Ask the Wizard

There is an old saying that the Military always fights the last war, and I think the same holds true in many respects for entrepreneurs. Armed with "lessons learned" from the last endeavor, successful or not, entrepreneurs dive into the next effort reminding themselves to make sure they don't XYZ this time. This is one of the reasons I like having a Board of Directors, as the board can act as a rudder in many ways, making sure you don't veer too far off course in your effort not to repeat past mistakes.

Two companies ago, we all felt we hired a sales executive too soon, and in our last company, Spyonit, determined not to ramp sales until it was time, we waited too long. After feeling like too many enterprise software deals slowed us down in a previous company, we entered FeedBurner with the mantra "no enterprise deals". I can think of countless examples.

None of this is to say that these lessons learned are necessarily bad or wrong, they're just the lessons that might be more aptly applied to restarting the previous company, not necessarily the right lessons for this new company in this new environment in this different economy. This is one of the great challenges in providing advice to entrepreneurs and startups. You might be very good at helping them build version 2.0 of the company you just built, but the advice may be wholly inappropriate to what anybody else is getting ready to do.

Are there any lessons we've learned that I think are appropriate to any new company? Yes, I can think of a couple right off the bat.....and after another twenty minutes I thought of a third.....I still wonder whether these are truly appropriate to any new company or just abstractions that make sense for a certain class of companies, but what the heck, here they are:

Lesson One: At some point in the company's first two years, the executive team needs to become passionate about revenue. This may seem obvious to the point of inviting ridicule, but there's a difference between "concerned about revenue" and "passionate about revenue".. In the first year or two of the company's life, the passion has to be almost single-minded around the product or service. There is then a transition in which the management team needs to *also* become passionate about the customer, and then finally *also* passionate about revenue. Some people are revenue animals and some aren't. If you're founding a company and you're not a revenue animal, then you need to understand that you should bring somebody in to run the company who is a revenue animal at some point. It's no fun trying to run a company as CEO if you're passionate about the product but you wish the Board would stop freaking out just because you missed the numbers last quarter. If the executive team is only concerned about revenue, that's not good enough.

Lesson Two: It is easier to not start spending one new dollar in expenses this month than it is to stop spending one existing dollar of expenses next month. This is true for travel, infrastructure, marketing, development tools, web services like salesforce.com, on and on. If you engender a strong sense of capital efficiency in the company, it's much easier to KEEP spending under control than it is to GET spending under control.

Lesson Three: Goals, not competitors. When you focus on your company's goals, you are focusing on something you have control over, you make strong decisions, and everybody knows what success looks like. When you obsess about your competitors, you are focusing on something over which you don't have control, you make bad decisions, and nobody is sure what success looks like, since the company's actions are in reaction to a third party. Being fiercely competitive is fine, you can hate that your competitors are performing better than you, and you can be hyper-paranoid about what might happen to your business, but the best way to compete in the market is to focus on those things you can strive toward independent of what anybody else does. While this point may sound like motherhood and apple pie, in reality, it can be extremely challenging because everybody else (the media, your mom, customers, vendors, etc.) are looking at the landscape and constantly commenting that X is doing this and you're not, or X is gaining market share from you, etc. So, clearly some part of creating goals is going to be based in market realities, and some part of market realities is going to be driven by existing and emergent competitors. Nonetheless, I am confident that nobody understands where or when their ultimate competition will emerge, and by obsessing about existing competitors instead of clearly defined goals, you make it that much easier for the unforeseen competitor to swoop in and bonk you in the head with the Mallet of Justice(tm).