Taking a startup from 0 to venture-backed
A few musings...
First of all, apologies to a) those who enjoy this newsletter and haven't received it for a number of months, and b) those who have unsubscribed but are receiving this email anyway. I’ve been engaged in a long battle with Elon Musk over his premature shutting down of Revue, the platform I used to publish. In his infinite wisdom, not only has he deleted all my old posts, but also my subscriber list. I’ve managed to get access to an older list, but it may include some emails that have unsubscribed, so truly apologies for that. I’m assured Substack are so heavily backed by the biggest VCs in the game and can sustain a loss-making platform for an infinite time period – we shouldn’t have this problem again…
Anyway, enough of the admin.
I probably spend around 10 hours a week taking advice. Usually, this advice comes in the form of podcasts or biographies. I’ll tune into My First Million or Founders podcast on my morning walk, and my bookshelf is lined with the biographies of Tech Wizards, Finance Bros, Politicians and more.
The issue with advice like this is it nearly always focuses on the breakout moments of success, the key points in that individual’s journey. It doesn’t deal with the smaller milestones, the early goals that ended up shaping the individuals, or the companies success.
Most people reading this article are at the start of their entrepreneurial journey or career. You need to hear what it’s like from people who are maybe 1 or 2 steps further on the path to you, not 100.
In this article, I want to share my experience in hitting one of these goals.
I’ve just entered a new chapter in my life, co-founder of a Venture-Backed startup. Lithium, the company I’ve been all-in on for the last 11 months has just secured seed funding. I can’t go into the details of the deal yet, but it’s a fairly significant milestone.
Some may say that raising VC cash is nothing to be celebrated, instead celebrate revenue milestones, customers acquired, user growth, that kind of thing. While I see the logic, I also feel the fresh pain of having a company whose growth is throttled by lack of capital, where month to month you are having to decide exactly how much development and marketing spend you can afford. For most ambitious founder types, raising their first round of funding is a goal to be aimed at, especially in the current market conditions. In this article I’ll share my thoughts on the last 12 months, hopefully informing you on whether its a goal you’d like to pursue
Starting your own company won’t necessarily be more enjoyable than a 9-5
I think for most of us a big part of the motivation to move away from a career and towards something more entrepreneurial is that it will just be more enjoyable – more fun. While at times it’s definitely more fulfilling, I’m not sure I would say starting a company is inherently more enjoyable than a 9-5.
People bag on the 9-5 (myself included) but there are some huge benefits. There are obvious ones, job security, getting to work with loads of diverse people, and probably a higher likelihood of building more wealth. But one of the main ones in my eyes is that if you are working for a largish company, you aren’t having to stress every day about whether the company is making something useful (whether your role is useful is another question entirely)…
The goal of any startup is quite simple – to make something people want, and to charge more for it than it costs to make. If you can do this your startup will succeed. Logically then, any startup which is not yet successful (and this will be you, for at least a few years) isn’t making something people want and isn’t charging more than it costs to make. This is stressful. As a founder, you are going to have to wake up everyday, and look at your product, which is likely dogshit, and think how can I make this less dogshit today. Do this everyday for 2 years, and you might make a great product.
When founders tell stories on podcasts, they often tell it that they had some unique insight, and their product was a hit from the off, it was just that much better than the competition. This simply isn’t true. Every startup I worked at before Lithium had a dogshit product at the start. This is not out of laziness or releasing something too early, it’s by design. You need to get your product into the hands of paying customers, get validation and identify new problems you need to solve. This means you need to release your product before it’s great or you’ll waste time building the wrong thing.
It’s not just the making of the product, you then have to sell this product, which you know isn’t yet anywhere near what you want it to be. If you are lucky, you’ll be operating in an industry (like Litihum) where the competition is either non-existent or very poor. More likely, you’ll be competing with some incumbent, who although far from optimal, likely has at least a proven record of delivering value to its customers, otherwise, the market wouldn’t be paying them, and they wouldn’t be an incumbent.
Because you value your early customers so much, and because you know you can deliver them a 10x better experience than the one they are having now, you’ll naturally obsess over them. You’ll do everything you can to make them happy. I’ve personally designed slide decks, ran marketing campaigns and written blog posts for some of our earliest customers, just to keep them happy. This is not fun. You now have as many bosses as you have customers. Even less fun.
In a standard career, this is not something you have to worry about. If you are an Account Manager you might be responsible for a set of customers’ success, if you are a Product Manager you might be responsible for delivering features for certain customers, but this is always confined to the problem the customer is paying you to fix. The nature of a startup is you are constantly looking out for new customer problems to fix (indeed you probably don’t even know what the end problem you will end up fixing is) so you can build a better product, you end up taking on all that customer’s headaches. This will cause you headaches.
I can’t over-exaggerate how much quicker you will learn
I’m pretty confident that for learning anything business related, there is absolutely no substitute for building a startup. If I learned at a rate of 0.1 about business in studies, 1.0 at a large company, 2.0 at a startup, I’d say you learn at a speed of 5.0 with your own startup. It’s quite simple why – it’s learn or die.
