Lucas Carlson's Blog, page 8

Should I Do A Revenue or Growth Startup?

Dear Lucas…

A time-honored strategy among “super unicorns” (e.g. Google, Facebook, Twitter) is to get users first, then figure out how to monetize way later.

It is not uncommon for investors to consider “revenue later” strategies. I’m not saying we want to put all our eggs in this basket however, but what do you think about “users first” for my startup. Right now I’ve got 1000 users and adding a new user ever day.

—Mr. Growth

Dear Mr. Growth,

Users-first is a fine strategy if your growth numbers back it up. The trouble with the users-first strategy is that you can lie to yourself very easily. You can always say to yourself that you are just about to crack the growth code. The problem is that you may believe it, even when it is not true. You have to be brutally honest when evaluating your growth.

Look at Twitter, within their first year they grew from a few thousand users to 150,000 users. That mean that they doubled their entire user base every 2 months for over a year. That is astounding growth. That was in 2006. Now they are at 500M users. That means they have doubled 12 more times. That kind of growth is ultra rare and unpredictable—you can’t plan on having that growth. You can definitely build a company this way, you just can’t force a company to grow this way, so you can’t plan on it.

The reason you can’t plan to build a company this way is that you can’t be certain you will ever figure out how to unlock the magic behind that kind of growth. That kind of growth has more to do with luck than anything else. Sergey and Brin, Zuckerberg, and Williams all got very very lucky. To think that you can reproduce this kind of success is a common logical flaw called survivorship bias. From Wikipedia:

“Survivorship bias is the logical error of concentrating on the people or things that “survived” some process and inadvertently overlooking those that did not because of their lack of visibility. This can lead to false conclusions in several different ways. The survivors may literally be people, as in a medical study, or could be companies or research subjects or applicants for a job, or anything that must make it past some selection process to be considered further.”

How many Twitter clones have their been? Facebook clones? How many had astounding growth by any account, but just not as astounding as Twitter and Facebook. Those companies failed.

How do you get to 10M users/month? What is your plan to get to 10M users from the 1000 you are at right now? If you tell me any answer except a ton of luck, I won’t believe you.

So if you can’t predict success in a users-first strategy, how can you predict success in a startup? The only tried and true, many times proven method is by generating revenue. The reason is simple. If you haven’t hit your growth stride in a users-first startup, you can’t pay your bills indefinitely and eventually you are forced to give up. If you haven’t hit your growth stride in a revenue-first startup, the revenue you do have should be able to give you runway to keep experimenting until you get it right.

—Lucas

Money is a Rotten Motivator for Startup Founders

I find most startup founders fall into two camps:

those that are open and free with their pursuit of money
those who are ashamed of their desire for money

There is nothing wrong with wanting money, or even wanting lots and lots of money. The problem with most founders is that they see and treat startups as a fast way to get to loads of money.

Let’s say creating a company is like building a chair.

Someone sees a startup sell to Facebook for $1B in 18 months and says: I can build a chair and sell it for $1B in 18 months too. They proceed to find the crappiest pieces of wood they can, and as quickly as they can. They slap the wood together with some old rusty nails in the vague shape of a really fucked up primitive chair. When they are done, they wonder why nobody acquires them or whey no customers even want to use what they built. Finally, they give up and take a programming job at LivingSocial.

That’s why money is such a bad motivator for startup founders. You have to really love building startups for the sake of building startups. To stay in the game long enough to see a great outcome–you need motivation with stamina. If 1 in 10 startups succeed, then you have to be ready to do 10 startups in a row if you want to ensure a victory. You have to really love building chairs and be willing to build a bunch of crappy chairs knowing that you need practice to build a great one.

Wanting money is fine. Wanting free time is fine. Wanting financial independence is fine.

But startups are fucking brutal. They will chew you up and spit you out.

Bullshit: your hope for eventually making a lot of money is not strong enough to make it worth while doing 10 startups in a row
Bullshit: the bet that eventually you will have free time is no comfort when you have to lay off your staff
Bullshit: the idea of financial independence is not enough to get you through the hard times in even a single startup

Your motivation for doing startups needs to be much deeper than money if you want to have a chance to make real money in startups. You have to love the craft. You have to love building chairs for the sake of building chairs. It is not easy work. It is often not fun work. But it can be very gratifying work to build a startup (or a chair) that stands the test of time.

30 Tips For Aspiring Entrepreneurs

Do you want to start a company? Scared you will fail or be embarrassed in front of family and friends? I’ve been in your shoes. I spent years trying to dip my feet into starting a company before jumping in. Here are a few things I’ve learned along the way:

