NY. Bestseller: The Startup PlayBook



Introduction The fact that I (Will) was essentially bankrupt wasn’t even the bad part. The bad part was I had to admit that my parents might have been right about what
a stupid idea joining a startup was and, to add insult to injury, I had to ask if I could move back in with them.


You see, as a sophomore in college, I was so convinced that the startup path was right for me that, against my parent’s pleadings, I quit school to join a fledgling company.
As far as I could tell, everything was going incredibly well, and I’d made a great decision—until the day the company announced it was folding. What ?
It didn’t make sense.
And, to make matters worse, no one could explain what caused the meltdown.
It wasn’t even clear if anyone really knew.
Despite the failure and with no idea why the company crashed and burned,
I thought I could do better.

So, I acquired some of the assets from the failed company
and created my own startup, DataWare Logic.
I was sure I’d find success where the last company hadn’t.
It didn’t turn out well.

In eighteen months, the new company was dead, and I went home with
my tail between my legs.
After two failed startups, I still had no idea what had gone wrong
or how either unraveled.

There were customers, computers, and contracts, but no more cash.
Not only was there no one to ask—I didn’t know anyone who had even tried a startup—but I didn’t even know what to ask.
No wisdom.
No knowledge.
No help. Starting a Company is Hard. Really Hard. Unfortunately,
this story is far from unusual.

The fact is, nine out of ten startups fail.
1 Yes, you read that right.
Only 10 percent succeed, and we think that’s being generous.
Some would-be successes are really just among the walking dead.
They haven’t failed yet, but they’re getting there slowly.

Others are surviving but can’t find a way to make money for their founders
and investors.
In our experience, when thinking about companies that have succeeded in all dimensions, the success rate is closer to just a few percent.

So, what do you do when you want to start a company and the odds are so clearly stacked against you ?
How do you ensure you are among the few percent who succeed when you don’t have the knowledge, experience, or help to take a new, fledgling company from inception to success ?

As with most things, surrounding yourself with people who have the wisdom of experience born from both successes and failures increases the odds of success.

The Startup Playbook is our personal how-to guide for building your startup
from the ground up.
In it, you’ll find a collection of the major lessons and shortcuts we’ve learned
that will shift the odds in your favor.


We’re sharing our tips, secrets, and advice in a frank, founder-to-founder
discussion with you.
In the following pages, we focus on the fundamentals you need to create
and run a successful business.

We provide a framework for how to think about the startup journey and specifically how to validate whether you have an idea that can be successful.

We also hit the major points—points that many books and advisors ignore—that you need to blend and balance to take an idea and turn it into a successful business.
We’ll share the nitty-gritty details that are often skipped over when talking about building a business.

Unfortunately, those details are often the ones that trip up entrepreneurs the most.

We both became founders in the early days of the tech startup boom.
Will co-founded his first successful company,
Viewlogic Systems, a few years after failing with DataWare Logic.

Will and Rajat met when
Rajat was starting NetGenesis in 1994 when Will became one of his first
angel investors.
While we certainly can’t make the claim that we’ve done and seen everything, we’ve learned an awful lot and enjoyed long, successful careers as entrepreneurs
and tech startup founders.

Between us, we’ve started over a dozen high-tech software companies, raised over $500 million in investment capital, acquired over thirty-five companies, had three of our startups go public, sold six of them, and we made a lot of money for shareholders.

We’ve also advised and mentored over two hundred companies and actively worked with venture capitalists (VCs), incubators, and accelerators to help launch many other new startups.

We’ve seen the other side of the startup world, the investment side, too.
We’ve directly invested in over one hundred companies and hundreds more through angel networks and venture capital funds.

We’ve done this work together and independently for over twenty years.
And yes, amid our successes, we’ve also crashed and burned.

We’ve failed at building companies and products, been a breath away from bankruptcy, and some days, we’ve wanted to walk away from the very
concept of startups.

We’ve had turmoil in our founding and management teams.
We’ve dealt with lawsuits, intense competition, and we’ve been blindsided
by market shifts.
As investors, we’ve also made bad investments and thrown good money
after bad more than a few times.

We certainly never wished for these scars, but we’ve learned so much from them.
The tips, strategies, and advice in this book are here to help you avoid
the mistakes we’ve made.
We make no bones about our bias.
We’re on your side, the founder’s side, and you’ll hear that perspective.

There is no doubt that venture capitalists, investors, and accelerators/incubators have great value in the startup ecosystem, but this book isn’t about their points of view.

We’ll tell you where our interests as founders diverge from those on the other side of the table—investors, bankers, advisors, board members, and others.

We mean no disrespect to these critical and important constituents in the startup process, but we feel the tribal knowledge of building a business is being lost.

We want to share with you the true, honest, and unabridged version of what it’s really like to start and grow a company—everything we’ve learned.

The real, uncensored truth isn’t a glamorous story.
Even the highly visible, successful founders everyone knows by name had a bumpy ride at many points along their journeys.
We realize this book probably isn’t the first stop on your journey to learn about how
to deal with startup challenges.

