It drives me mad when I hear startups use the fact that one of their competitors received €X Million in funding as market validation. Customers are a measure of success, so is revenue, so is profit. Funding is not.
Investors put money in high growth companies because they expect a high return but they also accept a high degree of risk. A typical Series A VC is hoping that 10% of their investment will be a huge success and a further 20-30% will return their money. The remainder are going to fail. So on an investment basis they expect that only 1 in 10 companies will achieve their ambitions.
If you use funding as a measure of success you will be wrong 90% of the time. Being wrong 90% of the time isn’t good.
No one should set up their company for the purposes of attracting funding. You take on funding as a means to achieve a much larger ambition. Funding is a vanity metric. It is a metric that people use to make themselves feel important, to boast about and to intimidate others. But funding is nothing to be proud of, it is what you do with the funding that matters.
Prioritizing is difficult for startups because there are so many uncertainties and not a lot of solid information to base the prioritizing on. Most of the time it is a judgement call which is uncomfortable because it is easy to be wrong and, as humans, we don’t like to be wrong.
Frequently this difficulty means that startups don’t aggressively prioritize and even if they do they work on multiple priorities at the same time. This is staggeringly inefficient and is indicative of a weak management team that is afraid of committing to a course of action. if you don’t decide you can never be wrong, but you will also never succeed. Human beings are naturally more afraid of loss then they are excited by gain – you have to fight this instinct.
You should only work on your top priority, unless you can no longer efficiently devote more resources or time to it. For example your top priority might be selling to a particular customer – if you’ve done all you can with the customer and you are waiting for them to hold an internal meeting and you can no longer do anything to increase your chances of winning the customer, then you should feel free to work on priority number two.
Imagine that you have two priorities: A & B. Each priority will take you one week to complete and each priority has a 50% chance of revealing something important about your market. There are two approaches
Work on both priorities simultaneously (in parallel). Since each priority takes a week you will have both priorities completed after 14 days and no results before then.
Alternatively you can work on the top priority first and only when you have completed it do you work on the second priority (in series). After 7 days you have completed the first priority and after 14 days you have completed both. The bonus is you will frequently discover something important about your market from the first priority
It should be clear that working through your priorities in series rather than in parallel is dramatically more efficient. Have you taken the time to prioritize and do you re-examine your priority order everytime you learn something significant?
Frequently startups pay lip service with prioritization and cheat by pretending to themselves that they are prioritizing. This is easily done by working on projects that are actually multiple different priorities.
Ideally you should prioritize using solid data to back up your prioritization, however given how little information many of you have scientific prioritization is going to be impossible. THIS DOES NOT MEAN YOU CAN’T PRIORITIZE. Even a blind guess at prioritization is better than no prioritising at all. Startups must be good at working with ambiguity and have tremendously limited resources – make sure you applying those resources efficiently.
As CEO of a startup, it is your job to make tough decisions and if you aren’t making them you aren’t doing your job.
Tough decisions are decisions where you don’t have enough data to be fully informed but you need to make one anyway. Tough decisions are where you decide to fire a staff member who is trying their best but isn’t up to the job. It’s going back to a long term customer and telling them that they aren’t going to be your customer anymore because you have decided to pivot the business. It’s telling your co-founder they aren’t performing.
Easy decisions are obvious and by their very definition anyone competent would make the same decision. It’s the difficult decisions that define you and your business. If you aren’t making these sorts of decisions then the company could have any CEO – you are letting circumstances control your business. It is through difficult decisions that you shape the future of your company.
We all face difficult decisions every week. How we address these decisions decides the fate of the business. Never let difficult decisions slide, they rarely become easier. Bear in mind that consciously deciding not to make a decision until you have better data is a decision and can often be the best course of action. However, do not use this an excuse not to make the tough decision when you need to. You do not have the luxury of time and resources that these unnecessary delays will require.
At the end of each week ask yourself what difficult decisions you made. If those painful decision aren’t front and center in your mind then you’re probably not addressing the real problems in your business. We all want to ‘kick the can down the road’ but we all know that is a losing strategy. Be a winner, be brave, make the tough decisions.
What age are you? How often are you going to be that age? Once, right?
Entrepreneurs burn two forms of capital in a start up – financial capital and human capital. Since the financial cost of setting up a company has steadily and dramatically declined, the scales have firmly tipped to burning human capital and in particular the human capital of the entrepreneur. Every day you work at your company you are burning a little bit of your human capital.
It’s not a renewable resource. In fact, it is not just finite, it’s irreplaceable – every second you burn is never going to coming back. Time in your eighties will not compensate you for the time you missed your child’s birthday.
Financial capital is fungible and human capital is not.