The Next Founder helps founders build great startups. We offer advice on managing your mental health and productivity, hiring and managing great people, building a strong culture, and keeping people aligned and working on the right things. See the series overview at Welcome to The Next Founder and find out more about me at My Story.

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“Focusing is about saying no. And you’ve got to say no, no, no. When you say no, you piss off people.”
– Steve Jobs

“The main thing is to keep the main thing the main thing.”
– Stephen Covey

“If you chase two rabbits, you will not catch either one.”
– Russian proverb

Right Under the Wire

Today is the last day of your fiscal year, and everything comes down to a customer meeting an hour from now.

You were at $1.5 million ARR when you closed your seed round last year, and growth since then has been solidly “mid.” You lowered the annual plan to $2.5 million and placated your board, assuring them that the new plan would at least be a slam dunk.

But “slam dunk” is now “half-court shot.” You’re at $2.2 million, and you won’t make the plan unless you close the $300K contract in the meeting.

The good news is that the customer told you they will sign today. The bad news is they’ll only sign if you agree to their list of demands. It’s not a sales meeting; it’s a hostage negotiation.

The customer is a health insurance company, an industry you don’t sell to. They won’t buy unless you build an integration with their proprietary medical records system, commit to HIPAA compliance, and offer user-based pricing instead of charging per transaction.

You and your co-founder agree you need to take the deal, even though it will suck up your engineering resources for a quarter and will create ongoing hassle for your finance team. Neither of you wants to roll into the next board meeting with the news that you missed your plan yet again. At best, the board will rant and rave. At worst, they’ll pull their support. You cave within the first five minutes of the meeting.

Later that night, as you lie in bed doom-scrolling, the purchase order arrives. You feel little joy as you scribble your digital signature. You lived to fight another day, but you worry you now have much larger problems looming.

The Goldilocks ICP

In Embrace Contradiction, we said a startup demands constant trade-offs. Some of the toughest involve who you sell to, or your “Ideal Customer Profile” (ICP).

Your ICP describes the customers who are the best fit for your product and whom you can reach and win in a repeatable and scalable way. An ICP typically includes the customer’s industry, size, geography, and factors such as their tech stack, risk tolerance, and urgency to solve the problem you solve.

A startup with a clear and focused ICP can:

• Focus product development on precisely what those customers need.

• Craft messaging and value propositions to appeal to those customers.

• Build marketing channels that find those customers where they learn about products.

• Build a community of customers who want you to succeed and refer other customers.

But even a startup that is clear on its ICP, like the one in our vignette, will feel pressure to chase non-ICP customers because of:

Challenging targets. Most founders set aggressive revenue targets and struggle to meet them, making it hard to say “no” to customers who want to buy (especially on the last day of the fiscal year!). Walking away from revenue feels odd when you’ve been scraping and clawing 80 hours a week to bring it in.

Fundraising. Investors seek startups tackling large markets, so founders feel pressure to describe a huge market they can sell to from day one.

Internal pressure. Your sales and marketing teams will always uncover prospects who don’t fit your ICP, and they’ll ask if they can try to close those deals. When you say, “no,” they’ll ask why you are paying them to close deals and then not letting them do it.

Learning curve. Even if your ICP is spot on, it always takes time for your team to learn to attract and win those customers. You won’t always know the difference between the normal sales learning curve1 versus the possibility that you got your ICP wrong.

But chasing non-ICP customers can raise marketing costs, fragment your roadmap, reduce your win rate, and raise churn. That can lead to even more pressure to win deals, leading to the “ICP Death Spiral”:

On the other hand, a startup succeeds by being agile, scrappy, and responding to market feedback. Surely this sometimes means going after deals that aren’t perfect.

How do you know when to hold your ICP and when to fold?

Navigate the “ICP Hourglass”

You can think of your startup as an hourglass, wide at the top, narrowing in the middle, and widening again at the bottom:

How you handle ICP decisions depends on where you are in the hourglass. Starting from the top:

Explore ICPs – Every startup begins as a hypothesis about an ICP, their problem, and your solution. That hypothesis is almost always wrong, so you might need to cast a wide net and test different ICPs and product features to identify a set of customers who feel your problem most urgently and are most ready to buy. This is your “beachhead ICP.”

Commit to a beachhead ICP – Once you find an ICP where you consistently grab customer interest, win, and solve their problem, you can double down on that ICP and focus your product development, sales, and marketing on it.

Expand ICP – Once you consistently hit your targets in that core ICP, you can make deliberate, gradual expansions into adjacent ICPs.

The hourglass also helps you solve the investor problem: communicating a bold vision to eventually address a huge market while showing a plausible plan to get started.

But once you settle on an ICP, how do you make it real?

Make Your ICP Stick

Your ICP isn’t an abstract strategy. It has to guide how you run the company day to day. You should:

Write down your ICP, train your team on it, and constantly remind them of it. Laminate it and stick it on the wall if you need to.

Tag every sales opportunity that enters your funnel as either ICP or non-ICP. Don’t allow your team to burn cycles on non-ICP opportunities, and don’t pay them on non-ICP pipeline.

Focus your messaging on your ICP. Your website, customer case studies, demos, and pitches should all speak to your ICP.

Develop marketing channels tailored to your ICP. Target ads to your ICP. Show up at the trade shows your ICP frequents. Work with partners that sell to your ICP.

Only build product features that win ICP deals and make them successful. Don’t let your sales team harass your product team to add features to chase non-ICP accounts.

If your team isn’t tired of hearing about ICP, you probably haven’t done enough.

Face the Real Problems

Let’s say you do everything described here but still end up like the startup in our vignette, feeling pressure to chase non-ICP deals. What do you do?

Before you cave, as our founders did, take a step back and ask why you find yourself in this predicament. You’re usually suffering from one or more of:

Not enough pipeline. If you find so few qualified ICP opportunities that you have to chase non-ICP ones, you may not have enough pipeline. Startups often need much more pipeline volume than founders realize.

No compelling messaging and value proposition. If you reach customers in your ICP but consistently fail to engage them, you might not have identified the messages and value proposition that resonate with them.

The product is not ready. If you successfully generate ICP prospects but lose to competitors or homegrown solutions, you may have a product problem. Identify what is missing and whether you can build it.

You got your ICP wrong. If the problem persists, you may have selected the wrong ICP and need to rewind and identify which of your assumptions were incorrect. Pop back up to the top of the ICP Hourglass, experiment, and see if new answers emerge.

No one cares about the problem you solve. Many startups are simply working on a problem that isn’t urgent for anyone at all, regardless of ICP.

How do you know which of these it is?

Before assuming it’s volume, ask: are ICP customers entering the funnel?
Before assuming it’s messaging, ask: do engaged ICP prospects convert?
Before assuming it’s product, ask: do converted customers stay and expand?

Compromise with Integrity

Well-funded startups have the freedom to turn down customers. Bootstrapped startups often don’t. Closing a non-ICP customer beats putting the next payroll on your personal VISA card.

But if you absolutely have to take the customer, make sure:

You are honest with your team. Don’t try to gloss it over. Explain why you decided to sell outside of ICP.

Avoid the slippery slope. Tell your team that it’s not open season on chasing any customer who answers the phone. Approve any ICP exceptions yourself.

Be honest about the cost. Don’t fool yourself into thinking that signing up the wrong customers is no big deal. Be honest about the cost of supporting the customer, and assume they will likely churn.

Ask why. Most of all, don’t just show up at work the next Monday, congratulating yourself on closing the deal. Ask why it happened and if you have bigger problems on the horizon.

Face Your Demons

Managing a startup is hard, but managing your psychology is even harder. Missing the number hurts. Disappointing the board is scary. Saying “no” to your team is uncomfortable.

But running in circles and never building a great company because you didn’t focus on an ICP will feel even worse.

But you’ll feel way worse if your startup languishes because you were never willing to pick an ICP and go all in on it.

If you have feedback or suggestions for future posts, please comment or contact us at michael@nextfounder.co.

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The Next Founder helps founders build great startups. We offer advice on managing your mental health and productivity, hiring and managing great people, building a strong culture, and keeping people aligned and working on the right things. See the series overview at Welcome to The Next Founder and find out more about me at My Story.

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"The best startups don’t rush to grow; they perfect their foundation so they can sustain growth." 
— Reid Hoffman

"The hard thing isn’t setting a big, hairy, audacious goal. The hard thing is laying brick after brick, day after day." 
— Ben Horowitz

"Don’t worry about scaling. Worry about building something worth scaling." 
— Paul Graham

Running in sand wearing ski boots

On Saturday morning, you wrap yourself in a bathrobe and brew tea to regroup after a frantic week. You ask your AI assistant Aimee to extract to-dos from transcripts of the week’s meetings. Aimee spits out a task salad that makes you wonder if your little LLM friend is hallucinating.

On Tuesday, your Director of Sales blew up when you asked her why the forecast is so meager. In a millisecond, she deflected the blame to your marketing team, claiming they are delivering unclosable leads from prospects who stretch the definition of “qualified.”

The next day you asked your Director of Marketing why the leads are weak. He says that since you don’t have any happy customers, he has no idea what value propositions resonate with buyers. You brought your Director of Customer Success into the meeting, who says, “I can’t convince customers to love a product that is trying to solve so many problems that it doesn’t solve any of them well.”

You finished the week going out for drinks with your CTO / co-founder. You hoped to confide, commiserate, and brainstorm solutions, but instead, he explodes, “You are so obsessed with closing deals before the Series A, you stopped listening. We are trying to sell to too many different types of customers who need different things. I told you that it’s too early to hire a sales and marketing team, and soon we’ll be laying people off. I’m not sure how long I can last since this is not what I signed up for!” 

You are left reeling, wondering how your “high growth” startup got stuck in the mud. But you aren’t the first startup struggling with growth, and you might be able to recover if you Scale Step by Step.

Too fast, too slow, or just right?

As we covered in Embrace Contradiction, founding a startup forces you to balance seemingly contradictory ideas, many of which involve how fast to grow.

A startup exists to grow. Grow is what a startup does. The best startups grow 3-10x per year, and a startup that doesn’t grow will die. Great founders are willing to leave their comfort zone, take risks, and invest resources to achieve that growth.

But that pressure to grow can lead to a common startup failure path: scaling prematurely. Those founders try to speedrun scaling by copying the tactics of high-growth startups, like hiring a marketing team to build a pipeline, sales reps to close deals, and cramming the product full of features. They build a startup that is like the 10-year-old neighbor kid missing free throws in the driveway despite wearing his new Steph Curry jersey and Curry Series 7’s.

So how do you know when it’s time to grow, and how do you know when you need to lay more of the foundation needed for growth?

The Startup Scale Hierarchy

You can think of startup growth as a hierarchy, where each level serves as the foundation for higher level1. Trying to climb too quickly up the hierarchy can cause the whole thing to topple down, but moving too slowly can cause you to lose the market to competitors.

Each level is a vast topic that we can’t do justice to here. Most startup advice, including from Next Founder, applies to one of these levels. We’ll limit our discussion to some of the signs that each level is solid enough to start supporting investments at the next level.

Level 1 - Founders work well together with founder-market fit

At an early-stage startup, the founders are the company. They decide which customers to focus on, what problems to solve, and design and build the product. They hire and manage the team and set the culture.

The founders in our vignette were disconnected from each other and were losing faith in their business. You can avoid that if you:

Invest in your co-founder relationship

More than half of startups fail due to problems with the founding team, often leading to a founder break-up2. The founders might discover they aren’t equally committed once they discover how hard a startup is. They might find they have different working styles or that they flat-out don’t like each other. In Start Out the Right Way, we talked about a few ways you can discover if you and your co-founder are a good fit and set the right expectations at the start.

Find a problem where you have “founder-market fit”

No founder is universally talented: their knowledge, passion, and skills are only relevant in the context of a building a specific startup to win a specific market. The founders must either arrive with a deep understanding of their market or quickly develop that understanding. Plan to spend a great deal of time with your customers to get to know them, understand their problems, and ensure that you are the right team to solve them. 

Avoid burnout

It usually takes ten years or more to build a sizable startup, so you are going to spend the greater part of a decade working with your customers on their problems. As we discussed in Train Like a Startup Athlete, investing in your physical, mental, and emotional health enables you to work hard over a long period.

A great founding team isn’t enough, though. You need something worth working on, meaning:

Level 2 - A focused and well-defined ICP with an urgent problem

A great startup needs a great market, meaning a customer with a problem you can solve. That combination of customer and problem doesn’t just drive what product to build. It also drives your pricing, business model, and average deal size, which in turn drives the go-to-market strategy, what metrics to track, and even who to hire.

The founders from our vignette built a company where no one knew who the customer was or what they needed, so the team was running in circles. To avoid that, make sure you:

Find a problem that customers need solved urgently

The most common startup failure path is simply not finding a customer problem so critical that customers will buy a solution from a startup to solve it. Ask hard questions about whether what you are working on matters, work with prospects to incorporate their feedback, and experiment and pivot until you find something that resonates.

Pick a focused Ideal Customer Profile

In Spread the Good Word, we talked about how most startups struggle to get anyone to pay attention to them at all. After all that rejection, you’ll be tempted to say “yes” to anyone who picks up the phone. But if those customers are too different from each other, your startup can find itself with a mishmash of customers from different industries with different problems, none of whom are happy. Focus on a well-defined ICP that feels the most urgency to solve the problem, even if you need to say “no” to other prospects along the way. You can expand your ICP over time, but it’s almost always better to be very focused at the start.

Know your positioning

Most founders know and love their product and assume everyone else will, but prospects have an odd way of refusing to go along for the ride. When a prospect considers your product, they’ll mentally “position”3 it by considering what problems it solves, how urgent those problems are, and what the alternatives are. Your startup’s positioning then drives how you sell and who you compete with. In some cases, you can turn your product from a “nice to have” to a “must have” simply by reframing who you are for and why they should care about you.

Of course, you have to actually to solve that problem, which takes us to:

Level 3 - Product-market fit

Your product has to solve the customer problem well enough for customers to use it, choose it over the competition, pay for it, and recommend it. Yes, we are talking about Product-Market Fit4. PMF is such an important step that startups are often described as either “pre-product market fit” or “post-product-market fit” since they have such different challenges. Many first-time founders are shocked to learn how difficult and rare it is for a startup to find PMF.

You know you’re converging on product-market fit once you:

Obsess about a customer problem

This is worth repeating since it is probably the primary source of startup failure. At most startups, the founders have the skills they need to build the product, so when customers are apathetic, it’s because you haven’t solved a problem they are losing sleep over. Don’t just ask yourself how well-designed, fast, and feature-rich your product is; validate if your customers care about the problem you solve in the first place.

Ship a product that solves that problem

Of course, you have to build a product that works, is a joy to use, and spits out metrics that prove you have solved the customer problem. This rarely happens right away, so you need to get the product in front of customers in your ICP and keep testing and iterating until you have a handful of customers who love it. Plan for this to be iterative, where you need to experiment with different ICPs, value propositions, and features to get it all to line up.

Find customers who love you

The first baby step towards product-market fit is to find a handful of customers who use your product, love it, and are willing to pay. Most founders will tell you that getting those first few customers was agonizingly slow and required them to do “things that don’t scale”5 like working their personal network, camping out in their prospects’ office, and offering generous discounts. Do whatever it takes to acquire and retain those customers and turn them into evangelists. Don’t worry about how you will get 1000 customers until you’ve gotten ten.

But you can’t stay at ten forever, which means you need:

Level 4 - Scalable and repeatable way to find and win customers

Product-market fit with a handful of customers is a prerequisite to scaling, but it doesn’t guarantee anything. You only succeed if you use that early traction as a springboard to find scalable ways to build your business.

The startup from our vignette was flailing since the team had no idea how to find and win customers. You can flail less if you:

Train your team to close deals

The founders drive the first sales at a startup by building relationships with early users, ensuring the product meets their needs, and converting them to paid customers. You only scale from there once other team members can do the same thing. Although you should always stay involved in sales, invest in figuring out what messages and value propositions resonate with your buyers, and train and support your team to close deals with minimal help from you.

Learn to build pipeline

Your first few customers might come from your immediate network, including former coworkers, friends, relatives, classmates, or peer companies in your incubator program. But no matter how connected you are, your network will run dry pretty soon. You and your team need to learn where prospects in your ICP hang out, find ways to reach them, and learn what messages and value propositions resonate enough to get them into your pipeline.

Expand with discipline

Founders always feel both internal and external pressure to grow, so they can be tempted to prematurely expand their ICP and chase prospects who won’t be successful. Like the founders in our vignette, they feel pressure to add sales and marketing staff to chase growth, reasoning, “you need to spend money to make money,” only to find they are spending without making. Be deliberate about which investments to make and when, and don’t expect that adding people will magically bring in new business.

At this point, you are getting smarter about your customers and how to build a business that solves their problem, but now you need someone to do the work, which takes us to:

Level 5 - Hire and manage a great team

Almost any founder scaling a startup will tell you that most of their problems involve finding great people, keeping them, and getting them to work well together. Although AI is helping startups grow with smaller teams, the smaller the team, the more critical each role is.

You’ll know you’re on track to building and managing a great team once you can consistently:

Bring in the right people

Recruiting is time-consuming. Adding a single person to the team can take dozens of hours of sourcing, interviews, reference checks, and courting the candidate. Most startup teams spend so much time building their product and finding customers that they can’t imagine finding extra hours to recruit their team. You have to find a way to do it, even if you have to drop some other tasks. Adding the right people to your teams gives you way more back than it costs. In Find Your People, we discussed what kind of people to target.

Move out the wrong people

No matter how well you hire, you will always make some mistakes, where you hire someone who just isn’t working out. You’ll also find that as you grow, people who were great in the early days are not scaling as your company scales. When you recognize that someone is not working out, move quickly to help the person improve, find them a new role, or ask them to leave. The best founders are uncannily good at this.

Learn how to delegate

Many startup management dilemmas involve what to delegate and how. You won’t scale if you make yourself a bottleneck, but delegating the wrong work to the wrong people can slow you down even more. In Activate Founder Mode, we discussed how to know the difference.

Build an open and transparent culture

Any founder will tell you that they prefer working for an innovative startup than for a large, sluggish incumbent, but ironically, many founders build BigCo cultures at their startup anyway. They are reluctant to share information with their team or trust them with decisions, as we discussed in Know Your X's and Y's.

But the best team in the world doesn’t help you unless you ask them to work on the right things, which means:

Level 6 - Plan and execute a strategy to win

Startups always live in a world of scarcity, where they can only afford to prioritize a few goals at a time. You need a strategy that tells you which of those goals to prioritize based on a strategy to win your market. You then need to track those goals, make sure each team member knows their role in accomplishing the goals, and replan regularly.

To excel here, you need to:

Have a clear strategy to win

Every successful startup attracts competitors, and in most markets, only the top handful of competitors capture the bulk of the value. You need a strategy and plan to become one of them. That strategy has to represent clear choices and tradeoffs, such as which ICP to focus on, how to expand that ICP, how to win customers, how much risk to take, and what product and distribution strategies to invest in.

Plan and replan regularly

All startups compete in dynamic markets, so they gain insights into how to win their market daily. Your job isn’t to set a long-term plan and then white-knuckle it against all opposition. Your job is to stay in learning mode and constantly update your plan as you learn. But startups also need some continuity, where they don’t fall victim to “shiny object syndrome” and chase every new opportune that comes along. Assume you will plan and replan often, but be thoughtful about the changes you make and take time to explain them to your team. 

Manage the company based on the plan

A plan isn’t just a quarterly corporate exercise, where you write some goals down, show them to the board, then put them into a virtual drawer until the next quarter. A well-run startup reviews the plan daily, asks how they are tracking the plan, and changes the plan based on new information. You’ll know you’re on track when you use your plan daily to make decisions and facilitate conversations with your team.

Using the Startup Scale Hierarchy

The hierarchy doesn’t give you a roadmap or a checklist that guarantees you’ll build a great startup, but it does give you a framework to guide certain decisions. You can refer to it when you:

Don’t skip steps

Every startup, especially venture-funded ones, feels enormous pressure to grow. You’ll feel a lot of pressure to skip steps, but that can lead to several problems:

• Pivoting into a market where the founders don’t have a lot of knowledge or conviction.

• Building a product without a comprehensive understanding of your ICP and their challenges.

• Hiring sales and marketing staff before reaching product/market fit.aa

• LARPing a successful startup by “playing house”6 and leasing a nice office, hiring a Head of Finance, launching a podcast, and doing the things that successful startups do without actually being one.

But don’t move too slowly

But, this hierarchy is not linear, where you master each level before leveling up. Sometimes you’ll have to work on several levels in parallel. For example, finding product-market fit requires experimenting with different customers, problems, and features until you get them all to align. And sometimes, you’ll need to poke your head up a level and start investing before the previous level is completely baked, for example, hiring and onboarding a couple of sales reps (a multi-month process) before you have converged on your sales playbook. Only you can decide what level of risk you are willing to take, based on how much funding you’ve raised, how quickly your market is moving, and if you are willing to make hard choices when things don’t work (like laying off those same sales reps once you realize you hired them too soon!)

Better understand investors

The hierarchy helps you understand investors since different investors invest at different levels. Although every investor needs to believe you will eventually master every level, they vary based on the amount of progress and proof they need.

• Angel and pre-seed investors invest at the bottom of the hierarchy, mainly focusing on the founding team and the problem they are tackling.

• Seed and Series A investors want more evidence of product-market fit and that you have found a scalable GTM motion.

• Later-stage investors want to see a fleshed-out executive team, compelling metrics, and a long-term plan to win your market and build competitive advantage.

Always target investors who invest at your level, center your pitch around evidence you’ve mastered those levels, and give a preview of how you plan to master subsequent levels, for example how you plan to build barriers to entry.

Stay vigilant

No matter how high you climb in Maslow’s Hierarchy, you never stop needing food and shelter. This hierarchy works the same way. You have to keep investing in your co-founder relationship as new challenges arise. You have to invest in burnout avoidance, which can get harder every year. You can’t take product-market fit for granted - you can lose it over time. You can never stop getting better at winning customers since new competitors always pop up. Monitor your metrics and momentum at every level, and never get complacent.

Be ambitious and take risks when growing your startup, but always ask if your foundation is strong enough to support that growth. Good luck!

If you have feedback or suggestions for future posts, please comment or contact us at michael@nextfounder.co.

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The Next Founder helps founders build great startups. We offer advice on managing your mental health and productivity, hiring and managing great people, building a strong culture, and keeping people aligned and working on the right things. See the series overview at Welcome to The Next Founder and find out more about me at My Story.

Subscribe now

Start where you are. Use what you have. Do what you can."
— Arthur Ashe

“All you have to do is write one true sentence. Write the truest sentence that you know.”
— Ernest Hemingway

"If you don’t ask, the answer is always no."
— Nora Roberts

It’s Quiet, Too Quiet

After months spent recruiting a co-founder and pitching your local startup accelerator, you finally got accepted and are working full-time on your startup. You were ready to spend your days on customer calls, pitching your product to buyers, blowing them away with your brilliance, and watching your Stripe account light up like a Vegas slot machine.

That, well, hasn’t happened. Your office is so silent you can hear the ticking of the tell-tale wall clock, and tumbleweeds are blowing through your Zoom account.

The advisors at your accelerator advise you to do one thing: get more customer meetings! They remind you that meetings are the lifeblood of a B2B startup, where every meeting is a chance to get feedback on your product, refine your pitch, and add prospects to your pipeline.

Duh. You wonder if those advice-dispensing advisors know precisely how hard it is to get those meetings. You spent two hours last week sending 50 emails and LinkedIn requests and haven’t gotten a single reply. You could devote more time, but with a 0% conversion rate, doubling or tripling your outreach would…crunching the numbers…still land you at 0.0 meetings.

And the time you spend reaching out to a cold and uncaring world is time you could spend on your product. You started a company to deliver breakthrough innovations, not deliver annoying spam.

Don’t feel too bad: struggling to get prospects’ attention in the early stages is normal, but you do have to solve it. You have to learn to Spread the Good Word.

The Connecting Core Competence

I mentor early-stage founders through programs like Stanford’s StartX and Entrepreneurs First, which makes me the annoying advisor from our vignette saying, “More meetings, more meetings, more meetings!” This essay is an attempt to offer some tips on how to get those meetings.12

Most founders know they can’t just build a great product and hope people find it, even if they hope to deploy a product-led growth model eventually. They must talk to customers to get product feedback, test their pitch, and recruit their first customers. Those founders usually end up like the founder from our vignette when they discover how hard it is to get customers’ attention with no brand, references, or marketing team.

Cold outreach isn’t just a skill you’ll need while getting your first few customers, and it’s not just a skill you need if you sell to large enterprises. It’s a skill you need if you want to:

• Raise money - You’ll probably need to reach out to dozens of potential investors who haven’t heard of you and get meetings with them.

• Hire key talent - You’ll have to reach out to candidates who might not even be in the market to encourage them to talk to you.

• Sell to mid-to-large enterprises - Even if your startup makes product-led growth happen, if you want to go upmarket, you’ll have to learn to reach out to prospects who don’t know about you yet.

• Enter new markets - as you break into new verticals or geographies, you’ll have to go back into startup mode to find the first few customers in those markets.

Being great at cold outreach is a high predictor of startup success. It’s not easy, and nothing guarantees good results, but you can try a few things:

Respect the Role

Founders sometimes struggle with cold outreach because they haven’t done the job before and don’t really want to do it. They see it as grubby and beneath them. They have to change that mindset.

Some people do cold outreach to prospects for a living; they are called Sales Development Representatives (SDRs). Good SDRs are truly impressive. They are creative, resourceful, and persistent. Congratulations, you have now joined their ranks.

SDRs approach the job with energy and enthusiasm. They love the thrill of the chase. They are incredible at handling rejection and will tell you they had a great week if they got 10 solid customer meetings, even if they had to reach out to 200 prospects to get those meetings. They love to tinker with different approaches.

Most of all, SDRs know pipeline math, which is brutal. Let’s say your goal is to sign three paying customers before you raise your seed round. If only 5% of the people you reach out to agree to meet you, 20% are interested, and 30% of those become paying customers, that’s over 1000 prospects you have to reach, many more than once.

You can’t just fire off a few dozen messages and get discouraged when the unsubscribes roll in. You have to devote hours and hours every week, and you need to test and experiment with different approaches.

The difficulty of the task is why the “hacker and hustler” founding team is so effective. To have any hope of success, one of the founders has to spend most of their time trying to reach prospects and experiment relentlessly with better ways to do it.

The founders won’t be your company’s only SDRs forever — you’ll eventually hire people to take on much of the load, but you are more likely to hire a great SDR team once you appreciate what the job takes and candidates see how much you value it. And you can never delegate reaching out to potential investors, partners, acquirers, and key senior hires.

Position as a Missionary

Cold outreach is painful since you’ll need to reach out to hundreds or thousands of people and get rejected most of the time. You might get frustrated, discouraged, or even want to quit.

Doing a hard thing is always easier when you strongly believe in your mission. Your outreach will work better if you have a firm conviction that you are doing prospects a favor by telling them about you:

• You’ll be able to power through the hard work and rejection since you’ll honestly believe you are doing customers a favor by sharing your solution with them.

• When you do reach a customer, they’ll be more likely to respond since they’ll pick up on your energy and enthusiasm about how you can help them.

• You’ll develop more powerful messaging and value propositions when they are rooted in a conviction that you can help solve customers’ most important problems.

So, before you fire up your browser to send off a batch of messages, remind yourself why you started your company in the first place and picture the customers who will be grateful you connected with them once you’ve solved their problems.

Pick Your Profile

Like everything else at a startup, cold outreach relies on knowing your Ideal Customer Profile (ICP) and the specific titles and roles in those companies who will buy from you (Ideal Buyer Profile). When you know your customer, you are more likely to build the right product, develop the right messaging and value proposition, and concentrate your outreach on prospects most likely to respond.

For example, “We sell to sales teams” is too broad to get you far; the world has millions of sales teams. You can’t reach out to a team but only to a specific person, and that person has a title, responsibilities, and goals. A more focused ICP/IBP, like, “We sell to Directors of Sales at B2B software companies between $50 and $500 million in revenue based in the United States” makes it more likely you’ll know who to target and develop messages that resonate with them.

If you are so early that you haven’t settled on an ICP, you can use your outreach to test different ICPs, but just make sure the result is a focused ICP and not “all of the above.”

Work Your Network

You are probably more likely to respond to a request if it comes from someone you know and trust, so assume the people you want to reach are the same way. Successful startup founders often recruit most of their first customers via introductions from friends, family, colleagues, and investors.

You might assume those founders had better networks than you do, but your network is probably better than you think. Your network is not only your immediate friends, family, classmates, and co-workers but also theirs. You just need to learn how to connect those dots.

List the people you are trying to target, and then see if you can map a path to them. Does a connection of your uncle work at the same company? Did your boyfriend’s father go to school with them? The answer is usually “no,” but you’ll be surprised how often it’s “yes”.

When you find a connection, even a tenuous one, be aggressive about asking for an introduction. Be clear about why you think you can help the person you want to reach (you’re a missionary, remember?) Make it as easy as possible to make the introduction by writing a draft of the introduction message they can forward instead of putting the burden on them to write it.

Speak How You Like to Be Spoken To

You are probably bombarded with marketing messages, and your brain has developed heuristics to make snap judgments about which are worthwhile. The instant you glimpse “breakthrough solution!” Or “You can’t afford to wait!” Your mental spam filter is triggered.

