Startup Principles

There aren’t many universal “rules” in the startup world, but there are some principles that can help explain a little more about how it works.
There tends to be some mythologising about the industry, a lot of it is based in truth, but some of the realities tend to surprise new entrepreneurs.
Each of these principles seemed to be true ten years ago, and will likely remain true ten years from now.
Feel free to agree or disagree if you’ve created your own company or worked with other startups…

Literally everyone you meet who has built a business will tell you that startups are hard work.
A lot of those people also go on to say that the work was worthwhile, or that they can’t imagine not building startups in the future.
Anyone promising easy work or instant riches is selling you something.

Startups are an experiment, to see if there’s an exciting business model that can grow and do important work.
This is different to building a small business, which seeks stability instead of growth.
Small businesses can be great, but your local fish and chip shop is probably not a startup.

Because they are experimental, startups are also full of uncertainty.
This uncertainty makes the work interesting, rewarding, unpredictable and sometimes off-putting.
It’s the part of the business world where a small company can out-compete a giant, and then potentially be irrelevant three years later.

The startup world is attractive to smart, independent and hard working people. That’s likely because it is fast-moving, with lots of potential, and it can be lucrative.
It is also sometimes uncomfortable to people coming from university, corporate or government roles.
The pay is usually worse (at first), there’s no clear career progression, no HR team, etc.
There’s some adjustments that can take some getting used to, but the perks are also highly appealing.

Ideas, even revolutionary ideas, are cheap, execution is expensive.
Lots of people had the idea for Uber, but then didn’t build Uber.
Even if you set out to build it in 2007, the timing would have been wrong and the technology wouldn’t have been ready.
This also means that most people in the industry won’t sign a non-disclosure agreement just to hear about your ideas.
If someone can build a better business than you just from hearing about the concept, then you have a bigger issue, one that an NDA won’t protect.

Startups have to specialise.
You can’t launch six different business units at once, not to a high enough standard.
Even though you think you know how to do all six, it’s better to start by nailing one then moving on to the next most logical opportunity with momentum and a happy audience.

Lots, but not all startups, grow through the use of clever technology.
Some are high-tech companies that invent or improve new technologies (e.g. Apple, OpenAI, Google).
Some are tech-enabled companies that use existing technologies to build new brands and clever offers (e.g. Uber, Bumble, Airbnb).
They are both good, and appeal to different sorts of funders and partners.

Good startups serve a customer, preferably a deep pool of motivated customers.
If we don’t know who the customer is, how will we know what to build for them?
We want to solve a problem or make a compelling offer to a lot of people, so that we don’t run out of customers.
The all-too-common alternative is to prioritize building the company you want to build, then go hunting for customers once you’ve set everything up.
This is the approach favoured by boards and large corporate teams, who care more about their growth ambitions that what a customer wants.
Yes it sometimes works, but it also leads to some catastrophic failures.

You can’t make customer do anything.
You can’t change their behaviour, but you can entice them or make it easier for them to change, but it’ll be based on them serving their own interests, not yours.
Customers have a really tempting competitor option called “Doing Nothing” and they’ll usually take it unless someone presents a compelling alternative.

Some founders specifically design startups to be able to take on massive funding, grow quickly and become a billion-dollar company.
This is a tough road but it can make you a lot of money, or implode spectacularly. Investors only want companies that have enormous potential, they are tough judges but will also put in a lot of cash. These high growth companies are called “Venture Backable” startups.

A lot of the media and reporting around startups is specifically referring to these venture backable companies.
Their path is not the norm in the industry.
You can learn a lot from them, but comparison can make you miserable or daunted. The best basketball player in your city may not play in the NBA, and the best startups in your city might not be “Unicorns” with a billion-dollar valuation.
That’s fine.
But I bet most of your city’s basketball fans talk about the NBA a lot.

Every industry has room for startups, which usually try to fill in a gap in the market that current operators are not handling very well.
If you have a successful company, there’s a good chance a startup will come along and focus somewhere near your business.
Competition isn’t a bad thing, so long as you’re focused on being your customer’s favourite option.

Unlike a job, a startup cannot be fired or shut down by a boss.
Instead, they can be fired by the market, if every customer decides to shop elsewhere.
These customers can be brutal, but at least you’ll get a lot of warning before it becomes critical, not the whim of a new executive who wants to change the direction of your corporation.

There are three kinds of “fit” for good startups.

• Customer-Problem Fit, which is when there are real customers who really care about a particular issue/need/interest.

• Product-Solution Fit, when you know how to give customers what they want/need.

• Product-Market Fit, when customers recognise your brilliance and say “shut up and take my money”.

They’re all important but it helps to work on them in this order.
If customers don’t have a strong want/need, then even your brilliantly designed solution will be a tough sell.

