For anyone in the early execution stage of your startup, what is your biggest hurdle to getting launched / getting early traction, etc.?
For any veteran startup founder, what was the most important thing you DIDN'T know when you started your company?
Arezou Zarafshan and I sat down for a talk during Denver Startup Week focused on execution essentials, how to go from idea to MVP, etc. We were hoping to do it as a live Q&A, but because it had to be virtual, we did it as a recorded talk -- but that turned out to be a blessing in disguise, because it prompted us to ask for questions and input from our various startup communities in advance.
If you haven’t already, check out our 30-minute talk on the Denver Startup Week website. Or, if you’re more of a reader and would rather skip the banter, read on -- for questions we answered, questions we didn’t get to, and new questions we got in the chat when the session went live.
If you’re an execution nerd like us, or are looking for ideas on how to get your execution juices flowing, or have more questions, sign up for our new Execution Essentials mailing list. We promise not to bug you too much. We’re just excited about building a community in Denver centered around startup execution. (We might even start a podcast!)
JOIN THE EXECUTION ESSENTIALS MAILING LIST
Why would I say that “no one gives a shit about the founder's idea”? Isn’t that what creates disruption and new industries?
Arezou’s Take: Yes AND! Without executing on those ideas, who cares about how amazing the idea is? Founders fall in love with their idea and forget that this is a business. Hence, they spend an excessive amount of time on perfecting their idea/product instead of figuring out how to get market feedback and narrow down on their business-model. According to research, #1 reason startups fail is about lack of market viability. If you don’t get your product out as soon as it is viable and collect real feedback, you could very well fall into this category.
Liz’s Take: I agree with Arezou that nobody else is going to be so blown away by your idea that it will carry the day all on its own. Almost every “great idea” was tried and failed by a dozen other people before the big famous example we’ve all heard about as a so-called “overnight” success. At the same time, your idea is perhaps the single MOST important thing in determining whether your startup will succeed. In order to do what it takes to make your startup succeed, your idea has to matter a lot -- to you. Your level of passion for your idea will almost certainly dictate whether you stick with it long enough to see it succeed. As Paul Graham famously said, most startups die of suicide, not homicide. Whether you can weather the slings and arrows of outrageous startup fortune, and live to fight another day, is entirely a function of how committed you are to your idea. So yeah, it matters. But not for the reasons you may think.
I have a great idea, and have even modeled out how it would work, how we’d make money, etc. I think it’s time for me to go raise money from VCs so I can make it a reality. How should I start?
Liz’s Take: If you’re a first-time founder, and your plan is to raise money based on an idea, I have bad news for you. It’s almost definitely not going to happen. VCs don’t invest in ideas anymore -- which I think is a good thing. You have to bring SOMEthing else to the table. If you have a million Instagram followers, or have built a successful startup before, or even held a fairly high-level position at a giant former-startup like Facebook or Twitter, that might be enough -- combined with a great idea. But if you don’t have a proven track record of startup success or some other startup pedigree, it doesn’t matter how great your idea is. VCs need to be able to see that you can actually make it a reality -- and the sad truth is, most people can’t. To prove that you CAN, you need to take the first gritty steps down the execution road, build some sort of bare-bones version of your product (a minimum viable product, or MVP), and get it into the market -- so that you can prove that it will work (or learn that it can’t, without wasting too much of your own time or other people’s money). Before you ask anyone else (even your friends and family) to invest in your idea and in you as an entrepreneur, YOU have to invest in both. The startup fairy godmother who turns an idea into a unicorn startup overnight does not exist -- she never has. Every great startup story begins with a scrappy founder who’s willing to cobble together something ugly and throw it into the world to see if it has legs (or, ideally, wings).
Arezou’s Take: I completely agree with Liz on this. Just having an idea means Not A Thang! You have an idea, good for you. What do you have to show for? Do you have revenue? A prototype? Do you have followers? Anything? I actually get very upset when I see founders who say, “Look, I am smart. And I have this great idea. Now give me money so I can make it happen! Um...No!” I honestly care very little about your idea (unless it is outrageously out of every realm of possibility). I care about your grit, your guts and how committed you are to trying things (based on strategy) to make your idea a reality. Do not, I repeat, do not go after VCs or even angels with an idea. You will lose credibility and they will not answer your calls when you actually have something to show them.
What are the most common and avoidable mistakes that you see founders make as they launch their companies?