But for some reason, many founders send messages to prospects they’d never respond to themselves, as if some marketing god in the sky insists that sending spammy and gimmicky messages is the “right” way to do marketing. It’s not.

Talk to people the way you want them to talk to you:

• Be human — “write like you talk” is always good advice, and it’s especially true for cold outreach. Be friendly, conversational, and respectful. Cut the jargon, keep your messages short, and get to the point.

• Put them in the center — people aren’t that interested in the history of your company and your long list of product features. They care about how you can help them. Yes, make sure your personality comes through, and establish credibility with success stories from other customers, but put the focus on how you can help them. Don’t drone on about your “mission.”

• Be personal — highlight something you have in common with the recipient, like a hobby, school, city, or previous job. Research the company and comment on the challenges someone in their role may face.

• Ask for something small and specific — you aren’t asking the recipient to write you a big check or to sign up for a lengthy sales pitch. Ask for something small that will tangibly move the conversation forward, usually a short meeting where you learn more about them, show your product, and propose next steps.

• Leverage tools, but not too much — the market is loaded with AI-based outreach tools to help you run these campaigns3. These are most helpful when you know who you want to reach and what messages resonate with them, so don’t scale them prematurely. Devote hands-on time to personalize your messages and experiment with different approaches. Don’t be afraid to “do things that don’t scale.”4

These tips only scratch the surface of what it takes to master cold outreach. Those who do it for a living are experts in getting customers to respond, and you can find all kinds of videos and blogs with more tips and tricks. The point is to take it seriously and spend time learning the craft.

Embrace Who You Are

You have plenty of disadvantages as a startup with no brand, a small team, and few customers, and you shouldn’t expect a prospect to respond to you unless you offer something that the established incumbents in your market don’t already offer. It might be easier than you think.

Instead of apologizing for being a startup, turn it into a strength:

• Leverage your founder superpower - Buyers get pitched by SDRs and sales reps all day, but they don’t get many chances to talk to founders. Try using your real name, be clear that you are a founder passionate about your product, and see if you get better conversion rates.

• Offer customers a chance to innovate - most buyers are pitched products developed long ago and rarely get a chance to steer a new product. Ensure your early buyers know they’ll have the chance to work closely with your team to shape a new product and category.

• Focus on your differentiators. Assume buyers have already heard from competitors, including the stodgy incumbents in your market. Position yourself as an innovator not by listing everything you do but by focusing on where you are most differentiated.

“Fake it until you make it” still has its place — you should project the confidence of a founder who is convinced they will build a successful company, but don’t pretend you are something you aren’t. Be proud to be a disruptor who can do things no one else can.

Recruit Co-Conspirators

You should constantly experiment with which tactics and messages get prospects in your ICP to respond. You can do this by running tests and analyzing the results, but you can also do something simpler: just ask them.

When you do manage to get a meeting with a good prospect, leave some time to ask questions like:

• “I’m sure you don’t respond to many messages. What was it about mine that got you interested?”

• ”Did you know about solutions like ours before you talked to me?”

• “Are you getting approached by other companies with competing solutions? What did you like and not like?”

• ”Now that you know what we do, how do you think we can get your peers to respond?”

Yes, you are allowed to do this. Buyers are just people; many enjoy meeting and helping startups, and they might picture themselves getting a promotion after bringing an innovative solution into the company or giving a keynote at your conference. And remember that their meeting with you might be the most fun they have all day.

Evangelize At Real-World Events

If you are lucky, you work in an industry with trade shows and conferences that do you the favor of gathering your buyers in one place. Take advantage. Don’t be that startup that spends months blasting prospects with emails when those same prospects are boozing it up down the street at the Marriott Marquis, all wearing badges that make them easy to identify. Find a way to get into that room (or at least lurk in the lobby bar).

I know many startup founders who found a way to get into an industry event and made more progress from two days working the room than they had from weeks of cold outreach, having dozens of conversations with attendees.

Events might seem like an approach that doesn’t scale, but you aren’t trying to scale in your early days. You are just trying to get in front of as many customers as possible.

Besides, it might turn out that events do scale for you, especially if you are selling to midsize or large enterprises. Many startups generate leads from events. There is a reason that 45,000 people show up at Dreamforce every October in San Francisco, wearing their badges around town.

Take cold outreach seriously, respect the function, put in the time, and get great at it. Soon, you’ll build a following. Good luck!

If you have feedback or suggestions for future posts, please comment or contact us at michael@nextfounder.co.

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The Next Founder helps founders build great startups. We offer advice on managing your mental health and productivity, hiring and managing great people, building a strong culture, and keeping people aligned and working on the right things. See the series overview at Welcome to The Next Founder and find out more about me at My Story.

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“I noticed that the dynamic range between what an average person could accomplish and what the best person could accomplish was 50 or 100 to 1. Given that, you’re well advised to go after the cream of the cream. A small team of A+ players can run circles around a giant team of B and C players.”
—  Steve Jobs

“I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than when they got up, and boy does that help.”
—  Charles Munger, 2007 USC Law School commencement address

“If he’s such a good hitter, why doesn’t he hit good?”
—  Billy Bean, Moneyball, (Aaron Sorkin Screenplay)

A Tale of Two Bosses

You hired Angie and Bonnie as Directors of Marketing and Operations last month. They started at 9 am on a Monday, and by noon their paths had diverged. Now, four weeks later, they are in different zip codes. 

Today’s staff meeting drives the point home. Bonnie presents an improved operating plan that shows she has completely digested your startup’s market, culture, and strategy. She introduces three new team members she hired, each of whom seems so talented they could do Bonnie’s job.

Angie’s update reveals she’s circling the drain. Marketing didn’t accomplish any of its goals this month, which isn’t surprising since she barely remembers those goals. She still can’t articulate what customers you sell to or why they buy from you. She presents the resumes of two people she wants to hire, each a junior clone of herself. You ask to hold off since it’s unfair to hire people you’ll have to let go right after you let their boss go, which you’ll do by the end of this week.

In the spirit of learning, you ask yourself why Angie and Bonnie turned out so differently.

You start with their resumes. Angie’s was actually more impressive. She did the same job at a well-known larger tech company, where Bonnie came from a failed startup you had never heard of. But it’s Bonnie who is firmly in control of her team, while none of what Angie learned at the BigCo has helped her at your startup.

You consider their experience in your market. Angie’s last company sold into the same industry you sell to, and you expected she’d leverage her knowledge and contacts. Bonnie’s company sold similar-sized deals but in a different vertical. Yet, Bonnie is building connections with your customers daily, while Angie burned through her handful of tentative contacts in her first week and hasn’t developed new ones.

You read the interview notes. Angie was smooth, polished, and professional. Someone commented she was like an actor playing a corporate executive in a Netflix series. Bonnie was a clear communicator but came across as geeky and introverted. She didn’t seem interested in small talk and dove down quickly into her recent projects and the teams she built to do them. But now everyone is confused about what Angie’s team is doing but blown away by what Bonnie’s team has delivered.

You are flummoxed. If you had to bet on Angie versus Bonnie when you interviewed them, you would have doubled down on Angie, but she’s the one who will be gone after the awkward 5-minute firing you have scheduled for Friday afternoon. 

How can you hire more Bonnies and fewer Angies? You have to Find Your People.

“On paper” versus “on the ground”

Every product your startup builds will be built by a person. Every customer will be sold to and supported by a person. Every marketing campaign will be driven by a person. Every strategy, plan, and decision will be made by a person. Every one of those people will be hired by another person. And you can only build a big company if you beat your competitors, who are all merely collections of people.

This is not the first time you’ve heard that building your team is one of the hardest but most important things you’ll do, but when you think about building your team, you probably lose sleep over how to source candidates, interview them, check references, negotiate compensation, and convince them to join your company. These are all important, and we’ll cover them in future essays.

But one of the trickiest parts of hiring might seem to be the simplest: deciding who you want to hire in the first place.

Every search starts and ends with a job description. That job description will attract specific candidates and repel others. You'll evaluate candidates against that job description. It will drive what they work on and whether they are doing a good job. It will drive how much you will spend on each position.

Yet most job descriptions are fired off without a lot of thought, often cloned from the horrible boilerplate job descriptions that big company HR departments cut and paste onto job boards. These job descriptions often have a long list of required credentials and experiences but manage to tell the applicant almost nothing about the company or the team they’d be working with. You might want to put a little more effort into yours for a few reasons:

You are a high-growth startup

More people have worked at medium and large companies than at startups, so many people who apply for jobs at your startup will come from larger companies with established brands, large customer bases, and playbooks for their primary business functions. A high-growth startup builds those things from scratch, which demands different skill sets and, more importantly, different attitudes and expectations.

You are doing something new

Any startup worth starting is building a product that has never existed before and often is tackling a new market. You can’t hire someone who has done precisely what you are doing since no one has. You might find people who have solved similar problems for similar customers, but you are hiring people to help you figure out your business, not replicate what they did at their last one.

You have a small team

Your startup has to research, design, build, and deliver your product. It has to attract prospects, turn them into customers, and make them successful. It needs to hire people, pay them, and fund the company. It does all this with a tiny team — even a startup with only a few people has to cover every one of these functions, so anyone working at a startup will have to cover more ground than at a larger company. They have to be willing to jump in and do jobs they’ve never done and where they have no experience or training.

Your startup will change

A large company can hire people into jobs that won’t change much, but roles at startups change constantly as the startup pivots its product and experiments with different strategies to attract and keep customers. A startup often hires someone to do a job that doesn’t exist in the same form in a few months, and startups often promote their team members since they grow so quickly.

You can’t pay as much

Most startups are racing the clock to keep from running out of money before they make enough progress to raise more or get profitable. You have to find people willing to sacrifice some cash for stock options and are looking for the learning and career acceleration a startup can provide.

These differences mean you have to put a great deal of thought into what kind of people you need to succeed, how you’ll attract them, and how you’ll evaluate them. No two startups are identical, but as you build your team, you can think about a few things:

Don’t “hire by keyword”

You know the work that needs to be done at your startup, so you’ll be tempted to look for people who did that exact work at their previous gig. If you are building machine learning pipelines in Python, you might write a job description requiring 5 years of experience building machine learning pipelines in Python. If you sell CRM software to financial services companies, you might only consider sales reps who have sold CRM software to financial services companies.

Looking for people who have already done the same job can work, but asking someone to cut and paste their last job often backfires for a few reasons.

First, you aren’t a Google or an OpenAI, where thousands of applicants will respond to each of your job postings. You have to expand the pool of candidates you can go after, and every time you add a “must-have” qualification, you drain the pool. I’ve seen startups write job descriptions with so many “must-have requirements” that almost no one applies.

And you are building a new product and using new technology to build it. When you’re on the bleeding edge, you won’t find many people with years of experience in the relevant technology stack. Reddit is full of threads mocking job descriptions written by HR departments demanding “5 years experience” working with technology invented 12 months ago.

Should you at least find people who have sold into your industry? It can be helpful, but when you make industry experience a requirement, not only do you limit the pool of people you can recruit, you might find that experience isn’t very helpful anyway. Airbnb is full of people who have never worked in hospitality, including the founders. Netflix was not startup by anyone had worked in Hollywood. Many of my worst hiring mistakes happened when I got enamored by candidates with experience in the industries we were trying to crack. Many of them couldn’t adjust to a new approach to their industry, and they didn’t last long.

Don’t write a “unicorn job description” where, if taken literally, the Venn diagram of people who could check every box would yield almost no one.

Be open to people who have worked with adjacent technologies and markets and who have the desire and ability to learn your business quickly. That profile describes the founders and early teams of many successful startups.

Hire for the future

Some founders assume that hiring is like reading applications for an elite college, where you look at a candidate’s qualifications and achievements and pick whoever has the most impressive list. But a credential happened in the past and is only helpful if it predicts what the candidate will do in the future when they work for you. 

You might think you should look for people who have already done the job you are hiring them to do, but that filters out many of the best candidates. Ambitious people want to learn and grow, not spend the next five years doing the exact job they did for the last five years. They won’t join if you ask them to.

Look for people on the upward trajectory of their careers who might be doing the job for the first time. If you are hiring a VP of Marketing, your best candidate might be a Director of Marketing who was second in command working for a great VP at another startup. They might join you because you give them a chance to do the larger role for the first time, and they’ll tackle the job with energy and enthusiasm, seeing it as an opportunity to make their mark.

Look for “learning machines”

Experience is important, but anyone joining your company will have a steep learning curve regardless since your business is new and unique and will continue to morph and pivot as your market changes and as you learn how to win that market. Find people who love to learn and know how to.

Great learners don’t usually have elite educations. Sure, someone who went to Stanford probably has some brainpower (unless their parents donated a building), but for every elite college grad, dozens of others went to less prestigious schools (or no school at all) and can learn just as quickly. You can also hire them without competing with the thousands of other companies who target prestigious degrees, especially since that degree might come with a level of entitlement that makes them a poor fit for a startup anyway.1

At one of my companies, we built our backend systems using the Go programming language, but we didn’t list Go as a requirement in our job descriptions. We would have cut our candidate pool by 95% and excluded many amazing candidates. The kind of people we hired would be smart enough to pick it up quickly anyway. Some even joined us because we offered them the opportunity to learn something new.

Hire for your stage

Most founders want to build a big company and are told they need to “learn to scale.” Some assume that scaling means hiring people from already-scaled companies, like Salesforce or Google. Hiring those people can work, but it can easily backfire.

Just because someone works at a big company doesn’t mean they know how to build a big company, any more than driving a car means you know how to build a car. Many BigCo people sell mature products into established markets using playbooks that someone else wrote years ago. You and your team are building your product, defining your market, and figuring out what works and what doesn’t. You want people willing to sign up for that rollercoaster and not get frustrated by constantly shifting projects and priorities.

Also, many positions at large companies are narrower and more specialized. They have enough people to slice responsibilities thinly. An early-stage startup only has a handful of people, each of whom has to cover more ground.

Many of your best candidates will come from other rapidly growing startups. Some might come from failed startups, where they learned some things not to do and are eager to do better the next time. They know what to expect at a startup and have probably picked up the skills and resilience needed to thrive in day-to-day startup life, where every day is different, and pivots and course corrections are constant.

Make it personal

We have talked about hiring people who are ambitious, want to learn, embrace change, and know that sacrifice is needed to build a great startup. Are we talking about culture? 

We’re starting to. Culture is a big topic and will be the subject of future essays, but you need a sense of what kind of culture you want to build because, spoiler alert, that culture is a mashup of the founders and the people you hire. Your culture attracts the right people, and you build that culture by hiring those people.

Hiring for “cultural fit” has gotten a bad reputation, and, yes, it can backfire. No, don’t only hire people the same age, gender, nationality, and personality as you, or your startup’s diversity and creativity will suffer. Don’t only hire people who approach problems like you do and won’t challenge each other. But have a point of view about the kind of people you want, and don’t be afraid to go after that. 

Expose your culture at every touchpoint of the recruiting process, starting with your job descriptions and the recruiting section on your website. Share why you are excited about your startup, and be explicit about the kind of people you want to bring on the journey. Don’t be afraid to repel the people you don’t want. The very definition of culture is that it attracts some people and not others. Let your personality shine through and make your content conversational and friendly. There are no HR gods in the sky who will crack down on your company because your job descriptions aren’t written like the ones down at the DMV.

At this point, you might be wondering, once you know who you want, how do you find them, get them interested, evaluate them, and get them to work for you? We’ll start answering those questions next in “Build a Talent Magnet.” (Coming soon).

If you have feedback or suggestions for future posts, please comment or contact us at michael@nextfounder.co.

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The Next Founder helps founders build great startups. We offer advice on managing your mental health and productivity, hiring and managing great people, building a strong culture, and keeping people aligned and working on the right things. See the series overview at Welcome to The Next Founder and find out more about me at My Story.

Subscribe now

"Given the opportunity, workers are eager to learn, grow, and take responsibility for their work."
— Douglas McGregor

“The only way you can make a man trustworthy is by trusting him, and the surest way to make him untrustworthy is to distrust him and show your distrust.”
— Henry L. Stinson 

“The essence of the idea, radical at the time, was that employees' brainpower was the company's most important resource.”
— Peter Burrow, BusinessWeek (on the HP Way)

Sometimes they really are out to get you

You’ve learned to tolerate the mood swings that go with being the technical co-founder of a fast-growing 40-person startup, but you’ve never dreaded coming to work until now. It started three weeks ago when you added Chad, your new VP of Sales, to the team.

When Chad started, you tried to build rapport with him and oriented him on your product team and processes. But things went south at last week’s leadership team meeting when you announced that your team slipped a product deadline by two weeks. Chad has been standoffish and surly ever since.

Your co-founder senses the tension, too, so she organizes a team dinner on Friday, hoping that taking the leadership team offsite to get to know each other would ease the tension. Unfortunately, the dinner only made it worse.

After sangria and tapas raise his blood alcohol and blood sugar levels, Chad comes to life and starts a rant about how “things need to change.” He says he “holds his team accountable,” but other teams at the company “escape the consequences.” He beats his chest about whipping his team into shape, whereas other managers (clearly you) let your people “do as they please.” He proposes that your team would miss fewer deadlines if you docked their pay when dates slip. He questions your startup’s work ethic since he sent some emails last night at 8 pm that no one answered until the morning.

Chad seems utterly unimpressed by your startup, and the rest of the dinner is awkward. You are in for some painful discussions next week, but they’ll be easier if you Know Your X’s and Y’s.

What are we actually arguing about?

You’ll be tempted to charge into Chad’s office on Monday and tell him why he’s wrong, defending how hard your team works and their track record of delivering a great product. He’ll say that he joined your startup to raise the bar and that you need to step up your game and drive people harder. You’ll have different versions of this debate every few weeks unless you pinpoint the core of your disagreement.

The core of your disagreement might be different mental models for what motivates people and how to manage them. His model is more “Theory X,” and yours is closer to “Theory Y.”

Theory X and Y is a framework popularized by Douglas McGregor at the Sloan School of Management in the 1950s1. If you haven’t heard of Theory X and Y, that’s because it was so successful that it’s baked into modern management and is rarely mentioned explicitly. But like so many golden oldies, each generation seems doomed to rediscover it, which is what you and Chad are doing.

Theory X is grounded in the Industrial Revolution, where many workers worked in manufacturing jobs. Their jobs had limited scope, and their output was driven by how many hours they worked. Management’s job was to decide what the workers should do and how to do it, then push them to do it for as long and hard as possible. 

Theory Y is grounded in the knowledge economy, where the work requires a high level of skill and creativity, and workers are valued more for what they know how to do than how many hours they do it. They are trusted to work more autonomously alongside management and contribute their own ideas.

Theory X and Theory Y help answer questions like:

Are employees labor or capital?

Theory X says employees are hired to execute tasks and are interchangeable and easy to replace. Theory Y says employees are “the talent,” possessing rare and valuable skills, where the value of a company is a sum of the skills of its team, in the way that the value of a pro sports franchise comes from its star players.

Are employees motivated by incentives or by the work?

Theory X suggests people are motivated by keeping their jobs and preserving their paychecks. Theory Y says they are motivated by doing great work, building their skills, contributing to a mission, and supporting their teammates. Many of the ideas behind Theory Y were motivated by Maslow’s Hierarchy of Needs, developed around the same time.2

Do managers have to compel employees to work?

Theory X assumes that employees are lazy and will try to get away with doing as little work as possible when management isn’t looking. Theory Y says most workers can be trusted and are internally motivated to deliver good work because they want to contribute to the mission, grow their skills, and support their teammates.

Is management a partner or an adversary?

Theory X employees and their management clash over money, hours, and working conditions in a zero-sum game, with labor unions often mediating. Theory Y sees management as another role on the team that partners with the people who work for them. It’s not uncommon for Theory Y employees to outearn their managers, just as pro sports stars are often paid more than the coach.

Do you pay people for their time or their skill?

Theory X suggests that the more hours a person works, the more they deliver, and management’s job is to extract as many hours from them as possible. Theory Y says employees add value to their company by deploying their creativity and talent, in the way Nicole Kidman adds value to a Netflix Series by being Nicole Kidman, not by acting for more hours.

Does the management team assign tasks or assign problems?

A Theory X manager sees their role as deciding what work needs to be done, breaking the work into tasks to assign to individual workers, and supervising the tasks. Theory Y managers trust their teams not just to execute tasks but also to help decide which tasks need executing in the first place.

Is the workplace a hierarchy or a network?

Theory X takes a more hierarchical view of a corporation, where management possesses the information their team needs to know and then carefully transmits it down the org chart. A Theory Y corporation is more of a network where employees communicate with anyone they need to across the company to get work done, regardless of their department or level.

Theory Y and the tech industry

The tech industry probably embraces Theory Y more than any other industry. A tech firm creates new, unique, differentiated products requiring skill and creativity to invent. Hewlett Packard, arguably the prototype of the modern startup, pioneered many Theory Y-based management practices with the “HP Way” in the mid-twentieth century.”3 These have become standard in the tech industry.

You could argue that Theory Y peaked in the early 2000s when companies like Google and Facebook hired as many talented people as possible, showered them with benefits like free food and dry cleaning, and gave them leeway to work on problems they found interesting, including Google’s “20 percent time.”4 The most hilarious scenes from the HBO Series “Silicon Valley” mocked Theory Y taken to excess, portraying the employees of a Google-like company spending their days enjoying free sushi and sunning on the roof while their employer looked the other way since it would be worse if they left for a competitor. 

Of course, the story is more complex. As with any binary framework, the answers lie in the middle. Yes, employees are motivated by more than money, but compensation is a significant driver of why they work for you. Yes, you hire people for their skills and creativity, but they do deliver more if they work more hours, up to a point. Yes, you should empower your team, but sometimes you have to overrule and make hard decisions. Yes, everyone says they want to build a Theory Y culture, but when times get hard, Theory X creeps in, sometimes out of necessity.

But building a successful startup means knowing what mix of Theory X and Y to apply to which situation, starting with:

Get leadership aligned

Some startups underperform because their leaders hold different ideas about what kind of people to hire, how to manage them, and what culture to build. A fundamental mismatch can even cause a co-founder breakup, often discovered only when the founders start to grow the team and hit these management dilemmas.

Talk to your co-founders about the kinds of people you want to hire and how much autonomy to give them. Discuss which decisions you want to drive vs. which ones you want to trust the team with. Pick a few hypothetical management dilemmas and ask how you’d approach them.

When interviewing potential leaders like Chad, ask questions that reveal their management philosophy and ensure it aligns with the culture you want to build. Don’t expect to agree completely. For example, Heads of Sales like Chad often employ some Theory X tactics since managing a quota-driven Sales team differs from managing an Engineering team. But you still want to uncover if you have different core assumptions about what motivates the kind of people you want to hire.

Hire for Theory Y

Most management challenges have less to do with how you manage your team and more to do with what team you hire in the first place. You can only build a Theory Y culture if you have people who can handle it. Start by looking for signs of Theory X and Y thinking when you recruit:

You generally aren’t looking for candidates who just need a job and will take the first offer they get. And you don’t usually want a candidate who will simply join whichever company pays them the most. Instead, look for signs that a candidate is specifically drawn to building a startup at your stage, wants to work on products like yours, and understands what that will take. They should ask many questions about your business and culture, and you should see them noodle over whether it’s a good fit for what they want, especially for more senior candidates.

Get a sense of how a candidate expects to work with others. Ask for stories about conflict or cooperation with co-workers and management from previous roles. Look for evidence that they envisioned their role as strengthening their team instead of acting as a free agent. Even if they were unlucky enough to have a lousy manager or unreasonable co-workers, ask how they tried to improve the situation. When you find a candidate who tells you that everyone at their last company was an idiot, proceed with caution. And always check references and push on the same topics.

And even though you want people motivated by more than a paycheck, never use their enthusiasm for your startup against them to justify underpaying them. And, of course, if you want people to act like owners, you need to make them owners. Give them generous stock option grants and regularly remind them that their job is to find ways to make that stock worth something. 

Hold people to high Y standards

Given the choice, most people would rather work for a Theory Y company. We all want to be empowered, trusted, and given latitude to do our best work. But it’s a common misperception that Theory Y jobs are easy. Notwithstanding our friends on the roof in “Silicon Valley,” a Theory Y job can be brutally hard.

Theory Y means high expectations for people to live up to the trust they are extended. They have to deliver great work without being micromanaged. They have to generate creative ideas and anticipate problems. They can’t wait to be told what to do but should come to you with ideas. They should understand your mission and strategy and find ways to make them happen.

When you recruit people, confirm they understand these expectations and can live up to them. If they don’t, they either need to improve quickly, or you have to let them go.

Give people problems, not tasks

Many startup leaders claim they empower their team, but too many define empowerment as “I trust you as long as you do exactly what I would have done.” This isn’t empowerment; it’s dressed-up Theory X.

Don’t fall into the trap of “leadership does the thinking, and the employees implement the leaders’ ideas.” You want every team member to contribute ideas, down to the new graduate you hired yesterday. You don’t hire people because you are too busy to do the work yourself. You hire them because they are better at the work than you are.

For example, many of the best-run software companies build “product teams,”5 where a cross-functional team of engineers, designers, and product managers team up to solve a set of problems tied to a user persona or business problem. The teams become experts in their product area, understand their users’ problems, and propose and build solutions to solve them. Management doesn’t tell them what to do. Management expects them to figure out what to do.

Examine your attitude towards your team. Do you assume you know more about every aspect of their work? If you do, does that mean you have the wrong team? Do you believe good ideas can come from anyone? Do your people know you expect them to bring those ideas?

Always ask if you are giving your team problems to solve and space to solve them. You can still give feedback and overrule when needed, but make that the exception, not the baseline, and when it happens, ask why.

Build a see-through startup

An unfortunate leadership antipattern is when leaders hold onto crucial information and dole it to their subordinates on a need-to-know basis. These info-hoarding managers often use excuses like “We don’t want to distract people” or “They can’t handle it.” This is seldom the case. 

Those managers employ Theory X thinking, believing their title gives them a unique ability to manage complexity and risk that their mortal subordinates could never dream of. Managers are as susceptible to Imposter Syndrome as anyone else. Holding on to information can become a way for them to justify their position and give them the right to lead.

You should rarely tell a team member, “If you knew what I knew, you’d understand why we have to do this.” Why wouldn’t they know what you know? Why didn’t you tell them?

Build a transparent culture where the whole team can access the same information you can. Communicate your strategy and goals aggressively. Share your vision. Share all of your forecasts, customer meeting notes, and product plans. Make your file shares and Slack groups public. Have a company meeting where anyone can share important news and insights.

You can’t get your team’s best thinking without giving them the whole picture. Once you do, great things will happen, more will get done, and your life will get easier since you won’t need to stay on top of every person and project. Theory X management is no fun.

Don’t regress to Theory X as you grow

All founders want to grow their startups, and the faster you grow, the more critical Theory Y becomes. As you add people, projects, and complexity, your only hope of executing well is to harness your team’s collective brainpower, let them make decisions, and let them act without asking permission.

Unfortunately, the exact opposite happens at many startups. As they grow, they reduce their trust in the team, add more approvals and roadblocks to getting things done, and share less information. They regress to Theory X just when they need Theory Y the most.

Sometimes, the startup’s culture goes bad after it hires managers from larger companies and they bring their BigCo culture along with them. They build silos. They carefully control communication. They add multiple layers of approval for decisions. Founders often go along with this, assuming that maybe this is what scaling looks like.

Sometimes a startup becomes more risk-averse as it grows, and it starts to focus on preventing bad things from happening instead of encouraging good things to happen. A single employee abuses the expense report policy, but instead of simply firing or disciplining that employee, the company adds layers of approvals to expense reports that signal to the employees that none of them are trusted. Saving a few thousand dollars comes at the cost of demoralizing a team capable of generating hundreds of millions or billions of dollars in market cap.

Many people who have worked for growing startups can tell stories about the day their startup “jumped the shark”6 and regressed from a great place to work into an ordinary and mediocre corporation where the team is no longer trusted and is kept in the dark. The employees leave and watch from the sidelines as the startup’s Glassdoor scores plummet and results decline.

Yes, you need to add experienced managers as your startup grows. Yes, you need a few more processes and controls. But none of them help you if they come at the cost of your best people feeling like you are treating them like children. 

We will cover these topics more in-depth in future chapters.

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The Next Founder helps founders build great startups. We offer advice on managing your mental health and productivity, hiring and managing great people, building a strong culture, and keeping people aligned and working on the right things. See the series overview at Welcome to The Next Founder and find out more about me at My Story.

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“In effect, there are two different ways to run a company: founder mode and manager mode. Till now most people even in Silicon Valley have implicitly assumed that scaling a startup meant switching to manager mode. But we can infer the existence of another mode from the dismay of founders who've tried it, and the success of their attempts to escape from it.”
— Paul Graham, Founder Mode1

“God is in the details. But I am not a creative person. I can’t draw, I can’t sketch, I can’t make anything. I just have to make sure things are being done right.”
— Anna Wintour

“It is the responsibility of leadership to work intelligently with what is given and not waste time fantasizing about a world of flawless people and perfect choices.”
— Marcus Aurelias

Lean in or sit back?

Your startup grew from 20 to 25 people this month. You don’t know if that qualifies you as a “Blitzscaler”2, but you feel great about the new talent, especially your new Head of Sales, Agnes, and your new Head of Product, Pablo.

