This article is adapted from a talk I used to give both to students and seasoned innovators.
The odds are not in your favor.
Who reading this has founded or thought about founding a startup?
What if I told you that half of backed founders make below minimum wage, including cash from exits?
What if I told you that only 1-2% of founders get any meaningful value returned from an exit (i.e. 1x more than they could have earned in salary somewhere else)? That unicorns are 0.05-0.5% of all startups? And that the economics of VC don't make mathematical sense for companies under $1 billion?
What if I twisted the knife and mentioned the startup community's track record on diversity—with only 2% (and falling) of dollars going to female founders and 0.6-1.2% going to Black founders?
Pretty slim odds you face. Why is this?
1. Your product is hard.
New products and new technologies are hard. There's no beaten path to getting to the finish line for your specific product or service.
2. Your team is small.
Your team is small, but you still have all the responsibilities of a company outside of your product: acquiring customers and building the team are just two of the one million things you have to do.
3. People fetishize failure.
The entrepreneurial culture fetishizes failure. We tell everyone to "go out and fail." Fail fast! Fail often!
4. You don't believe in "the odds."
We are visionaries! Screw the odds! Probabilities they don't apply to me. I will for sure be that one in a thousand.
Gosh, this is all quite unfortunate. Fortunately there is a way to beat these terrible odds, and that's to stop gambling altogether.
Focus on process rather than outcome.
Acting is quite similar to entrepreneurship, in that the odds are also against you. Bryan Cranston, who famously played the protagonist of the show Breaking Bad, said something helpful:
To become an extraordinary actor, "focus on the process, not on the outcome."
Once you focus on making an impact every day and loving it, versus expecting some glorious outcome, you raise the likelihood of success.
Yuck. I went into startups for the outcomes, you scream! To make a billion dollars! To "have an impact". Not to focus on petty daily stuff!
Unfortunately, Bryan Cranston is right. Research has shown for decades that humans with optimistic expectations but low likelihood of success actually make worse decisions than those who have no expectations.
That means: live in today. You're entrepreneurial. You're already good at dreaming and being visionary. But what you will struggle with more is prioritizing today. If you make your venture successful and sustainable today, and tomorrow, and every day, then your likelihood of a good outcome is definitionally 100%. I've started calling this "incremental moonshots."
How to "prioritize today?"
Let me translate this from a mushy catchphrase into a few tactical implications that I've seen over the years at Gaussian, Newton Three, and NYC tech.
Don't sit on ideas: get customer feedback every week
A startup is essentially a market research firm, because your job is to uncover answers and remove uncertainty about what and how to give to customers. If the answers were known, then there would be no opportunity.
This means that the most important criterion is to learn as fast as possible about your customer and your service.
One tactical way to do this can be to force yourself to get substantive customer feedback every single week. There are times when this will be easy and times when this will be difficult, but the most competent teams find ways to make this happen in creative ways no matter how hard it is, through customer experience checkpoints, warm introductions, cold calls, online polls, and even surveying consumers as they leave the supermarket.
And remember: learning the same thing over and over is not learning.
Don't brood over ideas. Ideas are a dime a dozen, and are nothing without execution. Oftentimes, successful companies use existing ideas to build upon, like Dyson, Apple, Slack, Airbnb, Google, Amazon. Many pivot their ideas. Slack used to be a video game company. But all of them managed to every day improve the lives of their customers and meet their needs.
Build your team slowly and proactively
They say startup success is driven "1% by the idea and 99% by the team," and they're wrong: it's actually "100% team." Your team is your lifeblood.
If you're a tech-enabled business, the bulk of your expenses will be people, either as payroll or external vendors and contractors. Talent (especially good talent) isn't cheap, so make recruiting choices wisely. And unlike your one-time purchase of oversized noise-canceling headphones, employees are a recurring expense.
It takes 15 months for a new employee to get fully productive, the first 3 of which they are a net drain on your business—so hiring too fast is the equivalent of punching holes in a rowing boat.
And this is saying nothing about the ability to manage people. Great managers are built over years, and if you've never managed anyone before, you're going to have a hard time getting good results from the team of 40 you just hired with your fresh round of funding.
Don't reinvent the wheel, 95% of the time
Your time is hyper-limited, and should be focused where it can have the greatest impact and differentiation. Talking directly to customers about the problems you want to solve? High bang for your buck. Building your own CRM? Low bang for your buck.
I often say that for 95% of your activities, someone has done it before, better than you ever will, and there are best practices out there. Your aim should be to copy the answer for those (using third parties, open source libraries, off-the-shelf solutions, communities and advisors) so you can focus more time on the 5% of activities that are truly differential.
Understand your financials
Your business is a financial engine. (Unless you live in a dystopia where goods have zero value.) Visions and pitches are amazing but must yield measurable outcomes and exist within a financial framework, otherwise they're just a fun intellectual exercise.
Keep on top of your balance sheet, profit-and-loss and cashflow statement. (If those concepts feel alien to you, take a quick accounting course or watch some videos.) Make sure these financials are up-to-date, and review them at a regular cadence. Invest the time to understand them. It's easy to pretend to review your financials, and I see that a lot.
Build a cashflow forecast based on realistic assumptions. Allow for scenarios, like hiring some engineers in 3 months time, that you can toggle on and off to see how it impacts your bottom line. Try tools like Fathom if financials really float your boat.
Fundraise as a means, not an end
A wizard once told me that the fastest way to become a billion dollar company was for someone to write you a billion dollar check.
Fundraising is a tool to achieving growth, and a critical one. It comes in many flavors, including equity raise, equity secondary, debt, and (the oft-forgotten) grants. Like a surgeon at the operating table, consider which tool to use when and for what reason—don't bring a bone-saw to an appendectomy. There are enormous companies that did not raise equity capital until much later (if at all)—like GitHub, Atlassian, Qualtrics, Braintree, Campaign Monitor, BigCommerce, Envato, Sparkfun, Octopus Deploy.
Remind yourself of yesterday's momentum
It's easy to forget the daily and weekly accomplishments, but I'm not implying a self-help love-thyself approach here. As creators, nothing beats the feeling of having created and seeing your creation in the wild, with a life and momentum of its own. So take a moment and reflect on this momentum that you've created. Imagine it as a flywheel on a rowing machine—you exerted yourself to get it turning, now revel in its blissful, unassisted motion.
Our brains cherish relative comparisons—our neurology rewards us when we validate how we compare to others. In the absence of validation, we either (1) slip in motivation and productivity or (2) grab validation wherever we can. Observing momentum can be a key antidote.
Try to be your extreme opposite
If you're a good seller, be more modest. If you're a realist, inject some buzz and hype. You'll never reach that extreme, because of who you are—but you'll get closer to it and get more balance.
Being an entrepreneur—whether starting a company or joining one early—requires you to care deeply about changing the world. And we owe it to the world to not throw ourselves off a cliff in search of an elusive outcome, hoping the Eagles will save us, but to guarantee we change the world a little day by day, and love doing it.
Photo by Milos Tomasevic