Following on my post at the end of last year where I talked about the need for a more inclusive and collaborative community, I...
Top 10 Tips on Starting a Company Learned the Old-Fashioned Way
We all know that there’s no playbook for startup life – but that doesn’t mean we shouldn’t try!
While life as the co-founder of a startup is exhilarating and full of excitement, it is also extremely demanding and requires you to make hard decisions while existing in a high degree of uncertainty. Too often in the early days of co-founding my company I either let me ego get in the way or was moving too fast to slow down and seek advice from other folks who had gone through similar experiences, because I didn’t appreciate that while every startup is different, there is some great advice that applies to all early-stage companies.
Luckily, we’ve benefitted from some truly wonderful mentors over the last few years who would help us with a friendly tip or a shoulder to lean on, and in the spirit of that camaraderie, I wanted to try and codify some of those hard-earned lessons for future founders. This is by no means an exhaustive list, but I often get approached for startup advice, and I felt that putting together this first draft and inviting collaboration would be an important step in the direction of guiding the next batch of founders towards making something incredible.
…and without further ado, here are my top 10 tips on starting a company which I learned the old-fashioned way.
Scratch Your Own Itch
Find one problem and solve it more thoroughly than anyone else.
First things first, you should find a problem that you know all about and that you truly care about solving. You have to become fully obsessed with the problem and solving it because for most ideas you come up with there already will be defined players solving it – think taxis and Uber, search and Google, telephones and Apple, legal research and ROSS – and to win you have to get up every single day and work as hard as you can to unseat the old way of doing things.
Usually, your idea or method of solving the problem you identify is something that at first many folks will think isn’t a good idea at all. Chris Dixon of Andreessen Horowitz has said that the best ideas to invest in are good ideas that look like borderline insane bad ideas – usually, the differentiator is that the founders have identified an emerging trend that will be changing the way that issue can be solved. AirBnB identifies the coming sharing economy wave, Netflix identifies online streaming efficiencies, Warby Parker taps into online sales of glasses, etc.
At the company I co-founded, ROSS Intelligence, we identified that AI would solve issues lawyers had as they could no longer bill their clients for tasks related to legal research coming out of the 2008 recession – this seemed counter-intuitive to many folks off the jump but it was something we identified as a team of lawyers and AI researchers before others did.
A quick example of what it looks like when folks don’t get it early on? In November 2013 Jamie Siminoff was a guest on the TV show Shark Tank where he asked for an investment that valued his WiFi enabled video doorbell business at $7 Million. Four of the five sharks passed. Kevin O’Leary offered a loan and royalty deal that Siminoff passed on. Five years later Amazon acquired Ring for 1 billion dollars.
Not everyone is going to think what you are doing will work, that’s part of the journey.
Not everyone is going to think what you are doing will work, that’s part of the journey. Click To Tweet
In the words of Paul Graham, cofounder of Y Combinator, “you don’t need a brilliant idea to start a startup around. The way a startup makes money is to offer people better technology than they have now. But what people have now is often so bad that it doesn’t take brilliance to do better.”
Find Other Crazy People Like you
The right founding team makes all the difference, find your A-Team.
You’ve identified your problem, you really, really, really, care about solving it, on a deeply personal level, and now you have to go out there and find the right folks to bring onboard as a fellow cofounder or cofounders.
Being a founder is very hard and finding the right combination when it comes to a founding team can de-risk things and ensure the best chance of success.
So, what is the right number of cofounders? Well, it depends. As Paul Graham says, “ideally you want between two and four founders. It would be hard to start with just one. One person would find the moral weight of starting a company hard to bear.”
Keep in mind, you don’t “hire” a cofounder they join you on your mission fully and completely. I always say the best founding teams are like the A-Team, a group of folks with different and complementary skills (so you avoid butting heads as much as possible!) who work as a team to accomplish goals but who are also never too proud to get into the nitty-gritty and pull the all-nighters and learn new skills needed in a fast-moving environment.
Finding the right founding team is mission critical – you’ll be spending the next years and potentially decades to come together, so choose wisely!
Put the Start in Start-Up
Every journey starts with one step.
At the end of the day, there is an infinite number of things you can do before your startup comes together and you begin truly working on things – this being said, in order to have a startup, you have to start…up – see what I did there?
