Successful Startup (Part 3)

Resuming today the entrepreneurship season (which will be interlacing with other topics from now on), let's briefly recap the two previous posts. The first one was about the entrepreneur and the three personal traits: passion, courage and perseverance, being a prerequisite to a success. In the second one I named the team as the most important piece of the puzzle, placing the team before the ideas, the products and the business models.

Today I want to write about the risks. The risks of the entrepreneur, he is willing to take with his courage and mitigate with his passion and perseverance. I am using a plural form, but in fact there is just one risk. The risk of failure.

The risk of failure has many faces.

Some are afraid they will be subject of jokes in the community. You should not. The act of engaging and creating a startup is itself the act of courage. After all you might have had a hot job and a chance to spend the bank loan on a new house. You left the job to starve, struggle and create. It is not (regrettably) what most would do.

Some are afraid of a financial loss. Which itself is bad indeed. But life is about becoming more than we are. And I have never heard of an eternally bankrupt entrepreneur. Yes in some extreme situations you may be forced to sell some of your assets, but just consider it a lesson you pay for. And it is a very good lesson, which will make you even better prepared to assault on the next summit. Remember, a startup is like Mount Everest. Sometimes even like K2. It is not uncommon to approach several times before the summit is reached. And even if you are forced to retreat, remember: the pain passes, but the beauty remains. And to quote Robert G. Ingersoll: "The greatest test of courage is to bear defeat without losing heart". I believe those who create startups have already passed this test of courage.

The real responsibility starts when you employ people. For me the biggest risk is breaking the promise I give to the team. I promise, you trust me. Almost like in The Little Prince, mutual ties are established. The team becomes your team. Weakening this bond of trust is the biggest risk I carry. Because, as I explained two weeks ago, the team counts the most - building a perfect team is the most difficult and delicate task. Which is getting easier when the mutual bond of trust gets stronger. But the same bond of trust can be impaired by actions considered harmless by many.

Finally the team can fall apart in one particular scenario. When you run out of money. Even temporarily. Yes, cash flow is the king in any business. You can survive with bad cash flow, when you are a freelancer. But being responsible for a team, never, never steer yourself in a situation when cash flow disturbances start engaging your brain, slowing the execution and affecting the others. The world is awash with money while great teams are probably the scarcest to find and most difficult and time consuming to assemble. Teams contribute the biggest value to the business. Unfortunately some investors do not understand this, often looking through a trellis of budget spreadsheet at the "headcount". Or just a sum of individuals. Which a real team is not. The value is in the ties among them.

Myself, I take the cash flow risk very seriously, meaning I always have a number of options and "plans B" ready. At this point it is extremely important your co-founders equally share the responsibility of this risk. If you are prepared sign your house as a collateral, make sure they are too. This is the ultimate test of the founding shareholders, make sure they all will pass. Otherwise you are alone and the burden you carry is even heavier. Careless treatment of a cash flow risk is like driving downhill a car in a dead ended tunnel, praying for the wall to disappear. You'd better find a turnaround early. Or at least make sure your brakes are working before you slam into the wall at full speed. But in the first place, never get yourself in such situation. Cruise in the open air and admire the views while you focus on your next steps.

At wiho.me, our pace was slow when we started. And believe me, it is just incredible how much we have gained over the year. Investing in the team and in the tools we are now an order of magnitude faster and more efficient. Everyday when I am in the office, my hair is being raised by the wind speed. The pedal is to the metal and we are still accelerating. Which, at this moment, is the most rewarding feeling I could dream of.