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In August last year, Administrate CEO John Peebles gave a talk at Turing Fest 2017, Scotland’s tech gathering which is hosted in Edinburgh. His talk, The Greatest Lies the Devil Ever Told to Start-Ups was presented as part of the strategy track, and you can now view the full video from John’s talk over on the Turing Fest website.
However, if you want to read about the greatest lies the Devil to start-ups then keep reading!
The first like that the Devil tells to start-ups is that we should all listen to lots of advice, all the time, but particularly at tech conferences. One thing that is very common when people come and talk to me, or when I’m talking to other founders, is that people read or hear things and they don’t really filter it through the appropriate calibration for whatever situation they are in. This means that they’ll read or hear something that is geared towards a VC funded, Valley, B2C start-up, and then try to apply it to their bootstrapped B2B start-up somewhere not in the Valley, which just isn’t going to work.
This is something that every founder believes – they’re a snowflakes. Maybe it’s just Millennials, but I think it’s true across the board. Every start-up and every founder believes that they’re a snowflake, and they believe that conventional wisdom doesn’t apply to them.
This is a belief that you can have, but you’ll be setting yourself up for some failure. The key thing to remember here is you can read about these bull-headed founders who manage to succeed against all odds, but these are typically outliers – actual real examples of snowflakes.
In a start-up you need determination, you need to be bull-headed sometimes, but you need to control those variables. Don’t try and innovate everywhere across the board and be a snowflake in everything you do, just pick a couple of areas of focus on instead.
And I would say, you know, that’s a belief that you can have, but you’ll be setting yourself up for some failure. And the key thing here is that we read about these bull-headed founders that against all odds succeed, and we read about that and we hear about that, and we don’t realise that we’re reading about outliers, we’re actually reading about literal snowflakes. And I would say that the key thing in a start-up is yes, you need determination, you need to be bull-headed, but you need to control those variables to be down bull-headed and against all odds, and just a few things. Just one or two things don’t act as if everything you can be a snowflake in. pick your variables, one or two. And that’s what you need to focus on. Don’t try to innovate everywhere across the board.
The second thing that surprises a lot of founders, particularly in early-stage start-ups, is how hard it is to start a start-up. This is something that even in the last two years I’ve hard to learn anew, and this is super painful.
Starting a company is probably one of the most painful things you can do in your life. This can sound like false modesty of a humble brag, but it’s really true. There is intense pain, intense suffering, and you really need to count the cost if you’re thinking about starting a start-up. You also need to understand that if you do one start-up, you probably need to be set-up to do another because otherwise the pain is just not worth it. All the pain and suffering and things you learned along the way for the first start-up should then be ploughed into the second one, otherwise it’s just a waste of time.
This point is sort of related to the above, but people think it’s really cool to start a start-up, when the truth is it’s so unbelievably uncool to be in a start-up.
I really cringe with this idea that people have nowadays that’s like, “Oh yeah, everybody should start a start-up. People should avoid university and start a start-up instead.” That might be good advice for you personally, but in general it is not cool to start a start-up.
I’ll give you an example – last week at our all-hands meeting, I sat there in front of 60 people, on three continents, and I added two simple number together wrong. That wasn’t even the most uncool thing that I did that I did that day, but it’s just typical in the daily life of a start-up. This is not something that you get into if you want to be cool.
Another thing that people brought up a lot when I was talking with them is that they think that their friends and their family will understand the start-up life. Or they’re surprised when they don’t.
While they may not understand what it’s like to work in the world of start-ups, they can still be there with some great advice. So when they tell you everything is going to be okay and you will get through it – they’re right!
It can be easy to get into arguments which will challenge your relationships, but it’s important to apologise and try and gain some understanding for their point of view. They may not know exactly what you’re going through, but they’re right, you will indeed get through it.
A concept I see more and more is that people think they’re going to make lots of money and quickly. This is statically just not true with start-up. Most start-ups fail most of the time, even the ones that succeed sometimes end in these glamourous things called acquihires, which means nobody made any money. If you’re in this for the money, focussed on the money, and if your primary mission is financial, then be prepared to be disappointed!
You can have a wonderful career, doing a lot of things, in a lot of areas, and make a lot more money with a lot less stress than starting a start-up, so don’t fall for the lie that you’ll be rolling in money instantly!