You’ve likely already encountered a staggering amount of information—some good, but much of it likely bad, incomplete, or biased.

The internet megaphone doesn’t distinguish between the expert and the poseur.
In fact, many legitimate experts (and there are many of them now) don’t trumpet their knowledge or success.

Most entrepreneurs are busy starting and running companies, after all,
and don’t have the time to share their stories.

Alternatively, many so-called experts who haven’t been founders, haven’t built startups, or haven’t succeeded at any entrepreneurial venture, will offer and even advertise their “advice” through blogs, social media, and any other outlet they can find. These are among the last people you need to be listening to.

Hopefully, The Startup Playbook becomes your startup manual—a manual you can read now and come back to time and time again to help you think through challenges as your business grows.

How This Book Is Organized

In Part 1: I Want to Start a Company,
we cover subjects many experts gloss over if not avoid entirely, like what it really means to be a founder.
In these chapters, we discuss the reasons why people become founders; common traits, characteristics, and habits founders need to have; and their must-play
roles in the company.
This section is designed to make you think, reflect, and consider whether becoming
a founder is the right path for you.

Hint: it’s most definitely not for everyone.
In Part 2: Getting Off the Ground, we move into generating an idea for a company, creating a business model, validating it, building a founding team—which we strongly favor, and the nuts and bolts of forming a company.

We can’t tell you how many mistakes are made at this stage.
Conventional wisdom says you need a brilliant idea to succeed—we’ll debunk that myth. What happens after the seed of an idea is far more important than the
idea you start with.

In Part 3: Funding Your Startup, we discuss what most founders incorrectly
think is the most important milestone on their startup path—raising money.
In our experience, it’s not.

Still, having money accelerates your efforts, which can be an important
component of your success.

In these chapters, we’ll walk you through the available funding resources and give you a way of thinking about what the best ones are for you and your startup.

We’ll discuss the process of figuring out how much money you’ll need,
how to develop a comprehensive plan for investment, and, ultimately, how to approach and close investors, including reviewing term sheets,
setting your valuation, and what to negotiate.

Our goal is to demystify the funding process and to add a realistic founder’s perspective to the venture-capital-dominated narrative you hear
about every day. Finally,

in Part 4: Running Your Company, we detail how to transform your vision and preliminary business model into a great business.
In these chapters, we offer you our secrets to building a product or service that resonates with customers;
how to create a killer sales and marketing strategy; how to identify and connect
with your target audience; and how to manage your business.

Successful entrepreneurs will tell you time and again that great execution
is crucial to success.
In fact, it’s the single most important factor in creating a successful company
in our opinion.

So, we’ll break down what that means into how you run your business including thinking about your culture, building your management process, recruiting top-notch talent, and creating momentum with your team.

In short, this section is the CliffsNotes® to running your business.
Our Assumptions The explanation of the startup journey is a complex one,
and we could easily get mired in exceptions and nuances.

Covering each of these at every turn would make this book thousands of pages long and really wouldn’t serve anybody.
While we’ll try our best to point out the exceptions where it makes sense, the following are some assumptions we’ve made to make the book easier to read.

Assumption #1: The startup process is linear.
We all know that it isn’t, but for the purposes of this book, we’re going to lay it
out in a fairly logical, step-by-step fashion.

The book will start with why you should create a company and what that company looks like, whether a person can and should be a founder, how a founder creates a business concept, the process of validating and starting the business, and how to bring an offering to market and then grow it.

Sometimes, those parts happen in a different order; often, they take place in parallel. Since each situation is unique, we’ll generalize a logical case.
We’ve written the book so you can jump around and read any chapter in any order.

If you’re reading it straight through, you’ll see that we take a complex process and make it linear for readability.
Believe us, we know it’s easy to get lost in the startup process since so many things happen at the same time.

Assumption #2: There is a founding team, not just one founder.
We see many individuals attempt to create and build companies alone.
They are at a huge disadvantage if they try to do so.
Well-rounded founding teams do far better.
They move faster, avoid more problems, and take advantage of more opportunities than individuals.

As a result, accelerators often only take on teams of founders, and investors prefer
to invest in startups with multiple founders.
This is why we believe that having multiple founders is the only way to go.

Assumption #3: One of the founders is also the CEO.
It can happen that an external CEO is brought into a company, but for the purposes
of this book, it’s a founder who plays that role.

We’ll explore that more in Chapter 12 to help you decide whether you should
bring in an outside CEO.

Assumption #4: Founders are the management team.
It isn’t strictly the case that the team is just founders at the early stages of a company.

We often see founders hire their first employees or part of their management team early on.

That being said, we assume that for at least a reasonable amount of time, the founders are also the management team and responsible for operating the business on a day-to-day basis.

This will help us illustrate some of the founders’ key responsibilities.
We will, though, actively discuss how and who to recruit to join the startup team, from executives to individual contributors.