You are a bad judge of your own ideas – When picking a startup idea, seek the advice of Smart No-People in your life (as opposed to Everyday Yes-People). You can’t pull the wool over their eyes as easily, so you have to convince them with real traction. Here’s the important part: Ask them directly whether they they think your idea is worth starting a company for or not. People don’t want to tell you it’s a bad idea unless you explicitly ask them to honestly give you their feedback.
Startups are a long game – The only way to beat the 9 in 10 odds of failure in startups is by preparing yourself to do the best 10 startups you can. Successful startup liquidations take 7 years on average, so try to get your first 9 companies to fail in the first 3-5 years so you can move on to the next one if things aren’t looking good. That means that you could be waiting 30 years to get your big exit. That is a full career in startups. Steel yourself: this is a marathon, not a race.
A quarter of a watermelon is better than half a grape – When dealing with investors and employees, be generous with your equity. It is much more important to put together the best team you can than to keep as much of the pie as you can. And don’t forget that investors are part of your team. If you have an offer from a top-tier investor, you should usually take it without haggling much on equity.
You don’t need investment to start a company – Most investors will never invest real money until you have more than just a nice story. Go build your app. Get users. Get revenue. Do it on your own time and your own computer. The average amount you need to spend to get some basic traction these days should only be $2000-5000. Don’t know how to write code? Find a co-founder who does and convince him to partner up with you? Can’t find one? Try a different startup idea.
Your job is mostly storytelling – A startup founder is a storyteller. You tell stories to investors, to employees, and to customers. Most of the time, the stories are boring because most people are bad storytellers. You focus on telling people stories about your new features (features = brochure = boring) instead of focusing on the problems your product solves (problems = drama = exciting). Don’t tell stories about yourself and your product, tell stories about your customer’s hair-on-fire problems. Make it juicy and exciting.
Building a great team is even more important than a great product – It is harder too. More frustrating. More painstaking. Takes longer. But startups are about the people. You will want to cheat and hire contractors to get it done quickly. Try not to, an engaged A-player employee is worth 100x more than a temporary contractor. Team trumps product because team can out-live a series of bad products.
Don’t mix your day job with your startup – If you are doing a startup while still employed, you have to be extremely careful. First, don’t compete with your day job–that is unethical. Second, do all your work on your own personal time and on your own hardware. No checking in during lunch break. Nights and weekends only. Third, check with a lawyer to get advice local to your state. It sucks to pay $300, but it sucks more not to own your IP. You may want to even tell your boss in writing what you are doing and that you are doing it on your own time and your own hardware for a paper trail, but check with your lawyer before making that decision.
Hire a great lawyer – Don’t skimp. Don’t even try. No legal zoom allowed. Don’t do it. No excuses. If you are doing this, do it right. Hiring bad lawyers or using generic fill-in-the-blanks legal forms is always penny wise, pound foolish. One wrong move can kill your company down the line or even worse, you could be held personally liable. Never worth it. Trust me.
Your personal network is your most valuable asset – Many founders start with no network. That’s ok. Remember you are going to do this 10 times, you have plenty of time to build a network. The single most important rule about building a network is to give more than you get. Always, always, always try to find ways to help people more than they help you. The dividends on this behavior are hard to see at first, but pay off exponentially as you go along.
Have the tough conversations early – Co-founders should discuss up front how decisions get mediated when they don’t all agree. Does the CEO have the final call? Majority shareholder vote? Don’t save these conversations for when you disagree about something, it is too late. Same goes for employee and contractor problems. Don’t let bad behavior go unresolved because you are afraid of conflict, it will just make the conflict worse when it all comes to a head.
Money is a fickle motivation for a founder – Many founders get into startups to get rich. That’s as good a place to start as any. But the idea isn’t comforting enough for most people to last long enough to finally get rich. So if you want the best chances of getting rich, find a deeper motivation. Start appreciating the craft of startups.
The feelings of fear and anxiety don’t go away – It never feels like the right time to quit your job. The fear of failure doesn’t go away even after raising millions in venture capital. Trust me, I know this personally. And you can’t argue with yourself or reason your way through the feelings of anxiety. You have to become friends with your fear and let it power and motivate you.
Study those that have gone before you – The path of entrepreneurship is well beaten. Go read The Hard Thing About Hard Things by Ben Horowitz. Go read Like a Virgin by Richard Branson. Go read The Narrow Road by Felix Denis. Surround yourself with 5-6 excellent advisors who have been there and done that before. Give them stock in your company, anything from 0.10-0.25%, and if they are an excellent fit, even up to 0.5% equity.
Skip the incubators and accelerators (except YC) – You don’t need them. Don’t waste your time. Do the real work of building a startup yourself. Incubators are bullshit.
Learn the difference between urgent problems and big problems – Focus all your time on urgent problems. You should hire people to solve the big problems. It is easy to get carried away in everyday details: Which payroll service do you go with? Who will do your taxes? How to keep your books? These are big problems, not urgent ones. Urgent details are: How do you build a product worth paying for? How do you reach an audience of customers? What problem are you really trying to solve? You can’t hire people to solve urgent problems, they are for founders to figure out.
Don’t fall in love with your idea too early – Too many startup founders fall in love with their product long before the product should survive. They put it on life support, unnaturally keeping a bad product alive. But the founder has trouble seeing this truth because he is in love with his product. Don’t let this happen to you. Don’t get stuck on a product. Read the Instagram Story… if they had fallen in love with their first product, they would never have sold to Facebook. Fall in love with real traction, not with your product.
Not every company is investable – Why do you want to raise money? If your answer is: “to pay myself a salary and grow awareness of your company” then you probably shouldn’t even be trying to raise money. Raising money is best done after product-market fit, after your company is taking off. I know it feels like a chicken-and-egg problem, but you have to figure out how to get awareness of your company before you raise money. Money won’t solve your problems. Traditional marketing techniques don’t work for early stage startups. You need to create a great product first that doesn’t need marketing to grow.
Do the math early if you ever want to raise Venture Capital – VCs only invest in companies that could potentially go public within 7-10 years. That means growing to $100M/year in revenue. In other words, you need to be signing up 326 new customers a day who each pay $10/month every day for 7 years straight. That is incredibly unlikely and exceedingly rare. Venture backed companies deliver higher value and can tell a much more compelling story than “we will get a bunch of people to pay $10/month.” Figure out your viable path to $100M/year in revenue.
Buckle up, this could take a while – The difference between success and failure is usually tiny – almost indistinguishable. In golf, the difference between a hole-in-one and a flub can be less than a millimeter in distance. In startups as in golf, it often takes years of practice, repetition and mentoring to get it just right. Overnight successes are flukes and outliers. By the way, the average whole-in-one startup takes 7 years for a liquidity event (acquisition or IPO).
Your idea is worthless, execution is everything – Don’t be secretive about your idea. Your company is MUCH more likely to fail because of lack of awareness than it is from someone stealing your idea. You should be shouting your idea from the rooftops. You have to do everything you can to ignore your concerns of someone stealing your idea.
Beware of commitments – A lot of people will ask for quick commitments (VCs, customers, investors), and it is ok to say: “thank you but let me think about that for a night” or more simply “no.” You can get yourself in a lot of trouble quickly if you are not willing to say no.
Your reputation will last longer than your startup – Many founders often blow people off and treat them badly. They do this to their own employees and lower level employees at other companies. They don’t realize that the people they mistreat today could be VPs, VCs or M&A decision makers tomorrow. You have to bring your A game to every conversation you have.
Cash-flow is king – You must always always always watch your cash-flow like a hawk. How much do you have left? How long will it last you? Did you save enough for taxes? You should have these numbers memorized and keep looking at them frequently. Forgetting to watch cash-flow is like forgetting to breathe… a very fast way to die.
Nobody cares about your startup as much as you do – Nobody will promote it if you don’t. Where is your blog? Why are you still making excuses for not posting? How are people supposed to know about you? How do people find you? Nobody figures this stuff out for you if you don’t. And nobody can write blog posts as passionately as you will. Get off your ass. Get out there. Write. Convince the world that you can solve a problem.
Beware of following your passions – It is always good to scratch your own itch, but it is always better to get passionate about the success of a product than it is to be passionate about an unsuccessful product. Listen closely to Dilbert’s founder, Scott Adam’s advice on following passion.
Surround yourself with advisors – People who have been founders recently enough that it counts. Guys that haven’t been active founders since the 90′s often won’t have advice that is fresh enough to be relevant. Listen to their advice carefully, solicit it frequently… but in the end make up your own mind. It is good to have a mix of advisors: some who question your every move and some who motivate you.
Focus more on the hair-on-fire problem than your product – What hair-on-fire problem is your customer facing (must be articulated in one simple sentence)? How can you help them? The key to your success is your customer’s success. If their problem is not a hair-on-fire problem, then they are not going to be looking for a fire extinguisher. Make sure you are building a fire extinguisher. And be certain your potential customer’s hair is on fire first.
Nobody believes in you until you quit your job – I know it sounds harsh, but it is true. It sucks, but nobody takes you seriously until you are doing your startup full time. Especially investors. You can have a great pitch, but even angel investors will ask: are you doing this full time? If you say no, they won’t invest. This doesn’t always mean you need to quit your day job on day one. But when you think it is time to raise money, be prepared to quit.
Take care of yourself – Until your startup really takes off, you are your startup. If you are tired, overworked, unhealthy, under-slept, and disheveled… your startup is too. You can’t take proper care of customers unless you are taking care of yourself first. If you don’t take proper care of customers, they will leave and pay someone else who will take proper care of them.
Give weekly quantifiable updates to all stakeholder – Investors, employees, advisors and significant others should all receive a weekly email from you with key performance measures (KPMs) like users, signups, revenue etc. It does not have to be a long email–in fact, shorter is better. But it should cover what went well that week, what went poorly, and how you need help. Keep copies of these in Evernote for yourself like a startup journal, they are massively fun to look back on.

