The core tenet of the modern entrepreneurial philosophy is to test everything to find the right answers. Markets. Products. Ideas. People. Find results that are good (enough) and see what the world makes of it.
Rip out the bad stuff. Keep the good. Modify as needed. Repeat where you can.
Sometimes, there are things you just shouldn’t do. “I’ll try anything once” is a great Strokes B-side track, but it’s not an absolute in the startup world. I’ve done things no entrepreneur should do. There is only one truth: Good lord, I’ve made a lot of mistakes. So have others.
Gather round while I tell you the tales of entrepreneurial regret:
1. Don’t spend all your money on ads early
It’s so alluring. You have a day where your product becomes real. You have a marketing team, and they’re excited about that day. You’re excited about that day. Everyone is excited about that day.
Your customers don’t care about the day. Let’s be honest: You’ll launch with something that’s at least 99 iterations from a conversion machine. Don’t spend money marketing it. You will end up having to defend your awful cost per acquisition in venture capital pitch court months later.
2. Don’t do service for equity models
You meet a VC/angel investor with a pocketful of cash. He will sell you on the fit of his expertise and what that means for the market opportunity that lies ahead. It seems great.
Maybe, if you’re like most startups, this individual is the first “yes” you’ve heard in a while. For me, at Menguin, I had about 70 no’s before we finally got our first yes.
It was from someone who also took a pretty big chunk of equity at a premium, for services. Thankfully, he brought some killer domain knowledge that helped with takeoff, but it does not always work out this way.
3. Don’t forget to spend lots of time with customers
Your customers are everything. If they’re happy, they’ll reward you with business.
Figure out what makes them happy. Use services like inspectlet to creep their on-site experience. Focus test them. Offer them gift cards to interview them one by one.
They have all your answers.
4. Don’t focus on a single growth channel
It’s very, very easy to get hyper-focused on a specific channel at the expense of other opportunities. If you follow e-commerce, you know how this story goes.
You realize you’re profitable on Facebook. You spend hundreds of hours testing and honing in on a great return for that channel. You focus your team on that channel. Everyone gets excited about unit economics that are about as stable as Kim Kardashian’s hair.
Suddenly, one day, it just stops working. Facebook changes the math, or a competitor comes in and raises the ad unit equilibrium price (especially common in the Google pay per click game), and next thing you know, you just lost your damn growth engine. Don’t do that.
5. Don’t spend money on scale in advance
“If you build it, they will come.”
Startups who have founders who are from the Silicon Valley cognoscenti or are just rich kids of instagram can occasionally raise large amounts of money with a pitch deck and a dream.
These companies burn fast out front of growth prior to having an established brand. The issue becomes one where balance sheet value and traction or income statement value are at odds. It can create a tough environment to raise additional money.
I have never had this problem.
6. Don’t be a perfectionist
There’s a near-perfect product somewhere that nobody has ever seen. A competing product that sucks is beating that near-perfect product. With mbox.co, we just launched it as a prototype, warts and all. It was held up for months in perfection prison.
There is no time for perfection.
7. Don’t pitch as a committee
Investors invest in people, not companies. This changes slightly as you get bigger, but it’s definitely true at Seed and Series A stages.
This means that if you pitch as an individual, you’ll connect with your investors on a more personal level. If I show up, they’re meeting with “Justin” from Menguin. If I show up with my co-founders, we’re not as personally connected and we’re viewed more as a “company.”
The latter does not work very well.
8. Don’t be too candid with info
One of my first pitches was to a group that invested about $20 million in our competitor a few months later. One of the group’s partners basically used me as a source of intel.
Typically, this sort of thing just happens with analysts. A good rule of thumb: Don’t share too much on a first date, especially proprietary growth stuff.
9. Don’t be your own legal counsel
Common and stupid. Once you get a little traction, people will sue you.
Deals will also need to get made. There will be phrases like pari passu and things will happen that you’ll regret, like participating preferred and crazy liquidation preferences.
10. Don’t irritate Mark Cuban
One of our first investors at Menguin was Mark Cuban. In our first email exchange, I was kind of a jackass and disagreed with him about something meaningless to show that I would stand my ground, no matter the stature of my debate partner.
He blew me off for the following six months.
We’re cool now, I think.