I just shutdown my first startup, cisimple. The official line is that the company was acquired, but anyone familiar with startups knows that an “acquisition” this early really means “acqui-hire”. Here are a few things that I’ve learned, with a few recommendations for anyone thinking of starting their first company:
Learn what you’re not good at.
Find out what the various and incredibly important skillsets required to build a company are. My background is in engineering, and I’m pretty good at it. However, in no way did that prepare me to be good at marketing or selling things. Or accounting for that matter (yuck, outsource it). Furthermore, these functions are critical to success.
Get real world experience trying to do some of these things. Do in person sales meetings so you get better at pitching. In-person is key. Try using things like ad networks and blog posts to drive traffic. Look for ways to partner with other companies’ and cross-promote.
You just might find out you’re good at some of these things. For example, I feel like I’m good at biz dev, and only decent at sales and marketing. Now I know what kinds of people I need to surround myself with.
Do what you’re passionate about.
The hidden truth about founding a startup is that the vast majority of the time they are not fun at all. I know a few founders who have been pounding on the same company for 3+ years now with very little to show for it and no guarantee of a lucrative exit. When you add up lost wage potential, the suddenly elusive personal life, and the lost hours of sleep, the sum is an extremely expensive endeavor.
Do it because you eat, sleep and breathe the shit you’re building. Do it because not doing it would literally drive you crazy.
You’re further than you think you are.
The inside of an early stage startup is messy. As a result it’s incredibly easy to become insecure about how the rest of the world views your startup and how “far your company has come”. This can be a trap if you let it and it can lead you to making decisions simply for appearances sake.
Every once in a while I was able to get a glimpse of how the “outside world” viewed our company. At first, I was incredibly surprised to learn that they believed we were a “real” company. I mean, we were, but it was hard to feel like it some times. Learning that we had people’s trust and respect was a truly incredibly thing.
It’s easy to read HN and TC articles about companies that are announcing funding or traction/revenue numbers and feel like “success” is a thousand miles away. However, behind every success story I’ve heard is a roller coaster of incredibly close calls. There was a point in time where they were where you are or possibly even worse off.
Build a founder network
The single most powerful tool I’ve been fortunate to acquire is a network of other founders. I cannot overstate the value of these people. Having other founders to bounce ideas off of, make introductions or just have a beer with is priceless.
I have been incredibly surprised by just how accessible most of these people are. I’ve learned that in the general case, entrepreneurs respect the struggle and are more than willing to help when they can. I’ve found this to be true of both first time entrepreneurs as well as several well-known founders that I never thought I’d get a meeting with.
**Obviously, you must reciprocate by being respectful with everyone’s time and pay it forward when you can.
Note: A great way to build your own network is by joining an accelerator program like AngelPad.
Build a great team and do it early.
Building a great team is the single most important job you have. A great team can (and often does) make the difference between funded and broke. In fact, I know founders who have raised with no product, traction or revenue which they credit in large part to the strength of the team.
It is important to recognize that when you approach investors, they are looking for team “DNA”. What this means is they want to see founders from reputable companies that they are familiar with and impressed by. It’s also worth noting that this may, or may not align with building a team that is good at execution.
Not building a strong team early on was probably the single biggest mistake I made. Also, the earlier you build your team the more invested they will feel in the company. This is not to say that finding co-founders/early employees is by any stretch an easy task.
Know your market
This was another one of those “business-y” things that my engineering background had not prepared me to think about. Before selling your car and moving into an RV to start your company try this exercise first:
- Estimate how much money you can make off of each customer (note: you may have several types of customers).
- Take that number and multiply it times how many potential customers exist in the world.
This is the absolute maximum amount of money your company could possibly ever make in a perfect world. If it’s not huge maybe try something else. Some other questions worth asking:
- Is this market growing or shrinking? (Dunder Mifflin?) What’s the annual growth rate? This is important b/c maybe it’s not a huge market now but in 2-3 years it might be.
- What percentage of that big number are you going to be able to get in 1 year? What about 3 years? If you can build a sustainable business with very low percentages, that’s good. If you need 25% to break even, that’s bad.
- What strategies will you use to get those customers? How about 2-3 years down the road? A good example here is a startup that focuses on low-touch SMB sales for the first year, then transitions into enterprise sales.
- What is your typical customer spend? One of our challenges was that developers notoriously don’t like to pay for things. If the customers in your market are billionaire philanthropists that’s probably better.
Another big mistake I made was not researching the market opportunity in advance.
In summary, the last year and a half has been an incredible experience. I’ve been asked if I’m still glad I did it and it’s a resounding “hell yeah”. I’ve learned exponentially more than I would have if I’d stayed at a job and that’s priceless. Furthermore, this is addictive. It’s only a matter of time until I get the itch and do it again and next time I will be much better prepared.
Next up for me, I’m the new Director of Product over at Appurify. If you’re a mobile developer you should check us out. If you’d like to chat some time, I’m pretty accessible, just shoot me an email: email@example.com