The week they joined, you spent a few hours offloading responsibilities to them. You walked Agnes through recent deals you won and lost, your sales playbook, and your best customer references. You trained Pablo on your product strategy and roadmap and your development process. You finished the week with a company happy hour to welcome them then spent the subway ride home gleefully deleting meetings from your calendar that you handed off. You fell asleep to dreams of hyperscaling.

It’s a month later, and in this morning’s leadership meeting, you are blown away by Agnes’ update. She flipped a set of dormant leads into active opportunities on the brink of closing. She’s made several upgrades to your sales playbook. She has a pipeline of new reps eager to join. You think, “This scale thing is easy!” and mentally pat yourself on the back.

Your love fest with your back stops at Pablo’s update. He shares some new projects he’s launching, and it’s feature salad. None of it connects with your startup’s strategy or goals or solves customer problems. You have an awkward discussion ahead of you where you’ll have to ask him to change the roadmap and pause the projects he just launched. You imagine his pushback: “Why did you hire me if you don’t trust me?”

You leave the meeting confused. You know that scaling your startup means hiring good people and delegating, but now you’ve been both rewarded and punished for doing just that. Don’t be too surprised, though. All founders face this dilemma, but you're more likely to succeed if you Activate Founder Mode.

Micro-manage, macro-manage?

Conventional management wisdom is “hire great people and get out of the way.” That would seem to make sense for a growing startup, given how much work there is and how much talent you need to do it. Plenty of startups fail because their founders don’t learn to hire great people, train them, and trust them to take on important work.

But anyone who has worked at an early-stage startup knows this is incomplete advice. Founders struggle with which work to delegate and which to do themselves. They agonize about overruling decisions made by their team versus letting them stand. They debate which parts of their business they should go deep into and which areas to hand off. In my 30-year startup career, not a week has gone by that my teams didn’t struggle with these questions. It’s the core dilemma of managing at a startup.

Paul Graham’s Founder Mode essay, based on a talk by Brian Chesky, resonated with founders like me because it pinpointed that tension and gave it a name. We are told we should hire good people and delegate, but we see that fail constantly. We hate being micromanaged, but are tempted to micromanage others. We want to build our startup into a big company, but we know we can’t manage it like it already is.

Unpacking these dilemmas requires remembering why a startup isn’t just a smaller version of a big company3. A startup is growing like crazy, changes every month, and is always adding new people. It has to constantly learn as competitors and incumbents respond. It has little room for error and can’t afford to waste much time or money. Most of all, it has to be as innovative at 100 employees as it was at five.

Hiring people, handing them the work, and hoping for the best rarely solves these challenges, but micromanaging every person and project won’t either. As is usually the case, it’s not a binary choice.

Paul Graham doesn’t go deep on Founder Mode, but I can weigh in with my own definition. Founder Mode means learning where you should go deep and where you should sit back. It’s spending time with the right people and projects and letting others run on their own. It’s learning how to manage people and projects tightly but in a way that builds trust instead of eroding it. It’s accepting the risk of failure but not accepting sloppiness and low quality.

Founder Mode means learning to:

Pick your spots

Most of us want to be fair and treat people equally. If we have five direct reports, we assume we should manage them the same way, spend the same amount of time, and tell them their work is equally important.

We shouldn’t. People aren’t all the same, and the work isn’t all the same. You should spend more time and be more hands-on with the most critical projects and the least experienced people:4

If you are running out of money in three months, devote time to raising the round and work closely with the people who will help get that done, like your finance team. Don’t hesitate to tell other teams that their work is less important and that they’ll get less of your time, at least for now. You have to prioritize. Launching a new product is more important than optimizing your tech support. Designing your brand is more important than designing your office.

Your people are different and need different amounts of time and focus. Some will be new and be ramping up, where others will be more established. Some will have proven their excellence, and the jury will still be out on others who might not make it.

Find out where you are needed, put your time and energy there, and be willing to roll up your sleeves and go deep.

Build a Founder Mode team

Most startup management challenges have less to do with how you manage your team and more to do with who you hired in the first place, especially for executive hires, many of whom don’t work out and either quit or are asked to leave. Many of the startups I work with at Point Nine and elsewhere assume that up to half of their executive hires will fail, with many of them failing because they can’t work in Founder Mode.

A common failure path is to hire an executive from a larger company who can't adjust to a startup. The executive builds a silo and runs their team with little input from you or from others. They aren’t hands-on enough to know if the work is any good, and their solution to problems is to ask for more budget to hire even more people.

Hire leaders who know their job is to get input from you and others and be willing to put their work up for scrutiny. Hire managers who are able and willing to activate Founder Mode themselves. They do exist; the best startups are full of them. You don’t want a team of managers who are too defensive to get feedback and too timid to give it.

And stay open to internal promotions, who often outperform outside hires even when they have far less experience on paper. They grew up in your company, are hands-on enough to contribute to the work, and are used to the discussion and debate that characterize a startup.

Front-load new hire training

Many founders, like the ones from our vignette, assume they should hire a senior person, spend a few hours training them, and then turn them loose, assuming anyone worth hiring can take over the job from there. This sometimes works, but it’s better to assume you have to make a big upfront investment in them.

If you hand off too quickly, you’ll get Pablo from our vignette, where a few weeks after the new executive starts, something isn’t quite right. Little work is getting done, and what does get done is low quality. Their proposed new hires make you scratch your head. They don’t know the details of the work. You now have to spend time and energy unwinding some decisions, and the team has lost faith in your new hire and in you for hiring them.

A better plan is to front-load the time you spend with a new hire and devote several hours a week for several weeks. Walk them through how you do things at your company. Shadow them on their first few projects. Sit in some meetings with them. Brainstorm solutions to problems. 

They will get up to speed more quickly, and you’ll learn how to work together. You’ll also both discover if they are a fit for your company earlier. If they aren’t going to work out, both of you are far better off pulling the ripcord early.

Let the work guide you

Your startup has to deliver excellent work and deliver it quickly. As a founder, you are responsible for every piece of work that comes out of your company, whether you created it or someone you hired did. If you hire someone, delegate the work to them, and the work isn’t great, then you hired the wrong person, delegated too early, or didn’t delegate the right way.

Use the work to lead you to where you should spend your time. If the work from one part of your organization is excellent, congratulations. You probably don’t need to spend much time with that team other than checking in regularly and recognizing and rewarding them.

In the areas where the work isn’t excellent, dig in. The people on that team might just need some more coaching and feedback. You might need to step in and help resolve some important decisions. In the worst case, you might have the wrong person running the team, and you have to ask them to leave and bring in someone new. But you can’t just sit back and hope things improve on their own.

Know your own strengths and weaknesses so you know which of your opinions you can be more confident in. But don’t limit yourself too much. Maybe you’ve never run a sales team before and your Head of Sales has, but you do know if you are making your plan or not, and you are perfectly capable of calling a prospect and asking why they didn’t buy or calling a sales rep and asking what help they need. You can also lean on your board and advisors in areas where you are weaker.

Talk to everyone

BigCo managers can get with just interacting with their direct reports and a few peers, which can come from big company politics, where managers want to control the information coming in and out of their team. “Stay off my turf, and I’ll stay off of yours” doesn’t work at a startup, though.

You need to know what’s happening in your own company. Find out how people are feeling and what questions and concerns they have. Test if they understand your strategy and plans. Find out who is performing well and who is struggling.

Have skip-level one-on-ones. Talk to people working on important projects and critical deals. Have ad hoc conversations with whomever you bump into in the elevator or the lunch room. Encourage everyone who works for you to do the same thing.

If a manager at your startup is possessive and wants to “protect” their people from “being distracted” by anyone but them, that’s not a leader you want at your startup.

Be curious, not judgmental

“Good people hate to be micromanaged” is accepted wisdom in modern management, but it has some nuance. When people complain about micromanaging, it’s usually about how that management is delivered. People will always remember how you made them feel, and all that.5

People bristle when feedback seems arbitrary or is delivered disrespectfully. If one of your product managers has interviewed 25 customers and put a hundred hours into designing a new feature, they won’t react well if you fire off a curt midnight Slack message telling them their solution is wrong and you know the right one.

Lead with curiosity instead.6 Ask what assumptions were behind the work. Ask what constraints they were under. Ask what else they considered. You might learn you don’t have all of the background. Maybe they have insight you don’t. They might be operating off of the wrong information or were never trained properly, which is your fault but something you can fix. You might learn that you’re just wrong, which should happen a lot unless you really are better at every job than every person at your startup, in which case you have bigger problems.

You will seldom hear someone complain about micromanagement if you treat them with respect, lead with genuine curiosity, consider the possibility you are wrong, and take the time to collaborate on the best solution.

Bake feedback into your operating system

Manager feedback also gets a bad rap because it’s often delivered reactively and unpredictably. You might have scars from a “Dilbert” manager at a previous job who would show up at a meeting for a project that is halfway done and dump feedback on the team that they are on the wrong track. Everyone gets frustrated, the work needs to be redone, and the team starts to flinch when they see the manager coming.

It’s more productive to bake feedback into the day-to-day cadence of running the company. Use your one-on-ones with your team members to regularly give and get feedback on their work. Schedule regular review meetings for important projects. Establish checkpoints for projects where you and other people will give feedback, and schedule them early enough in the project that work doesn’t have to get thrown out and redone.

You want to be known as a manager who helps teams do excellent work, not one who derails projects. Make the investment up front to make that happen, and tell everyone else you expect them to do the same.

Solve problems once

Sometimes, you’ll see work delivered by your startup that doesn’t meet your high standards. It might be a slideshow that’s ugly and misformatted. It might be a sales rep using out-of-date competitive intelligence. There might be more bugs in your product than you can accept.

When this happens, you get disappointed or angry, especially in moments of weakness when you are already tired or frustrated (which is why you should avoid the midnight Slack). It’s tempting to assume that someone screwed up and that you need to track down the culprit.

But it’s more productive to ask a few questions, find the root cause of problems, and propose more systemic solutions. Instead of getting mad at a sales rep for creating ugly slides, have your design team create a beautiful template and train the whole team on how to use it. If your competitive intelligence is wrong, assign a team to solve it and make sure they know to prioritize it.

Your reaction to all of this might be, “Hmm…Founder Mode doesn’t seem unique to startups. It’s just good management, the kind that big companies need, too. This is true. Although Apple could not have built the iPhone without thousands of talented managers and engineers, it also wouldn’t have built the iPhone if Steve Jobs had told that team, “Go build a phone, and if you need any help, I’ll be in my office.”

Some will argue that only a founder like Jobs can operate in Founder Mode. Others say that anyone with enough fortitude can. It doesn’t matter. The point is that you can. Your startup probably wouldn’t even exist if the legacy incumbents in your market had figured it out. Founder Mode is the only sustainable advantage you have over them, so never give it up.

If you have feedback or suggestions for future posts, please comment or contact us at michael@nextfounder.co.

The Next Founder helps founders build great startups. We offer advice on managing your mental health and productivity, hiring and managing great people, building a strong culture, and keeping people aligned and working on the right things. See the series overview at Welcome to The Next Founder and find out more about me at My Story.

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“Many a young person tells me he wants to be a writer. I always encourage such people, but I also explain that there's a big difference between being a writer and writing. In most cases, these individuals are dreaming of wealth and fame, not the long hours alone at the typewriter. You've got to want to write, I say to them, not want to be a writer.” 
— Alex Haley

"To achieve your dreams, you must apply discipline, but more importantly, consistency. Without commitment, you never start, and without consistency, you never finish." 
— Denzel Washington

“A lot of people say they want to be great, but they’re not willing to make the sacrifices necessary to achieve greatness. They have other concerns, whether important or not, and they spread themselves out. That’s totally fine. After all, greatness is not for everybody.”
— Kobe Bryant

Theory, meet my friend Reality

After working all weekend, you succumb to the temptation to check Instagram. You digitally stalk a startup founder acquaintance who raised his seed round when you did 18 months ago. You can’t tell how well his startup is doing, but you can tell he’s having more fun than you.

You watch several Reels of him partying at nightclubs with other startup founders and venture capitalists at last week’s Art Basel Miami. Now he’s in New York, launching his product at TechCrunch Disrupt. He then heads to South by Southwest in Austin to speak on a panel about raising a seed round. He also launched a podcast with another founder, but you decide you can skip it.

You compare his week to yours. You spent ten hours interviewing candidates for an open marketing position, wasting nine of them since you knew each one wasn’t a fit after three minutes. You demoed your product to a dozen potential customers, all of whom ghosted you when you requested follow-ups. You had two tense one-on-ones with team members where you had to deliver harsh performance feedback. You still have 100 unread Slacks to plow through.

This week’s calendar looks very much the same: no launch parties or conference keynotes, just back-to-back interviews, customer pitches, one-on-ones, and team meetings. You’ll answer a hundred emails, close 25 support tickets, and track down dozens of references for candidates you are trying to hire. You reserved an hour each day for “thinking work,” but you know they’ll get absorbed by team members who need talking off of whatever ledge they’ve shuffled onto.

OK, your life is far less glamorous than your friend’s, but the good news is that you are probably more on track to create a successful startup. You are willing to Embrace the Grind.

Grinding it out

The first couple of years at a startup are a scrum where you just pile onto whatever it takes to build a product, get a few customers, and hire the people needed to make that happen. Good for you if you graduate from that phase since most startups never do. You then transition to a company-building phase where you settle into a steady rhythm of spending your days trying to make progress in a few ways:

Pitching and selling

Landing a few happy customers is a nice milestone, but it’s only a toe in the water. Now, you have to build a machine to make sure prospects know about you, get them into your pipeline, and get them to pay you. Selling involves a great deal of time, repetition, and rejection. Don’t be surprised if, in a week, you cold call 50 prospects just to get a handful of meetings, most of which will end in rejection. Or you might spend the week working the booth, pitching prospects at an industry trade show. Think Columbus Airport Hilton, not Art Basel Miami.

Recruiting your team

When you are growing, you are almost always filling new positions or backfilling for people who quit or you let go. Filling a single position might require dozens of hours of interviews and reference checks, with an executive hire requiring even more. You might spend 10 to 20 hours per week recruiting, and if a hire quits or doesn’t work out, you have to start over from the beginning.

Managing your team

If you are in a senior role, your days will fill up with staff meetings, project meetings, training new hires, and one-on-ones. Some of these discussions can be draining and emotional since they involve disagreements and delivering tough feedback. 

Soothing customers

Even after you get to some level of product/market fit, you have to stay close to your customers to understand how they use your product, what enhancements they need, and what value propositions and messages resonate with them. A customer can go from happy to unhappy very quickly and they’ll cancel you if they aren’t getting value. You’ll meet lots of customers, possibly traveling to the larger ones. Some of these meetings are hard to delegate since customers love meeting founders.

Operating and financing the company

Close the books. Appease the landlord. Pay the taxes. Issue stock options. Prep for the board meeting. Although you will rely on your team, firms, and software to manage your operations as much as possible, you are always responsible for the final product. It’s your signature on the documents.

In other words, much of your time is spent on work that’s repetitive, difficult, boring, and often ends in rejection. You never have enough time to do all of it, so you’ll likely try to solve that by cramming activities into your calendar until it looks like a brick wall of meetings, sometimes in 30-minute or 15-minute intervals.

The days blend into each other. Soon, the weeks and even the months start to fly by as you bounce from one thing to another all day, every day.

Welcome to “The Grind.”

Now, sure, you knew that you wouldn’t spend your time partying at Art Basel Miami with the founder from our vignette (although, yes, such founders exist). But you may not have known how much of your day would be mind-numbing and repetitive. You thought you’d be Willy Wonka, but most days you are more like an Oompa-Loompa.

The best startup founders master the grind and don’t let the grind master them. You can keep a few things in mind when you think about yours:

Don’t start a startup if you don’t want to grind

You wouldn’t become a surgeon if you didn’t want to spend all day stitching people up. You wouldn’t become a musician if you hated rehearsing and recording studios. So don’t become a startup founder unless you want to spend all day every day grinding with your customers, product, and team. 

The grind isn’t just an unfortunate byproduct of the job. It’s not just something you do until your startup gets some traction. The grind is the job. It’s what you do. And as your company grows, the grind can get tougher before it gets better.

Even founders who have taken their startups public and have nine- or ten-digit net worths still spend much of their time grinding on staff meetings, one-on-ones, interviews, investor meetings, and customer meetings (although traveling to those meetings in a private jet somewhat eases the burden!)

No, you shouldn’t expect to enjoy every minute of the grind — it’s called “work” for a reason — but you have to enjoy the day-to-day rhythm of selling, recruiting, managing, and inventing. You can’t look at the grind as something to endure until you get to the “fun part.” It has to be the fun part.

But know that the grind will evolve

Although you shouldn’t start a startup if you don’t want to grind, take solace that you aren’t signing up for a “Groundhog Day” existence where every day is identical to the last until you slouch toward retirement. As your startup evolves, your grind will, too.

The grind is like a spiral staircase. You’ll cover the same ground again and again, but you’ll do it from a higher vantage point. Instead of pitching every customer, you’ll help close the most promising ones. Instead of being the first person to interview a promising candidate, you’ll do a final sanity check interview. You’ll go from pitching dozens of potential investors to updating the handful who invested in you (at least until the next round).

This constant progress is why startups can be great compared to larger companies, where the years can blend together because the grind is more static. You can often look at how you spent your time today and reflect that it’s very different from a year ago. The downside is that if your startup isn’t growing, you and your team will be frustrated by a lack of progress, and you’ll struggle to hold the team together.

Don’t get lulled into complacency

The grind is hard work, and most of us were raised to believe hard work pays off. After a hard week of grinding, you might go home assuming you are a week closer to success. You might not be. Grinding doesn’t help you if you grind on the wrong things.

Grinding on your product gets you nowhere if you are solving a problem that isn’t urgent for a well-defined ideal customer profile (ICP). Grinding on customer calls doesn’t help if you use the wrong value proposition, messaging, or pricing. Grinding on managing your team doesn’t help you if you have the wrong team.

The grind can become mesmerizing and hypnotic, where you go on autopilot and start going through the motions. Be careful when you feel that happening. Always ask if you are grinding on your most important priorities. We’d all love to live in a world where hard work produces results, but it doesn’t always. It’s necessary but not sufficient.

Focus on your priorities

Working on those right things means going on the offensive and ruthlessly controlling your time. Don’t let the tsunami of meetings, interruptions, and an overflowing inbox turn your days into whack-a-mole, where you try to smack down every random task and problem that pops up, going home frustrated that you’ve made no progress on your top priorities.

For example, if your startup suffers from a lack of leadership in Engineering, spend ten or more hours per week hiring a new VP of Engineering. If you have a churn problem, devote time to working with customers to diagnose and solve it. If you are fundraising, scale back anything that’s not a critical path to closing the round.

And don’t let the day-to-day grind distract you from the “deep work”1 that requires time, focus, and discipline to complete, like working on your product, creating a sales playbook, or revamping your messaging. 

It’s easy to look at your overflowing calendar and think, “Where do I make time for that?” but where do you think that calendar came from? You created it, and you can change it anytime you want to. It’s your calendar. It’s your company. 

Find a fast but sustainable cadence

If you embarked on a weeklong cycling trip, you’d plan a cadence that works for you. Maybe you’d bike in the early mornings to avoid the heat and recover in the afternoons. Maybe you’d break the day up into two segments of riding with a long lunch in between. Maybe you’d alternate the hard days and easy days. Startup grinding is similar.

Some founders try to stack all their staff meetings on Monday, leaving the rest of the week free for 1-1s, customer calls, and individual work. Some like to get up at 6 am, get a few hours of deep work done, work out, and then go into the office. Some like to reserve a day a week (even if it’s Saturday) for “deep work” that requires creative thinking, coding, or writing. Experiment until you find what works for you.

Hire for your weaknesses

At an early-stage startup, you’ll spend much of your time on things you don’t like to do and might not be very good at. You might have to join customer calls even though you are an engineer with little experience pitching prospects. You may not consider yourself a great recruiter, but find yourself in Interviews and reference checks all day. You’ll spend time outside your comfort zone, which leads to rapid learning and builds confidence.

But there is a difference between having a challenging job and having a job you hate. Although you should expect to regularly take on difficult and uncomfortable work, if you dread every minute of every day, you might be in the wrong role, or you may need to tilt your hiring toward people who will take over areas where you aren’t as strong.

Although you should hire the positions your business needs, you can steer your hiring to make up for areas where the founders have less interest and experience. If you and your co-founders are engineers, you might accelerate some of your sales hiring. If you detest finance and operations, you might bring a Head of Finance a little earlier than you otherwise would. 

Just be careful you don’t go too far in the other direction. Some founders make the mistake of losing touch with their business after hiring people to take some of the load. Don’t stop interviewing candidates just because you hired a recruiting manager. Don’t lose touch with your customers after you’ve hired sales and support reps. You can never stop being an expert in your business.

Gamify the grind

You grind to get results, so always ask if you’re getting those results and getting better at getting those results. As you interview candidates, experiment with different questions to see which ones give you the most insight into candidates. As you pitch customers, test different messages and techniques. If it takes ten meetings to convert one customer, ask how you can do it in five meetings. Experiment until you get there. You might not feel the momentum from day to day, but with weeks of compounding improvements, you should see steady progress.

The obvious benefit is that it will improve your startup’s results, but continuous improvement has a less obvious benefit: your grind will get more fun and fulfilling. You’ll feel your skills level up like in a video game. You’ll discover new talents. You’ll gain a feeling of satisfaction and momentum.

Bring this spirit of continuous improvement to your team, too. Share tips and tricks, like which messages in cold emails get the best results. Write down playbooks that work. Train new hires on the most effective tactics your team has learned for closing deals or evaluating recruits. Or even better, have them train each other.

Next, we’ll talk about one of the most common management dilemmas you’ll face as a founder in Activate Founder Mode.

If you have feedback or suggestions for future posts, please comment or contact us at michael@nextfounder.co.

The Next Founder helps founders build great startups. We offer advice on managing your mental health and productivity, hiring and managing great people, building a strong culture, and keeping people aligned and working on the right things. See the series overview at Welcome to The Next Founder and find out more about me at My Story.

In “Gaze Into the Abyss,” we’ll discuss what founders can do to manage imposter syndrome, which, although common among startup founders, can hurt their startup and make them miserable.

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“If you gaze for long into an abyss, the abyss gazes also into you.”
— Friedrich Nietzsche

“Keep your shadows in front of you—they can only take you down from behind.”
— Carl Jung

“Running a start-up is like chewing glass and staring into the abyss. After a while, you stop staring, but the glass chewing never ends.” 
— Elon Musk

Wow, nice abyss

You take your boyfriend to a local jazz club on Friday night. He asks how your week was, which he soon regrets after you spend twenty minutes talking over the music, unloading your litany of woes on him.

You launched your product six months ago. You have a handful of occasional users, but their feedback is lukewarm, and your meager revenue barely pays the kombucha bill. You aren’t converging on product/market fit, and you’ve been slow to launch experiments since your three engineers bicker constantly. Microsoft is also rumored to be adding some features to Azure that would compete directly against you and smother your market while it’s still in the crib.

Your boyfriend’s pupils expand as you toss rhetorical questions at him. Should we pivot and attack the market from a different angle, or be patient and stay the course? Should we fire the engineers and rebuild the team, or do we endure the dysfunction since we can’t stall the work at a pivotal moment? Will Microsoft lose interest like big companies often do, or are we wasting time thinking we can compete against them?

Your boyfriend is still paying attention, but it seems effortful. He wants to help, but since he works as a pastry chef, he has limited insight into your nascent niche in the AI tools landscape. But he makes an excellent sounding board, so you feel free to ask the real question: was this startup a mistake? Are my co-founder and I deluded in thinking we can do this? Should we just quit? At least date night would be more fun.

The good news is that if your boyfriend is willing to stay on board this carnival ride, he’s a keeper. The other good news is that you are willing to Gaze into the Abyss.1

It can get abyssmal 

Successful startup founders write a business plan, raise money, hire a team, build the product, sign up customers, scale the company, and then sit back and sift through the potential exit opportunities that land in their inboxes.

LOL, just kidding, that never happens. 

Every startup, even a successful one, constantly fends off an onslaught of problems, like a spaceship in a sci-fi movie dodging lasers, ricocheting off of asteroids, and careening toward black holes that threaten to suck them into oblivion.

Some problems, like a bad hire or a lost deal, are recoverable if you move quickly. Others, like trying to win a market that doesn’t exist, are existential threats. Some situations are so bleak that you are better off shutting the company down, taking a break, and starting a new startup from scratch.

These are “abyss” moments. An abyss isn’t just one of startup life’s long series of day-in/day-out challenges. They are company-defining moments where a brutal truth emerges. An abyss is realizing everything you asked your team and investors to believe was false. Escaping an abyss requires a bet-the-company decision with no clear answer.

Typical startup abysses are when you realize that:

You are not converging on product/market fit. You are solving a problem no one cares about, or you are solving it for the wrong customers. Or maybe you just built a lousy product. You need to rewind and rethink your product, possibly starting from scratch with a new problem to solve or a new market to tackle.

You hired several weak team members, and no amount of time, training, or leadership will turn them from the wrong people into the right ones. You have to ask them to leave and devote months to hiring and training replacements.

You will miss your revenue plan by a mile even if you close every deal in your pipeline. You’ll run out of money faster than expected, so you need to raise money quickly or lay off some of your team.

You raised money at a crazy high multiple during the last bubble and are facing a crushing down round. You tried to convince yourself that you’ve “grown into your multiple,” but the more likely case is that you’ll struggle to raise a round at any price. 

How can you tell when a problem is an abyss? A few symptoms are:

You are tempted to deny it

Almost everyone is slow to accept harsh truths or even deny them, especially truths that put the viability of your company into question and thus your competence as a founder. For example, accepting that you hired the wrong VP of Sales would require admitting you made a bad hire, losing all of the time and money you spent recruiting and training them, and living without a VP of Sales for the year it will take you to hire and train a new one. 

It’s gone on for a while

You always have good and bad days at a startup. You win a deal one day and lose one the next. You land a key hire one day, and someone quits the next.

An abyss is more persistent. It’s when you go three months without adding a customer. It’s when you look at your team and wouldn’t mind if any of them quit. It’s when 25 investors in a row ghost you after you pitch them.

The right thing to do isn’t obvious

An abyss rarely has a straightforward path of escape. If it did, it wouldn’t be an abyss. Let’s say your product is getting a lukewarm reception. You could convince yourself you’ll be OK once you add a few features. Or maybe you need to target different customers. Maybe you just need to give it more time. Or maybe you should shut your startup down and move to Bali.

When the right thing to do isn’t clear, you’ll likely be slow to act on it or suffer analysis/paralysis (or worse, paralysis without the analysis). You also might act impulsively and make fast but wrong decisions, sending you careening toward the next abyss. Doing nothing is dangerous, but doing the wrong something can be even worse.

You doubt yourself

Most founders hope their startup is the pinnacle of their career. Everything you’ve done up to now led to your having this idea, hiring this team, and building this product. You may have spent years dreaming about the day you could launch your own business.

You did, and now you are circling an abyss. You might feel like your life’s work is being soundly rejected, which leads to crushing self-doubt. You wallow in existential angst at the exact moment you need to think clearly, focus, and take decisive action.

At this point, you might wonder, “Alright, Nietzche, now I feel even worse. What do I do now?” There is no guarantee your abyss can be evaded, but you can try a few things:

Don’t panic when you approach the abyss

You have to be an optimist to start a startup, believing that your idea and your team are so great that you’ll be an exception to the rule that most startups fail. You have to believe your product will resonate, your team will get along, your revenue will grow, and the abysses will bypass you and haunt some lesser founder.

But a founder who expects everything to work out can be less resilient when they look up one day and see an abyss looming. Stay confident, yes, but don’t be shocked when the abyss looms. Face reality and get to work escaping that abyss once you are on its event horizon. Many other founders have.

But like most advice, don’t go too far in the other direction. If you expect to see an abyss around every corner, you can become hyper-vigilant, look for problems, and react too quickly at the first sign of trouble. Every problem isn’t going to kill your startup but stay attuned to the ones that might.

Plot your escape trajectory early

Founders have the most to lose and the most to gain from their startup, much more than their team and investors. You’d think they’d be the most sensitive to problems at their startup and be the quickest to react. They often aren’t. They sometimes see them even later than their team does.

For example, if your first three customers tell you they are switching to a competitor, you can try to convince yourself that you’ve just hit some bad luck. Maybe the customers just lack vision. Maybe you can add one killer feature to get them back. And you may be right. You certainly don’t want to overreact and toss out your plan or bail on your entire startup. Most startups take time to build momentum.

But don’t fall victim to wishful thinking. Take the problem seriously and start working on it. Talk to those customers. Gather data. Start building options and weighing them. You don’t want to make a rash decision based on fear, but the earlier you act, the more time you’ll have to make good decisions based on a clear-eyed assessment of the situation.

Let nothing cloud your judgment

As a startup founder, you should educate yourself on mental models and conceptual biases2. They come in handy all of the time, especially when hard decisions loom, and the emotional side of your brain is battling the analytical side.

For example, the Sunken Cost Fallacy3 often trips up founders. They have often spent years working on their ideas, and when they start to get poor customer feedback, they have a strong bias to ignore or downplay it rather than accept that they may need to pivot and “lose” some of the investments they have made. Sunken costs are behind many people problems, like being unwilling to accept that you spent a year hiring and training a VP of Marketing who isn’t working out since you’d have to devote a second year to hiring and training a replacement, “losing” the work you put into the first one.

