My friend called to share with me the exciting news that he is starting a software company, and he asked if I had any advice for him. I was delighted because I love talking about business!
After our phone call, I decided to sit down and write out some of the most important things we discussed, in the hope that it might be useful to someone else as well.
While I acknowledge that I’ve gained many insights from co-founding a 1,000+ person company, I also repeatedly said that there is no definitive formula to building a successful business. However, I believe there are some universal insights that can increase your chances of success. I’d like to share some of those with you here today.
Co-Founders
Without fail, this is the most important one: it’s imperative that you pick the right co-founders. (Read: You’ll need some luck with this one.) There are plenty of successful solo founders out there, but in my view a solo journey would be too lonely. Things are bound to get tough, and having someone for mutual support to share the journey can make all the difference in pushing through those difficult times.
Things I would look for in a co-founder:
Similar risk tolerance. You’re going to have to roll the dice a lot.
Complementary skills. I’ve read before that between the two (or more) of you, you’ll need a visionary, a hustler, and a hacker – I don’t disagree with that view.
Same level of commitment. If you have a person who’s only prepared to be involved part-time and wants to wait for meaningful traction before they’ll be willing to go all in on the venture – don’t take them with you. They will likely be the first one to bail when things get tough. You need all parties to fully commit to a 7-10 year journey.
Mindset
This is a broad, multifaceted topic, but here I will focus on one thing: it’s important to adopt the mindset that the only one you can truly depend on is yourself. Don’t peg your company’s success on investors, partnerships with big co’s, key management hires, and so on. Why not? Because all of those things will fail you at one time or another. You may have term sheets on the table – only to find them pulled last minute. You may have hires that turn down your offer and partnerships that never pan out. Your attitude in overcoming these adversities is critical to your success. It really sucks when things go sideways, but in the long enough run they always will at some point. Adopting the mindset that you’re on your own and the cavalry is not coming will actually make it easier for you – all you need to focus on is doing the best work you can, and spend less energy trying to control things that are often not in your control. Here we’ve come to call it “the StackAdapt way.”
Product
Countless advice on the subject of Product is easily searchable, so I’ll focus here on just one thing: think about the size of the problem your product solves. Do the back-of-the napkin math of what it would take for your product to drive $100M per year in revenue within 7-10 years. How many customers (or users) would you need and at what price point? Add these assumptions:
Assume you can’t get more than 5% of your total addressable market
Assume a high churn rate
Assume the market will get more competitive in year 3 (presumably, you’ll be gaining steam and competitors will start to notice you)
Assume you can’t hire as fast as you want
Assume there is no word-of-mouth and minimal product-lead growth traction
Assume you won’t get funding to grow ahead of your revenues
Plan for the worst case scenario and push yourself to solve bigger problems for your customers with your product.
Sales
Every time I’m asked out for a coffee to have my brain picked on the challenges of growing a startup, a consistent theme emerges: most startups simply don’t sell hard enough and, as a result, see their growth flatline. As the company gets larger, there are other considerations to keep in mind, but in the startup or early phase the most important thing is to have enough sellers. As a rule of thumb, you need at least one-third of your team selling. The market is just so noisy, crowded, and competitive. Also, don’t get married to a single distribution channel (“We’re a DTC brand” or “We’re a PLG company”). Don’t box yourself in – experiment and grow every way you can!
M&A
One of the things that stood out from my conversation with my friend was him saying that they want to shoot for an early acquisition. I told him that would be great but that I wouldn’t count on it. As a founder it’s hard to fully tune out the news on TechCrunch of massive acquisition offers or friends telling you, “You’ll be acquired by Google for sure!” Those kinds of comments may sound great, but in reality they’re just noise (also see point above on Mindset). I would suggest shutting down the voice in your head that insists once you get decent traction all of the big strategics will come knocking. I’ve never been a part of a big co, but what I’ve learned from observation is that their priorities change very fast depending on who is leading them, what the competition does, etc. Big co’s are often driven by FOMO, and you can’t build your business trying to predict what will be in vogue 3-5 years from now when you’ve pushed past the initial traction. The best thing you can do is build a strong, defensible, sustainable business, and if someone shows interest – great! If not, just keep building and keep growing.
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Trying to tell someone how to create a successful startup in a blog post is a somewhat futile effort because there’s simply too much to cover (which is why I have an entire blog partially dedicated to it!), but I hope that my thoughts above will at least help you start thinking of some of the less obvious issues you’ll need to consider.
Good luck!