The Buzinga PodcastEp 7: 10 Fatal Commandments Of Building A Startup

• Hey guys, Logan Merrick here and you’re listening to episode 7 of The Buzinga Podcast:

• The number 1 resource for startups building and growing their business in the tech space.

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The Buzinga Podcast

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Ep 7: 10 Fatal Commandments Of Building A Startup

What we’re talking about today10 tough lessons you need to learn about building a startup

• What is a ‘startup’?

• A startup is not the same thing as a small business.

• “A Startup is a human institution designed to create a new product or service under conditions of extreme uncertainty.” – Eric Ries, author of The Lean Startup.

• The aim of a startup is to GROW as fast as possible.

• Buzinga was a startup once…We learnt quickly what decisions would be fatal, and which would help us grow.

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In this episode…

• How to survive the startup phase, in 10 Fatal Commandments…

1. Thou shall not build a unicorn2. Thou shall not focus on revenue first3. Thou shall not lack the ability to pivot4. Thou shall not be a lone warrior5. Thou shall not hire the wrong people6. Thou shall not launch at the wrong time7. Thou shall not startup without a plan8. Thou shall not mishandle finances9. Thou shall not think too small10. Thou shall not ignore hunches

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1. Thou shall not build a unicorn

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• A unicorn is a company that is valued at $1Billion, based on fundraising alone. Eg: Snapchat, Uber, Slack, Facebook

• The aim of building a unicorn startup could not be more meaningless for entrepreneurs – It’s a vanity metric.

• Don’t set out to create a unicorn. They’re impossible (and even dangerous) to replicate.

• INSTEAD: The goal of your app startup should be to have a point of differentiation. You need to find an innovative solution to the problem your target users are having.

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• Mark Zuckerberg didn’t aim to create a billion dollar company. He just had an awesome idea that helped people connect and communicate in a unique way.

• His aim was to build a long lasting company that would have an impact over the long term.

• Facebook’s wealth creation was a side effect of their hard work and determination.

1. Thou shall not build a unicorn

2. Thou shall not focus on revenue first

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• Making an app into something people actually want is a lot harder than making money from it.

• The startups that win and make money are the ones that focus on growth first and revenue later.

• For example, Google: They made search work first, then worried about how to make money from it later.

• Making money came easy in the end, given that they held 84% market share.

2. Thou shall not focus on revenue first

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• Instagram also focused on their users first. It was then acquired by Facebook.

• It’s irresponsible not to think about monetisation. It’s even more irresponsible not to think about the product.

3. Thou shall not lack the ability to pivot

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• You’re not just stuck in the one place! You need to be constantly moving forward or pivoting in either direction to continue moving forward.

• Every startup at some stage faces the challenge deciding when to pivot and when to persevere.

• As yourself the question:“Are we making sufficient progress towards our original idea and strategy, or do we need to make a major change?”

3. Thou shall not lack the ability to pivot

Example:

• Nokia was once a paper mill and also made rubber boots…

• You could also make the argument that it’s time for Nokia to ‘pivot’ again… Time will tell.

• Startups that are unable to pivot in a new direction on the basis of feedback from their marketplace will fail.

• See also: 10 Successful App Pivots You Won’t Recognise From Their First Versions

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4. Thou shall not be a lone warrior

• How many successful startups can you think of with only 1 founder?

• Even the few sole founders (like Mark Zuckerberg) needed a lot of help from others to succeed.

• Sole founders also aren’t as likely to get external investment – co-founders reduce investor risk.

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“No one accomplishes anything alone”

4. Thou shall not be a lone warrior

In my mind there are 5 universal criteria for a co-founder:

1. You genuinely feel that the person is irreplaceable and is a requirement for success.

2. You both believe that building a startup is the best thing you can do with your lives now and into the future.

3. When defining success, you both have the same definitions.

4. You’re both keen to put the startup ahead of your personal life and other priorities until success is achieved.

5. You genuinely like each other as people.

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What defines a real co-founder?

5. Thou shall not hire the wrong people

• Hiring the wrong people drains your startup financially and may even hinder your startups progress and future successes.

• I know many startups that have folded due to hiring the wrong people.

