“I currently run a startup that has big potential. There are lots of ways to grow within the company and learn new skills, so it’s great for the team? Several months ago we shifted to a new IP and I asked the team to move out of state for us if they wanted to continue with the company, and some did. Fast forward to today, and I have not been able to pay the last six weeks. I’ve offered ‘Profit Shares’, but since we are pre-revenue, it hasn’t done much to rally the team? I’m worried they’ll quit. What should I do to get them to hang in there?”
Earlier this week, I had a conversation with an owner of a startup who was desperate to keep his team together. He felt like he was on a breakthrough for his company, but knew that he was on the verge of losing his team.
His product had been slow to develop, and because of this, one of his funders had pulled a majority of their funding from the project.
He had a team of 15 – a mixture of part time and full time – with the majority who hadn’t been paid in 6 weeks.
This was a really frustrating conversation to be honest, and it’s because this owner was living on another planet.
There’s a trend in the startup community – it’s a trend that believes that using the term “startup” exonerates you from any responsibility to possess even the most basic requirements of a functional business.
I’ll note that I haven’t seen this trend happen in the bootstrapping world. Apparently when you put your own money up front, you operate a lot more carefully.
Outside of this, in the world of angel investors and venture capitalists, I’m finding that time and again there are a slew of “Startup Owners” who ignore even the most proven of fundamentals for business, and they usually force young, rising talent to bear the risk (and consequences).
If you run a new startup – let’s hit on some basics.
1) You still need a product that people want, and you need to get that product in their hands as fast as possible. It doesn’t matter how innovative you think your product is, how disruptive you think it is, or how cool the tech is. You need to offer what people want. Ever heard of an MVP? If your “pre-revenue phase” lasts well into 2020, you don’t have an MVP. You have a product bloated with feature creep. As the owner, your job is to steer the ship and keep the team focused on what’s most important to get your product into the hands of your users so you can validate as fast as possible.
2) You need to ignore your own ego. This deserves its own article. I found myself in a mild argument with an owner several weeks ago who was having internal drama over the valuation of the company, which he put at $2-3 million. This owner was blind to the basic dysfunction of his own business and kept pointing to this valuation to dismiss any legitimate criticisms of his business, even the ones coming from his own employees. Here’s the challenge I gave him: Stop talking about valuation when you don’t have a single customer yet.
3) Take Care of your People. Joining a startup is scary. It’s why the startup industry attracts more young entrepreneurial talent than any other when it comes to bringing on employees. It’s dishonest to bring on a highly inspirable dynamic of people – sell them on a massive vision for success – and then get them to agree to payments through equity or profit-shares. It’s downright shameful to do all of the above, ask them to move states for you, and then force them to worry about how to pay their rent because you’ve mismanaged the business so badly. Don’t put that on your team. They’re already sacrificing a lot for you, so pay them what they are worth.