The Vector of Life: Startup Phases and Their Goals

Before Birth

Let’s start with a basic question: Do you want to build a company or do you want to be in a startup?

If you want to be in a startup to get a special kick from the proud feeling of telling everyone “I run a startup”, from the sense of self-importance – don´t waste time reading this (or anything else similar for that matter). Firstly, get a shared desk in a coworking with a table tennis table and beer kegs. Then urgently start looking for events with names like “Thursday's Beer, Pizza and Networking for Startups”. Attend as many of those as you can. You'll find a lot of like-minded and very understanding people there. It is them with whom you can discuss your amazing journeys of startup founders, ambitions and pitfalls, give each other psychological support to get through difficulties of being a visionary in a backward world and much much more. Your kind of people. Done. You are in a startup.

If you goal is to build a company, then once you got over this woozy feeling of “oh, cool, I've started a company”, try to understand where you are in the journey. Then focus on the goals of each step because that's the only way you can build something rather than do a lot of “busy work”.

“Busy work” is a phenomenon present in any part of life. It can be anything: building a product, meeting people, making slides, building a logo or even buying office supplies. The main criterium is that it keeps you busy without much result. Busy work can take up all of your time, especially in early phases of a startup. And it often doesn’t need much planning, very helpfully showing up from around the corner in a very natural way and bringing a satisfying feeling of constant busyness, lack of time, a lot of efforts, hard work and an occasional feeling of achievement. The thing it rarely brings is results - as per definition.

An alternative is articulating the next goal clearly and focusing on it. That significantly increases the chance of getting something achieved (note I chose to write “achieved” vs “done”).

“If you don't know where you are going, you'll end up someplace else.”

A few important points:

1. Honestly ask yourself “are startups for me?” I’ve seen a lot of people going around saying “I want to do a startup”– many of them unhappily working in their corporate careers with very nice compensation. And they do want to do a startup. However, most of them never will. I’ve heard some of them say “I really really really want to do a startup! I just need someone to pay me, say, 60% of what I am making now and I am in”. Maybe they find something like this, but most likely they will eternally be like people who spend years saying “I need to lose weight” and never getting around to doing anything about it. Well, similarly, I really really really want to be able to teleport to places… 

2. Below I will be talking about assessing where you are on a regular basis. For that you need people close to you who can give you two kinds of checks

• • Vision checks (sometimes aka “pep talks”). Every now and then someone needs to remind you how great your idea is, how amazingly well you are doing and tell you that all will work out. Day after day you are dealing with some very thickly layered shite, so without such reminders, you may either start losing you vision unbeknown to you (little by little, gradually replacing it with incrementally less ambitious decisions) or some days start considering killing yourself. Or both.
  • Reality checks. Equally important is to have someone who challenges your views on progress and status. There is a massive danger (and desire!) to wear larger and larger rose glasses as time goes by. After all, all this effort had to get you somewhere, right? The catch is that if you are wrong about which stage of company you are in, you are likely to focus on a wrong goal. And then that goal is often unachievable if you haven’t lined up all that’s required to achieve it (previous goals). Predictably, that can turn out … let’s say suboptimal and not pretty. E.g. if you try to scale before having a sellable product you can easily kill the company – it will miss forecasts, the hired expensive salesforce will be frustrated without commissions, investors who voted to increase the cash burn to increase sales will start believing that “the thing just doesn’t sell”, and you can continue on and on from there…

3. I want to be clear what I mean when I say “you know” about something. Founder statements of belief do not qualify as “knowing something”. Of course, you “know people will buy this”! Dah! You are a visionary (at least an aspiring one), so of course you believe this! That’s all very nice, but we need more people to think the same way and ideally vote with their feet (=wallets). And those people can’t be not your family and close friends forever. At some point validation from people other than your closest circle needs to happen. In fact, starting from people close to you is always a good idea, if you can’t convince even them of your idea - you have an issue. Same about first customers – they are likely to be people who trust you enough to take a risk and pay you some money. But as you progress, the dependency on you being a good guy has to decrease. So my definition of “we know” is really about proof coming from other people in the market – be that about interest, wanting, using, willingness to pay, or whatever.