Arezou’s Take: Lack of strategy for learning and experimentation: You got your product built! Or your website launched. Great! Now what? What is your strategy to figure out the critical elements that move the needle for your business? I once heard one founder say (and this is actually a very successful founder, near IPO): “our strategy is to throw as many noodles on the wall as possible to see which one’s stick.” I vehemently disagree with this idea. Throwing noodles on the wall is not a strategy, it is being lazy. Early on, founders should figure out the top levers that move the needle for their business. Those are generally about customer acquisition channel, cost of customer acquisition, customer engagement or use model , business model and one or two that are unique to each business. You gotta figure these out before you run out of cash. Which brings me to the second avoidable mistake.
According to research, the #2 reason that Startups fail is they run out of cash. Often, when startups get funding, they think they are home free. In the company I was a cofounder for, we wanted to celebrate with an expensive dinner! Bad idea! Money, whether you are bootstrapping or you have investors, *will* run out one way or another. What did it get you before it went to zero? Did it get you new customers that you can actually afford? A sustainable business model that can run itself? Or a shiny office with free flowing beer? As a founder, you have to plan to have achieved certain goals before money runs out and be ruthless about decisions that are not in support of reaching those goals. Do not, I mean, do not spend money on what does not move the needle for your business. Do not hire unless you absolutely have to. Do not get an office or get generous about snacks and beer. Do those after you have raised your series A. Stay focused and be strategic about how you use your cash.
Liz’s Take: I’m sort of superstitious about pointing out other founders’ mistakes. (There but for the grace of god go I, sort of thing.) But I want to stand up for the idea of spaghetti throwing. No, it’s not a strategy in and of itself -- but when combined with a rigorous testing strategy and intelligent iteration, I think it’s very effective. A lot of people -- startup founders and otherwise -- get so married to their initial ideas that they just can’t let them go, even in the face of lots of evidence that their idea just isn’t as great as they thought it would be. This is especially tragic when a relatively minor pivot would have saved the day. Try a lot of things. Don’t be ADHD about it (though a surprising number of super successful founders are, clinically). Just test, measure, analyze and iterate -- almost like picking a lock. You get one tumbler in place, then another and another, until finally, you’ve got startup success unlocked.
Can you talk about founder/cofounder dynamics and how they might affect execution?
Arezou's Take: Someone once told me that selecting a cofounder is as consequential of a decision as a marriage would be to two individuals. There are venture firms that just don’t invest in companies that have the founding team not having at least 2-3 years of experience together. If you need to find a cofounder, look for someone who is strong where you are weak and be honest about your strengths! Are you highly technical but don’t know marketing? Then look for someone who is a generalist and one who is a killer marketer. Are you high-level and conceptual? Then find someone who is detail oriented and can find the needle in the haystack. Founders/co founders need to get some key topics out of the way BEFORE they choose to join forces. If they don’t and these issue arise when they are trying to build the business, like it did in my case, the whole thing *will* eventually fall apart. Agree on whatever is important to all of you: equity, compensation, goals, decision making, etc. But most importantly, pay attention to what can not be put in a phrase or in a document but you feel it. Is your cofounder a micromanager but you believe in delegation and empowerment? Does your cofounder like to drink constantly in the office while you like to focus on work? Are you a match? Don’t fool yourself. If it doesn’t feel right, don’t hope that it will at some point. Move on!
Liz's Take: I agree. Founding a startup together is like getting married, and your startup is like your child (only way more needy). Most of us don't take the time to find Mr. or Ms. Right. My co-founder and I say this to each other all the time. We started Nanno together as complete strangers (literally), because we were both so carried away by our idea that we were halfway to our MVP before we really thought about what we were getting ourselves into. Luckily, once we realized that we'd charged headlong into a battle that would likely last a decade, we realized that we really do complement each other in so many important ways that it works (most of the time). But again, I think that what continues to unite us, every single day, is how wholeheartedly committed we both are to solving the problem we set out to solve and making Nanno the skyrocketing success story we know it can be.
The product I’m planning to build is something I really know people need, and it will make their lives -- not to mention the world -- so much better. That should be all I need, right?
Liz’s Take: Wrong. YOU knowing that the world can’t live without your new product is irrelevant unless THEY also know they need it. One of the very first steps in executing on your idea is validating that there actually is a market for it. One of the easiest ways to do this is to use the Google Keyword Planner (which is totally free) to find out how many people are searching for answers to the problem you’ve identified. Maybe you think it’s a problem “everyone” has, but if they’re not Googling it, they aren’t trying to solve it, period. If you use the Keyword Planner and you DON’T see a ton of search traffic related to your problem thesis, that doesn’t necessarily mean your idea can’t work -- it just means it’s going to be a lot harder to market, because you have to both convince people they have a problem AND convince them you can solve it.
