To create a successful company = Courage

I have been reminded recently about how great it is to make a company. There are so many people who dream of doing their own thing or creating technology, but just don’t know where to start. Honestly, it is not that complicated, but it takes courage. Most of the courage is financial and the other is just faith in yourself. Many will never take the leap.

The one thing I wish to impart to my children is that you can do anything. It is a struggle and people and circumstances will let you down. However, for those who get back up and brush themselves off, you can achieve and create meaningful things at a young age  - or any age.

I was fortunate enough to go through US Army Ranger school as a young man. I learned that the mind often fails before the body. If you can strengthen your mind, you can accomplish a lot more than you thought possible.

This is short blog post, but one that has been reaffirmed for me this year.

Neal

Betting the farm – the classic startup mistake (among others)

Please forgive any typos – I decided that if I am going to blog, I am going to make mistakes.

Many people think startups are all about risk. On the contrary, they are mostly about risk mitigation. The overall idea may be risky; however, the execution needs to mitigate risk. Some ways to mitigate risk are:

•    Hire/ work with an experienced team of founders who have made successful startups.

•   Go after an existing market with a new idea or tie the foundation of the company to a product people are buying today.

• In a cloud or Saas model, iterate in production and don’t spend time doing six month releases like an old software company. You don’t want to find out six months later that you were wrong – better to find out in a few weeks and change course.

• Make sure your investors (whether angel or venture) know the market, use the product and are connected in the ecosystems that service your industry.

Hire the right people

Early startups are an art and not a science. You can use science to measure and be helpful. However, the benchmark metrics you are using at first are likely the wrong ones and will dramatically change as you discover your correct way to market. You should hire people who can deal with uncertainty and who do not get lost (freak out) under the pressure of constant iteration/change. The best solution is to find people who have successfully maneuvered a real startup before (not a $15M or $20M, but a $0M).

These tenets hold true for investors as well. I have found that the best investors will roll up their sleeves with you, use the product and give you room to maneuver. If an investor starts pushing 50 metrics on your brand new venture – get out now or find a new investor.  The best investors know it is more an art at early stage. Zenas Hutcheson (Managing Partner at Vesbridge Venture Capital) has referred to a successful startup CEO as an artist – to this I can’t agree more.

Go after an existing market

If you can tie your service/ product to existing market where people are buying similar services, you will mitigate risk. At GeoTrust, we attacked the existing ecommerce security market that was dominated by VeriSign. We innovated around the distribution model and took it from days to minutes.

At another company, I tried to tie a new innovative service into a platform that sold services that people were buying today. I was not willing to bet the farm on the new innovative service until I had the evidence it would work through customer traction and solid technology partnerships. I had seen early in my career (at a company where I was a product manager) where we had spent six months on a release of a service in a new innovative market to launch and find the volume was not there. The result was the company could not recover the loss of money, time and confidence.  We had great excitement around the release, but reality set in after three months that we had made a terminal error. This is the classic bet the farm maneuver. Today, I know that betting the farm is not an experienced startup move – you might as well buy a lottery ticket.

Iterate in Production

This is counter-intuitive to old school development. In a startup time is your enemy. From the moment you start, it is only a matter of time until bankruptcy unless you figure things out. If you are running a cloud service or saas model, you are putting out frequent releases and receiving frequent customer feedback. You cannot do major scientific surveys and six month release cycles. Your best feedback is real time in production from paying customers. As quickly as you make errors, you can generally correct them. I am not saying don’t QA. However, I am saying that a 70% solution delivered today is way better than a 100% solution delivered a year from now in startup life.

Get the right investors

This is a hard one for a cash strapped startup. This becomes especially hard when picking venture investors. I firmly believe that spending time to get the right investor syndicate will let you create art.  When you give up control of your company, you should know whom you are dealing with on the other side. Would you ever knowingly hand over your future to someone who would mess it all up? I think for most of us the answer is no – so how can you mitigate risk here. I would try these steps.

• Does the investor understand that early stage is more art than science?
• Is the investor willing to work late nights with you on your art?
• Is the investor highly recommended from “real”, successful early stage CEO’s/ founders?
• Has the investor ever tried your product/ signed up and used it himself/herself during due diligence. I am not talking about someone else in the firm – I mean the partner sitting at the table?
• Are the investors truly connected or are they 5 levels down like inception?
• Would the investor bet the farm or even know what that means?

I hope these tips are found useful. I am going to write next time about when to angel finance versus venture finance.