Startup to Last

First off, sorry about the terrible audio this week. This is probably related to the fact that Tyler is recording from his apartment instead of his office due to COVID-19. We'll get this figured out before next week.Here are some takeaways from this episode:There are three possible audiences for a startup manifesto: customers, founders, and employeesThe customer-facing version is very different from the founder/employee version because it should focus more on the problem that your company is trying to solve. Write that type of manifesto can be a great way to get people interested in your company before you have a product. It's mostly a marketing play.The founder version is mostly useful as a way of keeping you focused on your core values which makes it easier to make decisions. It is especially helpful for knowing what not to do.When you hire your first employee, that's probably a good time to take an informal founder version and write it up in more detail so that you can share your vision with employees.Because Rick isn't primarily focused on marketing or internal culture right now, he's going to wait to spend time on a manifesto. Instead, he's going to write a press release about what his product might look like in a few months. This will help unblock his product work, but it's not really the same as writing a manifesto.

This week we take a break from our normal deep dive topics to talk about current events. Between the coronavirus and the stock market volatility, a lot has been happening that could potentially impact our businesses and lives.

Here are some of the takeaways from this episode:Even if your product is good for a large group of people (all small businesses in this case) it can be helpful to focus on a specific segment rather than "boiling the ocean" because it gets easier to acquire new customers as you become more dominant within the segment.There are different ways to segment your customers (industry, job title, age, location, etc.). The specific segment you should choose depends on your company, but it's helpful to pick one that can easily be targeted. It might be easier to reach a specific industry (trade shows, etc.) than a specific age group.Once you pick an industry, the key is to commit as many resources to dominating that industry as you can, for as long as you can. You won't see results overnight.Do everything you can to be known in the industry. Nothing is off the table. Go to trade shows, run ads, sponsor podcasts, write blog posts, build a referral network, etc. The more touch-points you can get with each person in that industry, the easier it will be to acquire them.

Rick's new business is ramping up, and he's starting to think about how he's going to fund it until it's profitable. He definitely doesn't want to give up any equity at this early stage, so he needs to consider non-dilutive options. Here are some things we cover:There are a few main ways to fund a new business without giving up equity:Consult or work a normal job to make money and funnel that into your businessEnter pitch contests and apply for grantsTake on debtMake enough revenue directly from your customers to pay your expenses (this is ultimately what every bootstrapped company needs to do, it's just a matter of how long it takes to get there)It's helpful to understand the different capital needs for different parts of your business. Some things might be risky and uncertain. Others might be proven. Rather than thinking "I need $x to run the whole business", break it down by expense type because some might be a better fit for debt (e.g. scaling proven customer acquisition channels) whereas others might need other types of funding (e.g. paying employee salaries).For each type of funding, consider how much you'll get out of it relative to the time it takes to get the money. The most obvious thing you get out is the funding, but there might be other benefits that are harder to measure. For example:Winning a startup pitch could help you earn credibility for things like raising money from investors or finding early employees.Making money directly from customers might be harder at first, but the effort you're putting in is moving you in the right direction vs. something like consulting which is probably unrelated to your startup's business model.This episode of the Out of Beta Podcast discusses ways to think about raising debt

The main theme of our discussion was that it's important to understand the objectives of any meeting. Rick helped Tyler narrow the list of objectives down, and now Tyler needs to (1) consider which objectives are most important to him, (2) consider if some of the objectives are being met in other ways so they can be left out of the meeting, and (3) communicate the objectives to employees prior to each meeting so that they can understand what's expected of them.

Here are a few takeaways from this week:Identify what your most important work is, and devote most of your time to that. Rick was spending some of his most productive hours on reading and blogging, neither of which are priorities for his business.If you have things you have to get done (e.g. client work), try to knock that out early in the week so you can focus on your other work without distractions hanging over you.There are two types of work: transactional (meetings, phone calls, routine maintenance, etc.) and creative work (writing, strategy, programming, etc.). Transactional work can be done effectively even when you're not at your most productive, but creative work can't. So try to devote your most productive hours to creative work."Flow state" is when you're in the zone and getting a lot of work done. When working on creative work, one hour in flow state can be more productive than a day of normal productivity. But it's hard to get into flow state, so the key is to protect it once you're in it. To do this, try to structure your days to allow max flexibility to stay focused if you do enter flow state.The downside to giving yourself unstructured time for creative work is that it can be hard to manage your mental health. It can lead to stress and burnout because it doesn't follow the "hours worked = productivity" equation of more structured work. Combat this by expecting to go hours or even days without being very productive, and give yourself time to recover if you do end up having a productive streak.