If you don’t register the domain, if you don’t start writing that first line of code or have that first market research session with someone who suffers from the problem you are aiming to solve, nothing will follow.
I was lucky to have some great mentors early on in my entrepreneurial journey and this helped to develop the idea of thinking of what was blocking a launch, so we could tackle that issue head-on in order to keep moving fast.
What’s blocking you from starting right now? Chances are it’s you yourself so get out there and put the start in start-up.
Sell Something, Anything, But Do It Better.
Don’t chase new, chase different and better.
I continue to see this pressure when talking to entrepreneurs around the world to sell something completely new, that is, to solve a problem that no one has ever solved before.
While this can work, if you step back for a moment you tend to see that entrepreneurs and teams that become wildly successful aren’t necessarily selling something new, they are selling something different and better.
At the end of the day, Howard Shultz, founder of Starbucks, sells coffee. Warren Buffet buys and sells other peoples’ stocks. Ray Kroc, founder of McDonalds, sold burgers. Bill Gates sells software. Jeff Bezos sells well, almost everything these days but he started with just books. You get the picture.
It’s not about innovating on a problem per se, but the innovation comes in the solution itself being both different and better.
A great idea and solution to a problem doesn’t mean you have to find a problem that has never been solved, it means the way you are solving the problem at hand must be different and better and by better it has to be markedly better as a small delta of improvement just won’t cut it when it comes to taking out entrenched products and services.
Find the Village that It Will Take for Your Startup to Grow
Get by with a little help from your friends
You’ve got the problem, the A-Team is together, you’re solving things in a different and better way, now you need to find the village that’s going to help you raise your startup from its early days to a fast-growing success.
The old adage is that you become like the five people you spend the most time with – aside from your great cofounder(s) you should aim to surround yourself with like-minded, forward-thinking, innovative and supportive people as you start your business up. Attend startup events in your city, read as much literature as you can by successful founders, network with other founders and find a network of individuals who help make you a better entrepreneur yourself.
Starting up is not easy but with the right network and community you can, as the Beatles said, get by with a little help from your friends.
Listen and Learn from Everyone, But Double Down on Your Potential Customers
Startups don’t run out of money, they run out of time. You have two ears and one mouth, listen.
It’s an oft-repeated mantra of Silicon Valley that startups don’t run out of money, they run out of time. When you take a second to think about it, it makes a lot of sense – on a long enough timeline with enough money to try new things, a business success becomes much more probable. Because the money you raise will not be finite, you need to figure out how your potential customers want their problem solved, and you need to figure it out fast.
Now you have heard the old Henry Ford line, “if I had asked my customers what they wanted they would have said a faster horse. If I had asked people what they wanted, they would have said faster horses,” funny thing is? Henry Ford never actually said this line.
How do you figure out what your customers want? Ask them! Watch them! When folks ask me if I think a particular idea they have is a good one I always ask, what do your potential customers think about it? If you are not willing to put in the time to do market research and talk to your potential customers off the jump, it becomes nearly impossible to build a successful product.
Remember that the best approach is to always be speaking to your customers so that as the product matures you continue to seek feedback on how your product can improve – in Silicon Valley speak this is called iterating on your product and it something that can lead to a very successful product as customers’ needs are constantly being addressed which ensures that at every stage of development your tool is something people want and need.
Learn whose opinion to ignore.
Not everyone’s feedback is going to help, some of it, if taken at face value may sink you.
As I mentioned above, the problem entrepreneurs often face is that you will receive negative feedback. While some of this feedback comes from a place of wisdom and should be taken very seriously, feedback that comes from a place of negativity or insecurity should be ignored at all costs.
For example, when you start your company many will see what you initially build and think of it as a “toy” or a “science experiment” that will never truly gain market traction. These folks need to be ignored.
Steven Sinofsky, former President of the Windows division at Microsoft puts it this way, “As many have recognized, when inventions and innovations first appear they are often (always) labeled as ‘toys’ or ‘incapable’ of doing ‘real work’ or providing ‘real entertainment’. Of course, many new inventions don’t work out the way inventors had hoped, though quite frequently it is just a matter of timing and the coming together of a variety of circumstances. It can be said that being labeled a toy is necessary, but not sufficient, to become the next big thing.”
