If you are at all like me, you have probably had enough with seeing WeWork in the headlines. If you are like me you are also wondering what in the name of Sam Hill happened that led to such massive failure.
You’re probably hoping that you can figure it out so you don’t make the same mistakes.
I think it’s important to reflect on some of the things that we can learn from them as Founders and CEOs, as well as draw some more logical conclusions going into 2020.
The following should prove helpful whether you are just starting, or whether you are 99% of the way to Unicorn Status.
As founders, we are naturally two things: idea people and executors. We came up with this idea. Then we beat all our fears and doubts and went out and did something. Whether you are still bootstrapping it or are being backed by some investors, you are a go-getter who has ideas.
Because we have this tendency we need to be sure to focus on what we are building. Uber is a class A example of an unfocused startup. They are seeking to dominate so many other markets, and they haven’t even figured out how to dominate and make-profitable the transportation sector.
The reason they got funding in the first place was that their idea would revolutionize the transportation industry. Their backers didn’t say, ‘okay, here is a boatload of money to go do, not what you just sold us on’. They were sold on the idea of what they were doing in the present, and they gave it to Uber with the intention of seeing massive returns.
Don’t be like Uber: Dominate your market and make it profitable before you do anything else.
In the words of SoftBank’s Masayoshi Son, “You need to stop losing money now—or else.” Softbank has made a sort of ‘lesson’ out of WeWork’s recent debacle. A wise founder will learn from the mistake of others.
From the statement above it is clear that players such as SoftBank are not happy with this sh*t show. If you want to grow a successful startup you need to learn how to make your idea profitable with the smallest amount of money possible.
Once that is done, you need to deploy and become the master of that market. Oh, and since there seems to be confusion about what that means I’ll state the obvious. When you deploy into those markets, you better be making money.
While it is obvious, it seems like it has to be said. I imagine people like Son not understanding why they have to say that profitability is the goal. He probably sees it similar to telling an adult not to place their hand in a fire. If you are a founder know that the goal is not to bleed money every month like Uber, it’s to return the investment.
See all outside investment as a means to scale. Let me put it differently. Don’t see this cash infusion as a means of creating more hype for the next round of funding. If all you care about is the next round of funding, you are just like most Americans who are living paycheck to paycheck. One bump in the road and you are toast.
If you have done your market research with your first rounds of funding, you should know what it’s going to take. Take that number, give yourself room for error, because errors are inevitable, fundraise what you need (maybe more if you feel you undershot what you’ll need), then deploy.
Take that funding and actually make it happen. Scale the company and reduce operating costs until you are profitable. As mentioned before, don’t forget about retaining the customers you acquire.
If you are a 24-year-old who has a great idea and want to take this thing and blow it up, you need to realize that VC might not be the answer. Young founders (often time even mature founders make this mistake too) see companies like Stoop and Todoolie closing large funding rounds, and get way too excited about that money. They hear the success stories of people exiting for an ungodly sum of money. Don’t be distracted by those stories.
Hunker down and scrape by with as little as possible. If you are worth your salt you will make your business profitable and you will do it fast.
Many less well-known startups are reaping the benefits, or lack thereof, from a bad or nonexistent customer experience. I’m talking about the UX, I’m talking about, once they are paying for your service what is going to keep them there. What will you do to be like Southwest Airlines or Disney?
I hate to break it to you. If all you do is offer a service to them, they will eventually move to someone who does it better. If someone doesn’t do it better already you better believe they are on their way.
Dealing with you should be an experience. I don’t care if you sell a data migration software or a no-code-needed automation tool, they need to love something about your company.
This can be done through personal touches and engagement. It is very hard to have truly personalized touches when you have thousands, soon to be millions of customers, but you need to dig into that creative mind to figure it out.
As for engagement, that one is not easy but a lot more scalable. Create highly valuable content for your customers. A startup would be highly justified in hiring a small team of production badasses to create that content. I mean it. Your content has to be GOOD. With a capital G.
Again, use that idea creation brain of yours here. You can let it run wild but keep it in the scope of service you are seeking to dominate.
Just today I had another demo-call with someone from Ship Station. First of all, this was one of the very few human interactions I’ve ever had with a SaaS company. If you saw my monthly bank statement you would see that I use a lot of SaaS products.
Aside from it being one of the very few interactions I’ve had with a SaaS provider, it was also the most enjoyable one ever. The service rep on the other side was super real and I felt like I could totally relate to her. Aside from that, she proved to me that Ship Station really is the expert at shipping. A website can not communicate the way a human can.
What you can do going into 2020 is to prioritize utilizing the technology at our fingertips to actually create relationships. If your CAC is high, you better have a very robust team of customer success team members, and I’d also recommend paying them well (they are one of your biggest assets).
This is something I just heard this week which I think is so spectacular, but so simple. Part of the principle is having an Undiscovered Awesome People list, or UAP for short.
These people are the ones you come across and the ones you are actively seeking every week. They are the people who really do have something special but haven’t been given a chance yet. If you pass them up someone will eventually pick them up, and then their price tag will be way too high.
Another perk of this is that most people would love to plan ahead for a change in jobs. When you are in a scramble to make the next addition to your team, you have to convince people to make a move really quickly. Most people have commitments and want to have more lead time. Being so quick crosses a lot of people off your potential hire list.
You will also have more time for yourself to screen candidates and offer trial periods to make sure you work well together. This is especially important for early-stage startups (2-8 people).
Let’s be real. A company’s success is 80% due to the people on the team. Regardless of how advanced our AI gets, humans will always be the greatest factor of success, in my opinion.
Spending at least an hour or two per week scanning the LinkedIn, your network, and all the random Slack channels, will help you come across great people. Many of these people will stand out to you for some reason. Since you are always recruiting you will be able to learn more about them, and if they are really interesting, follow them to see what kind of person they are.
You can keep in touch with these people and when the time is right, you reach out.
Obviously we don’t hear about all the startups that fail because many of them don’t make it to the news unless they are good ideas. However, with what I would like to coin as “the dawn of massive f**king failures in the startup world” upon us, kicked off started by Uber and WeWork, we have many lessons we can learn from.
Many more failures such as these are bound to come unless founders check their ego at the door and see what went wrong with these companies to make sure it doesn’t happen to them. They say experience is the best teacher. I’d like to juxtapose, the experience of others does a pretty good job too.
What kind of founder are you going to be/become in 2020? While these examples might not be perfect and 100% rock solid, I hope they provoke some reflection and thought within you so you can avoid the ginormous mistakes made by some of the original unicorns.
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