Lessons Learned From My Startup Journey
I had the fortune of going through the full startup cycle in terms of starting a company, raising funds, building a team, and even exiting. In our podcast with my friend, the powerful Joseph Kim (GameMakers, LILA Games), he asked me what were the biggest lessons I've learned and if there was anything that I’d do differently.
The 5 x Lessons Learned
Learning #1 The crucial role of market research
As many of you, in the first part of my career as a game lead, I believed that making a great game is all it takes. And who better to know what great looks and feels like than the super-experienced team making the game?
And just like you can expect, I was making games that crashed and burned in the soft-launch phases because what the team wanted and was able to build didn’t resonate with what the market wanted.
The failures made me obsessed with the market, as you’ve likely noticed from the prediction posts on Deconstructor of Fun.
As a founder, this drive to logically prove (pre)product market fit by using tools like:
Data.ai to thoroughly understand direct and direct competitors and the size of the market
Solsten to understand target audiences at much deeper levels than just demographics
Geeklab to test different styles and settings and radically improve marketability
Playtestcloud to validate the software with target audiences
Thorough, and some might say over-the-top, market research allowed us to convince not only ourselves that we're doing the right things but also to convince others to join the company. This approach also resonated with the investors, who saw this as a major de-risking.
Learning #2 Building a team is direct value creation
As your team grows with high-profile people, so does the value of your company. That is why we see ex-Blizzard and ex-Riot teams soar to high valuations off the bat attracting the best investors and getting the needed capital to build with fewer compromises.
Most importantly, profile hires kick off a flywheel. Folks will notice that the people they look up to are joining your company. That in turn will expand your talent pipeline to other great people who likely haven’t even heard about your company before.
That is why it is imperative that the leaders in your company put a significant effort into getting the key hires and promoting whenever these people join.
The war for talent is real and as a startup without an impressively scaling product, you’re a true underdog. The time investment in getting folks with a high profile or who are coming from a high-profile company is, in my opinion, the best use of a startup CEO's time.
Learning #3 Wrong hire is the biggest mistake you will make (and you’ll make it several times)
It's very easy to move too fast, it's very easy to overpay, and it's very easy to hire specialists from different companies, um, who are far away and might not fit your, um, your culture, your values, your virtues.
Being measured with hiring is imperative for any company, but especially a startup with a limited runway.
The costs of hiring are not small. There are the direct costs of advertising the position and possibly using an external recruiter. And then there are the indirect costs of all the time a team will spend on interviewing and getting the candidate excited to join you.
And when the candidate joins, the onboarding process begins, which again leads to significant time investment from the team in addition to IT and administrative costs.
If you make a mistake in hiring, you will not only have wasted the indirect and direct costs accrued till this point but you will also have to now do everything again as you’ll be looking for a replacement.
And then there’s the intangible damage to the culture that may have occurred due to the wrong hire. Sometimes there’s a mutual agreement between the company and the new employee to part ways during the probationary period because the expectations of both parties were misaligned. That’s a good kind of departure.
And then there are often departures because either your company dropped the ball on onboarding or expectation management or because the candidate was just not up to the task or didn’t align with the culture and the values.
How to avoid these costly mistakes? Here are three simple steps:
Verbalize your company culture, values, and desired virtues. Hire only against them.
Always test a candidate. If they don’t want to do a test, that’s a bad sign.
Build a thorough hiring process that involves several team members who will challenge the candidate against both skills and virtues.
I’d also recommend hiring open-minded generalists, especially in the beginning. People who love wearing multiple hats, taking ownership, and who are not ideologically positioned against any modern tools and technologies.
Learning #4 Your network is your net worth
There is a notion that once the startup is set up, the team should crawl into a hole, work tirelessly and come out only when they have something to show. And while that is a proven strategy, it is not the only strategy that works.
Personally, I encourage the leaders of the company to interact with the broader community and build their respective networks. I guarantee that there will be countless moments when knowing that certain someone, or having a specific insight, will allow your company to zig when others zag.
For example, a great network will give you insights into the market, guidance to your marketing efforts, refer you to potential customers, and give access to decision-makers in corporate development teams and VC companies.
Now don’t get me wrong. I’m not advocating for folks to start touring conferences the moment they get funded. The key with everything startup related is to be time and cost-effective.
In my case, I had already built a good network through founding Deconstructor of Fun. But during my time as a founder, I doubled down on doing podcasts because it allowed me to speak to the experts in different fields, form connections, and get insights (which are often shared post-recording).
I encourage founders to find effective networking ways. Such as joining closed professional Slack communities, actively looking to be guests on a podcast, and sharing their thoughts in writing on high-impact newsletters (like this one). The goal is to improve your visibility and attract others to interact with you. That is, in my opinion, a way to build a high-value network.
Learning #5 Have an exit strategy
A good exit strategy is more than a dream. It also takes into account the negative scenarios and mitigates them before they become a reality. You need to avoid the situation where you’re thinking about exit only when you’re about to go bankrupt. Avoid situations where you don’t have options left by talking to investors and acquirers early and often.
Yet when founders talk about an exit strategy, they often refer to it as a number. How much would someone need to pay you (and most importantly, your investors) to acquire the company you’ve built? But that’s not a strategy. That is an outcome of an execution of an exit strategy, not the strategy itself.
The way I see it, an exit strategy should be adapted to not only internal factors such as the success of your business but also external factors. That means that you have to understand what the market is looking like at every moment, what are the different ways it could evolve, and match these scenarios with how much runway you have and how much runway you can get through investments and things like development contracts.
The Venture Capitalist business model is built on ultra-high risks and ungodly returns for risk-taking. They will push your company to go all the way, even if it means bankruptcy because in their business model, doubling or tripling an early investment is simply not meaningful. Their business model evolves around finding that one company that can bring 1000x returns rather than ten companies with 3x returns.
As a CEO, you’re responsible not only to the shareholders but also to the people you’ve hired. Those who bought into your vision. That means, in my opinion, that you need to take a more measured approach to risk management. Which in practice can mean exiting rather than doubling down if the risk of doubling down is overwhelming.
Then again, if the VCs are willing to give your team secondaries (acquire vested stock of the employees) then you can continue taking more risks. At least then you and your team are not in a position of losing it all.
Something that was pushing me personally forward was making sure that the company had longevity - whether through an exit or through additional funding. And it’s a mindset I’d have should I do it all over again.
Want to know the 4 x things I would have done differently? Check out the full podcast or YouTube.