To test out whether you have the chops to convince people they need to solve the problem you identified, you can do some basic market research, using things like polls in Facebook groups to talk about your problem, your idea for a solution, etc., or even build a simple landing page to explain your product and value proposition, and see if you can get enthusiastic buy-in. But remember -- even if you do find an enthusiastic audience for your product, that doesn’t mean they’ll pay for it (or pay enough for your revenue model to ever be profitable). And finally, once you do find product-market fit (essentially meaning a product people want and are willing to pay for), you need to make sure there are enough of those people to reach the revenue you’re targeting.
Yes, it sounds complicated. But the good news is, market research is something you can do without ever building a single thing. And it is truly the first step in any good execution strategy.
Arezou’s Take: My first question is this: how do you know people need your product? How many people/target customers have you talked to? What kind of research have you done? And when you talk to people/target audience, do you ask them about their problems/needs or do you show them your product? In other words, are you seeking to understand their problems so you can develop the right solution or are you prescribing them a solution that they may or may not know what to do with?
I don’t necessarily agree with Liz about people needing to know that they need your product. Henry Ford famously said: “If I had asked people what they wanted, they would have said faster horses.” What they need to agree is first, they have a PROBLEM that they want fixed and second, your product fixes it.
Is your startup scalable is a common question. What does that mean and how do you do it?
Arezou’s Take: It means, can you grow your startup, predictably and without going bankrupt. Yes, a startup HAS to be scalable or it will remain a small business, assuming that it is profitable. Let me give you an example: let’s say that one of your big clients asks for an additional offering to your existing product. You can do it but it will require a robust team to get your client onboarded. You do this for your big client and maybe one more cause you want to be customer-obsessed. You also get an additional revenue stream from it. Great! But now, to provide this to more clients, you have to dramatically increase your team. In order to dramatically increase your team, you have to either cut expenses from somewhere else or change the price model so you charge more...Or...erode your profit. The problem with eroding profit is that your investors will be mad. So, in other words, you can make it happen for one client or two...But beyond that, it will break! This is not scalable.
Liz’s Take: “Scale” means different things to different businesses. For a high-margin B2B business, it may mean going from two clients to ten in a single year. For a consumer marketplace, it may mean going from a few thousand to a few hundred thousand users per day. Some people say scaling quickly is essential to the definition of “startup.” Personally, I’m not too concerned with semantics. I think some businesses have to scale quickly to be viable (not to mention profitable). In my own business, nobody took me seriously until we’d reached a certain scale, and I certainly have no chance of having enterprise-level profitability until we scale a lot more. At the same time, I’ve pitched at a ton of startup events, and am always jealous of these lovely little SaaS platforms that can get to a million dollars in ARR (annual recurring revenue) in six months, with just a handful of big clients. I think the most important thing is understanding the role of “scale” generally in your business model, understanding when it should happen (or has to happen), and, like Arezou said, not doing it just for the sake of it.
After you know your business is scalable, how do you know you are ready to scale?
Arezou’s Take: I will answer this question in this fashion: You are *not* ready to scale your business unless your “formula” works time and time again. Do you have your customer acquisition channel figured out and proven? Not just once but many times. Do you have your CAC/LTV figured out? Do you understand your cost drivers? In other words, if your business were a black-box and you had a number of defined inputs into that black-box, could you predict the output with a reasonable amount of accuracy? If the answer is no, you are not ready to scale. And to scale too early is very dangerous for a business because it causes the founder to lose focus and waste valuable resources that they could have used to optimize their business performance.
Liz’s Take: Again, my view is a little different from Arezou’s. Yes, if you scale prematurely, you risk overextending yourself and not doing anything well. At the same time, there are LOTS of things you really can’t learn until you’re at scale. Nanno is a great example. I have never wanted to be the proprietress of a nanny agency -- and the business methodology I would have employed if I’d wanted to succeed in a single local market would have essentially been that. Our product has always been one that was meant to utilize technology to do things a smaller-scale business couldn’t do. And for a double-sided marketplace, it can’t work at all without some degree of scale, since the volume metrics are intrinsic to our model. That’s not to say that that’s true for all startups -- it’s definitely not. My point is that, just like everything else, the scale question is very unique to each startup, industry, business model, etc.
I am super type-A and I have thought through absolutely every aspect of my startup. I’ve built an incredible revenue model, have a carefully planned go-to-market strategy, built a pretty good MVP. I work on it day and night. But every time I think it’s ready, I think of one more thing I can or should do to make it better. How will I know when it’s time to launch?
