Startup Guide
Two paths to avoid and one that will require great trust
I’m a 3x CEO, Founder, CFO, Product Owner and everything in between. None of my startups have turned into unicorns. Hopefully, understanding the pitfalls I encountered will lessen the pain for the entrepreneurs looking to “start up” in technology.
I will outline 3 high-risk startup paths I embarked upon since I left Wall Street in the hopes of building something of value.
1. Don’t part-time your startup
Starting a technology company with a bunch of experienced corporate executives working part-time has zero chance of success.
In 2004, while living in Los Angeles, I joined a friend and two other partners to build a digital media content delivery service for malls, which later pivoted into a storefront, coupon-delivery service using SMS text messaging. We had some pretty good ideas, and we made our first sale before we even had a product, but we never managed to execute on the technology.
It started all wrong.
I was the only partner who could dedicate full-time to the company, and I was much younger than two of the other partners, whom I had only just met. This put me in a strange hierarchical position as I was the odd man out and the only person willing to dive in 100%. After delivering a winning presentation, much to my surprise, everyone else comfortably slipped back into their day jobs.
My friend, who was also part-time, and I were left with having to deliver results. The company proceeded to miss every single deadline due to not having enough hands-on-deck. A lack of commitment from the other two partners and an unwillingness to get their hands dirty led to a slow drift into an “Ian, do everything and work for everyone” situation, which, of course is a sure way to fail. It became clear that no amount of effort would have been enough to deliver on what we had set out to do.
Don’t involve any part-time employees at key positions in your company.
No matter how smart or talented they are, they just won’t deliver, and you will be left empty-handed, frustrated and exhausted.
Starting up requires everyone being all-in! The best they can do is to serve YOU, as an advisor.
2. Don’t outsource your Startup.
My next venture involved building a social network in Brazil. I know, looking back, this was not my best idea, but, let me contextualize a bit.
At the time, it was still unclear whether social networking was a winner-take-all market. Facebook was still relatively small and Orkut was the dominant social network in Brazil. Orkut was so bad I thought I could build a better version myself, with some tweaks, better gamification, and a focus on Brazilian soccer teams. I set out and hired a bunch of overseas engineers to build the platform. Given the strength of the dollar at the time it seemed like a wise way to execute fast on the technology piece.
Two years later, and most of my money down the toilet, I had nothing.
Recalling this experience, reminds me of a piece of advice an old friend of mine from my Goldman Sachs days — now famous startup coach, Chris Haroun gave me, “make sure you use other people’s money to build your startup. Putting money in is not the job of the CEO, but that of the investor, unless of course you have plenty of it and want to take a moonshot.” I clearly didn’t. I should have listened to him, but I didn’t.
The problem with outsourcing your development is that your business execution will depend on your technology execution if you are a technology company. You can’t outsource your core competency and expect to deliver on the business side. Which brings me to…
You can MVP a product, but you can’t MVP a company!
MVP = Minimum Viable Product
Over time, you will realize that you don’t have control over the engineers you outsourced. They won’t be willing to put in the extra effort it takes do design the right architecture for your business, they will cut corners and they will put in minimum effort.
What you need is maximum effort and cohesion between your technology and business teams in order to deliver on product-market-fit. Again:
You can use an outside team to build a service or MVP a solution for a specific user type, but you should not outsource building your core.
3. The Strategic Partnership challenge
A strategic partnership always comes with a degree of risk, but for early-stage startups it is especially precarious. In order to succeed, you will need a great deal of trust and determination.
A couple of years back, I decided to build a company to digitalize the circular economy and ensure that post-consumer waste got tracked to its best end-use final destination; to an End Processor that could recycle it or compost it, rather than have it end up in our oceans, landfills or in an incinerator.
Business synchronicity brought me to an excellent company, with a unique tracking technology for supply chain and a fantastic patent on codification of assets and chain-of-custody tracking using blockchain. The deal was great, but it required that we go down deep into a cave before coming back out again into the light. I was lucky because I had an excellent partner who was willing to go all the way. If not for that, it would’ve most certainly have gone wrong.
Let’s take a look.
So, the advantage of striking a strategic partnership is that it is often a way to get to market faster. If the technology is similar to the one you want to build and you can adapt it to your market, it can be a win. However, while this may seem like a fast low-cost solution, you and your partner must understand that ultimately, you will need to throw it all out and build a new solution from scratch.
For starters, you end up in a situation similar to that of the previous example. In a strategic partnership you really don’t have control over the technology delivery schedule. The team isn’t yours; you didn’t hire the professionals; they aren’t invested in your mission and you aren’t the one paying their salaries. Even with the best of intentions from both sides, you need to get to POC (Proof-of-Concept) or MVP as quickly as possible and then turn, as soon as you can, to building your new platform!
Let’s dive in a little deeper.
Aside from all of the challenges that come with managing shared human resources, sprint schedules and very different client expectations, the technology architecture will never be a perfect fit for your business. The question will arise almost immediately, “for how long do we want to keep adapting before we start again from scratch?”
In our case, it was an easy decision because the technology we had “acquired” was developed for SAAS and we needed to build a user-centric dynamic marketplace platform.
My experience would suggest that you will need to rebuild from scratch in every real technology startup scenario. I say this because when you you are a startup and begin building your team, you will try to hire the best possible people you can get your hands on and it is very unlikely that the people you will hire will want to work on the existing tech stack. If the documentation of the old platform isn’t supremely well done, they will immediately become frustrated.
Good engineers will quickly give up on YOU and YOUR COMPANY if they can’t figure out how to do what they want to do.
It took us eight months to build our new platform from scratch, and OMG, it was well worth it! We are developing 10X faster and now we have a chance!
In sum, the the challenges I shared above all relate to the common denominator of how to build your startup team. Much of the choices you will make will be a result of the amount of money you have at your disposal and the talent you can acquire through your business and technology networks.
I had little money and even less of a network which led me to taking many wrong turns. I did come away with one major lesson though, know what your MVT (Minimum Viable Team) is!
Knowing your MVT is the key to having a chance at executing on what I believe are the three core technology development principles every startup requires: quality, speed and flexibility.
[Not to be mistaken with MVT (Model-View-Template).]
This will be the subject of my next post.
It will be a bit controversial, but I believe it is the most helpful piece of advice I can give to a tech entrepreneur starting today — the advice I wish I had received 15 years ago when I first started out.
Stay tuned.
