Startup Life: The Scary Truth No One Tells YOU — Part 2
By Danny Holtschke from StartupGeist
This is part two of the scary startup truth no one tells you about. In the first part, I covered the following points:
- Startups will take over your life.
- There will be hard and depressing times (independently of your role).
- Startups are chaos and toxic.
- Startups are counterintuitive.
- Making a startup successful is not about ‘Hacks’.
- Getting customers is harder than you think!
Let’s explore five more that are important to learn about.
- You probably don’t know your customer as well as you think you do.
- Pivot early, pivot hard.
- Not giving up can get you surprisingly far.
- Deals tend to break. Don’t ever depend on them!
- Startups take time.
— P.S.: You are reading part one of a three-part Startup Life series from StartupGeist…
- Startup Life: The Scary Truth No One Tells you
- Startup Motivation: 5 Bad and 5 Good Motives to Start a Startup
- Startup Life: How to Prepare for the Rollercoaster
80/20 Summary
You probably don’t know your customer as well as you think you do
The key to startup success? Sounds simple. Intellectually too simple. But extremely hard to follow and impossible to achieve — only the few do:
Make something people want. — Y Combinator mantra
You might think that people MUST want your product because it is SO extremely great…
Even the smartest people fall in love with their own ideas and fail to see that no one really wants their seemingly amazing thing. Trust assured, it happens all the time.
Have you done customer development and validated that other people are interested in what you’re building the lean way?
Much better, but not safe either.
There are examples of people who did all validation steps properly and still failed, likeDan Norris and his app Informly. He did promising interviews, created targeted surveys and built pre-sign up landing pages and still didn’t get paying customers in the end. Why?
You can’t fully rely on what customers tell you. Pre-signing up for something doesn’t mean that people will actually download it.
If people say they ‘like’ or even ‘love’ your product, it doesn’t mean that they’ll buy it either.
Most of the guys you ask are either too nice to be really honest or simply don’t know it better themselves.
This is somehow in line with Henry Ford’s famous quote:
If I had asked people what they wanted, they would have said faster horses.
That’s why there is this myth about Apple and Steve Jobs that they have never donemarket research for building the iPhone and iPad. Of course they did. But they didn’t just listen to the customer. It’s an Art — not Science to understand people’s needs and desires. I won’t go into detail, read more here.
Just let me add this: There is a broad consensus in psychology that asking people about hypothetical situations doesn’t yield valid results, and yet this is what many entrepreneurs do.
Pivot early, pivot quickly
Yes, pivoting is more common than most first-time startup founders think. Startup Genome revealed that more successful startups pivot one time. Chances of success significantly decrease if you don’t pivot at all or too often.
There is a popular image about a successful startup founder as someone who continues despite all setbacks — that is essentially right. However, it doesn’t mean that you should continue to market an unsuccessful product as Paul Graham advises:
The stick-to-your-vision approach works for something like winning an Olympic gold medal, where the problem is well-defined. Startups are more like science, where you need to follow the trail wherever it leads.
So don’t get too attached to your original plan, because it’s probably wrong. Most successful startups end up doing something different than they originally intended — often so different that it doesn’t even seem like the same company.”
You will have to find the right mix between perseverance and pivoting — that is hard — like everything in the startup world is.
It’s hard to keep financial discipline
Startup spendings are a really strange thing.
Please meet Peter. His startup raised $100,000 and aims to provide the world with an amazing nearby party notification app. Let’s say this money will last for 9 months until he runs out of cash.
Now, please meet his competitor, James, who wants to do the same thing, but raised $200,000.
What’s the point, Danny? I don’t get.
Hold on. I was just about to make it.
You might think that James’ 200k startup lasted longer than Peter’s 100k startup — probably not twice as long, but many more months, right?
Wrong! I have seen a few contrary examples and am now convinced that startups generally adapt to the amount of money they have in the bank and then burn through it — whether it’s $50,000 or $200,000. It doesn’t matter.
