10 Insights — Best learning from a professional to a founder journey
When you start your business, you have to start with one of a few basic ideas for your new company.
You have to turn a basic idea into a concrete plan for how you will get the necessary funding, how you will build the company, who will be on the team, how you will strategize in your first months of operation, and many other details.
The process is very different from starting in a larger organization where your tasks are well-defined and where your progress is continuously monitored by supervisors.
In the startup world, success or failure is a binary decision. Either your business model quickly demonstrates that it works and becomes self-funding, or it fails. There’s no middle ground. Either you grow rapidly enough to become self-sustaining within a year or two, or you run out of money and die.
The most successful startups have founders with the right mix of skills and experience. Founders who are good startup CEOs should be able to design and build a product, but they should also know how to sell it, where to get the money for it, how to attract and retain great talent, which investors to approach, and what to do when their original plan no longer makes sense. They must be able to anticipate and respond quickly to unexpected challenges — and even turn apparent liabilities into assets.
Since there are many great articles out there that talk about the success of startups and the reason they happen, this post will take a different approach. I want to present some lessons every startup founder should learn from other founders. It’s faster than learning them from your own mistakes, and it can help you avoid common pitfalls.
There are many important startup lessons in this post. I have tried to lay them out for you in a clear sequence and manner that is easy to follow and easy to digest. You’ll see here is the process of realizing a vision, building a team, creating a prototype with feedback, getting customer traction, raising money, pivoting, deploying resources (human or otherwise), hitting milestones and finally scaling the company.
Let me go over 10 things you should learn from other successful startup entrepreneurs:
1. To get where you want, you need to have the right people on board.
The single most important thing you can do as an entrepreneur is to hire the right team. Most startups fail not because they have a flawed business idea, but because the executive team is weak.
In fact, if you were to plot the reasons for startup failure on a 2×2 matrix — idea vs. execution vs. team — I bet you’d find that team is 90% of it, with idea and execution making up the other 10%.
When a startup begins to grow, forming a team is one of the most important things a founder can do. But how does one go about hiring the right team? Here are some tips.
Start thinking about hiring from day one. You are going to need a team no matter what kind of business you’re starting. In the beginning you might do everything yourself, but growth will be swift and acceleration will be quick. If you want your company to grow as fast as possible, you will want to build your first full team as soon as you responsibly can.
You should think about hiring the right team more than anything else when building a startup. The other things you need to worry about — product, funding, etc. — will follow from that.
If it is not already obvious, the single most important thing a startup needs to get right is its team. When everyone on the team is on the same page, magic happens. Growth explodes. Competitors don’t stand a chance. But if even one person on your team is in the wrong role, communication breaks down. The vision doesn’t get communicated. Important details fall through the cracks. Competitors find blind spots and exploit them.’’
The best team will have the right combination of skills. They will have the educational background, knowledge and experience you need. You need to make sure they fit in with everyone else on your team. And, of course, they must fit in with your vision for your business.
How do you hire the right people? The first problem, it seems to me, is that people get in the way. Especially you — the one hiring. Bosses are a plague on the world of work; but perhaps the worst kind of bosses are those who believe that they can hire anyone and teach them to be good workers.
2. A motivated employee is an effective employee.
Keeping employees motivated and happy is as important as it is difficult for startups. One of the most common things startups must do is fire the wrong people, but letting go of team members is a painful and gut-wrenching experience nonetheless. Even if you know it’s what’s best for the company, it can be very hard to actually make it happen.
Employees have to be acknowledged as the key asset and their motivation has to be taken into consideration if we want them to run through walls for us. No one cares more about the operation than they do. When they are happy, everyone else is happy.
Happy employees are productive. A good, focused startup is built around a small group of motivated people, so keeping your team happy is a high priority. In-house ‘drama’ is distraction: you can’t grow if all your energy is going into arguing with other people in the company.
As a founder, you will be paying your team members in equity, so the most important work you do is to keep them happy. If you don’t, they won’t stick around. In fact, it is the job of management to get new employees to be sufficiently excited for the future that they’ll work hard today.
