Exactly one year ago I quit my job with the dream of starting a technology company. I didn’t have a plan except to work hard and learn. Yet I could have used a lot of advice in the early days, which is why I’m writing to you today. My hope is that the below advice will help guide some of you if and when you make the decision to quit your job and pursue a startup.
I have two blog posts summarizing the year and the six products I’ve built. The first — here — is a telling of what I’ve done, what products I’ve built and what I’ve learned from each. The second — the post you’re reading right now — is a summary of advice for others who are in a similar position as I was a year ago.
1) Be prepared for dark days: the last year has been both the hardest and most amazing year of my life. There have been days where I was angry at everyone, scared that my life-long dream would drift away out of reach because of my insufficiencies. And there have been days when I’ve been on top of the world, literally running down the streets skipping with utter joy. You’ll have both of these days, but you’ll remember the dark ones. They’ll leave a stain on you that only washes off with a good attitude and a happy candor.
2) Try not to freak out about your personal runway: I have a panic attack once every few weeks about my personal finances. I’ve emptied multiple 401k plans, consulted on the side, and sold other financial holdings that shouldn’t have been sold. I’ve done what I’ve needed to do to survive, but I’ve probably done a little too much. That is, I’ve let my anxiety control my financial decisions.
Set aside plenty of money to keep yourself afloat, and try not to stress out too much. Chances are good you can find money to keep going when you’re close to running out. But when you have money in the bank, try to focus on building your startup. Easier said than done, at least for me :).
3) Raising money is not success: until recently I assumed that success meant raising money. Perhaps the Silicon Valley culture has rubbed off on me too much. Raising money is not success. In fact, it’s an incredible distraction from running your business. The lure of getting meetings with big-shot investors is strong, but your time is probably better spent elsewhere.
Only raise money if you truly need it. Come up with a rough 6-12 month plan for your startup and determine all the possible costs. If those costs are too large and can’t be offset with revenue or personal funds, raise money. Otherwise, don’t raise money. It’s as simple as that. Furthermore, the best time to raise money is when you aren’t raising money. Build your business/product, not your pitch.
Plenty of awesome businesses started without investment, Atlassian and Github to name two. Raising money is not success unless you truly need the money.
4) Raising money is not easy: a common assumption right now is that raising money is easy because there’s a lot of it out there. If you have an easy time raising money it’s either because you’re awesome or because you have shitty investors. Good investors will ask great questions and find holes in your business. You’ll need to do a lot of selling and a lot of convincing. And you’ll need to infect them with your energy and passion for success.
If/when you decide to fundraise, take it seriously. Learn from every meeting, find mentors to help you with your pitch and strategy, and go into meetings prepared. Don’t let a bad meeting get you down. You’ll probably have more bad meetings than good ones.
5) Start fundraising with investors who know you well: a successful seed round starts with one good investor. With one good investor all other meetings you’ll have will be easy. When it’s time to raise money, find someone who knows your market well and has worked with you in the past — your former CEO, a friend who’s in the space, etc. Get this first investor to commit $10-50k on terms you both agree on. Then go pitch other investors. Pitching an investor when money is already committed is much easier than otherwise. The conversation goes from “please give us money” to “you can participate if you want.” The latter is a far better position to be in.
Again, try to get $50k committed from investors who know you before you speak to a professional investor. If you’re interested in learning more about raising a seed round, I’d suggest you read this.
6) Customer development is key: customer development is the most important thing to get right in the early days. The best customer development is with a product, not a survey. Get a prototype out there, get people using it, and become friends with those people. Your early adopters will make a huge impact on the success of your company. Get to know them, treat them well, and listen. They’ll fall in love and they’ll tell all their friends.
The following three questions matter the most:
- Why do you use our service?
- Will you continue to use our service?
- Will you pay $XYZ for our service?
Know the answers to these questions before you take any idea seriously.
