Most early stage startups have a consistent relationship with money: never enough.
When describing the financial situation of these startups, people typically use the words runway and burn almost interchangeably.
The word runway brings up the vision of a talented, scrappy team working hard to bring a plane to takeoff while they are still building it. The runway is made of money and it’s short with an uncertain chance of being extended. The team may not build the most beautiful or technically brilliant plane before takeoff but the goal is simply to build and fly.
The word burn brings up the vision of a talented, scrappy team smoking cigars in a dark room lit up by the glowing fire of money engulfed in flames. The sound of laughter crackles and echoes throughout the room. The defining memory etched into everyone’s mind is the intoxicating smell of cigars and burning money.
Clearly, these are two very different visions. One is about building. The other is about destroying.
Words and images aren’t real. Are they?
In a startup, every word and image counts. Don’t burn money, build and fly.
Everyone knows time is a scarce resource. In fact, once basic necessities have been met, time is the scarce resource.
That means time has value.
Many very smart people have taken this idea to its logical conclusion. They put a high price on their time. $300 per hour. $3,000 per hour. $30,000 per hour. If you want to get their advice, hear them speak or simply meet them, you have to pay.
After all, time is money.
But money foregone today can be made tomorrow. Money can earn more money. We create money.
Time is none of these things.
Time can’t be made tomorrow. Time can’t earn more time. We can’t create time.
In fact, money is a poor substitute for time. They ain’t even close to being equals.
So stop using money as a measure of time.
Instead, use your mind, heart and spirit. What is the logical thing to do? What is the right thing to do? What is the intuitive thing to do? Suddenly you have real choices to make.
Time ain’t money because time is priceless.
For entrepreneurs, there are always way too many things pushing and pulling in different directions. Being able to prioritize is key. But everything seems important. Everying seems urgent.
Start with the basic basics.
First, survive. Seems obvious, but if all your advisors and investors are telling you to go big, and they’re really smart people, it’s easy to forget about this most basic rule. It’s good to fail small and fail fast. But also make sure to survive the failure. It’s no good to fail if you can’t get up again. The most successful founders have an uncanny commonality: the ability to survive.
Second, explore. True exploration feels like zero progress. Everyone around you will tell you to focus. To stop messing around. To get on with it. The problem is, you need to find it first. This takes time and mistakes. In theory, this is all about fail fast, fail small. In reality, this is slow and painful.
Third, build. Once you find it, there’s something to build out properly. Don’t mess around. Yes it’s fine to test assumptions. But now is the time to build. Usually, it’s easier to start small. Find a great solution to a small pain point. Then use that to grow bigger.
Of course, there are many other things to do. Plenty of details to manage. Issues to consider.
But start with the basic basics.
Survive first. Explore second. Build third.
Investors in early stage companies have long used pattern recognition about founders. The basics are common sense. Work ethic because startups can’t succeed without plenty of grunt work. Integrity because life is too short to spend it all in courtrooms. Smarts, both book and street, because there is an endless supply of problems to solve.
Beyond the common sense, there is a tendency by investors to add in several additional, and questionable, layers of patterns. Founders have to attend certain universities. The number of official founders has to be more than 1 but less than 5. Founders have to know how to pitch extremely well.
If early stage investing were about patterns as simplistic as this, then analytics and algorithms would definitely replace all humans as early stage investors sooner than later.
But the key to success in early stage investing ain’t about patterns.
It’s about unique people who break patterns.
It’s about outliers.
They went to the wrong school and still busted through to do something special. They are part of a strong and large team who work well together. They are terrible at pitching but build awesome product.
If you’re a founder who breaks the patterns, who is an outlier, the bad news is that there are many investors who will pattern match and say no.
The good news is that, by being an outlier, you have a chance to prove them spectacularly wrong.
In the first stage of a startup ecosystem, only the true believers are involved. Most of the investors really are angels.
As a startup ecosystem gains momentum, it naturally attracts some sharks. They smell blood.
The reality is that most entrepreneurs won’t be able to separate angels from sharks just by simply meeting them. In fact, angels may be brutally honest while sharks may be deceptively flattering.
So how can busy entrepreneurs distinguish between angels and sharks?
Find entrepreneurs who have successfully completed fundraising from the local ecosystem. They won’t have the time or desire to post about sharks on social media. But they will tell you the real story in person.
