Nine Lessons from 9 Years in Startup-land
Some of the best ideas and mental models I've learned after 9 years of running a startup.
It was around this time, in June 2014, that I started working on the gaming and esports startup that has now become the company Challengermode, together with my co-founder and the CEO of Challengermode, Robel Efrem.
Over the past nine years, our startup has grown to 40+ talented and driven people, we've built a platform that has hosted many of the largest esports competitions in the world, working with several major brands, organizers, and game publishers, and we've raised over $20M in funding. I share this not to gloat but to give some background as to why I'm sharing these ideas.
Although our journey is far from over, I've been reflecting on what I've learned over the past nine years. As any founder and entrepreneur will tell you, most of what they know they know because of mistakes they have made, and I can't say I'm any different; failure is often the best teacher. But I've also gathered many ideas and learnings from colleagues, from other founders, and from books or articles. Ideas that have evolved how I look at building a company.
In this post, I want to share some of those ideas with you.
1. The MVP is probably not what you think it is (The Goldilocks Principle)
If you're not embarrassed by the first version of your product, you've launched too late.
- Reid Hoffman
Everyone knows what an MVP is, but it's harder to get the MVP right than most people assume. To emphasize this, I like referring to it as the MV-MVP: The Maximally Valuable - Minimum Viable Product.
It's not particularly insightful to say that a product needs to be valuable. But it's worth emphasizing because it contrasts the "minimum" part. The MVP must be valuable enough to meet the needs of the intended customer while taking as little time, money, or effort as possible to create. This is what is meant by viability.
And what is viable wholly depends on the level of complexity and sophistication required of the product to satisfy the market (or at least an initial subset of the market).
MVPs are a de-risking strategy: you create an MVP to figure out as cheaply as possible if the intended product or feature is the right solution for a customer or business need. But if your MVP is too minimal and not viable enough, you will have difficulty validating if your solution idea is the right one. You can learn that the "MVP" you created didn't address the need (if it's not successful), but you won't know if that's due to the MVP not being viable enough or if it is the solution idea itself that's mistaken.
The point of this is to emphasize that an MVP must be minimal in the right way. A successful MVP may not always be small or cheap in absolute terms, just small in its scope compared to the final product. As a result, it can range from a scrappy prototype made with some html and javascript to a multi-year product effort that needs the whole company behind it. It has to be just right.
2. You need a constant sense of urgency
This means that you can't sit around and wait for things to happen to you; you need to go out and make things happen. A startup, especially an early-stage startup, can't survive without constant pushing. Startups that aren't pushed will stagnate and stall and probably go under (they are not default-alive).
You must push everyone in your team or company to keep a sense of urgency in nearly everything they do. A sense of urgency also encourages focus. And a sharp focus on the most pressing problem is one of the most important things for a startup company to maintain.
A sense of urgency does not entail rushing, panicking, or stressing. It doesn't mean running from one shiny opportunity to another. You can be completely calm, purposeful, and focused and still maintain an underlying sense of urgency. It just means that you are executing with focus, speed, and a sense that there's always more to do, more to learn, and, crucially, that no one else will do it for you. (And by you, I'm generally referring to the whole team and not just the founder/CEO.)
The role of a leader is to change the status quo, step up the pace, and increase the intensity.
- Frank Slootman (Amp it Up!)
As a side note: It's not news that large companies that attempt to create new things by incubating projects often fail to produce new innovations. Aside from just working on the wrong idea, not feeling a true sense of urgency is a big reason most such innovation and startup projects tend to fail. The people running the projects rarely have enough skin in the game or ownership of the innovation they are working on to ever feel a true sense of urgency.
3. Figure out your growth loop
Every successful product or company has at least one working growth loop or "flywheel" that sustains or drives the growth of the company.
A growth loop is fundamentally a kind of closed system with an input that creates an output through a defined process. The inputs are usually money, users, employees, or customers that, through some process of one or more steps (buying, sharing, using), produce output that can be reinvested into the next cycle of the loop.
The crucial thing about a growth loop is that it must fully "close." In other words, the output of the loop should feed into its input, creating a cycle of sustainable and compounding growth.
