When A Founder Should Hold ‘Em, Fold ‘Em and Go All In

I have a lot of discussions with startups as an adviser, blogger, event organizer for an event that has launched some amazingly successful startups (and some that were amazing flops too).  I recently had a chat that was a part of a growing series of chats about launching, raising money, and at what point does development take a back seat to customer acquisition and product validation.  The lean agile startup bug bit me too.  Simultaneously, I have been trying to think of something to write about on a blog that has been running in some form or another for a long time. I don’t want to do startup write-ups, that isn’t my thing.  Add to the fact that  I haven’t had much time to write lately because, as many of you know, I have been through the same valley of despair on the road to the prosperity and pleasure (some of you may know where I’m going with this by the clue here) over the last three years.  So, today I want to write about learning to trust your at least trusting the gut of your trusty swiss army knife adviser’s gut.

Let’s get right down to it.  I’ve spent the last three years straddling the fence between building a startup that I thought I would raise seed or angel funding for and building a profitable company that has been my day job for the last five years.  The first company was profitable on day one and has been that way ever sense.  Some days I think about how it would be if I gave up the first business and completely focused my time and energy on the second.  Man, what a world of difference that would be.  I want to do that, but every time I look at a term sheet or talk to an investor who simply doesn’t get it – not even a little – my heart sinks in my chest and I back away from the deal.  Or the investor backs away from the deal.  Or both. I’m not the ideal startup guy to invest in. I didn’t go to HBS or Wharton or Stanford business school, or drop out of the computer science program at Harvard or Stanford in order to pursue my startup in my early 20’s.  I had some friends that dropped out and some got lucky while others are still working day jobs for someone else.  I managed to figure things out sufficiently that I could quit my day job and live the life that I want. I also got lucky and married the girl of my dreams.  But enough about me. I’m writing this post because I feel that there startup founders and hopeless romantics have something in common that they need to get over.

So, as the gambler would say, you have to know when to hold ’em, fold ’em and to go all in.  I’ll leave the know when to run part to co-founders, investors, and employees of founders who might give them reason to do so and use a more modern analogy from the game of Texas Hold ‘Em (all in).  The problem with Hopeless Romantics is that they are in love with their startup idea so much that they want to spend all of their time, energy, and resources on developing the product into something that is absolutely perfect.  This is the kind of person that Steve Wozniak was, but the kind of person that Steve Jobs only found himself in to the extent that the people he brought into his startup allowed him to be.  As I read Walter Isaacson’s biography of Steve Jobs this becomes more clear. I had read iWoz about Steve Wozniak previously.  If it had been up to Steve Wozniak, the Apple computer would have been given away to people at meetup groups until someone at HP or IBM or some other company realized its potential and mass marketed it.  Steve Jobs focused on the sell it, mass market it, and go all in part.  This is a very important point.

Too many startup founders think of their startup idea like the Winchester House or like South of the Border.  The problem with these founders, and all of us are these founders sometimes, is that you have to finish what you are doing sufficiently some day.  If not then you will never get a customer.  If you can’t do it then that’s it, game over, stick a fork in it you are done.

I feel like there is a lot of talk about Lean Agile Startups.  People talk about this concept so much that I wonder if there is anyone anywhere who has not heard about this model.  The funny thing about talk is that it often goes in one ear and out the other.  In many cases people just seem to create their own Steve Jobs style reality distortion field for themselves.  They think that because they are somehow inspired that they will be able to accomplish great things in spite of their attempts to defy the odds.  The reality is that things just don’t work that way.

The biggest lesson from the Lean Agile statup discussions is to start with something small that works and then get validation on that fast.  Then evolve.  The problem that most founders have is that they are into their 19th evolution before they even seek their first user, much less any validation.  Ok, I’m exaggerating a bit (in some cases).  The point isn’t that there is some magic out there for getting it right.

This is where advisers come into play.  As a founder who has often looked out for a mentor or adviser who was a swiss army knife worth of insights, advice and a fat wallet to go along with it I just want to point out that when you go looking for advice you absolutely must listen to it and take it when you get it from someone that you are taking the time to sit down with.  If not then move on to the next person, but by all means do yourself the favor of taking someone else’s advice sometime.  If you can’t do this then you should probably not be in the business of starting a business in the first place because advice from your advisers will be a lot easier to take than advice from your customers who came to you, not the other way around.

On to the next topic.

When A Founder Should Hold ‘Em, Fold ‘Em and To Go All In.  Startup founders like to go all in as soon as they have an idea.  They get it on the napkin and then it is time for a PowerPoint (or Prezi if you are trendy) and a trip to sand hill road.  That may have worked some number of years back, but it isn’t a viable option now.  Hold on to your idea and get past go at least once before you push your chips into the middle of the table.  The time to go all in will come, but it is after you have some degree of validation.  I’m not going to cover the subject of when to fold them beyond saying that if you don’t know where the money is going to be coming from and you don’t have a consulting gig or something that allows you to work on your schedule while paying the bills after three months then you should fold the startup or get a job or at least get a job.  This is part of the problem mentioned above.  You can’t hold on to your idea waiting for the perfect hand to be dealt to you every time.  Sometimes you will not ever get a good hand or things will just not go your way.  Expect that and know when to walk away.  Beyond that, you should be able to get to the part of the Lean Agile startup approach where you have people who are willing to use your product and ideally pay to use your product.  If you get there, that is when you know you are on the right track.  You might say that that is your cue to stay in the startup game.

The bottom line here is that you need to be thinking about taking some risks, placing some bets on your risks, and being ready for when the right moment comes to take things to the next level.  Be smart and don’t lose sight of this and by all means, learn to walk before you try to run.

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