Topic Category: Bootcamp
Different personality types handle fears differently. Yet fear is an inevitable component of life in a diversity of situations. As an entrepreneur, you will encounter and experience fear regularly. Whether it’s the fear of being an impostor, the fear of failure, or even the fear of success, you need to learn to handle fear effectively so that you are in the best position to grow as an entrepreneur and also take your idea (and startup!) to the next level.
- An aggressive, go-getter personality will tell you to toughen up, suck it up, put your fear aside and go for it. Face your fear and love the struggle.
- A tender-hearted, magnanimous personality will tell you to deal with the fear by focusing on helping other people – your customers, your team, your partners and your friends.
- An organized, super-efficient personality will tell you to file away your fear neatly in a box and only take it out to tame it when it will impact your business the least.
- A party-loving, outgoing, flashy personality will tell you to deal with the fear by having fun. Lots of it. Every day. At work, being an entrepreneur.
One of these recommendations may appeal to your own personality, but the following are three tips that any personality can apply:
- Be transparent about the fear, but take action anyway.
- Minimize consequences, while embracing flexibility
- Elevate your mindset to treat every experience as a learning experience and a personal growth opportunity in your entrepreneurial life
Be transparent about the fear, but take action anyway.
- Be honest about your fears. You don’t need to suppress them or hide them. People will like you for being authentic. But you should also not get stuck in fears. Feel the fear and still take action that is right for the business. You can feel the fear, but it doesn’t mean the fear must hold you back.
Minimize consequences, while embracing flexibility.
- Create an environment of experimentation and where taking changes does not have disastrous consequences. As a founder, you can create this environment, which will put your team at ease, but it will also put you at ease. Also, by embracing flexibility, you become increasingly open to different outcomes. You roll with the punches, rather than let the fear demolish you. You recognize that things are not as bad as they seem.
Elevate your mindset to treat every experience as a learning experience and a personal growth opportunity in your entrepreneurial life.
- If you work regularly on managing your mindset to see all your entrepreneurial experiences as learning experience, you will take the pressure off yourself and you will see the fears decrease. Even if you “fail” in your first entrepreneurial endeavor, who cares? You will have learned so much. Investors like to invest in second-time entrepreneurs anyway because you have been through the trials and tribulations. If you don’t have adversity and troubles in your first startup, you are in danger of not learning anything. Focus on treating everything as learning opportunities and you will see the fear dissipate.
Fear is not weakness. Fear is evidence that what you are doing is worthwhile. You are seeing the potential in a situation for both positive and negative. Fear reminds you that you need to stay positive to fight off the negative thoughts. If you never had fear, you would lose your edge; you would get lazy and mediocre. You should be thankful for fear as a motivator, but it must be managed. You should also build up your faith in your company, your team, your customers and yourself as a founder and leader of a startup. Faith and fear cannot exist at the same level at the same time. When faith is high, fear is lower. Believe in yourself, your vision for your company and your team or partners. Use any fear as adrenaline. Turn it into a positive.
Becoming an entrepreneur is a bumpy ride with a lot of excitement and its fair share of trepidation that will motivate you to bring out as much courage you have to make the tough decisions, which are the right decisions.
You may remember your first year of high school or your first year of college; you had to make adjustments. Likewise, in your first year as an entrepreneur, you’ll have to make adjustments.
The following are a series of “survival tips” to help you in your first year. They may contradict some of your assumptions about your first year as an entrepreneur, but that’s a good thing. You should question your assumptions and ponder insights that have the long game in mind.
- Don’t act like a big company suddenly. You don’t need fancy offices or a $350 an hour lawyer taking notes at a meeting or a secretary in your first year. Conserve the money you have raised in your seed funding round. Focus spending on the most critical things to move the business forward.
- Don’t hire other people too fast. You may think that the first thing you do as an entrepreneur is hire a bunch of other people to do the work. But why would you raise $100,000 and then blow through it so fast hiring a bunch of people. Tip: you can use freelancers until you grow to a point where it makes financial sense to hire full-time employees.
