I'm a little over two years into building Accrue, and I've learnt a lot about building an early-stage software startup. I'm writing this in hopes that my lessons are helpful to other (potential) first-time founders.
1. Startups are hard.
From the outside looking in, startups seem glamorous, perhaps even easy to do. In reality, startups are really fucking hard. Four years of University was the hardest thing I'd done before co-founding a startup. Running a startup is easily 1000x harder than that.
If you are considering starting a venture, please know that you're signing up for a never-ending chaotic emotional rollercoaster that (counterintuitively) gets harder the more successful you become.
2. Build with a co-founder or two
Again, startups are hard. If you do it alone, the difficulty goes up by another 100x. There are many levers in an early-stage startup — engineering, product, design, marketing, growth, fundraising, people and culture management, operations, etc. For your startup to do well, you must excel at wielding all these levers. Having a co-founder or two helps you to divide, conquer, and excel without becoming overwhelmed.
For example, fundraising is very distracting. You usually have to take 4-6 months to close a funding round, and to be successful, you have to be all-in on it. As a solo founder, spending that much time away from your business will cause stagnation. Having co-founders with well-defined responsibilities (tied to one or more levers) allows your company to keep growing while the CEO focuses on raising money.
Startups are also very emotionally taxing. The highs are high, and the lows are fucking craters. Having people on the same rollercoaster as you, who you can go to for emotional support, is incredibly helpful.
3. Build with a technical co-founder
In the early stages of a startup, you will be searching for product-market fit. That search involves talking to customers and rapidly iterating. If you do not have a technical co-founder and have to hire or outsource to iterate, it can get expensive quickly. Even if it weren't expensive, you'd have a higher quality product if it's made by someone with a lot of skin in the game.
It's likely that the first idea you set out to build won't be a hit in the market, and you'll have to pivot a few times. Having a technical co-founder helps pivot as many times as necessary to build something people want.
4. Making money is your goal
Make something people want, and then charge fairly for it. That's what the goal of a business is. Not fundraising. Not building a personal brand or anything else, really. Right from the get-go, you should be sprinting towards generating cash flow and profitability.
There are a lot of benefits to being a sustainable company — continued growth, flexibility, and peace of mind being chief among them.
5. Talk to your customers
If you intend to build a successful startup, your primary objective is to make something lots of people (aka a big market) want. You cannot do that without talking to your customers.
What jobs are your customers hiring your product to do? How can you help them do it as frictionlessly as possible? Each day, you must make progress on anything that ensures your product gets hired to do the job your customers want to be done.
6. What is product-market fit?
Product-market fit is when your product is growing rapidly, and the primary reason it's growing is word-of-mouth. If you're spending a lot of money on marketing to grow, chances are that you still have not found market fit, and you should not make the startup-killing mistake of scaling before product-market-fit.
Word-of-mouth growth is the perfect marker because it shows you've made something people want, and they are so delighted by how well it works for them that they can't help but share it with others.
7. Don't hire too much
This might be extreme, but you should have at most fifteen people at your company if you have yet to find product-market fit. Keep your team lean. Keep your burn low. Talk to customers and ship like your life depends on it.
Only when you've found market fit should you start scaling up to meet the demand. Scaling prematurely will most likely kill your startup.
8. Runway over everything, especially valuation
No matter how great your idea is, if you run out of money, it's game over. If you're raising money, place having cash in the bank on a higher pedestal than a high valuation. Cash-in-the-bank is tangible. Being a paper multimillionaire is not.
Raise enough money (and then a little more to cover nasty surprises) at a fair valuation — one that, by your next funding round, you can justify a 2.5x markup.
9. Be delusional
“A great company is a conspiracy to change the world.” — Peter Thiel.
You have to be delusional about what you're building because there will be lots of discouragement along the way, and delusion helps with powering through. This delusion does not mean you should keep working on something that does not resonate with customers. Instead, it's for when you're grinding on something resonating, but no one else but your customers see the vision.
10. VC analysts don't have sway
When you start talking to venture capitalists, ask each person you speak to what their role is. Here are the people you might be talking to, in order of how much weight what they tell you holds:
- Managing Partner/General Partner: The managing partner or general partner is the top role in a VC firm. They are responsible for managing the firm's overall operations, including fundraising, deal sourcing, due diligence, and portfolio management. They also have a significant stake in the firm's profits and decision-making processes.
- Partner: Partners are senior-level professionals responsible for managing a portion of the firm's investments. They are involved in sourcing, evaluating, and executing deals and providing guidance and support to portfolio companies.
- Principal: Principals are mid-level professionals who work closely with partners to manage investments. They are responsible for conducting due diligence, evaluating investment opportunities, and working with portfolio companies.
- Associate: Associates are entry-level professionals who support partners and principals in their daily tasks. They are responsible for conducting research, sourcing deals, analyzing data, and preparing presentations.
- Analyst: Analysts are also entry-level professionals who support the firm's investment team. They are responsible for conducting market research, analyzing data, and providing support in the deal sourcing and due diligence processes.
A VC analyst is most likely the first person you'll speak to at a VC firm. They might think you're the best thing since sliced bread, but you must always remember that they don't have sway. A general partner is the only person whose words you should believe, but even then, exercise caution.
11. Fundraising is not an achievement
Raising money is not an achievement, and it certainly shouldn't be a goal. When you raise money, it should be sobering. You have just raised the stakes for your startup's employees, investors, and even your customers.
12. Talking to investors if you’re not raising is a distraction
If you’re in build mode, just build. If you’re in growth mode, just work on growth. If you’re in fundraising mode, spend your time on just that. Talking to investors when you’re not raising money is, more often than not, a distraction. Sometimes, it’s even more insidious — it’s a complete waste of your time or an encounter that could leave you demoralized. You’d be surprised by how many VCs request meetings with founders so that it seems like they’re busy at work.