Building a Venture-Scale Startup: Unconventional Wisdom and Hard Truths

1. Start Slow Many new entrepreneurs rush to formalize their business with licenses, trademarks, and accountants before earning their first dollar. It's crucial to pace the startup process. Validate the business idea and prove its viability before getting entangled in regulatory and administrative details. Prioritize generating revenue and customer feedback to ensure the business model works effectively.

2. Focus on Fundamentals Recruiting great people, building a solid product, driving revenue, and creating value are the core elements of a successful startup. These fundamentals should be prioritized consistently to build a business that stands the test of time and meets the needs of customers and stakeholders. Focusing on these basics ensures long-term stability and growth.

3. Understand the Odds Equity is often worthless, but the small chance of success can be incredibly rewarding. Staying grounded and realistic about the high failure rate in startups is crucial while striving for the success that can change everything. Maintaining a balanced perspective, celebrating small wins, and keeping an eye on the ultimate goal is essential for long-term success.

4. Fancy Titles At a certain stage of growth, egos shift, and money changes people. What was once a customer-centric company that was fun to work at can become increasingly corporate. Maintaining startup culture and values is essential. Just because large corporations have always done things a certain way doesn’t mean it’s the best approach. Keeping the spirit of innovation and collaboration alive is crucial.

5. Recognize Empty Offers of Help VCs offering help without a check are just being polite. Genuine support comes with a financial commitment. It's essential to prioritize relationships that provide tangible value and be wary of time-wasters. Seeking out investors who offer strategic guidance and resources in addition to capital ensures advice is aligned with real stakes in the startup's success.

6. Embrace Being an Outlier Success in startups is not linear. There is no definitive rulebook. Patterns can often be a crutch for those uncomfortable with chaos. Thriving in the unknown and being prepared to pivot and innovate constantly are essential. Significant successes come from those who deviate from the norm and take bold risks. Understanding that the journey won’t always be smooth is vital for preparing for inevitable ups and downs.

7. Purpose Over Profit Startups are driven by a mission to solve problems and reshape the world, not by a desire to get rich quickly. This mission-driven approach attracts passionate team members, investors, and customers who believe in the vision. While profits are necessary for sustainability, they should be a byproduct of a deeper purpose that guides decision-making and strategy. Understanding the customer deeply is more valuable than focusing solely on profitability.

8. Hire Daredevils, Not Bureaucrats Early team members should be risk-takers who thrive in uncertainty, not those who crave structure. These adventurers bring creativity and resilience, helping navigate the unpredictable terrain of a startup. They are more likely to find innovative solutions and pivot quickly when necessary, a critical trait in the early stages. The ability to adapt and make bold decisions is essential for survival and growth.

9. Be Patient Building a venture-scale startup to a $1B valuation is a marathon, not a sprint. Sustainability over speed should be the focus. Long-term success requires steady growth, careful planning, and resilience. Avoiding the temptation to burn through cash in pursuit of rapid expansion and instead building a solid foundation supports sustained growth. Patience allows for thoughtful scaling and reduces the risk of burnout.

10. Accept the Grind Startups are tough. Commitment to hard work is essential. The journey demands long hours, sacrifices, and relentless effort. Being honest about the challenges and ensuring the team is prepared for the rigors of startup life sets the tone for resilience and dedication. A realistic approach fosters a resilient and dedicated team.

11. Embrace Anxiety Anxiety and fear are part of the journey. Accepting them as constant companions helps in staying vigilant and proactive. Acknowledging stress without letting it paralyze ensures productive actions that drive the business forward. Embracing anxiety allows for better preparation and resilience in facing challenges.

12. Keep Going The difference between overall success and failure often comes down to perseverance. Many give up too quickly, unable to stomach repeated failures and challenges. Continuing to push forward, even when it's tough, often leads to success. Persistence is a significant differentiator between those who succeed and those who do not.

13. Fail Well Execution is incredibly hard, and even successful ideas might not be sustainable. Failures are inevitable. Embracing them, learning from them, and iterating quickly are key. Failing in ways that provide valuable insights helps refine approaches and build better solutions in subsequent attempts.

14. Say No Turning down new income, especially during lean times, can be difficult, but saying no to work that isn’t a good fit can save from burnout in the long run. It's important to recognize when a project or client isn’t aligned with the business’s goals or values. Prioritizing long-term well-being over short-term gains prevents overcommitment and maintains quality.

15. Delay C-Level Hires Until $3M ARR Before reaching $3M ARR, versatile team members who can handle multiple roles are essential. C-level executives are a luxury that can wait. Early on, generalists willing to engage in various tasks provide the flexibility and adaptability needed without the overhead of specialized executives. This ensures resources are directed towards growth rather than administrative costs.

16. Don’t Hire Big Corporate Bureaucrats for Early Stages Avoid hiring the bureaucrat who oversaw a $500M division at a Fortune 100 company for the $0-$50M ARR phase. Instead, hire someone energetic, adaptable, and with a track record of success in scaling from the ground up. It's crucial to find individuals who have proven ability in the $0-100M arena, not those from ginormous behemoths. Many startups fail by hiring based on stature rather than relevant proven experience.