Another is the Ostrich Effect4, which is the tendency to avoid bad news so that you don’t have to deal with the consequences. The Ostrich effect is why a founder can ignore an abyss gazing right at them when everyone else can see it clearly.

We can keep going, but these are all different versions of the same thing: you have to be ruthlessly honest with yourself about your startup, no matter how hard it is. Your team relies on you to face reality; it’s your job description. The best founders are almost eerily good at this. They can dispassionately focus on the right thing to do right now while being unsentimental about tossing out everything that came before.

See abysses as opportunities

It’s annoying to be told, “Every problem is an opportunity,” especially by people sitting on the sidelines and not chewing glass. But there is truth to it. Besides, you don’t have much choice.

Most successful startups veered close to an abyss at some point, and many emerged stronger. Sometimes, like at Slack, the abyss was the realization that the first product wasn’t working and the startup needed to pivot to an entirely new idea5. Sometimes, the abyss was slow product adoption, and the company responded by refining its go-to-market. Many startups have turned over their management teams multiple times.

Your abyss is telling you something. Ask what it is and if you can use it to make your startup stronger. In the worst case, you might learn that you don’t have a path to success, but you should be grateful to know that now instead of spending more years of your life working on something that won’t go anywhere.

Bring in your team

When that sense of dread that you’re at an abyss looms, it’s tempting to downplay it with your team. Managing your own psychology is hard enough without adding the burden of calming down a dozen of your teammates. And yes, you don’t want to share every negative thought with your team. They don’t need to join you on every plunge of your emotional rollercoaster. 

But an abyss isn’t just a bad day. It’s an existential threat to your startup. By the time you’re sucked into it, your team sees it too. They’ll be more nervous if they don’t hear you talk about it than if you do. No one wants to work for a deluded boss.

Bring them in early. Get their help diagnosing the problem so you can be precise about what problem you are trying to solve. Solicit possible solutions from them and enlist them to implement them.

If you have a board, investors, or external advisors, this is also an excellent opportunity to put them to work and let them prove their “value add.” If they are worth having in the first place, they’ve seen many abysses in their career, and they will have stories of how they’ve worked with other founders to solve them. Some founders worry this will cause investors to lose the faith, but it might have the opposite effect of solidifying their commitment to you since they can take some credit for helping you leave the abyss behind.

To put the abyss into your rearview mirror, you’ll have to hunker down and get things done, which we’ll cover next in Embrace the Grind.

If you have feedback or suggestions for future posts, please comment or contact us at michael@nextfounder.co.

The Next Founder helps founders build great startups. We offer advice on managing your mental health and productivity, hiring and managing great people, building a strong culture, and keeping people aligned and working on the right things. See the series overview at Welcome to The Next Founder and find out more about me at My Story.

In “Unmask Imposter Syndrome,” we’ll talk about what founders can do to manage imposter syndrome which, although common in startup founders, can hurt your company and make you miserable.

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“Among the vicissitudes incident to life, no event could have filled me with greater anxieties than that of which the notification transmitted by your order and received on the 14th day of the present month.”
— George Washington (upon learning he was to become President of the United States)

“Each time I write a book, every time I face that yellow pad, the challenge is so great. I have written eleven books, but each time I think, ‘Uh oh, they’re going to find out now. I’ve run a game on everybody, and they’re going to find me out.”
— Maya Angelou

"It doesn't go away, that feeling that you shouldn't take me that seriously. What do I know? I share that with you because we all have doubts in our abilities, about our power, and what that power is. 
— Michele Obama

"Jacked guy wearing suit must have it all figured out.”
— A Headline from The Onion

You’ve got that frauding feeling

Your Senior Director of Design started four months ago. This week, you gave him some harsh performance feedback that you don’t think he has come up to speed on your startup’s product, customers, and design principles. You tell him the work he delivers is not aligned with your market or your brand, and you spend too much time asking him to redo it.

He gets defensive and turns the criticism back at you. He says your design principles were flawed when he arrived, and he’s trying to nudge your startup in a better direction. He claims his two decades of design experience give him insight that you lack. He keeps the conversation professional, but the message is clear, “You hired me for a reason. I know what I’m doing. Butt out.”

After the meeting, you try to decompress. You wonder, “How do I know he’s not right? I don’t know for sure that our design principles are correct. I’ve never run a design team. What right do I have to criticize someone who has?”

This line of inquiry triggers you, and you start spiraling. You think, “I’ve also never run a Sales, Marketing, or Finance team, not to mention an entire company. Do I have the right to boss people around when I’ve never done the job they are doing? My team must have noticed by now that I’m in over my head. Maybe I never shouldn’t have founded a startup!”

You take a deep breath and try to calm yourself, remembering that other founders you know have shared some of the same feelings with you. And yes, these feelings are normal, but they can still do real damage. To succeed and not be miserable while doing it, you need to Unmask Imposter Syndrome.

The imposter syndrome syndrome

The typical characterization of a startup founder is of a visionary who sees a future no one else does and boldly leads her team to create that future. She assembles an incredible team, sets ambitious goals, and pushes her team to hit them like clockwork, leading to fame and fortune.

Does this describe a typical founder? Excuse me, but LOL.

Sure, the best founders have these characteristics in their best moments, but it’s far more typical for founders to stay awake at night haunted by thoughts about their:

Experience — “I’ve never run a startup before and don’t know what I’m doing. Why do I deserve to do this?”

Leadership — “I convinced some awesome people to quit their jobs and join me. Their careers are in my hands. What if we fail? What happens when they discover I don’t know what I’m doing?”

Investors — “I convinced investors to give me $3 million that could have gone to a better startup, AAPL stock, or feeding the hungry. What happens if I lose every penny? Will I ever work in this town again?”

Competition — “Why do I think we can take on Salesforce, Microsoft, and SAP with 15 employees and a few million in funding? Those companies have trillions of dollars of market cap and luxury boxes at the Chase Center. Am I delusional?”

Of course, we are talking about imposter syndrome1, which is a mix of feelings that you don’t deserve to have the position you have and are bad at your job. Your co-workers will realize this at any moment and probably react by abandoning you.

Imposter syndrome is not unique to startups: many people with demanding jobs have it, and awareness is growing, which is why you’ve probably heard the term before. It’s especially prevalent in people from underrepresented groups who don’t have many role models or success stories from people from similar backgrounds.2 Anyone can suffer from it, though, and almost everyone does at some point.

Founders can get a bad case of imposter syndrome

As a startup founder, you are especially susceptible to imposter syndrome for a few reasons:

The stakes are high

At a big company job, the cost of poor performance is contained. No, you don’t want to lose a deal or slip a deadline, but unless you are in a very senior role, your failure won’t put the company out of business. It might barely register. Maybe you don’t get the raise or the promotion, but you are unlikely to crash the stock price. The worst case is that you get fired, in which case you get another job and try to do better next time.

At a startup, the upside is much higher, and the downside seems much lower. If you succeed, you achieve fame and fortune, and you bring your team along for the ride. If you fail, an entire corporation goes out of business and ceases to exist, leaving a million-dollar crater.

You probably are in over your head

If you’ve ever soothed a friend suffering from imposter syndrome at their corporate job, you probably reassured him by saying, “Don’t worry, they hired you for a reason! You are good at your job! You got this!” Not only were you being a good friend, you were probably right. 

But when startup founders feel like they don’t know what they are doing, they might actually be right. Many founders have little management experience, or their experience was at larger companies. They may have never managed people or planned and operated an entire corporation. They don’t have a team of people who have expertise in all of the functions that need to be covered. And they certainly haven’t sold this product to this market, since no one has.

You are asking people to take a leap of faith

The people you recruit for your startup aren’t joining because of what you have accomplished, since you haven’t accomplished much. They join because of what you will accomplish.

So every time you recruit someone to the cause, whether an investor, board member, or an early customer, you are doubling and tripling down on the commitment to make the journey worthwhile. It’s like twisting friends’ arms to show up for a party you promise will be amazing. It’s a highwire act, where you raise the stakes every time you convince someone to come along for the ride.

You have little margin for error

Most startups fail, so it’s rational to lose sleep that yours will. Even if you succeed, you’ll go through long periods where you’ll feel like you are failing. Investors reject you. Customers leave you. Competitors launch scary-looking alternatives. Your bank account runs dangerously low.

Getting beat up daily and reminded that you might not live to fight another day isn’t exactly a confidence-building exercise. The constant negative feedback naturally triggers imposter syndrome.

You don’t have a boss

We all love to complain about the boss, especially if you’ve been unlucky enough to have had a bad one, but bosses serve a valuable function you take for granted: they provide guardrails that give imposter syndrome some natural limits.

A boss can give you feedback about your performance, which can rein in your overactive imagination. Even negative feedback can keep you from imagining something even worse, in the way that getting a C on a test means you at least didn’t fail. 

The boss can also jump in and help if you are floundering, or they can help you get more resources. And that boss is ultimately responsible for your deliverables. They have every incentive to keep you from failing.

At a startup, you’re the boss. You get little feedback on your performance, no encouragement, and you can’t kick problems upstairs to the boss. The boss is you.

The job keeps getting harder

In theory, your imposter syndrome would subside after you experienced a bit of success, like closing your first customer. It would be evidence you can succeed, and it would build your team’s confidence in you.

This might happen at a larger, more static company where you might get a few months or years to enjoy mastery over your new skills, but startups don’t work like that. Success just gives you permission to take on the next set of challenges, like leveling up in a video game or progressing to the next bracket in a tournament.

After you land your first customer, you need to learn how to keep them. Once you raise money, you have to learn how to spend it and manage investors. After you learn how to manage a few individual contributors, you have to learn to manage a team of managers. Imposter syndrome often follows you on the journey.

At this point, your imposter syndrome is probably worse than when you first started reading, but hang in there, I promise we are going somewhere.

Imposter syndrome can damage your startup

Imposter syndrome isn’t helpful no matter what your job is, but it can be especially damaging for startup founders for a few reasons:

Imposter syndrome slows down decisions

A founder’s job is to make decisions. You decide who to hire and who to fire. You decide what customers to target and what channels, messages, and features will attract them. You decide how aggressively to grow and what operating plan will get you there. 

Slow decision-making makes everything worse, and slow decision-making is almost always rooted in a lack of confidence. A founder who isn’t confident in themselves will delay decisions until they get more data, even if no new data is coming. A founder who fears being found out by his team might not ask for input on decisions or be willing to debate them. A founder who fears they are in over their head will be less likely to admit a bad decision and pivot.

Imposter syndrome lowers your team’s confidence

If a founder fears they are bad at their job and that their team might find that out, they might do unnatural acts to keep that from happening. Some founders might be reluctant to share information out of fear of having their decisions scrutinized. Some might get defensive or angry when challenged by their team.

This will keep you from accomplishing your most important job as a founder: attracting a great team. No one wants to work at a startup where the founders are skittish, don’t share information, and don’t want to discuss and debate the right things to work on.

In the most extreme cases, imposter syndrome can lead to a toxic corporate culture. You probably have stories about politics and conflict from previous jobs. Toxic conflict seldom happens between people who are confident in their abilities and open to debate and feedback. It happens between people who are insecure and brittle.

Imposter syndrome keeps you in your comfort zone

Human nature is to stay in our comfort zone. Think about how much more fun it is to play a sport where you excel than a sport where you are floundering. Think about how much more fun it is to hang out with close friends than to walk into a room full of strangers. 

A founder suffering from imposter syndrome is more likely to want to work in the areas of the business where they are most comfortable instead of where they are needed. Founders who enjoy building products will gravitate to coding when they should be talking to customers. Founders who doubt their ability to manage senior people won’t hire any. 

But success at a startup almost always lies on the other side of extreme discomfort, like hiring people who challenge you or spending time selling when you’d rather be coding. Imposter syndrome makes you less likely to jump into areas where you are in over your head.

You’ll burn out

Even the most successful startups founded by the most competent founders can be stressful and painful.3 Imposter syndrome makes a startup even harder. Feeling like you are bad at your job causes you to spend your days criticizing yourself. Fear that someone will find out causes anxiety and hyper-vigilance. This can lead to depression or anxiety. 

No one can withstand this for long, so a founder will eventually be tempted to pursue the only thing they feel can relieve the anxiety: leaving their startup or shutting it down.

Your reaction to this litany of fail might be, “Sure, I may have a bit of imposter syndrome, but I’d never do any of this!” and on a good day, you probably won’t. But startups have a lot of bad days, where you might have to accept that an important project has failed or that you need to fire a key staff member. Those are the moments when it’s most important to make good decisions, and they are the exact moments when imposter syndrome is most likely to rear its ugly head.

So if imposter syndrome is a constant threat, what can you do about it?

Wear imposter syndrome as a badge of honor

There is one surefire way to banish imposter syndrome: don’t try anything hard. Take a boring job that doesn’t challenge you and spend your days staring at the clock until you can go home and burn down your Netflix queue. You’ll have plenty of problems, but imposter syndrome won’t be one of them.

Of course, if you are reading this, that’s not the life you want. You know that a fulfilling life means taking on challenges and risks. If a bit of imposter syndrome is the price you pay to have that kind of life, that’s a trade worth making.4

Imposter syndrome also means you’re a self-aware and conscientious person. Sure, some people never suffer a moment of doubt about themselves and their capabilities: they are called sociopaths. You aren’t one, and it wouldn’t help you if you were. You’re self-aware and care about others.

So when you feel some imposter syndrome coming on, consider it the price you pay to have an extraordinary career and a fulfilling life. It might not ward off imposter syndrome, but it might help you reframe it and give you a different starting point from which to attack it.

Accept that imposter syndrome is normal

Imagine a successful business leader, and you’ll probably come up with a caricature of “important and successful business-ish person” out of a Netflix series: the decisive leader with good posture who charges into a conference room to rally his team around obviously-correct decisions that he made on his own.

You probably don’t picture him sitting alone at a bar after work, wracked with self-doubt and fighting back tears. You might assume that good leaders both act effective and feel effective, but not all of them do, at least not all of the time.

This is why imposter syndrome can be so insidious: when you feel like you’re doing a bad job, you assume that you must be doing a bad job since someone doing a good job surely wouldn’t feel like they are doing a bad one. That self-doubt might lead to you actually doing a bad job, leading you to think, “See, I was right: I’m bad at this.”

If it was exhausting just reading that, well, that’s the point. Imposter syndrome can suck your energy by triggering loops in your brain, where you put your energy into wondering if you can do the work instead of just doing the work.

Remember that most people have imposter syndrome at some point, especially startup founders taking on one of the most demanding challenges in the business world. Don’t assume you’re an imposter just because you feel like one. Instead, think of it as a nuisance, like a crosswind during a long bike ride. It’s an annoyance to manage, but not a reason to pull over and take the bus.

Stop comparing

We all compare ourselves to our peers, especially in a community as hyper-connected and communicative as the startup world. Although following and connecting with peers can be a source of information and inspiration, it can also trigger imposter syndrome if you compare yourself to them.

Most founders employ a bit of “fake it until you make it,” which is rational when trying to attract customers, investors, and new hires. “I don’t know what I’m doing” isn’t exactly a great way to rally support. You then end up comparing an unrealistically positive version of someone else to the worst version of yourself.

Judge yourself by absolute standards, not relative ones. Develop milestones for your business and work to meet them. Don’t spend time wondering whether someone could do your job better. Sure, someone out there probably can, but they aren’t here right now. You are.

Like most advice, the converse is true, too. Some founders take comfort in looking at other flailing startups and thinking, “Well, at least I’m doing better than them!” This can make you complacent. Customers don’t buy from you, and investors don’t invest in you just because you were the least hapless founder on your accelerator’s demo day. They judge you on absolute, not relative, measures.

Relish the wins

These tips help put imposter syndrome into perspective, but the most satisfying solution to imposter syndrome is to stab it in the heart. Prove to yourself that you are good at your job by getting good at it.

No, you’ll never excel at everything you need to do, but you can get laser-focused on the short list of items you have to nail at a given time, like getting product/market fit or raising a seed round. Learn everything you can and relentlessly work on them until you succeed. This is, of course, what you should be doing anyway. 

Once you’ve had a bit of success, take some time to let it sink in, celebrate a bit, and use it as a launchpad to build some confidence. Don’t just relish in the skills you have learned, but celebrate that you’ve learned how to build new skills. If you can learn one part of your job, you can learn others. 

This kind of mental fortitude is essential if you are going to successfully do what we’ll talk about next: Gaze Into the Abyss.

If you have feedback or suggestions for future posts, please comment or contact us at michael@nextfounder.co.

The Next Founder helps founders build great startups. We offer advice on managing your mental health and productivity, hiring and managing great people, building a strong culture, and keeping people aligned and working on the right things. See the series overview at Welcome to The Next Founder and find out more about me at My Story.

In this chapter, we’ll talk about my background, what led me to write The Next Founder, and what I hope to accomplish.

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“I have to study politics and war so that my children can study mathematics and commerce so that their children can study poetry, painting, and music.”
— John Quincy Adams

Where I’m coming from

The Next Founder is not a biography or a series of war stories from my career about when I did this thing and then that thing, and, oh my God, you won’t believe what happened next. That style can make some excellent reading1, but I don’t find that it works well for me. My writing draws from my experience, but I also draw from stories by other founders as well as academic sources.

However, a recurring theme is that all advice is contextual and should be filtered and scrutinized. I want to share my story so you know where I’m coming from, including my blind spots, biases, and limited perspective.

I also want to share why I’m passionate about startups, want to see more of them, and want to see more of them succeed.

In the beginning

I grew up as a typical Army brat, moving every couple of years, mainly across the Midwest and East Coast of the U.S. By the time I arrived at college, I had attended ten different schools, which left me with some social scars and some glaring gaps in my knowledge, like never learning about colonialism (I was probably 25 before I could have told you why they speak Spanish in the Philippines).

I had little exposure to business and entrepreneurship since the adults in my life were military parents, but I was lucky to live in the same house as a great leader: my dad. He led a 30-year career as a decorated Army officer who commanded troops in combat in Vietnam and served as Post Commander or Chief of Staff at several bases, including Fort Knox, Kentucky, where I was born and graduated from high school.

Military leadership is one of the purest forms of leadership. No one joins the Army to get rich. The financial upside is limited, but the downside is enormous: death or injury is a real possibility. I admire how military leaders like my dad get peak performance from young people in strenuous conditions by getting them passionate about committing to the mission and supporting their teammates.

Startups are easy in comparison. Your worst case is that you fail, in which case you can get a job at a tech giant for a few years and then start another startup. You might be embarrassed to face your friends and family, but you probably won’t die in a training exercise.

Like most families of military officers, we were solidly middle class, but my parents did make one extravagant purchase when I was 13: spending more than $1000 in 1981 (close to $5000 in today’s dollars) on an Apple II Plus. I learned to program and discovered that I had a real interest in and aptitude for computers (as well as a passion for pirating video games on floppy disks). 

When I got to Stanford, I devoted myself to computer science, getting a BS and an MS and graduating in 1991. I discovered that I was a much better teacher than an academic. I largely paid my way through college by spending four years as a teaching assistant and lecturer in the Computer Science department, at one point running the legendary CS198 undergraduate teaching program, which was also my first management experience.2 I still love getting in front of rooms full of students or founders and sharing what I know.

My career

I graduated in 1991 while the tech industry was in the depths of a recession. Many pundit were predicting that Silicon Valley was “over” (the industry has been “over” at least five times in my career). My first job was building equity derivative trading systems for Goldman Sachs on Wall Street. I wanted a job that would let me live in New York and London and get away from Silicon Valley for a while since I knew I was destined to return for good at some point. I loved Goldman Sachs and its focus on building a high-performance and people-centric culture. I draw on lessons learned at Goldman to this day.

By 1994, I knew it was time to return to Silicon Valley, where many of my college friends were getting involved in the first Internet startups. Friends introduced me to Ariel Poler, a recent Stanford GSB graduate, who was pursuing what was then a visionary idea: someday there will be advertising on the Internet, and advertisers and publishers will need tools to measure and audit it. The idea was controversial then (yes, I’m old). I joined his startup, I/PRO, as the first employee and ran part of the engineering team, building what might have been the first-ever software-as-a-service application. It was a fabulous experience. Our business spiked, we grew to about 150 employees, and a competitor acquired the company in 1999.3

After I left in 1997, Ariel introduced me to software startup Kana, where he had joined the board. Kana was founded by Mark Gainey and Michael Horvath (who also later started Strava) to help companies manage customer service over the web, which was a brand new problem since companies were only then putting up their first website. 

I joined as the first non-founder employee and ran the engineering team. I crammed a career’s worth of learning into four years at Kana. We raised millions in venture capital and grew the company from nothing to $150 million in revenue and 1200 employees in three years. We took the company public in 1999, and we peaked at a $10 billion market cap. We signed up almost every major B2C online business, and we acquired several companies, including the $4.2 billion acquisition of Silknet in 2000.4

After such an intense experience, I was ready for a break. My wife and I had just married, and we took a six-month sabbatical in Europe, most of it spent in Tuscany, where I mostly rode bikes and followed the Tour de France around. When we returned to San Francisco in the fall of 2001, the Internet economy had hit bottom, punctuated by the 9/11 attacks, which happened a few days after we landed back in San Francisco. 

Fortunately, I had time and space to think about what to do next, thanks to Dave Beirne, the partner from Benchmark Capital who led Kana’s Series A. He brought me into the firm as an Entrepreneur in Residence, where my only job was to start a company they could fund. It was a fantastic platform to meet great people, absorb great ideas, and brainstorm with the partners, who are some of the industry’s smartest folks to this day.

This led to my co-founding the security software company Vontu with Joseph Ansanelli, whom I have worked with off and on for 25 years, starting at Kana. Vontu was a fabulous company. We went through five years of rapid growth and sold the company to Symantec for $350 million in 2007. I joined the executive team at Symantec for a couple of years, which I enjoyed, although big company life would never be for me. 

I returned to Benchmark as an Entrepreneur-in-Residence a second time in 20095, eager to start another company. From there, I launched Pipewise, which was a failure. We tried a couple of ideas but never got close to product/market fit. While struggling to find traction, I realized I was exhausted and should have taken a break between startups instead of diving right into the next thing. A successful startup requires at least a ten-year commitment, and I didn’t have that in me at the time. I needed a break.

And take a break, we did. My wife and I moved to Barcelona with our two young children, which was just as fabulous as it sounds. We spent the year traveling, mountain biking, and hosting visitors, but I also took the break as an opportunity to extend my knowledge, expand my network, and connect with the startup ecosystem in Europe. I invested in and advised a few great software companies, taught at the best business school in Spain, ESADE, and became a Portfolio Advisor to Point Nine Capital in Berlin, where I still work with their portfolio.

When I returned from Spain, I co-founded customer service software company Gladly with Joseph Ansanelli and Dirk Kessler, our most senior engineer from Vontu. Gladly has raised over $150 million, signed up hundreds of customers, and is on track to be one of the most successful enterprise software-as-a-service companies of the decade.

As I’ve gotten older, I’ve increasingly enjoyed helping other founders. I’ve invested in or advised about 50 startups, a few of which have become unicorns. I volunteer at the Stanford StartX incubator and for the Stanford Lean Launchpad course. I’ve guest lectured at ESADE many times, spoken at several conferences, and lectured at Harvard and Dartmouth business schools. My work with Point Nine has connected me with startups worldwide and allowed me to deliver keynotes at their fabulous annual Point Nine Founder Summit, the best founder event in the industry.

What I believe

Although my career has been somewhat of a random walk, I can extract some themes I’m confident will apply to almost anyone reading this. All of them involve people and getting the most from yourself, your co-founders, and your team. We’ll go deeper into some of these in future chapters.

The people are all there is

Technology always evolves, markets change, and every startup is different, but I can draw one solid line through my career: every opportunity I’ve had to start, join, invest in, or advise a startup came via people with whom I had strong professional and personal relationships. The same is true for every successful person I know.

Strong relationships are easy when a startup works and everyone walks away rich, but I’m especially proud of the relationships I built when we failed. If you can avoid lashing out or finger-pointing when times get tough, adversity can build stronger relationships than success.

Startup careers are never linear

I didn’t plan out my career, but when I was young, I had a vague sense that I wanted to do something in the startup world and jumped into it when I had the chance. I made the most of each opportunity, and the work I did and the people I met led me to the next one. In almost every case, I pursued something I never would have anticipated but that always seemed logical in retrospect.6

This doesn’t mean careers are random; you should always control what you can. Never stop honing your skills and mastering your craft. Invest in your network and keep your reputation stellar. Expose yourself to as many people, ideas, and places as possible to expand your options. But accept that you can’t predict today what the best opportunity will be tomorrow. Stay open to a wide set of possibilities, and jump at the ones that speak both to your intellect and to your emotions.

You are a product of your environment

I’m not particularly entrepreneurial. I wasn’t a kid who hustled lemonade stands while thumbing through the Forbes Billionaire list. I don’t walk around San Francisco in my company T-shirt, cornering people in coffee shops to pitch my company. I’ve never slept on the floor of a hacker house (although my 22-year-old self may have been into that…)

My success is an outgrowth of my environment. In Silicon Valley, especially at Stanford, you are surrounded by founders. My college contemporaries were people like Jerry Yang, Reid Hoffman, Peter Thiel, and Keith Rabois. At least half of the people I meet at my co-working space in San Francisco are founders. Friends in San Francisco often joke that they feel like the only person they know who doesn’t have a startup.

Access to this much expertise and brainpower has some obvious advantages (and less obvious disadvantages7), but it’s not why Silicon Valley has so many great startups. The secret of Silicon Valley isn’t just that it attracts extraordinary founders; it’s that it turns non-extraordinary people (like me) into founders.

When you see so many other people start companies, especially the ones who are no smarter than you, it’s easy to think, “I could do that, too.” When there is no social stigma against turning down a big company job to work at a tiny, no-name company that might fail, more people will do it. This leads to a virtuous cycle where startups beget more startups.

I always feel bad for the poor souls hanging out in the Google lobby, sent to Silicon Valley by their city’s Office of Economic Development to find out how to attract startups to their hometowns. They spend a week visiting companies and meeting with founders trying to crack the code, usually flying home having learned little more than, “The best way to attract startups is to have startups already.” Fortunately, startup hubs are developing worldwide in places like New York, Berlin, London, and Paris, so it’s easier than it’s ever been for would-be founders to rub shoulders with experienced ones.

Quitting is an art form

To find an amazing career, you don’t usually need to quit a crappy career. You need to quit a good one.

My family thought I was crazy when I quit Goldman Sachs as a 23-year-old living in South Kensington, London, on a corporate Amex. They thought I was crazy when I walked away from the cushy life of a public company executive at Symantec, where my job was to fly around the world in first class to launch the Vontu business in a dozen countries. I agonized over shutting down Pipewise since it meant booking the first big failure of my career. But in each case, I knew I couldn’t move on to the next thing until I walked away from the current thing.

This is also why so many startup founders don’t come from elite schools or top-tier companies. Those founders are less tempted to quit when things get tough since they don’t have a $750k/year job at Google to fall back on. When your opportunity cost is low, you focus on the opportunity, not the cost.

Sacrificing life for career success might get you neither

Most startup founders are high achievers who want to build great products, work with great people, make money, and make their “dent in the universe.”8 But why do they want to do those things? Presumably, for the same reason any of us do what we do: we expect it to lead to some level of personal happiness and fulfillment.

Startups require hard work and sacrifice, so many founders assume that the more pain they suffer, the more likely they’ll succeed. They lose touch with friends, starve their love lives, stop exercising and eating well, and turn into miserable bundles of stress and angst.

The downside of this strategy is obvious when founders fail: they can feel like they sacrificed years of their lives pursuing happiness and achieved neither success nor happiness, but successful founders can be even worse off. After the wire transfer hits the bank account, they find they are no happier than they were when they started, and they can go through an existential crisis, where they wonder, if success didn’t bring happiness, what will?

In either case, those founder’s decisions are based on a false dilemma, where they think they can have career success or personal success but not both. Startups require hard work and sacrifice, but the successful founders I know make a baseline level of investment in their health, their community, and their families. The ones who don’t end up too miserable to do creative work, too burned out to persist, and they struggle to attract good people, since people who have lives are suspicious of working for those who don’t.

I’m proud that over the last thirty years, in addition to working hard, I've built a fantastic family, made great friends, and maintained my health, logging thousands of miles of running, hiking, open-water swimming, mountain biking, and cross-country skiing in San Francisco and Lake Tahoe. I never saw those things in conflict.

You know both more and less than you think

In many ways, a startup is the same as any other career, where you build up your knowledge, skills, and connections and make it more likely you’ll succeed. You can always get better at designing, marketing, and selling products. You’ll never fully master managing people, raising money, and planning and operating a company. 

But no matter how skilled you are, startups have a way of humbling you. If you start to believe you have the game figured out, they’ll smack you down. You see companies fail that you thought would succeed. You see strategies that worked for one company fail at another. You see your favorite founders humbled by the next generation of founders who disrupt them.

After my first successful startup, I was a font of advice for young founders. If they asked me how to raise money, I’d show them our fundraising deck. If they asked if they should move to Silicon Valley, I’d say, sure, right down the street from me. Most of my advice amounted to, “Just do everything I did.”

I’m wiser now. I realize that I know very little about most markets, including B2C, gaming, biotech, cleantech, or anything other than my specialty, B2B software. I’ve failed several times because I didn’t follow the same advice I’m sharing here. I still make mistakes, like delaying letting a lousy hire go or not checking that one last reference for a critical hire. I’m still on a steep learning curve. I cringe at things I believed just a year ago, and a year from now, I’ll probably be scrambling to update some of my opinions here.