Chris Dixon, who I mentioned above, wrote a piece titled, “The next big thing will start out looking like a toy” which described this phenomenon as follows: “disruptive technologies are dismissed as toys because when they are first launched they “undershoot” user needs. The first telephone could only carry voices a mile or two. The leading telco of the time, Western Union, passed on acquiring the phone because they didn’t see how it could possibly be useful to businesses and railroads – their primary customers. What they failed to anticipate was how rapidly telephone technology and infrastructure would improve (technology adoption is usually non-linear due to so-called complementary network effects). The same was true of how mainframe companies viewed the PC (microcomputer), and how modern telecom companies viewed Skype.”
If you’re still not convinced, here’s a more recent example, broken down into four words arranged in chronological order. Blockbuster, cable TV, Netflix.
This being said, the danger is that you have to walk that thin line of reality as not all things that are dismissed as toys will turn out to be disruptive products which means not all feedback you receive of this sort can be dismissed. The key differentiator seems to be that the products that seem like toys but are riding a shifting change seem to work out best. For instance, smartphones becoming available at the same time as extraordinarily powerful microchips becoming affordable while machine learning in app form becomes possible for the first time. For a product to truly be disruptive it should be riding a wave of change that continues to rise until the product fully blossoms.
Raise Money from The Right People
While all money may be green, getting funding from the wrong folks early on can end up sinking your business.
Oftentimes entrepreneurs conflate raising money with success. Raising money is something you do while building a successful company – raising money is not an end in itself. On top of this, entrepreneurs need to remember that when you choose to accept an investment, whether it be from family or friends, from angel investors or from an institutional source like a venture capitalist, these people and organizations become team members as well.
Choosing the right investors is just as important as choosing the right co-founders. What this means is that raising money from the wrong people can doom your company from the get-go.
Choosing the right investors is just as important as choosing the right co-founders. What this means is that raising money from the wrong people can doom your company from the get-go. Click To Tweet
If you are misaligned with your investors you will be building a product to hit metrics they may want to see, such as overall number of users or perhaps total revenue which may be a metric that can be maximized in the short-term but perhaps should not be the main priority for the health of your company at that specific time. Misalignment with investors is something you don’t want to have happen as it can sink a great early start so when raising money remember, choosing the right investors makes a critical difference.
Culture eats Strategy for Breakfast
Even with the best product and the right skillsets on your team you may not become as big of a success as you think.
A company’s culture is like a company’s heart and soul – you can’t see it but it’s what’s driving things forward. When a company gets culture right, things work great – employees are engaged and passionate about the company goals and operate with a sense of pride and mission rather than listlessly going through the motions and collecting their paychecks.
Culture is the bedrock of how the company operates – it forms the environment in which a company’s strategy and brand either grows and blossoms or shrinks and dies.
Culture is the bedrock of how the company operates – it forms the environment in which a company’s strategy and brand either grows and blossoms or shrinks and dies. Click To Tweet
When you start your company, you will have a lot of work to do but one thing you should do as early as possible is have a conversation and define what is important to the company from a culture perspective. Having important conversations about culture as early as possible is critical because as a company grows and gets larger and older, culture becomes something that is harder to shape and mold.
My suggestion is to take time early and have conversations about what values are important to the founders and early employees and aim to codify them so that in making decisions on a day to day level the company can stay true to its values and a healthy culture can take root which will be an anchor for the future no matter how large the company grows or how many offices you open.
It’s simple. All you have to do is never make mistakes.
…I’m kidding but the trick is to seek mentorship and educate yourself, so you can avoid as many of the wrong mistakes as possible!
I won’t reinvent the wheel on this last piece of advice because I recently came across the graphic below of the top 20 start-up mistakes from CB Insights that I think are super useful.
Before you read about these common mistakes, and keep in mind this list is not perfect by any means, remember the following: When you start a company you will make loads of mistakes. Mistakes are inevitable and you learn from them and grow – but if you can avoid making the wrong mistakes where possible you can maximize your success. Not all mistakes are made equally. Some you learn from and others you suffer through unnecessarily.
So get out there and chat with folks and read content from other entrepreneurs and founders so you can learn from their mistakes – history doesn’t have to repeat itself all the time, be smart, learn from others and don’t forget…enjoy the journey!
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