The things an entrepreneur will never tell you

We always glorify the struggle of the entrepreneur. Late nights, poor diet and little contact with friends. It’s cliche because it is real but we gloss over just how big of a toll it really takes.

Last week I was having a drink with a recently exited entrepreneur. His last exit was a biggie at $700m+. It seemed to be amazingly well executed from the outside but as we dug in to his story over a few hours I was amazed at how much I could relate to all the ups and downs and how tenuous his hold on success was the entire time.

Here are my top things that a young (first to fifth time) entrepreneur never tells you when they are in the thick of it, and they are the things you will never understand until you are there. Not everyone deals with each of these things, but the more I talk about it openly the more strongly I feel that it is the norm, not the exception.

The focus is debilitating

“He/She is focused!”, “Man, they are hustling!” — you see an someone in action, executing rapidly and firing on all cylinders. You feel like you go to sleep and when you wake up the entrepreneur has already taken it to the next level. How do they do it?

When you start operating and you can feel the business working you get overtaken by a myopic focus that drives you from one thing to the next. You can see everything in the path in front of you: Obstacles, opportunities and a sense of momentum. To maintain such intense focus though you have to take your focus off other things, and everyone has to choose. Health, friends, family, hobbies. Nobody de-prioritizes any of these things but the problem is you don’t realize which decisions you have made until they are well behind you.

Entrepreneurs can end up wracked with guilt and wishing they had done things differently.

The focus is what gives you the highest highs, but drags you in to the lowest lows. Every win seems gigantic and every loss feels equally consequential and that is because of that myopic focus– you only see a few things in front of you and it takes a lot of maturity to be able to focus on the longer term.

 

The lows are real

No matter how many highs you get, most entrepreneurs feel some incredibly low times. Almost universally we put on a very positive public face and you would rarely know, but the more time you spend with fellow entrepreneurs after they have left their latest startup, they are more open about talking about those dark days.

For some of us it makes it feel impossible to get out of bed, sometimes you just can’t bear another meeting. Some founders get angry and lash out, others just hit the bottle way harder than they want you to know.

These dark periods can last an afternoon or they can last a week. They are only multiplied by the unshakeable focus I talked about above. The focus narrows even more and an obsession with certain metrics or ways out of the trough can develop.

A manic nature develops and you start to seek the next high. You come out of the low with a focus on something that you know will give you the high you need and you drive towards it harder than most normal people would.

 

You feel alone and you are alone

I think a big reason founders move to San Francisco or the Bay Area is because you can at least find hundreds of thousands of like minded people. You feel just a little less alone while you are single handedly taking on the world.

You learn quickly that you can’t take your problems home because one day you are up and one day you are down, or you might be both on the same day. It doesn’t feel fair to put that on your partner, and if you did they would eventually get tired of it after years of constant ups and downs.

You toughen up and you bottle it up. You are afraid to really talk about things because you can’t afford to open the bottle– it might knock off your focus and set your company back. That’s a no-no.

The best investors in the world know that entrepreneurs have this loneliness and they take time to give you a safe space to vent. Almost nobody else can give you this safe space and it takes a lot of work on both sides to develop a level of trust that allows it.

 

Failure isn’t an option

Failure is OK. We all know that. It’s a powerful learning tool and it is a required piece of the long term success of an entrepreneur.

Holy shit it is scary though.

You are paying salaries, the people you are paying have families and they rely on you. Your investors backed you for a lot of reasons, but you feel like you have to deliver for them.

Your customers are relying on you.

You WANT to succeed this time, you don’t want to have to go through another cycle looking for a success.

It feels overwhelming and it weighs on you. We try to relax and blow off steam, but the feeling that it’s all on you doesn’t go away.


 

Nobody tells you it is going to be easy, but I think a few of us are surprised by just how much of a toll building a startup can take. Maybe it is hard because it was just never meant to be easy? Who knows.

Keep at it.

Aim for your next valuation

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“Ain’t no need to watch where I’m goin'; just need to know where I’ve been.” Mater in Pixar’s Cars

This is wrong. But it is the behaviour that a lot of founders execute on after raising money.

I’ve been thinking a lot about Venture Math, Valuation and Accretive Milestones and whiners. I was struck at how many entrepreneurs seem to be working towards the post-money valuation of their last round of financing. I think this is wrong. You should aim high. Higher than the post-money of your last round. You should be acting like the pre-money for your next round. That is the only way you will drive the necessary milestones for the next raise.

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Let’s make a few assumptions.

You are raising $1MM on a $4MM pre-money valuation. This gives you a post-money valuation of $5MM. If you subscribe to 2x valuation as the floor for the next round. This means that you need to start behaving like your company is worth at a minimum $10mm. That’s right, a minimum of 2x your post valuation. You should be targeting >2.5x, so in our example you need to start acting like a company that is valued at $12.5MM.

Your behaviour and decisions need to reflect milestones necessary to raise your next round of capital. Not the round you just closed.

“The art of raising a round it to raise enough money to get to a significant milestone, and not too much money taking too much dilution too soon. So how do you define the milestones.” – David Crow

This is incredibly difficult. Because the balance is crucial to the long term success of the company, getting it wrong and you’ve raised too much money you will be diluted, but you might have enough money to change direction and try again. If you aren’t behaving like the end point has changed, the company will be executing on goals that are too small to raise the next round.

Don’t aim for the Net Present Value milestones. You’ve already raised money to achieve those. Start setting milestones for your future value. And start delivering against those.

If You Have More Than Three Priorities, You Have No Priorities

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One of my favorite sayings (with apologies to Jim Collins, author of From Good to Great) is: “If you have more than three priorities, you have no priorities.” I literally use this to run my business life – every year, my team and I agree on three high-level strategic priorities for the business. Each of my direct reports then come up with three priorities that ladder up to those business goals, each of their reports define their three goals, and then the teams work together to define three aligned performance goals for each quarter (this approach is also known as “cascading strategy“). I love this approach because it’s simple and  because by focusing on just three things, we’re able to move some pretty big rocks in the right direction.

Fine, great – but how can this help you prioritize? By taking the same approach, Every. Single. Day. First thing every morning, ask yourself the question: what are the three things you MUST do today? I write them down, and I prefer it when they are specifically aligned to our annual strategic goals (for example, are my three “to do’s” helping me generate revenue, increase awareness of SMG, or growing our capabilities in a specific area?). Then I do those three things, no matter what, no matter how long it takes to cross them off the list – ensuring that I don’t let the urgent get in the way of the important.

I’m really interested in time management and effective prioritization (“working smarter vs. longer“) – I’d love to hear about your tactics in the comments; I’m also planning to explore other systems and approaches in upcoming posts. Let me know what you’d like to hear about!