I was recently invited to speak to students involved in a local university’s entrepreneurship program. In preparing my presentation, I reflected on my startup experiences – the good, the bad and the ugly.
Truthfully, my experiences with startups were mostly very good. I was extremely fortunate to be part of the leadership team for two successful technology companies. I helped to steer them from the start-up stage through the entrepreneurial process and into rapid growth, and each was a great ride. Both companies had public offerings and were ultimately acquired by leading companies in their industry, which is especially remarkable given that 75 percent of all startups and 90 percent of all products fail, according to Harvard Business School statistics.
Why did these two companies prosper when so many others fail? Here are the top five characteristics of winning startups, based on what I’ve learned and witnessed over my career:
Solve a Customer Pain Point with your Product – Build a product that customers can use. Sure, it sounds simple, but you need to balance listening to your customers with keeping an eye on new technology. There’s an old adage that if Henry Ford listened to his customers they would have ended up with faster horses. This does have some truth to it – sometimes customers don’t know how new technologies could solve their current problems – but they do know the result they want. So, listen to their pains, and see if you can think of new ways to solve them.
Companies also need to balance adding technological features with usability. Most customers won’t use every bell and whistle that is included in the product, but they do want the product to be easy-to-use and intuitive. The bottom line is that you need to deliver a positive customer experience. An advantage I had with both startups was that as we were developing the right product at the right time, we had the ability to change course as needed – or to “pivot” in today’s terminology. The ability to be flexible and strike at the right point to continue market share and revenue growth was essential.
Tight Team Environment – It is vital to build a good core group of people early. The leadership team is important, of course, but every employee also needs to be part of an innovative and collaborative culture to help the company thrive. In the early phases of building a company, I found that the first 50 employees were a very tightly knit core group. But then we needed to scale and replicate that success, so that when we doubled our staff that same culture survived. Nurturing, training and retaining employees were fundamental elements to our success, as was confidence in the company’s leadership.
Leadership, trust and strong opinions are key elements that create a positive energy and personal commitment to the company and to each other. Sure, a strong opinion can sometimes cause conflict, but it exemplifies the passion of the company’s employees. As long as there is a forum for communication, this can be a constructive force for growth.
Relentless Customer Focus – In addition to ensuring that your product solves a customer pain point, you need to focus on your customers as your number one priority. One of the ways we listened to our customers was to bring them into our company-wide meetings to share their experiences. In our weekly “Pizza Meetings,” we discussed Product, People, Prospects and Profits to give the entire team the big picture, and customers would often join us. It was important to hear the good and bad about the product and what our customers hoped to do with our solution in the longer term. This had profound effects on the developers to develop more modules and tight code, because it let them see how their work directly affected the people who used our products.
Operations as a Company Backbone – Although it’s not always seen as the most glamorous function, Operations is the workhorse of any startup. From the beginning, we linked Operations into tech support, manufacturing, logistics, and tied it closely to new product introductions. That way, if a customer had a problem with a product, we not only fixed that problem, we tried to figure out why this issue happened and make an operational fix within the company so that the larger problem would be solved long-term. When small companies are growing rapidly, a learning cycle needs be put into place to feed “lessons learned” back into the organization. This prevents repeated errors and was a major factor for our success.
Start Selling Early – I can’t overemphasize the importance of establishing an excellent sales force, and the need to start selling as early as possible. At one company, we needed to get customers on board before we could get funding. It was really a leap of faith, but our early sales team delivered. We couldn’t get Series A funding until investors saw that we had customers. There was little angel investing at that time and early stage investors were very conservative. Therefore, our early focus on sales was critical to our future funding – as well as our revenue.
Although I started this post by talking about the successful exits of these two companies, it is important to build your business as a strong company that can stand on its own, rather than planning a specific exit strategy. The right product, a tight team and a focus on customers, tied together with strong operations and sales will be a solid foundation for success.