There are lessons that some startups learn after they’ve crashed, and mistakes that successful startups either learn early or avoid making.
If you want to be successful as a startup, learn these lessons early – or be very lucky and avoid them.
Lunch yesterday with my friend and colleague Dr. Jo Whitehouse – a rockstar in the startup world – highlighted two of them. And as cash has flowed back into startups in a number of sectors (tech, green, biotech) – evidenced by the $41,000,000 that pre-product startup firm Color [Disclosure: WSJ reporter Geoffrey Fowler, who wrote this story, and I know each other socially] received this week – looks like school is back in session.
Finals might even be held early.
All startups (yes – all startups) lack one critical ingredient – time. You can pretty well figure out workarounds for most anything else, even IP in some cases, but time is the big limiter. And time is the one thing you can’t buy.
You can, however, buy other things. Groupon’s ill fated Super Bowl ad shows that you can spend $3,000,000 and get literally nothing (at least nothing good) in return. Anything that takes resources away from getting great products or service to market – and steals time away from that purpose – is stuff to be avoided at almost all cost.
Based on my work – both in running a startup as a managing principal – and consulting to many through my work as leadership and team coach – here are the lessons I’ve learned about places I’d spend money (and save time) so you can be successful – and places I’d avoid spending either.
This is the people – human side of things. If you can get on his dance card, somebody like former colleague (from our work together at startup Fluid) Ted Wang can do the best job of anyone I know walking you through lots of other start-up counseling stuff including funding, incorporation, investor relations, and running basics of the business. You can find a wealth of other information out there – including how to flip your startup in 5 easy steps.
Still startups are mostly about people. And business success, to be clear, is the name of the startup game. Here are the lessons to learn:
- Figure out where you want to take the business and what the key dependencies might be; IP, talent, collaborative relationships, creating new markets, marketing, etc. Startups can have lots of twists and turns but having a little forethought is what separates wipe-outs from “ahead of the pack.” This is an 80% rule; it won’t be perfect. Avoid perseverating about it.
- Performance is about being effective and efficient; get whatever key processes (recruiting, hiring, engaging, and retention if talent is one of your key dependancies, for example) to do both. More startups waste time - and waste time as they scale – because their processes (e.g every new hire has to interviewed with everyone in the firm, customer set up is labor intensive and not automated) don’t scale or they can’t be repurposed and the proverbial wheel constantly gets reinvented
- Avoid rework; the biggest time sink is redoing work that should have been designed well the first time. This covers a broad swath of turf including stuff like customer, investor, product development, employee communications and relations, process design, etc. As the saying goes, “To go fast you must first go slow.”
- Establish the measurements, milestones and metrics that will enable you to know if you’re headed where you want to go, and if you’re on your road to success. Metrics (a few – not hundreds) are your compass; no compass, no direction.
- Get your leadership on the same boat and rowing in the same direction. I never cease to be amazed how many co-founders – including some who have know each other for years – surprise each other with the differences in what they thought they were doing and going. The problem is that when it’s a disconnect at the top, it’s a tidal wave in the firm. And tidal waves, as well all know, do bad things. They can worse things when they suck away time from your startup because it’s time you can’t get back. See Road Trip as an example of how to get people in the same boat and rowing in the same direction. Holler if I can help.
- Be frugal. Spend wise money though on stuff that buys you more time, more effectiveness, and more efficiency. Stuff like teaming work so your founders and exec team are working together on the same goal, with the same metrics, known roles, and agreed rules of engagement. Doing the same thing throughout the rest of the startup team is a smart idea as well.
- Treat people well, people like investors, employees, vendors, co-founders partners, etc. That does not mean throw money or SWAG at them – just be a mensch. Reid Hoffman is a successful guy and hunch is he’s going to keep being successful and become wealthier. Why? People like working with him. It’s a small world and being candid, honest, authentic and doing what you said you were going to do has rewards now and in the future. Do avoid being a jerk.
Avoids (in other words – Don’t)
- Avoid being cheap; cheap is not being frugal. When you can get something for a fair price, take it. If you can get a resource or collaborative relationship that gets you four times as much for twice the price, jump on it. The game is about best value – not best price; learn the difference early.
- Avoid thinking you know it all. High IQ people are legendary for lacking EQ smarts. Be bright enough to know the areas you know well, and smart enough to bring in talent and help in the areas where you. There’s a good reason that a lot of rich, smart people buy sports teams and lose money; they’re not from the sports business and think their high IQ will compensate for it. It won’t. The same applies to startups. Read The 10 dotcom flops for a lesson on smarts and hubris.
- Avoid spending time and money on bigger, nicer offices, logos and marketing swag that no one will see, and whether to put the 20th office in your presently one location startup in Berlin or Amsterdam. Success rates of startups alive after ten years are around 30% – which means 70% (match quiz upcoming) will be toast. Focus on what you’re doing next week, next month, and next year. Period.
- Avoid thinking that it’s all about talent and resources. Or the next great idea or strategy. Or execution. It’s about all three, with some luck thrown in – just like sports teams and personal lives. You can increase your odds of good luck; being curious and reaching out (that’s why it helps to be good with people) to people are two of my favorites.
- Avoid thinking it’s how many hours you work. Yes, there will be long hours, but there’s compelling research that proves effectiveness tanks after 10 hours. Go home. See your family if you have one – even if it’s your dog or cat. Work-out. Recreate. You’ll be much, much more effective and efficient if you do.
- Avoid thinking it’s all work. Startups are great – they can be even be fun. Where else to you get paid and have upside for creating something out of nothing?
Get your lessons “right” and you’ll likely do well. Research has show that sustained performance is about time, talent, trying and thinking about different strategies. Sometimes things don’t all come together for the first time. Then again, sometimes they do.
Life Back West is an occasional set of writings focused on ways people, teams and organizations can be both more effective (doing the right thing) and more efficient (doing the right thing well). More about executive, new role, career and team / leadership coaching services can be found at the “About J. Mike Smith and Back West, Inc.” sidebar or the “Hire Me” tab above. You can also read an online interview with me at WhoHub, as well as participate in my learning community courtesy of KnowledgeCrush.