Recently I had the honor and pleasure to be invited to hold a keynote speech for Alumniportal by Deutscher Akademischer Austauschdienst (DAAD).
I spoke a bit about five things I wished that I had known before starting out as a startup founder.
Here they are – in no particular order.
About the DAAD:
The DAAD is the world’s largest funding organisation for the international exchange of students and researchers.
Since it was founded in 1925, around 3 million scholars in Germany and abroad have received DAAD funding. It is a registered association and its members are German institutions of higher education and student bodies. Its activities go far beyond simply awarding grants and scholarships. The DAAD supports the internationalisation of German universities, promotes German studies and the German language abroad, supports countries in the Global South in building and improving their higher education systems and advises decision makers on education, foreign science and development policy.
Startup Equals Speed
Not only does “startup equals growth”, successful startups execute at a speed that school and regular employment jobs usually do not prepare us for at all. And in a startup, it’s more important to make decisions quickly than it is to take the time to make sure it is “the right” decision. Every time you make a decision, you’ll learn something – and if you make decisions quickly enough, you’ll still have time (plus energy & resources) to course-correct with new decisions. The team doesn’t always have to consent – it’s OK to dissent – but you have to commit to a decision, as fast as possible, otherwise you are standing still – and going too slow kills startups.
The health of your startup can be measured by the time it takes to get things done, how long it takes to complete a build-measure-learn cycle. That is to say how long it takes from analysing data from customer interviews and metrics data from the product, interpreting (learning) what to do next, and implementing the learnings in a new product release (and repeating the never ending cycle).
If it’s taking weeks, you’re losing already. Stop everything. Do everything and anything — short of committing clearcut crimes — to speed it up and keep the speed up. Instill urgency. Try more things, more ways, different ways. Do more of what works, stop doing what doesn’t. Sacrifice all personal time. Fire co-founders if needed. Fire investors if they hold you back. Or just quit now.
Heuristic
When the amount of new learnings about new stuff to build outnumbers the amount of pre-existing learnings about the stuff you already know you have to build (the stuff you already have in the pipeline, the stuff you haven’t gotten around to implement or change yet), your startup is dying – or possibly already dead.
It takes longer than you think
On average, it takes much longer than you think to get anywhere interesting. Statistics show that startups often need 2-3 years to reach the mythical Product-Market-Fit (PMF). And after the initial spike “TechCrunch of Initiation”) of interest, growth, customers, users, press, etc – not much is going to happen for a long long time. This is the “walking in the desert” period YCombinator calls “the trough of sorrow”:
This is why you need to think about how you are going to sustain yourself for this long time period, both financially and physically. You need to take care of, and keep a keen eye on, your personal finances – at least to a point where you are barely getting by, but not creating new problems and worries you really don’t need right now.
You also need to take (somewhat) care of your body, so you don’t crash and burn before you get somewhere interesting with your startup. Care a bit about what you eat and do get some light to moderate exercise in each day – even if it’s just 30 minutes of faster paced walking; e.g. doing meetings while walking is a thing you might want to try.
Startups run on people
Startups run on people – obviously. A special kind of people. If you’re wondering if you should found a startup together with someone you haven’t done a startup with before, you want to find out sooner than later if you work well together. Don’t go all-in on founding a startup straight away. Work on a silly unrelated side quest together instead for a couple of months. Set ambitious goals, see if you can reach them (see if you have the same opinion on what ambitious means and if you think in complementary ways about how to deliver on those goals). Get to know each other before committing to co-found a startup.
And before people, co-founders, leave the startup – either physically or mentally – before you get to somewhere interesting (or later), you need to have something in place that on the one hand incentivises them to stay on until you get to somewhere interesting and on the other, to make sure people can leave or be removed without killing your startup (aka, “Screw you guys – I own 50% equity, but I don’t want to work on this startup anymore. I’m just going to sit on this tropical island, not working, just waiting to cash out on an exit”). And this something has to be legally binding. We usually call this a vesting plan or vesting contract. A vesting plan usually covers the first four years of your startup’s life. Why? It binds the co-founders for the timespan of reaching PMF – and statistics also show that a quarter of co-founders have left within the first four years. Get a startup lawyer, get a vesting plan in place for all co-founders.