- Focus on acquiring customers. Getting paying customers solves a lot of problems. Even getting one customer that provides great feedback and insights in your first year is a win. Raising money from VCs comes later, not in your first year.
- Work to stay healthy. Physically, emotionally, mentally and spiritually in your first year. Don’t forget to take care of yourself. You will be headed down a long, winding slope if you let yourself get exhausted, discouraged, downtrodden and upset all the time. Remember to laugh. Get some rest. Forgive and forget. Keep a positive picture in your mind of you overcoming challenges and building a brighter future.
- Follow up proactively with potential customers. Transition from a phone call or email to an in-person meeting as soon as possible. Build relationships. Build your network.
- Don’t hesitate in firing employees, when you do hire, who have a toxic attitude. If you do need to hire in your first year (rather than using freelancers), you should be quick to fire anyone who creates a toxic environment, which includes a negative attitude or playing office politics.
The struggle is part of the adventure. Learn from your mistakes quickly. You don’t need to let your ego drive you to make bad decisions, wasting money or biting off more than you can chew, figuratively speaking. With a little wisdom and a lot of passion for the work, you can survive your first year as an entrepreneur. And if you can make it past your first year, the odds of making it past the second, and third, and following year go up. Just stay focused and always deliver value.
So you need a technical co-founder? We all wish there was one standardized test or white board problem to be solved that would show you, in no uncertain terms, who is the best person to be your technical co-founder. But there isn’t.
Finding one involves exploration, trial and error, asking the right questions, and looking for the types of attributes and qualities that would be good for you.
The trick to finding a technical co-founder is that you will serve yourself best by selecting someone who doesn’t just want to work on a product idea, but, instead, the person wants to be part of something bigger.
This is an aspect that will help you differentiate between two or more technical people who all seem “good” or potentially “great.”
You may be gearing up to go to a networking event with many technical professionals; your plan is to meet 25+ people, then narrow your list down to 5 and then pick the person within a few weeks. This is likely not going to turn out well. You should give yourself more time.
For example, before you leave your current job to start a company, you could work on a side project with one or more technical people and see how it goes. You can always walk away after a side project; it will be harder to walk away after you have started the company, started raising money and have made a commitment. (You likely wouldn’t treat marriage in your personal life in such a rigid, short time-bound way. Why treat finding a co-founder in such a flippant way with a self-imposed deadline?)
Not only should the person be technical enough for your liking (whether you are technical or non-technical), but think about the importance of personality fit, alignment of viewpoints of the future, and underlying motivation. These factors come into play when you are looking to partner with someone. It is not just the person’s technical skills.
It is smart to partner with someone with emotional intelligence and resilience because you both will be riding an emotional rollercoaster together. You’ll want to gauge their psychological experience. Have they been through adversity at other companies? How did they handle it? How fast do they bounce back from setbacks or disappointments?
Here are four things to look for in a technical co-founder:
- Ability to figure things out, no matter how technically complex… all kinds of things, like an all-around athlete who can play multiple sports
- Ability to get things done… fast and accurately (whether programming or hardware fixes)
- Ability to communicate in simplified ways that translate the technical into the non-technical (not always at the top of the list for technical people, so that’s why you need to be patient to find the right person you connect with)
- Determination… and lots of it
You may be thinking, “well, I’ll just partner with an Ivy League grad and then everything will work out great.” Not necessarily, to be honest. The person may be extremely bright and very good at standardized testing, but he or she could also be so stuck in their ways that the idea of pivoting due to market changes or ever-evolving customer expectations may be something they would despise. In that case, you’d run into trouble later, for sure.
It’s better to partner with a technical co-founder who has flexibility to do technical work or oversee technical work based on market research and user feedback – a business-minded, customer-centric, technical professional who has some level of emotional maturity, resilience and humility. You won’t regret it.
Having a startup that fails is not necessarily the end of your entrepreneurial career. You can learn many lessons from your first failed startup. You should consider having a lifetime perspective around entrepreneurship. You do not need to link your entrepreneurial journey to a single company.