Assumption #5: Products and services are the same.
Most of the principles we discuss in this book apply to companies that offer products as well as those that sell services.
To make things simpler throughout the book, we refer to the offerings of all companies as products.
There are some key differences between the two, and we will point those out where applicable.

Assumption #6: Incubators are accelerators.
We mention incubators and accelerators throughout this book.
While there can be differences between accelerators, incubators, and the myriad of other startup programs, for ease of reading, we call them all accelerators.

Who Should Read This Book ?
This book is written for entrepreneurs who are eager to start and run their first company.

Founders come in all shapes and sizes.
We think of founders as building at least three different types of organizations: local businesses, nonprofits, and startups.

The local business is a restaurant, dry cleaner, or home contractor with a geographically local customer base.
Nonprofits are clearly entrepreneurial and focus on a return to society rather
than a financial return.
Startups are businesses with aspirations to expand rapidly by creating a scalable
and repeatable model.

While The Startup Playbook is applicable to all three, it’s this final category, startups, where we focus most of our attention.
In addition to founders, this is a helpful book for the entire startup team.
It’s a window into how founders think about their problems and how to grow
their businesses.

Anyone from the management team to early employees to advisors can benefit from understanding the startup process.
Finally, if you’re just dabbling with the idea of becoming a founder and starting this journey, then this book can help you determine whether it’s the right path for you.

Let’s Get Started
This playbook is what we wish we had when we began building companies.

Hopefully, the pages that follow will give you a way to think about the startup journey and process in a way that works for you. Many founders fail because all they focus on is the product they’re creating.

Successful founders realize that it’s finding the right combination of their team, value proposition, distribution strategy, product quality, and the sales and marketing approach that makes a successful company.

We think of this as the company’s business model, and differentiation can come from any of the components that make it up.
Even if you do all of this right, as a founder, we guarantee you’ll make mistakes.
And, that’s great; it’s a part of life, and especially a part of business.
Those mistakes will fuel your learning and help you build a better business.
It means you’re pushing hard to figure things out.
Of course, there is no right way or only way to build a company.

However, there is one important underlying principle that should be followed.
We’re not being preachy about it, we’re just saying that it makes everything
else a lot easier.

Be clean and honest.
We’ve encountered people who cut corners in big ways, but that approach rarely works in the long run.
If you lack clean books and financial statements, it will haunt you.
If you decide to have the cheapest manufacturing, use bad parts, or outsource to countries that use child labor all in the name of saving money, it will haunt you.

If you create a fraternity house culture at the office, it will haunt you. If you aren’t focused on being inclusive with employees, it will haunt you.

All of this is bad business.
And, there’s no reason for you to build your startup under these circumstances. In this book, we’ll show you how to create a company with integrity and honesty
from the get-go.

We know you’re feeling intense pressure to succeed, perhaps believing that success will only be yours if you become that next unicorn that exits (via an IPO or the sale of the company) for billions of dollars.

The pressure you’re feeling is most likely driven by external sources, which define success as building that one gigantic company that will sell for $10 billion or more.

We urge you not to believe the hype.
For example, in the technology sector over the last ten years, 88 percent of the few companies that exited were bought or acquired for less than $100 million.2 A key perspective you’ll hear from us throughout this book is to figure out the right thing to do for your customers, your investors, and your business without getting fixated on the external narrative of the time.

Building a business is a powerful, long-term journey that is about more than how much money you make.
It’s an experience that can transform who you are and create a legacy for you and your family.

And, who knows, you may create something that even changes society.
Success is for you to define.
And, we’ll help you think through what that means for you.
Success to us has meant many things, and these have changed along the way.
We’ve built some interesting products that have changed industries
and created new categories.
We’ve returned significant dollars to shareholders.

And, we’ve built incredible teams where people have transformed their lives personally, professionally, and financially.
We’ve watched people who we’ve worked with go on to start their own
ventures—and that may be one of our most gratifying achievements of all.

Look, we’re not saying personal financial success isn’t a great achievement.
It is, and it’s damned better than the alternative.

We’re just saying there’s so much more you can get out of starting a company. Although we can’t and won’t guarantee that you’ll sell your company for millions of dollars after reading this book—no one can give you such assurance—we know this book will help to increase your odds of success. In the end, that’s all any founder can ask for: the best chance to take the seed of an idea, turn it into a much-needed product, and create a thriving company. Good luck building your business!

What Is a Startup ?
Can you create a high-growth startup by combining a bunch of small businesses
or what some people call local businesses ?
I (Rajat) tried to do exactly that in my third startup.

I was a co-founder of a company called Interliant that focused on acquiring
and integrating small web hosting companies.
In three years, Interliant acquired over thirty of these types of companies and tried
to combine them into one high-growth, scalable startup.

While most of the companies that we acquired weren’t startups themselves, our goal was to inject a startup ethos into them and their teams so that we could create one of the largest web hosting firms in the world.
In Interliant’s case, we took a nontraditional path to building a startup.

