Lessons Learned: From a Founder Who Started a Startup in College

I’m Will. My co-founder and I started Scent Trunk in our final semester of university. Scent Trunk is a direct to consumer fragrance brand. It was acquired last month. The journey has been an incredible learning experience.

Now that I’ve had a chance to reflect, I wanted to write about what I’ve learned. Hopefully this helps some crazy college kid who wants to start a startup.

If you’re building an ecommerce or digitally native vertical brand, I have more specific thoughts on that at the bottom.

General Thoughts

It’s not the hours. It’s the emotions.

I think the stereotype for founders, is that it’s a tough job because you have to work long hours. Sure, there are weeks that are longer that others, but when you are working on something you are passionate about, it doesn’t really feel like work. What I wasn’t prepared for was the emotional turmoil.

You will have a responsibility to your team and their families, your investors and your customers. It’s this responsibility to others that will weigh on you when the startup is going through tough times (and every startup does). Before jumping into a startup, be mindful of the commitment you are making.

Always be learning.

Have an open mind because there is so much to learn. I’ve come to realize how little I knew when I started the company (and how little I still know!). Listen more than you speak. As a founder, you may feel a lot of pressure to have all the answers. Guess what, no one really has them all. If you approach every day with an open mind, you’ll slowly get the answers you need.

Be lean but not malnourished.

You need to be lean and save money wherever possible, especially if you’re starting a business out of college. You won’t have the same access to capital compared to more experienced founders.

That being said — do not be so lean that you’re not able to deliver on your value proposition. You will succeed if it you deliver on the value proposition better than everyone else. Don’t sacrifice on how well you can deliver this to your customer, for the sake of saving a little bit of money.

Minimum ‘Awesome’ Product

You’ve probably heard the term “Minimum Viable Product”. I believe that too many founders believe that building an MVP means launching a mediocre product. I prefer the term “Minimum Awesome Product”. Whatever your value proposition is — your product needs to be awesome at delivering that. It’s hard to get your customer’s trust. Don’t lose it by under-delivering on your value proposition. Everything else that’s not related to delivering your value proposition can be just ‘viable’.

Hire for culture.

Firstly, always hire for cultural fit. Every company exists for a different reason. Every company has a different set of core values. No matter how skilled or experienced a candidate is, never make a sacrifice on cultural fit. A well-aligned, high-performing team outputs work that is orders of magnitude better in quality. Protect your culture. You owe it to your brand and your team.

Hire deliberately.

Secondly, be deliberate about skills you are hiring for and what the role needs to achieve. As a founder, you probably feel like it’s no fun to create job descriptions. You may just copy the job description from another company hiring for the same role. Don’t do that. Creating your own job description allows you to really identify what skills you need the person to have, and what you need them to accomplish. If you are not clear on what you need them to accomplish and why it is vital for the business, you probably don’t need a new hire.

No Excuses for Burn

Revenue growth is sexy — so we all talk about it. Here’s the thing about revenue. Sometimes you’re going to hit your revenue targets, sometimes you’ll miss them, sometimes you’ll exceed them. As much as we try to accurately predict revenue, it’s impossible. There are just too many things that can go wrong (or right!).

But guess what? You can control your burn rate, down to the last dollar. Be very strategic about when you increase burn, and what that means for your runway. If you run out of money, it’s over.

Build a brand.

Every company should build a brand. I believe that many tech founders have a close-minded view of what a brand is. Your brand is much greater than how your product looks, it is the essence of why you exist. A well-defined brand will guide every decision that you and your team makes. It will help you attract the right talent with aligned values. Invest in your brand.

Be Firm on the Brand but not the Product.

Don’t fall too deeply in love with the product early on. Your product will evolve as you learn more about the consumer. Your product will evolve as you measure whether it’s actually working! If you’re too attached to the product, you may be too slow at pivoting when it’s not working. Focus on the consumer, their problem, and why your brand needs to exist. The product is just a way to solve the problem for the consumer, it can take many forms!

Invest in a ‘mirror’.

Invest in collecting data and building feedback loops so you can measure whether your product is actually working or not. This data and customer feedback will be a no-BS mirror for you. You will be able to look at your product without the bias that comes with emotions. It will help your team make smarter decisions.

In the beginning, the most important metric is stickiness. Depending on your product, this could be measured as retention, engagement, NPS, etc. Whatever the right metric is for you, make sure you have proof that consumers are addicted to your product.

PS. the “proof” isn’t for investors. It’s for you and your team.

Stop building for investors.

First-time founders spend too much time thinking about what “investors are looking for”. I often see founders with relationships with amazing mentors, that have so much wisdom on how to build a great product/business. But founders end up just asking time and time again for fundraising advice.

Here’s the best advice I can give regarding fundraising:

Build a great company. Build a great product.

Ecommerce/DNVB Thoughts

Margin Dollars vs. Margin %

We often hear about gross margin expressed as a percentage. I think the gross margin dollars you receive from an average sale is a more important measure for ecommerce businesses. You will have to invest a lot in customer acquisition. The gross margin dollars will dictate how quickly you will be able to recover your marketing spend, and this impacts how quickly you can scale.

For example, a company selling product X, for $4 may have 100% margins ($4 margin dollars). Company Y sells product Y for $100 and only have a 20% gross margin ($20 margin dollars). For simplicity, let’s say it costs $20 to acquire a customer. Although 100% margins sounds nice, it will take 5 purchases before Company X breaks even on their marketing spend. This could take 5 months, this could take a year! Company Y may only have 20% gross margins, but they recover their $20 cost per acquisition on their first purchase. That means they can scale the company much faster and without the need for as much outside financing (assuming they have a good product customers purchase more than once).

% of Revenue on Marketing

This measures the percentage of your revenue that you’re able to re-invest into marketing. Marketing drives growth, which generates more cash for marketing. The % of revenue you can spend on growth has exponential long-term effects. I like this metric because it factors in the expenses of running the business, supporting the customer, etc.

For example, company A may charge $100, with 50% gross margins. However, their product requires a lot of customer support and office space. In the end they may only be able to spend 20% of their revenue each month re-invested into growth ($20).

Company B may also charge $100 with 40% gross margins. However, their product requires very low “other” costs, so they can invest 30% of revenue back into marketing ($30).

At first look, company A has stronger gross margins, so it must be able to scale faster right? Not necessarily, we need to think about the other costs that the business incurs and how that affects what can be reinvested.

Think deeply about distribution and Cost to Acquire Customers (CAC)

First-time founders need to put a lot more thought into distribution. Great products don’t always win. Great distribution wins. Great product and great distribution and you’re really onto something great. Think about how your customer will learn about and buy the product. How much will that cost you? A high-touch sales process is expensive whereas social media marketing is cheaper. Think about how this affects your business model right from the beginning.

Secondly, don’t lie to yourself about CAC. There are so many ways to manipulate your CAC numbers to make them seem lower — the only person you are hurting is yourself. Your “fully-loaded” CAC includes all the marketing, sales, free trial, on-boarding, support, etc. costs that are required to acquire one customer.

Final Thoughts

Be Healthy and Don’t Let Your Startup Define You

Your health is important. Really important. If you don’t take care of your health, you will burn out. Make sure to keep a good balance between work and life. Don’t let your work define who you are. Live healthy, and you will make better decisions and be more creative at work.

Connect with me!

Wow — you made it all the way to the end. Hopefully you learned something. If you’d like to connect, or hear about what I’m working on next, feel free to add me on Linkedin or email me: will.z.yin (at) gmail.com.