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December 8th, 2009:

Who will win Tim Ferriss’s Business Competition? (and the need for a Z Combinator program)

Today Tim Ferriss and Shopify announced a $100k business competition.  They will award a $100,000 prize to a new company that has the highest two months of consecutive revenue within the next six months.  I immediately thought – can I predict the type of business that will win this competition?  Who will be the entrepreneur that will win?

After looking into the competition, I found out the business had to be built on a Shopify store (duh, why else would they sponsor it), so the type of business that will win is fairly obvious – it will be a online store.  They will also likely sell a product at zero profit margin or even at a loss (higher volume of sales).  They also won’t waste time building the product they sell, but will instead sell an existing product.

However, the second question still remains…

Who will be the entrepreneur that wins?

***Spoiler Alert ****

It is someone who you already know.

I love this competition because it addresses a challenge that is rarely talked about in entrepreneurship classes or the early days of a startup– the challenge of acquiring customers.  When I talk to many new startups I often hear them channeling Kevin Costner —  “if you build it, they will come.”

We need a Z Combinator Program

yc500I loved my experience with Y Combinator – and I love the motto “make something people want.”  My co-founder and I went through the Y Combinator program, and Xobni would not exist if it weren’t for the money, guidance, and network Paul and crew provided.  The problem however is that many startups come into Y Combinator, build a product, and expect a Techcrunch blog post to accelerate their startup to escape velocity.  This almost never happens.  Making something people want is still the most important step for a startup, but users turn a product into a business.  We need a Z Combinator program to address this second step ( zcombinator.com is already taken – I tried buying it).

The next step after building a product is making sure people know about it.  I like to say the role of an entrepreneur/founder is to “make something people want and make sure they know about it.”  I see these as the two important roles of product and marketing inside a company. The final step is becoming a profitable business, but in my experience few companies that have solved these first two challenges falter on the last piece.

The Rich Get Richer

There is a huge advantage for to companies that already have distribution – they sidestep the difficult second step.  A simple example that proves this point is Axe body spray (let’s forget for a moment that they are a division of Unilver).  Axe started with a simple new product with a great marketing campaign.  They succeeded and got huge distribution.  Now they can easily sell new product lines: body wash, shampoo, etc, because they’ve already solved the distribution problem.

Axe

A favorite counter example often heard is, “what about Google, they won because they had the best product?”  I think there is a lot to this, and with technology-enhanced megaphones like Twitter and Facebook amplifying word-of-mouth, great products are even more quickly bubbling to the top (this is an exciting trend I hope to write more about soon).  However, do you know how Google really hit escape velocity?  They did a deal with Yahoo, who at the time was the world’s biggest search engine. I remember seeing it “yahoo search, powered by google”  That was a huge mistake by yahoo and it was a coup for google.  Google made something people wanted but yahoo made sure people knew about it.

Back to the $100k business competition…

Because existing businesses are not permitted to enter this competition, the winner will most likely be an entrepreneur with an existing strong personal brand.  Someone like Tim Ferris (as a co-sponsor he won’t be competing), ijustine, or Ashton Kutcher.  The winner will have 100,000 or more twitter followers, a name we all know, and they will sell something they didn’t make.

Oh, and one more thing about the entrepreneur that will win – the person is going to need some free time to work on this new business, and not be tied up with another project.  Or, at least enough time to hire someone else to work on it for them.
May the best, already popular, currently available entrepreneur win!