No One Said Building A Company Was Easy: Overcoming The Psychology Of The Tech Entrepreneur
Mental toughness is what gets us through the self-doubt moments and the emotional rollercoaster of entrepreneurship.
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We're all aware today of the billion dollar valuations some tech companies are scoring, and all the coverage that they get with it. This can't but put massive expectations on up-and-coming entrepreneurs in a society venerating the successful ones and considering their struggles to be part of their resilience test and rite of passage. The stakes are high and the risk of failure even higher. In fact, according to a Harvard Business School research by Shikhar Ghosh, "three out of four venture-backed startups fail, and more than 95% of startups fall short of their initial projections."
A recent article published by Inc. entitled Psychological Price of Entrepreneurship shed a light on the effects of the traumatic events entrepreneurs go through: "No one said building a company is easy. But it's time to be honest about how brutal it really is and the price so many founders secretly pay... Entrepreneurs often juggle many roles and face countless setbacks -lost customers, disputes with partners, increased competition, staffing problems- all while struggling to make payroll." Of course, entrepreneurs can get support. There are valuable coaching tools to deal with stress, anxiety and failure, which in turn will help them preserve their mental health and maintain their drive. I personally believe that entrepreneurs can also avoid the challenging situations by taking into account what really matters to their entrepreneurial projects, and learning how to navigate through.
So, does funding really matter? In an article by SingularityHub entitled Why Startups Like Uber, Airbnb, and SpaceX Succeed, While Others Fail, Bill Gross, the brilliant entrepreneur, analyzed key factors of success for entrepreneurial projects. His findings are summarized in the following table:
Idea "Truth" Outlier: 28%
Business Mode: 24%
On why funding came last, Bill explained that "funding mattered the least, because you can make a company succeed even if you don't raise the money." So what really matters? Here are eight points to keep in mind when building your business.
1. Build A Solution To A Pain
Pain → Solution → Value
Reddit founder Alexis Ohanian sums up and epitomizes this point best: "A common mistake I see many startup founders making is they aren't solving a real problem. You should try to solve a real problem that people have, or identify a much better way for people to do things than they've historically done before. "Make something people want." If you can do that, you're probably onto something."
2. Build Mental Toughness Through Tough Times
Why fit in when you were born to stand out?
Mental toughness is what gets us through the self-doubt moments and the emotional rollercoaster of entrepreneurship. No one expressed this better than MailChimp founder Ben Chestnut: "It's hard. And just when you think it can't get any worse, it does. There'll be times when it just keeps getting worse and worse and worse. Meanwhile, everyone else around you is getting better and happier and richer. You'll feel like the only one who hasn't figured it out yet. You're sinking, your life sucks, and your business isn't going anywhere. Oh yeah, and you're not getting any younger, either. And just when you think about finally throwing in the towel, and saying "f*** all this,' that, right there, is the test that all founders are eventually faced with: when things get too hard, you decide to stay, or you decide to quit. My advice is this: before you decide, look at all those great, successful businesses that inspired you to start your own. They stayed."
For entrepreneurs, mental toughness means the resilience and persistence in not letting daily setbacks and obstacles, negative feedback, or erratic schedules divert you from the clear goal of achieving your vision. It is what makes all the difference for success- and not intelligence, talent or background. If you don't have it in you already, you can train yourself to develop it- in fact, you can train you brain into anything you can imagine. Mental toughness is like a muscle, you can grow it every day through small goal gains, as simple as committing not to miss your daily workout, setting time to meet your friends on weekends, or pledging to eat natural foods for a month.
3. Build A Sustainable Business
Worksheet, Spreadsheet And Term Sheet- Oh Sheet!
Worksheets It is critical to map your strategy in execution, goals and KPIs. Set execution and goals that are realistic and measurable. Regroup periodically to make sure your execution and your goals are on track. Assess, reinvent and measure. Have the attitude of a child, always learning and re-learning.
Spreadsheets You have a viable business when you have a sustainable business. Keeping track of your burnout rate and your cash flows can be onerous for the creative mind, but it's to make sure you don't run out of money. Furthermore, be flexible to pivot into a more viable business model when your tried model is not working quite yet.
Term Sheets Partners and investors don't like risk. If you're signing a partnership or raising money, pro- tecting everyone's backside requires what entrepreneurs often see as the tedious exercise of negotiating a term sheet– but then again, no one else can do it for you.
4. Build Traction Not Numbers
Be the smartest person in the room. If not, change rooms or get smarter.
