Start up, speed up - 10 tips for entrepreneurs to succeed in their startup journeyMadanmohan Rao
This compact book offers a wealth of tips and case studies across the 10 stages in the startup journey, for traditional and technology firms.
The barriers to entrepreneurship have dropped over the years, but competition has increased as well. Digital media have speeded up discovery and distribution on a global scale; consumers trust friends and influencers more than brands; and abundant capital is available from angels and crowdfunding. The stage is set for even small brands to go global at speed.
With this backdrop, the recently-published Shortcut Your Startup: Speed up success with unconventional advice from the trenches, by Courtney Reum and Carter Reum, is a practical playbook for aspiring entrepreneurs. It draws on case studies from other startups such as Lyft, Pinterest, Warby Parker, and ClassPass.
The brothers Courtney and Carter Reum are former Goldman Sachs investment bankers, and founded a liquor brand called VEEV Spirits which they sold to Luxco. Based in Los Angeles, they now run a holding company called M13 that accelerates startups; the brothers have invested in over 130 companies.
Success will come from discipline, precision, speed and flexibility. Successful entrepreneurs tend to be visionary, optimistic, energetic, risk-taking, emotionally resilient, and persuasive, the authors begin (see also my book review of Entrepreneurial Strengths Finder). Many large companies are tapping these qualities in their own employees for internal ‘intrapreneur’ initiatives.
The authors advise aspiring entrepreneurs to ask themselves what success means for them, how original or feasible their idea is, what’s special about them, and why this is the right time for launching their startup. “Being first can be a huge advantage, but being the best is more important,” the authors advise.
Their tips and techniques for entrepreneurs are divided into 10 chapters, as summarised in Table 1 below. The case studies focus on a wide range of sectors and not just digital products. The book’s online companion offers a number of resources and tools as well.
1. Investigation: get into the trenches
Getting insights from the frontlines or trenches helps you discover unforeseen obstacles and hidden traps that may trip you up and slow down your launch. Things to watch for are consumer hacks or changes in behaviour, distribution patterns, the role of influencers, and new uses for by-products. (For more insights, see my reviews of the books Trend-Driven Innovation and Cross-Industry Innovation.)
Success depends on risk minimisation and product-market-timing fit, the authors explain. Founder should be willing to change course and not be blinded by love for their original idea. They should go in front of customers to understand their experiences; sales teams are good sources for such insights.
Trench experience and desk research can help identify knowledge importance, gaps and strengths. This can help early formulation of product roadmaps and strategies for launching a company, not just a product. This should begin with a ‘hero product’ that will be your staple and create buzz and traction.
Examples of such insights include Howard Schultz identifying the need for a ‘third place’ between home and work (Starbucks), Google co-founders identifying the correlation between accuracy of search and frequency of citation, and the authors discovering the need for a healthy component in the drinking experience.
Darius Bikoff combined the consumer habits of drinking water and taking tablets into VitaminWater, and had it displayed in the water section of stores. The founders of Twitch.tv pivoted from their digital calendar to a gamers’ video platform.
Financial services platform Aflore succeeded by identifying the important role of community lenders to assess creditworthiness. Apparel company Hylete tested its products with the CrossFit community before broadening into athleisure.
2. Strategy: speedboat or sailboat
Founders should have the insights of a microscope as well as telescope, to see the big picture and the finer details. Using the metaphor of scale and speed in navigation, the authors describe companies as cargo ships, dinghies, speedboats or sailboats.
Speedboats are winner-take-all fast movers, often creating a new category, eg. AirBnB, ClassPass, Uber/Lyft and Facebook. Sailboat startups ride trends or learn from the first movers, eg. Pillow’s property management offerings for those who want to list on AirBnB, and the ALICE app for hotel operations.
The speedboat option has more risk and less flexibility, whereas sailboats must get the timing right. Not all speedboats and sailboats succeed, eg. housecleaning company HomeJoy went bankrupt.
The choice of strategy depends on speed to market leadership, capital needs, MVP readiness, asset costs, tech boost, timing, and viral effects. Proof of demand and traction can help companies find the right revenue model after launch, as shown by companies like Facebook.