One most insidious lies that the Devil tells start-up founders is that the company is more important than yourself. This is something that I really wanted everyone to hear, and I’m guilty of this as much as anybody – you’re focussing too much on your company and you’re not focussing enough on you. You need time to yourself, you need to existence, and you need to get habits in place to set yourself up for long-term success. I really mean that, and one of the best thing you can do as a founder, right now, is recommit to the idea that you’re going to go and spend 30 minutes exercising every day.
It’s scientifically proven, we all know this to be true, though probably none of us do it. We’re in high stress jobs, this is a very stressful experience. We all need to understand that this is one of the best thing we can do is to invest in yourself. Invest in yourself mentally, invest in yourself spiritually, and invest in yourself physically. You need to spend time on yourself because if you fail the company will certainly fail, and this is something that people just never really think about.
Another idea that is pretty common with start-ups is they think that the time horizon for the typical company success is 2/3/5 years, which is not a long time at all! I think that’s really misguided, because if you’re truly wanting to build an amazing company that is great, and does incredible things, it’s going to take you at least 10 years. There’s a pretty famous essay that was written a while ago, and it talks about how great software takes 10 years to build. Great companies take at least a decade to build.
Think about that in the context my previous point, where if you’re putting the company first all day, every day, you’re not exercising, you don’t have your habits in place, then you can only do that for about 3/4/5 years, and at that point things are going to fall off a cliff. Your body is going to start breaking down. You’re getting older, and it’s going to catch up with you. It can also mean relationships and friendships will start to breakdown, and these are things that are important. It’s a 10-year journey if you really want to build a great, sustainable, ongoing business.
This is something that is hard to hear, and it was hard for me to learn. It’s the idea that your first start-up is going to be the be-all and end-all and you’re going to hit that first start-up and ride it off into a blaze of glory. Most first-time founders fail and most start-ups fail, because we’re an incredibly risky business, and you need to get comfortable with the idea that your first start-up may or may not be the one.
Don’t get me wrong, it may the one. You could be an outlier, you could always be that snowflake. But it’s probably not the one. What is more likely to happen is you’re probably going to learn a whole bunch of things, make a whole bunch of mistakes, fail, and then you’ll do it again and then you’ll hopefully plough a lot of that of that hard learning back into your second or third or fourth or fifth start-up.
I’ve never once heard of any story anywhere about technology choices or poor tech killing a start-up, and yet we obsess over this as founders, particularly for technical start-ups. A lot of the time when people come and talk with me they would say, “I’m really worried about the tech stack, it’s not working right, we’ve got get to micro services.” And I would say, “Well who cares about any of that?” They’re always surprised by this and I think we need to really understand that technology is really nothing to do with anything at a tech start-up. Yes it’s important, yes I like it, yes I really enjoy building great tech, but it’s not the reason you’re going to succeed or fail. It just isn’t. There are other factors that are more important that are in play.
This is something that I think is at the crux what I’m trying to communicate. This is a journey and it involves more people than just yourself. You’ve got to get ready for this, and you need to seek out mentorship. One of the thing that seems to be prevalent is people tell you to put all your available time into your start-up, don’t think about anything else, don’t talk to anybody else, that’s okay. However, I think that’s a huge mistake.
Early on in Administrate, I was so fortunate to have interactions with people that were far further ahead on the journey from where we were. That’s why we’re trying to give back to people who are behind us on the road. You may be thinking we can do this because Administrate is more successful or has more experience that your start-up, but that’s not true. Everybody’s got something to offer.
There have been times in the past where I’ve spoken to founders who were struggling, or people have given me advice when I’ve been going through hard times myself, and that’s what I’m talking about – you need that community! You need those people that can be peers, that can listen to your problems, tell you you’re wrong, tell you you’re right, tell you you’re on the right track, give you hope, and give you encouragement.
Sometimes it can be the simplest of conversation, and it can seem like a really small thing, but it really matters. You’ll need that at some point along your journey and you need to be able to give that to others at some point. It really matters. You need to invest in your community. I’m really passionate about that because Edinburgh has given me so much, so we try to give back. It’s not perfect, sometimes the advice I give is terrible, but you should still do it, and you often learn a lot along the way.
