A decade ago I embarked on the daily grind of the startup. My company, Zinch (since acquired by Chegg— NYSE: CHGG), was hell-bent to change the way universities connected with high school students. We aimed to bring ease and simplicity to a market filled with ignorance and complexity. With visions of the impact we could have on millions of people who could discover the best university for their interests and potential, my co-founders and I sought advice and capital from the supporting system that prevailed in that day. How different the startup world was back then! Do you remember business plans (oh, the pain!)? And how many hoops you had to jump through to raise capital? Accelerators weren’t yet widespread (Y Combinator debuted in ’05, Techstars in ’06, and in our state local accelerator BoomStartup didn’t start until 2010), venture capital under management was half of what it is today ($28B invested in 2006 vs. $65B in 2014), and the advice given to us seemed so formulaic (“Write a business plan, go win a competition, give away the majority of your company to us, follow only known pathways, and let us govern your operations from our perch on high!”). Said another way, the journey of a startup was more arduous, less informed, and had both fewer mentors and capital support. But at the time, it was hard to have this perspective, because being an entrepreneur, leaning forward, being face-down in the grind…I believed that the people in the know knew truth–that the formula for success would work–and who was I (young & inexperienced) to believe otherwise?
Now fast forward in time to the present. I have hindsight for perspective, and I see that for all that has changed, nothing has changed at all. Startups still struggle, albeit in different ways. People who wield power and influence still claim to have the formulas for success, the truth that every entrepreneur should follow to success. Some of them still point startups to articulating a plan and raising advocates / capital as the goal. But this is not really the goal. It never was. Creating massive value, a function of enduring & executing on your plan, is the more appropriate measure. Statistics remain unchanged and still show that the vast majority of startups fail. There are still pitfalls and reasons to fail–even if you religiously follow the advice of your favorite podcast/author.
Another thing that has not changed is that despite the best formed plans (even those coupled with superb execution) challenges will arise for which there are no clear answers. The reality of this is so common sense it almost goes without saying, but somehow it is all too easy to lose sight of this fact as we chase thetruth evangelized by thought leaders that say “follow this and success will come.”
Last week a group of entrepreneurs assembled in Provo, Utah in a remarkable experience called StartFest. During one session, I shared my own story of the search for business truth: It was 2007 and my cofounders and I seemed to be on top of it all: Product had been taken from concept and design to production, and users were actually signing up! We had won 2 local business plan competitions and had an onslaught of interest in the business. We had bootstrapped our business on $120K of our own capital plus $40K that we borrowed from family, and at that point we were finally ready to raise equity financing. The local group of angel investors seemed to hold the keys to the castle (and a whole lot of truth). Off to the moon, right?
Wrong. Dead wrong. We received investment from them, and to our horror found out that the proscribed path of success was nowhere to be found. Instead, we struggled. And adding further to our misery, the investors who we had believed would descend to our rescue and offer path-altering advice, instead butted heads with us. We soon felt like the angry, rebellious sons of an overly aggressive father, ready to run away and never return home. Yet Zinch was ourhome, not our investors’! We had to own-up to ourselves, to not run away, but instead to give it our best and let the results (good or bad!) follow. This meant parting ways with our investors… whose money we had largely spent. We three founders huddled and decided to draw a line in the ground in the next board meeting, and to stay true to our decision to buy out the investors, come what may. The board meeting came and we stuck to the plan, sharing the strategy we had decided and our resolve to stay true to the direction we were heading. Upset and non-supportive, one of the investors, exclaimed, “If I could have my money back in this deal…” At which point we interrupted by agreeing that he could! We had anticipated this sentiment and had prepared the paperwork, which would return all of their invested capital plus 10% interest (not a bad return for 5 months!). Thus ended a painful period of unfulfilled expectations. Where was the truth?
Little did we know that the pain we experienced (which included going into the fullest possible personal debt to scrape up the funds to return our investors capital) would open up our own pathway to success. This came from a new set of investors, those who didn’t proscribe a chosen plan but instead helped us overcome the obstacles of the moment. These investors would prove to be all we could have hoped for, and the lessons I learned from them are driven deep into my psyche, to the extent that now I actively try to emulate them as an investor myself. Here are three key points I learned from this experience:
- Follow principle, not procedure. As an entrepreneur, you write the script. You are creating your own reality. You are creating your truth! So hold loosely to process and be a beast about the principles that govern how you do you.
- Get comfortable in chaos. For years (2007-2011 to be exact) I felt like every year I was dealing with a crisis. Death in the family, investor issues, founder conflict, company relocation, international expansion, you name it. And then one year (end of 2011 to be exact) I had a conversation with my wife that went something like this: “You know what, let’s just expect problems, in work and family, let’s just expect it. Then we won’t rattle or be surprised.” And so we did. And we rattle far less and take it in stride far more. That’s startup.
- Buckle up for the ride, but don’t be satisfied with the journey. Joy in the journey is overrated. Having an educational experience at the expense of investors and employees is a distant second. I’m not saying that you won’t learn in your journey, but I am saying that it can never enter your mind as an intended outcome. Buckle up for your journey, and be in it to win it. And if that doesn’t happen, be the last to come to that shocking surprise. Startups are about persevering. Be among the winners.
Here’s my point: there is no truth in building a startup. My problems wereunique, and so will be yours. Our issues had no formula or roadmap, and neither will some of yours. If there was a formula that worked, every would-be entrepreneur would adopt it. Startups are what they’ve always been—men and women creating their own truth. Go create your reality.
Photo cred: Bells Design