The First Twelve Months
So, you’re thinking of doing a startup? You’ve got an amazing idea, you’ve done your research, you’ve talked to friends, and you’ve found the passion. What’s next? Well, regardless of how successful you and your startup will be 12 months from now, one thing is for sure, it will be a great learning experience. This reminds me of what my manager at Google once said to me:
“Every time someone tells me it was a great learning experience, I had lost time or money.”
This post contains a few lessons I learned in the first year of launching my startup, and I hope that by reading and understanding these lessons, I can save you time, or money, or hopefully both.
Companies are people. The best people, together, make a great company. The most important decision you’ll make is finding a great co-founder. Until you have one, you don’t have a company. Finding a great co-founder is like finding a best-friend who is very different from you. To find one, you can’t go around asking people to be your best-friend; you’ll need time to pass and experiences to go through together to meet someone like that. Right before I left my job to start Employ, my manager told me:
“Find someone who is not you…and someone who can do what you can’t do.”
Simple, but effective. I met with over thirty potential co-founders and was very lucky and found a great partner in this adventure and have never looked back. We bring different skills to the table, agree on a million things, and also disagree with each other but with utmost respect, always coming to a conclusion that is based on reason and fact. I have a 100 potential ideas that I can work on in the future, I’ll do 101 with my co-founder Amsul.
Beyond your co-founder, your first 10 employees will define who you’ll be as a company. One lesson we learned very early is that it’s hard to hire good people, but it’s even harder to fire bad ones. To do this, make sure you never hire someone who is not all-in; don’t hire any part-timers, people who don’t have full conviction in the mission and are in it for the wrong reason (money, equity, title, etc.). But we all make mistakes, not just as founders, but also as employees when we choose the wrong role or company. If you find yourself with a team member who isn’t the right fit for your company, part ways immediately. Another important lesson from one of my previous managers:
“My biggest mistake is that I didn’t let go of people early and fast enough.”
It is the right thing to do for everyone. But, when you do take this decision, do it with empathy and help them find not only their next role, but the right next role for them.
Second, make sure you’re diverse from day 1. You have no brand, no pedigree, how can you prioritize diversity over execution? This is why it will be hard, very hard. As a new company with depleting resources, your goal is to hire the best-skilled person who can do the job, but now you also need to keep diversity in mind. The truth is, there is a very high chance you will end up with a bunch of men who all look the same. My challenge to you is to try your best to not end up like that, find people with different perspectives, different experiences, and even hiring smart people who can be trained quickly to take on the challenges, that’s the goal. Even if you don’t achieve full diversity in the first 10 hires, with this goal in mind, you will by the time you reach the first 100. If you don’t have this top of your mind, it will be close to impossible later and you will pay for it.
While running a startup, you’ll be making a ton of decisions every day, and each of your decisions has a massive impact on not only your company and the product, but most importantly your people. A bad decision today can easily result in good people losing their jobs down the road. It is on you to make sure you are doing your very best to make the right decision, don’t take this lightly. To do this, I highly recommend you to spend more time thinking deep and hard about every decision, and once you’ve made it, act on it quickly. High velocity pivots and decisions are important to execute on in a startup, but the wrong and ill-advised ones will be fatal.
Hence, take care of your people. Your people are the company; without them, there is no product, there are no customers, there is no company. Spend time with them regularly to get to know them, to understand their concerns, hear their ideas, and make sure they have your ear. Without them, without them at their 100%, your startup is guaranteed to fail.
After the team, the product is the most important part of your company. We all have ideas, cool features that we want to implement using the latest tech, I would highly suggest you avoid getting distracted by this. Instead of creating a Swiss Army knife, create a really sharp blade with a good grip. The core product and experience is the most important, the rest is just fluff. Once you’ve perfected the core product and experience, the remaining bells and whistles will be easy to add. To get the core experience as close to perfect as possible, conduct a beta or customer surveys as soon as possible. This is the best way to continuously find out what customers need vs. want, what they love vs. don’t care about, and what needs to be fixed vs. patched later. Constant communication with your true customers will define your priorities and allow you to filter out the noise.
Second, out of all of your employees, the most critical are your product and engineering teams. Make sure to hire the best and motivate them with the right reward. This isn’t always money or equity, many times it can actually be the right problem for them to solve and the right mission. Convince and motivate the best people you can find to solve the hardest problems, these are the challenges that excite people the most. Related to this point, never, ever, outsource your product development. Outsourcing core product to a third-party will always result in one step forward and two steps back. Your product is your child, no one will take better care of it and be genuinely passionate about its success than yourself, do not outsource its care and development.
