There are more than a few falsehoods within the world of startups. Most are not worth worrying about, but some are very damaging. Some have side-effects that can ruin or kill people.
Every once in a while, the debate about "startups vs lifestyle businesses" recurs. It's one of those never-ending debates, with one side, let's call them the "scalable startups", bemoaning the lack of ambition of the "lifestyle businesses", and the other bemoaning the hare-brained, risk-it-all attitude of the startup crowd.
This is not the main contradiction I want to address in this article, but it's related.
The falsehood I want to address is exposed when you look at the terms in the title: startup founders, entrepreneurs. Pretty much all startup founders believe they are entrepreneurs. They consider themselves an exclusive, elite subset of entrepreneurs who start an elite subset of businesses: the scalable tech startup. They therefore naturally look down on the wider world of entrepreneurs, who do business in a less fashionable, sometimes less scalable manner.
However, that belief is a falsehood. Many startup founders are not entrepreneurs.
What is an entrepreneur?
It helps to start with a good definition for entrepreneurs. Here I am not concerned with the dictionary definition, which is based on usage. I want a useful definition.
An entrepreneur is someone who sets out to find business opportunities and create business systems to exploit those opportunities for financial gain.
I have deliberately excluded "internal entrepreneurs" at large corporations, and "social entrepreneurs" who aim for social good rather than financial gain. I believe those should be considered as separate categories. Although many successful businesses lead to social good, making social good the primary objective of a venture makes it a social venture rather than an entrepreneurial venture.
This definition is useful because it is broad enough to include anyone who genuinely tries to create viable businesses, but not so broad as to include anyone who does anything of their own initiative in the vague hope that maybe some day it might make some money, however unlikely. Creating a blog or site which perhaps some day could make you money through advertising does not make you an entrepreneur, neither do owning a good domain name, having ideas for cool products, or registering a dormant business. Those things may lead one to later becoming an entrepreneur, but they are not, of themselves, sufficient.
However, the definition does include anyone who tries to find business opportunities (through pot luck, determined research, personal connections, etc) and do useful work (themselves or via employees) that results in substantial enough amounts of money being made that the enterprise has a chance of becoming profitable at some point.
There are many tens of millions of entrepreneurs in the world, perhaps hundreds of millions, or even more. In poor countries, many people have to be entrepreneurs to survive. They spot business opportunities and exploit them to make a living. Because the opportunities tend to be small and conditions are very uncertain, they are never able to scale those businesses up, but the person who runs their own clothes shop in Liberia under incredibly difficult circumstances is every bit as much an entrepreneur as the one who starts a global fashion brand in New York.
Many startup founders are in fact entrepreneurs. I consider myself to be both, for example, though only since launching GrantTree.
Startup founders are, quite simply, people who found startups. They register a business (maybe) and create something that might turn into a business at some point, or even do turn it into a business successfully. So far, they sound a lot like entrepreneurs.
One difference is the goal. Entrepreneurship always has a financial motive. For startup founders, though, that motive is often secondary. They usually want to change the world, build cool products, become famous, have a big exit - oh, and perhaps, if it's socially acceptable at the time, enjoy the money that they've made as a side-effect of their chosen career. The money motive is often discouraged as a primary driver.
The even bigger difference comes when considering the concept of closing the loop. A business is not viable until the loop between creating value, delivering it to customers, and being paid for it, is closed. For entrepreneurs, closing the loop is essential, the main task on their task list until it is done. There is no business until the loop is closed. For startup founders, closing the loop is often secondary, perhaps even toxic (since if the loop does not generate large profits as soon as it's closed, funding will often dry up).
This is not to say that closing the loop is the only way to build a business. Erstwhile startups like Facebook, Google and Twitter, show that it is possible to build huge businesses, some of them very viable, without worrying about making money for years. Success stories like Instagram, Tumblr or Youtube show that it is possible to achieve a billion-dollar exit without having ever closed any viable loop whatsoever.
In Silicon Valley, it is even plausible to make "the loop" be the creation and acquihire of the startup itself. That is a valid model for investors, and even for some founders, though it presents a lot of downsides that I believe most first-time entrepreneurs wouldn't accept if they were fully aware of the alternatives.
