good idea,” he says. “Or because many people can’t imagine being an entrepreneur themselves, they might discourage you from pursuing a venture.”
Rather, find objective people who understand the market you’ll be entering, he says.
Once entrepreneurs get that feedback, they need to prove that someone will actually pay for their product or service. The way to do that is to get to market quickly, Tear says. “You’re a theoretical entrepreneur until you put something on the market; in essence it’s still a science project,” he says. “Most companies fail because they wait too long.”
He encourages people not to wait until they have the perfect product. This advice, he says, is especially difficult for technical people to follow, because they tend to be perfectionists. The key, he says, is to continuously improve what you have after others have tested it.
To get something to market, most of today’s entrepreneurs have to figure out how to finance their prototypes on their own. “The days of investors funding a prototype are by and large gone,” he says. He suggests looking for other sources of money, including government and foundation grants, design competitions, and university resources.
Founders need to identify their customers clearly, Tear says. Too many entrepreneurs “want to serve everyone,” he says. Defining the audience helps to refine the product or service.
Entrepreneurs also have to figure out the secret to getting repeat customers. That’s no small feat, and often requires a shift in strategy.
Even when companies grow, the founders need guidance to help them tweak their business model. “The way you would run a company with 10 customers is different once you have a thousand,” Tear says. And when companies grow quickly, that’s when advice is needed the most, he says, adding: “The problems they face as their company grows have already been solved by other people.”
Tear points out an important difference between an inventor and an entrepreneur: The latter might invent but he also must be able to persuade others to come along for the ride.
“Entrepreneurship is an improbable journey,” he says, “but if you can convince others to join your team and invest in you, then you may be able to sell your vision.”