Rather than building a big expensive business from the start, startups can begin with a small version of an idea to test in the market.
It needs to be basic enough to build quickly and cheaply, but good enough to serve their customer.
This is a tough balance but it’s better than making expensive failures or ugly solutions that repel customers.
This idea is called a Minimum Viable Product (or MVP).

Plans change quickly.
You can work on something for weeks, then over one lunch meeting it might become completely redundant, with a new task in its place.
Each day brings new challenges, and sometimes a repeat of past challenges that need to be handled again.
This is totally normal, the hard part is not letting it get to you emotionally.
You have to change the way you think about “sunk costs” and the value of work that doesn’t make it to market.

Sometimes you need to change your plans but not your bigger vision.
This is called a “pivot”, like when you’re moving/turning one leg while keeping the other leg planted.
Now you’re in the same spot but facing a different direction.
Pivots can be big or small.
They can feel like you’re going backwards, but they can also be the best decisions that massively speed up your success.

Sometimes you scrap a whole concepts and decide to build something better.
And sometimes this is a brilliant call, made easier if your previous project was run in a lean way.

Ideas fail all the time.
Failure rates can be around 50% in the first year, 70% after two years, and 90% over five years.
Keep in mind you get to have lots of attempts, if you’re careful with money and can stay motivated.

Believe it or not, no one is watching you all that closely, and won’t really notice your failures and setbacks.
This is surprisingly liberating.
If you pre-launch a product, and nobody bites at your offer, you’ll be the only one who knows.
You have far more control over your narrative than you might think.

One of the most important things to get right in the early stages is finding the right co-founder.
You’re going to go through a lot together so it needs to be someone you can work with in tough times, and preferably someone who has strengths in areas you haven’t mastered.
It helps if this person has a similar timeline to you, so that your expectations and workloads are aligned.

Consider the airport lounge test for early hires/co-founders.
“If we had a 4-hour delayed flight, could I sit next to this person in an airport lounge?”
If that sounds horrible, you might not be a good match for a startup team.
You don’t need to be best friends, but you do need to be a good fit for extended periods of time.

Business is a team sport.
While it might just be 1-2 of you today, we eventually want to build systems that can work without you being there each day.
Otherwise you’ve created a job, which is nice but won’t let you grow.
If no one else can do what you do, your systems and assets aren’t designed well enough.
If the idea of training and building a team repulses you, perhaps you actually want to be a freelancer rather than a startup founder?

Silicon Valley has done a lot for the startup world, in terms of the language, ideas and business models it has given us.
Most other startup ecosystems have a complex relationship with Silicon Valley startup culture, which often does not fully translate across into other geographies, cultures, or investor networks.
It can be hard to know what to expect or embrace for entrepreneurs, given that their circumstances can be quite different from those founders living in San Francisco.

There is an important distinction between startups and large tech companies who are trying to be cool.
Startups usually do not have impressive offices or free food.
These are found in companies that are trying to entice employees to stay at work for longer.
Startups are also working late, but out of necessity not bribery.
The ping pong table cliche is real though, even startups can afford some bats, balls and a net.

You can run your startup however you like, but there are a lot of startup cliches that are very wise and useful.
E.g. advice on how to hire, how to run meetings, how to prioritize your time and money, how to build a pitch deck.
80-90% of these cliches are probably great for your work.
Knowing which 10-20% to ignore takes years of wisdom and experience.

Intermediaries are groups who want to see you succeed, often because it helps them succeed.
They might run programs, offer investment, or host a community.
Like any industry, there are good ones and bad ones, and the bad ones tend to fade out over time.
The best judges are the founders who most recently worked with the intermediary - they’ll tell you all about the pros and cons.
You’ll have lots of choices and can likely find one that’s your cup of tea.

“Stealing from one source is called plagiarism, stealing from many sources is called research”
You don’t need to invent new ways of running each part of a business.
You might need to learn what other groups do, then borrow and adapt the aspects that work for you.
Best of all, when you do this well, future customers won’t know who you’re copying.
Can you spot who Evander Strategy has tried to imitate?
Does it matter?

The startup community is usually pretty welcoming.
However, It is easy to hide.
The community won’t come knocking on your door.
You have to show up and be interested in order for the magic to happen.

It’s good to have two types of peer mentors.
Someone who’s two steps ahead of you, and someone who is twenty steps ahead. They each spot different issues and opportunities, so they can offer different things.

“Write your principles in pen and your business model in pencil.”
You shouldn’t compromise on your values, but in return you shouldn’t declare that the way your business operates needs to be set in stone.
Business models are temporary, integrity isn’t.

You don’t need to be an instant expert.
So many startup skills are acquired by the process of building something of your own.
Even if you only build rough initial drafts, learning by doing often beats learning from LinkedIn.
You don’t need to bluff all the time, so long as you’re open minded and not an arrogant jerk.

