The Ultimate Start-Up Guide

Hard Won Advice from Venture Capitalists

Many of us love to read stories of the beginnings of Apple or Facebook. We imagine what those early days were like and what it would be like to be a part of a small startup that skyrockets to success.

But, of course, statistically most startups fail. Studies show 90% fail in the first two years.

That’s sobering.

 

Why do so many startups fail?

What can the successful ones teach us?

Is there a blueprint for startup success?

 

Tom Hogan and Carol Broadbent founded Crowded Ocean, Silicon Valley’s top marketing firm for startups. They have years of experience working with some of the Valley’s most successful firms. Their new book, The Ultimate Start-Up Guide: Marketing Lessons, War Stories, and Hard-Won Advice from Leading Venture Capitalists and Angel Investors, is packed with the wisdom of their experience working with numerous startups. I recently spoke with them about what makes a successful venture.

 

“Start-ups fail because of lack of execution.” -Charles Beeler

 

Why Start-Ups Fail

Everyone reads about how many startups fail. What are a few of the reasons?

Dog design. According to a recent study of 101 failed startups, 42% cited ‘no market need’ as the reason they failed. In other words, they created their product ‘because they could,’ not because of any perceived market need.

ultimatestartupguidenew2Running out of money.  Obvious but it happens more often than you’d think. Because of parsimony (giving away as little of the company as possible) or optimism (I’ve never missed a deadline in my life), first-time CEOs work from budgets and schedules that assume that everything will go right. It usually doesn’t—and so the founders fold shop.

‘Camel Design.’  If a camel is a horse designed by a committee, a camel product is one where the founders listened to too many people, didn’t trust their initial instincts, and built a product that is a little of everything and compelling to no one.

A single, dictatorial founder. It’s one thing to have a strong vision. It’s another to refuse to tolerate questions or input about that vision, especially when that input comes not just from employees but from the market. One way to track how much of a martinet you’re being is by tracking employee retention:  this may be your first rodeo as CEO, but most startup employees are on their third or fourth.

Underestimating the competition.  Sometimes it’s hubris; other times it’s just not enough time. Either way, most startups don’t respect—or keep an eye on—the competition the way they should.  Give the competition their due:  The analysts who cover your market—and who have probably had nice things to say about the competition—don’t want to look like they’re stupid. Same for the prospects who either own or are considering the competition. So keep your derisive comments to yourself.

 

“Data driven marketing is…one of the best investments an early-stage start-up can make.” -Moe Kermani

 

Translate Failure into Success

How can past failures translate to a positive experience?

It all starts with humility and honesty. Virtually every team has one or more scars from failed past ventures. The key is to admit it to other key team members and then use the lessons learned to avoid making the same mistake a second time. The other element is pattern recognition:  If you can use your past failures to recognize a mistake in its early stages (say, a bad hire), you can take corrective action before the mistake takes root and does damage.

 

“Less is more. If you think you have focus, focus some more.” -Jishnu Bhattacharjee

 

Why Diversity is Important

I love this. Many people think diversity is for more mature businesses, yet you argue otherwise. Why is diversity important for startups? 

Diversity of multiple types is healthy and invigorating for startups, not only to build a strong culture but to build better businesses. All the survey data shows that diverse teams make better decisions and improve profitability. So, just like startups benefit by being able to start fresh at the whiteboard to design a better product or service, we believe startups should try to build in diversity from their founding. We encourage startup founders to focus not only on gender and ethnic diversity, but also to consider hiring staff who bring both big-company and small-company backgrounds and to consider embracing the oddballs and misfits who represent “disruptive” thinkers. When tech titans like Apple, Google, and Salesforce have heads of HR and cross-functional teams chartered to lead diversity initiatives, you know diversity is a big deal, not just because it’s the right thing to do but because it translates into better businesses.

 

“You never really know what the market really is until you go to market.” -Pete Sonsini

 

What is post-launch depression? How do you guard against it? 

How to Ruin a Business Without Really Trying

 

  • Would you like to ruin a business?
  • Have you been looking for tips that will guarantee you to fail?
  • Want to screw up your next big deal?

I didn’t think so.  That’s why you should read my friend, MJ Gottlieb’s new book How to Ruin a Business Without Really Trying: What Every Entrepreneur Should Not Do When Running a Business.

Because it will save you a lot of time, money, pain and aggravation to learn from someone else’s mistakes rather than your own.

Don’t own a business?  His advice isn’t just for entrepreneurs.  The same advice for an entrepreneur applies in the corporate world.

I recently had the opportunity to ask MJ to share his perspective with you.  He writes with an honesty and humility about his trials and mistakes that will draw you right in.

 

Fact: 90% of start-ups fail and 70-80% of all businesses fail within 10 years.

 

Learn What NOT to Do

MJ, why a book on ruining a business?

When an entrepreneur starts a business, a tremendous amount of time, effort and (often) money is spent and great sacrifices are made at the expense of friends and family.  That is a fact.  It is also a fact that losing (ruining) a business after all that sacrifice can be an extraordinarily painful experience.  What most people don’t realize is that they can significantly mitigate the risk of failure by learning from the mistakes of others before the clock starts and the stakes are for real.  If you truly study brands, you will see a pattern of common-thread mistakes that most businesses both past and present seem to share in common.  The ones who are willing to recognize a mistake and quickly adapt, adjust and modify will survive, the rest disappear.

 

“Only brands willing to recognize a mistake and adapt, adjust and modify will survive.” -MJ Gottlieb

 

It’s not that aspiring entrepreneurs don’t want to learn from failure, I think society is simply focused too much on the end result (the success) and is viewing things through rose-colored glasses.  Most of the information that I come across focuses on the small percent who are succeeding, as opposed to studying and learning from the vast majority who are not.

Statistics show 90% of start-ups fail and 70-80% of all businesses fail within 10 years.  Despite these facts, the market is flooded with how-to books and courses on how to succeed.  Here’s my concern with this.  Every business is different with its own unique blueprint to success, so there is absolutely no way you can tell someone how to run their business.  You can, however, find the key mistakes that most businesses seem to share in common to start to swing the percentages in the other direction and give more hope to the entrepreneur.

 

Learn From Adversity

How has adversity helped make you who you are?

I think it’s all about one’s perspective on the word.  Corny as it may sound, I have come to crave adversity and look at it as yet another great opportunity to grow.  The only reason I can see that perspective is because I operated from the other side for a very long time.  When I was young, I ran away from everything and accomplished nothing.  It wasn’t until I was able to turn around and look adversity in the face that I was able to take the power away from it and use it to my advantage.

I think adversity not only makes you a stronger person but also is the only way to see what you are truly capable of.  I think there should always be adversity to some extent, as it will always challenge us to grow.  Without adversity there is complacency, which I think is a four-letter word.  I always want some goal ahead of me that I have not yet achieved or some stumbling block I have not quite yet moved aside.

 

“It is just as important to know where you are as it is to know where you want to be.” -MJ Gottlieb

 

For example, basketball was my salvation, and I played every day until I couldn’t play anymore and had to get my hip replaced. I still do two hours of physical therapy every night because I not only want to get back on the basketball court but also want to dunk again.  The doctor says that is most likely not going to happen.  I say it most likely will.  While he is showing me the adversity, I choose to take it as a challenge and an opportunity.

How To Ruin 3D 2

Take me to the dark days after your first business failed.  What were you thinking?