The downside of being a startup founder
As I mentioned earlier, most startup founders believe they are entrepreneurs, even if their startups are completely divorced from the financial reality of business. Cushioned under a blanket of (relatively) easy VC money, surrounded by the hype bubble, drenched in startup articles from Hacker News, one could be forgiven for thinking this is the only way to do business in the 21st Century. Meanwhile, the rest of the entrepreneurial world looks on at this incredible machine that takes unviable businesses, pumps them full of venture money, and sells them on for stratospheric valuations.
It's a wonderful system for the savvy investors who know how to play it, but what about the founders?
The downside of this system for the founders is pretty simple: the risk and pressure are enormous. In order to succeed at this game, the game usually requires the founder to tie the startup to his identity. The failure of the startup and the founder's fate become closely tied. Importantly, the outcome, success or failure, is only known years into the venture. Youtube succeeded in a lightning-fast 1-2 years, but they are the exception, and even they must have been under enormous stresses approaching the exit event (Youtube was, I recall, being sued by content holders when Google acquired them). It could have gone very badly very quickly for them. Tumblr was running for 6 years before being acquired, and had, from the sound of it, a failing business model. Imagine the stresses David Karp was under.
Any startup where you're going to have to raise lots of money, make lots of promises, hire lots of people and generally tie your fate to the startup very publicly, for years, before you can find out if you're successful, is going to be a pressure cooker for the founders.
The result of such a game is tragedies like Jody Sherman and Ecomom. While tying the two together remains speculative since Jody left no note, it is fairly credible that the two were strongly linked.
Even if the outcome is not so dramatic as a suicide, such stresses take their toll. Binary outcomes that can change your life from heaven to (subjective) hell are always extremely stressful.
A funded startup always carries with it the possibility that you will exit as broke as you came in.
Despite its apparent anti-startup stance, this article is actually not an attack on startups and startup founders. I believe that the startup game can be a valid way to create businesses. Some day, I will probably venture down that road too.
However, it should not be painted as the default or superior option. Choose the startup founder path if you want to, but choose it in full knowledge of what you're doing.
The alternative is to do business the way it's been successfully done for millenia: find business opportunities and exploit them to make money.
There is much less risk in this approach (you know whether the business is working out within months, if not sooner), and it is more rewarding emotionally and financially. The skills are also more transferrable. You can apply the skills of the entrepreneur anywhere in the world, whether there's war (Milo from Catch 22 and Oskar Schindler come to mind) or peace. The startup founder path is only truly viable in a few places in the world right now - most of them in or near Silicon Valley. It could close up quickly if the historically rare, 60+ year long period of peace we're experiencing comes to an end.
And lest someone thinks entrepreneurship is destined to create only smaller businesses, there are many giant companies out there that started as level-headed entrepreneurial ventures - including such Tech household names as Apple, Microsoft, HP and Cisco. There was no guarantee that any of those would become the behemoths they are today without additional capital, but even if they had ultimately failed, their founders would have retired wealthy.
Either path is viable, and if you're determined to go down one path or the other, no article is ever going to stop you.
But if the thoughts in this article are news to you, I urge you to consider which option is more suitable to you at this point of your life, and to remember that you don't have to restrict yourself to just one of those. You can be an entrepreneur today and a startup founder tomorrow, or both at the same time, or just a startup founder. Which of those three you pick will make a huge difference to the risks you take and the pressures you face.
My personal opinion is that if you're starting off from a position of weakness (i.e. you're poor and not famous), and especially if you're not in a startup hub like Silicon Valley, it makes a lot more sense to go down the entrepreneurial route than to go via the startup route.
And if you do, don't let anyone who's chosen the startup route tell you that your business is somehow less worthy than theirs. Both are viable approaches with different risk and pressure profiles.
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I went to LeanCamp London last Sunday. It was a blast - there were a lot of interesting people to meet, and one of the highlights was, of course, seeing Eric Ries answer a whole bunch of questions very intelligently and entertainingly.
Another key highlight, for me, was my own "workshop" talk, judiciously titled "Lean Startup Skill Set". Was it really specifically lean? Perhaps not, but it's a skill set that will help any entrepreneur trying to build a startup, particularly those that use Lean methods.
My premise, as I explained previously, is that success (at least to the "survival" or "comfort" levels) in the startup world has more to do with skills than with ideas. A skilled entrepreneur will achieve some measure of success even with a mediocre idea. An unskilled entrepreneur is likely to fail even with a brilliant idea whose time has come.
