Lost and Founder: A Painfully Honest Field Guide to the Startup World

Spread the love

It was the first book which I listen to in English. My English teacher recommended something new for improving my English. I read and listen at one time. 

Get back to the book:) 

I am deeply impressed by transparency and honesty of Rand Fishkin, the Founder of Moz. In this book, he shares the true story of how he successfully started Moz and then at some point failed with its growth, why he recently left the company, and what he learned during these 16 years. So many insights about VC funding and  startup world in general.
If you are running a tech company it is must read. if you don’t want to read full book I totally recommend to watch this video or listen to main ideas in Ukrainian 

https://moz.com/blog/marketing-lessons-learned

#ЕсенціїLvBS: «Бюро знахідок для засновників» (2018) – це до болю відвертий і практичний путівник для стрімкого розвитку…

Опубліковано Lviv Business School (LvBS) Четвер, 25 квітня 2019 р.

 

Below Quotes.

No wonder first-time founders, like first-time gamers, die on the first level.

Raising prices for your product every year or two and grandfathering in existing customers is a great way to increase loyalty and grow your profit margins.

You need a network whose problems and solutions match.

That’s one of the biggest things I’ve learned about startups: it’s dangerous to go alone.

Starting a business works this same way. The first time you build a company, it’s scary as hell. Accounting? Payroll? Customer acquisition? Recruiting? Hiring? Fundraising? People management?

More than 75 percent of early-stage technology companies fail to return their investors’ capital

If you want to raise money from an investor, ask for help with your business. If you want an investor to help with your business, ask for money.

The cheat is to have connections to people—mentors, advisers, friends, family, partners, employees—who’ve been through the problems you’re facing before and can give you a map out of the woods and onto a path that works.

You need a network whose problems and solutions match.

through an issue alone, it’s gold.

through an issue alone, it’s gold.

That’s one of the biggest things I’ve learned about startups: it’s dangerous to go alone.

Moz is creating and serving a new market, rather than disrupting an existing one. SEO software has been around since only the mid-2000s. We were one of the first providers (starting in 2007) to offer it via a web subscription (versus downloadable, desktop software), and one of the largest in our field (both by revenue and by customers).

We operate with relatively high gross margins (75 percent and above).

We’ve survived boom and bust cycles, raising and spending venture capital, making successful acquisitions and not-so-successful ones, hiring sprees and layoffs, new product launches and product retirements, and big changes in strategy.

You’ve got an interesting business, but we don’t believe it will ever get past a few million dollars in revenue.

The great thing about a consulting business is supposed to be the low-capital requirements

The great thing about a consulting business is supposed to be the low-capital requirements—smart operators often make their consultancies profitable from day one.

Consulting) is dancing with the devil as you pursue your dreams and try to pay the bills.

The experts in the startup world will tell you that services and consulting are a waste of time.

Consulting is limited entirely by time and people.

the median startup founder, who owns only about 11 percent of his or her company’s shares at exit.

Fifteen percent of zero is bupkes.

Clearly, the answer to the product versus services debate is “it depends.”

Great Founders Don’t Do What They Love; They Enable a Vision

Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. —Steve Jobs, 2011

I love SEO. I love how small changes to a web page can make a marked difference in how it appears in search engines and how that drives hundreds or thousands of people to visit my site. I love the combination of technical skills and creativity required to overcome the competition for a tough keyword.

And I love the mystery of how search engines rank pages and the process of uncovering each little piece of that puzzle.

CEO Is a Real (Shitty) Job

We grew fast. And it was my first time doing anything (and everything) a CEO has to do.

The myth of “founding a startup so you can do what you love” is at least as enshrined in the tech world’s popular culture as the myth of getting rich.

When your startup is growing, the tasks and competencies change every six months.

Unless what you love is managing people, handling crises, delegating, holding people responsible, recruiting, setting, then constantly amplifying and repeating the company’s mission, vision, strategy, and values, being a startup CEO may not provide you with the work you love to do.