Liz’s Take: Now is the time. Right now. No plan survives first contact with the enemy, so there’s no point in trying to make it perfect. In fact, the more you labor over perfecting your plan, the less able you’ll be to see all its flaws and ditch the parts that don’t work. One of the hardest things about life as a startup founder is living perpetually where the rubber hits the road -- and learning that you’re going to be doing a lot more skidding all over the place than driving in a straight line. It’s painful to try things and fail, but that’s what you’ll be doing, on a micro level, every day. Learn to test and test to learn -- and don’t get sentimental about any of it. The sooner you get out there, the sooner you’ll start getting the data you really need to make your startup a success.
Arezou’s Take: Yes, right now. Get it out but also have a plan and a strategy. Know what you are trying to learn month one, week one, day one and how you are going to adjust based on those learnings. Be methodical about your approach and adjust as you go. Launch it NOW (after you have put together a plan for how you will experiment and what you will do with the outcome of your experimentation.)
I’m a first-time founder, and my background is in finance, but I’m obsessed with fly fishing. I want to make an app where people can crowdsource the best places for fly fishing onto a cool map, so we can all help each other discover the best spots. I’m more passionate about this than anything else I can think of possibly doing in life. Where do I start?
Liz’s Take: Building a company from scratch the first time is super hard. Getting early traction in a field in which you have no particular expertise is even harder. And, of course, raising money on an idea, when you have no track record of startup success, is all but impossible. If I had it to do over again, I would have built a simple little product in the legal-services space (I was a lawyer before starting Nanno). I would have chosen something I knew the market needed, that would be fairly small and easy to build, that I could easily market through my existing professional network, and that had a good chance of being acquired by a bigger company once it had achieved even a minimal amount of traction. Looking back, I can think of at least 10 ideas that would have fit the bill, and would have given me that first feather in my cap -- not only helping me learn some of the easy startup lessons the hard way, but giving me that track record of having started and exited a company (even if the exit was small), which would have made it easier to raise capital earlier, build an amazing team earlier, and start my more complicated passion project from a much more stable foundation.
Arezou’s Take: Glad to know you are super passionate about this. Assuming that you, yourself, are an active flyfisher and know a lot about the industry, I say, go for it. Do customer interviews, make a prototype or at least a concept. Take your MVP to market and get feedback. Have a plan for your experimentation and learnings. Make it happen! If you don’t succeed right away, you will get so many learnings that will be invaluable.
I’m planning to bootstrap my awesome app idea, and I have a little nest egg of $100K of my own money that I’m willing to put in. How do I find a good software development shop to hire? Or can/should I try to find a technical co-founder who can do it for me for equity?
Liz’s Take: I am a big proponent of non-technical founders building basic MVPs using third-party products that they can duct-tape together without writing a single line of code -- for free (or really cheap). There are SO many SaaS products that you can use to build basic websites, sophisticated onboarding flows, even some basic back-end functionality. The best thing is that all of these tools can be integrated with each other -- either through built-in integrations or through Zapier. So if your product idea is technology-based, you can almost certainly build a basic MVP yourself, which you can use to test your go-to-market strategy, get preliminary user feedback, and essentially validate BEFORE you spend money on having a proprietary product built.
Arezou’s Take: Do not, I repeat, do not go to a development shop. That said: you have 3 balls that you are constantly juggling as a founder: Time, Money, Scope. You have to keep one of the three sacred and optimize the other two. Let’s say, you only have a certain amount of money and with that money, you have to prove feasibility of your app. You then scope your app to the bare minimum, MVP and use as much time as you possibly can to bring that MVP to market. You would have to put a lot of your own sweat equity in there in that case. On the other hand, let’s say your time is minimal (say you have a full-time job) but you can afford to hire good but inexpensive developers. In this case, you still have to be close enough to the developer(s) to understand what they are doing and if they go astray, you can guide them back and manage them/the project well. A few points to highlight: I am a big fan of having a technical cofounder with a big caveat; you have to make sure you mesh with your cofounder as though you are marrying them. Also, be very wary of scope creep. If you have the money to hire a developer, it is easy to want to make the first instantiation of your product, the MVP, a “little better”. Don’t! Get it out and get market feedback as soon as possible. Remember, ideas have a shelf-life and time is the only thing in the world that is truly irreplaceable. The sooner you put out an imperfect and kludgy solution into the market, the closer you get to actually seeing your idea take wings and fly.