Some hard lessons about starting a startup (part 1)
- Building a profitable business from scratch is overwhelmingly difficult, even for talented people. I’ve watched quite a few friends and acquaintances that I respect start businesses, and the vast majority of them stalled, failed, or were forgotten. I used to suggest that anyone interested in starting a startup should “just start” but I’m no longer sure that is good advice. It helps to have a deep passion for the problem you’re solving. Missionaries are more likely to push through the inevitable setbacks than mercenaries.
- Over emphasize integrity and quality in your team. Be patient and wait to work with cofounders and early hires who you think are outstanding and deserve your trust. Perform due diligence on character and don’t “panic hire” as some startups seem to do. As Munger says, a web of trust is far more effective than layers of process for ensuring good behavior, and it is more fun and rewarding to work with good people. The founders and early hires will also create the culture of the company, and this is not something you want to mess up.
- No matter what else you do well, if you don’t create a product or service that your early users/customers love, you are dead. There is a tendency to fundraise, build 5 year financial models, network, and a whole host of other activities that in the early stages do little to de-risk the business. Focus on achieving 10 happy customers and don’t get distracted. (One exception to this may be if you are building a business with a “commodity” product or service, in which case larger worries will be around whether you can create a sustainable moat around the business.)
- “Stubborn on vision, flexible on the details.” Startups should have cultural principles that are ironclad but strategy “should be written in pencil.” Still, while I love the above Bezos quote, I’ve found that it is surprisingly hard to get this right as a founder. While it is important to stay nimble and try different things early on, it is tough to know when it is time to pivot. It is important to abandon losing strategies quickly, but going in too many directions is a distraction that can kill an early business. Focus on finding the one thing for your users/customers that you do really well.
- Founders should be prepared to work harder than they ever have, but you also have to take personal time to stay happy and healthy. Again, starting a startup is not for everyone. You have to be willing to sacrifice some areas of your life if you are going to be successful. I do not see many successful entrepreneurs going home and watching Netflix. That said, you must invest in your health and spend quality time with friends and family to stay sane and make good decisions. It’s a tough balance.