That said, we want to point out a few “lessons” that entrepreneurs have learned over the years. What can you learn from failure?
- Examine patterns of behavior. Look for what caused the failure. In the next startup, you can be more mindful of behavioral patterns, such as listening better, dialing back your ego, and becoming a better collaborator in general.
- Leave enough cash in the bank. Another thing that entrepreneurs have learned from failure is that it costs money to shut a company down. One should leave enough money in the bank account to close down the company. Know what the requirements are to employees and investors. It should be done in consultation with an experienced lawyer.
- Before starting a startup, validate that you can make money. Many startups do not validate in the early stages that their idea will actually make money. They have a great idea but don’t know how to monetize it. Then after blowing through millions of dollars, they realize that they had never really validated whether their idea would make money. Learn from their mistakes.
- Keep partners and competitors close. Startups have found that when they fail, they would have benefitted from staying closer to the competition. They could have sold their company to a competitor. Or they could have had stronger partnerships that may have given them more time to try not to be a failure.
- Try to run the company as efficiently as possible. Because running out of cash is a main reason why startups fail (lack of investments in the company), you should be very responsible for the money spent. Don’t try to grow too fast internally. Okay, you will have to hire people, but you can focus on key hires and require strict justification for another other hires. Try to outsource as much as you can. Run your business as a lean startup.
When a startup fails, it’s easy to get into the “blame game” – blaming everyone else or blaming yourself. But if you see your time running a startup as a learning experience, you can choose to do a deep examination of what went right (i.e. fast and efficient product development) and what went wrong (lack of research to validate that the market size was big enough to make the product development worth it).
In addition, you may also experience different kinds of “failure,” such as a failed product launch. Your startup may still survive but you need to recover from the failed product launch. In fact, you could have taken an MVP (minimal viable product) approach and partner with target customers to perfect the product. If you wanted for the product to be “perfect” before launching, that may be why the startup itself fails.
Many options exist to prevent such failure. Your continuing education will help you. Talk to other entrepreneurs. Attend startup conferences and networking meetings. Listen to the stories. Embrace and apply the lessons learned.
Startups stumble, falter and, ultimately, fail for many different reasons. By raising your awareness about the reasons why startups fail, you can take up the challenge to do what you need to do to prevent your startup from failing. In this module, we will list out 16 reasons why startups fail.
A startup fails because:
- The startup runs out of money. Every startup has a “runway” – the amount of time that the money it has raised will last to fund operations – and, if the startup does not acquire users, grow its business, and monetize its offering, then it will sooner or later run out of money and have to shut down.
- The team breaks up. Co-founders get into fights and refuse to collaborate any longer. They go their separate ways. Key members of the leadership team jump ship, so to speak, with skills and capabilities critical to advancing the business. Dysfunction, usually due to ego, rips apart the leadership team’s core dynamic to be productive.
- The startup fails to make a product that users actually want and are willing to pay for. This goes back to a key fundamental: understand the target customers (users) and build a product that they find valuable. The importance of this basic action cannot be stressed enough. Not knowing and understanding the user is fatal for a startup.
- The startup only has one founder. This reason for failure may sound a bit strange because sometimes one person is credited with making a startup successful. But even at startups where a particular founder is famous or given all the credit, there is usually a team of co-founders. Investors also like a company with more than one founder because there is more continuity, and there are better checks and balances.
- The startup is based in a bad location. There are certain areas of the U.S. where startups thrive, with Silicon Valley being the best area for startups, followed by Seattle, Austin, Denver and New York. In these cities, investors are looking to invest; startup groups get together for networking; and top talent want to work and live in these cities.
- The startup chose to focus on a niche market that is tiny and obscure. The rationale may be that this will limit competition, but there may be a reason other companies don’t want to be in this market. There is no money to be made. Also, the startup may have miscalculated the market size or the ease of entry.
- The startup is trying too hard to imitate an existing, successful company. If customers want a product that an existing company offers, they will be less likely to buy your product that addresses the same need as the existing company with proven solutions. It is better to identify a specific, unsolved problem.
