Startup Truths

Happy Wednesday Friends,

It’s all unicorns dancing on rainbows with pots of gold at the end. Overnight success happens all the time. People are making millions. There are pool tables, unlimited snacks and top-of-the-range Mac books for everyone.

This is the wonderful world of startups that social media and the press will have you believe. But, that’s the Instagram version. Reality is a different ball game.

I tried to start my first business in 2006/2007. Way before I knew anything about Silicon Valley or the word startup wasn’t in my vocabulary. But, I can tell you the same challenges I faced back then are almost identical to the ones most startup founders face today.

Startups are hard. Every day feels like you’re DEEP in the trenches. It’s sweaty and there is often chaos all around you. I’ve worked in 5+ startups and run one as CEO. Most companies from early stage to pre-series B have similar issues. Let’s not powder-coat them, that’s not what I’m about.

I’ve learned some powerful lessons over the past decade, let me share a few with you.

The less they pay, the quicker they churn

Generally, the lower your price point in the market, the more price-sensitive and demanding the customer. It’s a strange paradox but higher prices bring with it perceived higher value and also ownership. Low prices may bring more volume to the top of your funnel but the quality of those customers will be lower.

You’re always making trade-offs.

Free will cost you more

A sub of the first truth. When you start there is a desire to get your first few customers at any cost. Or, lack of cost to be specific. I’ve been there, you want to close the deal, but they’re unsure so you offer them the product for free. They sign then and there. Winning! So, you do that for the first few. You even start storyboarding offering a freemium version.

Don’t!
Again, you may get more customers in the top of your funnel but, your customer retention rates will drop. You want quality over quantity in B2B. If customers don’t have skin in the game they don’t ever fully commit to your offering. 

If they don’t pay in the beginning, they probably will never pay.

Scaling problems are unpredictable.

We were ecstatic to sign a deal with 75 venues going live at once. But, we weren’t ready for the chaos. What you can do in single digits is very different to what you can do in double digits or triple.

The worst part is that the problems that arose were not ones we could have foreseen or planned for.

The key lesson here is to know that there will be challenges at every step of the way when you’re scaling. Each time you climb one mountain there’ll be another waiting for you that is different from the first. Keep a level head and use systems to help as you scale.

In B2B referrals are your most powerful tool

Unless you’re playing in the project management or CRM space, the odds are your product is new to the market you’re trying to help. The good part is that there are very few competitors, if any. The bad part is that your potential customers aren’t aware they need what you’re selling.

In the beginning, use your Customer Success teams to leverage the relationships they’re building and get referrals. Not only from the decision-makers but from any user of your product. 

Warm leads and referrals are always better than the ones straight out the freezer.

Most marketing doesn’t move the needle

We did campaigns where we’d spend weeks building them out. Then we did campaigns that we threw together in a few days. They’d get pretty much similar results. The takeaway here is that you shouldn’t overthink your campaigns in the early days. 

Think about it more holistically. The consistent exposure over time is what will generate interest and results.

The whole company owns Churn

Many startups will blame Customer Success for churn. Some will blame Sales for closing the wrong customers. Both are correct and incorrect at the same time.

The entire company must own churn. When a customer churns, and they will, their reason for leaving will most likely touch every part of your company. From marketing to sales, to onboarding to product. 

If every department cares about churn every department can contribute to decreasing churn.

Don’t throw humans at every problem

As our business grew so did the problems we faced. The easiest “quick fix” is to hire, hire hire. “We can avoid that if we just hire someone to own it,” I cannot count the number of times I’ve heard business owners use that phrase. It’s often the wrong reason to hire.

Look at your systems and processes. Review your current roles and their output capacity. Try and solve the problem using tech and common sense first before increasing your spend.

Investors are not coming to save you - save yourself

It’s become so common that all startups will inevitably raise money. Or have to raise money. And for a lot, this may be the case. But, the reality now in 2024 is very different to the peak of 2020. The days when pre-product startups could raise $1M on just an idea are over. If you don’t have customers and a path to profitability you’re likely going to fail.

Let customers fund your growth. That’s how good, old-school businesses used to work. It may be a slower start but you’ll be able to play the long game.

Then, if you want help growing from $5M-$10M venture capital is a good option for a small piece of your pie.

Peace, love & growth,
Jarren

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