- Success requires 1% ‘product-market fit’ and 95% determination.
Most investors, business school lecturers, and authors on entrepreneurship will tell you that the most critical aspect in a startup’s success is product-market fit. There has been so much written and said about product-market fit that the true predictor of success is much too frequently overlooked.
The single most important factor determining your long-term success—as a founder and as a startup—is your capacity to develop resilience, persevere through difficult times, and remain committed to your long-term goals in the face of adversity. All founders confront difficulties at some point: key personnel depart, funding runs out, clients cancel pilots, sales fall short of objectives, and so on. Having the fortitude to overcome these obstacles is considerably more crucial than luck, a business plan, or product-market fit, all of which will occur naturally as a result of grit. Even outside of entrepreneurship, research indicates that tenacity is the single most important predictor of life success.
Therefore, if you are serious about entrepreneurship, you should develop a framework for dealing with the inevitable adversity that you will face: seek sources of inspiration and motivation; establish a support network of friends, family, and mentors; invest in your physical and mental health; develop a habit of reflecting on past mistakes (for example, by writing a blog post about them); maintain a long-term perspective and learn from the experience of others. Above all, remind yourself that no successful person ever achieved success without facing and conquering hardship. If they can achieve it, then you can as well.
2. People will disappoint you. Take care of it and move on.
Idealism and reality do not always coexist harmoniously. About a year ago, one of my best friends abruptly left Veho, at a key point in my life and the company’s. This was a devastating blow to both me and Veho, and it took months for me to recover. Two additional pals, as well as a couple people I regarded as mentors, mysteriously vanished from my life over the last year.
One of the most painful realizations for me has been that not everyone views loyalty equally.
Some people realize they lack the tenacity to accompany you to the summit; others have other goals in life; and still others have a completely different view of the world or just do not share your ideals.
Naturally, this does not mean that you or I should ever jeopardize the integrity and ideals of others with whom we collaborate. However, you must face the fact that some people will disappoint you. The sooner you accept this, the sooner you’ll be able to recover from this.
Improve your ability to recognize red flags, consider what you can do better the next time, and move on.
3. The most successful startups begin with contrarian thinking.
The best startup success stories of our generation are those of entrepreneurs who were daring enough to envision new markets (Uber, Airbnb), compete in a saturated industry in novel ways (Google), or undertake infrastructure investments that no one else would dare to make (Google) (Amazon). This is not an accident. Today’s barriers to entry are so low that any simple idea is already being evaluated and monetized by several rivals. Large organizations do not emerge simply by doing things marginally better. They are created as a result of thinking differently.
However, while much business theory supports contrarian thinking (“Blue Ocean Strategy,” “Zero to One,” to name a few), very few startup investors really use it. I’ve lost count of the number of times I’ve been warned by venture capitalists that “your idea will never work,” “you’ll never scale,” “you’ll have a poor valuation,” “autonomous cars will render your firm obsolete,” and “Uber will eat you alive.” By the way, the same venture capitalists also expressed similar sentiments toward the founders of Uber, Airbnb, Google, and Amazon… (We’ll return to the question of whether you should listen to venture capitalists later).
4. Collaborate only with individuals who are entirely aligned with your objectives.
The most critical decision you’ll make as a founder (and arguably throughout your life) is who you collaborate with. And you should be very certain they share your vision and are comfortable with the dangers associated with it.
This invaluable lesson was taught to me the hard way shortly after graduating from HBS. My co-founders and I had just returned from an interview with Y Combinator, where our company strategy was challenged. One of my co-founders began urging that we pivot to a completely other business since he was uncomfortable with the business risks associated with Veho at the time (remember, we are attempting to transform a large, established sector – this is not an easy task). We disputed this for months, and when we couldn’t come to an agreement, he opted to pursue another possibility (thankfully, we were able to maintain our friendship). By that point, we had squandered months of crucial time and consumed a sizable portion of our investment capital.
