You think you have no moves? How about taking your company public with $2M in trailing revenue and 340 employees, with a plan to do $75M in revenue the next year? I made that move. I made it in 2001, widely regarded as the worst time ever for a technology company to go public. I made it with six weeks of cash left. There is always a move.
Pay attention to financial operations from the early days. Make a budget.
Be explicit with your co-founders at the get-go about decision-making, distribution of information, and level of commitment. Formalize this in a written agreement.
Have conversations with co-founders and teammates when they join about what rules you’re comfortable bending and what hacks you’re comfortable implementing.
Don’t be a lone wolf. Lean on the experience and smarts of your teammates, investors, and mentors to help solve the tough problems and take advantage of the opportunities.
If you’re a first time entrepreneur, invite an outside director to sit on your board when you raise money. The upsides greatly outweigh the downsides.
Keep your investors posted on your progress, be responsive to their requests, and lean on their guidance.
Be overwhelmingly honest with your stakeholders (team, investors, customers).
Build a support network of fellow entrepreneurs when the times are good, because when the times are tough their support is invaluable.
I didn’t want to work. I didn’t want to get out of bed. I didn’t want to cold call people. But I did it anyways.
Now the math gets interesting:
To build a $100m business on a $5 a month freemium tool, you need 2,000,000 paying customers. Congrats to DropBox and SurveyMonkey. But who else is pulling this off? Not too many.
To build a $100m business selling to SMBs at $300 a month, you need ~25,000 paying SMB customers. A lot. But achievable. If you dominate a large vertical, especially.
In fact, it’s easy to see, 5-7 years down the road — 15-20 $100m+ ARR winners here. All selling verticalized solutions to SMBs. It’s, finally, time.
The Rise of the SMB SaaS Solution.
I’ve been everywhere, man.
I’ve been everywhere, man.
Crossed the desert’s bare, man.
I’ve breathed the mountain air, man.
Of travel I’ve had my share, man.
I’ve been everywhere.
— Johnny Cash, “I’ve Been Everywhere”
Startups and co-working spaces are like peaches and cream. They go so well together. And I’ve done a lot of co-working during my years in the startup ecosystem.
All of this co-working has given me some pretty strong opinions on which co-working space ‘features’ are most important for entrepreneurs.
Use this set of features as a rough checklist when you’re figuring out where you want to spend most of your waking hours during the earliest days of company building.
This is the top feature if you’re an early stage startup.
It’s completely insane for an unfunded, cash burning early stage company to pay for office space. In New York City and other startup hubs there are many co-working spaces that are 100% free.
Other startups that are at the same stage as yours
…important for all of the following reasons:
- Peer support – When you are having a crappy day (yes, it happens even though we entrepreneurs are ‘crushing it‘ all the time) it helps to have fellow founders around who can empathize with you.
- Talent – If a startup in your co-working space has to fold or downsize (not uncommon), their team will be keen to help their former team members find new gigs. Like most early stage startups you’re looking for good people. Need I say more?
- Service provider recommendations - Startups are always looking for recommendations about which freelance developers, designers, lawyers (you name it) they should be using. You can get in person, in depth recommendations from the other startups working in your space.
Investors hang out there
If you’re a startup and you plan to raise money you need to start building your investor network. If investors are spending time at your co-working space you’ll get to meet them in passing. That’s your foot in the door later on when you decide to formally start your fundraising process. (Remember, “Lines, not dots“.)
Not to mention that startup investors are very well networked. If you’re looking to get a bead on a certain sector of the market they can be a great resource to tap.
Co-working is nice because you are around a lot of people. And co-working can be extremely unproductive for the same reason.
Sure, you can bring your big ol’ noise canceling headphones to work every day. But it’s just easier if the default sound level in the space is Low.
A leader who cares
The founders and managers of the best co-working spaces go out of their way to help the startups that work there.
Running a co-working space is not about collecting rent for them. It’s about building more companies.
Alumni who have gone on to bigger and better things
Startups will “graduate” from co-working spaces into accelerator programs, or they’ll outgrow a space because they’re hiring quickly.
You should give some weight to the success of the alumni that have come out of the space when you’re thinking about where to put down roots.
After all, you want your startup to eventually graduate from co-working. Don’t you?
Before your B2B startup has a product available you’ll want a few – but not too many – metrics to help you steer the ship in the right direction.
Customer Development conversations
It doesn’t matter what your startup is building if customers don’t want it.
Get out of the building and make sure you are talking to potential customers often. This is the only way you’ll get a deep understanding of your potential customers’ needs.
When you’re getting started a good pace is somewhere on the order of 1-2 conversations (new potential customers) per business day. Once you reach 25-50 conversations you should have a good sense of whether or not your product idea has legs.
Don’t cheat on this metric by counting conversations with potential partners or investors as ‘customer’ conversations. These groups can provide useful feedback but their feedback shouldn’t be weighed as highly as what you hear from potential buyers (Customers rule!).
If you’re having trouble finding enough potential customers to meet your goals, here are 4 tips for finding those ‘earlyvangelist’ customers that are so important to a customer development process.
Potential employees met
If your little startup starts to make progress you’ll need to hire quickly. Without a pipeline in place you’ll struggle to make these hires.
Start developing relationships now which may turn into hires down the road:
- If you’re a technical founder without a counterpart on the business side you should make a point to meet a bunch of sales/marketing/product people each month.
- If you’re a non-technical founder without a technical counterpart then make sure you’re meeting a bunch of software engineers each month.
- If you have a complete team in place then just try to meet lots of great people each month.
Like anything in startupland, this is a numbers game. If you’re meeting 5, 10, 20 really sharp people per month you’ll quickly have built up a great pool of future talent for your company.
And if you can actually get them to quit their cushy job to join your budding startup before it’s on the tech community’s radar, then you may be on to something. On the flip side, if you’ve met 40 people and none of them want to come work for you, maybe that’s a signal you need to consider as well.
(Here’s some great guidance from Paul English, founder of Kayak, about how to make your startup really great at recruiting, interviewing, and hiring.)
Even if you don’t have a product available you need to start your marketing engine ASAP. Otherwise you’ll be caught completely flat-footed if/when you reach product-market fit and you want to scale up fast.
Pick one metric (be it leads, blog visits, Twitter followers, Facebook likes, or something else), set a goal for that metric, then execute.
Content marketing is probably your best bet – and most capital efficient way – to reach whatever goal you set (versus buying ads or paying to acquire traffic) at this early stage. And it is the gift that keeps on giving because you can re-use and re-purpose your content to drive future marketing efforts.
That’s why content marketing makes so much more sense when you’re at this early stage. You can develop an audience and a following by creating helpful, free resources to people in your target market.
If you do this content marketing thing right, that audience will be very eager to hear about what you have built once the product is finally available.
One more thing. Even though you are “marketing” don’t market your product. Because you don’t have one (at least not one that works) yet. Plus, the features you promise today may not (OK, 90% likely will not) be the ones that actually ship.
Product features completed
Last but certainly not least you should be setting product goals each month.
These goals should be focused on user facing features (“deliver user-facing feature X”) and not platform features (“build interesting backend queuing system that a customer doesn’t actually use directly”).
One exception? Perhaps a system for your team to monitor customer usage. Kind of important, eh?
What metrics did I miss? Let me know in the comments or just tweet at me and I’ll respond.
Thanks to my enterprise software / SaaS savvy pals:
for their input on this post.