Insider #917 – Be There

“Get in on the ground floor, put in a rough year or two and retire a millionaire.”

“We’re open to new and innovative compensation options.”

“Play a key role in tomorrow’s OpenAI … TikTok … oh heck, Apple!!”

You’ve heard these pitches.

You watched with amazement at the “ease” of funding, the fantastic company multiples thrown around and how “immediately” ordinary people were transformed into multimillionaires, even billionaires.

They were just ordinary people with ordinary talents.

Just folks at the right place at the right time.

It could have been – should have been – you.

Maybe … maybe not.

There’s an adrenaline high in building a new company.

Know Your Team – Do a realistic assessment of the strengths/weaknesses of all of your team members. Make certain there is the right mix of talent, expertise and compatibility to ensure you can all work together smoothly. Shared understanding and commitment can deliver success.

There’s a thrill in building something new from the ground up.

People need to be confident in their expertise and experience, certain they can make a difference.

There’s a feeling of solid satisfaction in doing things the way they should be done and seeing the results of your efforts pay off for the company–and for you.

For most, the dotcom bubble is nothing but a painful memory.

We once again have a rapid proliferation of new business opportunities.

Today, the runup on AI is upon us.

Hardware, software, service, consumer products and special interest activities are emerging faster than you can count them.

Fueled by great ideas and a new influx of venture capital money, the start-ups all have something in common.

Starting salaries are low because stock options are being widely touted.

Benefits are reasonable, job security is nonexistent, hours are long, and resources are in critically short supply.

Facing the Challenges

Know the Odds – A great idea and plenty of startup money doesn’t ensure your new venture will succeed. Be realistic about the chances of failing and then focus on beating the odds.

What the optimistic founders don’t tell you is that the chances of success are extremely slim:

20 percent of new businesses fail within the first two years.
45 percent of new business startups don’t survive the fifth year.
65 percent of new startups fail during the first ten years.
75 percent of American startups go out of business during the first 15 years.

Generally, new business success rates are around 10 – 20 percent over the long term.

Despite the odds, if you’re going to become a part of something new, exciting and game changing and are a constructive part of the team, you need to help keep everyone involved in the same goals:

The startup’s objective isn’t to sell something, it’s to solve customers’ problems, overcome their obstacles and achieve their goals.
The organization’s goal isn’t to sell to everyone (companies or individuals). It’s to focus on those customers where your product/service is best for them. Then, and only then, you can broaden your target customer audience.
Focus all of your messages and attention on those who need your solution and don’t get sidetracked by others who may eventually benefit.
Don’t wait until the product/service is perfect because it will probably never be. Instead, sell it with the idea/commitment that you will help each customer solve their problem. Stay 100 percent committed as a partner in their success.

For those who choose to join the startup, it still means sharing used desks and chairs, troubleshooting your own computer, shortages of office supplies, long hours and tons of weekend work.

It also requires folks to adjust their lifestyle to the reduced paycheck and occasionally carrying company expenses on their personal credit card in addition to wooing investors and ridiculous deadlines.

Falling Short – Before you begin or join a start-up, be realistic about all of the things that can go wrong and that you’ve done a solid assessment of the market and your team.

There are a ton of obstacles that can get in your start-ups path as you move forward; but those who realistically stay focused on the end objective can succeed even when they have to refocus, change direction.

The key is being realistically committed to what you want to/need to accomplish.

It also means understanding the uncertainty in knowing that a giant in the industry could roll over in its sleep and crush the fragile organization with better products/services, stronger distribution, greater visibility/credibility, more aggressive pricing.

Sometimes it means coming to the realization that the investors – not the individual employee or the founders – are calling the shots, pushing the company in a different direction.

In addition, it means meeting arbitrary investor deadlines to keep the infusion of cash flowing.

But the options are still in front of you and the company has been getting decent media coverage.

Things are looking good.

Then it happens.

An investor pulls out.

A competitor beats you to the market with the same or a slightly better product or service.