There are exceptions, of course, but you can't rely on being the exception any more than you can rely on winning the lottery. So the best approach as a new entrepreneur is to try and fill the glaring gaps in your skill set (via learning, partnerships and mentorship) so that if your startup fails, at least it will be failing for an interesting reason.
The workshop's purpose, then, was to discuss what those core entrepreneurial skills are and where to learn them.
For this article, I'll just list the skills we ended up with at the end of the workshop, along with a brief description. Over the next few weeks, I'll pick a number of these and cover them in more detail, including thoughts about what someone can do, concretely, to learn those skills. As I do this, I will update this article to include links to those articles, so the best article to bookmark is this one.
The purpose of the startup skill set
It's worth noting, before diving into the list, that none of those skills are absolutely mandatory. You can (and founders do, all the time) build a successful business while severely lacking in one of these areas. However, what is clear about all those skills is that they help. Being at least baseline-competent in all the skills on this list will markedly decrease the chances that you screw up your first business in a really obvious and easy to avoid way.
One of the reasons it works that way is because the options you will see for evolving and adapting your startup will be directly related to your skills. If you are a programmer, then building a tool to automate part of your business is an option. If you know how to sell, then customer development is an obvious approach. On the other hand, if you lack those skills, those options will seem less appealing, so you're less likely to use them, even if they make sense. The landscape of your skills determines what choices you make when developing your business. The more gaps in that landscape, the more gaps in your business.
Some of these skills (but not all) can be outsourced or delegated. However, the sad reality of delegation is that you can only truly delegate work that you understand. So even if you plan to get an external designer to do your design work, you still need some basic design skills to understand and evaluate their work.
1. Client management and customer service
Being able to handle clients and support your products or services is an essential entrepreneurial skill. Early on, and perhaps for the whole life of the startup, the founders will be doing this.
In the B2B world, this skill essentially consists of being able to handle nice and not-so-nice clients, to deal with both professionally, ensure that clients are happy with your service, feel well cared for, well informed, and don't end up "blowing up" because of some avoidable mistake you made. It also involves knowing how to react to a client actually blowing up, how to handle them the right way so they turn back into a happy client.
In the B2C world this consists of being able to respond to support queries in a polite and efficient manner, always remembering that every customer interaction is an opportunity to delight. It also consists of being able to deal with pissed off customers without losing your cool and making a fool of yourself. On the web, great customer service is a differentiator - or even, in some cases, a price of entry.
Directly related, but very different, is the skill of selling things. Although I said that these skills are optional, if you're going to learn one skill, let it be this one. As the saying goes, "sales cures all management ills". If you screw up everything else completely, sales won't save you, but making enough sales can at least give you the time to learn the other stuff.
"Sales" is a big word, covering everything from selling a $10 subscription on your website to selling a million-dollar contract to a large corporation. Funnily enough, the two are not as unrelated as they might seem. Certainly, someone who is highly skilled in one of those will find it easier to learn the other than someone who is completely unskilled in sales.
Being able to sell stuff, online or in person, is also incredibly easy to practice, so long as you are willing to try unusual things, as we'll see in later articles.
3. Making things
"I make stuff" is the credo of the hacker-entrepreneur. My parents used to ask me, when I was a kid, "what can you make?" It is always possible to build a business without making things, or by selling other people's ability to make things, but having that ability yourself is a huge bonus as an entrepreneur. It makes it easier to explore ideas, and it makes it much easier to communicate with others who make things.
Making things is split into multiple sub-skills: programming, design, and even engineering (and, perhaps, in the future, biotechnology! "Click here to download this YC-funded DNA patch and grow a third arm!"). But all of those stem from an impulse to "make things", from the sense of wonder that comes from looking at "something" and thinking "hey, I made this".
Luckily, despite the neigh-mystical nature of "making things", all those skills can be learnt. You can't learn the passion, but you can learn enough to be useful. Designing and building a simple web-app is attainable for pretty much anyone, and a huge plus as an entrepreneur.
4. Measuring things
As Eric Ries puts it, entrepreneurship is a management science. And, like both science and management, it relies on being able to measure the right things and draw the right conclusions from those measurements.
Understanding what to measure, how to measure it, how to apply statistical (or other) analysis techniques to it to figure out what it means - all of these are very useful startup skills. If you completely lack them, you will be at a disadvantage in building any kind of business.
