Over the past month I’ve really enjoyed the feedback from my posts about what I feel it takes to build a successful startup (I define a startup as any new company able to grow fast). If you missed the posts, the summary is I believe startups need to have the Startup Grit personality trait and a team that works extremely well together. Having these two core ingredients, I believe, startups can achieve the success they set out to achieve.
Which brings me to this post which is to clarify the meaning of building a “successful” startup. The question I have is “who/what defines success?” Is it me? The market? Our investors? My friends? The media?
You can argue that in business, the definition of success is objective because its based on Retained Earnings, Net Income, Cash Flow, or Valuation. Unfortunately even those numbers don’t even relate to each other (valuation, as proven in the SaaS public markets, has nothing to do with Retained Earnings) and they really just act as markers for an outside investor to review.
For us at BrightGauge (and me in particular), we’ve struggled defining what success means to us. And I’ve come to realize that its because in our SaaS industry, other companies have captured our imagination of going public or being sold with what we feel are crazy valuations (for example, 15x trailing 12 month revenue). We most often hear about the few companies getting a billion dollar valuation in just a few short years of existence (they’re called “Unicorns” in the industry). You know the stories, Snapchat, Instagram, and many other non consumer focused products which we know intimately. We continually dissect what these companies are doing and we’ve actually learned quite a bit on why the markets are valuing them so high. So we now know their formulas, we have the team, the grit, so why aren’t we (I) happy chasing that definition of success?
It wasn’t until I read an awesome post recently that it hit me what type of company we’re truly building. The title of the post is Unicorns vs. Horses, Why I want to be In-N-Out Burger, Not McDonalds and I encourage everyone to read it. Andrew Wilkinson, Founder of MetaLab (www.metalab.co) and Flow (www.getflow.com) did an awesome job articulating what many small startups are all about. In case you don’t read whole article, my favorite snippet was this:
Venture funds know that the majority of start-ups will fail, so they need to structure their deals like this in order to make a return. If you aren’t McDonalds, you better damn well be Burger King, or die trying. There’s nothing wrong with this, but this way of thinking — all or nothing moonshots to maximize shareholder value — has become pervasive dogma in tech. It’s become the only respectable path. Either you’re running a lowly lifestyle business, making ends meet so you can surf all afternoon, or you’re working 17-hour days goring competitors with your $48MM Series C unicorn horn on your way to billionaire mountain.
Meanwhile, there are thousands of internet businesses out there, quietly making tens, and even hundreds of millions of dollars, who have taken the same path as In-N-Out. They don’t need to be first, second, or even tenth, in their space, and have instead chosen to focus on a small percent of a massive market. They answer to customers, not investors, and focus on making their employees, customers, and themselves happy. They’re thoroughbred horses, not unicorns, and it’s time we start paying attention to them.
At BrightGauge, the truth is we’re building a thoroughbred horse and enjoying every day working together as a team (even the toughest of days). We love servicing our customer base, creating a great product, and building a team that is more like a family. Thats my new (but really old) well described definition of a “successful startup”.