Ask other investors about their favourite co-investors. Good angels like to co-invest with other good angels. They like to co-operate with people. Sharks don’t mix well with angels. Sharks like to control people.
Test the market. Don’t just speak with 2 potential investors. It may seem like a lot of time and energy to meet with 20 or 100 or 500 potential investors. And then due diligence the short list. But it’s worth the effort.
Sharks bleed your company dry until there’s nothing left. Angels donate blood to help your company survive and thrive.
The good news is that customer development is much more common among early stage startups. The bad news is that a lot of startups are still doing it wrong.
Teams research. They formulate questions. They get out of the building. They ask questions. They analyze the answers. They build products based on the answers. They bring the products to market. The products fail.
But these teams did customer development, didn’t they?
If customer development was simply a matter of getting customers to answer questions on forms, then all airlines would have perfect customer service. Have you flown economy lately?
Instead of diligently building lists of questions, spend more time simply observing customers and users in the wild. Do you see their faces getting tense? Do you hear them swearing? Can you smell them sweating? You’ve found gold dust: a customer pain point.
Importantly, observation ain’t just about what you see. You need to use all six senses, including your gut.
The reality is that, most of the time, we don’t even realize what our own pain points are as customers and users. It takes a special company to solve these hidden pain points.
Be that special company. Don’t just ask customers, use your six senses.
To build a business, you need to convince investors. You need to convince customers. You need to convince employees. You need to convince co-founders. But, most of all, you need to convince yourself.
That’s a whole lot of people who need convincing.
Investors love a big, profitable business. Customers love a great product or service. Employees love an attractive workplace and career opportunity. Co-founders love all sorts of things. And then there’s you. How to satisfy so many different goals at the same time?
Find a purpose. A purpose that pulls you.
Once people realize your purpose, they will rally around you. But not just any people. They will self-select because of the purpose.
It won’t be a smooth road. It won’t be a bumpy road. Because there is no road.
You have to build the road. Purpose helps you build that road.
Is purpose a powerful tool that can be abused? Absolutely.
So it’s not enough to simply build a road. There’s something more important. Build a road in the right direction.
Convince yourself first. Don’t just build a business, follow a purpose.
You’ve got a startup in Middletown, Land of Nowhere. Everyday, you read about the super fancy accelerators popping up all around the world with free wifi, rockstar mentors and bucket loads of cash.
Part of it is true. But a lot of it is hype.
That free wifi? It’s so slow, your grandma could knit 20 sweaters while waiting for 1 website to load.
Those rockstar mentors? They’re all too busy to meet in person except for the guy who keeps sending emails about timeshare property.
The bucket loads of cash? It’s all in kind services through a matching grant secured by the DNA data of your future grandchildren as collateral.
You’re not unlucky to be missing out. You’re lucky to avoid the distractions.
Build. Sell. Don’t believe the startup hype.
Running out of batteries on your gadgets ain’t fun. Running out of batteries on your body, mind and soul is worse.
The always on, always connected, always working superhero is a popular myth. Some people even actually live this way. But it ain’t healthy, fun or sustainable.
There’s a time to act and there’s a time to reflect. Without time to reflect, the time to act results in plenty of activity without getting anything done.
During the time to act, the best results come from being in the zone. Getting into the zone is hard. There are so many ways to miss the zone. An easy one is lack of sleep. Tired people make bad choices.
So keep it simple. Don’t be always on. Rest, recharge and reflect. You’ll get more done.
It’s snowing startups.
Startup ecosystems are building up all around the world. Things are being standardized. This makes the whole process faster, cheaper and better.
On balance, this is all fantastic. But not perfect.
Every company is unique because every team is unique, every market is unique and every story is unique.
Does content marketing help to generate low cost customer leads for many businesses? Absolutely. Is it necessary for every founder to be blogging and engaging in social media?
Should companies be taking advantage of the latest tech tools and services? Yep. Is it necessary to be on the bleeding edge of tech to build every business?
What about learning and practicing key techniques to improve pitching? Definitely. Is it necessary to have every pitch deck end with a final slide showing a graph of up and right, regardless of the metric?
As startup ecosystems scale, there is pressure for startups to follow best practices. Much of that is useful. But it is all context dependent.
Startups are snowflakes.