Entrepreneurs all need to be at least competent communicators. Communication can take many forms: written (via blogs or even emails), in person (presentations, pitches, networking, etc), vocal (on the phone) or even visual (diagrams and designs). All of these areas are important. Being "world class" at these skills is not essential, but a baseline level of competence is required. An entrepreneur who cannot give a presentation, write a good, sharp email, or close a sale on the phone, will be at a disadvantage.
Eventually, most startups end up needing to employ others to achieve their goals of rapid growth, whether directly or as subcontractors. Some may think that subcontractors manage themselves. Those people are in for a surprise. Management is hard to learn, perhaps the hardest on this list, particularly when it comes to managing other people - and yet most entrepreneurs don't think they need to learn it! Management mistakes can cost as much as recruitment mistakes, if not more.
Management skills are also essential early on, when the startup is made up of only founders. A full-time manager would be a waste for a pair of hackers, but at least one of the two should be thinking of where the project is headed, setting goals and milestones, considering whether the team is working well together, and fixing process and people problems before they become too painful. That person is, implicitly, operating as a part-time manager. If they suck at it, or don't do it at all, the business will suffer.
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Management (the people kind) and recruitment go hand in hand, in that you can only really recruit with discernment once you have enough management experience to recognise how someone will be to work with. The point when you need to bring more people into the company because there's just too much work is not the ideal time to learn recruitment, particularly since most corporate jobs offer ample opportunities to get involved in recruitment.
Being able to recognise talented people with the right work ethic, and to convince them to work for you, is a crucial entrepreneurial skill once the business picks up, and early on, it cannot be outsourced or delegated to anyone.
8. Marketing, branding and PR
I've lumped these three together because they all relate to projecting the image of the company and getting people to hear about it and care about it. All startups have a brand, whether they know about it or not, and those founders that know how to present their business with the right "branding" will typically do better than those who don't.
Marketing and PR, the ability to get people to give a damn about your product and to come check it out and to trust you, are equally important for many kinds of businesses.
Some people would call this an activity rather than a skill, and they may even be right. However, having "networked" for a number of years now, and having observed both skilled (e.g. my cofounder, Paulina) and unskilled (they shall remain nameless) networkers in action, I believe there is enormous variation in the amount of "value" that networkers will get out of a meetup, and that variation is directly tied to skill.
Learning to network is not hard, but it takes practice and perseverance and a deliberate approach to constantly push yourself out of your comfort zone.
There are truly incredible amounts of data available on the web. Most of that data is useless, but hidden in these mountains of straw are the needles that point the way for your business to go.
Being able to squeeze the right information from the web (and other sources) on demand and efficiently is a fantastically useful skill for any entrepreneur. And, like all others, it can be practiced.
11. Financial control
The ability to keep your business's cash above zero is a fundamental and often neglected entrepreneurial skill.
A startup CEO has three key responsibilities: setting and communicating the company vision, recruiting and retaining a great executive team, and making sure there's cash in the bank. Everyone gets very excited about the first two, but the last one is equally important.
In an age when most people live with humongous credit card balances, financial control is far from a given. If you don't know how to keep your own cash flow positive, chances are you'll screw up your business's too - with far more dire consequences.
Financial control for a business also requires an understanding of accounting, taxes, and the legal options for dealing with bad payers.
Depending on your perspective on business, investors, bootstrapping and so on, fundraising may be either the most essential skill of all or complete anathema. I myself prefer not to have to worry about investors. However, being able to raise money (from both private and public investors) if you decide it's appropriate for your business is a valuable business skill.
This is hard to learn in any other way than by doing it, though some elements of it can be learned separately.
This is a lengthy article (sorry about that) that will turn into a lengthier series of articles. Hopefully, they can provide a path for new or would-be entrepreneurs to make up for the skills gaps which they naturally have when first arriving "on the scene". Even knowing all those skills won't guarantee success. However, being competent in all these areas will certainly increase your chances of achieving some form of entrepreneurial success.
If you have other suggestions, please do let me know.
Update: Some people are suggesting that "persistence" or "willingness to take risks" are more important skills. Whether they are more important or not is debatable, but what I'll argue without hesitation is that they are not skills. So many articles are focused on character traits that correlate (or not) with entrepreneurial success. This article is about skills: things you learn, practice and get good at, not things you are born with, or which are properties of your personality.
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