Lessons Learned from Startup #3

Wow, it has been a long time since I last blogged here. Guess I got so wrapped up in my last company that I didn’t have time for blogging. But since I sold Validately in June, I now have time to share my thoughts on entrepreneurship. 

I will re-enter the blogging world by sharing my lessons learned with Validately, my 3rd startup. Here is my top 10 list of lessons learned. I will go into more detail with individual blog posts that I will link to this one.

1. Whatever is wrong with your business metrics, the reason is product. 
   • Marketing not getting enough leads…the reason is product
   • Sales not closing enough deals…the reason is product
   • NPS sucks…the reason is product
   • Usage metrics not growing fast enough…the reason is product.
   • Customer support tickets growing…the reason is product.
   • On-boarding conversion rate too low…the reason is product.
   • Churn rate too high…the reason is product.
2. To get explosive growth, a company needs organic expansion MRR.
3. Pricing is one of the most important aspects of a startup. I learned a ton about pricing, including:
   • You discover the right price by raising your price until you see behavior change. Never ask customers what price they want to pay. Give customers a decision to make on pricing and observe any change in behavior. That means, constantly raising your prices. I will say this again…keep raising prices.
   • Price based on a Value Metric, which means aligning your pricing with how a customer gains value from your product. That also means that as a customer’s usage grows, their fees grow organically.
   • Annual only pricing is game changing. First, it changes the cash flow dynamics of a startup. Second, it raises the bar for the product. The best business decision that I ever made was when I switched to annual only pricing and killed the monthly pricing option. It changed the company forever. 
4. Great Product = Great UX + a limited set of valuable features that solve real business needs + Great engineering
   • The answer is never…that one more feature on your roadmap.
   • User Research is critical. Measure twice, cut once.
   • Include your team in all user research.
   • Cross functional teams focused on outcomes, not outputs is the only way to build a great product. Give a cross functional team a goal and a vision.
   • Ask customers to purchase before building. If you are building something valuable, they will agree to purchase upon delivery based upon a review of a prototype. 
   • Ship early and often. Short dev cycles.
   • Strive for Continuous Deployment, not sprints. 
   • Invest in automated QA early.
   • Invest in IT security early.
5. Culture is critical 
   • Culture starts with the Founder(s), but is impacted by every hire. A talented asshole on your early team can destroy culture. He is not worth it no matter how talented he is.
   • Experiment with everything before committing resources. Build a culture of experimentation. Your team will love it and it makes the Founder’s job easier if the team uses experimentation to discover optimal solutions.
   • Build a culture of performance by sharing business data openly. Give teams goals and have them determine how to measure success. Then have them share those measurements of success with the entire company. It will foster collaboration towards achieving the goals.
   • Remote work and flexibility is highly valued. If you build a performance culture with data and cross-functional teams that our outcome focused, you don’t need to micro-manage by having everyone in the office together. 
6. When scaling Sales, hire the VP of Sales first. Let her build a sales team. Don’t try to scale a sales team on your own unless you have experience building and managing a sales team.
7. Don’t try to solve every problem. Empower your team with opportunity and data to help you solve business problems. Hiding data because you are afraid of data getting out in the pubic is a very bad decision. Trust your team with the company’s business data.
8. Firing an under performer will be welcomed by your team. They know he isn’t doing his job well.
9. Don’t fall in love with raising capital. Keep burn low or become cash flow positive. Control your own destiny. The funding environment is finicky. It can change on a macro event outside of your control. The best time to raise capital is when you don’t need it. If you need capital, you are in trouble unless your metrics are sterling (rare).
   • Be as capital efficient as possible – remote development, work from home, measure everything, experiment before over committing resources, etc. 
   • Constraints force a focused product. 
10. Spend half of your time with customers/prospects. No matter how big your company gets, spend the majority of your time with your customers/prospects.
    • Lead sales opps all the way through closing and on-boarding
    • Answer customer support tickets
    • Join customer research

So that’s my top 10 list of lessons learned. I will got into much more detail on several of these lessons in individual blog posts. Please feel free to leave comments…especially if you disagree.