Experience is critical for building a startup. Here’s the best way to get it.
Last week I had the honor to speak to a large group of college students building their own startups. Their biggest question was, what do investors look for when investing?
The simple answer is that for early-stage investing, more than the perfect product, investors want to see a founding team that combines technical capabilities with business experience and in-depth sector knowledge.
That’s a simple answer that doesn’t answer what they really wanted to know: how could they get from college project to investor funded startup.
Putting on my thinking cap, I elucidated 3 paths:
1. Build something so successful that investors will jump in despite founder inexperience.
There are plenty of unicorns founded by people who, to be blunt, had no clue what they were doing. But they created something that people wanted, so it took off like a rocket. If you build it on a shoestring budget and sign up lots of customers, investors will pile in.
2. Recruit an experienced CEO.
You may have invented a great new battery technology and proven it in the lab, but without industry connections and experience building a startup, getting to market will be a struggle. Add an experienced CEO who’s already built a related startup, and you’ll not only get customers onboard but an easy path to funding.
3. Join a startup.
Work for a few years at a startup before building your own. This was my path and the primary reason I was successful in building my own startup afterward.
Why Every Founder Should Work at a Startup First
As a startup mentor, the most common mistake I see from young founders is to focus exclusively on the product. They seem to believe that if they build a better mousetrap, the world will beat a path to their door.
If they have a great product, the thinking goes, customers will flow in, investors will throw cash at them, and the company will magically take off. I love watching magic shows. But I don’t invest in magic.
Real magic is illusion. What looks like magic takes practice, study, and exacting preparation. It only looks like the dove appeared out of nowhere. In reality, the dove was there all along.
What kills startups is rarely the product itself. It’s a fight between the founders. Or a founder leaving for a job with a market salary. It’s building the wrong product or the right product for the wrong users. It’s a market that’s too small or too fragmented to reach users easily. It’s better-funded competitors piling in with similar products. It’s hiring the wrong people and managing them poorly. In most cases, it’s all of the above and more. There are a million things that go wrong at a startup that have little to do with the product.
Most students coming out of college haven’t held a real job, much less hired and managed a team of 100 employees. No surprise then that many startups implode with personnel conflicts or self-inflicted wounds.
There’s a reason this Harvard study found the average age of successful startups founders is 45. That’s 45! Not 25. Experience matters.
After earning my MBA and transitioning from engineering to marketing, I joined a small startup. I was employee #7. It was the best decision I ever made.
The company already had customers and could pay a decent salary, which was important with those student loans and an upcoming marriage.
The company was far enough along that I didn’t have to reinvent everything. We had products. We had accounting. We had an office and IT taken care of. We had HR, a hiring process, and even a corporate culture.
We already had paying customers. All I had to do was figure out how to leverage what we had to expand the business to profitability.
The company was still small enough that I had the opportunity to be involved in everything. We were a team — engineering, sales & marketing, and business operations. We each had our own areas of responsibilities, but we worked together closely. It was still very much a startup.
The perfect startup size to learn from is 5–20 employees. The infrastructure is in place. The founders have done the hard work. But the company is still small enough that it’s still one team working on everything together.
Once the group no longer fits around the real or virtual conference table, the team begins to specialize into separate silos of responsibility. Engineers talk to other engineers instead of with customers. Customer support stops eating lunch with the sales guys. Only the executive team watches the P&L numbers daily while focusing on the next round of fundraising. Everyone stays in their lanes.
To learn how to build your own startup, get in early while you still have the chance to observe everything. Ask questions. Talk to the accountant and HR manager. Volunteer to help out on anything. Because a business doesn’t run itself. It’s the little details of operations that make the difference between a well-run company and chaos.
When the startup where I was working was acquired by a strategic partner, it was easy to build my own startup.
I knew what problems our customers were struggling with and willing to pay for solutions. I had a co-founder, a senior developer from the company, join me to build it. Customers and distributors were already friends who could validate our assumptions and be our pilot users.
We made enough money from the acquisition to work for a couple of years to build the product without begging investors for money.
But most of all, we had a template for the business operations. I’m not an accountant, but I knew what I needed to know to run the business and who to call for the rest. I’m not a lawyer, but I had contract templates and experience negotiating customer agreements.
I had experience as a manager running the sales & marketing team. I knew what I could do myself and what I needed to delegate. I knew how to hire the right people and how to train them to work well with me.
In other words, I got paid well for an intensive, real-world training program on how to build a startup. And when the time came for my own startup, I had the perfect template.
Startups aren’t supposed to be easy, but this was. All I had to do was insert a new product and turn the crank. No magic needed.
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