Did I miss any good ones? What are the best tips you have heard?

Don’t Believe Everything You Think

This week I am excerpting a chapter from The Craftsman Founder Manifesto.

Fear

There is a siren’s song inside all founders that can lead you into the rocky cliffs of depression. It’s an inner voice that frequently says mean and terrible things. It’s an inner bully:

“You are too stupid to start a company. Plus, your idea sucks and nobody wants to use it. How long have you been trying to get attention for this? Can’t you just give up now? Call it quits. Just do what everyone else does. Everyone’s laughing and making fun of you behind your back. Stop embarrassing yourself.”

And this is the tame version, the Rated-G version of what goes on in most minds. For those aspiring to be startup founders, this voice can be crippling. Many have stayed on the edge for decades, never making the leap to actually start a company.

The first thing to realize is that the voice is not you. Most people never realize this part. The voice seduces you into thinking that the thoughts are your thoughts–that the voice is your voice. The voice is tricky and clever and cunning. It sounds personal because it is in your head. But it is actually a universal song sung by commonplace demons we all share. Make no mistake about it: it is a shared experience, part of the human condition.

The second thing to realize is that the voice never goes away. You can’t turn it off and you can’t win arguments with it. If you are waiting to feel like it is a good time to start a company, you will be waiting forever. And the most screwed up part is that most of the things that the voice says are true. That’s what makes it so hard not to listen to.

But listening to the voice is like sitting in a movie theater: you often lose track of yourself and forget that you have the freedom to stand up and walk out at any time. The movie doesn’t stop playing when you walk out, just like the voice doesn’t stop yelling. It does no more good to argue with the voice than it does to argue with a movie screen.

