Startups

Startup Teenage Years

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We’ve all been there. That awkward adolescent teenage year where we’re trying to figure out who we are, what we want to do, who we want to hang out with, etc. When we were kids, we didn’t really know much about the world and just did what was fun and what we wanted. As adults, we know a lot more, are more confined, have been around the block a few more times, and know what works and what doesn’t. It’s those teenage years that are hard because we get rejected, we don’t know who to hang out with, we want to be popular, and we want to do what we want but reality is setting in.

Lots of startups aren’t much different. Many startups get their first leg in the door by offering a niche product that is affordable. They start to experience growth but are still able to have tons of creativity. We’re still able to launch features like crazy, have an idea of what we want to be when we grow up but aren’t really strategic about it, and sell to whoever wants to buy. We don’t really have focus.

For startups who have turned to the enterprise market and are grown up, the features and areas of investment are often very strategic, the feature release cycle is slow, they focus heavily on solving deeper more solution focused problems for companies, and have the business process to back it up.

It’s the middle years that are the hardest. Here’s why: inside the company people haven’t grown up. There’s a common trend among smaller startups that see success where they want to repeat the same strategies that worked before to attract larger businesses. I hear of many startups who want to hit that $100M ARR which primes them for that potential $1B valuation. It’s a good goal. But the reality is that inside of the business they’re not ready. The sales team still sells on features versus focusing on creating solutions that solve real problems for the customers. The features pushed out by product and engineering are still reactive versus strategically thinking about where the deepest problem sets and value of companies are at. Marketing is struggling to change the lead funnel from low value, volume focused to high value, low volume. They are struggling to change the messaging and positioning to gain the attention of strategic buyers at enterprises.

These are not unique problems. In fact, they are the hardest problems to solve. It’s not a matter of if the engineering team is capable of creating these solutions. It’s a matter of mindset. It’s not hard to change the thinking of a company from smaller deals to large deals.

I’ve seen this at every company I’ve worked at. Best part is? It’s ok. No company is perfect. Every startup has turbulence. Every startup has challenges. If a company says they have no problems with growth, they’re lying to you.

To me, the key to fixing this problem is having a truly compelling, strategic, and crystal clear vision that is simple. It needs to be a vision that goes back to the basics. This needs to be defined by management, understood by employees, and embodied in company spirit. There needs to be as little confusion as possible which means that every division (yes, including engineering) needs to be able to understand why they are doing what they are doing.

One of companies I worked at in my past was making the shift from a developer focused product to adding a marketer focus as well. No one knew why. There was a lots of reasons we did this but only a few new. What happened was that engineers didn’t care, marketing pushed out irrelevant messaging, and the sales team wasn’t enabled to sell it appropriately to a new buyer. It eventually got solved but was extremely painful for the first 8 months.

This is what I define as the startup teenage years. Reality is hitting. Buyers aren’t buying because the company isn’t ready. It’s not all doom and gloom though as long as the company is well informed as to where they are going, why they are changing, and what is driving that change. To me, it’s the most exciting time to be at a company because you see less of the petty deals and more of the massive deals that are causing real changes. The proudest moment of my career was knowing that a Fortune 500 company implemented our product and was saving $10M+ per year on infrastructure savings. That knowledge sparked the fire in the teams and drove deeper investment into a strategically focused product.

Knowing that your product is making a substantial difference and shift in your customers is the most rewarding validation there is.

20 Do’s and Don’ts in High Growth Startups

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I’ve worked for three startups now that were listed in the top 500 fastest growing startups in the nation. They were all software, B2B, or infrastructure focused ranging from hosting to personalization platforms. The size of the companies ranged from 40 to 750 with growths between 300% to 5,200% growth in revenue and head count. They all have one thing in common: whirlwind firehose. There’s a ton of moving parts in any high growth startup and the models in which you operate change quite a bit. I’ve seen a lot of “X things I’d do again” posts in the startup world so I figured I’d do my best to contribute some findings I’ve seen. While I’ve never been a CEO of one of these, I’ve been deep in the action and a core contributor.  This is my opinion from this perspective on what works well and what doesn’t from a software perspective so take it with a grain of salt.

Things to do that work well

  • Balance opinions on candidates during hiring based on past experience and passion. Just because they worked at some famous company doesn’t mean they’re good.
  • Always communicate a clear vision to all teams frequently. Ambiguity will kill you.
  • Keep an eye on the competition but don’t focus on them. Doing so causes feature wars. I’ve seen this twice and it never turns out pretty.
  • Smaller startups should focus on delivering key features that solve specific problems.
  • As a startup grows, transition from solving features to solving real business problems.
  • Constantly interview current and wanted clients to figure out where true business value lives.
  • Put a decent amount of focus on culture but not an excessive amount.
  • Having 30% of your revenue come from overseas
  • Having 15-20% of your revenue sourced from partners
  • Invest time and money into design with a proper design guide. You’ll regret not doing so.
  • Have a simple pricing structure that is easy to understand. It reduces complexity in the sales cycle.
  • Having a customer advisory board is like having a personal bank vault of gold. Seriously, build one. Listen critically to their feedback.
  • Be constantly in tune with how your managers are performing. As startups grow, managers sometimes don’t and need to be moved.
  • Positive reinforcement of individuals pays dividends. Even if it’s a small “I think you’re doing a great job”, it helps reset negativity built up from employee stress.
  • Allow for clear autonomy of teams as long as they’re clear of what the vision is. Have a clear leader (eg. technical and product) and make sure it’s balanced (eg. not 1 technical & 2 product). Doing the latter kills velocity.
  • Have frequent check-ins with team leads. If they’re frustrated with something or blocked, prioritize unblocking them.
  • Have 3 strategic goals each year executed by certain teams. Make the goal clear, almost impossible, and create (with the team) an extremely focused plan of attack. Staff the goals.
  • Microservices based approach with API’s is king. Your product will evolve over time. Make it easy to connect or rip out parts of the product.
  • Listen to new hires and what they’ve experienced in their past. You hired them for a reason. They often have outside insight.
  • Make sure every employee you hire has a very clearly defined role. They should be able to operate autonomously within their role.