There is no right or wrong way to be motivated. Each individual is entitled to their own risk profile. However, businesses, like everything else in life, have a risk-reward ratio. And those who aspire to greatness, by definition, must take more risks. If you’re prepared to take a chance and shoot high, it’s vital that you find partners that are entirely on board with your vision. This is not a lesson unique to founders. This extends to employees, investors, advisors, and even early consumers.
5. “Lead by consensus” is ineffective. Rather than that, embrace the concept of “disagree and commit.”
HBS coached me on developing a more compassionate leadership style. However, I interpreted it incorrectly. I established a culture at Veho’s inception that offered everyone an equal input in the company’s development. My objective was to position my then-partners as decision makers and to convince them to completely embrace our cause. However, once disagreements arose, decision-making became nearly impossible. We spent hours attempting to convince one another, but our efforts were fruitless, and we grew increasingly angry with our slow progress.
Make a great favor to yourself and avoid my error.
Parents are required to make decisions, and parents require autonomy. You are not required, nor should you be, to make every decision at your organization. Dictatorships of this type rarely succeed. However, make certain that you and others understand what is critical for you to have the last say in. Similarly, what is critical for other organizational leaders to have the final say on?
My co-founder Fred frequently discusses the Holacracy system. Jeff Bezos, another astute individual, advocates for a “disagree and commit” approach to decision-making. Both have the same priority. Making a decision quickly and heading someplace, even if it means making some mistakes, is significantly superior to making a decision slowly and moving nowhere.
Traction takes precedence over all other considerations.
About two years ago, I pitched my startup to a venture capitalist (when it was still in the concept phase). “If this is your concept, you should abandon it immediately and go get work,” he advised. Seriously. Four months later, after learning that Veho had already delivered thousands of items using crowdsourced drivers, the same investor emailed me: ‘Let’s meet again. I’d like to accompany my business partner as well!” Other cautious investors who had been on the fence wanted in immediately upon smelling success.
Given that no one can forecast the future, it is irrelevant what others think of your proposal – after all, they are merely speculations. Are you confident in your concept? Make it work. And if you do succeed, be sure to share your success with the naysayers. In my experience, even small amounts of material can swiftly sway people’s opinions.
7. Venture capitalists are unaware.
As a new entrepreneur fundraising for the first time, you will almost certainly pay considerably more attention to the opinion of possible investors than you should. True, venture capitalists see a lot of businesses; some of them succeed. They observe which innovations and business models attract the most money and which, on average, generate the highest returns. If you are inexperienced, it is all too easy to confuse the views of venture capitalists for real truth.
Always keep in mind that no VC knows your business as well as you do. It is impossible for any investor, even the most astute and experienced, to see through all the holes and possibilities, assimilate all the data, judge your competencies as a founder, and forecast the market’s direction in a 20–30 minute conversation — all the more so in a 20–30 minute conversation. Additionally, each VC makes a limited number of investments per year and says ‘no’ to entrepreneurs considerably more frequently than ‘yes’. As a result, they are highly skilled at finding reasons not to invest.
While it is beneficial to listen to seasoned specialists, you should never substitute their perspective and analysis for your own. Bear in mind that nobody can forecast the future, and that every great venture capitalist has passed on some incredible startups. You could very well be one of these businesses.
By the way, an excellent approach for obtaining more ‘yes’ than ‘no’ responses is to devote time teaching investors about your market, establishing oneself as an expert, and accumulating facts to dispel their doubts. Alternatively, you can just target investors who are already familiar with your subject. This will significantly simplify your life.
8. Make it a habit to ‘contradict conventional wisdom.’
Simply because someone says something does not imply that it is true. One example is the belief that founders should only start businesses in which they have a ‘founder-market fit,’ i.e. in a market with which they are already intimately familiar (think handymen selling software to handymen or moms marketing diapers to moms). Naturally, venture capitalists value ‘founder-market fit’ since it mitigates their risk of investing in someone who is not an expert in their field. However, since when should you listen to venture capitalists??