Starting Up: Everything I would do differently this time around |

Starting Up: Everything I would do differently this time around

Posted by Luke Thomas

In a previous post on my personal website, I wrote a lengthy story about how Friday came to be. In this post, I'd like to share the most important lessons learned and what I would do differently if I started a company again.

Unlike the previous post, this will be less story-telling and more specific advice and recommendations I have.

1.) Don't believe the passive income lie

It's trendy these days to talk about passive income and how you can start a lifestyle business that prints money while you sleep. I see the YouTube ads for this all the time for this. Many "entrepreneurs" peddle this garbage as a way to sell an information product.

Don't believe it.

Sure, there are some businesses that are more hands-off than others (like a leveraged software product), but any relationship with a customer requires some level of time investment. If you don't build a relationship, they won't be a customer for long.

2.) Let the market pull, don't push

After working for a few startups over the course of my career, I learned that most startups try to brute force their product into the market, which frequently fails. I'd encourage you to let the market "pull" you towards venture funding vs. trying to force that model for your business, especially from day one.

From my perspective, this is why you see some great businesses die. They could have been an amazing business that grows 10%/year. There's nothing wrong with that, but it's not going to lead to the returns that the VC model requires.

For example, up here in Maine there's a need to create an easier way for Lobsterman to report to the government (right now it's a paper process). Is this VC-fundable? Nope. Could it be a great business that prints $10k/mo in revenue with minimal work? Yup.

The market will be the one to determine the size of your business.

3.) There are shades of gray (funding vs. bootstrapping)

There's a lot of discussion around bootstrapping vs. pursuing VC funding, but there are various shades of gray and nuance that should be considered. Just because you take venture funding doesn't mean you can't grow a business with solid unit economics.

There's a lot of variance here, like:

  • The partner and firm you work with - were they an operator in the past? Do they have first-hand experience of what it's like to be in the trenches?
  • How much you raise - I've seen competitors raise what I consider to be WAY too much money. The reality is that you could raise less and in theory, retain more control over the business.
  • Capital efficiency - I'm a big fan of profitable businesses and I want Friday to become profitable, but right now it's not. With that being said, it's possible to keep burn in check and keep things from getting out of hand.
  • Funding instruments - Alex Danco has a great post on venture debt. That's another tool in the toolbox that you could use as you grow.

4.) You need to be excited about the problem you solve

I've seen friends start "arbitrage" type businesses. It's not something they are passionate about. I think this unsustainable over a long-period of time, because the problem doesn't excite you in a material way.

As I mentioned in the previous post, there was a time when I bootstrapped Friday when I wasn't excited about who I was selling to (Human Resources). Now that Friday is a tool for distributed teams, I get much more excited about what I'm working on. We live the pain we are trying to solve everyday.

Additionally, eating your own dog-food (using your own product) can help you synthesis market feedback a bit quicker. Just make sure you prioritize customer feedback over your own.

5.) What makes you really, really different?

If you're looking for inspiration for product ideas, spend some time thinking about what makes you different than everyone else. What gives you an information/insight advantage compared to someone else in the market? Ideally, this should be scoped by a few variables. Here's my example:

  • I've worked remotely for ~6 years
  • I've worked for 3-4 different distributed companies, so I've seen what works and what doesn't
  • I was homeschooled growing up, which is terribly familiar to remote work (positives and negatives)
  • I've worked in product, marketing, and engineering teams - so I have a weird combination of skills
  • I've spent years working for product-led companies

If possible, your startup idea should leverage what makes you unique in the market.

6.) Funding can speed up learning

The reality is that funding (if used correctly) enables you to learn things faster as a business. It's a form of leverage. It's a tool in your toolbox.

As someone who loves learning new things (especially quickly), I find that this is a more natural fit for me. At least for this phase of the business.

Additionally, I have a monthly call with our investor. I've learned a ton of new things in a few short months. It's like a college class that I'm not paying for out of pocket.

7.) Spend all your energy looking for a "product hook"

David Sacks (investor and former CEO of Yammer) talks about the notion of a simple product hook. I think of this as a simple, repeatable behavior that your customer "hires" you to do for them.

If I started a new company tomorrow, all my energy would go towards looking for a simple product/behavioral hook. There's a natural inclination to layer on complexity and new features to try to solve this.

I could have tested out the product hook for Friday with Wufoo, Zapier, and Google Sheets in a few hours before investing time and energy into writing code.

The benefit to this approach is that this product hook can help you understand if your product will retain users. I strongly recommend watching this video:

8.) Build in motivational checkpoints

There are times when you will be excited to work on your company. There will be times when it will feel draining. Think of your motivation like gas. You need to go to the gas station and refuel at times, otherwise you run out

How do you do that?

The right answer depends on your business, but I've found that regular customer communication gives me motivation to continue to work and improve the product. Specifically, jump on a phone call or Zoom to really unpack things.

Other motivational checkpoints could be product launches or new features being released. Consider how you might be able to stagger these so you keep refueling the "motivation tank."

Also, there are times to stop working and go hang out with family. That's another source of motivation for me. I'd like to provide for them!

