The startup serenity prayer

 I've been fortunate to have been on the management team of several funded startups, raising close to $40M dollars (closer to $100M in today's dollars) across several software companies and one services company.  Along the way, I have also been an advisor or consultant to some other startups and VC backed companies.  Lately, I am also an investor, putting some small portion of my earnings back into younger founders who are starting new businesses.  This experience of trying to grow a startup, from the inside, assisting startups as an advisor or consultant, and reviewing startups to determine whether or not to invest has taught me a few things I thought I'd pass along.  There are others who have more experience and better financial chops, so my advice is going to be more qualitative than quantitative. 

If you are familiar with the Serenity prayer (help me accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference) then we should create a Serenity prayer for founders.  Here's my first attempt.

Things you can control

Who you work with and your working style

Entrepreneurs have the luxury of building their own teams.  This is both a blessing and a curse, because far too often founders pick people they like and respect, but often don't know how to tell a person the role has become larger than their friend can address or not aligned with their friends' skills.  But I think it's better to work with a small team of highly engaged people who can get along, endure feedback and attempt to get better together, than a bunch of people who are excellent at what they do but no one can stand to work with them.

By the way, one significant cause for failure rests with the founder, himself or herself, and that is the ability to determine when the job has grown larger than you.  Too often, founders cannot relinquish control of the thing they gave birth to, only to watch it wither and die.

You've got to be willing to ask your friends who believed in the idea early to step aside, when the time is right, to find a new role in the company, and you have to be willing to do that for yourself as well.

Working style is also a big issue.  Some people believe in the new 9-9-6 model and chant it as if it is a sacred mantra.  Others are very hands on, micro-managing.  Still others are the big picture, Steve Jobs wannabes.  What is your working style?  How well does it mesh with the team?  How will it work as your company grows?

What you build, how tightly you cling to your idea, and your willingness to pivot

Another cause for success and failure is based on how much you and your team love the idea or the technology and neglect what the market is saying.  A great idea that has no product market fit, or a great technology that does not address a "whole product" will not crash, it just never fully takes off.

The best thing you can do is to listen to the market, address their needs and never fall too much in love with your own ideas or technology.  A lot of today's leading companies are the result of a beneficial pivot in their early existence, when someone noticed that their real target market or "ICP" was just adjacent to the markets or problems they were solving.  Don't let your love for your solution blind you to the needs of the market or assume that you know more than your customers.

Things you cannot control

There are literally a million things you cannot control, and if you stopped to carefully consider all of them and try to overcome or mitigate them, you'd never build a product or a company.  Some things you can pay attention to, but cannot control are these:

Timing

I worked for a startup that was growing and had landed its first really large paying customer - a big name brand that would put us on the map.  We were using that closing to go back for further investment when 9/11 happened.  Suddenly, no one was investing.  This is just random, bad luck timing.

Others have experienced random, good luck timing, when a fierce competitor gets acquired or taken out, or an influencer finds your product and starts championing it to their audience.  Timing and other incidentals are exogenous - they are outside your control.  You can attempt to plan for them, but you cannot control them.

The current fad or technology wave

It must be interesting to be an entrepreneur right now, seeking funding, because almost 90% of the deals we see are AI startups.  The market is hot for AI, and that's where you need to be.  It's the current "it girl".  Once, when I was with another startup, Bluetooth was just getting introduced and one of our investors felt that it was imperative that we have Bluetooth in our product.  Our solution was an enterprise application behind a firewall, not appropriate for Bluetooth, but that was what was hot at the time.

In some ways, I think zigging when others are pursuing AI might not be a bad idea.  After seeing 20-30 reasonably decent AI ideas, it would be nice as an investor to see something different, if for no other reason than for diversification.  Finding and addressing a need that is not aligned with the current fad or wave can be difficult but does not make the idea wrong.

Things you shouldn't worry about but will

What if / why won't XYZ do this?

This question is one of my favorites, and I find myself asking it as well.  If some entrepreneur shows a new product or feature, it's almost instinctive to ask, why won't Amazon, or Google, or Meta, rush in and copy it once you've proven the market.  And the answer is, they may do that, but often the markets and opportunities that entrepreneurs are targeting and their relative sizes are too small to be of notice for the FAANGs.  Of course they could enter this market, but the cost to benefit ratios are too small.  Besides, it's kind of nice to know that they are out there as potential acquirers.

Worry less about what the big players may do and worry more about the fact that no one has an original idea.  Someone somewhere is addressing the same problem you are, or you've identified a need that has no buyers or is impossible to solve.

Things you should worry about

Can you scale efficiently?

This is the challenge I see the most in the companies I coached and those that I see for investments.  They have a great idea, have a viable solution and in some cases they are making money.  The problem is that the solution won't scale without adding a lot of cost or people or both.  There's absolutely nothing wrong with a $15M to $30M business you've built and are making a very nice return on that can't grow or scale beyond that, but it is unlikely to attract investors.  When we explain this to entrepreneurs, they believe we are criticizing their business.  To the contrary.  It is hard to build a profitable business, much less to get to reasonable revenue.  But there is a difference between a rapidly scalable business and one that is nicely profitable but does not scale.  Ask yourself - is what you are planning/doing really scalable, if that is important to you and your investors?

What your gut tells you, even when data or advisors say otherwise

After all of this observation and possibly advice, I'll tell you another secret.  Every investor, every angel fund, every VC has a pocketful of businesses that they decided did not meet X or Y criteria, wasn't scalable, didn't have product/market fit and so on and did not invest, only to watch the company take off and grow.  You'll get tons of advice if you ask for it, and most of it will be good.

In the end, it's your business, your passion, and sometimes, you'll need to trust your gut.  I can't give you specific advice on when to trust your gut vs listening to expert feedback.  Perhaps that's what separates the truly successful entrepreneurs from the rest of us.

Building a business / solving a problem you have a stake in

Starting a new business will come with a host of challenges, some you can anticipate, some you cannot.  Every day as you work on your new concept, a host of new barriers, competitors and issues will emerge.  You simply cannot build a new business where you do not have a deep passion or belief.  It will be too easy to quit a business venture that you don't have a deep personal, emotional or other kind of stake in.  

In the end, everyone will have opinions about what you should do.  Focus on the things you can control, and focus on only a few really important things.  Don't get sidetracked, don't add features because the technology is the latest thing.  Solve an important problem people need to have solved.  Don't fall in love with your idea - question what you are doing and be willing to pivot.  Find a few trusted external advisors and listen carefully to what they say.