There are many books and posts that describe what is necessary to achieve success in a new startup. Having worked at a half-dozen startups over the past 15 years, I have concluded that successful startups are a three legged stool. Just like any stool, these three legs in a company don’t necessarily have to be the strongest or sturdiest in order for the company to be functional and even excel; but if they are uneven, or if one leg is very sturdy but another is not, then the entire company crumbles.
These three legs consist of:
Let’s discuss each of these areas in some more detail:
Product – in many cases, entrepreneurs at a startup are the inventors themselves. These folks designed, built and rolled out the product and are (of course!) very proud of it. It undoubtedly will transform the industry in which the product was intended. Of course, there are certainly products that have been able to be transformative and the founder’s legends in the industry. But even those products had serious flaws at the beginning. If it wasn’t for the consistent and honest feedback loop between product management and the customer, it’s likely a large majority of those game-changing products would have failed or been marginal successes. It is not a requirement that the product be perfect or anywhere close to perfect out of the box – rather, it needs to be “good enough” to solve a particular problem, and “flexible enough” to be able to change to customer needs/demands in a quick fashion.
Sales – this area is a lot of fun because there are so many ways for this to go sideways, and this is typically the area that gets primary blame when a product fails. In a typical scenario, startups will go from “beta customers” who don’t pay anything, to “early adopters” who pay something and start the validation process. At this point everybody gets very excited that the 2-3 customers who actually plunked down money translate into a product or solution that will perfectly fit the rest of the customers in that vertical market or geographic segment. Of course, that isn’t always the case. There are also companies that go “elephant hunting” looking for those 1-2 customers who will put millions of dollars into the product, rather than looking for a repeatable market that may generate less money per customer, but provide a more consistent stream of revenue and not require the company to put their eggs all in one basket. In pretty much every successful company, they will admit to a large luck factor in this area – no matter how senior or savvy the sales force, there was typically an outside force that had just as much to do with the market success of a product as the people themselves. So, this one requires hard work, lots of sweat, and luck. Certainly nothing you can plan for with absolutely certainly of outcome! In this area, don’t conclude anything too quickly, look for the repeatable sale, and make sure you bring your rabbit’s foot with you everywhere.
Leadership – Certainly the most talked about area but the least understood and hardest to address. First and foremost, senior leadership needs to be on the same page regarding the outcome of the company, there are so many instances where really smart and motivated entrepreneurs failed due to a lack of clarity or agreement on the ultimate vision. Empowerment is crucial. Every employee at a startup should feel like an owner; it is all too common that first time entrepreneurs from larger companies create the corporate “hierarchy” they’re used to, which does not work well in a smaller company. Communication is critical. People working 15+ hour days want to know what’s going on in the field, with customers, analysts and especially management. If information is only flowing one way, everybody loses. The issue here is that the qualities that make someone such a good entrepreneur are typically in direct conflict with the qualities that make someone a good manager. With all of the other things going against a startup, if you don’t have everyone paddling as hard as they can in the same direction, then you’re just making a tough situation that much more challenging. Not everybody can paddle as quickly or strongly as you; just make sure you’re getting the most out of each person that they’re capable of giving. If the founders are exceptional but nobody else is, it will be nearly impossible to succeed.
To recap, the simple formula here is to be “good” at all three of these things – no need to be “great” – it helps, for sure, but not required. For product, make sure you’ve built something that scratches an itch, then be tireless at listening to your customers about how to make it better. For sales, do all the blocking/tackling of prospecting and qualifying deals, but make sure you’re doing it where you can get repeatability in your model, and be tireless about satisfying customers both pre-sales and post-sales. For leadership, empower and listen.
- Mastering the Art of the Repeatable Sale
- Chess as a Sales Strategy (also, an ode to the NY Jets)