Subtle Mid-Stage Startup Pitfalls | Hacker News Reader

Subtle Mid-Stage Startup Pitfalls

foundersatwork.posthaven.com

162 pointsrdl24 comments

There's really nothing I've done in my career more demoralizing than talking to bizdev people. Even when we successfully sold a company, the experience of doing it was enervating. Doing it unsuccessfully, which is what happens most of the time, is like punching yourself in the face until you black out, waking up, and then doing it again.

It is everything that is bad about trying to raise from Serious Venture Capitalists, but amplified.

Do you mean corp dev? Very different than biz dev.

I don't think that's true as a general rule, but also super not worth arguing about.

Like most things on the internet ;)

"The more successful you become, the more haters you'll have." E.g. see Hacker News for any successful company

> E.g. see Hacker News for any successful company

I feel like pushing back on that a bit. Yes, HN has such people; it's a large community and envy is part of human nature. You could just as easily say "see any sufficiently sized group".

What HN also has, though, are commenters who celebrate success rather than envying it, and commenters who have been through this stuff and know a lot about it.

It's not a merely academic point. Anyone who comments on HN is part of it, so we're talking about ourselves.

Seconded. I don't see nearly as many negative comments here.

"Second, the media will only be interested in one thing about you: controversy. Because controversy equals page views. No actual controversy? No problem; they'll manufacture some."

Secret shut down today, and I think PandoDaily's coverage of Secret serves as a perfect example of this:

Secret founder doesn’t care if teenagers kill themselves, as long as they don’t cause a PR headache - By Paul Carr On August 1, 2014

Secret accused of being “too busy raising money to care” about teen suicide warning - By Paul Carr On August 3, 2014

Now we’ve seen Secret’s ugly soul, will investors act? - By Sarah Lacy On August 3, 2014

With bullying app Secret on life support, investors learn the risk of investing in assholes - By Paul Carr On December 6, 2014

Most of these headlines were complete with probably the most unflattering photos of Byttow they could find at the time.

That's not a great example; Secret was legitimately controversial no matter what journalists said. A dozen people in my feeds are celebrating their shutdown.

Secret was legitimately controversial, sure.

However, those headlines (in my opinion) were chalk full of hyperbole and amounted to a campaign of vilification.

I don't know that I agree, but hyperbolic headlines and vilification are different than manufactured controversy. The difference being that with the latter there's no sincerity.

I would argue that using such tactics to inflame an existing controversy constitutes the same thing, at least in spirit.

The notion of sincerity is nullified by the conflict of interest inherent to page views.

Not at all. Plenty of people were "inflaming" that controversy with no motive at all other than thinking Secret legitimately horrible. For it to be the same in spirit, the writer has to actually have the same spirit, a mendacious one. That is so far undemonstrated here.

Really great content.

One point though: does haters matter? Even if your company is the next Justine Sacco and the everybody hates you, does it really have that big an impact? Everybody hates Donald Trump, but he is worth billions.

It's much easier to say that from the outside than the inside. Unless you're a sociopath, you're wired to care about what other people think of you, and it takes conscious effort to not care when everybody says that you're a terrible person who's either stupid or evil.

The other big pitfall is that it's very hard to turn this not-caring property on selectively, so that you tune out the general negativity but actually listen to substantive criticisms. I've seen this bite executives frequently: they get so used to sticking to their guns because everybody regularly hates their decisions that they're incapable of realizing when they have actually, truly fucked up. If you run a startup and not a huge company, that can be the death of your company.

I think the solution lies in this quote I once read, can't remember who it was attributed to: "If we have data, let's go with data, if all we have are opinions, let's go with mine"

The idea being that when people back their criticism up with data, you should listen. When they're just throwing opinions around, you should stick to your guns.

> it takes conscious effort to not care

Plus conscious effort consumes limited energy, so even when those efforts succeed, they're depleting.

Haters are very demoralizing/depressing personally but more dangerously they say things that people start believing as the truth (and it usually isn't).

