What are the top assumptions that people have about entrepreneurship that are incorrect?
A few learnings for me, of things that aren’t “correct”:
- Almost all start-ups fail. While the raw numbers do prove this out, at least in SaaS, I’ve found that almost no (x) great founders that (y) get to even $10k a month in revenue ever fail. No SaaS company I’ve yet invested in, including the pre-revenue ones, has failed and none of the CEOs I started back-in-the-day with failed. Some may not make their investors any/much money — but that’s different.
- You have to start as a rocketship. I do think it’s very important how fast you grow after $1m in ARR. But it turns out it doesn’t really matter how long it takes you to get there, as long as you remain all-in once you get there.
- Capital raised = success. Don’t get distracted by who is raising how much. I went cash-flow positive at $4m in ARR. One of my best investments got to $50m without burning much at all. Another just had a strong cash-flow positive quarter at eight figures in ARR. A big venture round does suggest something good is going on over there. But a lack of one suggests nothing dispositive.
- Stanford / YC / Famous Angels / ex-Xooglers / whatever is so important. There are certain markers that do correlate to an outsized number of startup success stories. But as a founder — ignore that. Steve Jobs went to Reed College and couldn’t really program. Elon Musk had some background in supercapacitors, but never built electric cars or rockets. I have no idea where any of the founders I’ve invested in went to college. I’ve invested in great YC companies, and yes, it’s a clear sign of super smart and super driven founders. But I’ve also invested in great companies that built themselves from nothing, with zero social proof. There are patterns, but there is no single path to success. And when you are building an outlier anyway — who cares. Outliers by definition are different.
- VCs are Stupid / Overpay. Be careful here. You can mock VC firm XYZ for investing in some startup, or paying too high a price, or whatever. But most VCs know what they are doing. They are taking calculated risks. If they just invested in your “stupid” competitor — try to learn why. If you can’t get funded, but they can, that doesn’t make you “worse”. But try to learn why. Yes, VCs are pattern matchers. But they also invest in a lot of really, really good companies. It’s not all luck. Don’t dismiss. Instead — learn.
- She/he was such a great CEO in the beginning. None of us were. But we learn. And most importantly, we recruit great teams. Teams that are “better” than we are. That really make us great. If you can recruit a great team, you can be mediocre at a lot of specific things.
Published on July 6, 2017