It’s humbling, but I’d rather be humble than bored.

It’s early

The startup economy is volatile and goes from boom to bust once or twice per decade. Each time the startup economy is "over,” it comes roaring back as the next wave of technology unleashes creative destruction on legacy companies, some of whom were startups only a decade earlier. “Everything that can be invented has been invented” is never a solid bet.9

It’s early for me, too. I’m energized by the founders I meet and their ideas. They are solving big problems in health care, clean tech, productivity, and economic development using technologies that didn’t exist just a few years ago. I’m amazed by how much more they know than I knew at their age. But I also see how people like me can help accelerate their journeys.

Now, I want to share some of what I’ve learned. Learn more about the series in Welcome to The Next Founder.

If you have feedback or suggestions for future posts, please comment or contact us at michael@nextfounder.co.

Subscribe now

The Next Founder helps founders build great startups. We offer advice on managing your mental health and productivity, hiring and managing great people, building a strong culture, and keeping people aligned and working on the right things. See the series overview at Welcome to The Next Founder and find out more about me at My Story.

In “Train Like a Startup Athlete,” we’ll discuss what startup founders need to do to perform at their best and stay motivated over the long time period it takes to build a startup.

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 “Forty-hour work weeks are a relic of the Industrial Age. Knowledge workers function like athletes—train and sprint, then rest and reassess.”1
— Naval Ravikant

“Many people chase achievement, assuming it will lead to well-being. They should reverse that order of operations.”2
— Arthur C. Brooks 

"Be regular and orderly in your life, like a bourgeois, so that you may be violent and original in your work.”
— Gustave Flaubert

Limping along

Your alarm clock blares at 6 a.m. Monday morning. You smack the off button with one hand and grab your laptop with the other, which is easy since it’s still warming your chest from when you passed out working last night. You add the finishing touches to a pivotal customer presentation at 8 a.m. 

You mentally rehearse while taking a perfunctory shower and then jump into the meeting. It’s not the trainwreck from last night’s stress dream, but it’s firmly in the “meh” bucket. You stumble through a few sections since you are so tired, and you don’t handle some objections very well since you’re distracted by your long to-do list looming for the rest of the day.

You should have finished the presentation last week, but you couldn’t muster the energy to get it over the line. You didn’t get it done even after canceling all of your Friday meetings and canceling a Saturday morning hike with friends, which would have been your own exercise or social interaction of the week.

You sleepwalk through the day, then go home and dive into the mountain of unread emails that piled up last week. You suddenly sit bolt upright at 8 p.m. and realize you passed out while scanning your inbox. You had hoped to get to the gym for the first time in a week, but that plan is out the window. You were also going to grab a drink with a promising Bumble connection, but you cancel on her for the second time, accepting that you’ve now snapped the elastic on whatever tenuous connection you had built up over a few texts.

You pound some leftover Thai takeout, trying to ignore that your jeans have shrunk a few sizes since you founded your company last year. You reflect that it’s been a week since you’ve exercised, seen your friends, or eaten anything that wasn’t delivered by a guy on an e-bike. You usually rationalize that sacrificing your personal life is worth it for the sake of your startup, but after your mediocre presentation, you wonder if it’s helping your startup, either.

If you slept 8 hours a night, worked out regularly, and kept up with your friends, would your cringey customer meeting have gone worse? No, it probably would have gone better if you had learned to Train Like a Startup Athlete.

The Startup Athlete

Let’s switch the topic to sports; yes, a sports analogy is coming your way.

If you follow the training regimens of top athletes like LeBron James or Lionel Messi, they describe hours of intense drills and workouts, as you’d expect, but they also report sleeping 8-10 hours per night, regular sessions with coaches, nutritionists, and masseuses, monitoring their diet, and deploying meditation and other mindfulness practices to stay focused and balanced.

No one would call LeBron or Lionel “lazy.” We admire their discipline and dedication to their craft. Their fans want to see them do something amazing, and they train so they can deliver. And, not incidentally, tens of millions of dollars are at stake.

While you might not be going toe-to-toe against the best athletes in the world, the same principles apply to a startup founder pursuing a high level of performance over a long time period. And, not incidentally, tens of millions of dollars are also at stake.

If you want to perform, you have to invest in yourself. You have to train. 

You probably know this intuitively. If a friend told you they were exhausted, depressed, and distracted since they worked nonstop, ate a crap diet, never exercised, and barely spoke to their spouse, you know what you’d say to them. You’d encourage them to exercise, eat well, invest in their relationships, and prioritize sleep. They’d not only be happier and a better friend and partner, but they’d also produce better work. Win-win!

Then you’d probably return to sitting on the couch, eating tortilla chips, and scrolling TikTok until midnight. Most of us are terrible at following the same advice we happily give to others.

The performance stack

You might be with me so far, but if you are like most founders, you probably aren’t investing in yourself as much as you’d like, and it probably got worse when you started your startup, right when your need to perform hit an all-time high.

A shift in behavior requires a shift in your beliefs, which might require a shift in your identity. If you think of yourself as a hapless startup founder just trying to make it through the day without blowing up, you’ll constantly be in reactive mode. But what if you envisioned yourself as the startup world’s version of an aspiring Messi? What if you saw yourself as a Startup Athlete?3

Your performance as a founder exists at several levels, where each level builds on the level below:

Physical

We don’t want to launch a religious or metaphysical debate about souls and spirits, but we can probably agree on one thing: your brain is part of your body. Your brain is capable of transcendent feats of creativity, but it’s also a blood- and hormone-filled piece of meat. If you doubt this, try building an investor pitch after a redeye and three G&Ts (based on a true story).

When healthy and rested, your brain is a font of creativity and energy that produces excellent work and inspires others. When you are exhausted or stressed, that same brain makes you sluggish and indecisive and avoids the hard decisions and discussions that lie between you and success.

Emotional

Your emotional health is right downstream from your physical health. I’ve heard therapists say half of their business would disappear if their clients ate, exercised, and slept well. 

If you aren’t caring for your physical body, your emotional health will go downhill quickly. You’ll be stressed, distracted, anxious, and possibly depressed, which is no way to create great work. You’ll avoid hard decisions, won’t be able to focus, and will find it difficult to connect with your team. You’ll be more likely to quit or shut down your startup prematurely.

Mental

When you picture what startup founders do from day to day, you probably see their mental contributions. On a given day, a founder might build a patentable technical solution, turn a customer insight into a brilliant product design, or salvage a tough customer meeting by flipping a hard question into an opportunity to highlight a product differentiator. 

You can’t be sharp mentally if you aren’t in good physical condition and if you aren’t in an emotional state that allows you to attack your work with focus and optimism.

A word about work/life balance

You might suspect we are discussing work/life balance, but we aren’t, not exactly.

As a mental model, “work/life balance” creates a conflict that can never be fully resolved. It implies that an item added to one side of the work/life balance scale has to be offset by one on the other side. “Balance” implies that an hour of exercising is good for you but bad for your company. “Balance” implies that seeing your friends might distract you from work, but the need to make entries on both sides of the ledger demands such compromises.

“Startup Athlete” promotes alignment, not conflict. It promotes performance, not compromise. A good night’s sleep is not a luxury to indulge in on the rare slow day you get through your to-do list. It’s how you get through your to-do list. Time with your partner or friends isn’t what you do when you find yourself with some spare time. It’s how you maintain energy and perspective over a long time period.4

Instead of a balance of opposing forces, training like a startup athlete kicks off a virtuous cycle:

I learned this the year I both became a father and co-founded my third company, Vontu. I maniacally focused on never wasting a moment. I started running and biking to work since I didn’t have time for workouts. I focused on the most critical items at work, even if they were difficult. My company took off, I had my best year of triathlon competition of my life, and my kids are wonderful and don’t have stories about a successful but absent father.

You can also find stories from founders who report their startup years were some of the most miserable of their lives. They report episodes of depression, anxiety, substance abuse, losing touch with friends and family, and even divorce and estrangement. Some quit or were ousted from their companies. Most will tell you that many of these sacrifices didn’t help their companies anyway.

So, how can you turn yourself into a Startup Athlete?

Be honest with yourself

Most of us find excuses for not investing in ourselves. We skipped a workout because we had meetings all day. We ate junk food because we had a stressful day. We drank a third beer because we lost the big deal. We drank a third beer because we won the big deal.

You can always find an excuse, and startup founders have the mother of all excuses: their startup. A founder is always overscheduled and overstressed, so a stressful day can’t be an excuse not to train. Waiting for a quiet day to train will leave you waiting for months, so you may as well train on the bad days, too. It’s how you make the next day a good day.

The startup founders I know who worked at high intensity over a long time period all consistently invested in their physical, mental, and emotional health. They were startup athletes. Most of the ones who failed didn’t, and ironically, even after their startups failed and gave them their free time back, they still didn’t take care of themselves. Hmm…I guess the startup wasn’t the excuse after all.

Prioritize it

The best way to know if you are training like a startup athlete is to look at your calendar.

Do you only work out on a slow day when you have free blocks of time available? Or do you schedule your workout first and then schedule work around it? Do you cancel date night when you get busy, or do you close your laptop, show up, and focus on your partner?

Your training isn’t a luxury. It isn’t what you do on a slow day once all of your work is done and you have some time to kill. Your training is more like brushing your teeth: you don’t only do it on the days you aren’t very busy (or at least I hope that’s the case!)

Yes, there will be some exceptions. When your biggest prospect tells you at 4 p.m. that you need to show up at 8 a.m. tomorrow for a final pitch, you should cancel your workout and your date night and rehearse on the presentation until midnight, but be honest with yourself about how often this really happens. Don’t just cancel date night because you had a bad day. Rally, show up, and turn it into a good day.

Reduce friction

Even if you are supremely disciplined, you have no hope of consistently training like a startup athlete unless you make it easy. Always reduce the friction that stands between you and your training.

For example, working out at a gym is very high friction. You have to join the gym, pay for it, travel there, park your car, change your clothes, work out, change back, and travel home. Gyms know this, which is why they earn the majority of their profits from people who join but never show up.

But what would happen if you lived close enough to your office that you could bike or walk to work every day? To get in a workout, you wouldn’t need to carve out time or tap into your shallow pool of discipline. You simply wake up, lace on your shoes, put your laptop in your backpack, and hit the road for your commute. I’ve done this for 25 years, booking over 20,000 miles and saving thousands of dollars of gas and parking. 

You can also design your environment to be conducive to good habits. Don’t stock junk food in your office, even if your team says they want it (they really don’t). Get a set of dumbbells for your home office and do micro-workouts between meetings. Put your office in a neighborhood where it’s easy to go for walks with co-workers for your one-on-ones instead of sitting in a conference room.

Stop beating yourself up over your lack of discipline. Organize your life so that you don’t need much discipline.

Develop routines

Another way to make your training happen is to make it automatic. Create routines that make your training a built-in part of your everyday life.5

Sign up for an exercise class or a group workout at the same time and place every week, probably first thing in the morning. Park in a lot a mile from your office and walk to work, or take the bus halfway and walk the other half. Start the day with a brief stretching and bodyweight workout that you can do in your home office with no equipment. Get a cheap standing desk and join some meetings standing up.6

Many startup founders I know, myself included, schedule a date night with their partner on the same night every week. Some order the same healthy salad for lunch every day. Some do 25 push-ups at the end of every meeting. Some volunteer at a non-profit every Saturday morning. I join a group bike ride with other founders every Friday morning and a group open water swim and happy hour after work.

Don’t expect to get this right immediately. Experiment until you find something that works for you. Once you do, stick with it. You don’t just owe it to yourself, you own it to your startup.

And you will need every bit of energy you can muster to have any hope of doing what we’ll talk about next: Unmask Imposter Syndrome.

If you have feedback or suggestions for future posts, please comment or contact us at michael@nextfounder.co.

Subscribe now

The Next Founder helps founders build great startups. We offer advice on managing your mental health and productivity, hiring and managing great people, building a strong culture, and keeping people aligned and working on the right things. See the series overview at Welcome to The Next Founder and find out more about me at My Story.

In “Load Up On the Free Things,” we’ll talk about how many of the things a startup founder needs to success are free and can be done by anyone. They just require some hard work and conscientiousness.

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“80 percent of life is just showing up.”
— Unattributed

“How you do anything is how you do everything.”
— John Wick, John Wick 4

“If you can't do the little things right, you will never do the big things right.”
— William H. McRaven

The things money can’t buy

On Monday morning, you sleep through your alarm and pop out of bed late, already behind for the week. You don’t have time to check your email, review your calendar, or chew on your to-do list. You only have time to rush to the office and race to the conference room to join your 9 a.m. Monday staff meeting.

You roll into the meeting five minutes late, and you can tell your team has been waiting for you. You feel frazzled and embarrassed and aren’t in the mood for small talk, so you skip the niceties and jump right into the meeting, asking what topics your team wants to cover.

An uncomfortable silence falls over the room. Clearly, they assumed you’d show up with an agenda — after all, you run the company. You usually throw one together before the meeting, but you couldn’t this morning since you were in dreamland.

You break the silence and suggest that you finalize the quarterly hiring plan. Your Head of HR reminds you that the team discussed the plan last week, and you walked away with several action items to finalize the plan. Of course you haven’t given those items a moment’s thought since last week’s meeting. You propose pushing the decision until next week.

Your Head of Marketing reminds you that one of last week’s action items was to decide whether to hire a new Product Marketer or put the money into marketing programs instead. She says she sent you an email outlining the pros and cons last Wednesday and is waiting for your reply. Hers must be one of the 150 unread emails taunting you from the badge on your phone’s email app. Yet again you propose pushing the decision another week.

You exit the meeting grumpy since you left with the same action items from last week’s meeting with. It’s like last week never happened. As you leave the room, your Head of Engineering takes you aside for a private discussion. He says you barely acknowledged him in the meeting, canceled your one-on-one last week, and haven’t been answering his emails. He’s worried that you are unhappy with him. You reassure him that everything is fine and that you are pleased with his contributions, but you’re just busy.

You return to your desk to see what other treasures await in your inbox. Several annoyed customers are waiting for you to confirm meeting times. A “we need to talk” message from one of your teammates has been festering unanswered since last Thursday. Your marketing consultant is warning you that your website launch will be delayed if you keep ignoring her request to review a few paragraphs of copy. 

You feel yourself getting defensive. Doesn’t your team know that you are a busy founder at an underfunded startup? To avoid getting riled up, you close your eyes, breathe, and try to zen out. A realization dawns on you: you can’t blame a lack of funding for any of this. Preparing for meetings and answering emails costs you nothing but a bit of time. You commit that instead of focusing on your meager bank account balance, you’ll Load Up On the Free Things.

Play to your strengths

Early-stage startups are defined by scarcity. You will always feel like you:

Don’t have enough money

Most startups can’t raise money immediately, and even those that do find themselves in a race to spend as little as possible while generating enough traction to raise another round or get profitable so they don’t have to live on other people’s money.

Don’t have enough talent

Since you have little money, you’ll always hire the fewest people to accomplish what you need. Once you do get some money, you’ll find that recruiting takes a long time, and some of the folks you hire won’t work out. This perpetually understaffed team is all you have to build a great product and get enough happy customers to keep the lights on a little longer.

Don’t have enough experience

Many founders are early in their careers and don’t have much experience. Or if they do have experience, it came from a larger company and doesn’t translate directly to a startup. The rest of your team is probably pretty junior, too, since underfunded startups usually hire people who are early in their careers.

Don’t have enough credibility

Every startup begins with no brand, reputation, or track record. You don’t have money for advertising, PR, or to pay for a fancy branding agency. Whenever you try to sell to a customer or close a recruit, you are pitching your startup to someone who has never heard of it. You have to reassure them that you are a legit company that isn’t going out of business any time soon (even if you might). 

Since you don’t have these things and won’t get them anytime soon, it’s crucial to focus on the things you can do for free with a little time, effort, and discipline.

Some of this advice might seem simplistic and pedantic, like the advice you’d give a new college graduate on how to succeed in the workplace. But even many experienced people don’t do all these (including me on a bad day). None are unique to a startup, and they’d help you at any job, but they are especially crucial at a startup. When you have no money or brand, the free things are literally all that you have. You have to nail them since you have so little room for error, in the way that bike handling skills are useful if you are riding down a suburban street, but mandatory if you are mountain biking on the edge of a cliff.

So hang on and ask how well you do the following:

Be responsive

The day-to-day work at a growing startup is largely a series of conversations. On a typical day, you’ll find yourself in dialogue with several prospects who you are trying to turn into customers. You’ll discuss and debate product enhancements with your team. You’ll try to close candidates for critical positions. You’ll pitch investors and manage your board.

You have little time to waste, so it’s frustrating when people don’t get back to you quickly, but you don’t control other people’s responsiveness. But you do control your own, and responsiveness costs you very little. Aspire never to be a bottleneck, and get back to people quickly and courteously.

Implement “Inbox Zero”1 or something like it. Carve out time and energy a few times a day to clear your inboxes. Respond immediately to anything that can be dispatched quickly, and get action items off of your plate and onto someone else’s. An unanswered message should offend your sensibilities.

Everything will move quicker, and your responsiveness will leave a positive impression on customers, investors, and partners. It will remind them that working with a small company provides a level of service and courtesy that many big companies lack. You want their reaction to be, “It’s so great to work with a company that listens to us and is so responsive! How refreshing!”

You will also be modeling the behavior you want to see from your team. If you move quickly, they will, too. You’ll signal that you are the kind of manager who respects their time and thinks your mission is important enough that it justifies the urgency.

A common objection to responsiveness is, “I’m too busy,” but the math doesn’t work for that argument. You have to answer those messages eventually, so it may as well be now. Responsiveness helps you and your team get more done, freeing up time and letting you move on to the next project. When you net it out, being responsive doesn’t cost you time. It gives you time back.

Show up ready to play

If you glance at your calendar on a typical day at your startup, it will probably be full of meetings and projects. You’ll interview candidates, negotiate with customers, pitch investors, meet with direct reports, and work with your teams to ship products, close deals, and forecast and plan your business.

Nothing is more aggravating than feeling like your schedule is controlling you instead of you controlling it, flipping you from proactive into reactive mode. A meeting runs long, sending you into the next meeting late and distracted. Blocks of time you had booked to get organized are consumed by small interruptions. By the end of the day you feel like you just rolled into a series of exams you didn’t study for, like a stress dream come to life.

Go on the offensive. Every morning (or even better, the night before), scrub your calendar for the next couple of days. If you have a customer meeting, research the company, review notes from previous meetings, write down an agenda, and send the customer a note saying you are looking forward to the meeting. If you have a one-on-one with a team member, jot down some notes for items you want to cover. If you have a team meeting, make sure there is an agenda and remind people to come prepared to cover it.

The scrub takes a bit of time daily, but it saves far more time than it costs. You’ll make better and faster decisions, and your team will be more productive and motivated because they’ve gotten clear direction from you. You’ll also go through the day more confident and energized since you operate off of a clear agenda instead of just reacting to whatever comes your way.

Don’t let anything drop

Going through your calendar to review upcoming meetings is a pro tip, but an all-star pro tip is to also scrub your calendar backward. Before you look at the upcoming schedule, look at yesterday’s schedule, think about what follow-ups are needed, and add them to your to-do list.

If you met with a customer, send a thank-you note summarizing your discussion and expressing enthusiasm for working together. Review yesterday’s meetings, add the action items to your to-do list, and schedule time to work on them. 

This kind of follow-up is surprisingly rare but powerful. It helps you get more done and signals to your team that you are someone who does what they say they will. When your team sees you do it, they’ll do it, too.

Be pleasant and be present

A startup requires working long hours under stressful conditions. You always have more work than you can do, are frustrated by your slow rate of progress, and are fearful that you’ll go out of business if you don’t win the next deal. Founders often wear this stress on their sleeves, causing them to come across as brusque, tired, and distracted.

As a leader, you are under a microscope. If you act like something is wrong, your team will assume that something actually is wrong.  If you appear nervous and unconfident, so will they. If you are brusque with them, they’ll wonder what they did to upset you or feel you don’t value their hard work. 

Pledge to monitor and manage your demeanor. Before you walk into a meeting, take a deep breath and experience a moment of zen. Relax, stand up straight, and take 30 seconds to ask how someone’s weekend was or how they are doing at work. That 30 seconds will not be the difference between having a productive day or not. Having your team run around confused and worried will cost you far more.

Hand out recognition

You probably don’t have a bonus plan where you fire off cash awards to people who perform well. Your team works for your startup because they love the mission and see a path to building wealth by making their stock options worth something.

But people don’t just value money; they crave recognition. 

Take time in meetings to hand out compliments when someone does something well. Comment that you know how hard people are working. Send a quick email or Slack message to a person or a team who did a good job on a project. This doesn’t mean you don’t also give critical feedback when it’s warranted, but praising good performance makes it much easier to give feedback when things don’t go well since you’ve put some money in the bank.

Talk to customers

This one is a bit of a cheat since, although talking to customers is free, it costs time and energy to contact customers, convince them to meet with you, prepare, meet with them, and follow up. 

But it’s still worth adding to this list since it’s a relatively small investments with a huge payoff. Time with customers is how you beat large incumbents in deals, get feedback on what to build and how to sell it, and find out how to make them successful.

I’m surprised by how many founders I meet who have convinced themselves they can’t accomplish anything until they raise funding but who aren’t talking to customers, which requires no funding. I’ve also noticed those same founders often don’t do a great job talking to customers even after the funding comes in.

Doing the free things also has a major intangible benefit: it’s a confidence builder. When you spend the day showing respect to your teammates, showing up prepared and energized, and connecting with your customers, you build confidence and momentum that will serve you well. Keep it up even after you do raise funding.

Doing the free things is also a tool to solve the problem we’ll talk about next, which is to Train Like a Startup Athlete.

If you have feedback or suggestions for future posts, please comment or contact us at michael@nextfounder.co.

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The Next Founder helps founders build great startups. We offer advice on managing your mental health and productivity, hiring and managing great people, building a strong culture, and keeping people aligned and working on the right things. See the series overview at Welcome to The Next Founder and find out more about me at My Story.

In “Be the Adult in the Room” we’ll talk about how great founders learn to take responsibility for their startups and be willing to make hard decisions and stay accountable for their startup’s success or failure.

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“When you think everything is someone else's fault, you will suffer a lot. When you realize that everything springs only from yourself, you will learn both peace and joy.”
— The 14th Dalai Lama

“Gaming the system may continue to work if you go to work for a big company. Depending on how broken the company is, you can succeed by sucking up to the right people, giving the impression of productivity, and so on. But that doesn't work with startups. There is no boss to trick, only users, and all users care about is whether your product does what they want.”
— Paul Graham, Before the Startup1

“Perhaps it isn't that responsible people become founders, but that the act of founding makes the person responsible.”
— Naval Ravikant

Seeking permission

You wake up at 4 a.m., tired because you barely slept, and wired because today will be stressful. You look at your calendar, and everything on it makes you grumpy and resentful.

The day starts with breakfast with one of your new investors. As usual, she’ll push you to raise next quarter’s revenue targets, sharing “helpful” ideas to accelerate the plan. You mentally rehearse how you’ll convince her to stick with a lower target. These interactions stress you out since they remind you of the quarterly negotiations with your boss that were a fixture at your previous big company job.

Next will be your least favorite meeting of the week — your one-on-one with your VP of Marketing. He constantly makes excuses for missing his pipeline targets, arguing that he needs more budget. You know you’ll spend the rest of the week grumbling to your co-founder and to your husband about how much easier life would be without him.

Then, you have to prepare for the Friday all-hands meeting, where you have to defend the growth targets (ironically, your team will think they’re too high). You’ll explain that the board wants to see more growth, and you don’t want to have to tell them at the next board meeting that you missed.

Friday night will be dinner with your parents, where you’ll mount your weekly defense of your life decisions. They’ll ask why they paid $300K in tuition at Tufts just to watch you turn down a job at Morgan Stanley that would have paid you 4x more than you make at your startup. They’ll remind you that your sister is a surgeon, but you work out of a dumpy office that you sublet from an auto-body shop.

You knew that running a startup was hard work, but you underestimated the number of mouths you have to feed. You wonder if you can ever keep everyone in your life happy.

But how much energy do you really need to put into defending your choices and reacting to everyone else’s agendas? A lot less if you learn to be the Adult in the Room.

The Mommy and Daddy Syndrome

Like the fish who has never heard of water2, most of us have a model in our heads for how the world works that we don’t notice since we’ve never been without it. That model is formed early in life by:

Parents or guardians who guided us, rewarded or punished us, and whose approval we sought.

Teachers who graded our papers, corrected our behavior, judged our potential, and wrote our recommendations.

Coaches who judged our performance, praised or reprimanded us, decided if we got playing time, and had the power to demote us to the Junior Varsity team.

Admissions officers who held our futures in their hands, deeming us worthy to attend their schools by standing in judgment over our grades and activities.

Bosses who hired us, ranked and rated our performance, rewarded us with raises and promotions, and could fire or lay us off on a whim.

Growing up under this regime gives us a worldview where:

Someone else is responsible

At a regular job, no matter how much responsibility you have, your boss is ultimately accountable for the results of your work. The boss can coach you, navigate thorny decisions, and ask for more resources.

At a startup, there is no boss. You can’t kick decisions upstairs because no one is there. You can’t ask the boss for help because you are the boss. You can’t grumble about your company’s lousy management because you’re doing the managing.

Someone else gatekeeps our success

In school, the teacher designs the test and judges if you pass it. At work, the boss decides if you get the promotion or the raise. You hope they use objective and fair criteria, but they are the final arbiters. 

There are no gatekeepers to start a startup, which confuses people who aren’t part of this world. They look at the geeky and scruffy young founders who run the industry and assume, “OK, these can’t really be the folks in charge. Someone else must be.” 

Gatekeepers have a chokehold on many industries like media and entertainment, which explains why their coverage of startups is so dismal. It’s why you read articles about how a startup begins charging for its product because “their investors expect a return,” as if the founders never would have figured that revenue is important without adult supervision. It’s why “Shark Tank” is named after the “adult” Sharks instead of after the entrepreneurs, who are the actual stars.

Appearing to do a good job is the same as actually doing a good job.

If you’ve had a corporate job, you’ve probably worked with someone who is likable, professional, always knows the right thing to say, and gets precisely nothing done. Those people can get amazingly far by LARPing a person who produces results instead of being a person who does.

At a startup, you don’t have anyone to reward you for effort or appearance. Results are all that matter. You either make the hire or you don’t. You either close the funding or you don’t. The customer either buys or they don’t. You can easily find founders with impressive credentials, great communication skills, a great network, and who know how to raise money but who fail anyway, almost always because customers, unimpressed by these credentials, don’t buy the product.

The differences between being the adult and not being the adult are rather stark:

This might not resonate so far. It might seem obvious that the founders are responsible for their startups, and you are confident you’ll be one of the rare founders who adjusts to the role in no time. But humor me and ask how naturally these will come to you, especially when things go wrong:

Always blame yourself

When things go wrong, as they do every day at a startup, human nature is to find someone to blame. At previous jobs, you might have blamed your boss for a lousy performance review because he didn’t appreciate your hard work. You might have blamed the marketing team for losing a deal because they provided content that missed the mark. You might even be correct.

Blaming someone else never works at a startup. You can’t blame the boss because you’d be blaming yourself. You can’t get mad at your team since you hired, trained, and managed them. You can’t blame your customers since, if they don’t buy, you chose the wrong market, built the wrong product, or are bad at explaining it to them. Even if your co-founder is the CEO and not you, you chose to work with them, and as founders, you are responsible for working well together and making the right decisions.

Being at fault for everything might sound stressful, but it’s also liberating. You don’t spend time tracking down who is to blame since you are. You don’t bore your partner at dinner by ranting about the terrible boss since it’s you. And since the problems are all yours, the solutions are yours, too, and no one will stop you from implementing them. Being the adult in the room has its advantages.

Never point to investors or the board

It’s so natural to expect an adult in the room that many founders look for one. They find investors with money, experience, confident opinions, and puffy vests with logos, so they assume, OK, I found the adults. It’s these folks. Then they snap themselves into a comfortable manager-employee dynamic and act like they “work for” the investors.

Nothing makes me cringe more than watching a founder stand in front of his company and say things like, “We are raising the number because investors want to see more growth” or “Don’t make me go to the board meeting with bad news” or “The investors wanted me to fire our VP of Marketing since we aren’t building enough pipeline.”

Blaming the investors or the board undermines your leadership by signaling that you aren’t in charge of your company, but an investor who spends 15 minutes a week thinking about your startup is. It signals that you are executing plans you disagree with because the board asked you to. It makes you look weak and indecisive. Don’t do it. 

Yes, you have to manage investors, but they don’t have the time, energy, or knowledge to be the adults in the room. They invested in you because they thought you would be.

Don’t seek out gatekeepers

Many careers require permission from gatekeepers. Becoming a lawyer means getting accepted to law school, impressing your professors, and passing the bar exam. Success at Google means getting a manager to hire and promote you. Starring on Broadway requires impressing agents and casting directors.

You don’t have to ask anyone permission to start a startup. You can start one sitting on the couch in your underwear. This seems a bit too easy to some founders, so they start looking around for gatekeepers.

Some founders assume venture capitalists are the gatekeepers and put a disproportionate amount of worry into finding them, catering to them, and fearing the investors will “steal” their companies if they are insufficiently impressed. Many founders turn this into a self-fulfilling prophecy by approaching their jobs as if they were employees and not owners. 

