Five Lessons I Learned from Building, Growing & Exiting a Startup
My friend Ivan Lee has been in the news recently for creating Pokémon Go ahead of its time. Two years after Yahoo acquired his Loki Studios, Ivan blogged about the experience. So I figure, if nothing else, it’s not too late for me to dispense the knowledge I gained from GoFastCab.
Without further ado, here are four of the most prominent things I learned from building a company, growing it, and getting out at the right time.
1. Put Effort into Fundraising
In 2009, we pitched our idea in a conference room at Sequoia Capital. The associate thought our projections were too conservative, but the partner said our market wasn’t big enough for them. We did end up pitching to other VCs and angel investors. But in retrospect, we would have probably been better off packing up our bags and moving to San Francisco — and pitching to every firm that fit our business.
Still, it is critical that startups raise as much capital as they can. Having money allows you to execute faster and make quicker pivots.
Not many people realize that the ridesharing model wasn’t pioneered by Uber. Companies like Lyft and Sidecar started this. Travis and his team saw the traction they were getting and stepped into that space. They’ve succeeded to date because they had an abundance of capital to leverage their existing infrastructure and compete effectively.
2. Don’t Tie Yourself Down
Our business was launched to automate one portion of on-demand transportation: booking.
We used mobile phones (text messages originally) to send orders directly into fleet operator dispatch systems, which automated the process from there. This gave us a good deal of leverage and scalability.
In late 2009, Uber founders were walking around at a taxi convention that we were exhibiting in. I saw them and told my co-founder that Uber’s model requires them to go into every city with boots on the ground to train drivers. That would take forever to scale. They’d need much more than the $200,000 they had just raised. They’d need millions.
At the time, we had just previously launched in Chicago, partnering with Yellow Cab’s 2,500-car fleet. The integration involved entering some passwords and zip codes into our management portal. But after that, we instantly had all of Chicagoland covered.
Unfortunately, we became tied to a legacy taxi dispatch system, its vendors, fleet management, and specific drivers. We had zero quality control, and oftentimes the drivers and dispatchers involved didn’t have any incentives to provide good service. We simply couldn’t afford to compete with the players that were able to provide peer-to-peer technology, which enabled them to boot bad drivers out of their system.
Bottom line: The more quality control you give up, the harder it becomes to succeed. I don’t think it’s much of a coincidence that the world’s most valuable company, Apple, controls so much of the customer experience (e.g., hardware, software, stores, app approvals, etc.).
3. Get Traction — Even If You Have to Sacrifice
Deep down, I knew that GoFastCab wasn’t getting the traction it needed.
We did raise some capital. We expanded across the U.S. We got into an incubator. Eventually, we fielded several different acquisition offers.
But this all took years. We should have quit earlier, raised more funds, and given up equity for a partner. In my last two years of advising startups, I’ve seen just how important traction is.
Oftentimes, founders are reluctant to fundraise, apply to an accelerator program, or give up equity to an advisor like myself. Instead, they want to hold on to equity, add new features to their products, or delay product release.
With some exceptions, if your startup is going to become successful, you must keep the momentum going — even if it means having to give up something in return. Momentum creates a buzz with your current and prospective customers, employees, vendors, partners, investors, and the media.
4. Pick a Leader
At GoFastCab, my business partner and I shared the “President” title, but we were basically co-CEOs. We shared duties across all domains (sales, tech, marketing, finance, etc.). It was great: when one of us took a vacation, the other held down the fort and handled all operational aspects. However, when it came to decisions, we often fought. Execution slowed down and often, one of us unhappily surrendered to arguing. Plus, by letting everyone have hands in everything, there were way more discussions and meetings than if we had separate focus areas and divided ownership.
Travis Kalanick, the CEO of Uber, talks about how long simple decisions took when he was at Scour. They had six founders and he says something like picking red or white paper clips took four hours.
I think we would have been better off picking a leader in the beginning, and dividing responsibilities. I feel like a good entrepreneur knows their strengths and weaknesses. They recruit solid candidates to complement their skill sets and delegate with confidence.
5. Don’t Hang on Every Bit of Advice
When you are starting a company, advice comes pouring in every angle. Your friends and family members will offer their opinions, as will advisors, mentors, and investors.
Keep in mind that this advice is somewhat biased by their past experiences — just as the above advice is based on my experience at GoFastCab — as well as any ulterior motives they may have. Beyond that, a lot of the advice you’re going to get will be contradictory. There are many tenets in business that are orthogonal (e.g., “the customer is always right” and “some customers are bad for business”).
But on the flipside, if everyone is telling you the same thing — When are you going to quit your full-time job to throw yourself into your startup? — you certainly may want to pay attention. Great entrepreneurs understand all this. They evaluate all the advice and make a final decision.
I hope you found this advice valuable. Please feel free to comment below.