Something that I see that happens from time to time is I talk to people who haven’t really matched their business plan to their funding strategy and vice versa. I think this is an insidious problem, because if you come in and you’ve got these aspirations of building a super huge business within 18-24 months, but you’re not thinking about going after VC capital, you’re doomed to fail. This is because that’s a capital model that is matched to your aspirations.
On the other hand, if you’re thinking about bootstrapping, then why are you talking to VCs if you just want a lifestyle business? I think in less developed ecosystems, that are outside of the Valley, you see this more and more, because a lot of founders don’t really know whether they should be raising money or not, or how they raise the money. You really need to understand what your end goals are, and what you think you can attract capital-wise. It’s vital to make sure that they match, because if you don’t you’re just on a runway to certain frustration, possibly even failure, and that’s no good.
This one is very common and it’s even more common when the founder technical, where you are really focussed on the product but you’re not selling. You need to be selling something from day one. If you’re not selling from day one, you’re not getting this wonderful thing called feedback from the market. I know it’s hard and I know you don’t want to sell vapour, and you shouldn’t got out and sell vapour, but you should just be transparent about what you’re trying to do and have an idea of how you’re going to get to that first sale.
A customer is not a customer unless they’re paying you this thing called money. A customer is not somebody that has signed up to use your product, a customer is not somebody who is using your product – a customer is somebody that is paying you money. They don’t even have to be using your product to be a customer. We confuse these terms a lot and that’s a recipe for disaster. If you put off sales until after V1 or V2 of the product, you’re going to have to leave everything that you should have learned along the way, it’s going to cost you a lot more, and it’s going to be very embarrassing, expensive, and possibly cost you your company.
Your product is not the most important thing in so far as the thing that we think of when we think of the product. Your product needs to be broadened in your mind to include things like your team, your service, your route to market, and so on. It is not just the piece of software, the app, the widget, the gadget, that you’re selling. Your product is broader than that. When we think of product, when we focus on the product, and we ignore things like sales, or customer service, or we think that we can put those off till later, we’re setting ourselves up for failure.
If you neglect the people part of your start-up you will certainly fail. It’s the most important ingredient. It’s more important than the tech, and it’s more important than anything you’re doing. It’s about recruitment, motivation, building a culture that people want to thrive in, work with, and grow within. If you ignore this stuff than you’re really doomed. I would say hire that HR person earlier and don’t think of them as HR in the stodgy, negative way. There are great HR people out there, and they’re so important that you need to hire them about 50 hires earlier than you probably think you do. Most first-time founders wait until the company gets to about 100-120 people before they hire their first HR person. Don’t make that mistake – hire them in earlier, usually when you hit the 20-25 people mark.
This is another lie that gets said a lot and I get it. Start-ups everywhere are killing it just not your start-up. Everybody’s got growth, but everybody wants the straight line – up and to the left, and the reality is that almost never happens.
The last time I was out in the Valley I was talking to this great VC who I heard speaking, and when I told him things were a bit difficult for us throughout 2016. Our growth has slowed down, but we were hopeful things were going to pick up again in 2017 (which they did). He told me, “Every start-up has a gap year. Every single one. And if anybody tells you they didn’t have one – they’re lying.”
I just thought that was really interesting, so just take to heart. Everybody’s always killing it, everybody’s always raising more money, everybody’s always doing something better than you, and it doesn’t matter – it’s irrelevant. Focus on your problems, and these things are seasonal. You’ll be the hot start-up in Edinburgh at some point and then you will not. It’s a rollercoaster, but you don’t need to fall for this lie that everyone is always doing better than you.
We’re in Edinburgh, we’re headquartered in Edinburgh, we’re in a weird market, but it’s okay. There’s probably not very many start-ups with a collection of weird offices like us – Edinburgh, Bozeman, and Beirut. However, it makes sense to us, and we do not feel like we need to be in the Valley. You might need to have a small presence there, and depending on your funding, you might need to go there, but you can build a great start-up anywhere and that’s something that we’ve seen time and time again. It should just be obvious but it isn’t. More and more you’re seeing that people recommend putting a smaller presence in the Valley and doing the development and sales and service elsewhere.