Other founders look at accelerators like YCombinator or TechStars and, seeing a rigorous application process and a single-digit acceptance rate, think, “Ah, I’ve found a hoop I can jump through.” But accelerators, as great as they can be, want to accelerate your company, not gatekeep it. The startups they like to accept are the ones who wouldn’t be dissuaded if they were rejected. When I read accelerator applications, I give a low score to anyone who says they’ll only move forward with their startup if we accept them.

Don’t ask to be rewarded for effort

In school, sports, or previous jobs, you may have been rewarded for taking on challenging assignments, trying hard, and working many hours, even if you ultimately failed to ace the test or close the deal. At a startup, there is no one to reward you for trying hard. Hard work only helps you when it produces results.

Founders often hit this disconnect when they try to raise money. They go to an investor pitch proud of the hard work they’ve put into their startup, only to discover that investors aren’t all that impressed by what happened in the past, only about what you’ll achieve in the future. If anything, they are more impressed by the company that got traction after only one year of hard work instead of three years.

Receiving no praise for effort doesn’t feel great, but no one ever said that being an adult would be a bundle of laughs.

Don’t resist hard decisions

The setting on a founder’s adult meter is often revealed when they need to make a hard decision, like firing a key team member or betting the company on a pivot. Adulting means facing the decision head-on and not denying, delaying, or equivocating.

Founders can’t sit back and hope someone else decides, since no one else will. Their teams watch them closely and are frustrated when decisions are made slowly, capriciously, or not at all. Not deciding is deciding.

Monitor your emotions when you need to make a hard decision. You might feel some fear, denial, or even resentment that you have to make an unpopular choice with limited data and time to analyze it. When that happens, power through. Opportunity for growth and all that.

Filter advice from "adults”

As founders progress through their startup journey, they bump into adult-looking people, like angel investors, venture capitalists, executives at legacy competitors, and random uncles at Thanksgiving dinner who “know about business.” These “adults” are usually older, have long resumes, and speak confidently in a loud and steady voice. But they usually know nothing about your startup.

I’ve made this mistake several times, where I walked out of a meeting having had my mind changed by an opinionated “adult” (usually a venture capitalist) only to realize they knew less than I did about the situation. I was swayed by their status, not their ideas.

Don’t ignore advice from experienced people, but learn to filter it, as we discussed in “Embrace Contraction.”. A venture capitalist friend of mine, Greg Gretsch, says, “All of my worst investments were when the founders listened to none of my advice or to all of my advice."

All successful founders learn to be the adults in the room, and many unsuccessful founders never do. Next, we’ll downshift from hard things to how you can Load Up On the Free Things.

If you have feedback or suggestions for future posts, please comment or contact us at michael@nextfounder.co.

Subscribe now

The Next Founder helps founders build great startups. We offer advice on managing your mental health and productivity, hiring and managing great people, building a strong culture, and keeping people aligned and working on the right things. See the series overview at Welcome to The Next Founder and find out more about me at My Story.

In “Become a Learn-It-All” we’ll talk about how success as a startup founder means finding out what you need to learn and learning it as quickly as possible. We’ll give tips on how to turn yourself into a “learning machine.”

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“The most important skill for getting rich is becoming a perpetual learner. The old model of making money is going to school for four years, getting your degree, and working as a professional for thirty years. Now, you have to come up to speed on a new profession within nine months, and it’s obsolete four years later. But within those three productive years, you can get very wealthy.”1
— Naval Ravikant

“The really great news is that being a “learn-it-all” has never been easier … you can learn about new things 24 hours a day, no matter where you are or what you do. All you need is the internal drive and insatiable curiosity to understand why the world is evolving the way it is. It is all out there for you to touch and feel. None of it is hidden.”2
— Bill Gurley

“I am always doing things I can’t do; that’s how I get to do them.” 
— Pablo Picasso

You do know what you don’t know

It’s the end of the day on Friday, so you look at your to-do list for the following week. It’s daunting.

On Monday, you have your first board meeting with your new Series A investors. You’ve never managed a board meeting, but hey, how hard can it be? You’ve bookmarked a dozen blog posts and podcasts about managing a startup board and plan to dive into them on Saturday morning.

On Tuesday, you have an all-hands meeting where you’ll try to calm your team down about a tech giant who just entered your market. You need to get up to speed on the competitor’s product and pricing. You don’t have McKinsey & Company to solve this, just a few hours on Sunday morning before your Barry’s Bootcamp class.

On Wednesday, you are interviewing marketing consultants to help revamp your messaging. You aren’t a messaging expert (thus the consultants), but you need to learn some basics, or you’ll have no clue how to interview them. You look at the three thick books about messaging sitting on your desk. OK, you aren’t going to read them by Wednesday, but you are going on a long mountain bike ride on Sunday, so you tee up some podcasts on startup messaging that you can listen to at your favorite podcast speed (1.8x, naturally).

Lately, you’ve been having a classic stress dream—where you are back in junior high school, walking into the final exam for a course where you never attended a class. But it’s no longer just a stress dream. It’s your reality even when you are wide awake.

Your subconscious is telling you that you need to Become a Learn-it-All.

Learn to earn

Many people walk around with a model of the world in their heads, where they go to school to learn the prerequisites to enter a profession and get their first job. Our employer then provides experience and training to master our current job before getting promoted to the next job, the next, and the next.

Whether or not the world ever worked that way, it doesn’t now, even less if you work for a startup. You are building a product no one has built before, trying to win a market that’s never existed, and doing tasks you’ve never done before. If you survive long enough to graduate to the next phase, your knowledge gap opens up again. You can never fully master what you need to know. All you can do is race to learn quickly and hang on for dear life as your startup takes off like Tom Cruise holding onto the plane in Mission Impossible.

You have to compress a career’s worth of learning into just a few years, with no professors or corporate learning department to help you. It’s entirely up to you to learn things like:

How to get product/market fit

Until you’ve built your product and have customers who use it, love it, and pay you, you don’t know if the core idea for your startup is any good. You need to get in front of customers, get their feedback, share it with your team, act on it, see what happens, and then do it all again. The faster you can drive this test/learn/iterate cycle, the more likely you will succeed.

How customers find and buy your product

Every market is unique in how buyers find, evaluate, and budget for solutions. Every market requires different value propositions and business cases. Even if you come into your startup with strong sales and marketing experience, you must relearn what you know for this market.

How to hire and manage people

Once your startup gets some level of product/market fit, who you hire and how you manage them will drive most of your success. If you’ve been in a management role in a previous company, you have a leg up, but lessons from larger companies don’t translate well to startups, where you have to recruit with no brand, no recruiting department, and no beefy compensation to throw around.

Strategy, planning, and operations

Running a fast-growing startup requires finance, planning, information technology, strategy, legal, security, and compliance knowledge. The knowledge you need grows at every phase of your company, and gaps can put the company at risk.

Yourself

Startups are so hard that they always become a journey of self-exploration. You’ll discover how you respond to stress, handle failure, face bad news, and process difficult feedback. These require grit, introspection, and possibly coaches or therapists to help you process your new reality and adjust to handle it. You’ll need to learn new things and unlearn some of what you thought you already knew. You need to uninvent yourself a bit before you can move forward.

Nothing I’ve said might sound controversial, so your reaction might be a mix of “sure” and “tell me something I don’t know.” However, there is a large gap between knowing what to do and finding the time and discipline to do it. Otherwise, we’d all have six-pack abs and clutter-free houses.

So, how do you become a “Learn-It-All?”

Adopt a learning mindset

Becoming a Learn-It-All starts, like most things, by embracing that you need to do it and that it will take time and energy.

You might have an impressive education, excellent work experiences, and raving reviews from your ex-bosses. You may even have experience at previous startups, but the gap between what you know and what you need to know is still vast. You’ve never built or sold this product to these buyers. You’ve never operated in this financial market. You’ve never managed this team. You have to drop your ego and face the learning challenge with humility, accepting that today’s version of you will not get your company where it needs to be.

But don’t become so humble that you beat yourself up about the list of things you don’t know. Almost no founder, even the most successful, goes into their startups knowing a fraction of what they need to know. Don’t criticize yourself or let Imposter Syndrome set in. Channel that energy into learning.

Learning only happens if you make it happen. You don’t have a boss to train you. No corporate learning department will spoon-feed you courses or seminars. No professor will force you to attend class five days a week. You have to get up every morning and get busy learning.

Curate the best resources

A great thing about the modern era of startups is the surplus of information available. You can find books, blogs, videos, podcasts, and tutorials about every aspect of starting and running a company. Our footnotes link to many of the best resources.

Get into the habit of curating content that resonates with you in the form factor that works for you. If you have blocks of time while working out or traveling, podcasts might be right for you. If you learn best through video, YouTube is your friend. If you like to read before bedtime, queue up a stack of books and articles.

This is not a one-time glut of information you must absorb as a prerequisite to starting your company. Think of it as an ever-changing buffet of knowledge you’ll consume over many years. (I’ve been curating my reading list for 30 years. If I live to be 100, I might even get through it.)

Talk to customers

Books, blogs, and podcasts (and, ahem, The Next Founder) can help, but they can only cover “horizontal” topics that are common across startups, like fundraising, recruiting, and managing people. They can’t teach you the most valuable information of all, which is what your buyers’ problems are, what product will solve them, how you reach customers, and how you win. 

These insights are specific to your startup and are proprietary, valuable, and hard-won. You should expect to work hard to get them, and that hard work starts with talking to as many prospects as possible, trying to sell them your product, and getting feedback on what they tell you they’d buy. You’ll start these conversations before you even incorporate your startup and never stop them, even after you find some success.

The world is full of founders who can tell you how to craft a fundraising deck or get accepted to YCombinator but who can’t tell you who their customers are or if their product solves their problems (or, more likely, doesn’t). Don’t be one of those founders.

Set aside time

Learning takes time and energy, so you have to make space for it if you expect it to happen. Find a routine that works for you that you can maintain indefinitely.

Some founders do well by devoting time daily to learning, like a morning routine of scanning blogs and Substacks. You can set aside time before bed to read books or watch lectures. You can set up a queue of podcasts and audiobooks to listen to while driving or working out. 

Some founders do better with binge learning. They might set aside an entire Saturday to do a deep dive into their competitors, spending the time watching product demos, reading analyst reports, and poring through user documentation. They might spend a whole weekend working through something like the First Round Review or a Stanford course on entrepreneurship.3

However, the best learning method is usually “just in time,” when you need the information to accomplish a specific task. For example, if you are creating a fundraising deck for an upcoming pitch to a venture capital partnership, you’ll be so focused on the task (and panicked about the impending deadline) that you’ll easily muster up the energy to look at dozens of example pitch decks for ideas.4

As is the case for most things, founders who have their shit together have an advantage. A founder who starts working on their pitch deck two weeks early, sets aside time for learning, and seeks feedback on early drafts will probably nail the pitch and walk away smarter. The founder who builds their pitch deck at midnight the night before their first investor meeting won’t learn much, will flub the pitch, and will walk away frustrated and fundless.

Build a brain trust

Much of the best learning happens via your network, so collect people who have something to teach you and are willing to teach it.

You can seek out other startup founders with whom you can share tips and tricks and build an informal founders’ network. You can add advisory board members with expertise in areas where you need help. When you hire consultants to take on projects, you can ask them for extra time to teach you the concepts behind the work they deliver. 

Most of all, learn from the people who work with you. Everyone on your team knows something you don’t, so don’t hesitate to let them teach you. Some founders don’t do this because they worry it undermines their authority. It might seem weird to ask the Head of Sales you just hired to teach you Sales 101. You might assume your role as a leader is to know it already or pretend you do. But you don’t; they know you don’t, and they’ll love being asked.

Grade yourself on a curve

Yes, you are back in school but be realistic about what a passing grade is. You don’t need to get straight A’s. You can’t know everything about everything, so you need to focus.

You only need to be an expert in a few areas. One of them is your customers — who they are, what they need, how they buy, what product features solve their problems, what messages attract them, and why they’ll buy from you and not a competitor. You can realistically be the smartest person in the world on these topics. The best startup founders are.

But you can often lower the bar for functional or technical skills like sales, marketing, fundraising, positioning, messaging, pricing, managing a board of directors, or the hundred other things you could learn. Startup learning is full of 20/80 rules, where a little effort gets you most of what you need to accomplish a task or manage the people who will. Learning a topic has an initial steep learning curve that usually provides the bulk of the value.

And remember, you aren’t competing against superhumans but against other startup founders who are usually as clueless as you are. You and your competitors are all trying to figure this out. Whoever is the best Learn-It-All will probably win.

This is one aspect of what we’ll talk about next in Be the Adult in the Room.

If you have feedback or suggestions for future posts, please comment or contact us at michael@nextfounder.co.

Subscribe now

The Next Founder helps founders build great startups. We offer advice on managing your mental health and productivity, hiring and managing great people, building a strong culture, and keeping people aligned and working on the right things. See the series overview at Welcome to The Next Founder and find out more about me at My Story.

In “Grasp Why You Get Paid,” we’ll ask, out of all of the demands on a startup founder, what are the ones that lead to success? We’ll look at why founders “get paid” and how you can focus on those things.

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“It is not enough that we do our best; sometimes we must do what is required.”
― Sir Winston Churchill

“If you're in a job that feels safe, you are not going to get rich because if there is no danger, there is almost certainly no leverage.”1
— Paul Graham

“It’s not really about hard work. You can work in a restaurant for eighty hours a week, and you’re not going to get rich. Getting rich is about knowing what to do, who to do it with, and when to do it. It is much more about understanding than purely hard work. Yes, hard work matters, and you can’t skimp on it. But it has to be directed in the right way.”2
— Naval Ravikant

Like running in sand

The first year of your startup was a slog, and the stress dream is back: the one where you are running in deep sand while being chased by a pack of mountain lions. You don’t need Freud to explain this one: your startup is going nowhere.

Only a few customers use your product. Some have given you an idea for a pivot, but you are reluctant to put it into motion. For months, you’ve urged your team and investors to be patient and keep the faith. A pivot means going back to them with, “Whoops, forget everything I said before, but listen to me starting now.”

On top of that, your Director of Engineering is a problem. He’s a mediocre performer and is partially responsible for your predicament. Firing him will be painful since he’s a hard worker, and the team likes him. You keep finding ways to delay the tough conversation you need to have with him, using the potential pivot as an excuse to do nothing.

You have several unanswered “we need to talk” Slacks from team members. You don’t expect them to age gracefully, but you know they’ll be energy-sucking conversations about questions you don’t have answers to. You hide in your office, rationalizing that you need “thinking time.” 

Coding always relaxes you, so you start fixing bugs in your product so that you can at least achieve something today. You leave the office close to midnight, exhausted, wondering if feeling this stuck is normal.

Yes, it is normal to feel stuck, but it’s also normal to fail. You might be able to turn it around, though, if you grasp why you get paid.

The price of success

A startup founder can make a pile of money. Thousands of founders and early startup employees have walked away from startups with seven-, eight-, and even nine-figure fortunes. Over 100 members of the Forbes Billionaires list landed there by starting a tech startup, often in their 20s and 30s.3

On top of the cash, successful founders enjoy the camaraderie and respect that come from building a winning team. They relish the ego boost of speaking at a conference or their high school commencement. Most of all, they get the satisfaction of building something that helps their customers and changes the world in at least a small way. These payoffs are why, after a win, so many founders start another startup and invest in other startups.

Who gets rich and who doesn’t might feel disquieting and even unfair, though. Why do so many promising founders go nowhere while seemingly less talented ones walk away loaded? Do you deserve to earn a hundred times more than your barista or even your doctor? Where does the money come from, and how do you know if you’re working on things that bring it your way?

If you learn the answers to these questions, you are not only more likely to succeed, but you may also retain a bit of humility if you do. You don’t want to be a failed founder, but it’s not much better to be a successful but insufferable one.

Let’s talk about how you get paid.

You get paid for your output, not your input

As a startup founder, you’ll work harder than at most other jobs and harder than most people who work for you, but working a lot of hours isn’t why you get paid. No one has more than 60–80 productive hours per week in them. Mark Zuckerberg didn’t become a billionaire by working 10,000 hours per week. And you aren’t working harder than the single mom next door who holds down two jobs. 

The hours don’t matter unless you are working on the right things. You don’t get paid for building the wrong product, hiring the wrong people, or for executing a go-to-market strategy that doesn’t connect with your buyers. You may as well be driving a car 100 mph down the highway in the wrong direction. The wind whipping through your hair gives the illusion that you are moving toward your goal, but you’ll finish further from success than when you started.

You also don't get paid for work that is easy and in your comfort zone. The right work usually isn’t. Firing someone is uncomfortable. Cold calling a hundred prospects when you’d rather be coding is difficult. Pivoting your idea because your product isn’t selling is risky. But you get paid for doing the work that needs to be done, not for the work you want to do.

The world is indifferent to your hard work and sacrifice. You have no boss to impress or professors to give you extra credit. All that matters is what you produce for your customers.

You don’t get paid for being the smartest

Brainpower is crucial at a startup, and most founders have plenty of it. Use it if you have it, but don’t expect to get paid for being the smartest person on your team.

A founder who wants to be the smartest person in the room can make it a self-fulfilling prophecy by filling the room with less talented people. They hire a team that won’t outshine or challenge them, but that’s a path to mediocrity.

Your job is the opposite: hire the best people you can, spend time training them, and ask them to leave when they aren’t working out. You won’t get the ego boost of always being the one with the answers, but you might get paid.

You get paid for risking failure

Most startups fail, and their founders can work for years with little financial success to show for it. The high failure rate makes sense—if startups were guaranteed cash, everyone would start one. Fear of failure can be even worse than the failure itself, as founders lay awake at night, envisioning going broke and being shunned as a loser by friends and family. 

The good news is that you aren’t risking your life. You aren’t serving a tour in Iraq or dodging heavy machinery in a coal mine. You are sitting in front of a Macbook, sipping a latte. Yes, the stakes are high, and what you are doing is important, but if you fail, you’ll live to see another day, and you‘ll have new skills and a great network to leverage into your next gig. 

You don’t get paid for elbowing people out

Many industries are zero-sum games where only a handful of people can win. If you were a basketball player trying to make an NBA roster or an aspiring actor trying to break into Hollywood, you’d have to beat out thousands of other hopefuls vying for a handful of coveted spots.

Startups don’t work like this since there is no practical limit to how many can succeed. To build a winning startup, you only have to beat a handful of direct competitors in your market. Anyone else you meet, whether it’s another founder, an investor, or a recruit, is someone to work with or to learn from. This is why the tech industry is so collaborative. It’s a positive-sum game. Helping someone else win doesn’t mean you’ll lose.

Some founders mistakenly assume startups are like other industries, where powerful gatekeepers decide who gets a shot and who doesn’t. They assume venture capitalists must be those gatekeepers. Popular entertainment like “Shark Tank” bolsters this fallacy, portraying investors as if they were movie producers who pick the winners and losers out of the lineup of fresh-faced supplicants waiting in line at their door.

The truth is less interesting. There are thousands of investors who want to put money to work, and most will tell you they wish they saw more great startups. Yes, investors have biases and blind spots like anyone else, but they are all looking for the same thing: a startup that might turn into a big company because it’s tackling a great market with a fantastic team. If you have one, you have a good chance of raising money if you need it. Investors might even compete with each other for a chance to invest in you.

You get paid for building a product that customers need

Some founders assume they get paid for dazzling a VC into writing a check or launching a clever marketing campaign to wow customers into parting with their money. And yes, deal-making is an essential skill for a founder. But you don’t get paid for wheeling and dealing; you get paid for having a product worth wheeling and dealing over.

Nothing happens at a startup until you build a product that customers love, collect their money, and convince them to sing your praises. Raising money doesn't help if you don’t use it to build a great product and get it into customers' hands. An excellent distribution strategy doesn’t matter if people don’t want the product in the first place. Even hiring great people doesn’t matter if they aren’t building and selling a product that people want.4

Product/market fit doesn’t guarantee you’ll build a big company, but not having it guarantees you won’t.

You get paid for financial sacrifice

Many founders work with little or no pay. Even after they generate some revenue or obtain funding, they take salaries below what they could get elsewhere. If their equity doesn’t end up being worth much, they exit the startup years later poorer than if they had spent the time doing something more lucrative. 

The required financial sacrifice can be unfair. Some founders have rich friends and family who can provide seed funding, but most don’t. Some have family responsibilities that require them to maximize their short-term income. Many founders have overcome these roadblocks, but overcome them, they must.

The sacrifice varies by founder. For a Harvard MBA who would otherwise be making $500K at an investment bank, a startup represents a huge opportunity cost. For a high school dropout whose alternative is a more ordinary job, the startup wouldn’t represent much sacrifice at all. This is why founders with no Plan B are some of the most persistent; they are less tempted to quit. And it’s why so many elite college graduates’ interest in startups doesn’t survive first contact with the canapés at Goldman Sachs career night.

You get paid for wanting to get paid

The first glimpse of success can disorient a founder. A founder who owns 40% of a startup that raises a series A at a $30 million valuation wakes up with a theoretical $12 million net worth on paper, which generates a cocktail of emotions, including fear of losing the money and guilt for having it.

Don’t worry about it. If you are getting rich, your employees are, too. Your investors will get a return, which goes to the pension funds and endowments that make up the bulk of the capital they invest. It means your customers are buying a valuable product from a company that will stay in business.

If your wealth ever becomes liquid, you’ll pay a lot of taxes, and you can donate to causes you value and invest in the next generation of startups. Don’t lose any sleep. It’s fine.

You get paid for persisting

A new startup is like a baby: a perfect little being with no flaws and infinite potential. Not long after it's brought into the world, its owners find themselves awake at 3 am, wearing the same vomit-covered clothes they wore yesterday, wondering if it’s ever going to get easier.

A startup usually takes off slower than its founders expect, if it takes off at all. When the slowness is because the startup is working on the wrong idea, the founders need to pivot or quit, but even successful startups can take a decade to grow to a substantial size. Much of the growth happens in the latter years due to the magic of compounding.5 A startup might take a decade to reach a $500 million valuation but hit $1 billion just a couple of years later. Founders get paid for spending years of their lives plugging away making this happen.

Founders who burn out or let their physical or emotional health atrophy are useless to their startups, so taking care of yourself is part of your job, not only for your own good but also for the good of your team. This means focusing on sleep, exercise, diet, and maintaining social and family connections. 

Yes, you’ll make sacrifices, but make the ones that produce results. Don’t make them just for the sake of making them. Don’t miss your friend’s bachelorette party because you think the startup gods will punish you for taking a couple of days off.

We’ll cover many of these topics in more depth in future chapters, starting with Be a Learn it All.

If you have feedback or suggestions for future posts, please comment or contact us at michael@nextfounder.co.

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The Next Founder helps founders build great startups. We offer advice on managing your mental health and productivity, hiring and managing great people, building a strong culture, and keeping people aligned and working on the right things. See the series overview at Welcome to The Next Founder and find out more about me at My Story.

In “Choose Abundance,” we’ll cover a pattern that emerges over and over when you start a company: “scarcity vs. abundance.” We’ll talk about how to recognize this pattern and how to make choices that are most likely to lead to success.

If you have feedback or suggestions for future posts, please comment or contact us at uninvent@substack.com.

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“If you want to go fast, go alone. If you want to go far, go together.”
― African Proverb

“Founders who consistently make decisions that build wealth are more likely to achieve what I call a “Rich” outcome (greater financial gains, lesser control), while founders who consistently make decisions that enable them to maintain control of the startup are more likely to achieve what I call a “King” outcome (greater control, lesser financial gains).”
― Noam Wasserman, The Founder's Dilemmas

“If we don't put aside our enmities and band together, we will die. And then it doesn't matter whose skeleton sits on the Iron Throne.”
― Davos Seaworth, Game of Thrones

How much do you want it?

Your ex-colleague Marcy would make a perfect co-founder. She’s a technical wizard who has built products for your market. You are a sales and marketing operator with a pipeline of prospects interested in your product. You work well together and would make an ideal “hacker and hustler” co-founder dream team.

But you hesitate before sealing the deal. You’d give almost half of your equity to her, and you worry that she’ll slow you down. You know the strategy you want to pursue and don’t want to spend time debating it with a partner. You wonder if you should strike out on your own as a solo founder and just hire a more junior person to build the product.

Your bootstrapped startup is showing signs of life. Your revenue already covers you and your co-founders’ meager salaries. You can grow faster by spending more money, but you’d need to raise funding. A seed investor approaches you and offers you $2 million for 20% of your startup. She also insists you set aside 10% of the stock in a pool for future hires.

You keep the investor waiting for several days while your team debates what to do. Is the extra growth worth 20% dilution? Can you hire some people who won’t demand so much equity? If you increase your burn rate, will it lead to more and more financing rounds until you eventually own only a few crumbs of your own company?

You are getting middling feedback on your product prototype from potential customers. Your co-founder spends the weekend mocking up a prototype of a related but different idea he wants to try. You show it to those same customers, and they love it. They tell you they’ve been hoping a startup would solve this exact problem.

You’ve lived and breathed your original idea for two years and are reluctant to let it go. Your co-founder’s idea might be a faster path to success, but adopting it would require a permanent identity shift. Instead of working at a startup based on your own idea, you’d be working for a startup based on someone else’s.

You are choosing between two venture firms that have given you identical term sheets for your Series A. The partner leading the investment would join your board. 

The first investor has a hands-off reputation. He sees his role as deferring to the founders and only intervening when asked. The second investor is more prominent and respected, but she is known for taking her board duties seriously and pushing founders to grow as fast as possible. A recent Hacker News thread trashed her for ousting a founder from his startup after she lost faith in his leadership.

You debate if it’s more important to have a heavyweight in your corner who will push you and your company harder, or would you rather maintain the freedom to chart your own course and not lose sleep worrying about keeping your job?

Your new COO has worked for you for six months, and she is fantastic — so fantastic that she would be a better CEO than you are.

After six years of hard work and stress, you are tempted to promote her and demote yourself to a smaller role running product management. You’d keep all your equity, work less hard, and have a higher chance of building a great company. But you wonder if you’d be satisfied not running the company that you built. What will it feel like to see her picture on the home page of TechCrunch instead of yours? How will you feel listening to podcasts featuring her talking about leading the company you started?

These kinds of tradeoffs pop up at every startup. They require you to ask how much trust you are willing to place in others and if you are willing to take leaps of faith. They require you to ask what you are willing to give up if you might get more back in return. They require you to ask when to choose abundance.

You gotta give to get

It’s easy to incorporate a company, declare yourself the CEO, own 100% of the stock, and make all the decisions. You only need to file a few forms and pay a small fee to the state of Delaware or your country’s equivalent.

But you own 100% of nothing. Turning that nothing into something requires a series of decisions that involve taking risks, giving things up, and putting faith in others. Adding investors and employees means diluting your stock. Building a strong board requires giving up some control. Adding senior people means sharing the credit and risking that they outshine you.

Most of these tradeoffs are some form of the “Rich or King” dilemma, best described in Dr. Noam Wasserman’s seminal book “The Founder’s Dilemma."1 You’ll also hear it described as “economics versus control” in the context of a round of funding.

I prefer to frame these in terms of the “scarcity vs. abundance mindset,” which describes how a person tends to approach important life decisions, especially those involving placing trust in other people.2 (Thanks to my lovely wife, Mary, who alerted me to the concept.) 

At a startup, scarcity vs. abundance manifests in most of the big decisions you’ll make:

Team — Do you bring in confident and experienced people who will ask for more stock and might challenge your decisions? Or do you recruit cheaper, more junior staff who will be more pliant and accept a role where they just do exactly what you tell them to?

Ownership — Do you accept that you’ll give up some of your ownership as you bring in investors, board members, advisors, and hire a team, or do you optimize for keeping the biggest piece of the company that you can, even if it means you get less help?

Idea — Do you stick with your original idea, even if customers aren’t excited about it? Or do you accept that your ideas aren’t as great as you thought and pivot until you find something that resonates, even if it’s not your original idea?

Delegation — Do you delegate important work to your team, even if they don’t do it as well as you would have (or worse, do it better)? Or do you approve all important decisions?

Co-founders — Do you add co-founders, even though you’ll give up a big piece of your ownership, share the credit, and risk co-founder conflict? Or do you stay a solo act and bet only on yourself?

Funding  — Do you raise money to grow more quickly, even though that will dilute your stock and add more stakeholders with opinions on how to run your startup? Or do you grow more slowly but keep control of all aspects of the business?

Board  — Do you build a strong board that will challenge you and your team and provide strong governance? Or would you rather go it alone and forego both the oversight and the help a board can provide?

Choose abundance, but wisely

My bias is probably obvious: I lean towards the abundance side of the spectrum. I know you have to take leaps of faith to build a successful company, even if that means having a smaller role and less control. I want to have the biggest possible impact on the market, build wealth, and bring a fantastic team along for the ride. It’s also more fun.

I’ve met founders who put their energy into “not getting screwed.” They obsess about dilution, giving the smallest equity grants possible when they hire people. They don’t trust investors, even ones with stellar reputations. They hire junior people who won’t challenge them, or they even try to outsource critical functions. I’ve never seen one of these founders do well.

But abundance doesn’t mean abandoning caution and being indiscriminate about who to trust and what risks to take. Some decisions should be approached with abundance, and others with scarcity. Abundance decisions, which usually involve who you want to invite into your startup, need to be made carefully. You need to do plenty of due diligence and take risks only when you have a good chance of getting more in return.