For example, ClassPass used unlimited fitness classes in gyms as a door-opener tactic, then capped the plans. The Honest Company first went direct to consumer before approaching large retailers. VEEV used mobile-accessible coupons to track purchase patterns.
AirBnB had timing on its side; it was launched during a recession, when people needed extra cash and were willing to accept strangers into their homes. The Daily Harvest uses the subscription food business model to deliver a suite of products put together by nutritionists and chefs.
Entrepreneurs should carefully monitor trends in technology, media consumption, industry sectors, economic cycles, and youth/ageing segments. Other trends to watch are changes in regulation, eg. the cannabis industry in the US.
Product rollout should follow a ‘rings of Saturn’ strategy, in progressively increasing phases, with a combination of push and pull approaches. Investors help along the way via recruiting talent, introductions to business partners and influencers, and strategy advice.
3. Differentiation: your unfair advantage
Differentiation is key in the ‘switching economy’ where there are more options for customers, who are now switching faster than ever before. For example, Blackberry faced a rapid decline despite earlier industry dominance.
Unfair advantages of USPs can come from vantage point, processes, brand, influencers, lead over competitors, and other snowball effects. For example, winemaker Bill Moses used his production expertise to launch his startup KeVita in the liquid probiotics space. Pat Turpin used his Costco experience to launch potato chip company PopChips. Consultant Keith Ferrazzi drew on his consulting experience to launch HR SaaS startup Yoi Corporation.
Flower company Bouqs leveraged the supply chain access of one its founders, who owned a flower farm in Latin America. Jessica Alba, co-founder of the Honest Company, used her credibility among her fan base to spread awareness and increase resonance about her startup. Hylete uses crowdfunding to pre-fund production for new lines. Many founders are bringing in retailers as investors.
4. Specialisation: focus or outsource
Building all aspects of a business takes time, money and energy. Though founders must start off with broad and deep experience themselves, they need to focus on their strengths and outsource everything else. “The game these days is all about creating the minimum amount of new infrastructure necessary,” the authors advise.
For example, SurfAir initially offered unlimited flights for a fixed monthly fee using its own fleet; it later switched to selling off its fleet and working only with fleets of other operators. Amazon has partnered with the US Postal Service for logistics.
Bonobos, HauteLook and Warby Parker are forming partnerships with Nordstrom; after all, brick and mortar retailers still dominate many economies. On the other hand, the Chia Company unsuccessfully tried to become a consumer brand, rather than remaining an industrial supplier for consumer brands.
Useful resources to find outsourcing options are DojoMojo and Partnered (email management), GitHub (coders), ZipRecruiter (recruiting), LUMAscapes (PR), and UberEATS (restaurant orders).
5. Pivots: flexibility and iteration
While entrepreneurs do need focus, they also need to find the balance with adaptability and flexibility when faced with market realities. Founder-market fit can be as important as product-market fit. It helps to have ‘diversified focus’ by tinkering on related side projects and creating thousands of ‘mini-sails’ in the sailboat strategy.
Founders should maintain a ‘parking lot’ of possible side projects. “Don’t get so obsessed with what you’re doing right now that you fail to keep track of your other intuitions,” the authors caution. Staying curious and being a lifelong learner are key in this regard.
The ‘growth mindset,’ as defined by Stanford professor Carol Dweck, consists of accepting challenges, persistence in the face of obstacles, hard work, learning from errors, and being inspired by the success of others. Founders should use data to make decisions on whether to pivot, ramp up, or ramp down.
For example, Google lets its employees devote 20 percent of their time to relevant pet projects; this led to the successful Google News, AdSense and Gmail products. BevForce offers recruitment services to beverages companies, and also launched a software business line called Pinata for event-based hourly hires. The Levo League, a social media site for millennial women in the workplace, is leveraging a ‘secondary data play’ and selling insights on how to attract employees.
Three common types of pivots are on market segment, customer problem, or product feature, eg. Tote pivoting from shopping resources to sharing of favourites (Pinterest). Pivoting, however, requires humility, open-mindedness, self-awareness, patience, and tolerance of ambiguity. Life on Air’s Meerkat live video application eventually faced stiff competition from Facebook and Twitter; the company pivoted to another offering called HouseParty.
