Startups are Defined by What They Don’t Do
What is a startup? That is a question posed and partially answered in many places (see quotes below). For my money, startups can be defined by what they do NOT do:
- Get Distracted. We stopped running display media even though it was still profitable for us. But it was distracting to the team and the story. Killing a profitable but distracting piece of business is hard for any company, even more so for a startup where revenue and profit are blood. But startups typically have fewer people with personal incentives to protect, bonuses and vested interests counting on those profits, and can kill things.
- Get Comfortable. Fear drives startups and their founding teams. Fear of your best engineer leaving, fear of MegaCorp crushing you (they usually don’t notice you, and it takes a lot longer to do this than you think), fear of running out of money, or having your customers, investors or partners turn temporarily crazy (at least one of these groups will, trust me).
- Get Scared. “A leader sees it like it is, but not worse than it is,” says Tony Robbins. Fear can be a driver, but opportunity is a bigger motivator for startups. They see the bright, shiny future and optimism is the fuel.
- Maintain Legacy Thinking, or Legacy Code. With less legacy stuff to maintain, so you can do more interesting things with newer, more open-source code and technologies. But this applies to your thinking too. Beware though, technology moves fast and this can change quickly at even the most nimble of organizations. But even just being aware of this problem is already a step in the right direction.
- Turn Off. It’s like having a kid. You move closer to the in-laws, you hire a babysitter and you take breaks, but you have a new level of responsibility that nobody who hasn’t had one can understand. It doesn’t stop for the founders, nor for many if not most of the startup’s team.
- Support Bad Customers. Your initial contracts and the services around your software may not be fully defined and/or changing. Early customers may thus end up sucking a lot of resources, and you may have to fire them to preserve your team’s sanity.
- Keep the Wrong People. Startups need to preserve capital, and that means hiring top people quickly and not being afraid to fire quickly if it doesn’t work out. These are very hard decisions to make and these actions are not done lightly, but are better for everyone if done swiftly.
- Have Sacred Cows, or Thin Skins. A startup is dealing with a far smaller number of data points usually than an established business – searching for a repeatable business model. Three wins in a row (customers, press, tech etc.) can mean happiness, but three losses in a row happens too, and to the team cannot signal defeat. If these things become a trend, that’s a different issue, but there are going to be “small data” blips, just as there will be disagreements, good ideas and the Voice of the Market that may defy founders’ previous wisdom and puncture egos if these are held onto too tightly. Taking outside input while staying true to the vision is difficult, and hurt feelings are inevitable. Startups are organizations where people don’t hold a grudge, or compete for political points.
- Stop Recruiting. Keep hiring better people – better than the average person on the team now. When you stop, you stop being a startup.
- Focus on Short-Term Growth and Profits. Some may disagree here. And I know I initially felt differently about this. But most of the above points are the difference between Companies and Startups, but this is the difference between a small business and a startup. True startups need to grow but also show the potential to grow big: this is important. At various points, founders raising money for startups are really (perhaps without knowing it) pitching their small businesses, and professional investors probably rightly steer clear of most of these. (BTW Investors make lots of mistakes in assessing teams and startups, but let’s give them some credit – it is one of the hardest problems there is).
Some notable quotes about what defines a startup. What are yours?
“A startup is a temporary organization used to search for a repeatable and scalable business model.” – Steve Blank
“A startup is a company working to solve a problem where the solution is not obvious and success is not guaranteed,” – Neil Blumenthal
“A ‘startup’ is a company that is confused about —
- What its product is.
- Who its customers are.
- How to make money.
As soon as it figures out all 3 things, it ceases being a startup and becomes a real business. Except most times, that doesn’t happen.” – Dave McClure