Mistakes we made in our company’s first 8 years

https://hackernoon.com/8-mistakes-we-made-in-our-companys-first-8-years-3d38422333b

by brennanm • 8 years ago

231 81 8 years ago

smartplaya2001• 8 years ago

I think in our startup we are at the part where we are making all kinds of mistakes. We are Starting our third year next month however we are still making mistakes.

sarreph• 8 years ago

This is a really insightful article. However, I feel like point 2 somewhat contradicts point 1. I.e. In my opinion, being product-driven often forces you to innovate in some way. I guess there is a balance to be struck here and in the end it comes down to feedback-loops from customers directly rather than pondering over what they may want to use.

ENGNR• 8 years ago

I think he was saying evolution rather than revolution is a better business strategy, when bootstrapping at least

brennanm16• 8 years ago

Ooo, I like that! I’ll use that phrasing next time

lifeisstillgood• 8 years ago

>> ... in purchasing SoapBox for the entire company. They’re an old school business. 500M Revenue and 23 people.

Err, wow. that's 20M per employee ... I am astounded - is that real? 100,000 to 300,000 is common in consultancy style services, I mean even Google has ~100k people on ~100bn which is 1M per person

So really 20M per employee is stupidly "out there".

# google numbers - yeah ok I mean Alphabet, but more accurately 90k people vs 110bn but few years ago it was 40k vs 50bn so not changed much - ratio of about 1.1M per seems consistent - and Google is rinsing the productivity making the 23 people at 500M seem even more ridiculous. Maybe some obscure fintech? maybe big revenue low income? would love to know more

ithinkinstereo• 8 years ago

1MM+ per employee is common in some industries; finance and energy being two examples.

tomerico• 8 years ago

In Energy the number is missing the huge amount of temp workers that the industry tends to have

sheepmullet• 8 years ago

100,000 to 300,000 is common in consultancy style services

Sure - it’s a very different business model. It’s far easier to put more people on the project than convince clients to pay more for top talent.

I mean even Google has ~100k people on ~100bn which is 1M per person

And how many of those people contribute directly to Googles main revenue source? Only a tiny fraction.

Google is not optimizing for max revenue per employee.

anuragbiyani• 8 years ago

It all depends. Instagram was ~13 employees when bought at $1B. WhatsApp was like ~30-40 employees and bought at $19B.

shanghaiaway• 8 years ago

Neither had revenue so it is not comparable.

brianwawok• 8 years ago

That isn't that crazy though.

Hedge funds can make 100s of millions per employee.

I suspect Google COULD make much more per employee. But by 10xing their staff as they have over their last few years, they can maybe 1.5x their revenue. Sounds bad, but at the end of the day it is still a lot more profit.

davidgh• 8 years ago

I agree it would be interesting to know more.

Top line revenue is difficult to compare across companies in different industries. The top line revenue at a small car dealership may be much higher than a similarly-sized software company, but the margins on that top line revenue are grossly different.

brennanm16• 8 years ago

Yeah topline revenue in this business was not how most businesses here look at revenue.

Also it was the ceo telling me. He could have lied.

The margins were very very different

rabidrat• 8 years ago

Revenue, not profit. Their margins might be very slim.

avinium• 8 years ago

Usually these articles are nothing but fluff, but this was an interesting one.

I realize that's (ironically) a fairly empty statement to make, but I'm sure the author will be pleased to hear it.

brennanm16• 8 years ago

Thanks!

jldugger• 8 years ago

I'm reminded of the story of Abe Wald: https://medium.com/@penguinpress/an-excerpt-from-how-not-to-...

He ran a statistics office during WW2, and collected data on surviving airplanes. To paraphrase his findings: reinforcements don't go where the bullet holes are. They go where the bullet holes _aren’t_.