Also, don’t let stresses and issues related to regulatory and paperwork distract you from the product. Issues like how will I register the business? How will I get a work permit? Do we need to get a lawyer and get a trademark? These are all important questions, but not for your first 12 months. Your first twelve months need to be focused entirely on the product and the core experience.
Lastly, customers are the signal, competition is the noise. This is a very important principle in your first year as a founder, later on in the life of a company I am sure it will be different. But in the beginning, focus your product on your customers and solving a problem for them and listening to them; do not worry about what the competition is doing, how they are copying your features, how they are taking market share, etc. None of that matters if you can’t please the customers that are in your court. Remain laser-focused on your share of the market and improving the experience in that share. Don’t worry about the size of the pie and who’s eating from it, focus on your slice and make sure it’s damn tasty.
Once you have a product or an MVP, you’ll need customers. As a new startup, one of the most important lessons we learned is that not all customers are true customers. Similar to how not all of your friends are best-friends, most are just acquaintances, same goes for customers. The real and true customers are those who give something up for your product and services; either they pay you for your services, or they replace an existing solution with your product, these are the true customer that you need to be focused on. Everyone else is just an acquaintance and you can consider them as noise in your first year. These non-customers or fake customers will only distract and detract you from your core mission. Avoid them at all costs.
Once you’ve identified your true customers, you’ll need to sell your product to them and make them believers. With most products and services, excluding some hardware startups I would say, you’ll need to sell the future, not the present. Our strategy for selling our product is this: provide the steak first, then the knife, and finally the fork. Especially in software startups, you never have a complete product, there are always additional and pending features to be added. But as long as you have an amazing core experience, the steak in this case, get it on the customer’s plate so they can start eating it while promising them a knife in the near future. Then, a few months later, provide them the knife and promise them a fork coming very soon. Finally, provide them the fork as promised. This strategy allowed us to have a constant dialogue with our customers and in real-time identify and analyze their most important needs.
Finally, be careful when hugging big trees. Meaning, it’s easy to get excited about a big customer who wants to buy your product, but it can also drain your resources and focus too much of your limited time and horsepower towards one client’s needs vs. the broader market. In your first 12 months, be very selective and focused in acquiring a handful of customers in a single geography to really identify the problems faced by the market as a whole and nailing down the core experience and solution. Once you’ve figured that out, expanding and scaling will come easy.
At some point, you’ll need to raise money for your idea. I hope you don’t have to, but unfortunately you may have to. This is one of the worst parts of building a company, but it’s also one where you’ll learn and find the highs and the lows, professionally and personally. To give you an idea, one of my friends once said:
“Fundraising is one of those times when you feel great and shitty about yourself at the same time.” It really is.
The first lesson in fundraising is simple: most people will love your idea, many will engage to invest, some will actually invest, few will invest what they said they would, and only a handful will support you post investing. Your goal as a founder is to do your best to identify this last bunch of true supporters and ignore the remaining noise. There are a few telltale signs of investors you should avoid, starting with investors who have an egoistic or celebrity mentality. These investors are easy to spot, they invest from a high-ground, and I can assure you, they will never, ever, get off their pedestal to support you. When it gets tough, they will be the first ones to jump ship. Best not to invite them on the raft to begin with. Second, run fast from investors who don’t take a particular interest in the team, the product, and the vision, and jump quickly to economics and valuation. These investors are in it only for the returns and the returns only. They want the biggest share of every pie, regardless of the type of pie. These investors have no interest in what you’re doing, they just want to ride along on your team’s hard work and sweat, please ignore them. Rule of thumb, if someone is asking for more than 20% of your company in your first round, run! Unless it’s Barack Obama. Finally, avoid investors who love a good “learning session” and have no conviction in leading rounds. Literally 90% of investors out there love to learn, and their learning comes at a cost to you. When you meet investors, be upfront and honest and gauge their interest and ability to lead. If they can’t lead a round or don’t have the ability to make a decision on their own without a herd around them, best to respectfully avoid them. Lastly, if and when you get together a group of investors, do not give any single investor any preferential treatment over the other investors. The ball is in your court, you are the entrepreneur, you and your team are making the greatest sacrifices, let every investor know: same treatment across the board, period.
