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5 Crucial Lessons for Newly Funded Startups

Mladen Š.

2020-09-01

5min

Marketing

You’ve got funding! Congratulations! Statistically, 25% of venture-backed startups succeed in the long run. What do CEOs of these startups have in common?

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1. Get the first 10 customers

At first glance, this advice is quite simple. Sell your product or service to the first 10 customers. This is the only way you can show that your idea can be a lucrative business. In other words, from the first 10 customers, sales expansion can lead you to the next 100 customers and onwards. The crucial question is how to achieve such expansion. Usually, a lot of startup companies spend their time and resources on website creation or logo design, which are their first steps. Unfortunately, this leads to the absence of time for prospects search. Even though the aforementioned are extremely important for representation purposes these do not automatically bring you the customers. Two best ways to start attracting customers are reaching out to your immediate network and (a more important one) hustling – phone work, qualifying prospect and product pitching.

Ask yourself these questions:

  • Is there anyone in your network who would like to buy your product?

  • Why would they like to buy your product?

  • Do you have any pre-existing customers from another business that would be interested in your product?

These questions will give you vital information and first insights in your sales which can further help you down the road in your quest for the first 10 customers. So get out there and sell.

2. Be Frugal

Being frugal is not about sitting at the office trying to avoid spending money. It is about deciding what is crucial for your company at this stage and getting the most bang for your buck. For example, that new espresso maker does look great and coffee is superb, but it’s probably better to make sure all your developers have dual monitors and all the hardware they need. Ok, that one is easy, but there are more complicated dilemmas:hiring locally or outsource in order to build your product. Right now, covid-19 situation makes that one a no brainer:outsource, since you cannot have an in-house team anyway. But we would argue that is true regardless of social distancing rules. When done right, outsourcing means you will get an experienced team that can hit the ground running in one month for half the price you would spend if hiring locally.

This can sound almost silly, but the main job of any CEO is making sure that the company does not run out of money. As soon as you’re broke everything shuts down completely. It’s a terrifying reality of being a startup founder. But that is what you’ve signed up for :) Spend money wisely and make sure that every investment gets you one step closer to your goal.

3. Build the machine

In every startup your first job is to build the machine — the product that will attract customers which will generate the revenue. But you as a founder cannot build the machine, i.e. the product by yourself. What you must do is build a machine that builds machines. From just focusing on the idea you will find yourself hiring, leading, managing, etc. This transition will be peculiar at first as it is for everyone else, but you can make things easier for yourself. One often ignored reality of growing a lean startup is that scaling your company conservatively just in time is a core competency of success. This is by all means way harder without a good COO. For that reason, we highly recommend recruiting a co-founder or aspiring executive that would make a great COO. While this may not seem as a great solution it is well-documented that there is a trend of COO forerunning larger companies in corporate America. The operational reality of a startup is that growth is a requirement for success. As your market takes off, you as a CEO will be busy raising money, supporting sales, and setting direction. Your head of sales will be singularly focused on building your market. Your heads of product and engineering will be heads down delivering the product. A talented and synchronized recruit is a perfect colleague for the CEO in order to be focused on planning and executing to scale the organization for efficient market delivery. Another important aspect of an organization is creativity avoidance in terms of money-raising or company classification. A desirable company needs to look like every other company startup investors have seen. Money should be raised in the form of a convertible note or a preferred equity offering. Do a seed round, an angel round, and a Series A - do not skip a step even if you do not need the money. You need social proof when hiring employees, getting press, and raising money from investors.

4. Hire smart

Hiring amazing talent is probably the hardest obligation of the CEO since it requires a great deal of time and patience. After interviewing numerous people you may feel like being trapped under the ice. The biggest mistake you can make then is hiring someone just to get it done and fill the void in your company or deciding to save time by not hiring at all, for the sake of product building. Ideally, you can start modestly by hiring people that can take something of your plate and then gradually moving on to advanced hires. In addition, there are founders who can feel threatend by recruiting people more talented than them. This perception can be lethal for the whole structure of your company. A leader who has unlimited trust and faith in other peoples' expertise will define a healthy business climate and set foundations of success. One idea worth considering is to begin with allocating one whole month to hiring:“In the broader scheme of things, a month isn't going to kill you. And if you can get the people you need on board and ramped up, three months from now you'll have a completely different company.” says Rob Hayes of First Round Partners.

5. Be persistent

It will get tough, that much we can promise. Your startup will not always be the source of joy and happiness and you will meet the obstacles almost impossible to cross. But history is written by people who have found a way out of seemingly unsolvable situations. So when it happens to you:focus, do not panic and have faith that you will develop an answer. Give yourself enough time to deeply rethink the problem and make sure you understand what happened and why it happened. Consider all possible options and make sure you discuss it with people whose opinion you value. Make an informed decision, the best one you can make at that moment, then act. If it doesn’t work, try something else. You will find the way.

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