When determining what features to build and what directions to go, never start with “I think we should …” Always start with “Customers want X so we should …” What you think doesn’t matter — your intuition is probably wrong, unless you’re incredibly talented or you’re your own customer. Your customers are all that matters. Without them you have nothing.
7) Team matters, a lot: there are incredibly few people out there who can build a successful startup by themselves. Furthermore, finding good co-founders isn’t easy. Pick a great team before you enter anything risky — before you pay legal fees for incorporating, before you plan to pursue something for the long term.
Pick team members who you’ve worked with before. Have a total of 2-3 cofounders, anything more is too complicated. Do not assume your team will work out until it does. Doing a startup with someone else is like having a child or getting married. You’re entering a commitment and everyone needs to have the same expectations around success, failure, and day-to-day operations. Everyone needs to feel like a part of the team. Otherwise your team will fail to work well together. And your startup will probably fail, too.
Everyone on your team should have complimentary roles. You shouldn’t overlap too much in what you want your role to be. For example, two of three co-founders shouldn’t want to be the CEO or CTO. This is an early sign of a dysfunctional team.
8) Divide equity evenly amongst the founders: I can’t stress this enough. Do not be a founder with someone if the equity isn’t split evenly. Uneven splits almost never make sense. You’re all going to be busting your asses for years on this crazy idea of yours. One person doesn’t deserve more — I don’t care how much more work they’ve done to get things started. Split things evenly. No exceptions. The success of the company rests on each of your shoulders equally. Compensate yourselves equally, too.
If one of your founders isn’t comfortable with an even split, they probably don’t trust the rest of the founding team, which isn’t good. Or maybe they feel entitled, which also isn’t good.
If one founder did more upfront work than the other founders, put them on an accelerated vesting schedule. Don’t give them more equity.
9) “Business people” fight an uphill battle: I don’t mean to discourage you, but your path to success is harder and longer than those who can build a product on their own. Try to find a technical co-founder. Unfortunately that’s the best advice I can give you.
10) Seek out advice and mentorship: make friends who are also entrepreneurs. Find good advisors/mentors and meet with them regularly. Try to work around other startups, either by camping at a friend’s office, or by paying for coworking space.
11) Balance passion, skill, and opportunity: you will succeed if you do something you love, something you’re good at, and something that has opportunity. Try to build a startup that has a little of each of these.
12) Keep learning: you’ll never know all the answers. After you read this post you’ll know more about the early startup process. But when you finally get there you’ll have endless other things to learn. Be ready for this. Try to love the opportunity of learning something new. Keep reading, and stay hungry for knowledge.
13) You might need to search a while for the right startup: I spent most of a year soul searching, building products and staying busy. It took me nine months to find MemCachier, my current project that I’m in love with. Don’t expect that after you quit your job you’ll know exactly what to build. Stay busy, and ship as many products as you can while you’re in the experimentation phase. You’ll find the right startup eventually. And when you do, you’ll be so happy you spent time searching for it.
14) The best reason to get investment is for growth: investors want to invest in success. Investing in a company without traction is risky. Investing in a company that has traction and wants to see huge growth is less risky and very exciting. There are plenty of good reasons to get investment. But growth is the best reason.
15) Understand what type of investor you want: do you want an investor with good connections? A trophy investor? Someone with operational experience in your market? Or do you just want money? Understand what type of investor will help your business succeed and look for investors that fit the bill.
16) Starting a company is the most rewarding thing I’ve ever done: this whole process has been absolutely unbelievable. There have been lots of hardships: my personal relationships have suffered, I’ve dried up nearly all of my financial holdings, my net income for the year is -$40,000, I hardly buy or indulge in anything, and I’ve been highly stressed for almost an entire year. Yet I wouldn’t trade this last year for anything. For the first time in my life I’ve found work that I love, which is truly difficult to do. I’ve pursued my life long dream. And I couldn’t be happier about it. It’s all worth it.
Questions? I’m more than happy to answer them. Write a comment and I’ll get to it soon.