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Commentary

Tips for Making Sure Your Startup Doesn’t Fail in 5 Years

Feb 23, 2017

The Entrepreneur Insiders network is an online community where the most thoughtful and influential people in America’s startup scene contribute answers to timely questions about entrepreneurship and careers. Today’s answer to the question, “What are some of the biggest misconceptions about startup life?” is written by Sameer Dholakia, CEO of SendGrid.

The vast majority of successful businesses were, at one point, startups. The startup mentality is about making a decision to forgo stability in exchange for the excitement of making an impact in the world, and ideally, the opportunity to scale. Success is never guaranteed, though, and it takes more than just a groundbreaking idea to succeed. In fact, I've seen many startups fail in their first five years.

As scaling becomes a top priority for your startup, there will be a series of hard lessons that will help shape the future of your company. These are the lessons I’ve learned along the way:

Listen to your customers
As your startup grows, your engineers will likely push you to develop extensive product roadmaps that could last your startup through the next seven years. My advice is to not immediately reinvest in new products, but to instead focus on what your customers’ requests and needs are. You will learn that, with most startups, customers often value technical and onboarding support over a new product. You should focus on strengthening the services of your offering or product, as that will allow you to establish yourself as a leader in what you do.

We were surprised at SendGrid when our customers told us, a software company, that they needed services to help with things like deliverability and support. So rather than continue down the path of building more products and software, we invested heavily in services.

See also: Your Startup Won’t Succeed Just Because It’s a Great Idea

Focus on identifying the product-buyer fit before identifying the product-market fit
Product-buyer fit is about understanding the buyer persona. Identify your specific buyer’s pain point and the solution that will help them solve that problem. It’s also important that this buyer persona allows you to generate revenue for the service you are providing. My advice is to invest time in understanding your buyer and identifying a price point they’d be willing to pay to use that service.

Ask yourself these three questions before identifying your product-market fit: How do you serve or solve a problem for your buyer? Do you have an easy way to onboard your buyer? Are you directly targeting the person who is buying your product, or are you relying on someone to tell your buyer about your product?

Eight years ago, our founders came across a problem: They were struggling with the issue of building a reliable email system for their applications. They looked at other developers who were facing the same problem and decided to solve it. They had a specific problem that resonated with a specific buyer, one who, most importantly, had the ability to buy the solution.

Remember that hiring is a privilege
Don’t lose focus on who gets to decide who comes through the door at your startup. As you grow, recruitment will become a top priority, so take a step back and really analyze who gets to decide who joins your team. Most startups have too many people involved in the hiring process. A good starting point is to cut down the number of people you have interviewing candidates by half. Only your company’s best talent and culture fits should interview potential candidates.

When we hired our VP of engineering, we had over 30 people who were performing our interviews (based on who was available on the schedule). Now, there is a smaller, elite team of interviewers for engineering that stand at the gate to ensure we’re making the most of each candidate.

I also challenge you to ask yourself if you’re hiring the best candidates that found you, or if you’re proactively going out in the market and finding what you need. Most of the time, startups hire the best candidates that come to them. But you should be proactive and reach out to prospects that have the skills you need to help build a strong business.

Don’t get burned by your cash burn
Finally, and probably the most critical factor of growing your startup, is to be mindful of macro-economic environments and influencers. These days, there’s a lot of investment money, and the trend has been focused on the growth side of the equation. But if you look at the market trends, you'll see that businesses are heading back in the direction of profitability and fiscal responsibility. No one can predict the future, as we live in a boom and bust economy. It’s important to be mindful of how much you are spending to achieve company growth. If necessary, pull back on perks and travel.

My former CFO used to say, “Growing a business is hard. You will make many mistakes. The only mistake in business that you cannot recover from is running out of cash.”

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