We couldn’t afford a designer the last 6 months at Lithium, if we didn’t have designs, we wouldn’t deliver products at the speed or efficiency we needed to, so you learn how to design. As a founder, you will also be head of sales. In the first 4 months of our latest pivot, I think I closed every single customer. You’ll also get a crash course in strategy. We got lucky with our first product launch and built something there was huge demand for. We thought we were geniuses, that we’d hit product-market fit and everything was going to be great. 6 months later, there was no demand for what we’d built, the market had changed and we weren’t booking revenue. We reassessed the situation, spoke to customers, made an educated bet on future market demand and pivoted the product completely in 1 week. A (much) iterated version of that product is what Lithium currently is. Looking back on our brief history, this was one of the proudest moments for the company, everyone in the team learned new skills, got behind the pivot and made a success of it. Everyone learned so much in those first few weeks.
To be honest, the learning element of having a startup is what keeps me going a lot of the time. Every now and then I have the revelation I’m earning a low salary, with a small chance of wild success, and oftentimes it can feel like you are sacrificing too much. What keeps the engine is just comparing where I am to the person that would have stayed as a career Product Manager, realising that building competence, real competence, is one of the greatest pleasures life has to offer, and the quickest route to this is through a startup.
The flipside of this of course, is that you are constantly operating on the edge of your skillset. I imagine great companies put you in a role where you are working right on the border of what your skills are. They’ll give you the support you need to make sure you have the highest likelihood of success, usually, this would mean pairing you with a manager who has done what you are doing before. Then once you’ve mastered this challenge they’ll bump you up to your manager’s role or similar and the whole process starts again. Obviously, you don’t get this luxury of steady well-planned growth in a startup, you’ll never feel comfortable with what you are doing, and while you have support from your founders its a different kind of support, one of co-conspirators making it up as they go along.
Weirdly enough I now have a few people a month, mainly through this newsletter and the YouTube channel, wanting to pick my brain on how to get started with entrepreneurship. It’s only now I’m realising how important side-hustles have been to giving me the skills I need to work on Lithium.
Starting a YouTube channel is a good example of something everyone can do, that teaches you an absolute tonne. Just look at the skills involved.
SEO - If you want to rank on YouTube you’ll need to learn SEO pretty quick
Identifying a niche - You’ll learn more about finding a niche and iterating through bad ideas by creating videos than any marketing course
Writing - You’ll be writing scripts every week, overcoming the awful tendency formal education has of creating separate writing and speaking voices.
Presenting - Every week you’re presenting a new topic
Editing - You’ll learn to edit videos and eventually hire and work with a freelance editor
Design - At least you’ll design your thumbnails, maybe even a personal website
Product Building - YouTubers make 0 cash off ads, you’ll also have to figure a way to sell some kind of digital course, product or content offering.
Paid Ads - You might even run some paid ads to your channel or product
That’s 7 fairly hard skills that will 100% be valuable if you want to build a startup one day, all at 0 cost except your time (you might even make some money).
I’ve been fortunate enough to have run a few (some failed) side hustles like this. I can’t tell you how well they translate to something a bit bigger, the fundamental principles are all the same. If you’re looking to get started with entrepreneurship, pick something valuable you can build on your own. If you can code build a product if you can’t, make content.
As its been a while since I did one of these here are a few of my favourite books I’ve read over the last couple of months.
Post-Capitalist Desire, Mark Fisher
I’m definitely not a believer that capitalism is an evil system that exists purely to exploit. Capitalism and free markets have provided a level of wealth and opportunity to recent generations that nearly all of humankind before could only have dreamed of.
However, I think it would be a bit arrogant to assume that capitalism is the final form of our political system. It’s also self-evident to me that the problems of the world today are not about creating more wealth, but about distributing what we have. In this short book Mark Fisher does an incredible job of deconstructing capitalism, and why it doesn’t have to be this way.
Unfortunately, Mark committed suicide halfway through these lectures, so the book is cut rather short.
Good Strategy Bad Strategy, Richard Rumelt
I usually hate these kinds of books, but this is hands down the best strategy book I’ve ever read, not sure there is much more to say.
The Golden Mole, Katherine Rundell
More a children’s book, each short chapter focuses on a single animal, from sharks that live for 500 years to birds that never sleep. It’s a fascinating read, and one I dip in and out of every now and then when life needs some perspective.
The Essays of Warren Buffet, Lawrence A. Cunningham
Buffets no-nonsense folksy wisdom is anathema to the startup land moonboy rhetoric (including my own) that I usually choose to digest. This book is just a collection of Buffet’s shareholder letters. While I personally could think of no job more boring than choosing whether to invest in Pepsi or Coke, you can’t deny Buffet’s genius in seeing through bullshit, recognising his own strengths and weaknesses and having complete single-minded focus.
Bob Dylan Chronicles, Bob Dylan
Steve Jobs was apparently a big Dylan fan, I’m not saying that’s why I bought the book but – yeah. This was an incredible read, 10/10 would recommend. As well as doing a great job painting a picture of the times Dylan lived through, this autobiography gives a great understanding of the reluctant poster boy of the counterculture.