Employees are the single biggest expense in any company. As a tech startup grows, it can’t spend proportionally more money on people; it has to figure out how to do more with less. The key to survival and growth is having employees who feel the cause is important and who are engaged in doing their best work.
It’s been said that motivation does not last. Well neither does bathing — that’s why we recommend it daily.
3. Always keep your options open when it comes to fundraising.
A startup should be in continual fundraising mode. You need to get in the habit of meeting frequently with potential investors, with your team, and with advisors. You need to get used to giving presentations like a professional salesman.
In my view, a startup that is not in fundraising mode will die, just like a person who is not breathing will die. Thus, the emphasis here is on continual instead of imminent.
Whether or not you’re raising capital, be in fundraising mode. You’re never going to run out of things that need funding. Growth requires resources, and the founders are your company’s resources. It’s no good planning for the next milestone if you can’t pay to get there — and it’s no good being there if you don’t have a plan for how to get to the one after that. Don’t wait for investors to bring their money to you. Be aggressively resourceful.
Being in fundraising mode affects and constrains everything a company does. It colors every decision about resource allocation. It’s a fundamentally different way of operating, one that requires a startup to develop different strengths than it would otherwise need.
When you’re running a startup, you’re expected to constantly be in fundraising mode. It’s like being at war. You don’t get to take long weekends off. You don’t get to relax and do just enough to keep things going. If you stop raising money, you soon run out of it. If you slow down your fundraising efforts for any period of time, it becomes a lot harder to raise money later.
I suggest raising no more than 50% of your resources from angels and VCs. A typical scenario in later rounds is to raise 3 times the amount in the prior round, so if you’re doing that, you’ll be in fundraising mode most of the time. If you raise money one year, and don’t need to raise again for 2 years, it’s easy to get complacent and take your foot off the pedal. The world changes quickly, and one year there may not be any competitive.
Founders get into a state of mind where they think they are ready to start raising money but they are not. They need to constantly be in that mode.
4. Be ready to face challenges that are beyond your expectations.
Challenges are the essence of startups, both the ones that work and the ones that don’t. They’re what make them both so compelling to work on and so heartbreaking. To build a successful startup, you have to be ready for big challenges and not be daunted by them.
Big challenges give you a chance to excel, and getting through them proves that you still have what it takes. When we played the top players in the world, I knew it was going to be hard but I didn’t shy away from the challenge. For me, there was no substitute for playing against the best. — Magnus Carlsen
The challenges you’ll face in a startup can be big, but so are the opportunities. Part of being a successful startup founder is being able to deal well with both.
The key to success is never give up. When starting a business, you will face problems and they will seem unfair and big. But solve the problems step by step. Remember that there are people that went through way more worse situations.
The single most important thing to do is to prepare. The reason that giant corporations are more successful than startups is not because they have advantages in resources and money. It’s because they don’t have to scramble when the challenges come up.
If you’re getting tired of your life on track, don’t give up yet. You may be able to set a new record anyway. But you need to choose wisely. Some challenges are bigger than others.
5. Build a Great Product But Don’t Take Forever to Launch.
One of the biggest problems I see with companies is they spend too much time building their product. It’s a great idea and they should build it but there are ten different ways to launch. You know what I mean, you get all this feedback from people on Reddit or Hacker News about how things aren’t looking great or you should go in a different direction or redesign the landing page. Who cares? Launch it and if you have to fix it, great.
Create a minimum viable product and ship it. Even if your product is not perfect, you’ll get far more feedback than you did before. You will have built momentum for your venture and will be able to show prospects and investors that you are actively developing the business. It’s better to have an imperfect product out in the world being used and giving you feedback than none at all.
6. Focus on becoming a better salesperson and you will improve your chances of building a successful business.
A great salesperson is a valuable asset. A truly excellent salesperson, when combined with an innovative product or service, can lead to runaway growth. Great salespeople are rare, but tend to be needed at every stage of a startup. First, you need to sell the vision of the company to early investors. Then you need to sell the service or product to customers. Right after that, you have to sell equity in the company to employees.