Some time pressure is helpful, but too much can be debilitating.
A bit of urgency can spur you to action, and cut out the distractions.
Too much urgency leads to paralysis or over-investing in one idea, neither of which serve you well.
In a lot of cases, most time pressure is imagined, especially when it’s to do with your age. 

Some cynicism can be helpful, but too much can be debilitating.
There is a lot of fluff and propaganda in the startup media, and it’s good to ask questions before accepting everything as truth.
Too much cynicism makes you hard to work with, and often makes you unhappy.
Not everything is a scam.
Not everyone is a fraud.

Startups are sales organisations.
You are constantly selling, or you stop running a startup.
There’s nowhere to hide, your customers are what’s keeping you alive.

Despite what the ads say, sales tools and software do not magically make sales happen.
They make it easier to keep track of your sales efforts.
You still need to do the work.

Turnover is vanity, profit is sanity, but cash is king.
You need money in your accounts - it’s not much use having cool vanity metrics like high revenue growth if your costs blow out and you can’t pay your bills.
It might be better to be a $3M company with decent margins than a $8M company losing sleep and bleeding cash.

Money does not change what you are - it magnifies it.
It cannot fix a flawed model.
It cannot fix a toxic culture.
It cannot keep competitors away forever.

Investment is not a prize.
Some types of business need lots of money in order to launch, but this money is expensive in the long run.
Investment can be a vote of confidence, it can speed up your progress, but it’s not a good status symbol.

Investors don’t want to give their money to strangers.
In a lot of cases, you’ll need to meet funders 6+ months before you want to raise money.
This is their chance to become familiar with you, your brand and your traction. Therefore, a smart founder wants to research, meet and keep prospective funders updated for months or even years before they need the money.
It’s hard to build trust in a hurry.

You’re going to get hit with a lot of news, and it’s usually never as bad or as good as you think it is.
This can be hard to remember in the moment, but it becomes clearer over a longer time horizon.
This is especially true for new founders in their early 20’s.

As Mario Forleo said, “everything is figureoutable.”
So many of the core startups skills are learnable.
They may require practice and experimentation, but there’s nothing stopping you from getting started or finding great resources.

Your friends, peers and rivals are probably not doing as well as they are portraying on LinkedIn.
That’s good in terms of not being intimidated, but also good to keep in mind when checking in with your friends and peers.
“Fake it til you make it” can be awful advice in the wrong circumstances.

People do business with people, and with people they know, like and trust.
No one is entitled to investment or support, and it can descend into cronyism.
But it also means that if you’re a jerk, people can opt to avoid you.
Networking is important for meeting good people, staying front of mind, and hearing the real story about what’s gone down in the past.

Entrepreneurs need to be self-promoters, but that doesn’t mean obnoxious.
It means finding ways to be relevant, visible and with a clear story around what you do.
Since you are starting small, you are the manager of your own public relations team.
That might not sound like your idea of fun, but luckily you’ll have lots of good role models around you who you can copy.
Look at how other founders post about their work and see what works for them.

Startups aren’t usually great at widely advertising jobs.
Instead, they recruit people they know, or people who come recommended, or people they meet in the industry.
This is good and bad for jobseekers, who may have more luck finding out about opportunities through LinkedIn or Instagram than through Seek or Indeed.
I got my first three jobs in the startup world by either being around the right event at the right time, or someone recommending me to a founder in need.
There would have been candidates far more qualified than me, but my qualification was that I was right there.

The startup world has biases, problems and cultural issues.
It also has a lot of very compassionate, generous and inclusive operators building amazing cultures.
Both can be true.
Historically, investment has gone to what were considered the “safest bets” (privately educated white men in major cities without substantial family commitments) even if those are not the best nor most talented people.
It may have been deemed a financially smart decision in the past but that’s no longer proving to be true.
Investors can fund who they like, and there are now dedicated funders supporting entrepreneurs who don’t fit the singular, outdated mould.
Change has started but there’s a long way to go.

Unless you do something heinous or illegal, you can’t get booted out of the startup world.
This is actually refreshing to think about, as after a failure you’ll still be able to dust yourself off and start something new.
There is always room in the market for a well-designed startup, it’s just hard to build well-designed startups.
But the door is not closed on you.

If you are a risk averse person, consider the risk of NOT starting something.
What if you take the corporate job and hate it?
What if you watch someone else build the same thing you dreamed about?
What if you could have done the hard work?

There is almost nothing stopping you from getting started.
Sitting on the sidelines is fine at first, but don’t tell yourself that you need a special qualification or permission to build something of your own.
The work is hard but it’s rewarding, and we need more motivated and generous entrepreneurs in our ecosystem.