By Ken So
Though Silicon Valley startups are often treated as separate from Main Street small businesses, the basic tenets of starting and growing a business are the same no matter what you’re building. As the founder of a business that serves both enterprise and everyday businesses, plus a mentor to new startups, it’s been a special privilege to be able to observe and learn from business owners from all backgrounds and walks of life. Here’s advice I find myself giving a lot to new founders that I think all entrepreneurs can learn from.
Shark Tank is a good show, but it’s just a show
Shark Tank presents itself as an idea of what it’s like to seek angel investing for your brand new business. If you’re actually looking to find angel investors, however, you might not want to follow any of the pitch formats you see on the show.
One thing to remember is that private angel investors are using their own money to invest. They’re not backed by institutional money (like a bank, or private equity firm). What it comes down to is being able to look them in the eyes, and have them trust and believe in you as a founder. Conversely, you need to be able to trust them. Often they’re not looking to invest in the business itself, but in you.
With institutional investors, it’s much more structured, and there’s usually a team of people. They’re often looking for the next unicorn. Are you going to be the next billion dollar company? Can you sketch out a five year roadmap to get there? If not, you might not want to seek that kind of VC funding.
Taking on debt to start a business is a risky move
In the early stages of starting a business, it usually doesn’t make sense to take on debt.
Now, while this is a good general rule of thumb, there are some exceptions. For example, if you have a large Purchase Order from a well-known buyer and you need capital to fulfill the order, there are PO financing debt options that you can tap into. You don’t want to lose the business opportunity because you don’t have the upfront capital to fulfill the order. Certain vendors also provide vendor financing upfront. The point is to try and seek other sources of funding first before tapping into debt, such as vendor financing, friends and family, grants, and customer prepay.
At every stage, make sure debt makes sense as an investment into your growth.
B2C or B2B? It’s a more important question than you may think.
Many startups that I’ve mentored don’t realize that building a B2B versus a B2C company is very different. There are a lot of implications for how the business needs to run. For example, the types of people you hire, who you hire first, the sales cycle, the product development process, who you raise money from, and go-to-market strategy are all quite different. It’s not quite as straightforward as “selling to businesses” versus “selling to consumers.”
Selling to large enterprises often comes with a much longer sales cycle (I’ve found, often three times longer than you might initially think). You also need to employ strategic sales tactics to influence the right people in the corporate food chain. Finding those key influencers and stakeholders can be a much more involved process than you may think, because a whole group of people needs to be bought in. With consumers, there’s typically only one decision maker.
Are you building something brand new, or a better version of something that exists?
This is an important question because it affects your build, marketing, and pricing strategy. If you’re building something that people already use and know about, then your build and marketing will have to be more about feature comparison. Your pricing strategy will have to be based on the market.
Build with your customers
This is important no matter what you’re building, but even more vital if you’re building something brand new. Without customers, you don’t have a business. Instead of building something and hoping a customer will buy, seek out customers and solve their problems. Which brings us to the next three points…
Landing the first customer is the hardest. Use every advantage you have.
In Silicon Valley, a lot of investors have a herd mentality. It’s very hard to find one that will make a bet on you if you have no track record. They need that first VC to go in first.
The same goes for customers. Think of a new restaurant — unless you know the owners or have been there before, you might not try it out until you see some evidence that other people are eating there. You need that first batch of customers to go in first. Friends, family members, or companies that you used to work with or for can all be your first customer. Then, use them to land your second, third, fourth customer (etc.).
Have a customer advisory board
This is a fancy way to say “beta group” or just a group of customers who love what you’re doing and want more. These are your super fans. Talk to them!
When we were first building Tillful, we sought out people who would give us advice on their pain points and how to address them. A lot of them were actually extremely open to contributing. You have to remember, it’s a little bit self-serving. Your customers want their problems to be solved, so they want to help you solve them.
Find your superfans
Paul Graham of Y Combinator has a good saying that “It’s better to have 100 people that love you than a million people that just sort of like you. Find 100 people that love you.” Similarly, Seth Godin, has the idea that you can do anything with 1,000 true fans. Your superfans will carry your business and help you sell to new customers. Find them, lean on them, leverage their good feedback, and build for them.
Older entrepreneurs, learn from younger ones
While it’s easy to see younger entrepreneurs as lacking in the experience department, they often have many fresh, new ideas. I’ve personally found their energy to be quite inspiring, and a good reminder that in the startup world, you have to move fast and keep competing for market share and mindshare.
Younger startup founders also tend to take greater risks. They don’t have as much on the line, so they tend to make bigger bets and be a little bit more idealistic. Many Gen Z entrepreneurs are also impact focused. Impact companies and impact investing is the way of the future — there’s a lot to be inspired (and encouraged) by.
Younger entrepreneurs, learn from older ones
For younger entrepreneurs, it’s all too easy to see older business owners as stuck in their ways, or jaded about what can be accomplished. However, the reason for this is that they’ve seen a lot of businesses come and go, and they’ve still survived, right?
A lot of younger founders lack repetition. They haven’t done it before — they haven’t built companies, and possibly haven’t even worked for companies either. They don’t necessarily know, or are focused on, how a company functions as an organization. No matter how good or original your idea is, without a functioning underlying structure, you don’t have a business.
Don’t rely on self-discipline. Be accountable.
If it’s just one or two people in your company, who are you answering to?
Some people have a very self-disciplined personality and can be accountable to themselves. However, this kind of personality is rare. If you’re not that person (which most aren’t), then having a coach or mentor can really help because they hold you accountable. In the early days, my co-founder and I had a coach through our accelerator program who really pushed us. Every week we had to set a goal, and then we had to stand in front of all the other startups at the accelerator and say what our goals were and what we had achieved that week. It was embarrassing if you hadn’t accomplished anything, and that really helped us stay accountable.
Successful founders put skin in the game
Founders who are more established or have worked longer usually have other options. If you have a bunch of well-paying jobs you could have tomorrow if you just called up a friend or ex-colleague, and/or a comfortable nest egg, it’s easy to throw in the towel if you run into a roadblock, and go back to a more stable option. This is actually very common. One of the most prevalent startup killers is optionality.
To hedge against this, it’s important that founders invest their own money in their business. It’s not just about investing your time, but your own money.
Every single business, whether it’s a construction business or a restaurant or a tech startup, is simply about information. The more information and knowledge you have on a certain topic that others don’t, the more people are willing to pay for that (assuming that your knowledge adds value). Mastery is valuable.
I like to use this analogy — if you try to drill for oil in different spots to find it quickly, you’ll never get there. But if you drill the same hole as deep as possible, eventually you’ll get there. I’m not an oil drilling expert, but the point is that you must have the patience to stick with something.
Many people go around drilling a ton of different holes, hoping to strike oil, but never go deep enough to really find it. The younger crowd tends to want to try a lot of different things, working to find that hack. I think TikTok does a little bit of disservice here. Really, good business is built on mastery, which is a long game. Being willing to stick the journey out will go so much further than any shortcut or hack, or even list of tips like these.