One great idea. No products. No employees. No customers. No money. Welcome to the first year of building your company. The decisions you make now in the course of building your business will help (or haunt) you for years. And, to make things even more exciting, as the leader of a new company you often make these decisions with very limited information or data.
In the first year of building OnDeck, our technology-driven small business lending company, we made plenty of mistakes. But the lessons we learned from them have been instrumental to our later success. Here are three big ones:
1. Figure out what you need to be good at vs. what you want to be good at
One of the first decisions you make in building a business is defining what activities you're going to do yourself and what activities you are going to outsource. The typical advice here is to outsource what is not essential to your core offering, or what someone else can do more cheaply and better than you. The problem is, you don't always know in the early stages what your customers will truly value and expect you to provide.
In our first year at OnDeck, we originally thought we could outsource our operations and customer service functions, so we could focus on building our small business credit analysis and online lending capabilities.
After contracting a firm to handle this work for us, we soon realized that lending was very operationally intensive and customer service was going to be an essential part of our value proposition, so we brought these functions in-house. Simply put, no third-party firm would service our customers as well as we would and our customers highly valued hands-on service. This required us to raise more capital, but the resulting experience for our customers and the control that it gave us was well worth it.
2. Hire athletes... and avoid criminals
We made both wonderful and terrible hires in our first year at OnDeck. The quintessential startup advice is to hire "athletes"--employees who can handle multiple functions and wear different hats. This is completely true. One of our first 10 hires came in to do business development, but proved adept at managing our numbers, and six years later is now the CFO of our (much larger) business.
One of our worst hires in the first year was hiring someone who interviewed brilliantly, and did an outstanding job in his first three months at the company. Thanksgiving rolled around, and I received a cryptic email from the employee saying that he had to have an emergency medical procedure at a local hospital and would need to take the next week off. When he didn't come back to work, we called the hospital and sure enough, there was absolutely no record of him being there. He was gone.
When we did our homework, we realized that this person had a history of issues that might have suggested something like this could happen. In this day and age, when a detailed background check costs less than $100, no company is too small to do them, and you will be glad you did.
3. Get your product to customers--and revenue in your pocket--as soon as you can
I have watched a lot of entrepreneurs over the years take way too long to make their product perfect, jamming it with features that they think their end user will want. Even worse, other entrepreneurs will pivot from idea to idea without getting customer feedback, leaving a wake of half-built products and wasted dollars.
At OnDeck, we went live with a minimum viable product relatively quickly in our first year, and while it wasn't pretty behind the scenes, it enabled us to start getting great feedback from customers (and revenue) early in our existence. One valuable lesson had to do with our customers' use of online banking technology. We had assumed that almost all small business owners would check their bank accounts online regularly, but we quickly learned that many still used paper statements, and so we had to build processes to support both preferences.
Our early customers gave us more than just learnings: When the economy collapsed in 2008 and 2009, we could point to real revenue that allowed investors to remain optimistic about our prospects. The vast majority of entrepreneurs are not building businesses that require years to launch, so you should focus on getting customer feedback and revenue in those first 12 months. And when you do, you will be in a greater position for success.