Sometimes you get so focused on reaching your goal that you lose your way.
This is a phenomenon that happens to a lot of startup founders and leaders. It doesn’t happen to everyone, but it’s happened to me more times than I care to admit.
It definitely happened to an entrepreneur I’ll call “Jeff,” who reached out to me a couple weeks ago.
Jeff is a repeat founder, in the early stages helming his second startup after exiting his first through a particularly lucrative acqui-hire (that’s where a company buys a startup solely for its talent). While the previous exit was good for Jeff and his team, it was also part of the problem, probably the primary issue, in fact.
Jeff’s previous venture achieved an uncommon level of success rather quickly, more due to skill than luck, but there was definitely an element of luck involved. During his startup’s meteoric rise, Jeff got an acquisition offer that he and his team couldn’t refuse. He took it. In retrospect, he believes it was the right choice and I, for one, agree.
Fast forward a couple years, and Jeff is attempting something that rarely happens in the world of startups: Doing the same thing and expecting the same results. This time around, the results weren’t coming. A year into his new venture, Jeff’s plan for $1 million in annual revenue had come up short. About $999,000 short. He hadn’t cleared $1,000 in sales yet.
Now Jeff was burning through all the cash from his previous exit, as that windfall was the sole source of funding for his new venture. He was running out of money, running out of fall-back options, and definitely running out of any patience he had left.
Honestly, it might be too late for Jeff’s current startup, but maybe not his next startup.
The Myth Of Hockey Stick Startup Growth
It’s easy to think that the big paydays that happen with some startups could happen to any startup. But the truth is that there is no formula for startup success. Every venture is different. The same founder can run back the same team and the same technology with a different market or even at a different time and get completely opposite results.
While a big and brash goal might be a symptom of Jeff’s problem, it wasn’t the cause. The cause is a little more nuanced and a lot more prevalent than just trying to run it back with a winning team and playbook. The cause was more about where Jeff set his expectations. And why.
No founder puts serious time and money into a venture thinking it will probably fail. No successful founder, anyway. We all go into it with the sole conviction that our ideas have merit, our execution will work, and our company will be successful.
We play to win, not to not lose.
But often, this kind of hyperdrive results in setting a wild final goal without a clear path to get there. And why shouldn’t it? We’re doing something that’s never been done before, and everything we first absorb about starting a company begins with the hockey stick growth chart.
Aim high. Work hard. Then watch the results start to double on themselves.
That hockey stick is mostly a myth. It’s a placeholder. It’s a thing you put in front of investors because they’re used to seeing it and will ask you why it’s not there when it’s not there.
I’m not saying hockey stick growth can’t happen, I’m just saying it doesn’t happen without a catalyst. A known catalyst.
Numbers Mean Nothing Without Insights
When I asked Jeff how he came up with his $1 million revenue number, his answer was just more numbers. Lots of numbers. Numbers that aggregated into bigger numbers and numbers that divided and reproduced themselves into bigger numbers.
What he couldn’t produce was insights – how those numbers happened.
Don’t get me wrong. I love numbers, and I think quantifiable data is critically important. That said, one of the best lines of advice I ever got, from an IPO-exiting founder, is this:
“One of the biggest mistakes any CEO can make, no matter how experienced they are, is to see the beginnings of hockey stick growth and believe that the trend is going to continue.”
In other words, doing the same thing and expecting the same results.
Jeff’s run with his first startup showed him that what he was doing was producing incredible, amazing results that ultimately ended in a nice success. So Jeff figured that whatever it was he was doing to achieve those results was “the formula” for success. But that’s correlation, not causation, and even when you quantify it, it’s a statistical sample of one.
When Jeff ran the same strategy back, with a lot of the same team in a different market at a later date, the results were 180 degrees out of phase with his expectations.
What Jeff should have done was taken a more trial-and-error approach to his new venture, and found that causation first. An entrepreneur can indeed get a significant head start reusing what they know to have worked, but only if they know why it worked.
Any repeat founder will tell you that conditions change from year to year, quarter to quarter, sometimes even month to month. Knowing which way the wind blows and how strong it is, that’s a critical factor in making the necessary adjustments to repeat any successful shot. And if you don’t know why your shot worked the first time, you won’t know where those adjustments need to be made.
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