During fundraising, you’ll meet all sorts of investors: thoughtful, passionate, those who’ve been in your shoes before, such as Josh and Phin at First Round, Mark and Will at Greycroft, Joanne at Foundation, and Ansaf at Lightspeed are a few good examples. But unfortunately, they are the exception. More often than not, you’ll meet assholes. The key lesson here is not that these aren’t good investors, many of them are great investors, but they are just bad people. Your life will already be extremely tough as is being an entrepreneur, you don’t need more unwanted stress in your life. Now, there is no formula for identifying the bad apples, but if they are rude, challenge your idea without evidence or experience, point to the fact that you didn’t go to Stanford, and ask the wrong questions vs. the right ones, respectfully move on. To give you an example, an investor once asked me:
“Let’s say I invest and three years from now your startup fails, you and I are drinking beers, what are we discussing?”
As an entrepreneur with a very early-stage startup, this was a beautiful question; it was the right question at the right stage.
Finally, personal lessons. These in my opinion are the most important for you as an individual and will impact you the most. Starting with, and let’s get it out of the way, the difficulty level. Startups are hard, we know, we’ve read this many times before, but how hard? There are no simple ways to explain this, but here is what you need to prepare your mind for: there is a 99% chance you’ll fail, are you going to be okay with that? You will take a 90% pay cut, if you’re lucky, from your current corporate salary, can you survive with that? You will not be mentally or emotionally present with your friends and loved ones when you hang out with them, will you be okay with that? And, for all the hard work and struggles you’ll go through, you and only you alone would understand and no one else will care or call to check up on, are you going to be okay with that? If the answer to all of these is yes, then maybe, just maybe, you’re going to be okay.
Second, peace of mind. You have limited resources in money, and more importantly, in the time and the focus available in a day. You cannot afford unnecessary distractions by people, activities, and ideas that take up your precious time and focus. The best way to achieve this is to learn and liberally use the beautiful word “No”. “No” is an amazing tool we don’t use enough. It is a great way to cut what’s not important in your life and start focusing on what truly matters. Starting with the people that add unnecessary stress in your life, many of them might be your closest friends and family members who do this unknowingly with the wrong questions or comments at the wrong time, just mute them from your life. Similarly, avoid distractions such as people who’re always inviting you for a catch-up, just say no and let them know you’re caught up already. Same principles can be applied to ideas at work that distract the team from the core mission, just say no to them in the first twelve months. A week of clarity, focus, and time away from such distractions will win you a month in the long run, guaranteed.
Third, not everyone will believe in what you’re doing, and you will need to become comfortable with rejections and hearing no constantly. This feeling of being on an island with just your team is tough at first, but I guarantee you, as long as you stay focused on your vision, the product, and building what you think truly has value in this world, you’ll come out strong. For the most part, you’ll be the wind in your own sails. What you also have to realize is that what you’re doing is totally unorthodox; people don’t just leave their secure jobs at large corporates and go solve a problem a few people have. When you decided to do this, most people that you left behind are not going to be naturally supportive of you, and are more likely waiting and hoping for you to come back to the cubicle. Therefore it is important for you to grow a thick skin, maintain confidence in yourself and the team, and know that every no gets you closer to your next yes. Having said that, if somehow you find yourself in a situation where literally everyone believes in what you are doing and loves you for doing it, I’d highly recommend you rethink this startup and start a religion instead.
Finally, at some point, and this will creep on you from time to time, you’ll question yourself, your ability to continue, and asking if it is or ever was worth it? Yes, startups are hard, they have their challenges, ups and downs, and sometimes it will feel like you can never get rid of all the notifications on your phone. When this happens, I want you to first look at the words written on a plaque given by David Axelrod to President Obama, it simply read “Hard things are hard” and was placed on his desk. Startups, though far easier than running a country, are supposed to be hard, and solving a problem that exists and no one else has solved it yet is supposed to be hard. Second, know that fixing the world, even a little bit at a time, is always worth it. Not having to wait for the clock to hit 5 p.m. every day so you can leave, but instead be genuinely passionate about your work, that makes it worth it. Being happy 29 days of the month vs. just the day you get your paycheck, makes it worth it. And finally, when it comes to if you are the right person for this specific problem, maybe you are, maybe you’re not. But, one thing is for certain, the more time you’ll spend working in a startup, regardless of the problem you’re solving, the less you’ll want to go back to your old cubicle. If you can find that feeling, I would urge you to continue.
This probably took you around 20 minutes to read, so I guess I lied, I’ve already wasted 20 minutes of your time. Unless! You go and apply some of these lessons. I really hope you find some of the lessons in this article helpful and I hope to read a similar piece by one of you in the near future. All the best and stay passionate!