I always think the best way to learn how to build a successful startup is to build a successful startup. The second best way, in conjunction with the first, is to import lessons from those who have done it already.
Stuart Frankel is the CEO of Narrative Science, an innovative Chicago-based AI company that is a leader in advanced natural language generation for enterprise use. Founded in 2010, the company has expanded dramatically and is now making deep inroads into how to help enterprises better understand their own data to improve their human productivity.
"With Narrative Science our great challenge starting out was that AI was so early in its history...how do you build a business for a market that does not really exist yet," Frankel said.
Prior to Narrative Science, Frankel was at Proformics, which he joined as COO in 2000. This was a challenging period for startups, with a dead fundraising climate, and Frankel navigated it effectively to take the company from 10 employees and an unproven business model to about 300 employees and a successful exit to DoubleClick in the middle of the decade.
Asked what he felt were the three keys behind his own success as a serial entrepreneur, Frankel cited three major take-home lessons for new entrepreneurs.
1) Create a cultural atmosphere that embraces the core mission.
"Particularly for us at Narrative Science, pioneering a new market, we had to recruit true believers from the start," Frankel said. "When you think about bringing in new employees, from Day 1, they have to fit the DNA of the company. I look for grit, resilience, and unrelenting optimism on my team. 90% of mistakes that kill startup companies - 90% of my own mistakes - are wrong hires.
From personal experience, I would concur. When I look at my own startups and investments portfolio, nothing has killed more of my startups than hiring the wrong people to execute on the vision - and they trying to fix it after it's too late.
2) Grow and evolve organically
"You have to have a vision for what you want your company to look like, but you can't just stay in your own mental box as you expand," Frankel said. "You have to let the company evolve organically - be proactive without stifling natural change and evolution."
3) Secure the RIGHT capital
"Investment is like a marriage," Frankel said. "You have to be thoughtful about getting the right value and cultural fit out of it."
As an angel, this is last point resonates very strongly. From my own perspective, 'money' is about 20% of the value of good investment. The other 80% is strategic advice, relationships, and the opening of markets to the company. An investment from the right source should be worth five times its cash value.