Starting a business is hard. Even if you have an excellent product or service idea and a detailed business plan, plenty of funding and a smart co-founder, you’ll inevitably hit bumps in the road or stumble across problems you didn’t even know existed. (If you want an in-depth look at these types of trials and tribulations, check out the podcast, StartUp. Definitely start at the very beginning -- it’s worth getting the whole story.)
As CMX Hub’s David Spinks wrote about in this post, venture capital funds have a surprising solution for smoothing out the trials and tribulations of being a founder -- community. Instead of leaving each person they’ve invested in to figure things out themselves, many prominent venture capital funds, like Andreesen Horowitz, First Round and Y Combinator, are putting people they’ve invested in all in one spot, to talk to each other, help each other out, and exchange ideas.
But rarely does any company have a loaded hand, and funding -- or lack of funding -- is often the biggest obstacle for most startups.
Part of it has to do with old laws about giving, and getting, funding. Just because, in theory, anyone can start a business, didn’t mean anyone could become a venture capitalist -- i.e. give money to an entrepreneur in exchange for equity in their company. The term ‘venture capital’ often evokes elitism since, due to old regulations, until very recently only very wealthy people or companies could invest in startups.
Now things are different.
Thanks to The Jump-Start Our Business Start-Ups Act that President Obama signed, as of May 16th 2016, anyone can be an investor. Before President Obama signed the bill, the government set up strict regulations aimed at protecting everyday Americans from being scammed. Those regulations made it impossible for most people to buy equity in a growing company. But today, anyone can buy a piece of the next big company or small local venture, opening up a world of opportunity for both founders and small-time, home-grown venture capitalists.
Since more people than ever can invest, that means equity should be more obtainable for the everyday entrepreneur -- which means community, and the support that comes with it, is more important than ever, especially for small ventures.
Why should community be a cornerstone for new startups, no matter their industry or size?
Much like customer support, many people often have the same question. Communities are so effective because, rather than having many people ask the same question, people can go to the community and read the answer -- inevitably, someone else has already asked it, and another member already answered.
Rather than asking around or just guessing and hoping you made the right decision, members can ask each other directly -- which creates deeper conversations, and gets people meaningful answers more quickly. And getting high quality answers quickly is important if you want your growing business to survive. Founders can bounce back from mistakes quicker, or avoid them all together with the help of their venture-backed community -- which can be the bump that ultimately pushes a company towards success rather than failure. That’s why so many venture capital funds find community valuable -- it shortens a critical learning curve.
What if your company is so unique, no one has a similar business for you to learn from? Just because one person is trying to start an artisanal marshmallow company and another a cloud based SAAS company doesn’t mean they can’t help each other out -- maybe one person has a question about effective Twitter outreach and another needs help mediating a conflict with an employee. No matter the industry, someone in the community has had that problem and has helpful advice.
But it goes beyond shortening the learning curve.
Say people are in similar lines of work and something in their industry changes. For example, two different groups are building non-competing iOS based apps and suddenly Apple makes an unexpected change to an important policy. Both of them are affected and need to either figure out work-arounds or lobby for Apple to change. With a community, they can talk to each other or meet up offline to discuss how these changes affect them and brainstorm next steps.
This kind of collaboration helps young companies adapt more quickly and think beyond their own silos. Rather than being in the sea of entrepreneurship alone, founders have a team to work with, who are all in it together -- even across the globe.
A strong team is helpful for both practical needs -- like advice on finding office space in a specific city -- and emotional needs -- being able to relate to a group of people all striving for similar goals.
Joining a large, diverse, venture backed community brings founders into an enormous, exclusive club that few people are privy. But now that anyone can invest and more people than ever will have funding, that close-knit community doesn’t need to be so exclusive -- anyone can create their own community, which helps both founders, and firms.
Since the new law passed, more people than ever will participate in entrepreneurship -- either as a founder, or as an investor. And that means that communities can support the businesses that best represent them -- and companies can grow extremely loyal and (literally) invested brand ambassadors and fans. We know the power of community when it comes to traditional venture capital funds and can only imagine what’s next.