Now that ChatGPT has opened the doors to the AI gold mine, the rush is on. Entrepreneurs who are interested in building a big business using AI may find it useful to know how Unicorn-Entrepreneurs of the last 6 decades found the gold.
Most Unicorn-Entrepreneurs, from Sam Walton (Walmart) to Brian Chesky (Airbnb), launched on an emerging trend – and dominated the trend. Emerging trends offer growth opportunities. Dominating them helps you build a real unicorn (with sales above $1 billion) unlike VC-unicorns with manipulated valuations.
Based on my financing, interviews, and research of 122 Unicorn-Entrepreneurs, here are 7 rules to help you dominate your emerging trend.
#1. Smart entry beats slow entry: Enter before industry takeoff.
It is difficult to dominate an emerging trend after it takes off because someone else is leading the soaring industry and it may be difficult to catch up According to research by Karl Ulrich (Allen Shockley lecture at Carlson School of Management), most emerging trends take off within 3 years to 11 years after starting. Unicorn-Entrepreneurs mainly enter the trend after it starts and before it takes off. Now is the time to build a unicorn in AI.
#2. Smart movers beat first movers: It’s about strategy and skills.
Although the business press keeps harping about “first movers,” the reality is that fast movers beat first movers 9 out of 10 times. First movers identify potential. Smart movers capture potential. They imitate and improve on the first movers as did by Sam Walton, Bill Gates, Michael Dell, Steve Jobs, and Brian Chesky. Unlike the Silicon Valley “wisdom,” it’s not about first-movers or minimum viable products. It is about smart movers with strategies and skills. Sam Walton moved smart in small towns, Bill Gates in the operating system, Michael Dell in direct-to-consumer, Steve Jobs in a music platform, and Brian Chesky by making it easier for landlords to find guests.
#3. Smart capital beats venture capital: Grow with control.
To stay in control of your venture, and of the wealth it creates, delay or avoid venture capital (VC) by using smart capital to takeoff. 6% got VC before proving their leadership potential and lost control of both their venture and the wealth they created. 18% of Unicorn-Entrepreneurs got VC after Leadership Aha and stayed in control of their ventures. Examples are Bill Gates and Mark Zuckerberg. 76% avoided VC and kept more of the wealth created. Examples are Michael Dell and Michael Bloomberg.
#4. Smart starts beat money-losing starts: Revenues are the smartest capital.
The capital-intensive VC-model that hopes for revenues has mainly worked in Silicon Valley. If that is where you are, that may be a good option if you don’t mind being at the mercy of angels and VCs. But know that only about 100/100,000 get VC and about 80% of those who get VC end up failing. Plus you are likely to lose control of your venture. If you are not in Silicon Valley, your odds are better if you finance with cash flow and smart capital rather than relying on second-tier VCs, because the Top 20 VCs are mainly in Silicon Valley. Billion-dollar entrepreneurs from Sam Walton and Bill Gates to Joe Martin and Gaston Taratuta grew with revenues.
#5. Smart speed beats wrong speeds: Launch to balance cash flow and leadership.
How fast you grow often influences how much capital you need. Grow at the ‘smart’ speed, which is based on your cash flow speed, market speed, and industry speed. Bob Kierlin dominated the fastener industry by growing at an annual rate of 30% with internal cash flow.
#6. Smart alliances beat well-heeled competitors: Disrupt slow corporations and dominate.
The Internet allowed retailers, such as Amazon.com, to disrupt larger store-based retailers like Borders because online sales did not need stores – making Borders’ business model obsolete. But when corporations can add AI to existing business models, they can be a strong competitor – or a potential acquirer. So keep corporations in mind when starting your venture – for alliances or acquisitions. Google bought YouTube because YouTube was better than Google’s own service.
#7. Smart skills beat startup skills: Unicorn-Builders beat Unicorn-Starters.
Learn technical skills to develop an AI product, sales skills to find customers, finance skills to launch, and finance-smart skills to lead. Unicorn-Entrepreneurs used finance-smart skills to grow more with less. Get these skills. Or else your idea could be appropriated by someone else like Mark Zuckerberg who was approached by fellow Harvard students to write the code for what ended up as Facebook. Zuckerberg seems to have appropriated the idea. Or you could be replaced by a professional CEO, which is what happens to many founder-entrepreneurs.
MY TAKE: Emerging trends create unicorn opportunities for fast movers. AI is taking off and will create many new industries and growing ventures. This is the time. But entrepreneurs need skills to move smart. Areas can build unicorns by training everyone.