6 Secrets to a Successful Start-up
It's every entrepreneur's most pressing question: Is this company going to make it?
All companies need to have the basics: a solid business model, a viable market, and a brilliant product or service. But the most important-- and unpredictable-- indicator of success is the entrepreneur. Do you have what it takes?
Despite the popularity of 25-year-old Internet entrepreneurs, there’s no one template that guarantees greatness, says Rory O’Driscoll, a managing director with San Francisco-based Scale Venture Partners. "I've seen a 25-year-old serial entrepreneur run great a company and I’ve seen a 45-year-old with no entrepreneurial experience also run a great company," he says. "But there are certainly commonalities between those whose companies are successful."
Here, O’Driscoll and some of his colleagues in the venture capital world share their perspectives on the less tangible elements of start-up success.
1. Be flexible. Always. This encompasses both flexibility in your business goals and personal flexibility, which some entrepreneurs find harder to achieve. Could your company pivot easily if necessary? Could you adjust to new circumstances? More importantly, are you willing to alter your personal start-up dream if it doesn't match reality?
"Most business ideas fail,” says Bryan Roberts, a partner in the Palo Alto-based venture capital firm Venrock. "The successful companies are the ones that can take that initial idea and morph it one, two, or three times into a better version."
Fab.com provides one of the better-known recent examples of a successful pivot. The company, originally called Fabulius.com, was launched as a social network for the gay community. But the founders struggled to get a critical mass of users. After closing the site for three months in early 2011, they launched an entirely new company: Fab.com, a flash sales site featuring housewares from independent designers. Today, the company is valued at $100 million, has over 1.5 million users, and has raised $40 million in venture capital.
Your personal flexibility – or lack thereof – may be on display earlier, and more often, than you suspect. Venture capitalist Kathleen Utecht, of New York-based Comcast Ventures, recalls a recent pitch meeting in which an entrepreneur's first few slides were sharing information she already knew. "I knew what slide two, three, and four were going to say, so I asked him to move to slide five so we could learn what his product was actually about," she says. "He refused. He had this rigid idea of how his presentation should go. Huge red flag. How can I trust that you will evolve the company if you can't even re-order your presentation?"
2. Hire for work ethic, not just intellect. "Hiring someone smarter than you is always good advice, but I think leaders of successful companies also hire people who work harder than themselves," says Don Rainey, a General Partner with Virginia-based Grotech Ventures.
The entrepreneur is usually the first person in and the last to leave, Rainey says. Hiring other people who can match that passion can help give a young company the boost it needs. "I often see companies that [need to hire too many people] because they have to make up for the lack of work ethic in their existing employees," Rainey says. "Only hire people willing to roll up their sleeves with you."
3. Entrepreneur, know thyself. "Every successful entrepreneur or CEO whom I've met has been resoundingly and uniquely self-aware," says Rainey. "It matters because it's the key trait for a team building. They're aware of their weaknesses, and they create a team that fills in the blanks."
That's been one of the keys to success for 'wichcraft, a New York-based gourmet sandwich shop. Jeffrey Zurofsky and Sisha Ortuza founded the first shop in 2003 (with celeb chef Tom Colicchio as a third, silent partner). They now own more than a dozen 'wichcraft stores. The duo often speaks at entrepreneurial conferences about their unique partnership: Zurofsky is fast-talking and likes to take risks, while Ortuza is pensive and cautious.
"We are opposites. Every decision is considered from both sides," said Ortuza at a recent conference in his native Santiago, Chile. When the company was looking to open its first West coast location a few years ago, Zurofsky was ready to jump in as soon as they were able. Ortuza’s gut instinct was to first look at the mistakes they had made with the first location, including some supply-chain management misteps, so they could avoid them the second time around.
In the end, the duo decided to go forward with the expansion, and were better prepared than they would have been if Zurofsky had acted on his own. “We make better decisions for the business together than we ever would individually,” said Ortuza. “We each know our strengths and weaknesses.”
4. Willingness to restructure your team. While having a strong team is important, the line-up of that team can -- and often should -- change as the company grows.
"There's a difference between running a $1 million, $10 million and $100 million business. Each stage needs a different team with an emphasis on different skills," says Utecht. "When a leader can look at the team and make the--sometimes very hard--decision to restructure, it's an amazing thing for the company."
Even successful companies sometimes need to rethink their leadership teams and their reporting structure. In December, Facebook made headlines for a massive corporate restructuring. According to reports, the company, which was gearing up for its initial public offering, needed to bring more focus to their new priorities: mobile ads, product, and engineering. Their new structure reportedly requires each of Facebook’s top dogs (including chief technology officer Bret Taylor and vice president of product Chris Cox) to give progress reports directly to Mark Zuckerberg—whereas they previously did not have to.
5. Trust the customer. "A lot of times, a startup will create a product for an initial group of customers who love it, but then they discover the rest of the world hates it, and they won't change it," says Roberts. "Great companies listen to customer feedback." Even negative customer feedback should always lead to action: Entrepreneurs should either fix the product or rethink their target market.
Rachel Shechtman bases the entire direction of her brick-and-mortar store, called Story, on customer feedback. "The future of retail will be less about consumption and more about community," she says. Her customers help her find under-the-radar products and contribute to one of the store’s most unique features – a ‘theme’ that changes every four to six weeks. With each new theme, the store reinvents itself – new inventory, new look, everything. The first iteration sold products made by startups. In February, Story is selling love-themed products.
6. Have a slightly delusional passion—one that has nothing to do with money. True entrepreneurs are never driven solely by money, says Utecht. Instead, she says, "I like to see entrepreneurs who are slightly delusional about their companies. Delusional in a way that means they won't quit. They have to be reasonable enough to take feedback and be flexible, but none of that should shake their drive to create." It’s a difficult balance to strike, and just one of many necessary for entrepreneurial success.