Entrepreneurial Advice from a Startup Veteran. (updated by Popular demand from 2013).
I’m not going to go into my track record. It’s long, but the bottom line is I have had 9 exits that are fully cashed out, 2 failures, and my bet is now on my final startup, Metal which I am taking a taking a “coach” role to the supremely talented Marshall Hayner on.
Here’s the take-aways (updated for 2020)
1. Don’t start something you are not completely passionate about. I started an online shoe company in 2009 just because “it seemed like a hot area”. I had zero interest in women’s shoes. I failed. Meanwhile, a friend (not a close friend, but lets just say a friend), created Jimmy Choo and sold it for a small fortune. She cared about shoes. Fred, not so much.
2. Don’t assume you can disrupt a major leader just by adding more features. Hundreds of people have tried to make a better CraigsList (including me). Guess what: CraigsList still rules. You can’t attack a network effect with better graphics. Same with eBay. Same with … You get the idea.
3. If you are successful in one area with a startup, stay in that exact same area. If you have done an ad-tech startup, your best bet is to do another ad-tech startup, not a startup selling subscription razor-blades. There are certainly counter-examples (Uber for example), but as they say, the exception proves the rule.
4. It’s the people, stupid. The number one determinant of success is people — and especially people at the top. Your investors don’t matter all that much — money is money. What really matters is your partners. If you have great partners, great things will happen. Surround yourself with the absolute best people and cut them in on the deal. Great partners will work overtime or for peanuts when things get rough. Paid employees after pure high salary will not. Contractors will not.
5. Have money. At the end of the day, having money to bankroll a startup during tough times is probably the second biggest factor behind people. No matter what the idea is, and who is involved, all startups reach a point where they need more cash. The ability to write that next check yourself is a huge advantage over the first time entrepreneur. What if you don’t have money? Find a co-founder who does.
6. The failure rate for startups is going up, not down. It was one thing competing against Yahoo or DoubleClick in the 1990s (although not easy). Competing against the FAANGS is a different story. They are executing on a level not seen in human history. You really need to pick something not in the FAANG headlights. Otherwise you will be roadkill.
7. Different is better than better. I took that line from a book I bought in an airport once, but I love it. Do something really different. Pick a different name. Pick a new look. Try to do something absolutely nobody is doing now, not something that others are doing that can be improved 20%.
8. Try to do anything to improve your odds of survival. Take a strategic investment from a corporate partner. Merge with your #1 competitor. Keep your payroll down. It’s all about improving your odds. And per above, your odds are not very good in general.
9. Build something that you yourself really want to see. This is really the contra-positive to point 1. Personally, I want to really see a system where you can buy crypto with a debit card, send it to anybody easily, use it in apps with no fees, transfer back to your bank in seconds. That doesn’t exist quite yet. I really, really want to see it. By the way, that describes Metal in 1 sentence. If you can’t describe your vision in one sentence, you are doing something wrong.
10. Realize that your startup is FRAGILE. Don’t act like you are a big startup if you are unprofitable and 20 people. As Yves from Upfront Ventures told me: “The number one cause of startup failure is “premature scaling”. I agree.