With the resurgence of the online ad space and loads of companies starting up, it feels like the ’90s again. Never mind that 9 out of 10 startups fail. Those rare successes always lure people back with the promise of rewards and excitement.
I know. I’ve been there. After starting three different companies, I understand the drive to build something. I understand why people do it; the 80-hour weeks, the late nights on the computer while your spouse sleeps upstairs, the edge-of-your-seat, hanging-by-your-fingernails adrenalin rush of a startup. For many, it’s a compulsion, sometimes an unhealthy one.
Today, a lesson in startups. This isn’t meant to discourage anyone. Rather, it’s just a small dose of reality for those of you getting ready to start something.
- Be passionate about what you’re going to do. There will be days when you look in the mirror and you don’t recognize the person you see and have no idea what you’ve gotten yourself into. You must be absolutely passionate and resolute about what you’re doing. Without that scrappiness, you won’t make it through those moments.
- Build an outstanding team. Find someone you respect and trust and who’s just as good as you are. You want someone who has your back. Don’t trust lightly. Run lean and hungry. Only take in A-list players, because four or five A-list players can do the work of 10 C-list players. And those A-list players will be less productive with a couple C-list players around than they’d be without any “help” at all.
- Scrounge, scrape, do it all on your own. It’s the best thing you can do. But if you don’t have much money and your plans will take lots of resources, be wary of where you get the money. You want A-list investors, just like you want A-list employees. Investors should back you up. Don’t take 20 small investments from your uncle’s golf buddies, your cousin the doctor, or anyone who is going to eat your time. If the investment is big (to the person giving it), he’ll need to be managed. Would you rather have $1 million from an A-list professional investor, or 10 $100,000 investments from people who can’t really afford it?
- If you need it, only take smart money. Make sure your investors can help in ways beyond financial. I learned a lot from one of our investors. He spent all day in a strategy session with the management team. He brought us to his house for board meetings. He pushed and pulled every time we met. He wasn’t an MBA management consultant. He’d been CEO of several companies. One he took public. He sold them all for a lot of money. He offered real value. I’ve seldom seen (or heard about) this kind of value, even from decent venture capitalists. Only the best ones provide that kind of value. Hold out for them.
- Be smart with money once you get it. You don’t need offices in three cities. You don’t need swank digs. You don’t need to impress anyone with anything other than your performance and service. Most people I’ve dealt with respect a scrappy startup in horrible office conditions far more than a slick one with lots of high-priced executives. You don’t need high-priced executives with connections and big company experience. Rarely does corporate senior management experience translate to a startup. You want scrappy, savvy, streetwise business people who get the job done. There’s plenty of time later (like after a few years) to bring in the pedigrees, people who will help you get to the next level… and a successful exit.
- Process makes perfect. Though you don’t need the pedigrees to run the business, you do need some good mentors. You want real business people. You want professionals you’re proud to work with. And you need at least one lynchpin person who will set up business rules that get your operations humming. When you find that person, hire her. Beg if you must, but get her into the company. That person will make your A-list people a cohesive fighting machine. Whether that person is the office manager, head of operations, COO, president, or CEO, you need her.
- Your customers need you. And you need them! Business is simple: find out what people need, listen to what they tell you, and deliver what they ask for. Answer the phone when they call. Always return their calls if you miss them. When you screw up, admit it and apologize. Don’t blame the account manager or the QA team. Accept responsibility; tell your customers what you’ll do to address the problem, and provide at least three reasons it won’t happen again. Don’t make the same mistake twice.
- Take great care of your team. Don’t make promises you don’t know if you can keep. Don’t tell people what they want to hear, and don’t ask them to do things you wouldn’t do. Don’t lie to your team. Get to know them as people, care about them, treat them with respect. Cry when you lay them off. Take good care of the team you have left. Don’t sugarcoat things to keep employees from finding other jobs. If they have personal responsibilities your company puts at risk, help them find other jobs, help them transition out. Dig into your business and personal connections, and recommend the heck out of them.
- When you hire a loser, fire him quickly. Don’t be a wuss about it; you’ll anger your team, you’ll be frustrated, and, frankly, you’ll do nothing helpful for the person you hired. Give him a few weeks to try to find his niche. But if he clearly isn’t working out, transition him out quickly.
This goes for the receptionist up to the CEO you hired at the investors’ recommendation. If you have the power, use of it. In a company of fewer than 100 people, the person in charge should know every person in the company and at least a few things about her. The CEO should walk in and greet everyone by name. Beware the leader who doesn’t do this; he’s damaged goods.
- When it hits the fan, either put on a raincoat or turn off the fan. This isn’t for the faint of heart, and you’ve got to work with a never-give-up attitude. But if you finally get to the point where you can’t make payroll and you don’t have any way out, do the right thing for your team: shut off the lights. Many have been there, and it’s among the worst things you’ll ever do. But you never know what will rise from the ashes. If you’re really lucky, it will be the startup that really takes off.