Perhaps the most classic example of such a loop is a social viral growth loop: a user signs up, uses the product or services, and through using it, invites more users in order to get more value from the product, leading to new users signing up, which in turn invite one or more new users and so on. Every successful social network has grown in this manner. But nearly any sustainable business and growth model has some kind of loop built in—even sales and partnerships.
It's a good exercise for any entrepreneur or company to imagine what this core loop looks like as early as possible, even if it's hard to validate it early on. The steps and mechanics of the growth loop are crucial inputs to the spec of your product or MVP.
4. What gets measured gets managed
The positive version of this adage is straightforward; if you aren't measuring something (however implicitly), you will be unlikely to act on it. But it also goes the other way around; you may unwittingly be measuring the wrong thing and acting accordingly.
What gets measured gets managed — even when it's pointless to measure and manage it, and even if it harms the purpose of the organization to do so.
- Apparently not Peter Drucker (properly attributed to V. F. Ridgway)
We have certain "measuring sticks" that we use to assess progress toward our goals. These can be explicit and quantitative - as in revenue, active users, qualified leads, etc. Or they can be implicit and qualitative, like customer satisfaction, a manager's praise or scorn, cultural values, and so on.
It's trivial to see how an explicit incentive like a commission on sales can guide the behavior of salespeople, but there are often many other less explicit points of reference that guide our behavior and our choices, sometimes even without us being fully aware of what we are optimizing for.
We "manage" - pay attention to or act on - the things that the measures represent. And if you're not thoughtful about what you are measuring, you may be managing the wrong things.
Used well, good measures afford us the possibility to design our own behavior or that of our organizations by carefully nudging ourselves in the right direction. But without attention or with a lack of foresight, we can let the wrong metrics guide us down the wrong path.
5. Do things that don't scale... for a while
As a founder or really anyone working at a young startup, you have to do many things that aren't scalable or economically viable to do later on, like literally onboarding every customer one by one. The advice to "do things that don't scale" is now firmly a part of the startup canon of advice. The question is when doing things that don't scale is counter-productive. And the answer usually depends on several things, like whether you have product-market fit or not. Yet, in a startup, parts of the business or operations may have reached a point where focusing on doing things scalably makes sense, while in some areas, you need to roll up your sleeves and do whatever it takes.
… startups take off because the founders make them take off. There may be a handful that just grew by themselves, but usually it takes some sort of push to get them going. A good metaphor would be the cranks that car engines had before they got electric starters. Once the engine was going, it would keep going, but there was a separate and laborious process to get it going.
- Paul Graham
Anecdotally, I've noticed a correlation between the willingness of founders/executives/leaders to do things that don't scale or do "grunt work" and the success of the company or product. Countless startup stories have started that way. Elon Musk is famous for staying involved in detailed engineering work at Tesla and SpaceX.
Part of this is a matter of signaling to other employees what's important, but doing things that don't scale has several benefits. First, it's usually cheap or free. Second, it puts you directly in touch with the bare mechanics of whatever you are trying to do and that you will later have to scale. Talking to every potential customer is costly and not scalable, but you will probably learn more from doing so - especially early on - than you would from a hundred customer NPS surveys.
Founders and leaders who take the do-things-that-don't-scale advice to heart but don't know when to shift their focus to scaling tasks can get stuck at local optimums, stifling the growth of their company and their growth as leaders. They are unable to do things differently because they are stuck doing something the same way they always have. If you are so inclined, doing things that don't scale can be comfortable because you feel like you are in control. Delegating puts you one or more steps away from where the rubber meets the road.
So the heuristic could be that it's often a good thing to do things non-scalably for a while, if not for cost reasons, for signaling what's important, and for the learning opportunity. When you understand the work well enough, it's generally a good time to delegate or figure out a scalable way to do the same thing instead.
6. Communication is hard
It's your responsibility to make yourself understood as much as it is to understand. It’s not enough to just communicate; you must communicate unmistakingly.
Many of us will often lament other people's inability to understand what we mean. But communication is just hard. Harder still the more people that are involved.
A lesson I have learned again and again is how hard it is to communicate well. Even when you think you have said something many times in different ways, you'll often find that your message has failed to land. It's almost impossible to over-communicate. So even when you feel like a broken record, it's not at all obvious that what you want to communicate to someone else has been fully understood by them and internalized.
At the point when you think you couldn't be any more clear, assume that you have not made yourself understood and repeat it at least one more time.