We created a very fast-growing company using individual building blocks that weren’t, themselves, startups.
We never felt confined to any particular startup model, which contributed to the fast growth of the company.

The Definition of Startup What is a startup ?
There is no agreed upon definition of what exactly a startup is.

Of course, the academics do their best to define it in a “scientific” way, but if you ask ten entrepreneurs to define a startup, you’ll hear ten unique answers.

A quick search of the internet proves equally unsatisfying.
Famed serial-entrepreneur and teacher, Steve Blank, says there are six different varieties of startups: lifestyle, small business, scalable, buyable, social,
and inside a large company.

3 In an article for Forbes, Neil Blumenthal, co-founder and co-CEO of Warby Parker says, “A startup is a company working to solve a problem where the solution is not obvious and success is not guaranteed.”4 Jan Koum the co-founder of WhatsApp, says a startup is a feeling.

5 Confused yet ?
We think of a startup as a high-growth company that is scalable, focused on continuously growing, and one where the founders develop an exit strategy that results in either a sale of the company or an IPO (Initial Public Offering).

This definition isn’t unique, but we see it as one that eliminates some ambiguity and that creates a better framework for thinking about the business.

A startup is a high-growth company that is scalable, focused on continuously growing, and one where the founders develop an exit strategy that results in either a sale of the company or an IPO.

Let’s break this definition down further.
Scalable. Scalability in a startup refers to its ability to grow—usually at a fast pace and over the long haul—and with minimal incremental cost.
This means a company has a large enough market or opportunity in a market,
the ability to quickly expand into that market, and then, eventually,
to generate ever-increasing profits.

At a minimum, scalability means there are enough customers in the target market who can purchase from the startup, and the opportunity is significant enough with each customer to build a large and expanding business.


Of course, what amounts to enough and large are in the eye of the beholder,
but a simple rule of thumb is that if there aren’t enough potential customers for your business to justify continuous growth over time (this is often referred to as TAM, Total Addressable Market), or it’s going to be too costly to get access to those customers, you probably don’t have a scalable business.

Remember your TAM isn’t just the size of the overall market you play in, but the actual size of the market you can reasonably address.
High Growth and Continuous Growth.

Growth is a core part of any startup.
If a startup isn’t growing, it will struggle to stay ahead of its competition, attract key employees, and get additional funding.
Most successful startups grow fast, especially at the beginning.

Every industry has their own definition of what high growth means, but according to research by the venture capital firm IVP, successful companies grow at about a 133 percent annual rate between $0 and $25M in revenue.

6 These are, of course, averages.
Keep in mind that a consumer smartphone app business, enterprise software company, and hardware device supplier, as a few examples, will all have different growth characteristics.

In the end, you’ll need to judge what high growth means for your startup, but it should be within the norms of what your successful peers are doing and what your investors are looking for.

Growth also changes over time. Growing by multiples per year is possible early on, but as the size of the business increases, it isn’t realistic to grow as fast. According to the previously mentioned IVP research, growth rates drop in later stages, down to about 73 percent for companies between $25 and $50M.

For startups, the quest for growth never ends.
Continuous growth remains one of the primary benchmarks of startup success.

Exit Strategy.
Our belief is that every startup, by definition, will have an exit at some point in time.
At the very least, the founding team should be thinking about selling the company, doing an IPO (Initial Public Offering), merging with another company, or finding another type of financially positive exit.

Regardless of the type of exit, the goal is the same: to get a positive return on the investment—their money and time—for the investors and founders.

It could be many years or even decades away from happening, but having an exit is fundamental to the very nature of a startup.

Creating a payday that represents a significant return for the investors, founders,
and the team is part of what makes a startup in the first place.
We could join others in the startup world and present an even stricter definition
of a startup, but we don’t think it’s necessary.

There are many types of startups and even more ways to implement them.
You might be asking why labels matter, or why you should care whether your company is called a startup, a local business, a lifestyle business, or anything else. Does the label actually change anything ?
Yes, it does.

At the very least, what you call your business affects people’s perception of it,
which, in turn, will affect fundraising and hiring.

Knowing what type of business your company is will also affect how you capitalize
the business, what expenses you take on, your financial model,
your go-to-market plan, and much more.

So, for us, the term startup is really shorthand for a specific type of business.

Startups Exist in Many Sectors
While the technology sector attracts the most attention, especially in the
media, startups come from many industries and sectors.

If you’re just beginning to think about a startup,
consider what type of company you want to start, and then open your mind to the opportunities in all fields and industries.

Some of the most exciting new companies in the last few years have been in existing industries and older markets ripe for disruption.
Uber is a case study in this.
It’s easy to point to Uber as a technology startup and, certainly, they are leveraging technology.

However, at its core, they are really just a service provider helping people get
to where they need to go.