Vertical thinking (logical, incremental) and lateral thinking (disruption, cross-industry) are both important creative approaches for founders. Examples include AirBnB, and Richard Branson (Virgin Atlantic, Virgin Galactic).
Entrepreneurs need to zoom in on their unique ‘currency’ and put themselves in ‘interesting crosshairs.’ Troy Carter, Lady Gaga’s manager, has also become a successful tech investor. Regularly attending events about innovation and entrepreneurship (eg. Summit Series, Builders + Innovators Summit) or at co-working spaces helps get into new creative zones.
6. Operational efficiency: milestones, not just time
Entrepreneurs should define their roadmap based on milestones that are relevant, measureable and focused on business outcomes. Time-based targets can be hard to change, but milestones keep the focus on achievement and progress.
Milestones can include hiring the right person, reaching a certain target for customer acquisition cost (CAC), repeat customers, number of daily customers, and achieving a certain customer lifetime value (CLV) threshold. Some milestones are for growth mode, others for steady state or equilibrium. Funding is a way to get to a milestone, though many founders think funding infusions are milestones in themselves.
Founders should be honest and transparent in sharing details of the milestones with investors. Milestones should be prioritised, and shared across the board so that all employees are on the same page. Key milestones should focus on ‘antelopes rather than mice,’ i.e. on best use of resources and time. Entrepreneurial teams should make optimum use of productivity tools, eg. Evernote, Zapier, Humin, WorkFlowMax, Trello, Asana, Flow.
7. Model refinement: nail it before you scale it
“The one part of building a business that cannot be sped through is finding product-market fit,” the authors caution. Unfortunately, many founders try to scale too fast or accept any partnership offer they get.
Instead, once product-market fit (PMF) has been found at a reasonable CAC, the playbook should be perfected so that the operating model works at scale. Any CLV-to-CAC ratio above 4 is considered positive, according to the authors. They advocate setting aside 20 percent of the marketing budget on experimentation with channels, price points, media presence, and campaigns.
For example, Dollar Shave Club spent two years to refine its PMF and sound unit economics before scaling up. The Honest Company developed killer product lines and only then partnered with Target. ClassPass co-founder Payal Kadakia made two attempts before finding the right frictionless business model for fitness classes.
MakeSpace spent time refining its storage space model before expanding to ten cities. Amazon focused only on books in its early stages before becoming a global player across categories, and launching offerings like Amazon Prime.
‘Walking before sprinting’ helps minimise risk, build word of mouth publicity, and move beyond vanity metrics. “Nailing solid fundamentals is crucial,” the authors emphasise. (See also my reviews of the books Fail Fast and Adapt.)
Dollar discipline helps a startup become attractive to investors at later stages. “You have to be thoughtful when you give away product, because whoever has the deepest pockets will eventually win the game,” the authors caution.
8. Relentless improvement: each percentage counts
Founders should have a continuous relentless focus on incremental improvement. In a world of compounding and inter-related effects, each percentage point makes a huge difference in the long run. “Mistakes compound also,” the authors caution.
The startup should have a culture of paying extra attention to detail, with continuous testing to identify new opportunities and remove weaknesses. “By definition, startups are organisations built for learning,” the authors emphasise. They should regularly conduct strategic experiments to proactively develop and test hypotheses.
This can cover everything from landing pages and cart checkouts to email subject lines and creative visuals. For example, e-tailer Warby Parker carefully tested its brick-and-mortar model before expanding to dozens of locations. Walmart is testing own-branded products.
Such growth mindsets should be factored in at hiring stages as well. Good team members should have a builder’s mindset rather than an employee mindset. Founders themselves should have the humility to regularly strive for personal and professional excellence, and cultivate circles of influence. Mentoring and reverse-mentoring are effective approaches in this regard. Principles of effective networking include being targeted, staying relevant, and showing gratitude.
9. Storytelling: gaining buy-in with heart-based momentum
“What your brand stands for matters more than ever,” the authors stress. Consumers want to know about your purpose, what charities you support, what your pro-environment actions are, and what your stance is on various political issues. Companies need to have market share, mind share, and even heart share (see my reviews of the related books People with Purpose and Do Good).
