A lot of startups fail, sure. But what I’ve noticed over the years I’ve spent in the Internet industry is that more and more people are starting tech companies for all the wrong reasons—and they tend to be the first in line to fold.
I’d sum the issue up like this: If you’re building a startup because you believe that it’s the best way to become rich, then, let me tell you right off that this is going to be a very disappointing ride.
When you’re starting a business—where employees, investors, users and customers are involved (and probably a lot of other stakeholders too)—YOU, the glorified entrepreneur, are the least important stakeholder to satisfy.
Your job is to make decisions that are good for the business, and very often, those decisions are inversely proportional to your own interest.
Over the past 4 years running Producteev, I had to make a lot of tough decisions of my own:
- Raising money when I was already 2 months late paying salaries;
- Paying myself a frightening low salary throughout, even though I live in New York City with two kids and nothing in my savings account (!!);
- After the company almost died 4 times, convincing my investors that it was worth putting in just a little more money because we were so close.
And those are just a few examples; I am missing a bunch of stories here. What I am trying to say is that I could have left the helm and taken another job, or started something else. Financially speaking, that would have been a much better choice at any of the junctures mentioned above.
But I always made decisions that were good for my company, and never thought of my own personal motivations. I actually couldn’t have cared less about how much money I would make at the end of the story. My only goal was to make Producteev a success, so I could build on it—and build my career in the process.
Here are a few tips that helped us achieve a successful exit to Jive Software two months ago:
1. Product, product, product first. Build the most perfect product you possibly can, and your passionate users will take care of your marketing. Free marketing.
2. Iterate. At an Internet startup, you learn from your users all the time. Make sure to integrate that feedback in your product on a regular basis. That's how you'll keep your competitive advantage. Actually, it's the only way.
3. Cash is king. Whether you can generate revenue, or need investor's money to keep the company going, plan this ahead of time. Lack of cash is the biggest cause of death for startups, by far, so plan things accordingly, preferably farther out than you think necessary at first.
4. Take advantage of your investors and advisors—they've been here before. One thing great about having investors and advisors is that, in most cases, it means you have people around you who went through this startup thing before. Why take the risk of making mistakes if you can simply ask them for help? After all, they want you to succeed!
Bottom line: As an entrepreneur, don’t think about money, other than cash flow. Focus on what will make your business a success first. More often than not, if you do that, the money will eventually come to you (not always, but often enough).
—Ilan Abehassera is a U.S. based entrepreneur and founder of Producteev. Find him on Twitter at @ilan.
The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world's most promising young entrepreneurs. In partnership with Citi, the YEC recently launched #StartupLab, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses via live video chats, an expert content library and email lessons.
[Image: Flickr user Chris Guy]