Category: Entrepreneurship

Recently, I read a post about how entrepreneurs like to think that growth is readily planned and predictable. Then, an employee that had been in a hyper growth startup, said “no”, it’s not the planned growth that everyone thinks. Rather, it’s like striking oil and the resulting mad dash to take advantage of it as quickly as possible.

Here are a few thoughts on planned growth and striking oil:

• Consumer-oriented startups are more likely to strike oil and achieve hyper growth, but more entrepreneurs will be struck by lightning than achieve this level of growth (read about the Beanie Babies story)
• Software-as-a-Service (SaaS) startups that have a human-lead sales process are going to be limited by the number of sales people, and thus growth can be much more planned
• SaaS startups with a self-service sales process that don’t require sales people can grow faster, but are more rare
• Growth planning is more realistic once a repeatable customer acquisition process is in place (read the four stages of a B2B startup)

Planning and thinking through different areas of the business is important regardless of growth rate (use the Simplified One Page Strategic Plan). Entrepreneurs would do to plan for growth and know that it’s much more complicated than it seems.

What else? What are some more thoughts on planned growth and striking oil?

We’re going through a small pivot right now and it helped me realize that pivots result in an awkward transition period. Internally, we know the direction to go, yet we still have a number of responsibilities and relationships that we need to continue to honor, making progress more difficult. Balancing new and old is a challenge.

Here are a few thoughts on the awkward transition during a pivot:

• Start selling the new vision right away even if the product isn’t going to be ready for some period of time
• Set internal expectations that it will be extra difficult for a period of time before results materialize
• Transition the marketing collateral to the new messaging as quickly as possible
• Make a plan to transition the customers that are no longer a good fit
• Educate partners on the new direction and set the appropriate guidance

Pivots are painful, especially when there’s the start of a real business already in place. When the new direction is clear, it’s much more costly to cling to the past compared to pushing forward.

What else? What are some additional thoughts on the awkward transition period during a pivot?

In sports, there’s this concept of “big momentum”, or “Big Mo”, as it is fondly called. Similar to the idea of being in the zone, Big Mo happens when the last few shots turned out well and now there’s more confidence for the next shots. Just like with sports, Big Mo has a presence in the startup world. A few big sales wins come in, engineering makes a major breakthrough, and suddenly it feels like the whole organization is executing at a higher level.

Here are a few thoughts on Big Mo:

• Look for Big Mo patterns and find ways to keep it going
• When Big Mo comes, acknowledge it companywide and celebrate
• When Big Mo goes, recognize the new normal and keep pushing forward
• Use Big Mo as a talking point when recruiting, selling, etc

Recognize Big Mo the next time it comes along and reflect on how it impacts the organization. Big Mo is real and powerful.

What else? What are some more thoughts on Big Mo in startups?

Once a startup achieves a certain scale and growth rate, they’ve hit what’s known as escape velocity. From Wikipedia, escape velocity is the “speed needed to break free from the gravitational attraction of a massive body, without further propulsion.” The idea is that the startup has so much momentum that they can’t be stopped. Only, there isn’t a specific size (e.g. $25 million in recurring revenue) where this happens. Rather, it has to do with a combination of size (revenue and customer count), growth rate (many SaaS companies achieve scale but then the growth rate plummets), and market dominance in their segment (a smaller player dominating a fast-growth market is often better than a bigger player in a slow-growth market).

Here are a few benefits of escape velocity:

• Prospects bring them into every deal, almost like an incumbent, even though it’s a greenfield market
• New product functionality becomes the market standard, and other competitors are constantly responding
• Investors place a premium on these firms and they often trade at a much higher multiple than their competitors
• Press and media often cover the top player in a market more than all the other players combined
• Growth is only limited by the growth of the overall market

Escape velocity is one of the ultimate goals for an entrepreneur. Once achieved, nothing is slowing the company down.

What else? What are some other thoughts on achieving escape velocity as a startup?

As I sat down at today’s weekly Startup Chowdown, another Villager promptly introduced herself. We got to talking and she shared her story of wanting to join a startup and the process that lead to her new job. After the conversation, I started thinking about the benefit of meeting new people on a regular basis and how even with all this great technology, knowing a variety of people is still incredibly important. In fact, entrepreneurs would do well to make an effort to meet 10 new people per week, especially in the early years of a new startup.

Here are a few thoughts on meeting 10 new people per week:

• Figure out the events you already attend on regular basis and how many people you normally meet there (e.g. two events per month, like the Atlanta Startup Village, and seven new contacts per time)
• Attend at least one new event every month and continue to grow the circles of connections
• Decide on an area of expertise where you’d like to improve your network (e.g. sales people, software engineers, etc) and ask friends for introductions
• Use LinkedIn to track how many new connections you earn for a given week or month

Meeting 10 new people per week will add tremendous value and should be on the short-list of things for entrepreneurs to do.

What else? What are some other thoughts on meeting 10 new people per week?

Recently I was talking with an entrepreneur that’s looking to raise a Series A round. He’s already raised a small seed round and has good momentum with recurring revenue in the low-to-mid six figures. As we got to talking, the topic of minimizing investor risk came up. Of course, investors want to make a huge return, but they also want to limit their downside.

Here are a few areas of risk minimization investors look for in deals:

• Product-Market Fit – Does the product truly work and have happy, paying customers?
• Repeatable Customer Acquisition Process – Does the team have a business model that’s working whereby it’s clear how an increased investment in sales and marketing will grow the business?
• Management Team – Does the team have relevant experience (sales, marketing, engineering, support, and operations) and a track record of executing well together?
• Unit Economics – Does the cost of customer acquisition relative to the lifetime gross margin of the customer make sense?
• Path to Profitability – If the market or fundraising climate turns south, is there a clear route to making the business profitable and sustainable?

Naturally, there’s no way for investors to minimize all the risk. Entrepreneurs would do well to address these areas when talking to investors and make them feel comfortable with the risks.

What else? What are some other ways for entrepreneurs to minimize investor risks?

Earlier today I had an interesting conversation regarding how to get more talented to people to start companies. The general consensus is that in places like Atlanta there are a number of smart, self-starting people with an entrepreneurial itch but who choose not to act on it. While entrepreneurship isn’t for everyone, I do believe there are a number of people that could do well if they gave it a shot.

Here are a few thoughts on encouraging more people to start companies:

• Figure out how to get more publicity and media about the local entrepreneurial success stories (the more people that see the person down the street be successful, the more likely they are to believe they can do it themselves)
• Engage with professionals that are already attending entrepreneurial meetups, but haven’t started a company, as it’s clear there’s an interest level
• Help professionals understand the existing technology clusters in town and explain that starting a company where there’s existing expertise can increase the likelihood of success
• Build more entrepreneurial programs into the local universities to highlight entrepreneurship as a viable career path (encourage students to create their own jobs)

Of course, the biggest barrier to starting a company for most professionals is being trapped in a middle class lifestyle that requires extremely hard decisions to unwind (mortgage, car payments, etc.) Regardless, we can do more to encourage people to start companies and help them succeed.

What else? What are some other ways to encourage more people to start companies?