Similarly, when none of these mistakes killed the company, so to the extent that all companies are the same model of airplane flying in unfriendly skies, they shouldn't consider these mistakes necessarily existential.

soneca• 8 years ago

Nice observation. Now that you said it, I agree with you

rwallace• 8 years ago

Very good point! But keep in mind one difference: unlike crashed planes, crashed companies tend to leave survivors who can tell the tale.

So maybe read post-mortems of failed companies - and worry most about the reported mistakes that do not also show up in post-mortems of successful companies.

rhizome• 8 years ago

I wonder what's the incidence of non-disparagement/disclosure clauses in severance packages.

jaclaz• 8 years ago

I am not sure to understand, a successful company won't normally have a post-mortem.

antibes• 8 years ago

company failure survivors are not automatically the most reliable and neutral witnesses, of course. I was just reading the self evaluation reports of some top traders at Goldman Sachs in 2007. I am not disparaging individuals, merely to assess failure you need proximity and neutrality. I filled that gap with research and technical writing staff on rotation and with management prospects. Co appointments of sales and research worked out well because the research co manager's experience interested them around the company resulting in a lookout and balance to customer focus partners, no inherent conflict of interest or territory, and the value of watching out for one another was the payoff. I pulled a similar arrangement together between program managers and lead developers, to get a short path between realism for delivery and the product performance. Someone narrowly focused on sequential tasks with someone who multi tasks and I guess this was somewhat inspired by Isiah Berlin'sHedgehog and the Fox.

has there ever been any earnest blog or reporting in failed startups?

because I was driven to start my own company by a formative experience of being day by day taught whst was falling apart by my new friend who had started a year before me, coming from a major accountancy to switch to a sales role where he certainly made the best financial decision of his lice about then... I was giftedblow by blow analyses of the way rumours and signs would work their way through the quarterly public filibfs until the final audit couldn't be fiddled, but conveniently ibtra company trabsfer pricing eas holding up the booked revenue, but given away by a miscrepancy in Advance Corporation Tax the subsidiary had negoriated downwards in anticipation and need to preserve cash. (ACT in the UK was 35% iirc payable in advance on the Inland Revenue estimated income for your following year. This was a major reason why so many new companies failed at 18 months, when new registrations had to file. Naturally much more involved than that but that's a reasonable actual narrative that was in force into 1984, when our company shares first caught the shirt selling attention.)

No surprise that I started out heavy on finance brainpower. And sold to the private sale limit, short dated high yield puttable (by us) convertible notes against a collateral pool of sales revenues. Crude engineering, but it prevented wild guesswork to value equity we badly needed to not be all over the chart and troubling a knowledgeable staff who were deferring commissions for equity that we could afford because of the larger debt financing and the fact we had tgat secured only on buv corporate receivables and not the company itself, and we had no problems servicing the notes because we weren't paying sales at high gross commissions, a major cashflow enhancement and the equity compensation for sales worked out a ib dbyive nearly yoo successful.

but really while reverse engineering of opaque balance sheets is interesting, I find more ready clues in the organisation behaviour,if i can get a close feel of a company. I really must dug out my old notes, we applied the similar analysis for evaluating the strength of the sakes for competing but indirect rivals we could do business for where we had clients or domain knowledge advantage. Understanding the coherency of a small company is essential to make a credit assessment. I was raised by a great depression era banker father, who, decades before credit scoring, cyt mortgages to families by beubg a kind of nisey home inspector, attuned to a myruad vkues to the steadiness of the their home life. I can never forget his telling me how he ratted out a nasty wife beater, the pantry and stoop was just too scrubbed. He figured she was under pressure to make sure that house looked good to get the deal. Pop was having nibe of that ruse. He guessed right tvat the husband was deadbeat putting on his wife every last chore a man would normally do, chopping firewood even. Turned out the husband was in debt from gambling. This was enough to force him to agree a divorce, back when a husband could put up some nasty fight against almost any reason why he was no good. This was a company town and my pop got the house re let to the wife and sent her her husband's alimony, who they put on some truck crew to get him gone. I wish I had recorded his stories, he was 94 in 2001 when he passed, and had seen i still reckon all the most significant economic mobes in the century. I tried out telesales to see if you can find clues like pop did. Thrbs out you can. I don't mean high pressure tricks. I mean the proportion of business lost by reps not tuning in to the customer and heeding buying signals, is the difference between living and thriving without any kind of pressure that could pass on to aby customer.