Key Developer or Personnel Defects

People underestimate the difficulty, and the time required to accomplish key tasks.

Product or key supplier delays force the company to delay the product/service launch.

The government may levy new tariffs on key components/supplies that leave you with painful decisions – raise prices to a new, non-competitive level or lose money on every unit sold.

Startups have a much narrower margin for errors.

Events that are outside of the individual’s control can have significant repercussions.

Keeping the bad news inside the organization is one of the employees’ responsibilities.

Keeping the investors happy is also their responsibility.

Getting mediocre to lukewarm reception for the “almost ready” product or service is their responsibility.

Not getting favorable coverage for the company’s progress to date is partially their fault.

Suddenly, they are tainted. They are infected. They are fired.

Yes But…

Before people enter the promising world of the startup, they need to understand the odds.

There are a lot of statistics available.

Funding Failures – Venture capital funding is no assurance that your startup is going to succeed. To couch their investments, they may put money into a large number of proposals knowing most will fall short. Talent/commitment usually makes the difference.

The bottom line is that very few startups are successful.

Many of them fail spectacularly.

Those that are successful are not necessarily incredibly successful, but they manage to keep their heads above water.

If you’re still inclined to take the plunge, you should do your due diligence.

Ask questions and evaluate for yourself:

Is there competent management?
What does the competitive environment look like?
How is the company being funded?
What are the company’s contractual requirements for the investors?
Who are the key employees already on board?
How sound, how realistic is the business plan?
How long before the company is profitable?

If people are going to join the company, they should have an employment lawyer review the documents, especially the stock options package.

Options are lottery tickets. They aren’t primary compensation; they are a fringe benefit.

If you look closely, many of the IPO “instant” millionaires/billionaires really aren’t.

Many vest over a period of years.

In some instances, the options can be counted (and taxed) as income.

Typically, these options can’t be sold for six months to a year after the IPO.

Until the company is sold or goes public, the stock is nothing more than expensive wallpaper.

If you’re being recruited to a startup, have an exit plan.

Be Committed – Put everything you have in making the team/company succeed; but also have an exit plan prepared and a realistic assessment as to when it’s time to hit the silk.

What will you do if the company fails?

What happens if you get tired of the heavy workload, long hours and low pay?

What happens if you don’t meet the company’s expectations or does the company doesn’t meet your expectations?

Have a written agreement covering your leaving the company, especially if you have a piece of the action.

The options may or may not be worth something over the long haul, but the pressure cooker environment of a startup isn’t for everyone.

Believe in YOU

Once you’ve made the commitment, you must believe in yourself.

Listen to the inner voices.

Be intuitive.

If it feels like management is cutting too many corners or is shady in some of its dealings, listen up.

If it feels as though a competitor in your space is about to leapfrog your technology, product or service, don’t brush those feelings aside as something that couldn’t possibly happen.

If something tells you management is desperate and has hit a fiscal or physical stone wall, listen.

People should pay attention to their gut feelings.

They are probably right.

Over the past 25 plus years, we’ve collected more wallpaper than we care to admit as a consultant to startups.

We’ve justified in our own minds each of these times that we could make a difference, we could overcome the situation, we could help turn things around; or, with the right team effort, the product/service could be successful for everyone involved.

A few have done well. A few have survived long enough to be sold. But too many – way too many – painfully closed their doors leaving talented and dedicated people with nothing but … experience.

But who knows?

Maybe your next startup will be the one that changes the world.

Big Win – Perhaps because the odds are against startups, when you join one that is successful, the challenge, the extra pressure makes winning just that much sweeter.

Wouldn’t it be great to play a part in making it happen?

Maybe … just maybe.

Andy Marken – andy@markencom.com – is an author of more than 800 articles on management, marketing, communications, industry trends in media & entertainment, consumer electronics, software and applications. An internationally recognized marketing/communications consultant with a broad range of technical and industry expertise especially in storage, storage management and film/video production fields; he has an extended range of relationships with business, industry trade press, online media and industry analysts/consultants.