This is Part I in a series.
It’s hard to know if/when you should quit your day-to-day responsibilities to go all in on your startup. Whether you are a student or an executive in a tech company, we all struggle with this core problem: Is my startup good enough to quit what I have now? Unfortunately, too many people YOLO into a startup and hope for the best, while others wait for the perfect moment to get started.
The reality is that the only way to know is to do it - give it a try and see. However, there are things you can do WAY before you quit to even the odds and stack the deck in your favor. By making progress in these elements before your journey starts, you greatly level the playing field.
I want to get something out of the way right from the start: raising dollars from venture investors is not a good first step if all you have is an idea. Unless you are a super seasoned operator, the risks are simply too great. You may have a shot at getting into an accelerator if you have subject matter expertise, but raising venture dollars is going to be a tough bet. In addition, if you aren’t all in on your idea, why should the investors be? Venture funds get to make a handful of investments per year, and a founder who isn’t committed to the idea is an easy pass.
Think of this as a checklist, the more you have completed, the more you are likely to secure investors who add value to your journey. Venture is a risky business because there are always folks who are willing to make earlier bets. In some cases, elements such as a superstar team are enough to get an investment, but the goal isn’t to raise a round–the goal is to build a solid business for the long term. (It goes without saying that the terms of your round will be significantly better if you have more from the list below.)
I came up with 7 T’s - elements that you should have in your back pocket. The first part of this post will dig deeper into the first three: Team, Tech, and Traction. The second part will discuss Truth, Target, Time, and Trust. Let’s dig in!
Team: (People: early employees, cofounders, mentors, investors, advisors)
You need to have supporters. Whether they are cofounders, mentors, early employees, initial investors, or an unofficial board, you need people in your corner. These are your allies–folks that want you to win with your idea.
Starting something early is a team effort, and a team comes before the good idea. Talent is attracted to good ideas. If you think your idea is the next best thing since sliced bread, yet no one around you wants to join you, you should question that idea. Especially if you are surrounded by people smarter than you, you want their honest input in what you are doing.
Finding a cofounder seems like the first step, but that’s a HUGE commitment. Way before a cofounder, finding your allies helps you a great deal. They will push you to hone the idea, and it is way better to recruit someone from that group to be your cofounder, rather than hope that the first person you decide to work with is magically the best partner for your startup.
For instance, if your startup is in the food space, you should try to find an already successful food entrepreneur in the industry, preferably with a few successful exits under their belt. Share your ideas with them, and ask for their guidance and support. They likely have made way more mistakes than you, and can give you concrete advice on what to do, and more importantly, what not to do.
Their advice comes first, and if you find that useful, they will appreciate the relationship, too. It’s way easier to turn that person into an early investor or a powerful recruiting tool for their past team members.
At some point, you’ll need to start paying people. However, early on you need to be the missionary that gets others to believe. Find people who are as passionate as you are about the problem you are solving for your future customers.
Bottom line is this: it all starts with the people. You want to be part of an early cofounding team that shares this feeling: “Everyone in here is smarter than me. Everyone here is working harder than me. I need to step up to the plate to make sure I deliver.” Imagine if everyone on that team, in their respective fields, feels this way towards the others. This level of expertise feels like you are part of the avengers initiative.
Ps. Honestly, if you have a solid enough team, that is more or less enough to get you started… certainly enough to raise a preseed round to get things off the ground.
Here are some follow up questions worth exploring:
How do team members earn equity early on? How are you vesting it?
What are methods of receiving feedback with discipline?
What questions should you ask each other before committing to becoming cofounders?
How do you keep each other accountable, while respecting the boundaries of each other’s expertise?
How do you handle compensation when you have no funding or revenue?
How do you get someone to quit their job to join your startup?
Tech: (Product, means of delivering value to your customers.)
A product doesn’t make a business, but there is no business without the product.
