The Ellis Island Advantage to Entrepreneurism

Startup entrepreneurs have something to learn from America’s early immigrants.

Pilgrims who left Europe in search of a new world, our founding fathers, and the countless immigrants who’ve come to the U.S. to build a new life are very much in the same lineage as today’s startup execs. All are entrepreneurs. All are ambitious and hard working. All share a brighter vision of tomorrow.

But these early entrepreneurs, particularly those who arrived at the turn of the 19th century, had an advantage which today’s entrepreneurs lack. They often arrived on America’s shores with just a few dollars, a dream, and maybe a distinct skill set. They were hungry and desperate for work. They didn’t have access to capital, so had to convince people to pay them in exchange for goods or services. They had to become salesmen. This may seem at first glance like a challenge, but it was indeed an opportunity.

The Story of the Shoe Peddler

Imagine a shoe peddler just arriving in New York by way of Ellis Island. He knows how to do one thing: fix and shine shoes. He may have enough money to feed his family, but only for a few weeks. So what does he do? He puts up a sign that says “Shoe Peddler.” Maybe he adds a description or two about his services. Then, he stands on a street corner and asks anyone walking by whether they need his services.

When he finds someone who’s interested, he offers a price, but inevitably, negotiations begin until both sides feel that perfect mix of comfort and discomfort where fairness often lies. The peddler now has a sense of how many customers he’ll need to meet his costs and take care of his family. He has a daily sales goal based on experience, not aspiration. Only after he’s sold to customers consistently – and knows their needs and what it takes to convince them to use his services – does he even think about hiring or expanding operations. Often that first hire is his son. Any expansion plans are likely funded out of pocket.

They say necessity is the mother of invention. I believe it’s also a big driver of business innovation and entrepreneurial success. These Ellis Island entrepreneurs were forced to interact with prospective customers early on and develop a deep understanding of their needs. They didn’t set revenue goals based on an arbitrary measure of success; they kept their costs low and focused on acquiring customers profitably.

Applying the Ellis Island Advantage to Today

In today’s parlance, they offered a “minimum viable product,” one that gives customers what they want or need, but the bare minimum, to allow for feedback before investing more. Early entrepreneurs tweaked their product based on direct market feedback, only adding capabilities based on demand. They searched diligently for “product/market fit,” because failing to do so meant going hungry.

Despite their perceived advantages – technology, venture capital, the internet – today’s tech entrepreneurs don’t have this Ellis Island advantage. Some have friends and family willing to invest tens if not hundreds of thousands of dollars based on little more than faith. Many are just one or two degrees of separation away from a venture capitalist. But this access to capital is a double-edged sword. It allows entrepreneurs the space and time to build products based on what they think the market needs. They believe that if they build it, the customers will eventually come. They keep “busy,” focusing on product development and fundraising, instead of doing the difficult work of customer development.

But eventually the music stops, and vanity metrics like headcount and Facebook likes can’t hide the fact that not enough customers want what’s being offered – or if they do, they aren’t willing to pay enough for the business to run profitably. Indeed, when you look at the top reasons startups fail, it’s often because they never found product/market fit.

To solve this problem, entrepreneurs must engage with customers early. They need to get out of the office and start selling, with a focus on understanding and solving their customers’ needs. This isn’t easy. Sales is scary, and many of the best business schools don’t teach it.

But building a new world, a new life, or a sustainable business venture isn’t supposed to be easy. Entrepreneurs have to get out of their comfort zone, the way many of our forefathers did, because of the one timeless truth that applies to all business ventures: in the end, revenue is the only metric that matters.