Having been the founder, CEO, or COO of five start-ups, I thought I’d seen it all. But growth is ongoing, you can bring all of your lessons learned to each new venture and continue to make mistakes and learn new things. In my case, some were quite painful and others less so, but all valuable. I always like to share in hopes that others can take a nugget or two and leapfrog ahead faster.
My last start-up was a consumer IoT Platform as a Service company that we started almost 10 years ago and sold last August. We grew it from scratch to 110+ employees in three countries, and closed some amazing deals with Tier 1 Global brands. It was, as are most startups, a roller coaster ride – full of excitement and fun. While we achieved success, it is important to look back and see what we did wrong, and what could’ve been done better. I like to reflect on how to take the lessons learned and integrate them into my next opportunities. This is my take on some of the key lessons I have learned.
1. It’s the size of the pie not the angle of the slice
“Control” is an illusion. While there are exceptions to this, if you are the founder and/or CEO of your business, your control will be based on how well your business is doing, not how much of the shares you own. Whether you own 10% or 90%, the only thing that matters is the trajectory or your sales and profit and hitting your milestones. I run into founders/CEOs all the time that are worried that if they raise too much money and have to give up share “control”, that the business will be ripped out from them. This is highly unlikely if the business is doing well and extremely likely if the business is doing poorly. And if you own a significant number of shares, even if it is a minority position, you WANT a better CEO in there so that you can get some return on your efforts.
I have rarely seen senior management complain that they “raised too much money”. Generally, the limitation in success is gated by not having enough capital to hire the best talent, keep up with the competition, build brand, scale infrastructure, innovate, execute with excellence, etc., not because you have too much money. Of course, your business plan has to show the ability to have a reasonable return on the money invested, but if the idea is right, don’t be afraid to raise more.
2. When it comes to hiring, be frugal, not cheap
Great managers are not afraid of hiring people that are way smarter than them in their particular area of expertise. This is not an area to cut corners. It is not a given that great people are expensive, but surely when you have an opportunity to hire someone great, whether with salary, equity or both, pull out the stops to get them on the team. It is far better to have fewer great people than more mediocre people.
3. Don’t be afraid of firing people even if you have no bench
The converse of number two is equally true. Unproductive employees not only take up the salary you could use to hire a productive employee, but they also drag their colleagues down. It’s common for an unproductive employee to “set the bar” lower for the rest of the team and potentially demoralize them because they see that management is letting this poor performance slide, so why should they work so hard? You’re worried about who will do their job when you let them go? You should be more worried about the job they are NOT doing if you don’t let them go.
4. Build it for your customers, not for your investors
When you build a culture that is obsessed with employee and customer satisfaction, your investors will benefit. When you build a company that takes the investors’ or the board’s direction, if it flies in the face of your focus on employees and customers, you will likely fail.
There is no substitute for satisfied employees who are passionate about satisfying your customers. This is ALL employees, not just the sales people, marketing people or customer care advocates. Administrators, engineers, project managers, supply chain, all need to be driven by the same idea of making your customers happy. Of course, it starts with you. How you interact with the employees and customers is the key to creating a culture with this ideal in mind.
5. If you build it, they will come
When you bring in investors, you need to start thinking about your liquidity event. Will it be an IPO, acquisition, a merger? None of these are viable unless you build a business with legs. The fundamentals of the business are critical to any exit. Sure, you should have the exit strategy in mind, but that will be the outcome of building a solid, scalable business, not the other way around. The exit should not drive the strategy, the excellent execution of the strategy needs to drive the exit.
6. Pay more attention to execution than strategy
At the risk of oversimplifying, I often say, it is far better to execute a mediocre strategy with excellence than to execute an excellent strategy with mediocrity. I have led and consulted with companies that have had brilliant strategies that have failed on delivering at a high enough level. I have also worked with companies that had a “me too” strategy, whose differentiation was superior execution and have won based on that. Clarity and focus on execution are the key to thriving. Deliver what you promise and promise what you can deliver.
7. Recognize the red flags when partnering with your co-founders
Partnerships are a lot like marriages. Both parties get caught up with the passion and lust for the opportunity and what potentially can lie ahead. The temptation of Invigorating ideas, success, money, are all very stimulating in the beginning of a start-up. And just like the beginning of a personal relationship, that passion can often blind us to the red flags. You need to be very careful about not being blinded by the lust. Is this person someone that will always have your back? Will you always be able to have their back? Is your resolution of conflict easy or painful? Can you see this person as being a good manager as the team grows? Do you see them having a valuable contribution five years down the road? Pay attention to the small “challenges” at the beginning and don’t turn your attention away from them because if you can’t resolve them now, when the blush is off the rose, they could become logarithmically more challenging.