The Best Leaders Know When to Lead—and When Not To

This is the work entrepreneurs do in growing organizations: digging into problems, untangling conflict, freeing people from the mind-sets or structures that hold them back, crafting (and refining, over and over) the pillars and policies of how the company functions.

Ideas are worthless. Execution is everything.

Execution Is More Malleable Than Market, Model, and Idea

The Switching Costs Can Kill You

What happens as a startup makes progress? The team improves the quality of its work.

Customer service folks improve their response times. Product features and functionality catch up to customer needs. Engineers deliver better technology. User experience goes from bare bones to impressive. The marketing funnel widens. Conversion rates go up.

Keyword research (wherein you uncover what words and phrases people are searching Google for and in what quantities) will almost always uncover untapped opportunity. Move beyond the solution keywords, and look for searches that indicate problems—the quantity of monthly searches for “cityname+taxi” helped Uber figure out which cities to launch in, just as the monthly searches for “best restaurant in cityname” helped Yelp pick their expansion markets.

“People management. Mentoring. I hate it. I don’t have the patience for it.

Parts of our software improved during that time, but our link data stagnated. Simultaneously

Parts of our software improved during that time, but our link data stagnated. Simultaneously

Simultaneously two competitors in the market—one, a secretive operation based in the Ukraine and Singapore called “Ahrefs” (pronounced “A. H. Refs”), and the other, a British firm founded by a passionate Russian engineer whose initial goal had been to build an alternative to Google’s search engine called “Majestic”—grew to market dominance. After years of leading the industry, Moz became an also-ran in the field of link data.

Retrospectives, analyses, comparisons, competitive intelligence, anger, sadness, frustration. And the worst one of all … helplessness.

Every founder (or set of founders) has a different take on the hardest parts of building a company.

Learn the process and do it yourself. 2. Start the company with cofounders who have this strength already. 3. Invest in the knowledge necessary to hire, retain, focus, and manage great talent in the field.

The best way to ensure that your CTO is going to make you a better CEO is to hire a CTO who likes to teach.

Being able to explain complex things simply is a job requirement.

A founder’s strengths and passions will often become the organization’s strengths.

Tragically, most of us have a poor understanding of our own strengths and weaknesses.

If you’re a founder, make a list of the previous successes and failures you’ve had in your career, and of the elements of running a business with which you’re familiar and comfortable. Chances are high that your weaknesses will be the items not on that list.

Don’t Raise Money for the Wrong Reasons or from the Wrong People

The best entrepreneurs … know how to tell an amazing story that will convince talent and investors to join in on the journey.

Out of ten investments, five will fail. Another three will return an insignificant amount. The final two will combine to form the bulk of any gains.

Startup investing follows the Pareto principle: 20 percent of the investments return 80 percent of the fund.

“Personal happiness and successfully raising venture capital are rarely correlated.”

According to statistics from the National Venture Capital Association, an estimated 30–40 percent of high-potential US startups fail completely in the sense that investors lose all their money.

Their goal is to improve upon the rate of return that would have been achieved through putting the money into public stocks, bonds, or other investment vehicles. The target is 12 percent annual growth, which, over the life of a ten-year fund, means returning three times the fund size (e.g., $300 million on a $100 million fund).

National Venture Capital Association data showed that the average time from funding to exit (via an acquisition or an IPO) increased dramatically from 3.1 years in 2001 to 6.8 years by 2014.

startup culture is about one thing: growth. As fast as you can.

In the movie The Social Network, Mark Zuckerberg, portrayed by Jesse Eisenberg, insults a group of investors who hope to put money into Facebook, citing his friend Sean Parker, and walks out. It is indeed true that Facebook’s founder arrived late to a meeting with the VC firm Sequoia (whom I pitched on behalf of Moz, twice, and whom, I’d agree, has a fairly deserved reputation for humorlessness). In his pajamas, the Facebook founder delivered a “top 10 reasons not to invest in us” pitch, and mentioned Sean Parker, whom Sequoia had fired from the board of another company (Plaxo).

