Does the name ring a bell?
Iridium was a Motorola-backed company that spent $5 billion to launch an infrastructure of 66 satellites for a worldwide wireless phone service in the late 1990s. It failed miserably, collapsing after less than a year in August 1999.
Iridium is a classic example of starting big—and failing even bigger.
Starting any venture on such a grand scale entails spending lots of time in preparation, hiring a ton of people, coming up with detailed analyses, and investing truckloads of money.
Starting big can be a recipe for an epic fail.
That’s why I’ve always believed in starting small. Starting small gives you the freedom of maneuver to expand or simply to withdraw altogether if you encounter headwinds.
Here are the 4 big merits of starting small.
1. You never know if your business hypothesis will work until you try it out. Starting small enables you to road-test your assumptions at low cost while modifying your business model in response to feedback.
2. You don’t have to spend years persuading people that your idea is a good one when you start small. People will willingly give you the go-ahead because the downside is limited.
3. Since starting small takes less time and money than starting big, you can get your product out fast and enjoy the advantages of being a first mover/innovator.
4. If your venture doesn’t perform up to expectations, you can exit the market easily and cheaply, having harvested customer feedback and contacts you can recycle into your next venture.
In the best-case scenario, starting small enables you to grow your business rapidly and secure first-mover advantage. It’s a case of “little ventured, much gained.”
And even in the worst-case scenario of failure, starting small is only a matter of “little ventured, little lost.”
So, if not always “win/win,” starting small is a good formula for “win/don’t lose”!
In my own career, I have always followed the “start small” playbook.
• In 1992, I launched GLOBIS Management School from an office in an apartment and a single rented classroom. I was the sole full-time employee and we had a single class of just 20 students. We had just $8,000 in equity. Small beginnings indeed for a school that now has over 70,000 students.
• In 1996 we launched a venture capital business. Our first fund was $5.4 million. Of that, $5 million came from external investors—and just $400,000 from us. The fund’s 14 investments delivered our investors a net return of 700% and established us as a player in Japanese VC. We now manage $660 million.
• In 2006 we launched our graduate MBA school. We started out with just 60 students on two campuses. Ten years later, we have more than 800 students on five campuses throughout Japan.
We followed the same “start small” pattern with our online MBA, our English MBA and our e-learning programs. We put them out fast, tested them, and improved them continuously in response to data and customer feedback.
Of course, I’ve had my share of businesses that didn’t work out.
One example of this is a job placement business. Initially we thought that our network of business school graduates would give us a strong competitive advantage. Ultimately, though, we discovered that our business model was not unique enough to compete against the incumbents.
We exited the space, in line with our policy of only participating in areas where we can become the No. 1 or compete globally. The five people who had been working on job placement were redeployed to other new businesses.
The idea of starting small is the backbone of the whole lean startup movement. Lean startup is all about using resources in a flexible manner to develop and improve products/services on a rapid “build-measure-learn” cycle.
These days digital technology provides a whole ecosystem—open-source software (for creating), cloud-based web services (for storage), social networks (for marketing) and app stores (for delivery)—that makes it easier for entrepreneurs to move fast and cheaply, as they build their businesses. There’s also a ready supply of angel investors, incubators and accelerators eager to fund your idea on a small scale.
I’ve always found that starting small and staying nimble is the best way to enter (and exit) new business areas at minimal financial and psychological cost, while achieving maximum long-term impact.
Starting small makes growing your own company fun. You have loads of upside and no downside.
And you won’t end up saddled with $5 billion in debt and 66 spare satellites either!
Photo by Sergey Novikov