9.) Entrepreneurship is a lonely road

Our investor recently made a comment and it went something like this, "entrepreneurship is a lonely road. You should regularly meet up with founders and people who you can confide in."

I didn't realize how tough it would be to work on Friday on the side for three years. Being a solo-entrepreneur sounds cool at a high-level, but I've found human interaction to be critical. This could be with fellow founders, but also the people you work with. As Naval says, "play long term games with long-term people"

If the only reason you are an solopreneur is because you don't want to work with others (or give up equity), I'd argue that's not a good reason. Sure, it takes work to work well with others. But I think the reward is worth it.

10.) Pivots = Organizational Thrashing

The bigger your company gets, the tougher it will be to pivot. I can't imagine trying to pivot Friday if we had a bunch of full-time employees, hundreds of customers, etc.

Rebuilding our product was tough enough with a small customer-base. It took months of coordination and over-communicating. If you'd like to prevent organizational thrashing, keep the team as small as possible while you search for the product hook and business opportunity.

This can also help you be more capital efficient.

11.) Distribution is your toughest challenge

The toughest part about building your own startup is distribution (customer acquisition). This applies to your side project as well as a VC-backed company.

How do you cut through the noise? There's so many tools and solutions out there. If you are building a software company, you could be competing with people all over the world.

There's a few approaches you could take:

  • Pursue a niche where there's not as much competition. I should have pursued a very narrow target market where the pain is really strong from day one. Originally, I built Friday as a tool for managers, which was a terrible target market.
  • Consider tapping into existing audiences. For example, you could built your project in someone else's app store (Shopify or another marketplace). We gain new customers through our Slack integration. That can help you jumpstart distribution. Just know, it also creates platform risk.

For anyone considering SEO + content marketing, I'd recommend it. The downside is that it takes quite a bit of effort and investment to do this correctly. You can't write posts and magically start ranking for the keywords you want.

12.) Be thoughtful about how your business impacts your family

I started Friday when I was 25 (before my wife and I had children). I didn't consider the potential ramifications it might have on our family in the future, especially with a newborn son.

The beauty of entrepreneurship is that you can "be your own boss." This can be a blessing and a curse. You might work too much.

I really enjoy what I'm doing, but I have to set boundaries. In the past, I would work all the time. Now, I try to prioritize my work at different times in the day. For example, I will wake up early and get work done before everyone wakes up. Then, I feel more comfortable about taking a break and hanging out with family. 

I guess what I'm trying to say is - put your family first. They will probably be around longer than your business :)

13.) What does success look like to you?

I grew up in a blue-collar family. We didn't have nice cars. I lived in a trailer with my siblings for most of my childhood. This upbringing taught me that I don't need material possessions to be happy and fulfilled. I don't need a massive outcome for Friday. I don't need to be written about in all the tech publications to feel happy.

With that being said, I really want to build a meaningful product that's used by as many people as possible. I want to to make remote work prevalent. I want opportunity to exist no matter where you live. I don't want to have to live in a city to work on something interesting. 

To use a baseball analogy, I want to hit a home run. I didn't raise funding to bunt or hit a single.

As you think about your business, what does success look like for you? There is no "right" answer.

14.) Frugality + Personal Burn

If you want to build a business in the future, I'd encourage you to lower your personal burn rate and/or start saving up NOW. I was able to take a pretty big pay cut when I started working on Friday because we have been frugal for many years.

Our lifestyle has barely changed - it's nice to not worry about personal finances while also trying to grow a business.

I also never paid myself from Friday revenue. Everything went back into the business. If I had pocketed the income, it might have been tougher to make the transition.

15.) Solve a quantifiable business problem

You can dramatically speed up your sales cycle if you solve a burning business need, especially if this can be quantified. For example, a business that makes a company $500 in revenue but costs $50 may be a no brainer.

At Friday, we started trying to help companies improve "employee engagement", which was nearly impossible to quantify. I would not recommend it!

16.) Don't just sell to your friends

In the early days, it's easy to ask your friends/connections to use whatever you are building. I certainly wouldn't shy away from this, but you never really know if you'd built something useful until you can acquire a customer who you don't know.

For me, this was the manufacturing company in Illinois. That sends a strong signal that you've built something interesting. Selling a product to your friends can frequently mask the realities of what the market things.

17.) Consider who you sell to as much as what you sell

It was pretty great from a revenue perspective to close a $35k/year customer. But it also created new complexities as they were quite a bit bigger than other customers. This meant we couldn't focus as much on the smaller businesses/teams. We also had to move slower than before.

Be very thoughtful about when you move upmarket. Focus is critical in the early days. Speed is key.

18.) Your best weapon is speed (within reason)

The #1 benefit of a young company is the ability to move quickly. If you aren't leveraging this, you are shooting yourself in the foot.

With that being said, it's worth investing and creating a stable core. Make sure the core experience is reliable and move quickly around the edges. This was a mistake I made in the past.

Wrapping up

This is my best advice so far. I will try to keep this updated as I learn new things. Entrepreneurship is tough, but I've never had more fun in my life.

I can't imagine going back to work for someone else :)

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