Here are some takeaways from this week's episode:Marketing can be broken down into two categories: (1) bringing new people into the top of your funnel and (2) optimizing the conversion rates within your funnel. A lot of technical marketing projects are more about the second than the first. This can be helpful, but there's a ceiling to how effective marketing can be within increasing the top of the funnel.Increasing the top of the funnel is all about figuring out where your potential customers are, meeting them there, and telling your story. This can be done via inbound marketing (content creation, SEO, etc.) and outbound marketing (advertising, trade shows, participating in online communities, etc.)In order to know where to target your outreach, it's important to understand your existing customers. Where did they come from? What was their buying journey. This can be done by having one-on-one conversations with them, but it can also be automated by having analytics on your website, asking questions when someone signs up, etc.Because Tyler is interested in technical projects that help with marketing, a good approach is to build technology to help collect the right information about existing leads/customers so that the non-technical members of his team can understand where to focus their efforts to drive more people into the top of the funnel.

Acquiring early customers is a strategic blend of growth and learning. Identifying your target audience is vital; look for common traits among your initial customers. Open conversations with potential users can provide invaluable insights. Explore various acquisition methods, whether through personal outreach or innovative advertising. Understand the nuances between marketing to individual consumers versus corporate clients. Finally, foster genuine connections over aggressive sales tactics to build a loyal customer base.

It's impossible to cover the entirety of this topic in one episode, but there were some key takeaways that should apply to pretty much any startup:A financial model is something that takes inputs (e.g. historic data and assumptions about the future) and gives outputs (e.g. how much money might you make this year). It can be as simple as some notes on a piece of paper, or it can be much more complicated.There's no standard model that everyone should follow. The key is to figure out what questions you have, and build a model that will answer them.In some cases you'll want more than one model. For example, you might make a specific model to help predict what your customer acquisition could look like in the future, and then use the output of that as an input of a higher-level model predicting what your overall profit might be.The complexity of your model probably depends on the complexity of your business. Don't compare yourself with other companies.Having said that, you might find the process of building a model helpful as a way to force you to think through your business.If you're trying to raise money, your model needs to communicate information to them which you might not otherwise be interested in. Things can get more complicated at that point.Understanding all of the above, building a model is just a matter of opening up Excel, entering the inputs, and doing your best to generate reasonable estimates for the outputs. Each model is different, so it's hard to be more specific than that.

We considered having this conversation privately, but since almost every business should have a conversation like this, we decided to record it in the hopes that the discussion is helpful for others. As expected, this ended up being a bigger topic than we could cover in a single episode, but we did start narrowing down on some ideas and constraints around the idea of starting up to last:Traditional entrepreneurship is already set up well if your goal is to become as rich as possible. Startup to last companies should probably have some other motivation such as enjoying the work, feeling fulfilled by the impact the company has, etc.Despite needing to be motivated by something other than money, sustainability is key to survival, and that means that every business needs to at least make enough money to make it worthwhile for the founders. That's the first priority, and then once that "enough" number has been reached, it's time to start focusing on non-monetary goals.It's only possible to run a company this way if all shareholders are on board. It's not hard to get founders, employees, and customers aligned. It's harder, but maybe not impossible, to get investors on the same page (venture capitalists specifically are unlikely to want this approach). This is why bootstrapping is common among these types of companies.Because the goals of startup to last companies are different so are the rules. We didn't get too deep into how this might impact how you operate the business, but there's a lot to discuss there.It's helpful to think about the company as a place you'll work for the rest of your professional life (even if that's not true). That will help you prioritize sustainability, enjoyment and fulfillment. Companies that expect to exit soon can justify burnout-level work environments because they know it doesn't have to last.