In fact, if you argue with the voice or try to reason with it, you are often pulled right back into the theater seat. The voice wins because you forgot it wasn’t real. You forget that it is just speaking in a non-stop stream of empty and vile words. When you engage with the voice, you give it your power. When you argue with it, you make it real. When you actively suppress or try to ignore it, you are actually feeding it.

There is a siren’s song inside all founders. It is like a tape recording that is always playing. You can’t turn it off. You only have one choice: is it foreground music or background music?

A Craftsman Founder has tamed the voice–turned it into mere elevator music. He doesn’t fight it or suppress it. Instead he is motivated by the voice, not stifled by it. He allows the voice to power him instead of powering the voice. He uses the familiar sounds as a reminder to double check decisions instead of shooting from the hip. He also knows from experience that the louder the voice is, the closer he is to the finish line. It gives him strength and acts like a compass.

Can you hear your own inner voices? Listen, acknowledge, smile, and chose otherwise. You will have to do this every day. It feels unnatural and backwards, but this is a normal part of the craft of startups.

Like it? Want the rest? Sign up now for the Craftsman Founder newsletter to get your free copy.

How to Stay Away From Your Cell Phone

Do you feel tethered to your phone? Is there a particular time when you hate your habit more than normal? At the dinner table? During the weekends? At night in bed with your spouse? Driving? Do you have the urge to check your phone just reading about the urge to check your phone?

There is a fun game to try next time at the dinner table. Here are the rules:

Mentally count down 5-4-3-2-1 for every breath you take.
Always count on the exhale.
When you get to the number 1, tap your index finger twice on whatever is nearby (a fork, your leg, the bed, the steering wheel).
After tapping, start counting down again, 5-4-3-2-1.
When you notice you’ve lost count, smile and start at 5.

Here’s the most important part: Don’t be upset when you lose count, be grateful. Grateful that you noticed. Grateful to have a chance to start again at 5. This is a mini rebirth, a chance to be born again. It is the most fun part–the realization that you are alive. That you are here and now. Smile in the gratitude of being.

This little game is a gift. It lets you watch. It gives you instant freedom from your everyday habits. It gives you the space to see the instinctual urge to grab your phone. It allows you to smile at the urge and watch it pass. It gives you the gift of presence.

Try it. Don’t tell people what you are doing. Don’t brag about playing the game; doing so is almost a surefire way to lose count. Your spouse may notice you different that day. Your kids might play with you more. The colors of things may appear more vivid. You might hear the background music that you never noticed before.

Then tomorrow, when you realize you’ve forgotten to count for a while, just smile. Welcome back. 5-4-3-2-1

Can You Sign an NDA Before We Talk?

Dear Lucas…

I’m self-funding a startup right now, it’s my first company and I would like to get all the advice and help I can!

I’ve read a lot of conflicting advice on pitching style, but it seems that while most of them advocate the use of well chosen analogies some of them put more emphasis on differentiating and boiling the idea down to the essence (i.e. a one-sentence or elevator pitch).

I doubt either of these viewpoints is entirely correct and there’s probably no reason they couldn’t both be effective if executed well. I personally find analogies to be a bit cliché and unimpressive compared to a well phrased, simple and direct explanation.

I want to share more information about my company, but I’m cautious about sharing information with the right kind of people and I’d be more comfortable sending the slides during or after our Skype chat so that we can get to know each other a bit better; forgive the caution but I don’t want to give away any secrets until we feel comfortable working together. I could send an NDA but instead I think it would be better to do it less formally through direct conversation.

—Cautious Founder

Dear Cautious Founder,

I raised about $10M with the description: Heroku for PHP. Pitching has very little to do with style, it has everything to do with building relationships with people. VCs don’t invest in companies… people invest in people. Your pitch is only an extension of yourself.

Regarding “caution” and NDAs: I am happy to wait for you to feel comfortable sharing your idea with me, but your idea is worthless. It is all about execution. I could tell you about ideas I have had for secure email, or a news-as-inbox service, or dropbox for app developers, or crowd sourced security audits… but those are my passions, not yours. If they were your passions, your startup would be about one of those things already and it wouldn’t matter that I shared the idea because you would have already done it anyhow.

Ideas have almost no intrinsic value. Execution has all the value. You give yourself too much importance to think anyone is interested in stealing your idea, and if they are, all the better. Good competition can push you to succeed in a big way, you need the motivation. The better your competition, the better you push yourself to be. Look at Gates and Jobs, PlayStation v Xbox, Chrome v Firefox v IE, etc. etc.

One of the luckiest things you could happen to you at this early stage of your company is to find an opponent worthy of stealing your idea and give it to him wrapped in a bow. Ideas don’t thrive by keeping them secret and in a secure little lock box. That’s like trying to grow a plant without light.

You are very wrong to think that “people that aren’t on your side” are the things you need to look out for. The list of things you need to look out for is a long one, but “nefarious unscrupulous idea thieves” don’t even make the top 1,000 things you need to look out for. You are making up a boogie man and shooting yourself in the foot in the process. Good ideas are a dime a dozen. Bad ideas are even cheaper. None of the ideas matter.

Richard Branson’s idea was to start a record shop. What makes him different than the record shop owner that never did anything more than his independent whole in the wall? Was it a great proprietary idea that Richard kept to himself? No. It was execution. Read biographies of people you respect who have done this before, it is never the idea that makes the man.

