Ten Rules For Building A Successful Startup

Having launched over forty startups and rebooted ten pivots in our eight years of operation, we have been fortunate to be involved with our share of “unicorns” (Palo Alto Networks, Nimble Storage) and a few unicorns-in-waiting (Sumo Logic, Trifacta and Snowflake Computing). And, to be fair, to stretch the fairytale analogy, we have also kissed our share of frogs—who stayed frogs.

Given the wide range of companies we have worked with — and their equally wide range of success/failure — we are often asked by first-time CEOs to sum up the characteristics of a successful startup (and by extension, a successful CEO). So here it goes.

1. No Jerks Allowed  

This starts with you. Too many of our startup CEOs have a Steve Jobs fixation. Whether it is his boorish behavior (the early version of Steve), emotional outbursts, fixation on perfection, they mimic “Steve” in a number of settings. And we have to explain to them that not only was there thankfully only one Steve, but that today’s times—and employees—are different. If they keep up with their bad behavior, the result will be a lousy reputation and a revolving employee door.

On the employee side, the same “no jerks” rule needs to apply, especially if you are in this for the long haul. In fact, a number of companies have gone so far as to make this a part of their stated culture and business strategy. Early employees aren’t as unique—or irreplaceable—as they often think themselves to be. For certain employees, being a jerk is incurable—recognize those and rid yourself of them early. For the rest, catch the behavior early, call them on it, and the resulting culture will keep them in line.

2. Study The Competition, Then Steal From Them  

Most startups have myopia — they are focused only on their own product or technology and the immediate road ahead. This is particularly true in a company’s early days, when they’re focused on completing the product and early sales. But, unless you truly are the first one with your idea (which is a lonely place to be, since by definition there is no established “market” for your product), recognize that others with similar solutions have already trod this path. Learn from their failures as well as their successes. Have a room (or at least a wall) dedicated to the competition, including their homepages and core sales materials. And if they have a good idea, steal it, improve it, and call it your own.

3. Value Diversity To Build A Better Team

Most of our startups are laudably diverse — ethnically. Gender-wise, not so much. That is a mistake: Data shows that teams including women are more successful than their fraternity-like contemporaries. But “diversity” in our world means more than hiring women (though that is an obvious and necessary start). We also recommend psychological diversity (co-founders should not be identical but complementary), ideological (different backgrounds lead to healthy discussions that lead to fresh ideas), experience (mix of established veterans with young eager pups who don’t know better but will run through walls for you) and geography. The result will be a more balanced company built for the long haul.

4. Practice The Mantra: Done Is Good

We are back to the Steve Jobs model. Our startups will regale us with stories about how Steve (they talk about him as if they knew him) would rip an entire product apart at the last minute and rework it from scratch. Or obsess over the slightest detail until it was perfect. Which makes for a great story. It also makes for missed deadlines and frustrated investors. Pixel polishing can not only frustrate your employees, it can lead to a missed market window. The time that is spent obsessing over that last 2% of excellence is often better spent responding to early adopters’ feedback and improving based on third-party observations rather than your own echo chamber. When we say “Done is good”, we don’t mean “Put crap out there.” We’re saying set your goal, hit it, get it out there, and see how the market reacts.

5. Every Launch Slips Twice

Don’t get the impression from number four and the title of this paragraph that we are accepting of failure. And we would never advocate letting your employees know that you have built false starts or missed deadlines into your schedule or budget. But we are realists. And after launching hundreds of products over our years in the market, we know that products slip at least once, sometimes twice. The reason why varies, but not the reality. Often it is the product and its lack of prime-time readiness; other times it’s a reticent customer who won’t be quoted for the press. Whatever it is, build the possibility into your thinking and your budget:  The last thing you want to do is run out of money just short of the Promised Land.  

6. Fire Employees Faster

Every startup makes hiring mistakes. Sometimes, it’s a good person who was just hired too early; sometimes it is just a bad fit that slipped through the interview process. Building a “nimble” startup means not only recognizing and responding to market feedback about your product—it also means recognizing and responding to a lousy hire. It doesn’t matter why you made a hiring mistake; it matters that you fix it. The sooner your poor hire is gone from the building, the sooner the rest of your team can go about their business, confident in your ability to both admit a mistake and to respond quickly and decisively.  

7. Build Your Culture, But Don’t Obsess About It  

We know CEOs who obsess about the culture of their company before they have hired their first employee. And we know CEOs who spend more time wondering which socks to wear than they do about their startup’s culture. Our experience is that “building a corporate culture” as a separate endeavor is a waste of time in a startup:  No matter what a company’s stated cultural aspirations may be, the culture is going to evolve organically. On the flip side, if you do have a set of established and stated cultural goals—and have articulated and promoted them within the company—then we advise you to take a regular employee (it could be the office manager) and designate that person as “Chief Culture Officer” —someone who can keep you and the team honest by regularly and honestly giving you employee feedback on how well you are doing in living up to your stated goals.

8. SWOT Yourself And Post It For The Rest Of The Company  

We always ask the management team of our startup clients to do a self-analysis using the tried and true SWOT paradigm of strengths, weaknesses, opportunities, and threats. The exercise usually sifts out interesting gaps in strategy identified by selected members. The SWOT process may be fifty years old, but it works because the process of exploring each gap helps unify priorities across the entire management team. Rather than file away the results of that SWOT examination, we recommend that startup teams embrace the exercise by posting the results for the entire team to consume. If you do it regularly and honestly, employees will appreciate that the “S” side starts to outpace the “W” side—which is always a good sign.

9. For Outside Consulting Firms Or Agencies, Work Only With Principals  

When your startup outsources marketing hires like web design, photography, writing, or UI design, use principals only. Don’t hire a big-name firm for your early-stage startup and expect to work with the people with their name on the door—or even the people who pitch the account. Those people are there to win business, not work with you on deliverables. You will end up working with the junior players — and as CEO, you don’t have the bandwidth or time to mentor or train junior players. Hire only small, expert firms where you can expect—even demand—to work with the principals.

10. Test Everything

Startup marketing is initially about experimentation, hunches, and educated guesses. But it is also about self-critical examination, quick response to market feedback, and constant iteration. Everything from product pricing to the color of the free download button on your website can be tried, tested, and changed based upon feedback. Don’t tell others you are experimenting; that sounds indecisive. Say you are running a pilot; it sounds like something a pioneer would say.

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Written by: Tom Hogan and Carol Broadbent founded Crowded Ocean, Silicon Valley’s top marketing firm for start-ups, in 2008.  They are also co-authors of THE ULTIMATE START-UP GUIDE:  Marketing Lessons, War Stories, And Hard-Won Advice From Leading Venture Capitalists And Angel Investors.  For more information please visit www.CrowdedOcean.com or @CrowdedOcean.