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My biggest takeaways after being a startup CEO twice
There's a lot more but these are the biggest takeaways
Having done two startups now, including one that hit it big, I’ve learned more than I can imagine. It’s very hard to make a full list. But I tried to put down the most important ones today. Here’s what I came up with. I hope you find them useful. Cheers.
Be careful who you take money from. It's very similar to a marriage except there is no divorce. Only take money from someone you trust and who you know you'll have a good long term relationship with. Taking money from the wrong person can easily sink a company.
Be very picky with your co-founders. I strongly suggest not doing it with a friend or even someone you know. There will inherently be conflicts. This is probably the most common reason startups fail or founders leave. Find someone that complements your skills, not where they overlap, so you won't be competing against each other.
Focus on getting to market. Your product doesn't have to be perfect. But the sooner you get it out there, the sooner you can start building your brand, show off your product, and prove you have a viable business model. Don't burn cash trying to make it "perfect." There is no such thing. All products are works in progress. Just get it infront of people and show that there is interest.
Find product/market fit as fast as possible. Refine your product and find your customers as quickly as you can. If you can, get some commitments to purchase. Then show them to investors. Prove your model as soon as you can even if you "know" it will work.
Don't skimp on your law firm. Good corporate attorneys are worth solid gold.
Be realistic. Every entrepreneur thinks they will be in the 1-5% of startups that beat the odds. Chances are, you won't be. But there are ways to make sure you will. And if you are realistic about your cash flow, product, sales prospects, etc. you can be more assured you will get into those successful group of startups.
Recognize two things. First, most first time founders are not successful. I like to say I squeezed the first three months of my first startup into the first day of my 2nd startup. You learn exponentially. Second, most successful startup founders are actually in their 40s. This isn't the young guns game everyone makes it out to be and most successful startups are companies you've never heard of because they're too busy working instead of doing useless PR.
Speaking of PR, don't self promote, don't go to networking events, and don't otherwise waste your time unless there is some very direct benefit. You should be working. As a founder/CEO, if you're not busy 12+ hours a day, you're not doing your job right. I'm astonished when I see founders relaxing and drinking at networking events. Those are the companies that will fail. The founders instead sitting at their desks pushing their companies forward? They have a much higher chance of success.
Understand that being a CEO is the hardest thing you'll ever do. It's lonely. Everyone will be demanding things from you. I call it "balancing the three legged stool". Your employees, investors, and customers all will have requests from you, and they will frequently conflict. Not to mention your co-founders. Yet, you must keep all three (four) happy. It's literally an impossible task. You'll have to make a lot of compromises that usually leaves almost everyone unhappy. Most founders decide to prioritize investors. I prioritize employees.
Being a CEO is also the loneliest job ever. Your employees will think you are rich. Your friends will think you're a God of some kind. Your investors will demand the world from you as will your customers. Meanwhile, you'll be doing a lot of grunt work no one else wants to do and feel like a janitor. It's not that glamorous and you are the last to get paid. And guess what? No one cares. They all think you're living the dream. You'll be frustrated and stressed and worried and have no one to talk to (maybe one person if you're lucky).
Get ready for a new understanding of stress. When you need to make payroll in two days and you have no idea where it's coming from and your hair is literally falling out in clumps and you can't tell anyone or talk to anyone about it, it gets to you. Like nothing before. Generally, you'll find solutions, but you'll face challenges like nothing you ever dreamed of and it'll be 10x harder than you expected. Be ready. Learn to meditate, go to the gym, find ways to deal with the stress healthy. Stay away from alcohol.
Don't give away too much equity early. This can seriously mess up your cap table for later rounds. You may think your Seed and Series A valuations don't matter too much, but they really do. Fight for every dollar.
Hire slow, fire fast. Print this and put it over your desk.
In terms of your engineering department, if you have one, recognize they are not a cost center, they are your profit center, and treat them as such. They are literally the machines in your factory that build your product. Invest. Many companies take the approach of hiring lots of cheap engineers. I go the opposite. I hire as few fantastic engineers as I can. The math works out. One fantastic engineer can do 3-5x the work of one normal engineer. Then pay them 1.5-2x the salary of a regular engineer. You actually save money. It's worked every time I've done it, plus they are very motivated to put in extra hours, work hard, and be loyal.
Speaking of engineering loyalty, never skimp on fixed costs for engineers. They are picky and they need the right tools to get their job done. Compared to their salaries and associated costs, setting up their workspace is cheap. At my companies, whether remote or in person, we give engineers an "unlimited" budget for their workspace. Now, this is first a test to see if they make reasonable requests. But second, if you give engineers all the monitors, nice chairs, desks, headphone setups, whiteboards, desktops/laptops, fancy keyboards, and decor they want, their desk becomes their happy place.....and they will never want to leave. So guess what? You just found a trick to getting them to work 10+ hour days happily. And what did it cost you? $10,000 max? It's worth every penny. Invest in your profit center.
Capital is your blood. While you shouldn't skimp on deploying it where it's useful, don't waste it or deploy it unnecessarily. Returns on sales and marketing can frequently be much lower than you think until they have their formula figured out. Let them figure out the formula, then throw money at them. Every dollar you put into sales and marketing should return you greater than a dollar. Engineering, with senior engineers, is a great investment. So are top notch product people. Don't hire mediocre people and expect fantastic results, especially when you're not paying them top dollar.
Generally, with human capital as with anything else, you get what you pay for.
Understand that open offices were created to squish as many people into as small spaces as possible to save on cost. Not for any other reason. Any other justification you've heard is BS. People, especially engineers, need space and quiet to think. If you do have an office, don't pack in people like sardines or you'll get work product as if you hired a bunch of sardines.
Invest in benefits. It'll pay off.
Force people to take vacations before they burn out.
Let people take the time to manage their personal life. Deal with kids, go to the Dr/Dentist, deal with emergencies, etc.. Don't make them feel tied to work. They'll make up the time elsewhere if you give them free space.
Remember that while money is a driver, what actually motivates people is Autonomy, Mastery, and Purpose. Read Drive by Daniel Pink and follow it.
Sibble & Associates provide technical due diligence services to VC firms as well as angel investors and offers the ability to build prototypes, MVP's, and provide fractional CTO services to startups, all under one roof, ensuring that our clients have the ability to bring their technical concepts to fruition.
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