Take 5: How to Succeed as an Entrepreneur

1. Constraints Are Good for Business

Startups are small, their resources generally limited. But this is not always a bad thing. Young companies can use constraints to their advantage, says David Schonthal, a clinical professor of entrepreneurship at the Kellogg School and an entrepreneur in the healthcare industry.

One huge opportunity area? Hearing from your potential customers directly.

Large companies often use focus groups or research-and-development teams to get feedback about their products. The result is usually a composite picture of a customer. With limited resources, however, small companies have to get into the field themselves and meet the real people who might purchase the product. This provides very authentic feedback about who your customers are and whether your product resonates with them.

2. Be Wary of Angel Investors

New companies should be cautious about where they get their cash, says Scott Baker, an assistant professor of finance at the Kellogg School.

Baker explains that getting too much money from angel investors may not be to a startup’s long-term benefit. For one, it can create a complicated investment structure that could dissuade venture-capital firms from investing later. “It’s hard to go to a board meeting and discuss voting rights if there are 20–25 different investors, each with a small stake,” says Baker.

For startups that do turn to angel investors, Baker cautions against reflexively accepting the maximum amount. With less money on hand, startups can stay lean and focused—and less likely to fund unprofitable initiatives.

3.Fine-tune the User Experience

So your new tech startup or social platform has attracted some buzz. Will it last?

The burst of interest and traffic a startup experiences at launch usually falls off—unless the company can fine-tune the user experience, says Sean Johnson, an adjunct lecturer of marketing at the Kellogg School.

Johnson, who is also a partner at Founder Equity and the digital startup incubator Digital Intent, highlights the importance of quickly convincing new users that a product can be useful for them—what Johnson calls the “lightbulb moment.” While a lot of attention is often given to how users will experience a site once it is already populated with data or contacts, it is less common, but just as important, to envision it from the perspective of someone brand new, faced with an intimidatingly blank screen.

4. Find the Right Partner

If you are going to launch a business with a partner, Nicole Staple, a 2012 graduate of the Kellogg School, and Benjamin Jones, a professor of strategy at the Kellogg School, have a few pointers.

Staple and fellow Kellogg classmate Sonali Lamba cofounded Brideside, a Chicago-based startup where bridal parties can order dresses online, while still benefiting from high-touch, personalized services such as style consulting. From the start, Staple and Lamba had complimentary skills—and just as important, compatible personalities. “We played off each other really well in public presentations, we had a great creative process, we could spend late nights together and not get sick of each other,” says Staple.

This is critical. “A startup is extremely stressful,” says Jones. “It’s not a good day every day, and having founder frictions can be really devastating. They might not only damage your ability to go forward together, but can also set the tone and the culture of the company.”

5. Even Established Companies Have a Role for Entrepreneurs

So the startup life is losing its appeal? Many innovative business leaders choose to work in established companies. This does not mean that their entrepreneurial dreams have to wither.

While working at Discovery Communications, Gabe Vehovsky, an adjunct lecturer of innovation and entrepreneurship at the Kellogg School and founder and CEO of Curiousity.com, discovered a glaring opportunity for anyone willing to invest in a platform to attract new customers to online educational content.

After failing to find an external partner that would take on the project, Vehovsky developed it internally. In the process, he learned quite a bit about the advantages of intrapreneurship—for one, most big organizations have no shortage of deep expertise on hand—as well as what companies can do to support employees with the “gene” for innovation.