The one thing that you can guarantee at an early stage start-up is chaos. As the leader of a budding business, you take on huge risk, and commit yourself to a world of uncertainty and corporate mayhem. And that’s putting it politely. You leave behind your security and stability, and take a chance on building something big, something you can call your own, but something that is very fragile.
This cliff-edge existence is not for everyone. In fact, most people don’t have the nerve (or the insanity) for the erratic rollercoaster of start-up land. But the rewards can be colossal if you succeed. The tolerance for this risk, and the accompanying hunger for outsize returns, is what separates entrepreneurs from the rest of the pack.
Entrepreneurs are too often characterised for their greed and lavish lifestyles. What people often forget is the pain they’ve had to endure before they see any gains.
In start-up land, Murphy’s Law prevails: whatever can go wrong will go wrong. You thought you had enough investment; surprise, surprise, you’re running out of cash. You assumed you had secured your chief operating officer; well guess what – she’s been counter-offered and you’re back to square one. You believed your CTO was committed; oh no, he’s decided to leave to launch his own start-up. You were so close to securing that key customer; until they changed their mind and decided to go with a competitor. Start-up land is pitted with potholes; it’s a dark, dreary, crater filled place much like the far side of the moon.
The Survival Toolkit
Most entrepreneurs don’t make it through this initial rocky period. Some quit. Some never grow the courage and the conviction to jump into the uncertainty wholeheartedly. Sometimes, the founders realise they do not have a viable business model. Some pivot, while others fail fast and move on to their next project.
But those who do make it to the other side have learned, the hard way, the essential ‘survival toolkit’ of business. Cash flow must be managed meticulously. The leader must remain laser-focused on the plan, saying no more often than yes. With limited resources, the team must prioritise execution, realising that operations trumps lofty ideas. Fundraising is the life blood of a high growth business; those who do it well thrive, those who don’t perish. Most importantly, the calibre of people you attract will ultimately make the difference between winning and losing. A start-up’s human capital is the ultimate driver of success.
With this toolkit, a hardened entrepreneur emerges out of the start-up phase and is equipped to navigate the trenches of the growth phase.
Success is a Lousy Teacher
Bill Gates once said, ‘success is a lousy teacher. It seduces smart people into thinking they can’t lose.’
Fortunately, this adage doesn’t really apply to me. I’ve seen my fair share of failures. If I could one day write a business encyclopaedia, each of my failures would make up a chapter.
In the first business I founded, I became over reliant on one key client who stopped buying. This client-concentration risk was a huge mistake on my part and one that I paid for dearly. I have been part of teams where a key member has left, and the gap was hard to fill. I have invested in entrepreneurs who lacked the execution skills to fulfil their vision, and others who have quit before they had a chance to.
Navigating these challenges can be both physically and emotionally draining, but the rewards are there for those who are patient and stay in the game.
Entrepreneurs are people of great imagination. As soon as we think up an idea, we begin to imagine it in its fully functional state and we get excited. ‘When can you deliver this by?’ ‘Is there any way we can get there sooner?’
We then begin to race to the finish line and expect the results of our decisions to hit the bottom line almost immediately. When thinking of the big picture in this manner, we can often forget about the heavy lifting and the complexities we and our teams have to overcome to execute on these strategies. In these tumultuous early days, things usually get worse, and stay worse for a long time, until they finally start to get better.
Those with nerves of steel to stay in the game in the face of gruelling adversity will get through the obstacle course to reap the rewards. These rewards are usually a long way off, but when they finally come, they exceed our wildest imaginations. Bill Gates was on to something when he said, ‘we always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.’
Faisal Butt is the CEO of Spire Ventures, a property focused private equity boutique, and the Founder and Chairman of proptech venture capital firm Pi Labs.
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