With the goal of starting an open and honest dialogue about entrepreneurship, we reached out to the local entrepreneurial community to ask what questions they have about entrepreneurship.
Our subject-matter experts from the Cal Poly Center for Innovation and Entrepreneurship (CIE) have answered those questions in support of their fellow entrepreneurs:
What industries are the most successful? The least?
Judy Mahan, the Economic Development Director at the Cal Poly CIE and the Small Business Development Center (SBDC) said that business-to-business (B2B) — especially software as a service (SaaS) — is generally the most successful industry within entrepreneurship.
“B2B is sometimes a long sales cycle, but the pricing is typically more compelling and you can sell for a higher price,” Mahan said. “And SaaS typically, you can keep your overhead pretty low. The one tricky part there though, is you have to have a really amazing CTO. Your software developers are really important, and that’s a hard talent to find.”
Meanwhile, the least successful industry within entrepreneurship is typically manufacturing, Mahan said.
“It costs a lot of money, a lot of upfront investments. You might be left with inventory, and supply chain issues can really jeopardize your business,” she said.
What does it take to build a sustainable and scalable company?
Mahan said that building a sustainable and scalable company requires (1) a strong foundational team and (2) sufficient funding.
We’ll delve into the funding and investment process in the next section — but Mahan emphasized that regardless of how much funding a company receives, it is useless without a strong startup team.
“It is a key element to be able to hire the right people to do the right job,” Mahan said. “The right team can really help you execute on the business plan, the business model and hopefully generate revenue.”
How do I know if I need to raise money?
Tom Katona, a Cal Poly professor who teaches in the Orfalea College of Business (OCOB) and the College of Engineering (CENG), provided insight into when founders should begin raising money for their startups.
Startups should raise funding if the business has (1) a need for capital growth, (2) a plan on how the capital will be used to grow and add value to the business and (3) investors who see an opportunity for a return on their investment in the business, he said.
Katona explained that most startups will require funding at some point, but that funding can come from many different sources.
“Venture investment is only one source and is appropriate for only a small percentage of startups,” he said. “Early investment in companies typically comes from friends and family who aren’t necessarily looking for venture type returns, and although they still want a return on their investment, they are largely investing in the entrepreneur because they have a personal connection or relationship with that individual.”
Katona also pressed the importance of an entrepreneur finding a method of funding that is appropriate for their startup.
“In my opinion, the most important question for entrepreneurs to be able to answer is what is the right type of investor they should be looking for that aligns with their expected business growth and investment return, and being able to identify which investors may be appropriate for different stages of a business’s growth,” he said.
What is a mastermind group, and how do I find one?
A mastermind group refers to a peer-to-peer mentorship group composed of people in similar industries.
Jose Huitron, the CIE’s Director of Student Innovation Programs and an OCOB professor, suggested that entrepreneurs who are looking for communities similar to mastermind groups use social networks like Meetup.com, LinkedIn and Facebook. He also suggested using existing networks for referrals, or finding like-minded individuals in on- and off-line gathering places — for example, one might find fellow book-lovers at a bookstore or library.
“Part of building social capital is to become genuinely interested in connecting with others whether that means attending a meetup or relevant industry gathering,” Huitron said. “Everyone has a community.”
How do you convince your parents that entrepreneurship is a good choice?
Huitron advised students to explain the significance of entrepreneurship. Entrepreneurship teaches problem-solving skills and creativity, both of which are valuable skills in a world that is constantly changing.
“A student should use the opportunity to explain how entrepreneurship is an enabler for them to practice their skills and bring their talents to the stage of opportunity,” Huitron said.
How can we level the playing field to increase diversity in the sphere of entrepreneurship?
Huitron suggested a number of efforts that can be made in order to increase diversity, equity and inclusion (DEI) within the entrepreneurship space:
“Raise the narrative. Talk about it. Highlight the challenges and opportunities for growth. Celebrate progress,” he said.
He also said that it is important to “make equitable progress a focal point.” Organizations should take advantage of opportunities to increase diversity, and create strategic DEI initiatives with measurable impact.
“Find champions and have them model the way to drive an inclusive and open community where ideas and people can thrive,” Huitron said.
How can heavy industry better engage with early stage startups?
Dan Weeks, a mentor to several student-led CIE startups, including our 2022 Summer Accelerator teams, teaches his mentees “how to test if new business ideas actually solve real problems [for which] target customers are actively searching for a solution,” rather than exhaust time and resources creating a product they assume customers want, he said.
Early stage startups can accomplish this through digital marketing advertisements and single-page websites for new product ideas, then developing products that generate consumer interest.
Meanwhile, Weeks said heavy industry “often has ideas on new products to add to their offerings but does not know how to test if the new product [is worth investing in.]”
“Heavy industry can learn from the early stage startup best practices,” he said.