That doesn’t sound startup-like, but it is.
And, who would have ever thought that the taxi industry was ready for disruption
or could support a high-growth business ?
Uber is building a valuable worldwide business in one of the sleepiest industries that anyone could imagine. Interestingly, many entrepreneurs are using Uber’s model and applying it to other markets and sectors.

Uber is just one of many companies we’re watching that have burst
onto the scene in a variety of non-tech sectors.

Here is quick snapshot of a few non-tech startups selling products:
Clothing (Trunk Club, Blank Label, Rent the Runway, and Peach)

Shaving/skin care (Dollar Shave Club, Harry’s, and Birchbox) Furniture
(Leesa, Burrow, and Casper) High-tech or not,
startups are disrupting just about every market, and sometimes it’s not only the products that they disrupt, but the way products are purchased as well.
Just think about an Amazon Prime membership,
and you’ll know what we mean.

We also see loads of service-oriented startups in markets like:
Grocery delivery, food preparation, and beverages
(Blue Apron, HelloFresh, and Drizly) Health clubs (ClassPass and Exhale Spa)
Travel (Airbnb, HomeAway, and Hopper) While each of these startups use technology, for sure, their customers don’t get too involved with it.

Instead, their customers see better delivery of a service than they could have gotten before these companies were founded.

Each of these companies fit our criteria for a startup—scalable, for sure, and trying to achieve and maintain high growth.

Since they have all taken money from outside investors, we’d wager some kind of exit strategy is almost assuredly part of their long-term plan.

These are just some examples of what startups look like today and what industries we find them in, but there are tens of thousands of other examples of companies operating in fields many people wouldn’t think of—from philanthropy to life sciences. This should inspire you.

You don’t have to deliver the next innovative technology to get going
in the startup world.
Think out-of-the-box about what market and industries can be improved.

When you do this, you’ve made the first step in launching a potentially successful startup.

While the definition we use for a startup isn’t necessarily universal, it has the key, common elements broadly understood by most people involved
in the startup ecosystem.

Why is this important ?
By understanding the definition, you can begin to comprehend what it means to build a startup, and it gives you a basis for thinking more about what the broad goals are for a startup company along with some of the challenges to achieving them.

Why Start a Company ?
I (Rajat) was a senior at MIT and started my first company with a group of friends. The World Wide Web had just been introduced, and it seemed like there was tremendous opportunity.

I jumped at the chance to start a business,
even though I wasn’t finished with college.
My journey to becoming a founder didn’t happen overnight,
but it didn’t take long, either.

I was fortunate enough to work for Intel during each of my summer breaks
during college.

While Intel was and still is an amazing company, I realized quickly that I wouldn’t have the opportunity to make a significant impact.

I believed I could do more, but in the confines of a large, well-structured organization, a junior employee would hardly be trusted with critical decisions and work.

I wanted to be challenged and thought I could do much more with the energy and skills that I had.

At the time, I realized my only option to create that work environment for myself was by starting my own company.

The Allure of Startups Many successful entrepreneurs have
become household names.

Their journeys and exploits have been written about and movies have put them on pedestals. Soon, we’ll have action figures of the most successful startup titans.

Can you imagine a Mark Zuckerberg or Steve Jobs bobblehead doll ?
With the intense interest in these icons and the companies they created, it’s easy to see why many people want to do the same thing.
Or, at least, achieve the same status.

That status was achieved only after a tremendous amount of work and dedication—most of this glossed over by the media.

Apparently, years of long days and nights filled with many successes and a reasonable number of failures don’t make for exciting stories.

In the end, those successful founders each had tremendous energy and passion for what they were doing, and this, along with some brains and a lot of luck, is what elevated them to their superhero status.

Without the curiosity, passion, and drive to accomplish their goals—the internal fire to fill a hole in the market, exploit an opportunity, to do the right thing for their community, or to do something no one else ever has—they would have never achieved their level of success or iconic status.

Nor will you.
Successful entrepreneurs are driven first and foremost by unrelenting passion.

They’re internally motivated to create something from nothing.
If you’re starting a company because you think it’s cool or fashionable or because you think you’ll make bags of money quickly or even make money at all, you may want to reconsider your motivation.

Think about it, Facebook took about ten years to go from inception to IPO.
We guarantee you that those weren’t ten easy years.

Of course, very few companies even reach Facebook’s level of success, and you probably shouldn’t plan on it.

But, less success doesn’t imply a shorter path unless, of course, you don’t make it.
Even if you find yourself among the 10 percent who do make it, on average, you’ll still need about seven years of hard work to get there.

7 And, that’s in tech; other markets can take considerably longer.
In our experience, planning for about a decade is the smart thing to do.
Being an entrepreneur can certainly be fashionable and cool.

But, those things won’t support you when your company goes off the rails for the tenth time or when things aren’t looking good in year five. And, the money, well, let’s just say you’ll pay yourself almost nothing—at least initially.

One survey of 11,000 founders discovered that 73 percent pay themselves
less than $50,000 per year.

