19 Startup Lessons from 19 Years Working with Startups
Today marks the 19th anniversary of my company, StartupBiz.com. That’s a lot of chapters…a lot of lessons. Figured I would share a few. It’s Friday, I’m celebrating with a glass of wine and reminiscing. Grab a glass and join me.
(Thank you, BTW, to all my friends, colleagues and connections that sent me a congrats note here on Linkedin.)
I started StartupBiz in 1997 as a resource for aspiring entrepreneurs. It was one of the first websites ever created for startups. Truth be told, I needed a convenient place to direct all the people who wanted to buy me coffee and pick my brain. That was the beginning of the Internet boom and everyone wanted to stake a claim.
Having just sold a company and joined another high-profile Internet startup, people wanted to know how to do it, especially how to raise venture capital. I have a hard time saying no…always try to be helpful to those who ask, but could not personally accept every request. Thus, StartupBiz was born to give people a place to start their startup.
At its height, StartupBiz was serving about 50,000 unique users per month with how-to info, templates, best practices, and links to pre-screened service providers and investors. As more and more sites cropped up to fill these needs, StartupBiz morphed into an angel investment platform and an advisory service for select startups. It’s safe to say I’ve assisted thousands of startups via StartupBiz over the last 19 years.
In honor of this milestone, I thought I would share a few lessons that I have tried to pass on to entrepreneurs over the years. There is no magic to the number 19 and these are in no particular order. I don’t declare these as definitive “truths” for startups. They are simply my truths. Embrace them or reject them. They were learned the hard way by myself and many of the entrepreneurs I have had the privilege of working with over the last 19 years.
1. Don’t waste your time on a “me-too” idea. Develop something truly unique, otherwise you will always be resigned to competing on price and features.
2. No one is going to give you money for an idea, no matter how good it is, except perhaps family and friends who don’t expect to be repaid.
(The only other exception is if you are a serial entrepreneur who has had one or more successful exits and investors simply want “in” on whatever you decide to do next. If you’re one of those people, you could be writing this column. See lesson 19.)
You have to develop something of value, i.e., a real product and/or intellectual property, if you plan to raise outside capital.
3. Sorry, you can’t be a corporate employee and an entrepreneur at the same time. You can be gainfully employed full-time by an organization while you are exploring, building and testing an idea. That’s all fine and good and you SHOULD do that before entering startup land. But until you take the leap, you are awannapreneur, not an entrepreneur. And no, investors are NOT going to invest in your startup when you are working for another company.
4. The only capital you truly need to start a successful business is creative capital, which includes sweat equity, vision, energy, passion, determination, and a bias for ACTION.
5. Stop worrying about raising investment capital. If you develop a great product for a big enough market, it will find you.
6. There is a BIG difference between a growth company and a lifestyle business. Know the difference. There is nothing wrong with starting and running a lifestyle business, just stop confusing it with a business that investors will want to invest in. Go see an SBA banker.
7. The best startups tackle a really big problem in a new or under-served market, while focusing relentlessly on a small set of metrics and business practices. Don’t over-engineer your product or processes.
8. The best startups are hyper-focused. Stop trying to be everything to everyone. Apply the rule of ONE: One product. One market. One business model. One strategy.
9. A business plan is an awesome and vital exercise for you and your team. No one else is going to read it, so don’t mistake it for a fundraising tool. (The exception is your banker – see lifestyle business.)
10. If you can’t explain or demo your product and value proposition in less than two minutes, you have already failed.
11. The best investors are (future) customers. Pick your first customers very carefully. Make them an offer they can’t refuse and get them to agree to be a reference for prospective customers. Customers attract more customers (and investors).
12. The best go-to-market strategy piggy-backs on the installed base of others. It leverages the sales and distribution channels of others. You’ll never raise enough money fast enough to win enough paying users from scratch, to reach profitability before crashing and burning.
13. Website visitors and app users are not customers. Any fool can give a product away. If you are using the Freemium model, at least 20% of users should be paying for the product and that number should be increasing monthly.
14. Money has equal value no matter what source you obtain it from. That does not mean you should take money from the source that offers the best terms. The critical variable is always the people behind the money. It’s sad but true, many investors/lenders are clueless, and they can have a devastating effect on your business. Choose your investors/lenders wisely.
15. The day you raise outside money is the day you effectively give up “control” of your company, even if the investors have less than 50% of the stock. Control should never be your objective. Shareholder value is the only real measure of a company’s success.
16. Your business is either growing or it is dying (unless you are a life-style business). If you are not doubling your business every 12-18 months and are unable to raise growth capital, sell it before it is too late.
17. Everything you create can be copied and probably will be if you get traction, including your patents, branding and other IP. You only have two sustainable competitive advantages: your team and satisfied customers.
18. The best way to grow (scale) a business is through acquisition – other products, other customers, other markets, other teams – if done properly. If done poorly, it can just as well kill you. Your stock is a currency, use it to acquire assets to grow, then actively orchestrate good tech and cultural integration.
19. The single most important thing you can do to ensure a successful, long term career as an entrepreneur, is to make money for your shareholders. Your customers and most of your team will soon forget you. Your investors won’t. Get them out whole. Good exits provide the opportunity for more good starts.
Okay, so I could go on and list another 50 or so lessons, but then you wouldn’t have anything to look forward to on my 20th anniversary. I hope that whatever you are doing, you are having an amazing experience. And I hope your 19 years of doing it will be as exciting and rewarding as mine have been. Cheers!