The key questions all founders should ask themselves to see if they have the personality needed to run a startup successfully
- There are three questions that aspiring startup founders should keep in mind before launching a business. The questions focus on market fit, human capital, and personal circumstances.
- That's according to Noam Wasserman, a former Harvard Business School professor and the current dean of Yeshiva University's Sy Syms School of Business. Wasserman shared the questions during a Business Insider Prime Live event.
- To find the answers to these questions, Wasserman suggests founders use these key self-reflection methods.
- Click here for more BI Prime stories.
Founders may be thinking about the market for their product when launching a startup - but this isn't the only thing they should be paying attention to.
According to former Harvard Business School Professor Noam Wasserman, there are three key questions startup founders should be asking themselves to be successful.
Wasserman taught entrepreneurship at Harvard Business School for 13 years, and is now the dean of Yeshiva University's Sy Syms School of Business. He has more than 20 years of experience researching the mechanics behind startup success, and has studied more than 16,000 startups in the process.
At a Business Insider Prime Live event hosted by BI correspondent Shana Lebowitz, he broke down the three key questions for aspiring founders to ask themselves:
- How favorable are market circumstances?
- Have you accumulated human capital - the knowledge, connections, and career ties - to be an effective founder?
- Are you in a good place personally to run this company?
If all three of those questions check out, then the decision is easy, Wasserman said. But it can be difficult to evaluate your own readiness. Here's how founders can reflect and find accurate answers to each of those questions.
Look for evidence that suggests you'll fail
The first hurdle founders typically face is accurately measuring the size of the market. That's because Wasserman has found that an entrepreneur's passion for their product can cloud their judgment.
"If [you] love this idea, and [you] would really want to have this product, you're going to go and convince yourself that there's a whole slew of other consumers out there that are going to love that product too," Wasserman said.
Because you're so passionate, you may give more weight to evidence that customers want your product than to any clues that they don't. This is called confirmation bias, which happens when people are more inclined to trust information that supports what they already believe instead of evidence that suggests they're wrong.
In this case, it's possible to overestimate how many customers are actually willing to buy your product - and the price they're willing to pay - because of how invested you are in your own idea.
You can avoid this mistake by actively seeking information that suggests your product is going to flop. Running a few tests wouldn't hurt either. For example, Splice cofounder Steve Martocci launched the music-creation platform after testing to make sure it met demand from potential customers. So far Splice has raised $107 million and has 2.7 million users.
Be honest about how long you can go without a paycheck
Founders should understand whether they have the personal and financial support in place to go without a paycheck for an indefinite period of time as they establish their companies.
The question "that I usually have to push people the hardest on is their personal circumstances," Wasserman said.
Morra Aarons-Mele, the founder of Women Online and The Mission List, previously told Business Insider that she asks aspiring founders outright: "How much money do you have to live on for the next year or two?" It will take them at least that long to earn as much as they're currently earning in their full-time job. Plus, they'll probably lose their benefits. "It's the piece of the equation that no one ever talks about," Aarons-Mele said.
It's important for entrepreneurs to remember that starting a company when you're single with minimal financial commitments is different from starting a company when you already have, say, a family to support and a mortgage to pay off.
Your career stage matters, too. Mark Zuckerberg started Facebook in college, but most founders benefit from accumulating skills and experience in a specific industry.
"If you don't have technical expertise, it's going to be very hard for you to persuade investors that they should trust you to understand the market," Columbia University professor Tomas Chamorro-Premuzic previously told Business Insider. In fact, MIT research found that the average age of founders who started a high-growth company is 45.
Wasserman said these three questions can help founders get an accurate picture of potential challenges before they launch their ventures.
"You can go and create a much more favorable map than if you're waiting until the last minute," Wasserman said. "The proactive approach is a key piece to this."