8 According to that same survey, 66 percent of founders in Silicon Valley
pay themselves less than $50,000 per year, and a full three-quarters make
less than $75,000.

9 As we mentioned earlier in the book, there’s no guarantee you’ll ever become the next Zuckerberg or Jobs, not when 90 percent of all startups fail.

10 Any way you cut it, the chances of you making money are substantially higher when you work for someone else.

Not that any of this really matters if you have the startup bug.
True motivation only comes from within.
If you’re not working to build something you deeply believe in, then it’s not the tangible returns you receive that drive you.
As Frederick Herzberg, known for his work on motivational theory and management, said, “The bottom line is that none of these things [tangible returns] are motivators.

”11 Why Should You Start a Company ?
Becoming a founder and growing a successful company is hard work
(funny how we keep bringing that up, right ?).

We’ve noticed a pattern in those founders who have reached an exit milestone.
Many of them share a common set of reasons why they started their companies
in the first place.

Virtually all the reasons were deeply motivational on an individual level and were driven by a strong passion for what they were doing.

The reasons listed below are some of the most powerful that we’ve seen, and by many accounts, they give founders the edge when a likely but unexpected twist or setback inevitably happens.

As you read through them, ask yourself if they apply to you.
Do you think they will sustain you through the difficult periods during your startup journey ?
We encourage you to be as honest as possible with yourself when
evaluating each one.
It might also help to discuss them with someone close to you to validate your thinking.
I’m on a Mission

Some people have a vivid vision of how the world should
be in the future and they’re compelled to try and make it a reality.

Or, they have a vexing problem that just must be solved.
It’s a passion for shaping the world as they see it could be.

This may be a shift for mankind on a global scale, a smaller change that alters an industry or even a community, or perhaps it just solves a previously unsolved problem.
It’s the notion that you have an idea that must be unleashed, and you’re driven beyond fear to create a new world.

From our perspective, this is a prerequisite.
Being on a mission, regardless of how small or large, is what sustains a founder through the dark times, of which there will be many.
I’m Entrepreneurial by Nature Being an entrepreneur is more than a job title; it’s a way of life for certain types of people.

Just as many people who choose accounting as a profession have certain characteristics, so do entrepreneurs.
For one, there’s a sense of fearlessness despite risks.

It’s not that entrepreneurs are ignorant of risk, it’s more like they’re missing the gene that makes others feel worried.
At their core, these entrepreneurs are driven to experiment and to find new ways of solving problems, whether from creating a product or service or a company.

Their need to constantly learn and adapt outweighs the inner voice that tells most people to run and hide from a risky situation in the first place.

Entrepreneurs have an inner confidence and faith that if things don’t work out with their idea or company, then somehow, in some way, they’ll land on their feet;
they’ll rebound regardless of what happens.

They know that the next thing—an idea, a company, an opportunity—is around the corner. This confidence gives them the fuel to risk starting a company. When you have these attributes, it makes taking risks—of which there will be quite a few—more palatable and easier.

I Want to Be My Own Boss
Sick of being under the thumb of the Man ?
Some people do better when they aren’t taking orders or being managed
by other people.
These individuals don’t necessarily need to manage or be in charge of the office,
but they do need to be in charge of themselves.
Starting a company is a great way for you to have the autonomy and independence you need and crave.

Yet, if this is your singular motivation, you may want to question whether it’s enough without one or more of the other drivers in this list.
While this might seem like a good reason now, it might not be quite as motivational after five years of
round-the-clock worries.

I Want to Have a Big Impact When you work at a large company, it can take many years to learn the business, to make key decisions, or to have a significant
impact on the company or the customer.

In large firms (and many medium-size ones, too), your level of responsibility and ability to move up the ranks is often tied to your tenure with the firm and experience in the field.

Many entrepreneurs bristle and rebel against this approach, preferring to connect duties with performance.
As a founder, you get to skip to the front of the line.

(Of course, you also get all the responsibility and negatives of being in charge, too!) From day one, you can have a profound impact on the company.
You can make your work matter in a way that you can’t at larger companies.


I Also Want to Make Money
Don’t get us wrong, wanting to make money isn’t a bad thing.
It’s just that on its own, making money doesn’t consistently motivate successful founders—not when the sacrifices and challenges of starting and growing
a company are so high.

But, when you mix wanting to make money with some of the other reasons on the list above, then it becomes a powerful tool for success.

For sure, money may not buy happiness, but it’s certainly a nice reward.
We run into many entrepreneurs who think of little more than how rich their startup
is going to make them.

As we say, this can motivate you for a while,
but when you’re in year seven of your company, and you’re still struggling to reach profitability, venture capitalists won’t return your calls, and you have a new baby
at home, then what’s going to drive you to brush off the challenges and continue to charge forward with the same energy you had on day one ?
It’s not likely to be the prospect of making money, at least not by itself. •••

Starting a company can be a life-changing experience.