But as a founder, it’s critical to keep in mind your motivations and how they align with those of your investors.

don’t sign anything with anyone you don’t trust 100 percent and don’t believe has your best interests

if possible, build your expertise before you build your network, and build your network before you build your company.

Even Successful Startup Founders Don’t Get Rich (Quick)

Let’s assume a scenario in which you’re starting a very traditional startup—one with investors and a board of directors and the goal of a financial exit that returns money to those investors. Initially, you and your cofounders own 100 percent of the company, but once you raise money, the company will issue shares that are divided into several segments: Common stock: the kind you and any cofounders own Preferred stock: the kind your investors own (which usually grants them some special rights, like the ability to get their money out first in a sale and to have a seat on the board of directors) Stock options: the kind your employees own (which gives them the right to buy stock at the price it held when they were issued the option—usually when they join the company or get a promotion or bonus)

Private companies, especially startups, are very risky investments. The 90 percent failure rate keeps most types of investors away from the field.

In essence, founding a startup or being an early employee means taking a risk.

You’re sacrificing the certainty of a potentially higher-paying job with greater benefits at a more established company for what is typically a less-than-market-rate salary, bare-bones benefits, and the hope that if things go very well,

We also forget that startups take a long time to exit.

Early-stage companies need people who are self-motivated, mission driven, and can get immense amounts of work done in short periods (by working very hard, by being efficient with their time, or both).

Demonstrating that you have strategic vision, the ability to execute, and the qualities needed to recruit, motivate, and lead will make you a rare, desirable commodity in the modern economy.

CHAPTER 9 Scalable Marketing Flywheels > Growth Hacks Growth

if you improve your conversion rate it has a massive impact on your customer and revenue growth

The subscribers who signed up via the $1 offer had a much lower retention rate than subscribers who’d signed up via a non-promotional offer.

Airbnb’s hack was to scrape Craigslist’s vacation and rental home listings, then contact all of the owners and convince them to also list their properties on Airbnb (or, according to some accounts, do so without even getting permission).

Dropbox’s hack was a double-referral system wherein, when a Dropbox user referred someone else to the service, both the referrer and the receiver of the referral got upgraded account benefits.

In 2006, Yelp launched a hack that had an immense benefit to their overall traffic and branding—the website badge strategy. Yelp sent restaurants with four- or five-star ratings from their users a visual “badge” restaurant owners could put on their websites to showcase their positive reviews. The badge linked back to the Yelp page, sending Yelp both traffic and, through the search engines’ love of links, high search rankings for restaurant names, categories, cities, and more.

startup founders, investors, and pundits as evidence that finding the right, innovative “hack” has replaced classic marketing practices as the way new companies can and should achieve sky-high growth rates.

Some growth hacks do work. Most don’t.

companies tried dozens of innovative marketing tactics, combined them with strong, constantly improving products and plenty of traditional marketing best practices, and in some cases, a few specific tactics proved particularly effective as part of this mix.

Growing your startup’s brand, customer reach, conversion rate, retention, engagement, and virality can include finding that one great hack, but to do that, you need a broader understanding of the problem you’re working to solve.

I’d take my intuition and my experiences from client work,

The classic funnel optimization promoted by many marketers has this peculiar idea that we must race to turn as many visitors as we can into paid customers and that any missed opportunity represents a flaw in our marketing process. Our metrics show just the opposite. If we want to have the best long-term impact on customer growth and retention, we need patience. We need to wait for our audience to be ready and engaged with us before we nudge them toward our subscription.

I think this foments a beautiful, symbiotic relationship between our values, our content, and our paid subscriptions

Of the most successful startups, nearly everyone has a clearly identifiable marketing flywheel that brought awareness and traffic from the right audiences and helped those people convert to a sale or a signup at the right time.

