I have a love-hate relationship with tech startups. I’ve probably worked in more startups than I have established businesses (I’ve also turned down plenty of jobs from startups), and I’ve seen a lot of interesting similarities and a few key differences. For starters, leadership seems to play a massive role in the success of a startup. I know a lot of this will sound obvious, but you wouldn’t believe some of the “21st century CEO” nonsense I’ve seen and heard.
So, leadership. Again, a lot of this is stating the obvious… self-declared CEOs often suck at their job; those with an MBA and real-world experience can thrive. It doesn’t matter if you’re manufacturing tablets or making artisan cupcakes in Midtown. Business isn’t something that usually comes natural to anyone, even if they think it does, and leadership is the opposite — it isn’t something you can really train on, but rather something that’s either part of your personality or isn’t. Then there’s the painfully obvious: intelligence has nothing to do with success as a CEO. Actually, a CEO has to know when to use their medulla oblongata, which ends up being a lot more often than compassion, but that’s just how the game is played. You will see a lot of brilliant people fail for simply overthinking… not that you don’t also see a lot of idiot bosses fail for underthinking.
Strategy. A good chess player probably makes for a good CEO. But many lack the ability to strategize for the long term — or, hell — strategize coherently. You need to have a monetization strategy at all times, even if it’s not going to pay off now. You need to know where you’re going and what you’re doing, and not simply flailing around between projects. It’s not enough to have a business plan, you really need to know where you’re driving the car.
Research. For god’s sake, do your homework and see if there is profit in what you’re doing. Check out your competitors, and think about what it will take to make their customers come to you. If there is no competition, there’s probably a good reason. Figure out what you can do differently that others have lost millions failing at. Calculate the return on investment, and of course what the initial investment will be. Don’t lie to yourself, but don’t go nuts with the hiring, either. At the end of the day, you’re a startup and you should stay lean where you can. You haven’t earned the right to spend like a drunken sailor quite yet.
Location. Maybe you love the hip urban core, or the beach. But do your clients, partners, and employees? Don’t inconvenience people to make your business look good. It sounds like it’s not that big a deal if you’re not opening a storefront, but then again, not every developer cares to deal with downtown parking, and most can’t just ride a bike to work. You’re only going to attract those that can. And those people, of course, are generally self-absorbed Starbucks dwellers. We millennials are easy to make fun of.
Ideas. I’m gonna keep this short and sweet. CEOs, please stop making startups about how to grow startups. The idea has been done to death. Come up with something new.
Culture. To all aspiring CEOs (and project managers) — stop being so culture-obsessed. We know you hate the ’80s IBM corporate culture of our fathers, and there certainly is a lot to hate about that. We now know that people don’t have to hate their jobs, and loving your job makes many employees more productive. But let’s get real, potential clients and partners can smell the homegrown t-shirt and jeans nonsense a mile away, because they’ve been burned by it by people like you in the past. You won’t want to hear this, but the organic business thing died decades ago. Not that it can’t work, but even Ben & Jerry’s couldn’t keep it up for long… eventually you have to lay off the doobie and start the multimillion dollar business plans. Here’s an idea: treat your employees well, but know when to reign them in. Also, know when the tie goes on and when it comes off. I went to an interview at a multimedia agency startup years ago, and when I walked in a tie while everyone else was in t-shirts, I made a half-serious apology for being overdressed. The CEO smiled and said he never takes any candidate seriously who walks into an interview dressed casually. “If they can’t be bothered to dress nice for a job interview, it’s disrespectful and is usually the start of more red flags to come.” Even though this place was uber hip (and looked like a super fun job, kinda sorry I didn’t take it), the boss was a sharp young professional that knew his stuff. No ego, no need to have technical discussions, just a desire to get stuff done and the means to do it.
Communication. Sometimes this goes along with the culture. One of the last jobs I did had the most bizarre company culture I’ve ever had to deal with… very depressing and silent, despite ping-pong and total absence of an alcohol policy (what’s up with miserable companies and ping-pong, anyway?). Communication was also an issue here, with management that really didn’t know what they were doing, and a CEO with a good track record, but had his hands off the inner workings. That’s great, as long as someone else is willing to keep tabs on things, which nobody really was, or were resistant or reluctant to do so. Human issues in a business are just as important as financial and production. Without it, you will have morale issues and high turnover.