- The startup took a stick-to-your-vision approach. If you do not see and embrace better ideas when they come up because you have dug your boots into the ground and will stick to your original idea, you will likely fail. The hardest part is discarding your old idea for a better idea along the journey.
- The startup switches direction every week in a desperate hope to find success. Switching to new ideas every week can be equally destructive for a startup as the stick-to-your-vision approach.
- The startup has hired sub-par programmers and other mediocre technical people. A poor job of hiring the right talent comes back to bite a startup. It will show up in poor quality products.
- The startup chose the wrong platform. If a startup chooses to build its whole solution on a certain platform that eventually fades away, the startup itself usually fades away with it.
- The startup was too slow to launch a product. A hundred excuses may exist why a startup is slow to launch a new product, but the loss of time is a loss of user feedback and a loss of opportunity to continually improve the product. Not only will money run out, but the technologies and markets shift over time, and the startup misses the window of opportunity.
- The startup failed to do enough research of the business idea at the beginning. After a startup has spent hundreds of thousands of dollars, it discovers major flaws in its plans and in the way it views the market. This could have been avoided if better research was done early on.
- The company fails to take a step back and evaluate its prospects of raising money long before the need for additional capital becomes pressing. If a startup waits to start raising money when it is about to run out of money, it is usually too late. The wheels of raising money have to be turning well before that do-or-die point in the history of a startup.
- The startup raised too much money, too fast. Yes, this is a problem and it leads to failure more often than not. When the fundraising round is larger, the price is higher, and it becomes harder in the next round to raise the money that has been targeted. Also, raising too much money in the seed round, when money is abundant, can give a false confidence that raising money in Series A will be just as easy. On average, out of 100 startups that raised seed funding, only about one-third are successful raising Series A funds.
- The startup lacks an exit strategy. It just continued on year after year, just getting by. It lacks a way to get acquired after it grew. This is why you sometimes see a startup seemed to hit it big for a short time and then they cannot sustain it, and they don’t know how to exit at the right time to make money for the investors. In this case, it eventually runs out of investment and are pressured into bad decisions that don’t usually end well.
Educating yourself about the startup journey will help you avoid making these same mistakes. Or if you do make some of them, your continual learning will help you overcome them before they become fatal for your startup. Your awareness will drive you to take faster action.
The “why” is more important than the “how” when it comes to talk to investors. Telling investors why a startup will make money (more on the side of vision and mission) is more important than just telling them how you will make money (i.e. the mechanics of it).
Consider Starbucks as an example: Before it became a global behemoth, Starbucks was a small Seattle chain. Its new CEO, at the time, turned that into a worldwide household name by convincing investors to put money into this company that would disrupt the way people think about coffee. It wasn’t just about drinking coffee; it was really thinking and perceiving about the entire coffee drinking experience.
In a sense, investors were pouring money into Starbucks because of the “why.” Although the coffee business was not that much of an appealing business, given the prevalence of grocery-sold coffee, but it was through focusing on the “why” – the reasons why Starbucks would make money (lots of it) that the CEO was able to take the entire brand and company far beyond its revenue model into a global phenomenon that is worth billions of dollars today. You will advance further, faster if you think this way as an entrepreneur.
Another example is Robinhood, an investing app. Back when it launched, there was fundamentally nothing unique or different about the back-end platform that Robinhood was pushing out, especially compared to all other trading platforms, which had robust data reserved, huge user bases, and much more advanced technology. However, Robinhood was able to become a unicorn and is worth well over $1 billion today because it was able to capture the millennial generation.
Robinhood had been able to raise money from investors by telling them they would be the one platform that captured the millennial generation for investing by making it easy (and free) to trade. In effect, they raised lots of investment by focusing on the “why” they would make money (by earning the trust of the millennial generation), rather than on the “how” (their technology and app interface).
What’s your WHY? You should know your why. You should also be able to convey this why to any colleague, customer, or investor. Your why is what will turn your idea into something that may one day change the world.