CAVEAT: Be aware that, depending of the laws and regulations of where you are incorporated, vesting might work differently than the US-centric way described below — or not at all. E.g. in Germany you have “reverse-vesting” because of tax laws. Get a startup lawyer and consult on your regional options.
Ideas are worthless
Ideas are worthless without execution. Everybody has ideas, but only a few are willing and able to execute on their idea.
Fall in love with the problem or need you are solving, do not fall in love with your idea.
Why? Because more often than not, you initial idea of a product or solution is not what the market can or will adopt. If you attach your ego to a fixed idea of a solution from the start, you’re going to be turning a deaf ear to almost everything the potential customers or users are telling you (or would have told you, had you actually talked with them – and no, most likely not directly; you still have to read between the lines, interpret what the feedback means for the idea, for the product), actively not learning anything about the real world market, preventing yourself from becoming successful.
And no, you are not Steve Jobs (and you probably have exactly zero special insights into how he went about the process of creating new innovative products, so eat some humble pie). If you insist on sticking to your ego-bound idea, not talking to customers or users, I’m willing to bet my money on you being much more like an Elizabeth Holmes than a Steve Jobs.
If you insist on attaching your ego to a fixed idea, to proceed in a vacuum – not talking to customers or users – you’re probably going to end up like Smeagol turning into Gollum; You are going to become utterly and completely corrupted by your own idea. I have yet to see this ending well.
Sell first, build later
We are conditioned from an early age to believe that the (only) way businesses are built is that they first produce something, then they try to sell it. This is a dangerous and counterproductive way of thinking if you are a startup founder.
Why? Because we want to find out as fast as possible if our idea of a product is something the market will adopt – like today, not in some unspecified distant future when a product may or may not have been built. We want to still have enough motivation, energy, time, and resources left to keep changing and iterating the product with market feedback.
A tried and tested way to fail is to spend a long time in a vacuum building a product with no customer or user feedback, as I already talked about.
However, there is another insidious trap you can fall into if you are indeed building the product with feedback from potential customers (or so they say) – but you failed to qualify if they are indeed customers by not asking for their money (b2b), time & data (b2c) first.
On the surface of things it looks and feels like you’re doing everything right, but you might find out way too late that what you thought was a customer (b2b) or a user (b2c) just thought it was fun little diversion from their life or work to talk to you, making them feel important, having an influence on developing a product – with no ability or intention of actually buying or using the product.
This is usually not because they are in any way disingenuous on purpose. It’s because you didn’t ask them to actually part with value to proceed. No, asking “would you pay for this?” doesn’t count. They have to at least believe they actually have to purchase something (b2b) or giving personal data (b2c) to proceed. Better yet, they actually do / you actually let them.
And it’s also because the human brain is incapable of accurately predicting future behavior. It makes up stories for us. Stories that also intended to prefer social harmony (future optionality, if you will) to unambious rejection. This is why “I could totally see us / me buying / using this” is the worst kind of garbage feedback that you can safely ignore completely.
And let’s be honest, it’s also very often because you don’t want to go out of your comfort zone and try to sell (or market) something that doesn’t exist (yet).
The truth is usually to be found somewhere in between what customers say and what the data says they actually do.
And success is not found inside of your comfort zone. If you want to become successful, you need to start being comfortable with being uncomfortable with constantly being outside of your comfort zone.
Heuristic:
If your business model is b2b, you should be measuring yourself on your ability to sell. If you can’t sell it, you won’t make it. Day 1 you (the founders) are the product. You are sales. Outsource sales at this stage and you will die. Do things that do not scale. Sell services! Get into their procurement system. Get paid – no free “pilots” ever! Build trust over time. Get insights from customers to put into product. Sell more product than services over time. Follow Jen Abel. Rinse, lather, repeat.
If you’re b2c, you should be measuring yourself on your ability to distribute (grow) and delight (engagement). If you can’t distribute and grow it – and once distributed, users don’t engage with it on a regular basis – you won’t make it. Try many things in many channels. Do more of what works, stop what doesn’t, keep trying new things to compare to what already works. Keep an eye on your growth rate. Monitor your MAU, DAU, CAU.
If you are looking to raise money, investors will certainly be doing this evaluation of your startup.
A sale a day keeps the VC away.