Technology. When you meet a tech-obsessed CEO, run for the hills. Geek CEOs can definitely cause some trouble. I’m convinced some of them already know the development stack they’re going to use even before the project is fleshed out, and this sort of thinking will spell trouble when others challenge their decisions later. Your clients/customers don’t give a crap that you’re using Hadoop, Puppet, and HAML. They don’t care about your over-engineered Ruby on Rails back end. Build something that does the job, and stabilize it later when you know it works. Which brings me to…
Scalability. There’s no point in spending millions building something nobody will use. Your idea, not the system itself, is everything. Make your idea stick, or at the very least, find out if it even will, and go from there. There’s no shame in failing, but whatever you do, don’t spend millions to find this out. What’s cool about ideas is that they aren’t tied to a system. I worked for one company for years that was trying to build an online product. The first system simply didn’t have a good enough business model behind it. Then it was rewritten completely, and it worked for a year until the idea outgrew the system. Then it was rewritten again after we looked at what was working and what wasn’t. And after I left, it was again rewritten by a new company with new ideas. Four different programming languages (C#.NET, VB.NET, PHP, Java) and four different engineering teams. There was never anything fundamentally wrong with the systems, they just have evolutionary limits like all systems do. Ideas will change, and databases will always resist those changes. Accept this as fact and stop spending years building a system around an initial idea, especially an untried idea. It will most definitely change, and you’ll find yourself trying to talk yourself out of changing the idea to avoid a system rewrite.
S&M. Sales and marketing (get your mind out of the gutter). These guys are way more important than they get credit for. Good ones will treat your customers well, understand the product well, and never stop working for you. They bring home your bacon. Forget “if you build it, they will come.” This is the biggest lie ever told, and for whatever reason, startup after startup fails to recognize this. Advertise your product. Get partners over the phone. Hire people who know how to do this, otherwise you get nowhere. And if you have these people in place and they’re not doing their job, find someone who can. Of the startups I’ve worked for, the successful ones knew how to market themselves, and it took huge sales and marketing turnover to get the formula right. The good ones are as hard to find as good CEOs. How not to market? Well, this whole urban kumbaya “our company’s mission is to make the world better by being awesome blah blah mustache ninja zombies” isn’t a strategy, and most of the world doesn’t want anything to do with that. They already tried that, but then they sold their VW Bugs and moved into the cul-de-sacs to raise Aiden, Jaiden, and Brayden. This will typically be your market. I know they’re uncool and half-dead, but deal with it. They have money.
Ethics. When somebody talks about bad ethics in the local tech business community, you don’t want to be one of the executives they’re talking about. Nothing wrong with having many pots on the burner, but try to avoid hanging out with Carolina bootleggers and Tampa porn kingpins. Though it seems like every CEO in Tampa is linked to the adult industry in some way, heh.
Compensation. Pay your people what they’re worth, or you’ll get what you pay for. I’ve been at enough startups to know the pay is not usually competitive. And that’s okay; after all they’re startups. But in exchange, your people must love you. An employee isn’t gonna stay long if you’re only paying him or her half their value and still finding ways to stiff them on bonuses, while requiring stuffy attire, not giving any portfolio builders or new responsibilities, and not occasionally singing the praises of a job well-done. Especially in tech, there are so many jobs out there that nobody really needs to put up with that sort of crap.
Prime example of how to run a startup: SBS Studios
The founder here is a natural business genius who I have a lot of respect for. These guys make cool stuff. Their clients love them. They win awards. People love working there. They’re super hip in culture, but they still know how to get business done at the end of the day. They were recently acquired by St. John & Partners, and it’s not a surprise. SJP knew they were legit, not just by what they produced, but because the stuff I listed above was in effect, and working for them.
Prime example of how NOT to run a startup: Path.To
I interviewed with the original founder and CEO awhile back (not the one on their website). He’s a great guy, and extremely knowledgeable about the industry, but he really didn’t seem “in it to win it”. When I asked about monetization strategy, he couldn’t give a good answer. When I asked about what he could offer that LinkedIn didn’t already do, and how they would sell the idea to other businesses, no good answer. Just technical discussion. He also explained that he’s under a conglomerate that funnels money to web 2.0 projects so he can throw spaghetti at the walls. Must be nice to have benevolent angel investors with money to burn, even when your startups fail one after another.
…so it wasn’t a surprise to see that Path.To recently shut down. An interesting article, by the way, if not face-palm inducing. It’s really sad to see them fail, as the idea was interesting, but I can’t say I didn’t see it coming a mile away.