The authors identify four pillars for establishing meaningful relationships with customers: authenticity, purpose, storytelling, and a positive company culture. Transparency, integrity, and social good are highly valued.
For example, the Tender Greens restaurant gives consumers information on the name and city of its supply farms. Blake Mycoskie’s TOMS Shoes has a ‘buy one, give one’ model – it gives a pair of shoes to a child in need, for each pair sold. Gunnar Lovelace’s Thrive Market donates a membership to a low-income family for each paid membership sold. The authors’ VEEV Spirits certified itself as carbon neutral, and also donated $1 for every bottle sold to eco-friendly initiatives in Brazil, where its acai berries came from.
“Great storytelling starts internally,” the authors explain, building momentum from the employees outward. Effective stories connect ‘what is’ to ‘what could be,’ and include anecdotes as well as a call to action. (See my reviews of the books Let the Story do the Work and The Storyteller’s Secret for more examples and tips.)
“Your culture is an extension of your brand,” the authors add. “It requires constant focus. It needs attention daily, monthly, quarterly. The minute you stop focusing on it, it quickly drifts away,” they caution. Culture is created by the visible actions and examples of the founders.
A good work culture can attract like-minded customers, partners and investors. Momentum should be shared internally, via personal calls and emails as well. Culture is visible at multiple levels – employee (integrity, intelligence, maturity, energy), manager (business acumen, organisation, coping with complexity, good decisions, effective execution), and leader (setting direction, energising, coaching, alignment, team development, and coping with change).
Trust, humility and accessibility of leaders are evinced through phrases such as ‘I trust you to do this,’ ‘I screwed up,’ ‘It’s okay that you screwed up, let’s figure out how to fix it,’ ‘Be sure to come to me if you have any questions or need anything,’ and by specifying positive impacts of employee actions beyond ‘Good job.’
10. Exit: strategic sale
Tips on dealing with investors and buyers are offered throughout the book, and particularly in the last chapter. Corporate VCs are becoming increasingly active, in addition to angels, VCs and PE investors. See also my review of the related books A Dozen Lessons for Entrepreneurs and Startup Guide for the Technopreneur.
The authors offer typical metrics at different stages of the venture funnel, from pre-seed to Series C, with respect to PMF, unit economics, monthly revenues, and expected exit multiples. To deal with the ‘founder’s dilution dilemma,’ the authors caution founders to treat equity like gold, and do due diligence on different types of investors with the help of professional advisers.
While pitching to investors and potential buyers, it is important to showcase your intellectual strengths, passion, dream, vision, story, and business progress. Right from the beginning, founders should be clear on whether they are in the game as a lifestyle business, or to create enterprise value and sell the company. “Can you exist in a gap where smaller folks can survive because the big guys won’t be going there?” the authors ask.
Big companies will look to buy a startup for its distribution model (Unilever bought Dollar Shave Club for $1 billion), platform (Microsoft bought LinkedIn for $26 billion), talent (Walmart bought Marc Lore’s Jet.com for $3 billion and Andy Dunn’s Bonobos for $310 million), technology (Fossil Group bought wearables startup Misfit for $250 million), access to a new demographic (Clorox bought Burt’s Bees for $900 million; Nordstrom bought Trunk Club), or brand (Apollo Global bought Hostess Brands).
“Thinking strategically about the appeal of your business should be an ongoing activity from the start,” the authors advise. Startups need to differentiate between focused brand positioning and overall sales volumes. They need to establish relationships with potential buyers early on and ‘pre-court’ them.
Identifying ecosystem changes such as the growth strategies of large players reveals useful clues, as seen in the acquisition of Instagram and LiveRail by Facebook. It is important to create a sense of urgency in the buying company and time the sale discussions effectively. There will also be up-down and on-off phases in the negotiations, the authors caution.
In sum, entrepreneurship can be a non-stop job, though full of fun and learning. “It’s the pursuit of excellence through innovation and solving problems that leads to true global change,” the authors sign off.