Biggest mistake I see almost every time?

Not bringing enough strength to sales. Hire more don't arm twist more. Call back more. Get dedicated researchers for customer leads and customer needs. Get a Bloomberg terminal, the news and business research is indispensable and ridiculous value everything's included you can think of. (plus being reachable at Bloomberg's domain doesn't harm your impression to investors and banks. I used to have to buy annual Gales Information b directories at five thousand dollars a copy.. the Bloomberg is stacks of those... Oh, hire a female sales manager. And get her a really good secretary. Ask any woman to report what she sees amiss on any sales floor and you are about to learn a lot. She needs a secretary to help process all that I don't mean any condescension whatsoever, this is a critical role, few women like confrontation, so give her a assistant able to write up her analyses. Make this open save clearly sensitive to employment statue stuff. I tracked who read what abd correlated with sales figures and got a targeted research team under our manager. Nobody even thought about why their lead folders just kept up delivering the prospects ready to buy. Come bonus time our manager could point to directly knowing how much each rep sold more with her oversight and support, before handing out the biggest checks yet. From concern if she might be losing authority to being worshipped by men she enriched, never a question she was a sales Goddess and without lifting a phone or making a pitch, but she had every little detail and everyone's back. Just like the programmer who needs a bigger workstation to be in his zone more, leading by providing is the easiest and most enduring way I know. When i was just me instead of selling solo I advertised for a salesman offering guaranteed full time research assistant. me. Cost less salary because more sales done.

if course, once you get serious about learning from failure, you aqui hire failing companies. You claim it's for some IP and goodwill but really your just want all the internal emails to study. This is a great pity for the academic learning of business, but I know no better advice to pursue if you can. Having tax loss offsets to protect your own revenue, is the financial engineering side this is active trading. There's a assortment of ways to make swaps of shares held in the bust company by departed or departing staff, which can make you a gift of a golden hello incentive to get the people you want to return. I feel like I'm giving my life secrets aeay because i had to learn for myself, but this is routine stuff in bigger companies. In my domain, acting like a multinational was just the prerequisite for being able to offer a competitive price. It's not insanely expensive. A confident young qualified accountant given a research assistant and a private library budget is as good as the most prestigious consultants, in my experience. Consider the ages of Investment banking teams and top accounting firms consultants and compare the backup they get. Just as it costs, well in the early nineties a bond salesman cost about half a million dollars to support, the support is all important. If you can get to your destination with the right information, buy it for whose career will be transformed by the opportunity to use their equally capable minds. I am always despite having long experience to the contrary, surprised how little"information age" firms spend on information. The first information i purchase is up to date tax manuals. Find out what you don't need to pay or can reclaim as first duty of every monthly rules release.

I hope this wasn't too off the wall but I have been able to trap myself in a horrible mess before, by only thinking about how software production management needs to work, and neglecting the corporate stuff. Frankly, sakes and tax run as tight as is possible is a frighteningly sharp edge to carry to the marketplace. I hope I have been helpful somehow in my ramblings.

brennanm16• 8 years ago

Love it! I think this are more big things I’ve reflected on as large wastes rather than almost deaths

KineticLensman• 8 years ago

Great point - although I didn't quite understand it until I read the article and realised that 'reinforcements' means 'armour' (you put armour on the places where surviving planes lack bullet holes. The planes that were hit in these places - the engines- never returned at all)

sytelus• 8 years ago

Actions are mistakes only in retrospect.

tjalfi• 8 years ago

[0] is a reprint of Abraham Wald’s 1943 paper on this topic.

