Startups are Hard

If you’re not ready to cry, bleed and throw up all at once, you’re not ready to run a startup.

One day when I was working at Zynga, one of my developer colleagues tendered his resignation. He was done with the company and ready to move on. When we asked him where he was going, his reply was, to say the least, shocking: “I’m moving to a startup. I need a job with a slower pace…” I don’t know what happened to my former comrade, but I’m going to hazard a guess that his new startup gig afforded him a very rude awakening.

I’ve spent the last few years helping startups get off the ground. My experience has given me a lot of opportunities to reflect on what went right and what went wrong and I want to share some of my learnings and startup advice. This article isn’t exclusive to game companies. It can apply to any software startup.

Why Startups Fail

Hint: It’s not from a lack of good ideas!

There are a lot of different reasons why a startup can fail, but since this is a leadership blog, I’m going to focus on where leaders tend to go wrong. Interestingly, I’ve learned that there are many great ideas out there and a lack of a good product is seldom the demise of a startup.

Rather, these circumstances tend to cause the downfall of otherwise promising startups:

1. Lack of leadership — In my experience, this is the #1 reason startups fail! Founders tend to be experts in a specific field. They typically have a great idea within their domain of expertise, be it finance, medtech, blockchain, video games or really just about anything that can benefit from disruptive software. Problems arise when founders try to wear too many hats, which include the logistics and economics of running a business. These are highly involved skills that don’t often come easily to those who don’t have a background or experience in planning and running a business. With only 24 hours in a day, a founder simply cannot do it all.
2. Lack of focus (product and market) — Founders have a habit of trying to make their products all things for all people. As a result of this overreach, they end up building something that is a watered down version of their product vision. In addition, trying to market across too many channels compounds costs and typically burns through marketing budgets without making enough impact to drive profitable sales.
3. Lack of good marketing — Founders tend to skimp on marketing. Whether this is due to budget constraints or a desire to develop product first and market later, the result is the same: by the time a commercial product is released, there isn’t a ready client-base and it can take months of burning capital to establish one. Or worse yet, a competitor has come along and beaten them to the punch.
4. Lack of a good network — Whether it’s domain influencers, warm introductions to investors, leads to good talent or deals on tools and tech, a good network is an absolute necessity to launch a successful business. Too many Founders don’t have access to these vital resources and don’t make enough of an effort early on to build one.
5. Lack of funding — This one is obvious. Unsuccessful fundraising is the bane of many a startup. There’s a whole lot of information out there pertaining to effective fundraising (which I’m not going to cover here), but there’s more to it than that. How founders make use of available funds is mission critical. Too many startups waste money on expenses they don’t need, including excessively large salaries for early staff.
6. Lack of talent — Founders often fail to identify the right skills needed to build their products. All too often, critical skills are missing from the team from the outset. Startups can pay a big price for this when they realize their product isn’t, for example, built to scale properly, or compliant with industry regulations, or positioned properly in the market, or no one is tracking costs, or paying taxes.

How to set yourself up for success

Counter to my points above, you as a prospective founder can benefit from the learnings of those who have come before you. Consider the following vital learnings in your own startup efforts:

1. Focus your founder-ness — Founders start companies because they have a compelling personal vision they believe in with conviction. Their story needs to be told, to investors, to customers and to staff. Founders need to pitch and sell the product to everyone all the time. They also need to be effective at establishing a product design and defining the scope and scale of it. Finally, they need to be effective leaders, who can motivate their team and get the best out of them. As a founder, if you’re not 100% focused on these things, chances are you’re off track and spread too thin. Build a team that brings the skills that augment your own and lean on them to do what they do, so you don’t have to. Seriously, let go. If you’ve hired the right people, you don’t need to waste your time worrying about what they’re doing.
2. Narrow your product scope — I’ve been in so many investor meetings where the primary criticism is “your product lacks focus”. Build a specific product to solve a specific problem, ideally in your area of expertise, and don’t stray from that path. It may be tempting to go after additional market channels, but it’ll lead to a watered-down product that costs too much to build and doesn’t adequately meet user needs.
3. Find reputable experts to evangelize your product — Industry experts and influencers can go a long way in raising awareness of your product from the outset. Better still, identify these individuals and form an advisory committee. Not only will you benefit from their expertise, they will be more than happy to make your product go viral since they have direct input into the business.
4. Network network network (be humble, you need the help) — Founders need help from all quarters. Whether seeking domain experts, potential investors, staff resources or customer, it takes time to build a robust network. Smart founders make use of conferences and community gatherings to grow their network. Don’t be afraid to ask for warm introductions, either. You may not have a direct line to, say, venture capital contacts, but your associates might. In my experience, I’ve acquired a some of my most vital help from people two or three levels down my personal network. And for goodness sake, always be willing to return a favor!
5. Always be raising — From the moment you have a product concept, you need to begin evangelizing it and generating interest. As soon as you have a good vision deck and product prototype, you need to hit the “pitch circuit”. Expect to pitch dozens of times (or more!) before you gain traction. Once you raise a round of funding, start preparing for your next round. And use your funds wisely. Build a runway with your funds, ideally aimed at floating the company for at least two years, during which time you will (hopefully) achieve profitability. Be critical, invest in vital expenses and cut the chaff as much as possible. If you have a good business manager on your team, they will make sure this happens. One last note on raising: if you don’t think you’re ready, that’s too bad. If you let analysis paralysis or fear overtake you, you’re sunk! Fight through the reluctance and take your lumps. It will only serve to make you, the pitch and the product better.
6. Start with great people, and hold onto the best of them — Notice I didn’t say you should keep everyone. You need exceptional talent to build an early product, but the team that started the company isn’t always going to be the team needed to grow and scale it. Know your team’s abilities, and limits. Startup staff don’t always want or need to be part of the team after launch. Find out where their passion lies and help them find a role that suits them best. They’ll thank you later!

Still want to launch a startup?

Let me leave you with this: there is no sure formula for success. A certain amount of “right place, right time” needs to happen for an innovative product to take off. However, if you build a product that aligns with your vision, market the hell out of it and assemble a great team, you’re setting yourself up for the best chance at success. Also, a Startup Advisor never hurts…

Look for my upcoming book on Leadership in the Game Industry to be published in the summer of 2019. Subscribe to my blog for weekly updates: https://medium.com/total-kinetic and check out my website to learn more about my services: https://www.totalkinetic.com/.