You can change the world and learn while doing it.
You’ll meet many people, potentially affect many lives, and maybe even make
some money or become famous.
While these are wonderful outcomes, the sacrifices you make when you’re building
a startup can be significant.

If, at your core, you aren’t aligned with the personal
trade-offs you’ll make when building your company, then success will be tough
to achieve.
But, if you can find a mission you’re incredibly passionate about—better yet, obsessed with—then that will become the fire you need to give
the startup a real chance for success.

If you’re considering starting a new company, ask yourself why.
What is your internal motivation ?
Do you share any of the same motivations that we listed above ?
Do you have other deep desires or goals that you can draw strength from when this path gets rocky ?
If you can find that inner fire, then go for being an entrepreneur.

If you can’t discover any strong motivating factors, then you may want to look for another path, another job, or another career to apply your energy to.

Am I Cut Out to Found a Startup ?
I (Will) am not a visionary.
There, I admitted it in print.
But, that just doesn’t matter when it comes to being a successful founder. In every company that I’ve co-founded, I’ve been part of a team that had at least one person with strong visionary skills.

And, that’s what matters. Vision is a critical skill for the team to have. It’s not critical that everyone has it individually.

I brought my own strengths to the founding teams I was a part of—strong cultural beliefs, management and people skills, the ability to drive execution, and a complete lack of interest in trying to do it alone.

My deep-seated competitive drive certainly helped along the way as well.
I have plenty of weaknesses when it comes to being a textbook company founder,
but I’ve always been part of a team that filled in for where I was weak.

Because I also made a habit of surrounding myself with people who are smarter
or more experienced than me, I learned along the way and kept myself from making the same mistakes too many times.

The First Question
You Should Ask Before diving into the basic principles of starting and running,
a company, we want to address a basic question that almost never gets asked,
“Are you cut out to be a founder ?”
Often, would-be startup founders jump into developing their idea and building
a company without taking a moment to reflect on whether they have the personality, discipline, and habits that will help them succeed at the endeavor.
We’re not throwing down a gauntlet here.

This isn’t a challenge to step up and be something that you’re not. We’re just recommending that you ask yourself honestly if starting your own company is the best choice for you.

Just because you want to start a company doesn’t mean you can or should, and it’s better to know this now before traveling too far down the path.
Yeah, we know.

You’re about to skip this chapter, because you think that questioning your entrepreneurial cred is patently absurd, right ?
But, hear us out.

Even if you’re totally equipped to do a startup, you may still learn something
about yourself in this chapter that will help you become even better at starting
and growing a company.

We’ll introduce you to the basic habits you’ll need as a founder—among them, working smart, being persistent, and focusing on the right things.
We’ll repeat the habits in this chapter often throughout the book.

If you take this to mean that we think they’re important, you’d be right.
Honestly, most people aren’t cut out to be founders, and few of them ever even try.

Think of all the people you know—college friends, co-workers, relatives.
How many of those people do you think could start a successful company ?
Not many, right ?
The long hours, emotional ups and downs, the extreme stress, and humbling experiences are difficult for most people to grasp and come to terms with, let alone actually live through every day.
Still, there isn’t one cookie-cutter mold for a successful founder.
They come in all shapes, sizes, and backgrounds.

There are no specific prerequisites to be a founder, including special degrees, education, or even work experience.
No Harvard MBA required.
We should probably mention a brief definition of a startup founder.

A founder is part of the initial team of people responsible for the creation of the idea, the transformation of that idea into a real plan to form a business, and ultimately, the execution of that plan—at least initially. Initially because you’ll soon add people to the team, including other key management members and, potentially, even a CEO (more on these topics later in the book).

A founder is part of the initial team of people responsible for the creation of the idea, the transformation of that idea into a real plan to form a business, and ultimately, the execution of that plan—at least initially.

Every founder brings a variety of skills to the startup as well as different personalities, core beliefs, business networks, and, of course, energy. In fact, by taking advantage of the differences in founder characteristics, the best founding teams are created.

Yes, we said teams, because while it’s possible to be a sole founder, most startups have at least two founders, and many have several. In our experience, startups that have multiple founders with a variety of additive skills have a higher chance of success than those with just one founder.

Paul Graham, the creator and founder of Y Combinator, a hugely popular startup accelerator, lists having a single founder as the first mistake in his article,
“18 Mistakes That Kill Startups.

”12 It’s not that you can’t build a company with a single founder; it’s just that it’s insanely hard and risky to do.
It also makes it substantially harder to get investors to back you
and accelerators to help you.

These entities want to hedge their bets, and teams of founders almost always represent a safer investment.

“At Beachwood Ventures, we’re rather opposed to investing in single-founder companies—that’s not to say we won’t in circumstances where the founder is a repeat entrepreneur with past success, we just prefer a team with at least two founders,” says Adam Callinan, entrepreneur and venture investor.

13 So, circling back to our question at the beginning of this chapter:
Are you cut out to be a founder of a startup ?
Perhaps the real question you should ask yourself is
“Are you cut out to be part of a founding team ?”
The founding team is a group of founders working together at the inception
of a new company.
They have complimentary skills and knowledge, are all driven to make the startup
a success, and work together well as a group.