—Lucas

A Surefire Way to Make Millions as a Founder

If you are looking for a secret, this post is going to disappoint you greatly. Go watch a cat video. There are no big secrets. There are no shortcuts. The trick is to fall in love with being a founder and dedicate yourself to the craft for 20-30 years. If I haven’t scared you off yet, keep reading.

Every year, a select few startup founders turn into something more. To see this happen is a rare and beautiful thing. These people fall deeply and madly in love with their craft. To them it is not just a career, it is a calling. And their craft is startups.

Most founders get into entrepreneurship for the money. Silicon valley is currently teeming with status obsessed, arrogant, egotistical startup founders just looking to get rich quick. They heard about the $1B sale of Instagram in 18 months. Or a friend who just raised $30M for a stupid idea. They think that they too can build an iPhone app and retire at 23. Full of greed and startup envy, they believe that not only can they do it… they are entitled to build a successful startup. Somehow they believe it is their birth right.

But a Craftsman Founder has different motivations and a different timeline. A Craftsman Founder is driven by a different beat than a Startup Founder. Craftsman Founders are not doing startups out of a love of money, they are doing it out of love of the Craft; they could work for 20 years doing what they do and potentially never see “Fuck You Money” and are perfectly at peace with that as long as they do their best to change the world.

Startup wealth is a natural result of the fact that great rewards come to those who change the world for the better. If you are trying to get rich quick, a startup is about as likely to do that for you as Las Vegas. Can you bet it all on black ten times and make a million bucks? Sure, it happens to some. But the only surefire way to make millions in startups is to tilt at windmills until they fall over. It can take a while, so get comfortable and buckle up.

Startup Founder: I will get rich in a few years.

Craftsman Founder: I will change the world for the better in my lifetime.

Startup Founder: Growth first. Revenue second.

Craftsman Founder: Team first. Product second.

Startup Founder: How can I invest $60k today and make $100k/year forever? (real question on reddit)

Craftsman Founder: How can I build a team of motivated, excited, happy people who do great work and are obsessed with delighting customers?

Startup Founder: Hire slowly (check references on resumes), fire quickly (conserve cash)

Craftsman Founder: Hire slowly (relationships you build last many startups), fire quickly (a bad egg is the fastest way to de-motivate an entire team)

Startup Founder: I’m an entrepreneur.

Craftsman Founder: I’m just a guy obsessed with a vision.

Startup Founder: I need to start a company because I only have so many productive years of my career left and I need money to retire and pay for my kid’s college.

Craftsman Founder: I need to start a company because the idea is so good I can’t not do it.

Startup Founder: Let me tell you about our company’s success…

Craftsman Founder: Let me tell you about our customer’s success…

Startup Founder: I usually work over 80 hours a week, I am a god.

Craftsman Founder: I usually work around 40 hours a week, I am a marathon runner.

Startup Founder: I am terrified all the time, but do a good job hiding it.

Craftsman Founder: I am terrified all the time, I harness the fear and it powers and motivates me.

Who are you? What are you made of? A common startup founder? Or maybe a rare craftsman founder? If you are still not sure, check how many of the 30 common startup founder mistakes you still make.

The Secret to Platform Building for Startups

A.K.A. Book Notes for Your First 1000 Copies by Tim Grahl

UPDATE: This Thursday (the 13th), Tim Grahl has agreed to give away 3 free signed paperback copies of Your First 1000 Copies to mailing list members of this blog. Sign up at the top or bottom of this page and you will receive instructions on Thursday for how you can get a free signed copy of this book.

How would life be different if you had 5,000 friends you could reach out to tell about your new venture? How would 15,000 fans of You, Inc. change your luck? Would it make it easier to launch a company and get traction with 50,000 person engaged mailing list? Sounds impossible? Most startup founders don’t even try. What if there was a book that gave you step-by-step advice on how to accomplish this feat?

You’re in luck, because just a few months ago, Tim Grahl wrote it: Your First 1000 Copies.

Have you ever read a book that applied so perfectly to your life even though it wasn’t supposed to? Two books that did this to me years ago were Zen and the Art of Motorcycle Maintenance and Zen in the Art of Archery. I have never been very interested in motorcycles or archery, but both of these books shaped my high school years profoundly. Books like this are rare and transformative. I found a new one in Your First 1000 Copies. It apparently teaches writers of fiction and non-fiction books how to sell 1000 copies of their book by building a platform of fans. Or does it?

I originally picked up the book because I have written a few books and am thinking about writing another. But while reading this book, my eyes opened widely. I thought: “What if I used the same techniques to build fans of my startup?”

I realized the strategies and tactics in Your First 1000 Copies lays out an amazingly powerful platform building concept applicable to startup founders and entrepreneurs just as easily as is does for authors.

Overview. Getting attention for your startup in today’s world is difficult. To many founders I talk to, they don’t even know where to start so they don’t even try. Start by reading Your First 1000 Copies. It lays out a simple 4-layer strategy for building a following of fans for whatever you are doing: a startup, a book, a movement, anything.

Permission. The first and primary strategy is permission for email newsletters. Quantifying a fan base is done by counting the people who opt-in to inviting you into their email inboxes. Email is still the #1 sales conversion tool by orders of magnitude. When you tweet 100,000 followers, only a small fraction of them will see it. When you email 100,000 people, a large percentage of them will see it.