Dollar Shave Club, the famous Los Angeles startup that offers traditional men’s razor blades for a few dollars a month (originally one dollar, until their acquisition by Unilever), built a funnel based on humorous, online videos that positioned them against stodgy, expensive shaving product companies. Those videos would earn massive viral views from an audience perfectly poised to help them spread (usually young, heavily online, social-media-savvy men).

Today, this tactic of including influencers in the creation of content (often called “roundups”) is a staple of the content marketing practice.

Growth hacks alone can’t solve all your marketing problems, but the right ones may add immense value to an already humming marketing flywheel.

they’re not core values if you’re willing to sacrifice them in exchange for money.”

TAGFEE—Transparency, Authenticity, Generosity, Fun, Empathy, and the Exception.

“First Who … Then What,” posits that great organizations are made up of people who share fundamental core values and use these as their guiding light for decisions big and small.

Transparency—We believe in sharing what we know, learn, and do with everyone who’s interested. We reject secrecy, obscurity, and opacity in all its forms and strive instead to make the worlds of marketing, of SEO, of software startups, and of Moz itself open and accessible to all.

Authenticity—We hate pretending to be people we’re not or hiding our true identities, thoughts, or feelings in our work.

Generosity—We believe in giving back without asking for anything in return. Our goal, greater even than growth or financial success, is to help make our peers, coworkers, and the world of marketing a better, more nurturing, giving environment.

Fun—The work we do can be challenging and stressful, but we believe work is only work if you make it so. We aim to make our jobs and the jobs of those around us enjoyable, rewarding, and humor filled.

Empathy—Our most important value, empathy, demands that we put ourselves in the shoes of others and see things from their point of view. We endeavor to create products, content, interactions, and environments that are welcoming and respectful to all. We believe the best kind of empathy is that which aims for the most long-term good, not just a short-term veneer of niceness. Our goal is to apply this empathy with the highest priority to our community, audience, and customers, then to ourselves, and finally to our shareholders and investors.

The Exception—If everyone else is doing something one way, we believe there’s innate value in finding an alternative path. Moz strives to be unique, innovative, and weird. We cut against the grain and hope to stand out as an exception to the rule.

Real values are truths you hold to be more important than making money.

A team with shared culture and shared values will, almost always, outperform a team without these elements.

It’s far more difficult to retain team members who fundamentally disagree with how things should be done and why, even if they agree on what work to do.

Diversity, culture, and values might sound like a complex, tough combination.

CHAPTER 11 Living the Lives of Your Customers and Their Influencers Is a Startup Cheat Code A

A great way to build software is to start out by solving your own problems. You’ll be the target audience and you’ll know what’s important and what’s not. That gives you a great head start on delivering a breakout product.

People judge by first impressions.

Instead of spending time with my customers and potential customers, I spent it with my product designers and engineers, dreaming up wild new things we could build.

(Pro Tip: If you can afford an exec admin, get to it! You’ll boost your productivity threefold,

If you are not embarrassed by the first version of your product, you’ve launched too late. —Reid Hoffman, March 2011

Sometimes, something is better than nothing. Surprisingly often, it’s not.

Investors. Media. Employees. Fellow entrepreneurs. Startup enclaves. They push us to “go big or go home.”

This is the fundamental trade-off of startup finances: earlier stage usually means lower salary, fewer benefits, more risk, but more potential reward if things go amazingly well. Later stage usually means competitive salaries and benefits, less risk, but only a small reward even in exceptional outcomes.

We are the arbiters of our own future:

In a hierarchy every employee tends to rise to his level of incompetence.

Managing Is a Skill, Not a Prize

being great at the work yourself and being a great manager of the people doing that work is largely disconnected.

Google found to be the eight behaviors consistent across strong people managers. Here they are, in order: 1. Is a good coach 2. Empowers team and does not micromanage 3. Expresses interest/concern for team members’ success and well-being 4. Is productive and results oriented 5. Is a good communicator 6. Helps with career development 7. Has a clear vision/strategy for the team 8. Has important technical skills that help him/her advise the team Number eight.