Think of all the people you know—college friends, co-workers, relatives.
How many of those people do you think could start a successful company ?

Not many, right ?
The long hours, emotional ups and downs, the extreme stress, and humbling experiences are difficult for most people to grasp and come to terms with, let alone actually live through every day.

Still, there isn’t one cookie-cutter mold for a successful founder.
They come in all shapes, sizes, and backgrounds.
There are no specific prerequisites to be a founder, including special degrees, education, or even work experience.
No Harvard MBA required.

We should probably mention a brief definition of a startup founder.
A founder is part of the initial team of people responsible for the creation of the idea, the transformation of that idea into a real plan to form a business, and ultimately,
the execution of that plan—at least initially.

Initially because you’ll soon add people to the team, including other key management members and, potentially, even a CEO (more on these topics later in the book).

A founder is part of the initial team of people responsible for the creation of the idea, the transformation of that idea into a real plan to form a business, and ultimately,
the execution of that plan—at least initially.

Every founder brings a variety of skills to the startup as well as different personalities, core beliefs, business networks, and, of course, energy.
In fact, by taking advantage of the differences in founder characteristics,
the best founding teams are created.

Yes, we said teams, because while it’s possible to be a sole founder, most startups have at least two founders, and many have several.

In our experience, startups that have multiple founders with a variety of additive skills have a higher chance of success than those with just one founder.

Paul Graham, the creator and founder of Y Combinator, a hugely popular startup accelerator, lists having a single founder as the first mistake in his article,
“18 Mistakes That Kill Startups.

”12 It’s not that you can’t build a company with a single founder; it’s just that it’s insanely hard and risky to do.
It also makes it substantially harder to get investors to back you and accelerators to help you.

These entities want to hedge their bets, and teams of founders almost always represent a safer investment.

“At Beachwood Ventures, we’re rather opposed to investing in single-founder companies—that’s not to say we won’t in circumstances where the founder is a repeat entrepreneur with past success, we just prefer a team with at least two founders,” says Adam Callinan, entrepreneur and venture investor.

13 So, circling back to our question at the beginning of this chapter:
Are you cut out to be a founder of a startup ?
Perhaps the real question you should ask yourself is
“Are you cut out to be part of a founding team ?”
The founding team is a group of founders working together at the inception
of a new company.

They have complimentary skills and knowledge, are all driven to make the startup a success, and work together well as a group. The founding team is a group of founders working together at the inception of a new company.

They have complimentary skills and knowledge, are all driven to make the startup a success, and work together well as a group.
Now that we’ve got you thinking about the idea of a founding team, we’ll discuss the roles that successful founding teams play in the company.

Roles of the Founding Team In the early stages of a startup,
the founders do everything.
Every day the founding team works from scratch to raise money, to develop the product, to create visibility, and to sell the startup’s wares.

The amount of progress made is directly proportional to the work the founding group puts in. If the product has problems, they fix them.
If there’s a sales call, the founders do the talking.
If there are no more Post-It Notes or coffee, one of the founders runs out to the store.
Yeah, founders do everything.

Eventually, you’ll hire employees to handle certain responsibilities,
however, there are four critical areas the founding team must cover:
Leading the business,

Creating a strong vision
Setting the culture Building the startup team Now, you may say,
“Well, surely I could delegate some of those things to the employees
I hire. ” Yes, that’s possible, but we’d argue, at least initially, the founding team
needs to own these responsibilities, and it’s likely the founders will own them
to some degree forever.
Each responsibility is just as important as another.

Leading the Business
One of the first tests of any startup is who is in charge.

When a group of founders comes together, this can sometimes be a significant challenge. Whether it’s easy to choose a leader or not, you need to have one—preferably a good one !
For the purposes of this book, we assume one of the members of the founding team is the initial CEO of the company.


Most often, that individual remains CEO for the life of the company, but sometimes one of the other founders takes that role, or a non-founder is brought in as the CEO by the founders and sometimes by the venture capitalists (VCs) funding the company.

Think about how Eric Schmidt was brought on by Google’s founders
and venture capitalists.
Eventually, one of Google’s founders, Larry Page, took over as CEO.

The transitions and roles worked out well for them.
These days, such transitions are in the minority, and a member of the founding team, generally speaking, remains at the helm of the company.

Of course, every company is different, but the view is that a founder has more passion and commitment to the business while understanding the problem space bettr.

We started with the discussion about the CEO because every team needs a leader. Note that leader is singular here.
Very few successful startups have co-CEOs or share leadership in any area.
When you choose to share leadership, two things happen.

Every decision becomes excruciatingly difficult, and investors will run and hide when they see redundant roles in the company.

Not only do organizations with co-CEOs frequently fail, but the fact that the team can’t agree on a leader is a bright red flag about its ability to make difficult decisions.

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