From fundraising, to expansion, to cash burn, to work-life balance, here are words of advice from someone who has been there and done that
Are you a first time startup CEO? There is a whole bunch you don’t know. I threw together 23 points to think about, loosely organised around topic. I’ll update this over time.
Off you go:
1. Be careful about which investor you marry
You can’t get divorced to an investor. If investors treat you bad before you marry and things are going well, they will crap all over you when things are tough. Be vary wary of investors who will micro-manage you — they are everywhere and will make your life hell! Do not give up too much equity early on (e.g. 40 per cent at angel), you will either have to recap or not be able to raise again in future (I have seen this happen in India).
2. Pick terms over valuation when raising
Do not have vanity about your valuation. Don’t require too big a valuation — you need to grow into it at the next round. When faced with a slightly better valuation and worse terms, get better terms. You are highly likely not to get the biggest outcome, a medium one is more likely … and those terms you gave up will mean you get zero to little after the liquidation preference waterfall.
3. Raising money is not your business model
Raising VC is not a celebration moment; It means you have to get to work. You give up equity for the money, that chips away on your upside and means the company exit value needs to keep getting log bigger … Raising sucks. Hate the burn you have. Do not rely on VC $ and hate every dollar you have to spend.
4. Don’t expand too fast
Don’t launch in multiple cities. Start with ONE home market you are going to dominate.
- Figure everything out about your business model, then add one more market. You need to transfer learnings and document how things work, so people don’t duplicate learnings (it costs $ to figure out things, especially with marketing).
- Don’t be goaded into expanding too fast. Fab’s expansion to EU was a death knell. Rocket goaded them to expanding before they had validated their model. Very bad idea to ‘go big’ before you are ready. You end up going home with nothing.
- Your raises will be based on proving you can nail it and scale it. If you say the raise is to add more countries and you don’t, you can’t come back with the same story when you run out of cash. This is how one of the most famous startups in Singapore crashed and burned.
5. Spend time thinking how to give performers more work
Hire awesome kids (cheap) and spend time thinking how to let them fly, and fail for themselves. Amazing kids can do more than you reasonably think. Do less yourself, get them to do more, but be a role model or they won’t respect you
6. Keep selling the dream
You got people to join because of your vision; don’t stop selling it. Sell it every day! You are not doing this enough. Remember to ‘start with WHY’.
7. You don’t know anything!
Remember you don’t know anything as a neophyte startup CEO. Listen more than you talk. Seek to understand, before you seek to be understood. Staff are ok with you not knowing everything (other than the high level) and depending on them — they hate an insufferable know-it-all. The best idea should always win. Go Google style and ask for data — any decision can be changed with data
8. Don’t hire fast
It seems so tempting, but really, it does screw you. That coder ships, but is paranoid and thinks people are being mean to him. You’ll end up wasting a lot of energy bitching about him and figuring out what to do, instead of just finding someone with better fit.
9. Get the ESOP done
You may think you have other priorities, but if staff don’t have their shares sorted, they are pissed. ESOP done means your staff feel like owners. ESOP not done means you are a dick.
Also read: How do you size employee ownership of your startup? This is your comprehensive guide to ESOPs
10. Have the lowest salary
Set the standard for staff. By being the lowest paid, it’s really hard for new staff to argue to have outlandish salaries. Your margin is your opportunity to hire.
11. Reduce your focus
Do less, but do it better. Everyone picks too many battles. Really bad idea.
12. Ship. No construction sites
If you are moving, pick one optimisation each week and ship it. Do not pick 5 and deliver on none. Just keep getting better.
13. Work hard, but not too hard
Stop watching Netflix, you don’t have time. Working hard means a min of 12 hours a day, 6 days a week. There is no substitute for working your ass off — it doesn’t matter how smart you are if you don’t apply yourself. But, don’t work too much. This is a marathon not a sprint. Take Sunday off and shut down — you DO NOT want to burn out. What does that mean? It means you can’t face reading emails anymore, etc. You just can’t face it.
14. Learn every day
There will never be time to read a research report, or learn about new competition tomorrow. Don’t obsess about extracting all the information in a good report — you won’t have time to read it more tomorrow. Learn today so you are smarter startup CEO tomorrow, and done is better than perfect.
15. Hire smarter than you, then get out of their way
You need great people. The death dumb spiral is: A>A, B>C, C>D, D>…Z.
16. Know your numbers
You need to know all your key metrics off by heart. Track a few daily, but check all the numbers at least weekly. Not only do you need to know them, but investors will be impressed if you do and aghast if you don’t. Staff also think you are magically if you know their numbers better than they do.
17. Your business model is wrong
You think what you are doing is right, but you are probably wrong. Your unit economics are not calculated right, or over optimistic. LTV>CAC or 3x sounds good, but you really need 5x. Assuming your #s work is something you need to be totally paranoid about.
18. Do finance right, start clean
Finance will f*** you if you don’t keep on top it. Just be on top of everything from the beginning. Set up a chart of accounts, file receipts. Use expensify at least.
19. Focus on burn rate and runway
You are living on borrowed cash and time. You have no time. Don’t waste cash. Don’t make hires you don’t absolutely need. Unless staff are threatening to leave, you don’t need new people, etc.
20. You are what you measure
Many staff will chase the goals you set, so be careful. Make sure your goals are the right ones. For sales people, know they will game any comp scheme. So make it as simple as possible.
21. Have fewer targets
If you have 50 metrics for management, no one knows what matters. There should always be ONE thing you are focused on the most, and all staff should know what it is. There can be supporting metrics, but they should contribute to achieving that number.
22. Busy vs. productive
Do the right things. You can convince yourself you are getting s*** done when you are spinning tyres. Real traction matters.
23. Don’t go to startup events
If your customers aren’t at Disrupt, why are you there? Get to the fintech event where your bank clients are etc. The tech community loves to jerk each other off. It’s a false sense of security. The people building real startups aren’t at the events.
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This article was originally published on alexanderjarvis.com.
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