Things that don’t seem to work

  • Having a “free tier” is a distraction, waste of resources, and often doesn’t convert to valuable customers.
  • Don’t say “we’re going to revolutionize ___”. You’re often not. You’re not curing cancer (unless you actually are). Your employees don’t like the kool-aid. Instead, get them amped up by sharing success stories where your customers have proven savings or ROI. Show them that what they’re doing is making a difference somewhere.
  • Don’t buy a massive office space. It’s really, really expensive. Wait until you have truly predictable growth, are hitting sales targets early in quarters, have renewall rates at 93%+, and the cost of the yearly lease is < 10% of total revenue.
  • Don’t get into feature wars. You’ll lose money, discount more heavily, and lose focus on your products integrity and vision.
  • Don’t focus on the small/free tier. It’s hard to do but they are often the loudest, take up the most time, and often aren’t providing any significant amount of revenue.
  • Don’t believe everything that is said. It’s often rumorville, bullshit, or someones biased opinion.
  • Don’t waste time on products or features that can be easily commoditized or aren’t part of your core competency. It’s a waste of time, money, and resource. I’ve seen this one twice and it hurt both times.
  • Don’t be cheap on travel and enforce things like “cheapest route possible”. Fly non-stop when possible. Time is money.
  • Don’t have a conference because you think you have something to say. Conferences are expensive, you often have to give tickets away for free, often don’t provide high ROI, and are a big distraction for the company. Only do this when what you have to say is valuable enough for people to pay tickets for.
  • Don’t over invest in once channel of marketing. Blasting out 20 million emails per year isn’t going to scale from $80M in revenue to $500M.
  • Be careful of investor influence. Remember that they’re not always there for your best interest but rather the best ROI. Don’t lose sight of the end goal. Be prepared to fight for your position.
  • If you have to have 3 back channel meetings in order to influence a key stakeholder, you have a problem. This is how companies slow down. Confront this head on and erase it from the company.
  • Going public is a lot harder than it sounds. It’s expensive, requires a shit load of moving parts in the background, and is a long process.
  • Getting to and maintaining 90%+ profit margin is actually hard scale. There are lots of bumps in the road to get there. Don’t focus heavily on profit margin initially but ensure your tech stack has the potential to hit that margin
  • Remember that data grows exponentially. This gets really, really expensive and blows servers up.
  • China is hard. Don’t waste your time with it until you’re bigger.
  • Don’t underestimate the power of beers with clients. Deep relationships are built on pints and when shit hits the fan, you have relationship equity to pull from as you fix the solution.
  • Don’t get into the situation where 10% of your clients drive 90% of your revenue. This is extremely dangerous and often blows up.
  • Don’t forget that business pretty much stops in the summer. As well as your employees. Vacations happen so expect to see a big decrease in velocity each year.
  • Don’t expect magic to happen overnight. On-boarding or engine creation (think sales engine) takes on average 4-6 months.

Opinions? Additional items you think should be added? Feel free to comment!

Joining Let um Eat as their first Advisor

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I’m very excited today to announce that I’m joining Let um Eat as an Advisor. My primary focus will be advising the company on technology, expansion and strategy as they push the growth curve. So what exactly is Let um Eat?

Let um Eat is bringing back the connection between humans and food. In the past years, there’s been a real disconnect between where our food comes from, who the people are that prepare it, and more. The goal of Let um Eat is to promote, educate, inspire and connect the Seeders (Farmers), Feeders (Chefs & Artisan Producers) and Eaters (People who eat!) in our local and national food system by sharing stories, experiences and resources.

It’s a collective of people who care about sustainable food and praising those who grow it and prepare it. I’ve always been fond of food since I was fortunate enough to grow up in a city that boasted the highest amount of restaurants per capita for a long time. Let um Eat has showed significant growth in their community with the recent trend of consumers caring about their food. High quality local farmers, top chef’s, and sustainable conscious community members have helped accelerate the growth with their pledge to share their incredible and inspirational stories. With chains such as B-Good, Chipotle, Shake Shack and Whole Foods growing in droves due to their transparency and connection to the sources throughout the food chain, I have high confidence that their unique way of “sharing the love” will resonate with the community. Let um Eat has been bootstrapping for the past year and are starting to expand outside of Oregon into neighboring states.

It’s a great honor to help bring back the connection between the food chain and I’m excited to be part of the movement. Thanks for asking me to join the collective!

To see what it’s all about or join the collective, check out Let um Eat.