You Will Not Be A Startup Forever

Big Red Car here in the ATX and it’s ACL weekend #2, y’all. Austin City Limits is a huge music festival at Zilker Park which attracts 2.5 million fans annually — OK, that’s a lie it just seems like two and a half million. It’s a lot of people. In the old days when it was in September it used to be hot, dusty and dangerous. Now it’s in October and seems to attract torrential rains and frogs. Oh, well.

So The Boss was talking to four different CEOs and they got on the subject of when do you stop being a gangly, colt legged startup whose every transgression against common sense can be blamed on — It’s a startup, y’all! — and become a real company with real revenue and grown up leadership and management?

The answer is “sooner than you think!”

The Startup Exclusion (excuse)

When you are starting your company you are understandably focused on the product. Some dreary individual (like The Boss) who understands what it is like to actually do this because they’ve done it before will try to get you to focus on an organized approach — Vision, Mission, Strategy, Tactics, Objectives, Values, Culture — but you want to focus on product. You will ultimately do what you want to do because that’s what entrepreneurs always do.

There is nothing wrong with this approach as long as you say to yourself — “When I catch my breath and make some progress on product, I promise I will spend some time thinking about and creating the delivery system for my world changing product. I promise.”

Until then whenever anything bad happens you may play trump — anything goes because you’re a startup and part of being a startup is chaos unleavened by order.

This is real and real is OK.

The New Dawn

As you begin to evolve from crawl to walk and get ready to run, you will begin to develop some order and some processes. You will want to have a means of describing your business to others — spouses, relatives, angels, venture capitalists, new employees — and you will actually articulate a Vision, Mission, etc.

Then you will begin to confront full grown up issues like taking OPM and using it to grow your business. Other People’s Money only comes into your possession by virtue of signing grown up legal documents which require you to talk to lawyers and learn the language of money and orderly behavior. But you need that OPM to fuel your idea and so you do it and you learn and some days you even dress up because you’ve got to go meet with other grownups.

You begin to develop processes that work for you — hiring, communication, compensation, cap tables — and which you begin to do more than once. You may even refine them a bit based on experience.

Once you start down this path — like agreeing innocently to go to kindergarten and ultimately finding out you’re committed to decades of such drudgery — you will be inundated with one more grown up responsibility after another. As you company grows — no longer just a product or a gig, a real company — you will put your unique touch on it all. You will love the creativity of it.

Then you will find out that you did not personally invent business and that a guy named Peter Drucker had some damn good insights but he’s real old and, sadly, dead. He died in 2005 but not before he had written down some very insightful stuff about modern management and, OMG, management by objectives or MBO.

Like The Boss likes to say: “Your generation did not invent sex or business.” For the record, neither did The Boss’s.

Small Company

What has happened, Old Sport, is that you’ve gone from being a fragile startup to being a SMALL company in the manner in which folks use the term SMB to mean Small and Medium Business (a measure of size and complexity).

Now you will deal with another batch of issues — profits, real revenues, growth, expenses, expense control, budgets, elaborate comp plans, incentive stock options, performance appraisal, employee retention, founder disillusionment, superstar employee recruitment, changing management, performance appraisal, company culture — which can become progressively more complex as you continue to grow.

But you can take some comfort that you are also becoming progressively more accomplished. Your leadership skills are more finely honed and that magic called “management” — just a fancy word for resource allocation and alignment — is no longer intimidating. Why? Because you have developed coping mechanisms — you call them processes actually.

These processes are actions for which you have a clear understanding as to how they should be undertaken often with a graphic and a written description and a schedule. An example is the process by which you develop the company’s future revenue forecast and expense budget. You’re probably also making a capital budget. Soon, you’ve done these things more than once. You can get help doing them and they become substantially easier.

It is no longer your first trip to the rodeo, cowboy. You are a seasoned bull rider and bronc buster because you have made the transition to a small company and have buried the label of “startup” for all time.

Think about this and decide where — exactly where — you think you are. Don’t mislead yourself. Be tough. Then start acting like it.

But, hey, what the Hell do I really know anyway? I’m just a Big Red Car.

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  • True. That transition is key.
    But there has been several successful exits while still being a startup, and there is nothing wrong with that. It is what it is.

    • JLM

      .
      Nothing is intended to suggest that any startup should not be desirous of monetizing their work in any way possible. Money is the ultimate scorecard.

      During their startup days, no company should be anxious about their status as a startup. Nobody comes out of the womb knowing calculus.

      This is intended to speak to the companies who find themselves with five to a hundred million of revenue and can’t remember when they stopped being a startup and became a real company.

      Now they have to wear long pants with cuffs and tie shoes. And, behave like real companies.

      BRC
      .

    • FlavioGomes

      if you can exit while a startup, then all the power to you, and thats a rare occurance btw. You’ve either grown tired of the slog…or you’ve sold your vision to someone more capable of executing and nothing wrong with that if you’re lucky enough to realize its time to move on.

      The main issue for me…is there is so much available knowledge on startup principles. Startup experts everywhere…. but hard to find the dialogue around 5 – 100 million dollar (revenue) real businesses.

      • True that. Then it’s not so much a startup & more traditional principles start to apply, although you still need to subtract some, and add others.
        Are you attending Techtoberfest? I’m headed there today & tomorrow.

        • FlavioGomes

          Unfortunately no…been on airplanes all week. Hope it was fun.

          • It was good! Communitech does a good job with these events.

          • FlavioGomes

            Communitech is a great organization run by passionate people

      • JLM

        .
        The key to any useful information always had been and always will be experience. The challenge for established companies is how to tap into that experience. It can be done.

        Good sources of peer to peer information and counsel are groups like Young President’s Organization and Vistage. I was in YPO for a long time and I found it very useful. It was also great fun. We had three billionaires in our group.

        A CEO can also approach things in a bespoke manner and make a connection with a good advisory board member, a real board or a CEO coach.

        The CEO of a successful business in the $5-100MM space is likely a very good businessman by the power of natural selection. He will know what he needs and find it.

        One important thing is not to seek advice only in moments of crisis but to create a base line of knowledge in a long term relationship. It’s remarkably like getting married – for better or worse.

        JLM
        .