I submitted it to HN awhile back but it didn’t get many votes.

[0] https://web.archive.org/web/20140814122810/https://www.cna.o...

smoll3• 8 years ago

I really enjoyed this article, but calling "being sales driven, not product driven" a mistake doesn't make any sense to me -- had they not made the call to be unit-economics-focused, they might have gotten into some product-perfecting rabbit hole and failed to generate the traction needed to actually keep their company afloat. This is something I notice in a lot of articles like this; they say "we should have done X instead" without acknowledging that doing X would have exposed you to a bunch of unknown unknowns, any one of which would have sunk you. I agree though that in general "make something that people love" is sage advice, but using the fact that your company succeeded, though not quite as quickly as you would have wished, as evidence for it just seems invalid.

ransom15383• 8 years ago

If you own a company ran by sales you end up going for short term gains. You have to push back on sales requests that dont add long term value to your company (value others want into the future). Companies often die in a feature loop ran by sales that need a checkbox for their presentation.

smoll3• 8 years ago

"ran by sales that need a checkbox for their presentation" is a total strawman. I think we both agree that being entirely sales- and short-term profit-driven is a terrible strategy, but it is possible to have an appropriately long-term outlook yet uncompromising about the unit economics when the success of your business is still an unknown. Being sales-focused is perhaps even a way to keep "what people want" in top of mind, and works especially well for certain products/industries.

femto• 8 years ago

In a practical sense, I think this translates into fighting tooth and nail to avoid variants for a single customer. Listen to your customers/sales, but only incorporate their requests if they fit in with the product that you distribute to everyone. It's not to say that every customer must use every feature, but all the features must make a cohesive whole.

brennanm16• 8 years ago

Very hard to balance bootstrapping and product/market fit

brennanm16• 8 years ago

We’re working on making it succeed. We’re not there yet.

rmason• 8 years ago

The money quote for me was when he said:

"In today’s tech, you definitely want to scale your business with electricity, not people. Let your people figure out how to do that."

Liked it so much I tweeted it.

mbell2• 8 years ago

I don't find that particularly insightful. The reality has always been that companies which find the most effective way to either produce or consume electrical power are the most profitable. Actually I'd argue that power consumption per capita corresponds quite well with prosperity. If you want to 'win big' in the long run, do it in power in one form or another.

captain_perl• 8 years ago

Whoosh.

By electricity, he meant automation with computers.

brennanm16• 8 years ago

Thanks! I’m sure I stole it from someone at some point. Credit to them not me

telltruth• 8 years ago

My learning from this article:

1. An app for 1:1s is a real business!

2. You need 30 people to run this business!

3. Stay away from articles titled "M things for N things". You will find pointless regrets like "Not trusting my gut". So what's the solution? Trust your gut all the time?

brennanm16• 8 years ago

1. Yup! Well, that’s a feature in it. It’s an employee engagement platform.

2. Don’t need 30 to run this business. Have 30 to create the next iteration of the business.

3. Noted

Stratoscope6• 8 years ago

Most things in life are win-lose — someone gains, and someone loses. But networks are one of the few things that are win-win.

That's one of the saddest things I've read all week, and I think profoundly wrong. Does one party or the other really lose in most things in life? Surely it must be the opposite - both parties in a voluntary transaction or interaction have gained something by it.

I once had a friend who explained a similar idea this way: "There is a fixed amount of wealth in the world. Whenever anyone gains wealth, it always means that someone else has to lose wealth."

brennanm16• 8 years ago

Lol. Fair. Not most things.

Stratoscope6• 8 years ago

I didn't use the word "fair", and I think that's a rather different concept from win-win vs. win-lose. So I'm not sure exactly what you're referring to.

mathattack2• 8 years ago

In economic theory, every trade is beneficial for both parties. You have too many cows, but need money and I have money and am hungry - you sell me a cow and we are both better off.