You need to have a product that serves your future customers! I use the word tech deliberately. It doesn’t have to be fancy tech - if you are starting a cookie business, your oven is your tech. However, you need to be able to deliver value, or at least have a clear path to delivering value with technology and a product you understand.
The early version of your business should be able to deliver value without being fancy. Imagine making a painting tell a story, just by using stick figures. Imagine a melody, no more than a riff, waiting to become a song. This is critical, because no matter how much you plan, the moment your product hits the real world, it will need to change. It’s imperative that you get your idea out fast with a version that you aren’t proud of, just so that you can ask your customers about their experience. If you ask for them to pay, they will even be more honest.
Finally, this also weeds out ideas that you have no clue about. I hate to break it to you, but if you have never been involved with a hardware project, it's probably not a good idea to build a cell phone as your first startup. Being an outsider to an industry or a market can be an asset, but having no clear plan on how long it’s going to take you to develop an idea (or how much it’s going to cost you) is wasteful.
We can spend more time exploring the questions below:
How do you build cheap prototypes (both in time and money) that validate key assumptions on your idea?
What are effective ways to manage a technical team if you are a non-technical founder?
How do you avoid problems downstream by making effective product decisions in the early days?
How can you use the “jobs to be done” framework to ensure your product is inevitable?
When tech doesn’t work in the early versions of your product, how do you manage your early adopters?
Traction: (Early customers that pay a fair price for the value they receive)
You have a team, and at least a theoretical path to making a real product. Now you need sales. Most people wait until they have a “real” version of their product before they talk to their customers.
If there is one thing you take away from this post, it is this: There is nothing–and I mean nothing–more important than early sales to validate that you are onto an idea worth quitting your job for.
Whether it is a successful Kickstarter campaign, thousands in presales, folks signing up for pilots or early deployments, or hundreds of people on your waitlist waiting to sign up for your iOS app - you are onto something. First and foremost, it means that you will have a hungry group of incredibly motivated people willing to give you honest feedback.
This is invaluable because unlike your early customers, most people who want to support your startup will be nice to you. People you are already close to, people that love you, more often than not, aren’t amazing startup operators. I’m talking about your friends and family - it’s tempting to give feedback that lives on both ends of the spectrum. They are either:
Overly protective and want you to never venture out of the safe path,
Or they are overly supportive and want to give you a pat on the back, even when your idea is stupid.
Early customers don’t care about your feelings - they simply want their job to be done. Think how bad they must need your product. They are willing to take a risk with an unproven founder and a brand they don’t recognize. The fact that they signed up is an amazing signal. They are telling you that they have an urgent need that they are willing to pay to meet.
If you fail on your promises to them (i.e., miss your deadlines, compromise on features, deliver a buggy experience), they will let you know, immediately and effectively. I’d rather listen to my early customers than anyone else to give me product guidance.
There’s a clear art to how you do that. The old saying by Henry Ford is accurate: “If I asked people what they wanted, they would have said a faster horse.” (In effect, they would be right. A car is a faster horse after all.) I recommend the Jobs-To-Be-Done (JTBD) framework pioneered by Clay Christensen and Bob Moesta to interpret early customer feedback into a winning value proposition.
Above and beyond feedback, this is also your path to a salary. It’s way more reasonable to assume that your first paycheck from your new startup will come from a customer, instead of an investor. So work for it, and give yourself the flexibility that allows you to take a detour from the proven path.
Finally, early customers show that whatever means you used to get them can likely get you more customers down the road. Whether you are going to grow with your profits or an investor who can fast track you for a price, you will need a credible story on where your next set of customers will come from. This means more cash to grow, and more feedback to make a better product - all good things.
Here are other questions worth exploring as part of traction.
How can you create a trusted partnership with your early customers?
How do you price your product for the first time?
What are effective ways to get customer validation that aren’t measured in dollars?
Who should lead your early sales efforts?
What happens when your early adopters leave you?
Stay tuned for Part II in this series to read the read of the 7T framework on when to go all in on your startup. What do you think of the first 3 considerations? Let us know in the comments.