the 5 biggest mistakes i made as a first-time startup founder
June 4, 2019, was intended to be a remarkably joyful occasion for me.
At 11:30 a.m., a public announcement was distributed detailing the acquisition of the cybersecurity firm I had dedicated over eight years to developing, by a more substantial organization in the cybersecurity sector.
What could be unfavorable about a prosperous outcome? I would achieve financial security, the investors who contributed $70 million would realize a return, and the technology we developed would be revitalized within a larger, better-equipped entity.
However, I did experience some remorse. Initially, I had not been inclined to pursue a sale. (Further details will follow.) Additionally, I was troubled by the sense that our company hadn't fully realized its capabilities, and I attributed this to my own inexperience – specifically, a number of beginner errors made as a first-time business owner.
I no longer dwell on those mistakes. In reality, I am confident that the missteps I made at my initial startup will be instrumental in shaping my future endeavors. Consequently, as I develop my next venture, I am considering not only the actions I intend to take but also those I will definitively avoid repeating.
Here are five of those things.
Attempting to Handle Everything Independently
From a management perspective, my approach resembled that of a “pacesetter.” I consistently volunteered for any project or assignment, completed it with maximum speed, and anticipated the same level of performance from my colleagues. I believed this was the expected behavior for a startup’s leader – highly proactive and resourceful.
However, this approach resulted in a significant drawback: a lack of team empowerment. I wasn’t just centralizing authority – team members didn’t feel a sense of individual responsibility – but also retaining crucial information that should have been distributed throughout the organization as it expanded. I unintentionally functioned as a central point of direction; people relied on my guidance but found it difficult to navigate challenges independently. This hindered the development of original thought.
Eventually, I found myself with the disheartening feeling that I possessed all the solutions while others did not. In retrospect, this outcome was predictable.
I have since decided to reserve the pacesetting style for competitive events like NASCAR races and marathons.
The Assumption That Others Share Your Understanding
I used to operate under the assumption that a single explanation would be sufficient for everyone to grasp a concept. This led to frustration when my message wasn't immediately understood. I would often express my annoyance, stating something along the lines of, “This was discussed months ago.” Team members, feeling hesitant to speak up, would internally acknowledge that they had only absorbed a portion of the information.
Even a successful innovator like Steve Jobs occasionally exhibited this tendency. However, it’s typically not a productive approach to leadership or team encouragement, particularly within fast-paced work environments. Through experience, I’ve discovered the power of reiteration. Now, I routinely communicate key points three or four times, and then reinforce them with written documentation to eliminate any ambiguity when a company is operating at a rapid pace.
Mistaking Initial Gains for Sustained Growth
During the initial phase of our company, we benefited from having a distinct segment within the cybersecurity industry all to ourselves. Our solution effectively addressed a key customer challenge – the threat of harmful bot attacks – in a manner unmatched by other providers. As a result, the company experienced a tripling of revenue over its first three years. We were achieving remarkable progress!
However, new competitors emerged offering a comparable product that proved simpler to implement and operate. Having previously enjoyed success with early adopters who demonstrated greater tolerance for product imperfections, we encountered difficulties securing agreements with the broader customer base essential for continued expansion.
Our oversight stemmed from a failure to recognize that product-market alignment is subject to change. Lulled into complacency by our initial achievements, we neglected to proactively assess potential shifts in the market landscape. The key takeaway: It’s vital to consistently develop a forward-looking understanding of customer needs, regardless of current circumstances. I should have heeded the advice of renowned investor Brad Feld – understanding that the pursuit of improved product/market fit is an ongoing, perpetual process.
The Pitfalls of Excessive Frugality
I’ve always believed that successful new businesses are also characterized by careful spending. To manage our costs effectively, we implemented numerous policies, and looking back, some of these appear quite unreasonable.
For instance, we restricted the quantity of branded T-shirts provided to our team members without charge, despite the relatively low cost of such promotional items and their potential to serve as complimentary marketing. (This unexpectedly created dissatisfaction among staff, who perceived the restriction as being overly economical.)
Another example was our practice of supplying employees exclusively with pre-owned laptops. After a couple of years of utilizing a laptop that was already several years old, our engineering team voiced concerns regarding its diminished speed. Consequently, in an effort to save a modest amount of money, we were inadvertently diminishing overall efficiency.
That approach is no longer in place. At my current organization, developers are pleased to find that we cover the cost of any laptop they choose. I remain attentive to financial performance, but I now prioritize a sensible balance.
Overworking
My colleagues on the leadership team and I routinely dedicated twelve-hour days, every day of the week, to our work. This practice extended to numerous other team members, who also found themselves working similarly long hours. I readily communicated via email, text message, or instant messaging at all hours, including nights and weekends. As is common with many new businesses, exceptionally long working hours were considered a standard expectation.
Although we achieved significant progress during the initial two years, employee burnout began to occur around the third year. We experienced the departure of several valuable employees. However, the consequences extended beyond personnel losses. As previously mentioned, I initially resisted the idea of selling the company, believing we had substantial potential for continued growth as an independent entity. Some of our investors, however, favored a sale. Ultimately, the decision rested with my co-founders and the management team, who informed me that they were also experiencing burnout and were receptive to an exit. I believe that establishing a more sustainable work rhythm for the team would have enabled us to maintain our efforts for a longer period.
Currently, we require employees to utilize their vacation time. We now recognize that constructing a thriving company is a long-term endeavor, not a short-term race, and I am determined to prevent any further resignations from talented individuals due to excessive workload. I personally disconnect completely on weekends. Maintaining my own well-being is crucial, and it’s also vital for me to be fully engaged with my wife and children, particularly given the current circumstances.
As demonstrated by these five experiences, first-time entrepreneurs inevitably encounter significant challenges. In my opinion, the hallmark of a seasoned entrepreneur lies in their capacity to identify these errors and adjust their approach accordingly.