Why You Should Ditch Your Billion-Dollar Business Ambitions In starting up, founders often set their sights too high. Here's why you should start a $1,000 business instead.
By Walter Chen Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
We all want to build the next Apple, Google or Facebook -- companies worth billions and billions of dollars. But you might want to think smaller, at least initially.
Rather than ponder the question, "How can I launch the next billion-dollar company," Gary Chou, an instructor at the School of Visual Arts in New York City, tasks his students with taking the complete opposite approach. His course in Entrepreneurial Design has a surprising syllabus for a business class: Don't write up a business plan or create a pitch deck for an imaginary billion-dollar business. Instead, go out and create an actual, $1,000 dollar company.
Students in Chou's class must create a project that will produce $1,000 in monthly profit in a way that's repeatable and sustainable. The resulting projects include profitable, ongoing businesses and funded Kickstarter projects -- for if you take on the challenge of building a $1,000 startup, you'll learn three invaluable lessons:
Self-sufficiency
Individuals and startups need to be self-sufficient and that's why getting your project to ramen profitability is such a vital and game-changing milestone. But when you have to rely on a salary to make a living, or your company needs to rely on investor money to continue to exist, your autonomy and creativity become limited.
When you're making $1,000 per month, you begin to be able to cover your rent and that self-sufficiency slowly transforms into a dawning sense of limitless possibilities. Blogger Ailian Gan calls it, "creating a sense of self-propulsion" -- that feeling that you can take charge of your own destiny.
Related: What Makes Silicon Valley Successful? Not What You Think
Actually building a business
Treading the common path of idea to accelerator to funding to operating often results in a rude awakening. I've talked to a number of founders who have attended top accelerator programs, raised glitzy million-dollar seed rounds, and then fell flat when it came time to actually build the business. They'd never made a single dollar online and didn't know how.
In short, building a business is a lot different from fundraising.
By the time my company iDoneThis hit $1,000 in recurring revenue, I had learned how to set up the groundwork and grow from there -- from how to build a product, to how bring it to market, to how to get people to pay for it.
Most importantly, if you focus on building a $1,000 startup rather than a billion-dollar one, you'll get the order of operations right: validate and learn first, then scale.
If you focus on building a $1,000 startup instead of trying your hand at building a business for the first time as a funded company, you'll learn how to actually build a business first without millions of dollars of investor cash at stake. You'll save yourself a lot of pain and time that way.
Related: How Entrepreneurs Think Differently and You Should Too
Finding success anyway
In the biggest twist of all, it turns out that one of the best ways to build something big is to build something small.
The paradox is that limiting yourself to "big" ideas tends to produce bad ones, according to famed investor and founder of Y Combinator Paul Graham. The best ideas are often what Graham calls "toys" or ideas you wouldn't recognize as touching on a billion-dollar opportunity.
ZeroCater, a Y Combinator-funded company started by founder Arram Sabbeti, was born from the humble ambition Sabbeti had when he wanted to quit his job and needed enough income to pay for his rent and ramen. He started by helping his own employer cater their company lunches and began to expand to other startups in the area. What started as a $1,000 startup soon became a much bigger opportunity and then a full-fledged startup as Sabetti added more and more paying clients. Within a year, Sabetti had turned his rent and ramen side project into a startup backed by the best investors in Silicon Valley.
Related: How to Successfully Turn (Almost) Anyone into Your Mentor
Often the narratives and myths that swirl around in the startup world make it seem as if successful businesses spring out of people's minds, like Zeus' offspring. It so often doesn't work that way.
The $1,000 startup is a powerful frame to put on your ideas, because it strips the distorting force of market opportunity out of the idea equation. Rather, it properly focuses you on the question of whether you're building something that other people want enough that they're willing to pay you for it. Meanwhile, if you do the work and grow from it, that seed of an idea can sprout into a thriving startup that brings in real money.
What's your $1,000 startup idea? Let us know with a comment.