The only acceptable emotions for a leader were anger, envy, pride, and courage.

Emotional comfort with one’s colleagues was a better predictor than IQ, than years of experience, than the strength of previous work, than literally any and everything else researchers had hypothesized about.

social sensitivity, “the ability to perceive, understand, and respect the feelings and viewpoints of others,” was strongly correlated with high-performing teams.

We build up tolerances to criticism, acceptance of faults, appreciation for idiosyncrasies.

It’s hard to make logical connections between these personal, emotional experiences and the output or quality of work at the company.

People LOVE change (when it’s about changing others). People HATE change (when it’s about changing themselves).

I was the most tired, worn-out, poorly functioning version of myself I’d ever been, barely able to keep my eyes open during meetings, tense, overcaffeinated, and quick to irrational anger. But when I’d climb into bed, “the loop” would begin—an awful circle of thoughts fixated on how much I’d messed up and how it could never be fixed and all the opportunities and wonderful things I and all the people around me would miss out on as a result.

You have hypotheses about why one tactic worked and another didn’t.

I believe, deep down, that my career and my company might just be the result of accidental, undeserved success.

When we’re freed from the mythology that we control outcomes and asked instead to concentrate on behaviors, we have a powerful tool to fight against negativity and anxiety.

But focusing on behaviors gives me clarity and control. It lifts my burden from things I can’t perfectly influence (the reality that someday I might have depression again) to things I can: diet, exercise, physical therapy, investment in self-awareness as an ongoing process, breaks from work, self-forgiveness.

We have the power to change the ways we react and the way things make us feel.

You can, sometimes, teach a cat to walk on its hind legs. You might even be able to teach it to bark. But that doesn’t make it a dog.

A leadership team that’s trying to rebuild trust and relationships across their company can’t use “Hey, it’s better than getting fired” or “This is how business works” to defend their actions.

There are three ways you can grow a software-subscription business: 1. Acquire more customers 2. Increase the subscription tenure of customers 3. Up-sell existing customers to higher-priced subscriptions/packages

We knew that millions of organizations and marketers were interested in using SEO software, but we’d never done enough to make our product into a long-term habit and an essential part of those organizations’ operations.

Any additional new customers, or any up-sell on current customers, means growth.

Customer success surely isn’t the only way we can improve retention, but with the business so dependent on new customer acquisition, and the leadership team spread so thin worrying about multiple products, we were a combination of unwilling and unable to consistently experiment and invest in this crucial element.

The people who multitask the most tend to be impulsive, sensation-seeking, overconfident of their multitasking abilities, and they tend to be less capable of multitasking.

identify and reduce waste (of time, materials, people, or investments) fast, because it’s easier to see said waste when you have less to concentrate on;

Fewer people, more focused on just a few things, could do more than a much larger team pulled in myriad directions.

Percentage rate of growth, not raw dollars added, is the metric by which venture-backed startups measure themselves and are, from the outside, judged. Growing at 30 percent year-over-year at our stage is considered the minimum level for an “interesting” business in the venture world

other issues can inhibit growth as well, most commonly market size, cost of customer acquisition, and product scalability.

When you’re an early-stage startup founder, your job is clear—find “product:market fit”

When you’re an early-stage startup founder, your job is clear—find “product:market fit” (Silicon Valley–speak for “a product that a significant portion of customers in your market love, use, and will pay for”), then scale.

The benefits of focus are too great to ignore, hidden only by the resolve needed to stay on target.

One of the biggest causes of early-stage business failure is lack of real buyers hungry for your solution.

Establishing a vision for the foreseeable future and a company mission for the long term, even if they need refinement over time, will better enable focus

No matter what stage of life your organization is in today, my advice is to have a written, transparent road map. Plans change. The value of a team with a shared plan doesn’t.