4. Phases of the company are not necessarily linear. Sometimes they even switch places, but it’s fairly unusual in my experience. They can definitely overlap, and you can easily be doing things from several phases at the same time. E.g. you may have two customer clusters in different stages of maturity and with very different desires for product characteristics. That makes it harder to manage and even more important to get good diagnosis of where you are. The easiest in my view is to treat these things separately – e.g. one is in idea stage, while the other one is nearing sellable product. That makes it easier to decide what to do with each of them. Generally, more efforts should go to the more advanced (=closer to revenue) product-market combination, but there are exceptions. Market size would be a great example – it is probably unwise to throw all resources on selling the fully ready product that a total of 10 to 15 people can buy, while totally ignoring an early product which has potential to sell in billions. And here’s the “but” for the “but” – even in this seemingly obvious situation there is a minefield to navigate… That’s one of the reasons why startups are so intellectually interesting. And so feverishly and mind-boggling frustrating.

So let’s look at the phases of an early stage company and the most important goals during them. I can’t stress more strongly how important it is to know which phase you are in, identify the next goal and fanatically focus on it. Get this point wrong and you may be doing a lot of stuff that doesn’t matter…

Darkness

This one is simple and happy in its oblivion. Maybe you want to start something, but you have no idea what. I will not spend much time on this phase for obvious reasons. Let’s go straight to having an idea of what you want your startup to do.

Newborn Puppy

“Let there be light: and there was light. And that was good”. This slightly modified phrase from probably the most famous fantasy book is how it’s unlikely to happen for you. Instead let me inform you that puppies are born deaf (ears closed) and blind (eyelids completely shut). This fact is more relevant than the quote above because it is much more representative of you in this phase.

Like a newborn puppy in a dark room, without sight and hearing, you are looking for anything that may turn out to be a light switch. You don’t really know how a light switch looks like. The facts that you have paws with no opposable thumbs (can’t grab things), don’t walk well yet (can’t move around too far) and are rather small (can’t reach things much above you) are not helpful. But you have to explore the room, check out anything that may even remotely resemble a source of light and try to figure out how to get it to function. If it works, great. If it doesn't work, continue to the next suspect.

If you are super lucky, you will find a proper switch giving you a brightly lit room. But you are more likely to find a single match or two giving you the ability to create bleak light spots for short periods of time. Even more likely you will find one or two batches of different types of matches – and you will have to explore them as alternatives in the next phase.

The Goal: “find the first match”, aka “figure out what you might be able to sell and maybe even sell one unit of it”. This implies finding someone who wants to buy and understanding why they want to buy. More than one is better. Getting them to start a trial is worse, free trial worse yet, getting them to discuss and give feedback is even less helpful. But all of these qualify as successes. They lead to light.

How you know you got to the goal: you have interest from third parties.

The invention of fire

In the beginning of this phase you undergo a transition from a newly born puppy to a headless chicken running around in a random pattern. You are using the matches found previously to try to fashion something that gives a more stable stream of light. To achieve that you try different matches (ideas on what you could sell to whom) and see how the targets react.

You can try to organize the chicken’s running trajectory (and you should!), but in reality, you have to be super sensitized to feedback you receive as you try things. You are looking for the answer to “What am I actually selling?” And the answer cannot be “this technology” or “that widget”. It should be about the utility of your technology or widget - why people want it, how they use it and why they would want to pay for it. So, you try one option at a time and observe.

As you collect feedback, you form initial hypothesis on what your product is and what its value to potential customers is. That is the equivalent of moving from matches to a torch, albeit a rather crude one, but nevertheless the one that you can use to light up different parts of the room in an intentional and predictable fashion.