In short, traction can be viewed as sales, user base growth, customer proposition and other metrics of progress like adoption and engagement. It's one thing to say you have a great idea; it's another thing to say you have fast-train customer traction. The more momentum you generate around your business, the more people and investors you attract. Have a traction plan, build your branding, get to know your target audience and reach channels, become a thought leader, connect to influencers and amplifiers and keep trending. Of course, the best form of traction is paying customers– even if they don't pay a lot, nothing is better to validate your business. The more paying customers you have, the less capital you will need to raise. But getting paying customers isn't always as easy. But not to worry, free customers are just as important, and their commitment means that they are willing to pay money in the future. A lot of the big companies of today didn't monetize their customers at the start, like Whatsapp, Dropbox, Facebook, Pinterest. Instead, they focused on building a user base, nailing their customer proposition and increasing adoption and engagement.
5. Build The Best Team
Alone we can do so little; together we can do so much.
No one is able to do everything- your business is as good as its people. Seek out the talented and hard-working people who get your passion and vision, and keep them inspired. Mark Suster, founder of Upfront Ventures, said this about building his team: "Over time I took to telling people the following, "Join BuildOnline, because you think you'll get great experience. Join because you like the mission of what we're doing. Join because if you do a good job, we'll help you punch above your weight class and work in a more senior role. And if you ever feel that in the year ahead of you, you don't think that you'll increase the value of your resume and you're not having fun, then go. Join because we pay well but not amazing. Stock options are the icing on the cake. They'll never make you rich. Don't join for the options.'"
6. Listen To Your Customers
Don't drink your own Kool-Aid.
"There is a hype curve in any com- pany. Press, journalists, analysts, friends and family can reinforce the sense that you're "killing it.' As Public Enemy says: "Don't Believe The Hype.' The only way to build a sustainable customer is to listen to customers, partners, suppliers and employees," says Mark Suster, founder of Upfront Ventures. When you're starting up, account for the uptake of people to your product and look at the dynamics of the marketplace of your customer to see if they are ready for what you have. If not, start adjusting the offering to be what they actually need. Successful consumer companies keep analyzing consumer behavior, listen- ing to unhappy customers and learning from them. They get a unique insight about it and deliver then a superior consumer experience.
7. To Listen Or Not To Listen (To VCs), That Is The Question.
The advice VCs give you isn't always that good, or is it?
Entrepreneurs can have great ideas, but more often than not, they wouldn't know how to execute them. And this is the added value of a VC as opposed to silent investors that don't challenge you and help you with a clear path to take the idea into a success. But some startups are slow to get off the ground and they might not show promising numbers when they decide the time is right or necessary to meet a VC, risking thus a major dilution.
A study by Shasta Ventures published by Medium entitled What Did Billion Dollar Companies Look Like At The Series A? made clear that potentially big ideas are often not obvious at the Series A stage. "There is no formula, and each success story is unique and unprecedented." Furthermore, according to the Harvard Business Review article, VC Funding Can Be Bad For Your Start-up, Harvard Business School's Josh Lerner analyzed that "more than half of all VC funds delivered no better than low single-digit returns on investment."
As a startup, know when to raise money from friends, family and angels, and then more importantly, know when you need to brainstorm with a VC. VCs will find your weaknesses and even attack you on them. Learn from them how to be better and work with the VC that believes in you and your idea, and the VC you believe can add value to you and help you grow on your path.
8. Always Listen To Your Gut.
If your eyes cannot cry, then your gut will.
Another interesting finding from the study done by Shasta Ventures on companies that made it big: "Three out of four of the companies were built by people doing it for the first time. They did not have deep experience in their field, but were passionate about their product and had a unique perspective on how to serve their target customer. Having a fresh perspective is important in tackling a category as people with industry experience are often constrained by what is not possible and why it won't work."
Airbnb co-founder Brian Chesky remembers: "When we came to the Valley, no one even wanted to invest in Airbnb. One of the reasons was they thought the idea was crazy. People thought I'd never stay in a stranger's home. That's creepy." Big ideas may not, at all, be clear at first sight, either because the market is not obvious, idea is too small, regulations are high, or assumptions are flawed. That's why if you believe there is something there to your idea, keep believing in it, keep persisting, keep pursuing it.
Just believe in yourself and your passion. Most of all, allow your gut to tell you the truth, especially when your heart and mind don't. As Steve Jobs said: "Have the courage to follow your intuition. It somehow already knows what you truly want to become. Everything else is secondary."