One of Ben Horowitz’s famous mantras is ‘do things that don’t scale.’ One thing he doesn’t mention, may be the most important one. While you’re doing those things, ‘scale’ yourself into being a great salesperson. Chop up your market into small pieces and get really good at convincing each one to buy a lot from you.
Sales is a discipline. It’s about how to get other people excited about what you are excited about.
7. Make sure you keep a close eye on key financial metrics.
Making financial projections is not rocket science. It is just a matter of charting the company’s metrics over time and converting them into numerical terms.
A key part of the role of a startup CEO is to track the company’s financial performance and make sure that it is headed in the right direction. The most important metrics to watch are revenue growth and gross margins. Revenue growth measures the rate at which customers are adopting the product, and gross margins measure how much money you’re keeping out of each transaction after paying all expenses.
As a CEO, you should know the financial metrics for your business. In this section we’ll make sure you get started with all of those metrics. First though, let’s acknowledge that there’s a lot more to business than numbers. Your job does not end at crunching revenue and margin data. But financials are a vital part of your job because they define how well you’re doing in executing your strategy — the central task for any successful CEO.
Many businesses have a tendency to lose track of the metrics that matter most to their future. These metrics may be financial, like cash flow or profit and loss, but they can also be customer-oriented, like retention rate or asset churn rate. For startup founders, it pays to have spreadsheet templates that display these important numbers, along with charts that show how they’re trending over time.
While profitability is important, it isn’t helpful to set a goal for being profitable. It may be simple, but setting a number as the target obscures the real goal: growth.
8. Always be open to criticism, and learn from it.
Be open to suggestions, advice, and criticism. It sounds obvious, but it’s not. Most people instinctively think they know how things should be done and are threatened by recommendations or alternatives. That’s why we have the phrase “my way or the highway.”
But in a startup environment, everyone should be open to all suggestions and criticism… This is particularly true of founders. Founders need to learn to be humble and follow the lead of their customers, employees, investors, partners, board members and others.
Hubris is the enemy of every entrepreneur. It’s vital to be open to suggestions, advice, and criticism if you want to learn and keep growing as a founder. A healthy ego is important, but no less than a healthy dose of reality.
No matter how confident or experienced you are, you can benefit from suggestions and constructive criticism. You may still have to say no sometimes, but at least hear it out, because valuable feedback can make you grow and move forward.
When you’re starting a new venture, there are two kinds of criticism you’re likely to get. One comes from the people who doubt that anything can be done. The other comes from the people who believe they could do it better.
Feedback is the breakfast of champions. It helps us identify weaknesses in our skills, and makes us better at what we do. But most of us are terrible at receiving feedback. We spend far more time thinking about how to get better and improve than we do taking advice from others.
9. Be sure to keep your board and investors updated.
Whether you are a for-profit, nonprofit, or social enterprise, the law as well as common decency require you to keep your Board of Directors and investors up-to-date on events that might affect the value of their investment. To do otherwise is bad business practice and borderline fraud.
A startup CEO’s most important job is to communicate with their board of directors and investors. But since these people are busy with their own lives, they can’t expect that they’ll keep current on the details of the company without some help. So the best practice is to keep them up-to-date by sending them a brief but well-crafted regular update.
Keeping your investors and board of directors (if you have one) up to date is important. Stay in touch with them, and give them regular updates on the progress of your company. This keeps everyone on the same page, and avoids miscommunication.
10. Be Aware of Important Legal Issues.
Most startup founders I know are totally ignorant of important legal issues. They don’t seek out professional legal help, nor do they realize how much it is needed. I strongly advise all startup people to give serious time to this area.
As in every aspect of life, the law affects startup entrepreneurs in many and sometimes uncertain ways. Although some legal questions can be sufficiently answered by reading books or online research, most questions require the expert help of a lawyer.
Legal issues arise when a startup is formed, especially when it gets funding. These matters have to be addressed before any serious work can begin.