Is there any good way to counteract that?

> In the seed round investors are betting on the vision, but in the A round, they need to see results. They want to see rapid growth and they want you to be profitable or able to make it to profitability on the money you have in the bank. We’ve seen many companies get burned by this.

This is probably true in many cases but it doesn't seem to be a rule that's set in stone, especially for hardware startups. For example Lytro [1] has raised $50M in a Series A before they sold product. Same for Anki [2].

As a pure software company, Vicarious [3] have raised $55M in Series A and B rounds and I don't see a product on their site either.

[1] https://lytro.com/ [2] https://anki.com/en [3] http://vicarious.com/

Since I know the founders of the first two: those are hardware companies. A non-trivial difference in everything said here is that when you need to put down an order to build and manufacture X000 units, other people in the supply chain aren't okay with "We'll just pay you per item as you make them on demand". To a degree that's what the "unless you're the next SpaceX" from the post seems to be trying to encode: unless you're in a structurally high-cost business, you better not need tons of capital.

A common problem I've had is:

Prospective client: "We would like X, BigCompany did that last year."

Me: "Cool! We've been doing that since 2010, let me show you some videos, with timestamps."

Prospective client: "What! How come I haven't heard of you until now then!"

"Do they know they're competing in the wrong race, and that the right race is not office space or number of employees, but revenue growth?"

Exactly. I would add "... or amount of money raised, or number of customers, or networking events attended, or conferences spoken at, or product features added, or mentions in the press."

I talk about "After the Startup Curve" [1], because the emotional roller-coaster has really only just begun. Take all of the ups and downs from the early months, and then multiply them by years in business and dozens (hundreds?) of team members.

Most of the founders I work with haven't taken funding and don't have the high profile that brings on the haters, which can be advantageous in that it forces you to become a mid-Stage company doing what it needs to do: Ship Great Things.

What do I see as the biggest Mid-Stage Pitfalls?

1) Not Knowing your Business Model

Your Revenue is a formula - Value Proposition x Activity x Conversion. As businesses pivot, and as founders get distracted by all the other 'stuff' in business, their model can wander without them realising.

Always be clear about your Value Proposition - why people are buying from you, and whether there's enough margin and volume for you. Traction [2] is one of the best books I've read regarding activity - keep asking yourself, 'What will move the needle for me?'

2) Celebrating too Fast

Sustainable business growth, for most of us, isn't an 18 month billion-dollar acquisition. It's a constant investment, and it requires your ongoing attention even after it becomes self-sustaining.

At some point you will want to reward yourself for your achievements - energetically, take from the business rather than continuing to give to it. But make that 'Payback' too big and too fast, and things can collapse on you literally overnight. (And often over a 2-4 week period, it's that fast.) This 2 minute video touches on that [3]

3. Needing to be 1 Step ahead of the business

This manifests in a few ways over time. Early on, you're pitching to partners / channels / investors about what the business will be - so you're already one step ahead. But then you ship, you sell, you produce or deliver or whatever, and you become a cog in the business.

You need to pull yourself out and be the CEO, be 1 step ahead. For smaller, lower-growth businesses this can be part of your role, some time each week or month. Over about 24 staff (and less than that if you have big growth plans) it's a full-time role.

And that transition is hard, because it detaches you from the operations and the clients. As Jessica writes, you become a manager (and a leader and an entrepreneur). The business is going on a journey; so are you. And if you're not steering the ship, you'll sail right into a brick wall and find yourself seeking acquisition / funding with a giant "desperate" tattoo on your forehead.

I talked about this journey 'After the Startup Curve', a little more on this recorded webinar, if you're super interested [4].

[1] http://www.shirlawscoaching.co.uk/shirlawsresources/2012/3/3...

[2] http://tractionbook.com/

[3] https://www.youtube.com/watch?v=9UN6XUD7Tfg

[4] http://www.youtube.com/watch?v=xLsmN83Z0aU

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