Steve Blank's definition of a startup is "a temporary organization in search of a repeatable business model." Temporary, because as soon as he's built a machine where $10 goes in at the top of the funnel and $11 comes out at the bottom, it's no longer a new company. Or, if you run out of cash and everything collapses like a poorly built house of cards, and that goes for any type of company, only startups.
But few people talk about what they are actually building as a startup.
New founders often believe they are building a well-oiled product, marketing machine, or operations machine. All that may be true, but it is not enough. The world is full of examples where the second best product wins. HD-DVD was objectively better than Blu-ray, but the former was brutally ground to dust by Sony. There are thousands of solutions that are better than Jira, but large numbers of product managers are using it through gritted teeth. And the annals of startup history are littered with companies that built extremely efficient machines that were ready for incredible scale, only for the demand never to materialize. A great example of that is WebVan, who built millions of dollars in logistics and operations, only to never get the clients he needed, for a great analysis of that particular disaster, you can read in “eBoys”, the history of Benchmark capital.
As the CEO of a startup, there are three key tasks:
- don't run out of money,
- set direction and culture of the company and
- the most important, hire the right team. This is the crux of everything you must do, because it is what you allows to pivot and change the objective depending on the interestss of the market.
Stewart Butterfield is a good example of a founder who does this particularly well. He has tried to start a game company several times and "failed" every time. When he first created a game, his company wanted a mechanism to share images and screenshots. The second time he created a game, he found it difficult to communicate with his teammates and keep everyone informed of what they needed to know. They built tools to solve both problems and created those tools as separate businesses. He may have heard of them: Flickr to share photos and Slack for internal communication. Both turned out to be highly successful companies. And both were possible because the founding team didn't stick too closely to their original idea; they spotted an idea, validated that it might be a good idea, and then changed the company.
The important thing is to hire people who are passionate, inspiring, role models and curious.. You need team members who are willing to develop deep expertise in their area of expertise. If you're building a Health Insurance Portability and Accountability Act (HIPAA) compliant SaaS solution for electronic patient records, you're not just hiring a team that can solve those specific problems. Yeah, maybe that's what it takes in the now, but the magic of startups is that you don't really know what comes next. You are not creating a team of specialists at the beginning; that can wait until it reaches a stage of relevant growth, and that is when true specialists with deep knowledge are needed who can solve these problems in the best way in their field.
In the early stages of founding a business, you bring together a group of people who care about patient confidentiality, data security, compliance, and user experience, and who can apply those skills to different problems. .
Startups must be agile; If an unbeatable competitor appears out of nowhere, you can sidestep the challenge by redefining what you're doing. You don't have to fight on a swampy ground against giant competitors who can outspend the startup at all times; gotta find that blue ocean strategy where you look for a part of the market that nobody is interested in or pays special attention to at this time.
A recent company was building a platform for virtual events. Within a few weeks of launch, the crisis stemming from that of a certain pandemic that caused a lockdown appeared and, as a result, it had incredible growth. Out of nowhere, their biggest competitor appeared as the fastest growing startup of all time. With an amazing team at the former, he was able to pivot into a niche that no one else was serving at scale: white-label events for companies that care deeply about the brand experience of their events. It was a very small niche in the market, but it was a strategy of blue ocean with very high value clients paying much larger orders of magnitude for highly personalized events.
Without a doubt, the strongest startup teams are those that are versatile, professionally ambitious, and well-informed. Startups release minimum viable products (a misnomer, because they're not minimal, they're not viable, and they're not products), often defined as "the least amount of work you can do to validate a hypothesis." In the process of running these experiments, companies learn a lot about what customers want. They learn about pricing, about the problems they are solving, about customer buying dynamics, about the competitive landscape, and about the different business models that are available to them.
Most of the time, it takes six to nine months for a company to realize that its original assumptions were not entirely accurate. At that point, they have a choice: double down and stubbornly continue down the road, and some startup founders force themselves to start their companies and find sensible success that way. The other option is to pivot and change the goal, understand the hard-earned knowledge along the way, and take advantage of the flexible team created to choose a different direction.
Abandon the game that was being built in favor of building a communication tool. Give up the general virtual event platform and create a specialized niche product that can give you a foothold in the market. Or go to the team and say “this isn't going to work, but we've learned a lot about this industry over the past year. What other issues have you spotted that we can start looking at?
Over-specializing too soon means building a sniper rifle, perfectly designed to solve a very specific problem in a strictly defined way. Hopefully that can work, but what you really need to maximize your chances of success is a shotgun and as many shells as you can carry.
Hire accordingly.