This is another lie I hear quite a lot, particularly from first-time founders, and that is that they kind of view their investors and sometimes their board as opposition. This means they feel they need to prepare this song and dance routine at board meetings to keep them happy, and I think that’s a really bad idea.
If you believe like I do that start-ups are a rollercoaster, then you need to be prepared for your investors to get really excited when things are going well, but you also need to deal with the dips as well. If you’re used to this idea that only good news can be presented, you haven’t been transparent along the way, and you haven’t shown your work or how you’re thinking about decision, that’s when it really gets hairy. That’s when you realise that you have squandered a lot of opportunities to build trust along the way, and now you’re trying to build trust in a trending down or a negative, struggling environment, and that is very difficult.
I would really advise you to be transparent with your board. Don’t feel like you need to be reading your press releases to them at every board meeting. It’s a little bit jarring at first, but I really think if you picked the right investors and you treat them like they’re part of your team, because they are, then it will pay off over and over again, you’ll learn a lot, and you’ll have these relationships that are long-term and sustainable.
This is something that I hear and see a lot, where most first-time founders who come to speak to me come in with a B2C start-up idea. Connected to the ‘nobody is a snowflake’ point, I swear to you in the last 24 months, I’ve had four or five start-up founders come in to meet with me and they all have the same two or three ideas.
Two common ideas I see quite a lot are sort of scheduling app for local community events, or an app where local businesses can contact you through the app and try and offer you local offers while you’re in the area. I’ve literally had four or five people pitched me these same ideas in the last 12-18 months here in Edinburgh, which isn’t even a very big city!
I think a lot of this repetition can come from the fact a lot of start-ups are started by younger people, or that seems to be the trend anyway, and chances are they haven’t worked in a variety of jobs and they probably haven’t worked in a big boring business career. This means they are just inventing problems and trying to solve problems that they experience in their life, and that tends to be B2C problems.
This make it very hard for them because B2C problems are really only solvable with one thing and that’s lots of capital. In order to get lots of capital you really have to go to one place, because there’s lots of risk and that one place is Silicon Valley. You also really need to be lucky for this to work because there’s probably four or five other great ideas that are just the same as yours that are getting funded at the exact same time.
If you think about it, all the B2C companies have had a few competitors that are very close to them in their space until somebody finally wins. That’s not true in B2B, as you don’t have to have as much capital, you can get customers from day one, a lot of B2B customers are willing to pay for you before your product is even delivered, and you can get a lot of feedback from your customers. Think about that when you think about what type of start-up you want to build. It doesn’t have to be that hard – just tweak your B2C slightly to turn it into a B2B idea and it usually works out much better.
This is a lie! You need to really be fluent in your metrics and this means that you need to read a lot, and you need to really, genuinely understand the metrics that drive your business. For us and other B2B SaaS companies, the focus is on MRR, ARR, growth rate, churn, LTV, cost customer acquisition – all of these things.
You need to understand these very well because you’ll be asking about them, and you’ll be benchmarked against them – not because people like to keep score (although they do) but because these metrics paint a really good picture on the underlying heath of your business. If you’re fluent in them, use them and train your team on them, then you will be able to address and discover problems in your business much easier.
All of our team in Administrate gets an MI pack every month, that’s got every metric of our business trended over the last year. We also have a training session with every person who comes on board in the company about what these metrics mean and that’s really important.
One of the most common mistakes that I see with start-ups is they price their product too low! This means they are fixed firmly within the quadrant of doom, which is low value per account and a complex sales process. You can sort of survive in the other three quadrants, but the fourth is the quadrant of doom. You would not believe how many start-ups are firmly fixed in the quadrant of doom. Administrate was in the quadrant of doom about five years ago, and it takes a lot of work to get out of it. I wish we’d done that harder, faster, and better than we did, but once you’re out it makes a huge difference.
You will be finished if you do not succeed – this is a lie! You will be just fine if you do not succeed in your start-up. You may find that you go on to bigger and better and greater things as a result of the things you’ve learned. You are not going to fail in life if your start-up fails. I know it feels that way, because I feel that way a lot of the time. We all feel that way, but it’s a lie. We can embrace that as the lie that we know that it is, and reject it!
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