Content. How do you create fans? Create fantastic content and distribute it widely and freely to as many people as possible with a call to action to sign up to get more free content on a regular basis. Easy to say, hard to do. What are you passionate about? What do you get obsessed with? What would your spouse or significant other say you can’t stop talking about? Why not blog about that. After you put it on your blog, re-post it on Medium and Quora for even wider distribution.

Outreach. What about Twitter and Facebook? They are great places to deepen your relationship with your fans, but not a place to quantify a fan base. You can’t send multiple email newsletters a day, but you can certainly tweet and post useful updates multiple times a day. Treat your social accounts like mini bite-sized versions of your long form blogs. Keep them helpful and interesting. Use the 20-to-1 rule from another great book I will review soon: Platform by Michael Hyatt. For every 1 tweet to promote your own content, do 20 useful tweets with links and quotes that are not self-promotion.

Sell. After you have cultivated your fan base, you can let them know about your new ventures, whether they are a new novel or a new startup. Once a fan is a fan, they not only won’t mind a tiny bit of sales coming from you, they will want it. Think of your favorite football team. Not only do you expect to see overpriced mugs with their logo for sale at their home stadium, but you want to buy stuff with their logo on it. That’s because you are a fan.

Creating fans is an overlooked and underused startup technique that can pay huge dividends. DigitalOcean has created fans using the same playbook as SliceHost, creating tons of free and useful unix tutorials. Buffer has created fans by posting useful blog posts every day and encouraging users to join their daily newsletter. Even Paul Graham built a powerful personal platform using similar techniques of giving away tons of free content, one of the original entrepreneur advice bloggers. Think you can’t do it? Don’t have enough time? Read another book I will be reviewing soon: The War of Art by Steven Pressfield.

30 Things to Stop Doing As A Startup Founder

Being a startup founder is hard enough, but making common mistakes can often lead to total disaster. Here are some common things to look out for:

