Sobering Up Startup-Wise
Ten Lessons In Reality for an Idealist & First-Time Founder
Some of these seem like givens now; just goes to show there are so many things you don’t know you don’t know going in, especially if it’s your first time running a company. These lessons helped tether me to cold, hard, healthy reality; hope they can also prove useful for fellow idealists out there.
- Don’t hire people before there’s a clear revenue model.
My original plan for BGBridges was to start a social innovators’ professional network & project collaboration web platform — the solution that arose to the original question that started it all: “How to attract and retain globally-minded talent in Taiwan?” Like any founder, I believed wholeheartedly in the vision and needed help to keep operations going while I focused on pitching and getting funding. But turns out revenue models take time to test out and build before funding can even be in the picture; you’ll need to keep costs down to have a long enough runway. If you need consistent, dedicated help like I did, go with contractors.
- You need a tech co-founder before you can get funding.
I’d originally wanted to build a prototype first, and turns out you can do so even as a non-technical founder by drawing up your own low-fidelity wireframes, then contracting a graphic designer and a full-stack developer (thanks Nick!). But even if you have a prototype, turns out VCs only invest in ventures with a tech co-founder because they’re more scaleable. So all in all, it would still be much better if you had a technical co-founder. On it.
- Finding a technical co-founder is like dating to get married.
At first I’d casually ask around to see if people knew any developer who may want to co-found this thing with me. Turns out that’s like asking if people knew of a potential husband they could introduce to me—basically, it’s A LOT harder than I thought. In addition to the personality match and trust that needs to be built (you’ll be spending all your time together so you’d better like and trust this person), the potential tech co-founder would also want to know what you would contribute – what profit or traction have you built? Otherwise what keeps him/her from taking the great idea and building it on their own? Think Mark Zuckerberg.
- Everyone wants to see traction first. It takes time.
Investors, tech co-founders – everyone wants to see traction first, and that generally takes at least 6 months to a year to build, including lots of user research + prototyping + iterations, before an investor would take a look. (Oh, and when one does, you only get one chance, so make it good.) I tend to want everything to happen at once, so one of the biggest lessons here is: it all takes time. Figure out how you can bide the time it takes to get there.
- ICOs are new & shiny, but beware.
When I first heard of Initial Coin Offerings (ICOs) as a way to fund startups at the concept stage, I was thrilled — this was the deliverance, I thought. ICOs — they’re shiny, they’re exciting, the decentralized model seemed to be the holy grail for social entrepreneurs, you’d achieve instant fame (or infamy) if you held one. However, you’d better know exactly what you’re getting into, because if you don’t, you are liable to be thrown into the deep end — i.e. become a pawn in a game where people are there to make a quick buck off your idea by raising US$5 million and taking a 10% stake; get saddled with prohibitive legal fees; possibly go to jail if you don’t play it right (think SEC violations). The day after I declined, China cracked down on ICOs. Still, blockchain is pretty cool, worth understanding more.
- There are two types of startup models: funding first vs. revenue first.
Around the same time, I learned there were two models for starting startups — some believe in focusing on getting angel funding first, while others believe in demonstrating revenue and profit first, the old-fashioned way. At first I was advised to go the first route, before being advised and deciding that the 2nd route was more solid, albeit takes longer.
- Offer the right salary the first time. Pay can only go up, not down.
Because it all began with how to attract and retain globally-minded talent, I was intent on paying good talent decently for good work, so I hired at market rate or above. Turns out though that startups hire at below market rate in exchange for equity, because it’s a long road to revenue and profit, and you share in the upside. When I started realizing it’d be a long road ahead, I broached to my team the possibility of lower pay for more equity. Well, they were shocked, and the truth began to dawn on them as well. Very fortunately, we were able to have open conversations; they are all sought-after talent and moved on to more suitable endeavors; we all felt good about parting ways, and remained friends. I’m very grateful for their graciousness and support — we were a great team.
- There are 3 key roles in any startup: Hustler, Hacker, Hipster.
Around the same time, I learned from my business advisor that there are 3 key roles that any startup needs to be successful, and they can be filled by the same person or 3 different people. The “Hustler” brings in the money, be it capital, revenue, or funding; the “Hacker” creates the products and services to sell; and the “Hipster” promotes it all. I asked my advisor which role I was—Hipster, of course (most who know me would agree). That insight led me to seriously consider my limitations — building community is my strength, but building business models? Not so much. What then?
- There are 5 stages to entrepreneurship.
Apparently all entrepreneurs go through 5 stages of transition: uninformed optimism, informed pessimism, crisis of meaning, crash & burn (optional), informed optimism. For me, ‘informed’ began settling in in the sixth month, yet even then I was still optimistic enough to post this visual timeline celebration of 6 months and this video heralding the future. It wasn’t until a hard-core discussion with advisors about business models, that the full implications of turning BGBridges into an actual business hit me — and that’s when ‘pessimism’ set in: self-doubt and questions like “is this what I really want to do / am able to do?” began to roll in. It turned out to be an important time for the reflection I had not made space for during my entire ‘uniformed optimism’ high all summer.
- Sometimes, it’s okay to separate the buckets.
I don’t have all the answers yet, but I do know that I was trying to pin too many hopes and dreams onto one entity, which made the business model or even vision/mission of this one entity impossible to figure out. Instead, if I separate out the buckets — earning a living, community & contribution, space to be my authentic self — there might be a pathway through. Each bucket then gets its own focus without distorting and putting pressure on the others, and ironically, each bucket becomes more achievable.
I love to read and theorize, but it’s always been going out there and doing things in the world that I’ve learned my greatest lessons. For idealists like me, entrepreneurship is a great vehicle for those lessons, because it’s only in trying to make big ideas happen that we learn where ideals hit up against reality.
I’ve experienced my share of cynicism, ‘informed pessimism’, and ‘crisis of meaning’ this past month — it’s painful for idealists to let go of big beautiful ideas, which to us is what reality forces us to do: to focus, to recognize limitations, to fully internalize what it means for things to take time.
Yet I recognize that this is what it takes to ground our ideas in the real world that we are seeking to make a difference in. It’s not a straight shot to the moon; reality is the ground from which our ideas grow, slowly, as we water them. I grumble (moonshots are more fun), but I stand humbled.
Lessons learned. Here’s to more adventures in reality.