7. You are what you do, not what you say you do
Your company's values are mirrored in the actions and behaviors of the company's employees. People will not act according to some generic values written in an HR document unless these values are fully ingrained in the company and embodied by the leaders (formal and informal leaders).
What can this look like in practice? If you claim to value quality and you want your team to build a product that exudes it, a way to show that in practice is never to ship something that doesn't meet your quality standards (whatever that means). Not just when it isn't costly but precisely when not shipping incurs a high cost.
It is when we make costly tradeoffs that we stay true to our values. It is when you demonstrate with costly actions that a value is essential that others will take notice and start acting like this too. This is the most important rule to remember when it comes to culture.
Culture is not like a mission statement; you can’t just set it up and have it last forever. There’s a saying in the military that if you see something below standard and do nothing, then you’ve set a new standard. This is also true of culture—if you see something off-culture and ignore it, you’ve created a new culture.
― Ben Horowitz, What You Do Is Who You Are
8. As a startup, your lack of resources is your strength
In a startup, especially a young one, you will always be pressed for cash, time, and resources. But these restrictions and limitations are what make it possible and necessary for you to do things that don't scale. Things that larger incumbents or companies cannot and will not even consider.
You are forced to figure out scrappy ways to market your product. You can afford to target a small market that no larger company would even consider. Constraints foster innovation. Do things that only "you" can do.
Conversely, this is exactly why so much regular business advice doesn't apply to startups. You can almost take it as a rule to just invert standard business and management advice. Again, doing things that don't scale makes no sense in a regular and well-functioning business. But if you thought this way about everything you do in a startup, you'd never dare to try anything new. In startup-land, you can turn your limitations into a competitive advantage.
9. Being data-driven is not enough
Another common trope is that you need to be data-driven. It goes without saying that being data-driven is important. But truly innovative new products or features rarely come about just from data-driven optimizations against a given target but from a larger step-change - a bet. A startup is itself a big bet - the initial innovation of any successful company.
If that initial idea is successful (having achieved some level of product-market fit), then it makes sense to focus on data-driven experimentation in order to drive growth and monetization. If not, the startup probably needs to try something else (a pivot).
Just relying on data to optimize your way to success/growth/profits is like walking without a direction; it'll take a long time to get to wherever you want to go - if you ever arrive. What's more, new products or startups rarely have big enough data samples to make a purely data-driven approach produce reliable results.
If you have a somewhat successful product/startup, it's easy for data-driven teams to get over-reliant on looking at data to help them make decisions. The key is to know when to double down on data-driven experimentation against one or a few key metrics and when to take big swings.
For a startup to continue to grow when its growth has started stagnating - or to grow much faster - it often needs a new "innovation" that can drive that growth. And the most effective way to do that is usually to make strategic bets that can enable a step-change in growth rather than just producing incremental optimizations through data-driven experimentation.
To visualize this, imagine a landscape with peaks and valleys of different heights. Conceptually there is a higher peak somewhere else than the point where you are standing, and if you just optimize "blindly" against the data you measure, you are unlikely to find yourself at the highest peak on the landscape. To get there, you need to look more broadly and take your "head out of the sand."
The best way to predict the future is to invent it.
- Alan Kay
This is less about being data-driven and more about having an idea and a strategy for finding other peaks that are much higher than the peak or slope you're currently at. Certainly, data factors in, but just don't limit yourself to collecting and analyzing purely quantitative "hard" data. Ideas and experiences are also a kind of data that, weighted properly, are crucial to informing a larger growth strategy.
Bonus: There are always problems to solve
Entrepreneurs and founders are always in problem-solving mode. Running a startup is like playing a never-ending game of Whac-A-Mole. Just when you think you've squashed one issue, another pops up. Even when things are going well, you can't shake the feeling of having more to do. There are always problems to solve.
Much like in life, in a startup, most people have the sense that once you get over that next hill, things will be great. Once you raise that next round, you'll be set. Once you get that big customer, you're golden. It just never ends. That's not to say that there aren't important milestones you should feel proud of reaching, but just don't expect to ever reach a point of complete satisfaction and calm. The best you can do is to be mindful and appreciate the wins you get while keeping the bigger picture in mind.
On to the Next One.
- Jay-Z