17. Monitor Your Burn Rate Burn rate should be understood as collections minus expenses, not just expenses minus income. Keeping a tight grip on cash flow is crucial. Mismanaging burn rate can quickly deplete resources and endanger the startup. Regular financial reviews and adjusting spending ensure sustainability. Vigilant monitoring of collections and expenses helps in making informed decisions about scaling and investments.

18. Master Cash Flow and Charge Upfront Charging customers upfront ensures liquidity and enhances cash flow stability. This allows for reinvestment in growth opportunities and better management of operational expenses. Upfront payments demonstrate confidence in the product or service and help maintain financial health, keeping the business agile and prepared for challenges.

19. Be Transparent About ARR If ARR isn’t genuinely recurring, it should be clearly defined. Transparency maintains trust with stakeholders. Misleading metrics can damage relationships with investors, employees, and customers. Being upfront about revenue streams and their reliability builds credibility and fosters long-term trust, essential as the startup grows. Platforms like beehiiv.com and RB2B set strong examples of transparency, sharing their financial metrics openly to build trust and accountability.

20. Walk Away from Bad Deals Avoiding bad term sheets, toxic actors, poor hires, and problematic customers is crucial. Regrets from bad decisions outweigh any temporary benefits. Maintaining high standards and not compromising out of desperation prevents resource drain, morale damage, and significant setbacks. Knowing when to walk away from unprofitable or misaligned decisions is key to long-term success.

21. Maintain Positive Momentum Post product-market fit, slowing down is detrimental. Talent leaves, customers grow dissatisfied, and the overall energy declines. Continuous innovation, customer engagement, and team motivation are essential to prevent stagnation. Regularly assessing and iterating on product offerings and business processes sustains growth and enthusiasm, keeping the team motivated and the market interested.

22. Don’t Argue with VCs If a VC passes on a startup, it's important to move on. Arguing won’t change their mind and will damage reputation. Focus should be on finding investors who believe in the vision and are excited about the opportunity. Handling rejection gracefully leaves the door open for future opportunities and builds a positive reputation with VCs, crucial for future funding rounds.

23. Work Smart (and sometimes hard) While enjoying the work is crucial, recognizing that it won’t always be easy is important. There will be times when extra effort and elbow grease are necessary. Working smart by leveraging skills and resources effectively while being prepared for hard work ensures success. Balancing enjoyment and hard work helps maintain long-term productivity and satisfaction.

24. Keep it Simple Avoid following trends and signing up for every new tool or app. More apps don’t mean more organization. Picking one or two options and using them to their full potential prevents overwhelm and maintains focus. Simplicity in operations helps in maintaining efficiency and clarity in business processes.

25. Slow Down Again (when things start to go well) Most company owners get overly excited when things start to go well and begin hiring more people and pouring resources into growth, which can backfire. It's crucial to wait and assess the situation carefully. Growth might plateau or dip, and over-expansion can lead to financial strain. Patience even during successful periods ensures sustainable growth.

26. Stay Home If employees’ work can be done remotely, office space may be an unnecessary expense. Avoid stressing workers with commutes and creating environments they resent. Studies show remote work can increase productivity and job satisfaction. Embracing remote work saves costs and boosts morale.

27. Keep Doors Open As the business grows, it becomes impossible to say "Yes" to everything, but maintaining relationships with established partners is important. Valuable working relationships should be nurtured even as the business expands. Recognizing that nothing lasts forever emphasizes the importance of maintaining strong connections for future opportunities.

28. Aim for Global Impact The startup’s purpose should be to make a massive global impact. Thinking big and striving to solve problems with wide-reaching implications attracts like-minded individuals and organizations, amplifying efforts and increasing chances of success. Aiming for global impact ensures the business stays focused on meaningful and significant goals.

29. Reinvent Continuously Growth demands constant reinvention. Adapting and improving continuously is crucial to avoid being overwhelmed. Staying curious, open to learning, and ready to pivot ensures relevance and competitiveness. Embracing feedback and being willing to change strategies, products, or even business models keeps the business dynamic and aligned with market needs.

30. Evolve Relationships As the business scales, so should the circle of mentors, advisors, and peers. Building a strong network that evolves with the business is crucial for continuous growth and support. Surrounding the business with individuals who challenge and provide valuable insights fosters growth. A robust support system is vital for navigating the complexities of scaling.

31. Embrace Anxiety Anxiety and fear are part of the journey. Accepting them as constant companions helps in staying vigilant and proactive. Acknowledging stress without letting it paralyze ensures productive actions that drive the business forward. Embracing anxiety allows for better preparation and resilience in facing challenges.

32. Grow Personally Running a startup will transform individuals involved. The urgency and values adopted will foster personal growth. Developing resilience, leadership skills, and a strong ethical foundation is essential. Balancing ambition with empathy and humility ensures becoming not just a successful entrepreneur but a well-rounded individual. Personal growth complements business success and ensures a fulfilling journey.