First-time startup founders are not financially disciplined and tend to overspend.
Of course, you might say that this is just normal because the idea of fundraising is to invest money in order to create growth (a.k.a. revenue and profits). If a startup founder has more money, he will spend more.
But here’s the point that’s actually interesting: according to my observation, startups with much more money in the bank do not simply scale more successfully. Many of them do very inefficient things like buying nice chairs, renting fancy loft offices or hiring people they don’t really need.
Startup Genome calls this Premature Scaling — the number one reason for startup failure.
Curiously, investors often play a part in it, too!
Here’s an interesting observation from a VC who held a talk at Y Combinator, cited by Paul Graham:
Once you take several million dollars of my money, the clock is ticking. If VCs fund you, they’re not going to let you just put the money in the bank and keep operating as two guys living on ramen. They want that money to go to work.
If ‘going to work’ means to create visible results like fancy hires or big marketing campaigns, it’s likely that you’ll do things you don’t really need, isn’t it?
— So beware: Don’t give into the temptations that big money will create big results — often the complete opposite is the case.
Not giving up can get you surprisingly far
Startups are a beast that let you experience an emotional rollercoaster.
Contradicting pivoting (one of the points above), giving up is not always necessary! It might sound surprising for you, but just going on can get you surprisingly far.
Ben Horowitz notes:
In the technology game, tomorrow looks nothing like today. If you survive long enough to see tomorrow, it may bring you the answer that seems so impossible today.
And Paul Graham believes:
Sheer effort is usually enough, so long as you keep morphing your idea.
Therefore, you shouldn’t give up on your idea too early if you really believe in it. Keep trying to figure out how you can improve and adapt.
Deals tend to break. Never depend on only ONE!
Here’s another very sad, but brutal truth.
When you’re building a company, there will most likely be at least one investment or M&A deal that breaks.
And by ‘breaking’, I don’t mean that it won’t work out after some positive conversations. It’s literally going to be cancelled at the LAST MOMENT!
Deals fall through. — YC mantra
You might wonder why?
Mostly because a) the guys on the other table are only human too and b) deals are business and business is naaaasty.
Think, for instance, about the position investors are constantly in.
Because startups are extremely uncertain and counterintuitive, these guys can never be sure of what they’re doing. Yes, they might have become experienced by investing in many companies, but they still won’t have more than some questionable proxies to judge each investment deal.
So even if you’re absolutely sure about what you’re doing, investors will never be. Additionally, making an investment is always a big deal for these guys because they will invest into your company that won’t seem small to them.
Startups take time
Startups seem to be all about speed… Moving fast, evolving fast, scaling fast. Still, you shouldn’t succumb to the idea that you can create a ‘quick flip’ that will be acquired after a few years.
Creating a successful startup takes time. Plan at least 5 years, if not 7!
Don’t expect to become rich and successful quickly.
Don’t work on something you wouldn’t like to work on for several years.
— Never forget: ANY journey should be FUN!
What’s the point of doing something — if you don’t enjoy it!
ALWAYS AIM AT HAVING FUN, WISDOM, LEARNING …
What’s the point otherwise?
StartupGeist Knowledge Base
StartupGeist summarizes insights and experiences from digital entrepreneurs, startup experts and founders. This article is based on …
- Paul Graham: Before the Startup
- Paul Graham: A Fundraising Survival Guide
- Paul Graham: Startups are ‘Emotional Roller-Coaster’
- Ben Horowitz: The Struggle
- Steve Blank: Founders and dysfunctional families
- David Cummings: Start With What You Know — 7 Entrepreneur Lessons Learned
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I am looking forward to hearing from you.
I am Danny and started StartupGeist to help students and recent graduates build a business — and have a good life. Why? To be free, financially independent and healthy. How? Build a growth mindset and deliberately practice skills that turn your ideas into something bigger.
Originally published at startupgeist.com on February 12, 2016.