Armed with the torch (hypothesis) you review your MVP (minimum viable product) and start trying to sell it repeatedly. You are likely to still have variations in the hypothesis (“some people buy ease of use, others buy speed”), but you are now moving along the tracks that are set out by you. So random trajectories of a headless chicken are gone (well, almost). Try, observe, see who bites, which part they bite most, count them, and confirm the hypothesis. Congratulations, you have discovered your fire. You now have an MVP and initial sales.

Goal: confirm hypothesis, form MVP, start explainable selling.

How you know you got to the goal: you have 2 or more of those who bought the same thing for the same reasons. You can sell the same thing to client number N+1, maybe not easily, but you can.

Learning to Hunt

This step is easier than the others, although it involves very similar actions. The main difference is that the dark room is gone and you now can see – as a result you can act in a much more conscious way. You are fleshing out your value proposition and product, selling it and getting to the point of (hopefully) easier repeat sales. You are learning how and to whom to sell to best and easiest. Once you have this understanding (i.e. feedback from the market in the form of buyers who react to your sales pitch in a reasonably predictable and similar way), you know you can go into scaling.

Goal: Product ready for repeat sales. You can predictable sell it. You know the value of what you are selling, how and to whom you can sell it.

How you know you got to the goal: you have multiple clients who bought the same thing for the same reason (or several clusters of similar clients)

Scaling Sales

Once you have a product that you can sell in a replicable way, you start thinking about how to scale your sales. This has a myriad of aspects, from sharpening value proposition/product so that any good sales person could sell it, doing all kinds of classifications (customer targets, channels, features, etc), building playbooks, introducing a product management function, hiring a bigger salesforce, spending more on marketing and lead generation - the list goes on and on. For simplicity I assume that at this stage you have one product, although that is not always the case. I have put dealing with multiple products into later, more mature, phases of the company.

The ultimate goal of this phase is that the company starts selling in volume and, importantly, without you or without dependency on any one person. If your CRO gets hit by a bus, as sad as that would be, the sales should not stop.

Goal: A functioning sales machine.

How you know you got to the goal: sales orders are coming in and ideally you hit sales targets.

The Big Grown-up Life

This one is as non-linear as they come. Company has moved into a stage of real growth and is now looking to expand into new markers – either geographically, or by adding new products, doing M&A, or in any other way. Goals can be numerous – basic diversification, opportunistic desire to get more sales, wanting bigger scale, addressing competitive threat, etc, etc, etc. You are scaling the company now.

Goal: Functioning sales machines (note plural) in several desired areas

How you know you got to the goal: overall: growth in revenue and profits. Each direction: separate goals

Kaching (Exit)

Well, this hardly needs much commentary. A kaching moment for all involved or a subset of them. This is a mandatory step if you have investors on board. For world domination without an exit, either fund the company yourself or build a structure where you replace one set of investors with another set.

Goal: sell the company (fully or partially), make some money

How you know you got to the goal: kaching sound and zeros in the bank statement.

Funeral (shutting down)

For completeness, this is one of the possible outcomes, which hopefully won’t be your case. But sometimes it happens under the influence of forces beyond your control or it just has to be done. Either way, if you are in this phase, focus on the goal as much as you do in the other phases, get it done and move on.

Goal: close the company as cleanly as possible

How you know you got to the goal: you will have legal documents proving that the company is closed. You are not likely to not notice or misinterpret this one…

Other stuff

The above looks at the company lifecycle mostly from the point of view of product and sales. There are many other sides to startup life that are important and that are not covered above. Some of the most notable ones are running the company/operations, management/board structure, funding. In my view, as important as they are, they are secondary to the stuff above. If you don’t have a product that people want to buy, there isn’t much to manage or finance. So these are omitted on purpose and will come elsewhere.

Checklist

• Which phase are you in?
• What is the next main goal?
• What is the criteria to judge if you achieved this goal (ideally quantifiable and easy to check)?
• What are the immediate actions to get closer to this goal?