Reality is a little tougher. You and I both run hedge funds. One of us thinks Amazon will go up. The other down. One sells to the other. In a month, only one of us has made money. Exactly what the other missed out on making.

Conversely, I sell shoes. You sell supply chain software. You sell me the software for a million dollars. I save 20 million in costs. I want you to improve the software, so I tell the world about my savings. You sell to ten other customers, and I save another 20 million with improved software. Your investors make money, as do your employees. We grew the pie and we all win.

I don’t know what the world is truly like, but I prefer pretending it’s the latter.

zeusk• 8 years ago

and what about the people/services that were part of the 20 million dollar cost you reduced using that software?

krotton• 8 years ago

Well, the cow is a tad worse off than before...

api2• 8 years ago

That's a pretty good contrast between productive capitalism and financial capitalism. Productive capitalism is win-win. Financial capitalism is win-lose.

klenwell• 8 years ago

Injustice has parceled out the world, nor is there equal division of aught save sorrow. -- Oscar Wilde

One of my favorite examples of the successful application of a win-win philosophy was Paul O'Neill's focus on worker safety as CEO of Alcoa:

http://www.post-gazette.com/business/businessnews/2012/05/13...

chacham152• 8 years ago

There is a fixed amount of wealth in the world. Whenever anyone gains wealth, it always means that someone else has to lose wealth

From Milton Friedman: "Most economic fallacies derive from the tendency to assume that there is a fixed pie, that one party can gain only at the expense of another."

GDP increasing faster than inflation is certainly an indicator of this especially when you consider other countries GDPs are increasing past inflation as well.

naasking3• 8 years ago

From Milton Friedman: "Most economic fallacies derive from the tendency to assume that there is a fixed pie, that one party can gain only at the expense of another."

This is actually literally true. There universe's resources are finite. Economic growth comes at the expense of natural resources. Any situation where both parties of an economic transaction appear to benefit, there's a negative externality consuming natural resources making us all marginally poorer.

That said, Friedman's statement is still a useful fiction since "marginally poorer" sometimes is inevitable.

Edit: the reply to mine was flagged and removed it seems, but there's one commonly misunderstood belief that I think is worth addressing:

When humans had no technology or knowledge of agriculture, this may have been correct to some degree, but we are constantly decreasing the size of the population who create value from the extraction and sale of "natural resources"

Any and all value generation requires energy which necessarily comes from natural resources. We have a whole universe full of raw materials and energy, possibly more than we can conceivably work with for the lifetime of the human race, but it's still literally true that this is ultimately a zero-sum game. The externalities are simply hidden.

pcnix• 8 years ago

This is what Game Theory calls a Zero-sum Game. The economy isn't a zero sum game though, wealth creation does happen, and it doesn't necessarily come at the cost of someone else.

michaelrichards• 8 years ago

Wow. This is spot on.

I am the CTO of growing startup and every single point resonated with me.

I wish I'd read this 3 years ago and heeded your advice.

brennanm16• 8 years ago

Awesome! Hopefully it helps the next person then :P

scarface74• 8 years ago

Point #2 about being sales focus instead of product focused reminds me of a town hall that Jobs had when he came back to Apple...

https://www.inc.com/justin-bariso/20-years-ago-steve-jobs-de...

The hardest thing is: How does that fit into a cohesive, larger vision, that's going to allow you to sell eight billion dollars, 10 billion dollars of product a year? And one of the things I've always found is that you've got to start with the customer experience and work backwards to the technology. You can't start with the technology and try to figure out where you're going to try to sell it.

And doing the opposite led to the Apple Watch.

If Apple had been a smaller company, it wouldn’t have had the chance to right the ship by version 3.

typetypetype• 8 years ago

Great article, especially point #1 on innovation vs invention. Good stuff!

brennanm16• 8 years ago

Thanks!

mtorres• 8 years ago

Great article

Mistakes we made in our company’s first 8 years

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