You can do a few things that help you anticipate and react to these kinds of decisions.

Know thyself and know thy startup

Some startups are capital-intensive and need funding and experienced staff to get traction. Founders of those companies should be realistic that raising money and adding skilled people to the company requires giving up some equity and control and brings along all of the hard work, stress, and messiness of managing a growing team.

Other startups have products that are cheaper to build and distribute. They can push off hiring and fundraising until further down the road. But even those founders are often too optimistic about how much money and talent it will take to remain competitive. A startup that needs less funding to launch also has fewer barriers to entry. Markets that grow quickly attract competition. Winning a market usually requires adding money and talent.

One way or another, you’ll face scarcity vs. abundance decisions, probably earlier than you think. Discuss them ahead of time with your team to ensure you are in sync about what kind of company you want to build and what you’re willing to give up to get it.

Face your “scarcity” demons

Human nature comes with the “loss aversion” bias, which is when the fear of losing something we have motivates us more than the opportunity to gain something we don’t have.3 This bias was helpful a thousand generations ago when our ancestors were fleeing lions on the savanna, but it can slow a startup down.

Your life experiences also impact your scarcity vs. abundance mindset. Some founders tend to be more cynical about other people's motives, less trusting, and thus less able to take the leaps of faith that building a startup requires. Other founders land too far in the other direction, where they are too trusting of others and don’t do enough due diligence when choosing who to work with.

Uninvent can’t psychoanalyze you, but you probably already know your natural tendencies. If you tend to approach situations from a place of distrust and spend more time worrying about what might go wrong than right, work on taking a step back and asking what you can do to get comfortable with abundance decisions.

Learn the intricacies of control

Some founders are reluctant to raise money or build a strong board of directors out of fear that their company will get “stolen” from them. This occasionally happens, but it doesn’t mean your only two choices are to never raise money or hand over the keys to your startup. You have plenty of options that lie between those two extremes.

Control is exerted along several dimensions, including operational control, financial control, voting control, and board control, each of which breaks down further into individual terms that are often part of the negotiation for a round of funding. Most of the terms you negotiate involve which decisions your investors and board will need to approve.4

We won’t get into the technicalities here, which are complex and vary by the type of company you are and where it is incorporated. You’ll need to work with your attorney in the context of a specific funding offer. But get familiar with the topic so that when the time comes, you can approach the tradeoffs with more nuance and have already thought about what you’re willing to give up and what you aren’t.

Keep control by deserving it

Many founders’ nightmare scenario is getting kicked out of their own company by their investors or even by their own co-founders. It doesn’t happen often, but when it does, the story is almost always the same: the team has lost confidence in the founder’s leadership.

The loss of confidence usually starts when the startup starts missing its goals, but it usually takes more than that. Most startups go through difficult stretches, and the founders survive them as long as they are still seen as the best people to lead the startup. When it goes bad, it’s usually because the founders isolate themselves. They stop sending investor updates. They stop asking their investors and board for help. They don’t share the bad news with their teammates or enlist their help to solve it.

Even if you don’t have a board who can kick you out of your company, you don’t have the control you think you do. You can’t force great people to join your company or to stay with you during hard times. If you don’t communicate and don’t trust your team, they’ll leave, and you’ll realize that you “control” less than you thought you did.

Do due diligence on team additions

You probably know how expensive a bad hire is, and we’ll certainly remind you in future chapters. A bad hire can slow you down, damage your culture, and heap a pile of stress on you. But you always have a simple remedy for a bad hire: you can ask them to leave. 

You can’t ask investors to leave. They are with you for the long haul. Amazingly, founders often do more due diligence when they hire a new team member than when they add a new investor.

As you would for a key hire, spend as much time as you need to with a potential investor to get a feel for how well you’ll work together. Check lots of references from other founders who have worked with them, both ones the investor gave you as well as ones you’ve hunted down on your own. A good investor welcomes this and will respect you for it.

Choosing abundance helps set you up for a successful startup, but it’s no guarantee. You can increase your odds further if you Know Why You Get Paid.

If you have feedback or suggestions for future posts, please comment or contact us at michael@nextfounder.co.

Subscribe now

The Next Founder helps founders build great startups. We offer advice on managing your mental health and productivity, hiring and managing great people, building a strong culture, and keeping people aligned and working on the right things. See the series overview at Welcome to The Next Founder and find out more about me at My Story.

In “Embrace Contradiction”, we’ll talk about how startup founders are bombarded with so much advice that it’s not clear who you should list to, if anyone. We’ll offer a few tips on how to filter advice that might be relevant to you from advice that probably isn’t.

If you have feedback or suggestions for future posts, please comment or contact us at uninvent@substack.com.

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“Where did truth stop? Where did error begin? I was all adrift among a thousand contradictory hypotheses, but I could not lay hold of one.” 
— Jules Verne, Journey to the Center of the Earth

“Contradictions do not exist. Whenever you think that you are facing a contradiction, check your premises. You will find that one of them is wrong.” 
― Ayn Rand, Atlas Shrugged

“There are no solutions, only trade-offs.”
— Thomas Sowell

Uh, make up your mind

Your new startup will sell products to insurance companies. You’ve never worked in the insurance industry, but you’ve interviewed two dozen insurance executives who were effusive about your prototype. They say if you could build what you showed them, they’d buy. The product is complex and requires time to build, so you start to research what it will take to raise money.

You find a blog post from a prominent investor who says his firm’s thesis is to invest in founders who are experts in the industries they are disrupting. He shares stories of founders who spent years working in the trenches of industries like manufacturing, energy, and, yes, insurance before leveraging their hard-won knowledge and connections into a successful startup selling back into those industries.

You then listen to a podcast from a top investor who says her firm loves backing industry outsiders. She cites companies like Netflix, SpaceX, Tesla, and Stripe, where founders who never worked in their industries spotted opportunities thousands of industry veterans missed.

What do you do with this information? Will investors accept that you are entering an industry with fresh eyes and can disrupt stodgy incumbents, or will they think you are out of your depth? Would it be better to work for an insurance company for a few years before pursuing this startup?

The investor you are pitching wants to increase the size of your Series A funding round from $5 million to $7 million. They like your startup, want to own more of it, and think you’d benefit from having more money in the bank to give you time to achieve critical milestones before you need to raise the next round. You ask a few other startup founders for their advice.

One founder says you should almost always accept more money when it’s offered. Her company took longer to get traction than she expected, and the extra year of cash prevented a premature, highly dilutive series B. She was able to focus on her product and customers instead of scrambling to raise money and could make better decisions without the looming fear of going broke.

Another founder tells you the opposite. He says his startup raised too much money too early. They gave away a big chunk of the company and developed bad habits, throwing money at acquiring customers without first validating they had product/market fit. They burned through their cash quickly and then had to raise the next round on poor terms.

Both seem credible, so whom do you listen to? Do you raise at the high end of your range to give yourself more cushion? Or keep the round small, give up less of the company, but have less runway in case things go wrong?

Your Director of Product Marketing is doing a great job, and you plan to promote her to VP of Marketing and have her build out your marketing team.

One of your two angel investors is supportive. His best investments had founders who were talented at investing in their people’s careers and giving them more responsibility as the company grew. Those startups kept their best people for many years and built reputations as great places to build a career.

Your other angel investor is disappointed. The founders at her best investments were wizards at attracting senior talent. They recruited “unrecruitable” stars who raised the talent level across the company, bringing along their networks of top-quality recruits, customers, and partners. She recommends you look at external candidates for the marketing role.

Should you launch a long and expensive search for a VP of Marketing, possibly losing your best team member while you do it? Or should you invest in her career and reward her for the hard work and loyalty she’s already shown?

Congratulations! Intelligent people are willing to share advice with you. That advice probably doesn’t feel very useful, though, since it’s leaving you more confused than when you started.

Whom, if anyone, should you listen to? To figure that out, you need to embrace contradiction.

The contradiction contradiction

If you are like most startup founders, you are bombarded with advice from the “Startup Advice Industrial Complex.” You get opinions from books, blogs, podcasts, incubators, investors, advisors, and, if you live in a startup hub like San Francisco, random hipsters you bump into at Burning Man or over the kombucha tap at WeWork.

And because Uninvent is offering more advice to throw onto that pile, we owe your some meta-advice on advice.

If you pick any topic, double-click on it, and go down the advice rabbit hole, you’ll find great people giving intelligent, well-considered opinions that perfectly contradict. Some of the most common are:

Ideas — “You can’t win without a great idea” vs. “Ideas don’t matter; execution is everything.”

Product — “If the product is great, anyone can sell it” vs. “Distribution beats product every time.”

Co-founders — “You really don’t want to start a startup as a solo founder” vs. “Uh, Jeff Bezos?”

Hiring — “Hire sales reps with experience selling into your market” vs. “Hire sales reps with experience selling for startups at your stage and average contract value.”

Spending — “Don’t lose the market because you are too timid to raise money and invest aggressively” vs. “Don’t confuse fundraising with success. The best startups don’t raise much money.”

Burnout — “You’ll work 80-hour weeks and have no life for five years” vs. “Your startup will suffer if you are unhappy and unhealthy at home.”

Product — “Validate that people want the product before you build it” vs. “Customers don’t know what they want until you show it to them.” 

Talent — “Hire the most qualified people you can find and raise enough money to pay them” vs. “Hire raw and undiscovered up-and-comers.”

Authenticity — “Be authentic and vulnerable with your team” vs. “If the team sniffs out any doubt from you, they’ll lose the faith.”

This conflicting advice should not be too surprising because:

Every team is different

Some founders are passionate about their market, while others are more passionate about the process of starting and running a startup itself, independent of their market. Some founders are introverts and do their best thinking in isolation, and some are extroverts, who function best collaborating with co-workers. Some founders are product-focused engineers and designers, and others are more customer-focused salespeople and marketers. Some are early in their careers, and others are veterans. Unsurprisingly, what works for one team won’t work for another.

Every market is different

Some markets are already large but cluttered, so traction requires beating incumbents in competitive deals. Some markets are nascent and require a more evangelical approach, where the goal is to get an early lead and ride the market up as it grows. These markets require different skill sets and strategies to attack.

Every product is different

Some products require unique technical or scientific expertise and a large amount of funding to build. Others can be built by any competent engineer with a few months to spare. Most are somewhere in the middle. Where you land on that spectrum determines how much money you raise, who you hire, and how long you give your startup to get traction.

Every funding market is different 

Sometimes the funding market is flush with cash, and rounds get done quickly at high valuations. Other times, funding is scarce, may require months to obtain, and the terms might be painful to accept. Your strategy has to take today’s funding environment into account, not last year’s.

Correlation is not causation

Successful founders often share what worked for them, but they can’t know if their startup worked because of specific decisions they made or if they would have succeeded either way. It’s impossible to rerun history with a different set of inputs, so founders can be quick to assume causation when it might not be there.

Luck and timing matter

Although you should never count on good luck or blame bad luck, luck and timing impact your success. Many startups seem to do everything right but fail, usually because of bad market timing, while others succeed despite mediocre execution after stumbling upon an urgent market need.

Why so spurious?

It’s tempting to be surprised or frustrated by conflicting advice, write off the advice giver as clueless, throw up your hands, and decide to make things up as you go along since no one has the answers anyway. Don’t go that far.

Instead, try to adopt the attitude that advice from well-meaning, intelligent people is a gift, and you appreciate their taking the time to give it. Think of each piece of advice as an ingredient you can stash into your pantry. In the worst case, it will sit on the shelf. In the best case, it might find its way into a future main course alongside other yummy advice morsels you have collected.

This requires you to have criteria you use to evaluate advice, where you can ask a few questions to weigh how relevant that advice is. We’ll talk about a few questions you can ask to vet the advice, where the more times you can say “yes,” the more likely it is the advice is relevant.

Keep asking “why” until you get the answer

High-level advice like “don’t spend too much money” is usually too superficial for you to put into action, but if you take the time to dig a few levels deeper, you may uncover some nuggets of wisdom you can use. You do this by asking, “Why?” as many times as you need to until you’ve dug down into the core of what you are hearing.

For example, if a founder tells you, “Don’t trust venture capitalists,” ask, “Why?” Maybe they tell you that an investor from their last startup tried to remove them from their own company. Ask, “OK, why did that happen?” Keep asking why until you get the full story.

You might learn that the founder chose a notoriously skittish VC who is prone to panicking and replacing founders at the first sign of trouble. OK, now you’ve found a nugget you can use: when you raise venture capital, don’t pick an investor like that. Make as many reference calls as you need to check out a potential investor. The lesson isn’t, “Don’t trust VCs.” The lesson is, “Don’t trust this VC.”

Or you might discover that his startup was not doing well, he stopped sharing information with the board, didn’t ask them for help, so they lost faith and tried to replace him. OK, now you’ve learned you should always communicate with your board instead of keeping them at arm’s length, especially when things aren’t going well.

Asking a few whys might even reveal that the person giving the advice doesn’t even understand that advice but is just repeating something they heard elsewhere. That doesn’t make the advice wrong, but it provides a weak signal.

Consider the source

A good filter for advice is to ask who is giving it. Consider what experiences the advice-giver has gone through and how they led them to their conclusions. Ask what role they have and what incentives and biases come with that role.

For example, a founder who has started one successful startup will sometimes be quick to tell other startups to follow the same playbook his company followed (that’s me, circa 2001). This founder is at the peak of the “Startup Advice Conviction Curve,” where they’re convinced they cracked the startup code and are eager to share the secret playbook with others.

Whereas a founder who has been through several startups (and has probably been soundly beaten up as a result) can better apply more nuance to their advice, having seen that different situations need different solutions.

Or consider the advice you get from potential investors, who often feel pressure to prove they can “add value” since their value-add serves as the rationale for why you should take their money and for why their limited partners gave it to them. Investors, especially junior ones, can feel pressured to give smart-sounding advice, delivered confidently, in situations where the right answer is, “I don’t know.” Investors who have already proven themselves show humility when asked their opinion and are slow to dispense advice until they fully understand the situation.

Also, consider whether the person has invested time in getting to know your situation. Do they know you, or did they just meet you? Did they spend time asking thoughtful questions about your product and market? Was it clear they would have given different answers based on what they learned, or did they just start dispensing the same advice they probably give to every startup they meet?

Pay attention to your industry, not “The Startup Industry”

As a startup founder, you operate in two industries. The first is the industry in which you are competing for customers. The second is the “Startup Industry” itself.

Some founders spend most of their time in the startup industry, probably because it’s easy and fun. This is the world of meetups, hackathons, incubators, and co-working spaces. And, sure, this is a good way to build a support network and learn about fundraising, getting to product/market fit, recruiting, culture, and the dozens of other things you need to know to run a company. Much of what Uninvent covers is the startup industry.

But the advice you really need often comes from the industry in which you are selling. These are the people who will use and buy your product, the partners you’ll work with to reach customers, and the suppliers who will provide critical components. These folks can be harder to track down since they are less likely to be in your social circle or hanging around your WeWork. You often need to hunt them down in unsexy, dingy places like the Columbus Airport Hilton during their annual industry trade show.

Beware, however, that industry insiders can also be a source of terrible advice. If you had asked a taxi company about Uber, a Hollywood executive about Netflix, or a General Motors VP about Tesla, you would have gotten a long list of reasons the idea would never work, punctuated by eye rolls and condescension.

Don’t hold out for the “right answer”

If you were training to be an air traffic controller or a brain surgeon, expert instructors would train you on your discipline, including procedures and checklists to handle any scenario thrown at you. If you’ve ever flown on an airplane or undergone surgery, you were thankful the pilots and surgeons weren’t just winging it and making it up on the fly.

Some founders assume startups work the same way. They find the long list of startup books, incubator programs, and university courses, and they assume entrepreneurship is an established and respectable profession, like being a lawyer or accountant. It’s not, and thinking it is can cause a few problems.

One is that founders can assume there is a body of knowledge they have to obtain as a prerequisite to starting their startup. This can provide a distraction, or even an excuse, from just getting started. You don’t have to read every startup book. You don’t have to get an MBA. You don’t have to spend years applying to incubators. Yes, an incubator might help you, but it’s not law school for startups, and there is no bar exam anyone will ask you to pass. Most incubators will tell you that their best startups would have been successful without them.

Once founders get their startup going, they can over-research and over-analyze important decisions, assuming there is a clear-cut correct answer to the question of the day. This is rarely the case and can cause analysis paralysis and frustration. 

The best founders tend to be a bit willful and stubborn. They may seek advice from people they respect, but they don’t take a vote for every decision nor look for consensus. When they hit ambiguity, they plow forward anyway. 

Yes, you should take advantage of the resources available to you, but most startup learning happens on the job and is situational. As challenges pop up, you quickly gather whatever help you need, make a decision, move forward, and then fix it later if you need to.

Beware “happy ears”

We all suffer from “confirmation bias,”1 which is the tendency to focus on evidence that confirms what we already believe and to discount evidence that would force us to change those beliefs. If you’ve ever worked with someone who perked up every time they heard an anecdote that supported their position but developed hearing loss for stories that didn’t, you were lucky enough to work with someone suffering from confirmation bias. That person may have even been you.

Human nature is also to discount information that would require us to accept tough realities and make hard decisions. We don’t like to hear feedback that we need to fire someone on our team. We don’t like to hear that we need way more traction to raise a round of funding. We’ll ignore 10 customers who dismiss our product and latch onto the one who says they love it. (We’ll talk more about this in “Facing the Abyss.”)

This does not mean you should toss out your hard-won beliefs at the first sign of trouble. The bar for pivots should be high. But you can’t discover the truth if you aren’t really looking for it.

Most of all, you have to evaluate advice relative to the kind of company you want to build, which we’ll talk about next in “Choose Abundance.”

If you have feedback or suggestions for future posts, please comment or contact us at michael@nextfounder.co.

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The Next Founder helps founders build great startups. We offer advice on managing your mental health and productivity, hiring and managing great people, building a strong culture, and keeping people aligned and working on the right things. See the series overview at Welcome to The Next Founder and find out more about me at My Story.

In “Ignore the Noise,” we’ll talk about all of the distractions that can keep a founder from starting a startup or can slow them down once they do. We’ll discuss how you can stay focused on what matters, stay aware of the cycles that drive the tech industry, and shut out the noise.

If you have feedback or suggestions for future posts, please comment or contact us at uninvent@substack.com.

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“Don’t debate people in the media when you can debate them in the marketplace.”
— Naval Ravikant

“Stop buzzing in my fucking ear!”
— Logan Roy, Succession

“Sorry, dude, it’s the circle of life. Hakuna Matata, motherfucker.”
— My friend Scott

The trough of disillusionment 

You and your co-founder have worked 80-hour weeks for six months on your startup, and all you have to show for it is $15K in credit card debt. You have a decision to make: stay the course and try to make enough progress to raise money from angel investors, or cut your losses, quit, and get a “real job” to pay off your loans.

One Friday night, after a particularly frustrating week of no one returning your calls or clicking on your links, you find yourself doom-scrolling. 

You read an article about how the economy is likely entering a recession, and corporations like the ones you are targeting will likely slow down spending on new solutions.

Another article says that venture capitalists are slowing their investment pace. Fewer startups are getting funded, and the ones that do raise money are receiving lower valuations than last year.

A podcast tells you that the bad news from the tech industry is causing new college grads and MBAs to lose interest in starting or joining startups, breaking a five-year trend of increasing interest in entrepreneurship.

You read about a startup CEO going to jail after defrauding investors. You read about another whose board fired him for dating subordinates. Another was fired after raising $50 million and spending $15 million of it hiring Beyonce to play at their user conference.

No más! Your doom-scrolling is eroding your mental health by the minute. As you shut down your apps, a text from your college roommate pops up. She asks if you are freaked out about a newly-launched startup whose product sounds like yours. You weren’t before, but well, now you are. Thanks, Janice.

A call arrives from your dad. You swipe it straight to voicemail. You know it’s the weekly interrogation where he asks if your startup has found any customers yet. Every week, you respond, “No,” and he follows with, “Are you sure the whole startup thing is a good idea?” This interaction will not be helpful at the moment.

You reflect — yes, you know a startup is challenging no matter when you start it, but you wonder if your timing is off. Should you pause a few years until the economy rebounds, venture funding recovers, and anti-startup sentiment subsides? Or should you power through and ignore the noise?

It’s the circle of life

A few decades ago, startups were an obscure phenomenon, hidden in the suburban garages and office parks of Silicon Valley. Today they’re downright mainstream. The media follows the tech industry closely, often mocking startups who burn cash pursuing “dumb” ideas. Senators yell at whichever tech CEO is genuflecting in front of Congress. Netflix has launched several tell-all series about larger-than-life misbehaving startup founders. The venture capital industry flips between “overheated” and “licking their wounds,” never seeming to settle into a just-right Goldilocks middle ground.

Startup founders can extract some signal from this noise. It’s helpful to know the state of the funding market, what recruits are looking for, and what economic challenges your customers face. 

The noise can do more harm than good, though. It can add distraction and stress to what is already a difficult pursuit. It can cause you to lose historical perspective and give a false sense of how bad or good your timing is. The noise can give founders an excuse to quit, where they may have persisted had they put their heads down and stayed focused.

Much of the noise comes from the volatile cycles that whipsaw the tech industry:

The technology cycle

The technology waves we discussed in Know What You Believe drive most startup opportunities. A wave of startups was launched in the late 20th century downstream from the development of mainframes, mini-computers, PCs, biotech, client/server software, and the Internet. Since 2000, one wave after another has hit, including software as a service, cloud computing, mobile devices, app stores, CRISPR, blockchain, and now artificial intelligence. These waves unleashed thousands of successful startups and trillions of dollars of new market capitalization. Each wave also bred thousands of failed startups that burned billions in capital and returned almost nothing.

A new technology usually follows a predictable “hype cycle.”1 Interest builds until the technology is overhyped, attracting too much investment into too many startups chasing too few opportunities. A crash ensues, followed by a gradual stabilization, where the technology finds its most productive applications and becomes a mainstream part of the economy.2

The funding cycle

Funding from angel investors, venture capitalists, and private equity varies widely from year to year. These fluctuations are driven partially by the general financial markets since private company valuations track the public equity market and interest rates. The technology hype cycle drives them even more, where investors look for an edge by rushing into “the next big thing” until it’s so overfunded that it crashes until it’s no longer the next big thing. The result is a sharp boom and bust cycle, where capital is plentiful one year and scarce the next, even when the quality of the startups that need the capital hasn’t changed much.

The economic cycle

No matter how new and innovative a startup’s products are, its customers are still good old-fashioned consumers and businesses impacted by the general economy. Recessions cause consumers to spend conservatively. Companies focus on efficiency and saving money and have less appetite for risk. This impacts the startup economy (although, as we’ll discuss, less than it might seem).

The talent cycle

When I graduated from college in 1990, only a few hardcore techie classmates started or joined startups. After the 1995 Netscape IPO made many people millionaires overnight, new grads poured into the industry, and staffers at established companies like HP and Microsoft quit their “safe” jobs to jump on board “dot-com” companies. After the crash of 2000, talent receded from early-stage startups. It returned until the 2008 crash, ebbed, then came back, seemingly for good, until the 2022 crash drove many people away.

The talent cycle is downstream from the other cycles. When jobs, funding, and opportunities pile up, talent buzzes around it like bees to honey.

The sentiment cycle

Pre-Internet, the technology industry was a bit of a snoozer if you weren’t part of it. No one headed to TechCrunch for their morning news or opened People Magazine expecting to see an exposè of a “bad boy” startup founder.

Today, the industry overflows with money, quirky personalities, and products that impact mainstream culture. Stories about them get clicks, so media coverage follows. The coverage focuses on the most sensational stories, often the founders of B2C startups involved in the latest scandal.

This coverage gives the impression that something untoward must be happening, as if no one could be getting this rich unless they were involved in shady shenanigans. 

Riding the cycles

These cycles aren’t going away, so how should a startup founder navigate the noise and distraction they generate? They mostly shouldn’t.

These reminders might not even be necessary since the best founders don’t need anyone to tell them to ignore the noise. They do it naturally. When they find the idea they want to pursue and team up with the right co-founders, they don’t stop to ask for permission or approval. If anything, they are so obsessed and focused that they can’t be talked out of it.

That being said, every time I’ve taught a class or spoken at a conference, the questions from would-be founders are the same. “Is now a good time to start a company?” “My professor thinks this is a bad idea. Is he right?” “What’s hot right now?” “How do you feel about <latest scandal>?” Clearly, the noise can knock people off track who might otherwise succeed, so let’s talk about how to tune it out.

Zoom out for perspective

If you are early in your career, your window into the cycles is narrow. For example, if you started working on your startup in 2022 and are trying to raise seed funding in 2024, you experienced the funding cycle as a disastrous crash:

You might feel like you started a company at the wrong time and may as well shut it down since you missed the window. Or you might be tempted to “wait until the market recovers” and assume a bounce back to 2024 levels is around the corner.

But if you zoom out a bit, 2024, while much slower than 2022, is not all that bad by historical standards. 

This perspective doesn’t make it any easier to raise money but it might help you recognize that now is probably as good a time as any to try to make your startup work, even if 50x revenue multiples never happen again in your lifetime.

Take the long view

A question like, “Is now a good time to start a startup?” is immaterial when you take the perspective that it will take a decade or more to build a large company. In that time, we’ll go through at least one boom and bust cycle, one or two recessions, a few Presidential elections, five Olympic Games, and a few Taylor Swift albums. 

The more successful your startup is, the more cycles you’ll live through:

When Bill Gates started Microsoft in 1975, the economy was a disaster, but he bet that the software market would grow by thousands of times over the following decades. He wasn’t going to pause because the general economy was growing at 1% instead of 2%.

It might seem easier to start a startup during boom cycles when investors throw money around. Getting started is probably easier, but your goal isn’t to start a startup. It’s to start a successful startup.

Startups founded during low points in the cycles (think Google, Facebook, PayPal) probably succeed at a higher rate. They have less competition since investors don’t fund twenty competitors pursuing every plausible idea. They can concentrate a great stable of talent since it’s not spread out thinly across other startups.3 They can grow at a fast but sustainable pace since they aren’t racing against a pack of competitors who assume that whoever raises and spends the most money wins the market.

Every upside has a corresponding downside, and the downsides of starting a company during a boom cancel out the upsides.

Pay attention to your personal cycle

These cycles are external to you, so they are out of your control. You can’t influence them or reliably predict them. But what’s happening in the outside world is less important than what’s happening in your own life. 

Have you found an idea you’re passionate about pursuing? Do you know the founding team you want to work with, and are they available and excited to join up? Are you in a place in your life where you can devote several years of focus and hard work with minimal pay? 

If the answer to these questions is “yes,” the right time to start this company is probably right now, regardless of what's happening in the outside world. If you wait a bit longer, hoping for perfect timing, you may never start your startup since you’d miss the perfect timing for you.

And if the answer to these questions is “no,” then you are probably not ready to start anything yet, no matter how “hot” the market is. 

Focus on your market, not the market

A common question from would-be founders is, “What is hot right now?” They assume a hot market is a tailwind for a startup to raise money and ride the hype cycle to success. 

It’s not a completely useless question. For example, if artificial intelligence is “hot” right now, it’s probably true that you’ll have an easier time raising money and that some founders will build successful startups using AI. Of course, it’s also true that too many companies will get funded, making it harder for any one of them to break out.

But “artificial intelligence” is not a market. It’s a technology you can use to solve a specific problem for a specific buyer. You should care about the “hotness” of the market you are selling into. If you are selling AI-powered solutions to farmers to improve crop yields, you’ll succeed if that specific market takes off and if you are a leader in it.

Jane the Farmer doesn’t care about whether AI is “hot.” She cares if you can increase crop yields. You either can or can’t. If you can, that’s pretty hot.

Beware detractors coming from inside the house

Founders like to tell inspirational stories about ignoring the haters and naysayers when they started their company. Maybe someone told them their idea was dumb and would never work. Someone else told them to play it safe and stay at their cush big company job. The best of these stories end with the founders proving the haters wrong and living happily ever after on a big pile of “I told you so” money. (If this weren’t a family Substack, it would be, “fuck you money.”)

But if you dig deeper into these stories, these detractors were often the people closest to our founders, who presumably had their best interests in mind. They were classmates who urged them to play it safe like they did, teachers who didn’t want them to “waste” their education, partners who feared the impact on their relationships, and uncles who urged them to go into plastics.

Parents, in particular, are a notoriously poor source of career advice. Their mental model for how the economy works is usually a generation out of date, coming from a time when the only thing you demanded from a job was not losing it. In 1998, those parents were asking their kids why they were turning down jobs at solid companies like HP and IBM to join tiny startups with funny names, like Google. Today, the next generation of parents asks their kids why they are turning down jobs at solid companies like Google to join the next tiny, weirdly-named startup.

Yes, sometimes friends and family ask hard questions that help you reflect if you are starting a company for the right reasons, but you can’t expect to get their unanimous support, and you should expect the day will come when you need to move forward without it.

Ignoring the noise doesn’t mean ignoring the surplus of great advice about starting a startup, but putting that advice to work requires you to do what we’ll discuss in the next chapter: Embrace Contradiction.

If you have feedback or suggestions for future posts, please comment or contact us at michael@nextfounder.co.

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The Next Founder helps founders build great startups. We offer advice on managing your mental health and productivity, hiring and managing great people, building a strong culture, and keeping people aligned and working on the right things. See the series overview at Welcome to The Next Founder and find out more about me at My Story.