Stop drinking your own kool-aid. – If you are not brutally honest with yourself, you can’t make informed decisions that will truly improve your company. You will hide behind excuses and spin stories to yourself explaining away why you have to keep doing the rest of the things on the list. You can’t believe all the stories you tell. You need a healthy dose of skepticism (not the same as self-doubt or lack of self-belief) to make real forward progress.
Stop being so busy all the time. – Does an early stage startup founder really need to spend time evaluating every HR alternative instead of focusing on customers and product? Some people think that being the CEO means being involved with everything. But what they are really doing is getting in the way and usually just slowing down progress. Surround yourself with smart people and delegate delegate delegate. There are only a few things you should not delegate in the early stages of a business like customer engagements, raising capital and finding product-market fit.
Stop working yourself to death. – As the founder, you often feel like the world is on your shoulders and you have to be working 100 hour weeks to set an example for your employees. Startups are a marathon, not a race. The average successful exit takes 7-10 years. If you don’t take time for yourself and take care of yourself, nobody else will. Relax, take breaks, take walks, take days off, get massages, pamper yourself. You can’t take care of others if you do not take care of yourself first.
Stop half-assing it. – On the other hand, I have tried countless times to build a startup idea as side projects, and it doesn’t work. I am not saying that it is impossible to start a startup on the side. I am saying that to make a real play at doing something investable, you are going to have to make the leap and do it full time sooner than you will feel comfortable doing so. It always works this way. Nobody will invest in you if this is not what you do all the time, no matter how good the idea is.
Stop hiding behind fake traction. – Founders often highlight what looks good and hide what looks bad. This is fake traction. Like: “All of my users love my product!” Sounds great, but if you only have 12 users, your sample size is two orders of magnitude too small. If you find 1000 people who can’t stop talking about your product, you are on to something big. Or another is “I have 300 people on my waiting list to buy my product!” Awesome, how many of them are willing to pay you for it up front? None? Haven’t even asked yet?
Stop counting your eggs before they hatch. – An investor who expressed interest in investing but hasn’t called back in a few weeks isn’t money in the bank. Close close close. Convertible notes aren’t perfect, but at least you can do a rolling close cheaply. A potential customer who says he may pay if your product did such-and-such is not money in the bank. Close close close. What will he pay for today?
Stop trying to get around paying lawyers. – You are running a complicated legal entity that may take funding from individuals and VCs, and could eventually IPO or be acquired. This is not a mom-and-pop business, LegalZoom and RocketLawyer are not good enough. Do it right. Don’t even try to out-smart yourself here. Expensive in the short term? Yes. Worth it in the long term? ALWAYS. Your future self will hate you if you try to save too much money here.
Stop trying to serve two kinds of customers. – You can’t do two things great. You don’t have the time, money, or resources to figure out the product-market fit for more than one product doing one thing. It is always so enticing to try to follow new opportunities that come up, but don’t fool yourself. You can’t be great executing two go-to-market strategies at once. The split focus will mean you will be at best mediocre, but probably terrible at both. If you really think the new opportunity is better, pivot the company and go all in.
Stop believing that your product is your company. – Your company is the value your provide to your customers, not your product. Often your customers couldn’t care less if what happens behind the scenes was done by the best Scala code in the universe or a thousands monkeys… as long as it works reliably and timely. Your customer value and your team is your company, not your product. Focus on making your team happy and your customers happy and all else will follow.
Stop avoiding your customers. – How long has it been since you last talked with a customer? On the phone or in person? Not to sell them stuff. Not to offer support. To listen. To build your relationship with them. To ask questions. Please don’t tell me it has been more than a week or two. A founder, and especially a CEO, has no excuse not to be in continuous communication with customers. Don’t have customers yet? Call your prospects.
Stop avoiding your team. – There are often times you want to curl up and cry, but a leader can not hide behind his desk no matter how much he might want to. A leader must be visible in good times and in bad. Especially in bad times. When a child is scared and hurt he needs his parents the most. Your team is your company, keeping them happy is one of your top priorities.
Stop pretending to be superman. – A leader doesn’t need to be perfect. Don’t pretend that everything is always fine and that you never make mistakes. You might think it makes you look strong and brave, or makes people look up to you. In reality, it comes off fake and inauthentic. You don’t have to flaunt your failures, but hiding them is unnecessary too. Just talk about them honestly and ask people how they think you could improve.
Stop being so secretive about your idea. – You may be scared someone will steal your idea. Don’t. Just don’t. Such a beginner mistake, not even an amateur mistake, it is just a total rookie mistake. You will never find product-market fit by keeping your idea secret until it is perfect. You need to talk about your idea. A lot. To a lot of people. Because honestly, your idea probably sucks just as much as you are secretly afraid it might. One of the reasons many founders are so secretive about their ideas is because they don’t want to be told it is a stupid idea. This is just denial. Don’t be in denial. Anyhow, the people you are so afraid will steal your idea are too busy working on their own big ideas to steal yours.
Stop falling in love with your idea before product-market fit. – “The counterfeit innovator is wildly self-confident. The real one is scared to death.” —Steven Pressfield. The more confident an early stage startup founder is, the more concerned I am for them. Of course they can’t just go around telling people they are scared to death all the time. But when you are an early stage founder and really in love with what you built, you will never seek the changes necessary to really make your product great. Read the Instagram Story to get a great example of a team who wouldn’t stop until they really found product-market fit. If their love of Burbn (predecessor to Instagram) had held them back, they would probably be out of business by now.
Stop ignoring marketing. – Even before you launch your product, you should be marketing. By marketing, I don’t mean press releases and media attention. The best marketing is word-of-mouth. Getting people to talk about you. You only get word-of-mouth by creating real fans. You create fans by adding real value to people’s lives. You can add value to people’s lives in many ways besides your product or service. You can write tutorials and provide useful blogging content that isn’t directly related to your startup at all, but related to your industry. Some excellent examples of this include Signal v. Noise from 37signals, DigitalOcean Tutorials and The Buffer Blog. Create fans, not just users. Most startups don’t even try.
Stop comparing yourself to other startups. – Startup envy isn’t a good enough motivator to get you through the tough times. Thinking that such-and-such startup was just acquired for hundreds of millions of dollars and you are so much smarter than them is not a productive thought. I have written about how to cope with startup envy before but it is better if you just prevent yourself from getting envious in the first place. In fact, it is probably a fantastic idea to stop reading Hacker News and Techcrunch altogether until after you don’t work for your startup any more.
Stop ignoring history. – Trying to raise venture capital for the first time? You are not the first person to do this, read as much as you can and surround yourself with people who have raised money recently (not 10+ years ago, within the last 2-3 years). Trying to build a payment company but never built a payment company before? Don’t try to rediscover everything that worked and didn’t work for others, surround yourself with advisors who have done it before.  Get introduced to Peter Thiel and Max Levchin. Read their biographies before you meet them. Pick their brains. Offer them stock in your new venture. Hustle smarter, not harder.
