Design by Artis Briedis
You can most certainly call yourself an expert in startups after you have gained first-hand experience from building a unicorn (Airbnb, in Gustaf’s case). But how should we call a person who, as a general partner at Y Combinator (a startup accelerator and venture capital investment firm), has mentored more than 600 startup companies while they are going through the program?
Gustaf’s experience already amounts to a statistically significant sample that provides extra credibility to his views and conclusions.
Here are my three takeaways after watching Gustaf’s interview on Lenny’s Podcast which is available on YouTube:
Lesson #1
There is no magic crystal ball to tell which startups will succeed and which not. It is not possible to tell who the winners are going to be when making investment decisions at an early stage. But those who succeed indeed share some attributes that could be spotted and provide at least minimal guidance.
The personality traits of the founders are perhaps the area to look most carefully at. Usually, the winners demonstrate a super-strong determination to win, a refusal to give up in the face of difficulties and, most importantly, an internal motivation that is so powerful that it becomes infectious.
The best founders are usually technical. The more technical they are, the more successful they turn out to be (more on that below). Meanwhile, their ability to be excellent communicators who love story-telling is as important as their tech skills. You have to be good at both.
And, finally, most of the multi-billion businesses are built on an outlier idea – an idea that doesn’t make sense, doesn’t appear logical and doesn’t look like the next step the world is about to take. Initially, most people were laughing at Airbnb and their idea, weren’t they?
Lesson #2
Most startups fail because of not talking to their customers or users. Being accepted into an acceleration program or receiving venture capital investment creates the comfort of having achieved external validation. However, this could be misleading. Startups fail to achieve a proper product-market fit because they do not receive validation from future customers. About 90% of potential customers are not early adopters; finding those remaining 10% requires hard work and willingness to talk to them.
You may not always rely only on what the customers are telling you about their pain points. There are cases when they don’t even recognise that the pain is there. You will get a much better understanding by watching the customers using your product or service or, if possible when trying it out yourself.
Lesson #3
Another, maybe a lesser-known reason for the startup failure, is the absence of a tech cofounder on the team. In many cases, such companies fail even to get their first prototype ready.
Some startups try to solve this lack of tech skills either by employment or by contracting with a service provider. However, so many decisions to be made are technical. And too many product iterations rely on engineering to make this approach feasible. The sooner the founders understand the need for and the value of a tech cofounder, the better for the company. Some non-technical founders have even taken up learning programming themselves. They do not aim to become world-class programmers but rather to have a better understanding of the tech aspects of the product.
And, as a final note, Gustaf thinks that for early-stage startups strategy doesn’t matter. It is the execution that is important. When someone tries to turn any discussion into a strategy debate it signals a lack of understanding of what the real priorities are.
For those willing to try and pick top lessons of their own here is the link to the video.
* from anything that you are reading, watching or hearing you can realistically expect to remember only a limited number of things. My solution is to pick just 3 items or ideas from any material. This number is non-negotiable. Even the most extraordinary experience gets compressed into 3 things to remember. This approach has worked well for me.
This note was first published on medium.com on 25 October 2024.
Aivars Jurcans has more than 20 years of corporate finance and investment banking experience. His services are currently available through Murinus Advisers. More of his writings can be found on his page Corporate Financier’s Notes.