In “Start Out the Right Way,” we’ll talk about all of the things that can go wrong between you and your co-founders and your teammates when you start your company, some of which are very common. We’ll propose a concrete list of things you can do to “start out the right way.”

If you have feedback or suggestions for future posts, please comment or contact us at uninvent@substack.com.

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“Beginnings are such delicate times. A beginning is the time for taking the most delicate care that the balances are correct.”
— Frank Herbert, Dune 

“Coming together is a beginning, staying together is progress, and working together is success.”
— Henry Ford 

“Instead of looking for a person who checks all the boxes, focus on a person with whom you can imagine yourself writing a story that entails edits and revisions.” 
— Esther Perel

Marriage, separation, and divorce

You meet up for drinks with a few co-founders from last year’s incubator program. During two rounds of Manhattans and some soul-baring stories, you learn that your paths have diverged wildly.

Sarah tells the first story: her co-founder Peter bailed on her and quit their startup only six months after they started. The first version of their product didn’t resonate with customers, and he wasn’t interested in rewinding, pivoting, and testing other ideas to get to product/market fit. He took half of the company’s shares with him since neither he nor Sarah are on a stock vesting plan. Sarah now has to convince Peter to return the majority of his equity, or else she’ll shut the company down with nothing to show for it. 

Sanjay goes next. His startup has several large companies interested in buying their product, but his technical co-founder, James, is passive-aggressively sabotaging their efforts. James is angry about the 70/30 stock split he and Sanjay agreed to when they started a year ago. He has seen how crucial building the product and hiring the engineering team is to the company, and he feels he made a mistake agreeing to anything other than a 50/50 split. James is slow-rolling his work, is not giving Sanjay access to the code, and is threatening to leave and start another company in the same space if Sanjay isn’t willing to renegotiate the equity split.

The other founder from your cohort, Xiang, dreads going to work every day. He agreed to let his co-founder, Lucy, be the CEO, and he took the CTO position. Lucy works alone, rarely sharing what she is doing or asking for his input. When he asks to be included, she shuts him down with, “let me do my job, and you do yours.” Xiang feels like his two-person company is more political and siloed than the 10,000-employee tech giant that he resigned from to start this startup.

You feel fortunate since you and your co-founder are working well together, but Sarah, Sanjay, and Xiang thought the same thing the last time you talked to them. Do you have any similar landmines lurking in your company? Did you start out the right way?

“Founding” is the “foundation”

Change gives birth to startups, and startups effect change, so you shouldn’t start a startup unless you want to be part of the change industry. You are trying to change the market you sell into. You will likely change (“pivot”)  your product and business model one or more times. You’ll constantly be adding people to your team and letting others go. Change is your friend. Bring it on. “Chaos is a ladder,” and all that.1

But a few things at a startup are very hard to change, and most of them are set at the beginning. You might not appreciate the importance of some of the early decisions you make until years later when you end up with tales of woe like our friends from the vignette we just heard. Most of these decisions involve your founding team.

The founding team is the foundation of a startup (it’s right there on the label). They decide what market to attack and what product to build. They attract the rest of the team. They close the early customers. They attract investors. They set the culture. Amazing things happen when the right founding team teams up, attacks the right market, and works harmoniously together.

And when they don’t, it can get ugly. Co-founder conflict causes as many as 65% of startups to fail, worse than the divorce rate in most countries.2 Anyone who invests in or works with early-stage startups knows that when you meet a founding team, one or more of them will likely be gone within two years. The startup often doesn’t survive.

Even when the founding team stays together, several things can derail them. They may fight over important decisions and who makes them. They might discover they have different management philosophies. Or they may be too similar, fighting to work on the same things but leaving other important areas uncovered. They might not be equally committed, with one founder ready to spend several years working through the inevitable challenges, and the other quitting as soon as customers reject their first product, which they usually do.

A lone founder has a different set of issues. They don’t have to navigate co-founder issues, but they lack the extra bandwidth, skills, and emotional support the right co-founders bring. They might struggle to raise money, be extra susceptible to stress and burnout, and be more likely to quit. Their decisions about the first few employees to hire are especially critical since that team has to compensate for the missing co-founders.

So a few early decisions, like who is on the founding team, how to split the equity, and how to assign responsibilities, can make or break a startup. Building a startup without that foundation in place is like building a skyscraper on a crumbly brick foundation on sandy soil.

In the early days of your startup, you can do a few things to make sure you start out the right way.

Work with an attorney

You might think it’s hard for a tiny company with no money or customers to go too far off course, but startups often find trouble right out of the gate, in the way that many plane crashes happen at takeoff. You can avoid many problems if you work with the right attorney.

Find an attorney who works exclusively with early-stage startups in your locale (this is not the time to ask your brother-in-law, the estate planning lawyer, for a favor). An attorney can help you understand the decisions you need to make, including where to incorporate your startup, how to split the equity between co-founders, and how to implement stock vesting. They’ll ensure your company is prepared to raise money and, once you do, will help you navigate the process. 

Many attorneys will work for free or reduced rates for early-stage startups, expecting to make up the difference once your company raises money, grows, and generates more fees. Find one and build a relationship early. 

Get engaged before you get married

Many founders report that their relationship with their co-founder(s) is one of the most intense in their lives. Founders often spend more time with each other than with their romantic partners, and founder “divorce'' is heart-wrenching (and expensive). Co-founders usually go through difficult times and disagree on high-stakes decisions, often causing conflict to grow and trust to erode. Their relationship needs to last years to have a chance of building a large company. When their relationship is full of tension, the whole company notices, and it can lead to slower execution and worse decisions.

If you and your co-founder(s) have already worked together for years, you are lucky. Don’t stop reading, though, since we’ll discuss what can still go wrong within teams that thought everything was copacetic.

If you don’t have a co-founder, should you stop and find one? We won’t try to settle that perennial debate here. You can find arguments and anecdotes on both sides. But we are quite sure that the wrong co-founder is worse than no co-founder, so don’t rush out and join up with the first plausible partner who comes along.

Be patient. Sure, it’s easy to go to a “founder dating” event and find someone who looks good on paper, but you need to spend time, probably months, working together to find out if you are a good fit. Carve out a trial period, and check in regularly with each other to see how it’s going.3

Only co-found a company with someone when you are clear about what skills, connections, creativity, and commitment they bring to the enterprise. Never add a co-founder just because you think investors want you to have one. Yes, you should understand the (mostly valid) reasons investors prefer to invest in startups with more than one founder, but only add someone to your team if they actually solve those problems, not for the optics. You can’t know that until you’ve spent time together.

Seek complementary skills

Although most of us don’t like to admit it, our friends are usually like us, sharing the same interests, skills, and personality traits. In the tech industry, engineers often hang out with other engineers, sales reps network with other sales reps, and MBAs booze it up with other MBAs.

Founders do need to share some core values to work together well, but if their skills overlap too much, they can run into challenges. Two engineers as co-founders might neglect sales and marketing while overemphasizing product development. Go-to-market founders often struggle to build a technical team, since many engineers won’t work for someone who doesn’t understand product development.

This is why the “hacker and hustler” founding team is common. One or more co-founders focus on the product and technology, and the other(s) focus on acquiring customers. But they should share the same core principles for the kind of company they want to build and the values and culture they want to instill:

Think through the skills you need on your founding team. If you don’t have them, you might need to find an additional co-founder or make some early hires to shore up the gaps.

Talk about why you’d quit

Founding a company requires an unreasonable amount of confidence that you’ll beat the odds and be one of the rare startups that succeed. However, even the startups that work usually take longer to get traction than the founders thought they would.

You and your co-founder might convince each other that your stamina is unassailable, but the truth is that everyone has a breaking point. There is a moment in your future where, if you aren’t making enough progress, you’ll walk away.

Discuss with your co-founder(s) what it would take for each of you to reach that point. How long can you go without cash if you can’t raise funding? How long will you keep hope alive if you don’t get product traction? No, you don’t want to start a company with a “bail at the first sign of trouble” co-founder who quits when the initial product doesn’t immediately fly off the shelves, but you both should be honest about how long you’d keep plugging away and see how closely your time horizons match.

Plan for possible pivots

Most founders love their initial product idea, sometimes spending years chewing on it before starting the startup, but when that product meets the real world, they learn their vision is partially or entirely wrong. The founders may only need to make small changes to the product feature set, pricing, or messaging, or they may need to go back to the drawing board and find a new idea.

Some founders embrace this. Their goal is to start a successful company, and they are perfectly content if the idea diverges from the one they started with as long as it’s still a reasonable fit with their skills and interests. 

But some founders aren’t interested in pivots — they started the company to do this idea, and if the market rejects it, they’ll push ahead until they crash into a wall. The founder who brought the initial idea into the startup is often the most stubborn. Their identity is wrapped up in being “the idea person.” If their idea is tossed out, they see their status tossed out with it, leaving their value to the enterprise in question.

Even if the product idea survives, some founders are committed to a specific business model. A founder committed to building a product-led growth company might have no interest in a startup that requires an army of sales reps. A founder who wants to bootstrap a startup might reject a plan that requires giving up some equity and control to venture capitalists.

Co-founders should talk about how they’ll react once the feedback starts rolling in. How close do you have to stay to the original idea to stay interested? Same product? Same market? Same business model? If you are too far off, you might want to slow down.

Vest your stock

Imagine you and your two co-founders split the equity in your startup equally. You incorporate the company and issue a third of the stock to each of you.

Six months later, one co-founder changes his mind and quits. Or runs out of money and quits. Or has a health scare and quits. Or dies, and is, well, no longer contributing. Your co-founder’s 33.3% stake in the company is “dead equity.” It doesn’t represent any work or money adding value to the company. It’s a permanent drain — from now on, every founder, employee, or investor involved with your company will realize a third less value than they otherwise would have. You’ll struggle to stay motivated and attract new hires. Raising money will be nearly impossible.

Solve this with stock vesting. You, your co-founders, and your employees will all need to vest your stock over at least four years, perhaps even longer. Raising money from angel investors or VCs will force you to put this vesting plan in place anyway (no sophisticated investor will invest without it), but there is no reason to wait. Have the discussion up front and put the vesting plan into motion right away.

Depending on your locale, there are various mechanisms to do this, either via stock options or by giving the company the right to buy back your shares on a vesting schedule. Again, work with your attorney.

Mind your intellectual property

A nascent startup is just a small collection of people and their ideas. When those people sit at a table together brainstorming strategies, hacking some code, or building a sales pipeline, you can easily see the contributions of each person like you doing a group project at school. Sarah wrote some clever code. Sanjay generated a list of prospects to cold-call. Klaus mocked up a cool user interface. 

But an invisible entity is sitting at that table with you: the corporation you just founded. All of the work your team is doing is to add value to that legal entity, which means that Mrs. Corporation will own all of the intellectual property (IP) that you create.

What makes it even more confusing is that in some places, namely the United States, the corporation does not automatically own that intellectual property, even if the people creating it are paid employees or contractors.4

Everyone who works on your startup has to explicitly agree that the intellectual property they create is owned by the corporation. This is true for co-founders, employees, contractors, agencies, and even that random college roommate of yours who hung out in your office for a month before deciding to get a job at TikTok instead of joining you. They all need to sign a “Proprietary Information Inventions and Agreements” document (PIIA), where they assign the IP they create to the company and agree to keep the company IP confidential. Again, your attorney can help you.

You do not want those people to show up years later, once you have had some success, claiming they own a piece of your business. You don’t want a round of funding to fall through because you can’t get a disgruntled ex-founder to retroactively sign a PIIA. You don’t want an acquisition to fall apart because you can’t produce the PIIA of some randoms who worked for you briefly eight years ago.

Does it seem awkward having a contractor sign an agreement who is only going to work with you for a few weeks? Does it seem awkward having your college friend sign a contract even though you trust him completely? It doesn’t matter. Do it. This is what it means to be a founder.

Put someone in charge

Co-founders are often friends or are at least friendly. They may have been peers at previous companies. They usually work side-by-side, contributing equally, to start the company. They often split the equity equally or close to it.

But corporations are hierarchies, and someone needs to be in charge. Every company needs a CEO so that someone has final responsibility for decisions and results. Co-founders should figure out who will be the CEO early in their relationship.

Some founders avoid this discussion because they fear it will be awkward or that they’ll uncover irreconcilable differences. That is exactly why you should have the conversation. You need to ensure you are aligned, plus you need to be great at having difficult conversations with co-founders. You’ll have harder ones.

“We’ll just make all of the decisions together” does not work, since you’ll never reach consensus on every one of the long series of hard decisions that are in store for you. “Let’s be Co-CEOs” has the same problem. Founders often do it for the wrong reason: to avoid conflict when they both want to be the CEO. Important decisions can go unmade since no one has the final call, and your team can end up confused about how to get things done. Some startups have made it work, but, if you do it, you need to do it for the right reasons and find a way to split responsibilities so that you define which of you is the single owner for as many functions as possible.

Treat your team like owners

Let’s say your startup has three co-founders. They are employees 1, 2, and 3. You then hire three more people: employees number 4, 5, and 6. What is the difference between your three founders and three employees, other than who gets to brag about having the lower employee number?

The answer is whatever you want it to be, but you should seek to minimize the gap between founders and non-founders. If your plan is, “The founders make all the decisions, and we hire employees to implement our plans,” you are well on your way to creating a culture as political and toxic as many large companies. You also won’t be able to hire anyone great if you expect them to sit in the corner and be worker bees at a 6-person company.

“Founder” is not a job description, and it won’t necessarily be the case that the founders are the most talented and most senior members of your team. Your job as a hiring manager is to hire the best people possible. If you bring in someone more talented than you, you’ve done a great job. Sometimes founders even report to senior hires who were brought in later.

The qualities you want in your first ten or so hires are not that different from the qualities you want in co-founders. You should be clear about what skills they bring and that they complement yours. They should have some interest or passion in your business and be a cultural and philosophical match with your team. They should want to take on a broad set of responsibilities, learn rapidly, and be willing to live with the risk of failure.

You should plan to give these people large equity grants –- it’s not fair for them to do the same amount of work and take the same amount of risk as you but get a hundredth of the equity just because they joined a few months later. If you want them to act like owners, they need to be owners. 

Now that you’ve started out the right way, we’ll talk about why you need to focus on what matters and “Ignore the Noise.”

If you have feedback or suggestions for future posts, please comment or contact us at michael@nextfounder.co.

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The Next Founder helps founders build great startups. We offer advice on managing your mental health and productivity, hiring and managing great people, building a strong culture, and keeping people aligned and working on the right things. See the series overview at Welcome to The Next Founder and find out more about me at My Story.

In “Know What You Believe,” we’ll talk about how every founder starts their startup based on a set of beliefs about their market, their product, their teams and themselves. You can build a great startup if those beliefs are correct and if they compel others to come along on the ride with you.

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“The architect must be a prophet, a prophet in the true sense of the term. If he can't see at least ten years ahead, don't call him an architect.”
— Frank Lloyd Wright

“The first principle is that you must not fool yourself — and you are the easiest person to fool.” 
— Richard Feynman

“It’s hard to do a really good job on anything you don’t think about in the shower.”
— Paul Graham, YCombinator Co-founder

On shaky ground

You knew that founding a company would mean hustling your way to the top, but you didn’t know you’d have to start so close to the bottom.1

You have an idea for artificial intelligence software to help finance departments run their corporate planning process.2 You’ve talked to finance managers at several small companies and got vaguely positive feedback on the idea.

But you can’t turn those prospects into customers until you have a product. You can’t build a product until you find a technical co-founder. You can’t find a co-founder willing to work for free. And you can’t raise funding until you have customers, a product, and a co-founder.

Your startup seems logically impossible to start.

You do believe in your idea, though, so you start networking. You ask a colleague who owes you a favor to introduce you to two of his friends. One is an engineer who could be a potential co-founder. The other is an angel investor who can tell you what it will take to raise money from investors like him.

You head to Philz Coffee and sit for back-to-back pitches with each of them. You explain why once you build this product, a finance team at any well-run company would want to use it. You feel good after both meetings. You think the product’s value is obvious, and the grins and nods you got from each of them suggest that they agreed.

The next day, you check with your colleague to see what feedback her friends gave her. The verdict: meh.

They both said the same thing: they didn’t get it. They weren’t sure if this was an urgent problem for customers, and if it was, why those customers hadn’t already bought a solution. They didn’t know if other startups have already tried to solve this, whether it worked, and why you’ll succeed where they failed. They didn’t get how you’d find customers, win the market, or even if it was a market worth winning.

You hang up and stew. You think you described an important problem and a powerful solution and provided examples of prospects who agree. The investor and the engineer didn’t even understand the pitch well enough to ask good questions. You console yourself that not everyone has the brainpower and curiosity to process new ideas. Not everyone is a believer.

But the problem is probably not them; it’s you. Even if you think you do, you probably don’t know what you believe.

Testify, sisters and brothers!

Before a startup has a product, customers, a team, and revenue, the only assets it has and its founders and what they believe. They have to believe in themselves and their ideas enough to take on the hard work and risk of starting a startup. They have to believe they’ll be one of the few startups that break through and find a path to build a big business.

Then they have to create more believers by convincing early employees to join, investors to invest, and customers to take a chance on a product from a new company they haven’t heard of and that could run out of money and disappear.

Their beliefs shape the product they build, what customers to focus on, how to reach them, whether to raise money, and how to operate the company. They will likely go through a positioning and messaging exercise and create a pitch using a framework like Raskin3, which are essentially exercises to transfer beliefs from their heads to their customers.

Belief keeps founders from quitting when things get hard, which they always do. Belief drives them to push a little harder when a customer says no. It pushes them to polish a product design just a bit more, believing their solution matters enough to justify perfection.

Listen to the strategies and values communicated by legendary companies like Southwest Airlines or Costco, and you’ll see a direct line back to the beliefs that drove the founders to start those companies decades ago.

The belief stack

But it doesn’t follow that “all you need is to believe.” The world is full of startup founders who failed even though they believed in what they were doing. You probably have already had the experience of evangelizing your startup to someone only to watch their eyes glaze over.

This is because it’s not enough for founders to believe in themselves and their ideas. They need belief at several levels of a “belief stack.”

Each level could be the subject of its own book, so we won’t do each topic justice here. We’ll cover a few of these in later chapters and provide links to many other resources that go deeper than we ever could. 

Team

Founders must believe that their team has the insight, talent, and tenacity to find the right market, build the right product, attract customers, convince others to join them, and beat the competition. We’ll focus on giving founders tools to help them do just that. But a great team is a waste unless they work on the right:

Problem and Solution

Every startup is in business to solve a problem. The founders need to have insight into the problem, a passion for solving it, and the technical and leadership skills to build a solution.

Some founders start with the problem and then experiment with potential solutions. Others start with a piece of technology and then look for problems that technology could solve. In either case, problem + solution is the starting point for most startups, but they only make sense in the context of a specific:

Market

Products are bought and used by people. Those people behave in certain ways, value certain things, can be found in certain places, and are willing to pay a certain price. They will compare you to competitors, alternatives, or the status quo: buying nothing. This is your market.

Founders need to know their market well enough to reach buyers, educate them on the problem, show how their product is different and better, and get them to pay enough to make this all worthwhile. They also need high levels of passion, insight, and aptitude about their market, often called “Founder/Market fit.”4

Timing

Startups rarely solve genuinely new problems. Fifty years ago, businesses wanted to grow revenue and lower expenses. Consumers wanted to be entertained, shop, and find a date for Saturday night. Fifty years from now, they still will.

This is why it’s not enough to simply find a problem that customers want solved. You have to answer, “Why now?” What is it about the problem, your solution, and your market that makes right now the right time to solve this problem in the way you are proposing? Are products like yours already on the market? If they are, are customers adopting them? If yes, why will they adopt yours instead? If not, was there a previous generation of startups that tried to solve the same problem and failed? What pitfalls did they hit, and how will you avoid the same fate? 

The startup that wins a market doesn’t always have the most talent or raise the most money. It’s often the one that starts at the right time. A startup that starts too early fails because customers aren’t ready to buy or because the technology is not available to build a great solution. A startup that starts too late has too much competition and has to fight for scraps in a cluttered market. A quick scan of the early 2000s dot-com blowups reveals a set of failed startups, like the notorious Webvan or Pets.com, that were rebooted by different founders into successful companies just a few years later.5

Waves

If something valuable hasn’t already been done, it’s almost never because no one else was smart enough to think of it or capable enough to build it. It’s usually because of an enabling technology that either made the solution possible to build or made the problem more urgent to solve. We’ve just lived through back-to-back waves (Internet, cloud, software-as-a-service, mobile, blockchain, AI), each of which launched thousands of successful startups.

Distribution

Understanding a market means learning how customers in that market find solutions like yours, what criteria they use to evaluate them, and what process they use to buy them. You need to know how they budget for solutions like yours, how much they will pay, what roles or personas purchase solutions like yours, and what kind of people you need in your company to run the playbooks to close them.

Size

No startup can win more than 100% of its market, so the absolute limit to your growth is how large a market you can eventually address.

Some startups tackle a market that is already large, usually by focusing on a niche in that market, grabbing a foothold, and then expanding to the broader market. Other startups tackle nascent markets, grab an early lead, and then ride the market up as it grows. Both can work, but you need to know which of those two games you are playing since they require different people, funding, and strategies.

Market size is hard to predict, especially for the new, fast-growing markets that often create the best startups. You won’t find a definitive piece of market research that will give you a definitive answer. You often need to do more of a bottoms-up analysis, where you ask how many people or companies in the world could be buyers of your product, how many you can reach, what you can charge, and whether you can add more products over time.

We are now at the top of the stack and need to believe one more thing:

Value

Selling a product valued by a large number of customers is a prerequisite to startup success, but generating value for customers doesn’t guarantee you build a valuable company. You have to keep some of that value. Otherwise, you may as well stand on the street corner selling dollar bills for 90 cents each. 

You must see a path to building a profitable company, even if those profits lie far down the road. This means selling the product for more than it takes to provide it (gross margins) and then, down the road, building a profitable company (net margins).6

You then need to maintain those profits. Profits naturally erode as capitalism works its magic and attracts competition, driving down prices, raising sales and marketing costs, and making it harder to retain customers. 

The best startups build a competitive moat to slow down competitors trying to catch up to you. This might be network effects. It could be a piece of unique intellectual property you own. Or it could be that you start at the right time and execute so well that you get a lead on competitors that you never relinquish.

Belief and fundraising

If you have a nagging feeling that you’ve seen this list before, it might be because you’ve tried to raise money for a startup. If you’ve read anything about pitching investors or looked at sample fundraising decks, you saw a similar list of topics you were urged to address.

Founders usually do a good job articulating belief at the bottom of the stack as they pitch their team and product, but their answers can get sketchier as they try to climb the levels. Founders are often frustrated when they feel like they’ve pitched a good opportunity, but then investors ask questions about distribution, waves, timing, or moats that convince founders that the investors “just don’t get it.”

Some founder think the reason to develop and articulate beliefs is that investors will ask about them, and if they want to raise money, they need to play the game. This is backward.

Investors won’t ask you anything you shouldn’t already be asking yourself. Even if you never raised money, you’d need to answer all of the same questions. Your beliefs drive everything about how you run the company and even help answer whether the startup is worth starting in the first place. 

Building belief is challenging in a company's early phases. You have limited information and a compressed time frame, and you don’t have a crystal ball to see the future. So, how do you get started?

Don’t expect to have all of the answers

You won’t have a high-conviction and fully-validated belief at every level of the stack in the early days of your startup. No one would start a company if that were a prerequisite. When Mark Zuckerberg was hacking The Facebook in his dorm room, he probably wasn’t thinking about gross margins and competitive moats.

Instead, think of it as a journey where you gradually develop and support your beliefs as you work with customers, get the product in front of them, make adjustments, and watch how your market develops. You’ll have various levels of belief at different phases of your startup, and your goal is to keep moving your beliefs to a higher level of conviction:

Testing your beliefs and adjusting based on what you learn is what it means to be a startup. It’s what a startup does. If these questions were all answered, you wouldn’t need belief, you’d just be a regular company executing a predictable and optimized plan.

You can build conviction for some of your beliefs early, like your ability to build a product and get some customers to pay for it. Other beliefs, like how you can build a competitive advantage or how large your market grows, might take years to play out. 

But you still need a hypothesis about each belief, and you’ll need it earlier than you think. Those beliefs drive the product you build, the people you hire, the customers you target, whether you raise money, and how you run the company. Have at least a working assumption for your beliefs, then set out to validate and develop them.

Find case studies

One way to become literate in this framework is to look at the founding stories of other startups. Think of a few startups that you admire, and ask yourself, in their early days, what beliefs drove the founders. Ask yourself how you would have pitched Uber’s market size7 or the wave that created Instagram (hint: mobile, duh).

Go through a dozen pitch decks from both successful and failed startups. Watch demo day videos and pitch competitions.8 See what beliefs drove the founders to start their startups and how those beliefs evolved. You also might gain some confidence when you see how undeveloped or plain wrong many of those beliefs were at first and how many pivots the founders needed to get onto the right track.

Find lightweight ways to validate your beliefs

Your job as a founder isn’t to land on your beliefs and defend them to the death. Your job is to develop beliefs that are right. 

Too many founders think that after they come up with an idea, they’ll just raise money, hire a team, build the product, and watch the cash roll in. Technical founders, who identify as builders, are particularly prone to rushing to build the product before validating the problem, solution, and market. They are willing to spend thousands of hours writing code but claim they are “too busy” to spend a few weeks asking customers if they should build the product in the first place.

Your beliefs start as educated guesses, or “hypotheses.” As you test those hypotheses against the real world, some will hold up, and others won’t, requiring you to adjust, or “pivot,” aspects of your business. The first few years at a startup are spent in that test/adjust loop, and you want to get through it as quickly and cheaply as possible.

You can test your beliefs much earlier and much cheaper than you think by getting your ideas in front of customers and getting feedback, even before you build your product. The Lean Startup and Customer Development9 methodologies provide tools to validate your problem, solution, and market as early, quickly, and cheaply as possible.

Even after you get product/market fit, you’ll constantly adjust your feature set, how you price and sell your product, and how you define your market. This is the “idea maze”10, where you embark on a multi-year journey of experimentation, dead-ends, and the occasional triumph as you discover what works and what doesn’t for your business.

Study those who came before you

You probably haven’t come up with an idea that someone hasn’t tried before. Previous startups may have attacked your market and failed to gain traction. Larger companies may have launched products and abandoned them after they failed.

Whichever of these plays you are running, your job is to be an expert in your market, including its history. Find companies that tried to solve the same problems for the same customers, even if they are out of business now. Find out what worked and what didn’t work. If no one has successfully built a company doing what you are doing, find out why. Ask buyers if they’ve heard your pitch in the past and why they didn’t buy. Has the problem or the market changed? Has a new technology wave made it possible for you to build a better solution than the last generation? 

The history of a startup idea can be a source of friction between founders and investors. Many founders are convinced they have an original idea, only to face a jaded investor who says, “I’ve seen this pitch every year for the last ten years. Tell me why you’re the one to finally make it work.” You need a great answer to that question, and not to appease cranky investors. You have to solve the problems that put those startups into the graveyard.

Take the 10,000-foot view

Successful startup founders are impressive, with high brain power, creativity, and tenacity. It’s why they win. But if those founders never started their startups, someone else would have eventually built a successful startup based on the same insight.

If Uber had never been started, we’d still be able to summon a car on our smartphones. If Salesforce had never started, we’d still run our sales teams with software-as-a-service. Other founders would have recognized and exploited the same opportunities. It may have happened a few months later, with the products and market share playing out differently, but the ideas would have happened since the prerequisite pieces were in place, much like how Leibniz and Newton invented calculus in the same year without speaking to each other. When an idea is ready to happen, it happens.11

“Someone is going to build a big company in this space, and here’s why it will be us” is a great framework for developing and pitching your beliefs. The “someone will do it” part should hold up even if you had never started your company. Imagine how you’d pitch an investor friend to find and invest in a startup tackling your market with the kind of urgency you’d have if you had found a pirate map showing a trail to a buried chest of gold.

Don’t focus on questions that have already been answered

Some of your beliefs will be unique to your team, solution, and market, but others will mirror startups like yours. For example, software-as-a-service companies tend to converge on one of only a few models for selling their products that result in 70-80% gross margins. Many startups can claim to have been enabled by the same waves.

Yes, validate that those assumptions apply to your business, but don’t feel pressure to come up with unique answers to questions already answered by other startups. Save your creativity for the parts of your business that are different. “Exciting product, boring business model” is just fine.

Write it down

Writing down your beliefs clarifies your thinking. It forces discussion and debate within your team to uncover and resolve differences. It crystallizes your thoughts and lets you practice communicating them.

An advantage for startups who join accelerators and pitch at demo days is that they are forced to define their beliefs and communicate them to a crowd unfamiliar with their company. It’s a valuable exercise, even for startups that don’t need to raise money.

No, don’t write a 20-page business plan, but at least create a pitch deck that outlines your opportunity, and update it as you refine your beliefs. You’ll find it a valuable tool to build consensus within your team. You’ll use it to pitch people you are trying to hire or partner with. When you are ready to raise money, your pitch will have been battle-tested since it’s a document you use to run your company, not something you hacked together the night before demo day.

Next, we’ll discuss the things you need to think about in the early days of your startup to ensure that you Start Out the Right Way.

If you have feedback or suggestions for future posts, please comment or contact us at michael@nextfounder.co.

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