Stop procrastinating the launch of your company. – Procrastination is just giving into your inner demons. You don’t want to know if it will succeed or fail, but all you are doing is shooting your own feet and cutting of your legs and arms. Go read The War of Art, now. I’m serious. Steven Pressfield calls procrastination a form of your own personal ”Resistance”. The closer to launching your startup, the stronger the Resistance feels. You will make up excuses, you will do anything to put it off another week, another month. You can’t find product-market fit unless you have a product to try to fit with.
Stop launching too early. – Launching a “Minimal Viable Product” or MVP does not mean building the crappiest proof of concept and launch it as quickly as you can. Though “Lean” startups are a hot trend right now, many founders misunderstand what a MVP is. Build a product worth using, not a proof-of-concept. If an MVP was a proof-of-concept, it would be called POC instead. Build something that someone would pay for. This means making the product look professional and polished. This means finishing enough details that it doesn’t look like a fly-by-night endeavor.
Stop avoiding thinking about revenue. – Stop comparing yourself to Twitter and Facebook that didn’t worry about revenue until many years after being founded. Stop saying you are the next Instagram. I’ll believe you about as much as I would believe you told me you are holding a winning mega-lottery ticket. Growth is great, and great growth can be wonderful to experience, but cash-flow is king for almost all startups. Don’t tell yourself that you are an exception, you are risking too much if you are wrong.
Stop using your lack of funding as an excuse. – With today’s technology, you do not need to spend millions of dollars to validate most startup ideas. You can usually validate that people want to your product in some form or another, or even pay for it, with just a few thousand dollars. Haven’t built your product yet because you think you need funding first? Build another product that won’t cost so much. Haven’t started selling your product because you think you need funding first? Richard Branson built a billion dollar business without venture capital. You are making up excuses, go find solutions.
Stop just following your passion. – Passion is an energy that can power and motivate you, but easily blind you too. Passion can blind you to truth; it can deceive you. I have seen many founders blind with passion. Passion can blind you to know when you need to pivot or change your product. If the Burbn founders had been overly passionate about their first app, they would have never created Instragram. The trick is to get passionate about product-market fit, not about the product as it is today. Keep tweaking until you find the fit. You will know when you found it, there won’t be any doubt. ”When I was a commercial loan officer for a large bank, my boss taught us that you should never make a loan to someone who is following his passion.” –Scott Adams
Stop asking people to sign NDAs before discussing your startup. – Early stage startup ideas are not worth protecting because they almost all suck. Yes, your baby is ugly. Sorry, but it is the truth. After you raise a few million in venture capital and you are setting up a meeting with a large public company, then you can ask to put an NDA in place. However even then, you will have to sign their NDA (they don’t do special NDAs for every startup they talk to) and thus you won’t likely get much protection.
Stop lying to yourself when things are not right. – How long have you been telling yourself that the employee (you know which one I mean) is not pulling his weight and is causing more harm than good? How many times have you turned the other way hoping it will go away? STOP IT. DEAL WITH IT. TODAY. NOW. REALLY. You can’t afford to put problems off to the side at a startup. There is no time. Deal with your problems today, stop putting them off. Stop hoping they will resolve themselves. This is business, do your job. Deal with your mess.
Stop trying to get away without knowing your unit cost. – Unit cost is how much your service costs you to run per customer. “But I’m a SaaS, Lucas!” Stop it, you are a business, right? You have customers? You have service bills? Take out the fixed costs, then divide the rest of your service bills by the number of customers you have. Find out how much it costs you to support one more customer on average. Make sure you are charging your customer a lot more than their unit cost, otherwise you are a charity, not an investible business. You can’t start calculating unit cost too early. It is key to understanding cash-flow and profitability.
Stop believing that hiring sales people will cure your revenue problems. – Reality check: sales people don’t figure out how to sell your product. You do. The only reason you should hire a sales person should be because you don’t scale and you have been doing more sales meetings than you can handle lately. A founder/CEO doing sales calls? YES. Never done a sales call before? Doesn’t matter. Start now. It is your job to figure out how to sell your product. You need to perfect your sales pitch. You need to create a great deck that works. Once you know it works, you let a sales person shadow you until they can say the same things you do.
Stop postponing the calculation of your cost of user acquisition. – Cost to Acquire a Customer (aka CAC) is one of the most important metrics an online business has. If you watch Shark Tank, you know they always ask entrepreneurs for the number up front. It has been extremely well studied by top tier investors like Bessemer who have published great resources on learning about CAC. To calculate CAC, you will need to know your business numbers inside and out, which you should already know. If you don’t, then figuring out how to calculate CAC will get you asking the right questions. Hire an accountant to help you double check your work and assumptions. Like lawyers, don’t try to skimp here, you future self will thank you. Like unit cost, you can’t start calculating CAC too early.
Stop hiring contractors instead of employing great engineers. – It is so so so tempting to just say: “fuck it, I’ll just hire a part-time contractor to build out my prototype.” Don’t do it. don’t give in to the temptation. Hiring full time employees takes longer and is harder and can cost more, but the long-term benefits will always outweigh the short-term gains. A startup is not about the product, it is about the team. A great team will always out-do a great product. Hiring full time employees is about building a team. Hiring contractors is a band-aid full of dirt and bacteria. Startups are a marathon, not a sprint. It is more important to slowly build an excellent team, a motivated team, the right team… than it is to get your product out of the door faster.
Stop ignoring your Ideal Customer. – “All novels are really letters aimed at one person.” –Stephen King, On Writing . That person is called the Ideal Reader. Novels are subjective, not everyone will like any given novel, so you don’t even try to please everyone. You try to please your Ideal Reader. Stephen King’s Ideal Reader is his wife. Whenever he gets stuck, he thinks of his wife and asks himself: what would make her laugh/cry/pee her pants? When you get stuck, always ask yourself: Who is your Ideal Customer? Who are you trying to make pee their pants?
Stop picking such small problems to solve. – Will someone pay for your app that increases Twitter followers? Yes. Can you grow that into a $100M/year business? No. It is a small idea. It is a small market. There is nothing wrong if your goal is to create a small business that augments your income or might even support your whole lifestyle. But that kind of business will never get venture capital, nor should it, so don’t even try. You are wasting investors time and your time. A real startup’s goal should be to change the world for the better. If increasing Twitter followers is a temporary revenue-generating bootstrapping step to a next-gen marketing platform that improves the connection between brands and customers… that is a big problem to solve. That is an investible idea.

 

How do I lay people off?

Dear Lucas…

My startup has been growing steadily for three years now. I bootstrapped it and we are making over five million dollars a year now. I know we could be doing so much better with some extra marketing budget and I believe that if we continue to invest ahead of our revenues, it will pay off big for everyone.

Nine months ago, we landed our largest customer ever. That deal alone was two million a year in revenue, but we needed to staff up quite a bit to serve the customer. It’s a crazy story (and not our fault) but after two months, the customer changed their mind. But because I knew I could get a few more customers to fill up the slack in no time, I kept the new hires on even though it meant we were losing money every month.

At the same time, I started trying to raise my first round of venture capital. But I guess the big client pulling out spooked the venture capitalists because after six months, nobody has committed to investing yet. We still haven’t signed the big customers we were expecting to, and now we are a few months from cash-out.

Can you introduce me to any venture capitalists I haven’t talked to yet?

—Anxious Warrior

Continue to Read Lucas’s Answer on Medium…