• There’s many reasons for this. Perhaps you hired a friend who lacked the necessary skills for the role.

• Or, you hired someone who didn’t fit in with the team and startup culture because of a personality mismatch.

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5. Thou shall not hire the wrong people

• Make sure you’re continually tweaking the hiring process so you’re hiring the best quality people.

• Cash flow in startups is always tight. Any leftover funds are usually funnelled into growth areas of your business.

• Instead of paying staff huge wages, attract talent by offering them an incredible workplace culture.

• See also: Why We Chose Company Culture As Our Growth Strategy.

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6. Thou shall not launch at the wrong time

• Timing is EVERYTHING in penetrating a market.

• Launch too early and the market won’t be ready for the product. (For example, Airbnb didn’t take off for years, until the GFC made people so desperate they didn’t mind taking a risk sleeping in someone else’s home).

• Launch too late and you risk losing market share to an earlier competitor.

• “If you’re not embarrassed by your first product then you’ve launched too late”.

• Release an MVP to gather feedback and optimise performance.

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7. Thou shall not startup without a plan

• The business plan is your foundational pillar upon which everything will be built.

• Your business plan will be your startup’s road plan. At least for the first couple of years.

• It will also serve as a ‘first look’ for potential partners and investors.

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7. Thou shall not startup without a plan

The 6 critical answers your business plan must provide:

1. What problem is your startup solving?2. What’s your point of differentiation/your unique selling

proposition?3. Who’s your target user?4. How will you generate revenue?5. How will you market your business?6. What do you need to get started?

See also: The 1 page, 20 Minute Business Plan For Startups – this is an adaptation of the Lean Canvas designed specifically for app startups.

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The business plan

8. Thou shall not mishandle finances

• The biggest mistake startups normally make after raising funding is hiring people too quickly.

• You’ve suddenly gained all this money and you’re eager to expand through hiring extra staff.

• Only hire those who are truly needed. Always reassess your new hires to ensure maximum ROI is being achieved.

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8. Thou shall not mishandle finances

“What if’s” to be mindful of…

• ‘What if… the original plan must be scratched in favor of a backup plan?

• What if… an investor backs out or a client doesn’t pay?

• What if… a vital element for the business costs too much? Is there money to handle such scenarios?

• What if… your business has to make a very costly pivot?

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10. Thou shall not think too small

• If the market you’re targeting is too small or ‘niche’ then your success may be elusive.

• Many startups belief that it’s ‘safer’ to target smaller markets to avoid competition.

• “You can only avoid competition by avoiding good ideas”

• If you make anything great, then you’re going to have competitors, so you may as well face them sooner or later.

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10. Thou shall not think too small

• You should’ve already done your research into your market and know who your competitors are.

• This should be factored in when building your application, so once you’re ready to launch your app, it should already be a step ahead of your competitors.

• See also: How To Perform Competitive Analysis On Apps

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10. Thou shall not ignore hunches

• Entrepreneurs are a savvy bunch. And as such, you should always trust your instincts.

• It’s probably the reason many get far with their startups.

• So don’t ignore that hunch. Use it to your advantage.

• Be smart about it though.

• Make sure this ‘hunch’ is thoroughly’ investigated by crunching the numbers and conducting the appropriate research.

• Don’t act blindly upon it!

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Summary

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• Building a startup is not an easy task. By avoiding the 10 fatal commandments, it will give you every possible chance of succeeding.

• You’ll make some great and not so great decisions along the way.

• If you can make more good decisions than bad, you’ll be well on your way to building a very successful startup.

Further resources

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• Hope you learnt something from this!

• If you want to learn more tips for being a successful entrepreneur, then check out our blog, I’ve included 3 relevant blogs in the show notes:

1. 5 Steps To Becoming A Key Person Of Influence In Your Startup Niche

2. The 2 Forgotten Secrets to Startup Success3. 5 Lessons Every Startup Entrepreneur Must Learn

Thanks for listening!

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• For more of this please subscribe on iTunes, watch on Youtube with accompanying slides or on our website at buzinga.com.au/the-buzinga-podcast

• See you on the next episode!