Monday, November 6, 2017
I've seriously been neglecting this blog mostly because I've become overwhelmed with all of the other priorities in my life which have pushed updates further down on my never ending to-do list. I actually have two other drafts on other topics started which I'd like to get to a some point, but I figured I'd get this off my chest while the ideas are fresh and the nerves are raw.
I haven't touched much on my involvement with startups, as they've all been stealth mode, early founder level operations, trying to bring an idea into reality from scratch. I've been involved with six startups in the past seven years as the primary technical architect, with only two that are still active, one I'm no longer a part of. Combined, these startups have burnt through over $1 million, though only roughly about $650k was on my watch. I've sunk at least 4000 hours of my own time into them with nothing to show other than failed prototypes, unpublished apps, dozens of patents.
I've learned many hard lessons through trial and error. This blog post is my attempt to compile my hard-fought wisdom as I've failed to find a singular online source or book. I was looking for something that I wish I could have read back in 2011 when I started pursuing these ventures. Therefore, here is my distilled lessons learned. This is by no means a complete list, and it assumes the reader already has some basic understanding of startups and related terminology.
1. Limit your partnerships. More the merrier isn't true when it comes to startups. Ideally, you are better off not having any partners and running the show yourself. If you must, no more than 1 or 2 equal partners, as you will quickly find yourself in a situation where no decisions can be made without weeks to months of deliberation. Half of the my failed startup attempts died because of this; too many chefs in the kitchen, no real leadership or direction. There has to be a singular vision which is best set by one person, yourself. Feel free to bring on a few advisors, but make sure they understand you are the boss and they are just providing insight and perspective.
If you aren't a leader, but have a great idea and maybe some way to start building it, find yourself a real leader and step aside and follow. But, if you are the type "A" personality, paint a vision with real goals and objectives planted with fixed dates; develop a clear timeline for MVP and launch and stick to it.
2. Don't mix business/money with friends and family. Seriously, you'll regret it when you burn through your uncle's seed money and don't have anything to show for it. Don't hire friends or family as you put the underlying relationship in jeopardy and are asking for trouble. Especially don't hire friends who don't actually know what they are doing when you really need an expert in that role. I've also loaned money to several friends and family members and those relationships became strained. Now, if I do give money to friends or family, it's a gift and I don't expect it back.
3. Only work with professionals. I've found that the one partner I'm able to count on who has never swayed in our original goals and vision isn't a close friend of mine, but merely a business acquaintance who I've always kept at arm's length, having very formal iteration with. It's not a matter of trust, because trust doesn't matter much when opportunity strikes, rather our long term goals align and we are on the same page about our startup philosophy. You are always far better off hiring someone qualified and keeping things professional than taking an informal relationship and expecting professionalism from it. Don't take money from investors who aren't professionals; they won't be able to help you when you need guidance and they will expect unreasonable outcomes and likely won't be able to understand the true risks.
4. Say no more than you say yes. Turn down ideas that don't pass the smell test. Be a skeptic and try to poke holes in it. Do your market research first, competition analysis, market size, target customer, etc. If you don't understand these metrics and how they affect the likelihood of failure, you need to read more about the market you are trying to enter before you even start building. If I could go back, I would have said no to 5 of the 6 startups I became involved with; I never fully believed in them because the risk to rewards ratio was too far skewed out of our favor. My old mentality was "let's see what sticks, it's a numbers game", meaning one of these startups will work out if I keep on trying different ideas. But that's wrong for many reasons, you simple don't have enough time to try all the ideas, so you must figure out how to test each one quickly and zone in on the golden idea. Don't do any startup you don't truly believe in.
5. Launch with MVP in 4 weeks or less. MVP, or Minimum Viable Product, that means the most bare bones version of what you are trying to build. Even if it sucks, just launch anyways and quickly improve it, but launch first. If you can't launch in 4 weeks, you don't have an MVP worth building, go back and keep on editing the complexity down. KISS, Keep It Stupid Simple. Once you have a product out there, you can start collecting feedback and data to quickly improve, which is far more valuable than countless team meeting reviewing and changing designs with no launch in site. To clarify, don't start your MVP until you have sufficiently convinced yourself that it's worth building. More on that later.
