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1-Page Summary of Reality Check

Introduction

Two people with a good idea built in their garage approach investors, who love the idea and quickly fund it. The company is immediately profitable and goes public within a few years. It continues to innovate and thrive for decades.

It is a common belief that startups are started by an individual who has a great idea and then goes on to build a successful company. However, this isn’t the case. In Reality Check, Guy Kawasaki explains how most startups fail and why they do so. He also shares his insights about entrepreneurship from three decades of experience in the industry.

Four Harsh Realities of Entrepreneurship

1. Your employees will all be a little crazy

In today’s world, it seems that entrepreneurs are able to create successful companies with ease. However, Guy Kawasaki believes that this is a myth. In reality, most startups fail because they lack the proper resources and skills to succeed. The people who join startups tend to be idealistic and believe in changing the world for the better; however, it can be hard for them to work together effectively since they’re so different from one another.

2. Good code doesn’t write itself

3. Everyone has to rebuild

4. You will always be terrified

According to Kawasaki, the best way to help your employees reach their full potential is to make them feel in control and give them a bold, inspiring mission. For example, “creating a plug-in that allows marketing teams to generate 10% more leads” is not an inspiring mantra but “revolutionizing the way innovators connect with end users” is. It’s important for software engineers to have time and support while writing code because no matter how good your ideas are or how well-built the first version of your product is, innovation is a process of trial and error. James Currier wanted his startup Tickle (a platform for providing people with tests on anxiety, parenting relationships) be successful; however it wasn’t working out as he had hoped until someone suggested making quizzes about what kind of dog you are which went viral and brought him the audience he wanted. As CEO of another startup Kawasaki considered promising at one point said anonymously asking Facebook friends if they thought his idea was any good because he was so afraid of rejection. Furthermore you’re statistically more likely than not going bankrupt instead of becoming famous; therefore it’s better if you get comfortable with that sooner rather than later.”

What Investors Are Really Looking For

It is harder than you think to raise capital. Ann Winblad, who co-founded Open Systems and now works as a venture capitalist herself, remembers promising limited intellectual property rights for her company in exchange for $10k investments. But she was able to grow the company into something worth billions of dollars!

Commitment to impact

Demonstrable traction

Cleanliness and honesty

Acknowledgement of competition

Brevity

Startups are risky, but there are ways to maximize your chances of success. Many entrepreneurs focus on the return they can get on their investment in a company, but venture capitalists also want to be associated with companies that have a big impact. The easiest way for you to show traction and prove that you have a real business is by acquiring users or generating revenue. You must resolve any liabilities before pitching investors; if not, disclose them and explain how you plan to fix them. Investors don’t like surprises when it comes to liability issues. If you’re claiming no competition for your product, acknowledge this fact and then explain why your product is better than what’s currently available. Your pitch should be short – ideally 10 slides long – so make sure each slide has only one main point (20 minutes). Finally, use font size 30-point or larger so people can read everything easily (30 minutes).