I believe in the old adage, “If you want to be great, learn from the things that great people do.”
As investors, observing 100s if not 1000s of entrepreneurs, we are at an advantage to observe what the best founders do, how they think and how they act. As we spot these trends of what the best founders do, we can then help other founders copy those habits of success.
I share these insights with founders often 1:1. But I thought it would be worthwhile to share 1:many for a wider group of founders to benefit from our learnings.
Fady Mishriki, founder of PowerByProxi, presenting at The 2017 IceAngels Showcase
Here are (some of) the top 10 things the best founders do (in no particular order):
- Long term vision, short term focus. The best entrepreneurs can paint a compelling and exciting vision of the future and the way in which their company will play a role in that future. It’s long term and in some cases, somewhat abstract. But they are very good at boiling that vision down to the next most important steps to take in the business on a daily, weekly, monthly, quarterly basis that will take them toward that vision.
- They are capital efficient. It’s common in startup venture culture to raise a bunch of investor money, and burn through it before you start to make any profit. This makes a lot of sense if you are investing in activities you know will generate value. But the downside is that in many cases it can lead to a culture of fairly reckless spending on inefficient customer acquisition, development of features that don’t need building or bloated overheads that don’t take the company to their next major milestone. The reality is, investment is just a means to create more value (revenue and eventually cash flow and profit), at a faster rate than what they would be able to by ‘bootstrapping’. The best companies are very careful with capital expenditure and recognize that every dollar invested is a dollar of margin that needs to be earned in the future to be back to square one (so they tread carefully).
Read blog: 35% of Founders are likely to suffer a partnership breakup; here's what we've learned
- They know their margins and how they will make money. In every startup there is a bit of ‘spreadsheet magic’, that shows a perfect hockey stick, but the best founders don’t discount that and say, “oh I just wrote that revenue for the investors, cause they wanted to see a hockey stick”. The best founders have a working hypothesis at all times that is being tested and iterated on to find the money. We don’t invest in companies to build technology, we invest in them to find a customer’s need and fill it with a new product or service (technology). We invest in the potential of long term, durable, free cash flows.
- They swim downstream. They are not trying to build a market, they don’t have any ego around their idea and they don’t have the ‘build it and they will come’ mentality. They are focused on finding a customer pain point (that the customer is willing to pay for) and building a product fit for the customers needs. They swim downstream toward a market need that already exists.
- They spend a lot of time with customers. They are good at listening to their customers, have genuine empathy for their customer’s needs and translate this into a product that meets those needs. They look for nuance in their customer’s answers to questions or product feedback. Instead of trying to validate their own hypothesis, they are comfortable invalidating their own hypothesis with customer feedback to find the “real problem” that customers want solved and will pay for.
- They work insanely fast. They surprise you with how quickly they produce high quality work.
- They know that the main thing is keeping the main thing the main thing. They are incredibly focused on achieving the most important next milestone. They are really clear about what they are going to do next. They can clearly justify why they need to do that and how it plays into their long term plan. They have thought about steps 3 and 4 before taking step one while still maintaining the flexibility to adapt if needed.
- They are “reality junkies”. (Thanks Peter Dickinson for passing on the phrase). They know the metrics that represent the creation of value in the business and they stay focused on those, ruthlessly. They don’t report on vanity metrics, they report on realness. The best founders get their teams together every week and talk about metrics, what they have learned from the tests performed against hypothesis in the previous week and what this means for the next step in the business.
- They eat risk for breakfast. Being in a startup is not inherently about having a higher tolerance for “risk”. The best founders are actually quite risk averse. They work hard to de-risk the next step, the next business investment. They do this with research, planning, testing and measuring. When taking big risks, the best founders know, with a fairly high degree of certainty it’s going to work before they leap. This makes it much less risky. They take leaps of faith, but try their best to know the ground they will be leaping to is solid on other side.
- Know they can’t ‘boil the ocean’. (Thanks Tom Furlong for the point) Good founders focus on delivering on a core need for a focused group of customers. Once they have found product market fit with the customer set, they expand horizontally and vertically.
Ultimately, there are many different types of founders with different skill sets. Some of the best would have all of these attributes, some would have only a few and suck at others. But one thing that all great founders have in common, is that they are 'LEARN IT ALLS'. They identify their areas of weakness and they fill it in, by learning new skills, or by bringing great people around them.
Hope this shed some light on the successful founders we have seen and gives some food for thought for entrepreneurs on their journeys.
This blog is written by Barnaby Marshall, a Flux Managing Partner at The Icehouse.