6. Stay lean and bootstrap. Until your MVP is in production and you can secure additional funding or are cash flow positive, don't break the bank. Keep your costs low by contracting internationally when possible. If your MVP is too costly for you to cover, build a solid business plan, a well thought out pitch deck, and a proof of concept (PoC) that you can show to investors.
7. Don't bother with patents, contracts, titles, etc until you have an MVP. I've spent over $4500 alone on attorneys just going over contracts and patents. I was part of a startup that spent over $300k on attorney's fees for international patents. Not even worth it if you don't have a viable product. The one thing you should have is an NDA (Non-Disclosure Agreement) which protects you from having your idea stolen.
8. Execution is more important than the idea itself. I'm always amazed when I see these half baked ideas get funded by billionaires and I say to myself, "I could have thought of that!" And so did countless other people. But execution of strategy is what really wins in startups, it's having a solid business plan, go-to-market strategy, short iterative improvement cycles, addressing customer and client needs as they arise, while developing a solid marketing brand with smart targeted ad campaigns. Build your company in the correct order, a tested business solution first, then viable product, then legal protection. The one startup that blew $300k on patents did so before they ever had a viable product. Once they brought me into build that product, it turned out the product didn't even solve the business problem in the first place and everything done up until that point had to be scrapped.
9. Fail fast, fail often. If you have a great idea, don't wait for the MVP to be built, quickly try to formulate all the pieces for a solid startup concept. Think holistically, revenue models, market penetration, capital & operational expenditures, servicing and customer support, etc. Do a Proof of Concept and try to poke holes in it. The sooner you can find potentially unsolvable red flags, the sooner you can stop waiting any more time on that failed idea and move on to the next good idea. Make sure you do a post-mortem and figure out what went wrong and why it failed. This knowledge of failure is what success is built on. For every successful company, there are hundreds of failed attempts which helped create it. It's vital that you learn from your mistakes and don't repeat them. This is my new strategy, I'm now aiming to quickly build a skeleton framework to see if there are any major unsolvable flaws and deciding quickly to move on or try and work through. Being overly persistent with a losing idea/concept will get you nowhere; like in poker, you are better off folding when you know you have a bad hand.
10. Don't worry about revenue generation initially. I know this contradicts what I just said about staying lean, but usually with most products and ideas, there's a critical mass number that needs to be hit before you can start charging for the product or service. Develop your revenue model for later after critical mass has been reached, but first focus on producing real value, only then can you charge for it. This is how to get past the chicken and the egg problem.
11. Build your network and keep in contact with movers and shakers. The startup landscape is all about human capital and you won't succeed if you try to do everything yourself. You will fail at least a few times in trying to build something successful. You'll encounter professionals and experts who can help you and advise you along the way and it's important to keep these connections for when you might need them later. An opportunist will use their connections for a quick buck in the short-term, while damaging these relationships in the process and potentially burn those bridges, preventing future opportunities. A wise networker is playing the long game, offering true value to their connections with nothing expected in return. They become sought after and opportunity will flow to them.
I helped one friend raise $1.5M in a lunch meeting because I was on good terms and had the respect of a few investors in my network. I periodically touch base with my list of investors and entrepreneurs and try to give advice or contacts, or any other way I can help provide value. I genuinely want them to succeed, not for selfish reasons, I don't expect anything back, but I can bet you they think of me when they need someone of my ability. He who burns his bridges at the first sign of trouble is foolish and near-sighted.
12. Trust your inner voice. If you believe in your idea and have put serious thought into it, don't listen to the naysayers. It's one thing if a trusted adviser has serious reservations about a decision, but it's something else entirely if some random stranger thinks you can't succeed. Once you develop your vision, see it through execution to completion, be it successful or failure (see rule #9).
13. Don't actively work on more than one startup idea. It's better to fail at the first one and move on to the second one. There are exceptions for this, but mostly, if you are trying to build two MVPs at once, both will suffer. Be realistic about your level of effort and don't bite off more than you can chew. This is especially true if you are a family man and are trying to maintain some semblance of a work/life balance.