What I learned from Failing Startups
The challenges that helped me grow
Never Burn Bridges
Fire someone, otherwise everyone gets fired.
Hard part of a recession is that you have to make sacrifices. I also learned from layoffs in startups is that if they are executed well and the company survives, you may have a chance of getting your old employees back that you’re still on good terms with.
There is always time and a “budget” to handle layoffs gracefully. Be kind. Appreciate what was contributed, communicate gratitude for exemplary work performed by those about to get axed.
You’re not Lean while you’re comfortable
We like to think we’re Agile. We like to think we’re Lean. But no team truly experiences the true meaning of Lean Startups until they have to think fast on their feet on a really tight budget.
Try a feature. Iterate. If it doesn’t work — cut it out of the system. Any code written is always a liability. Minimise it as much as possible and keep the teams small until you know you have a cash-flow positive business idea that has shown evidence of being a scalable product or service.
Avoid cutting costs — Eliminate waste instead
A startup’s lifeblood is their ability to say ‘No’. Often. All the time. Know exactly what your main value streams are and reject all else. If you need to run a company-wide entrepreneurial experiment, open another venture instead.
I’ve seen departments burn $5k/mth, $10k/mth on software licenses they don’t need. Over-hiring personnel for products that aren’t generating revenue. Or value of any kind.
These may be fun toys. It may offer a giant payoff at some point. But the number one problem I see, especially in young companies, is the lack of cash-flow transparency past the C-level rank. This means that the hands-on departments aren’t aware whether they can afford $10k/mth licences or servers.
Any assumption made will likely cause friction down the line.
Data-driven or Dictator. At least one. Never both
When faced with hard times the senior leadership needs decisive clarity. Either resolve conflicts fast with the data on hand— or follow a visionary’s gut feeling and instincts. These are extremes. And they don’t mix well with each other. But they can save a company from bankruptcy.
The People will Find (Better) Jobs
There is a virtually endless supply of jobs. A failing startup generally produces talent that has learned on hard, real-life problems. Perhaps shell-shocked or overly vigilant for a while— but definitely more experiences than your average hobby developer.
I find it helpful to know a company’s exit strategy. Is it targeting survival? Ramen-viability? 10x? 10%?
We see from Google’s experiments and sunsetting of Google Domains that they are not happy with a value stream that produces $100m/year in revenue but cannot be scaled to billions of users with advertising. While that may seem cold— especially due to bad customer support— they have a clear target and do not compromise on it.
Play Big — Playing Small Helps No one
Playing Small keeps you stuck in the lingering zone of not succeeding but also not going bankrupt. This is a losing game as you cannot keep up with the increasing opportunity cost of your talent and inflation.
Your focus areas will on average focus on two lists:
Fighting Fires
Pursuing Value Streams
The list you focus on will grow.