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 must every entrepreneur know about startup success?” is written by Michael Litt, co-founder and CEO of Vidyard.
Most startups begin as an idea. Right now, countless would-be entrepreneurs are hunched over their laptops imagining the next big thing. It could be a new social media channel, or it might be a revolutionary app. The idea behind my company, Vidyard, was to build a platform for companies to distribute, analyze, and manage their video content. But a great company needs to be more than just a great thought.
To turn that inspiration into a successful startup, I’ve found the hard way that a founder must focus on three critical priorities: knowing when to hire, truly innovating, and keeping money in the bank.
Are you hiring the right people?
Without a doubt, people are the biggest contributor to productivity, from both a growth and product development perspective. That’s why ensuring you have the right team members—and an adequate reserve of new talent—is one of the most sacred responsibilities a founder has.
Initially, my co-founder and I looked at our company as a giant dam full of leaks. Our approach was to plug the holes with our fingers—covering as best we could—until we could find someone to plug them for us. Each hire brought someone in with the expertise to do his job better than we did.
Eventually, we reached a point where we could bring in senior-level managers and remove ourselves even further from the day-to-day. I think this kind of deliberate “zooming out”—finding better people to fill your old shoes—is at the core of a founder’s responsibilities.
So how do you hire the right people? In my experience, culture is the “X factor” that enables smart companies to attract exceptional talent. Yes, employees are looking for the right compensation, growth potential, etc. But, at the end of the day, they’re seeking a culture that aligns with their values. And once you succeed in bringing A players on board—and helping them thrive—you’ll have a steady pipeline of referrals. I think that’s why a remarkable 49% of our hires came from referrals from people already on our team.
Are you truly innovating?
Innovations are more than just novel ideas; they’re ideas that actually catch on and drive change. When 3M scientist Spencer Silver accidentally invented a removable adhesive in 1968, it had no practical use. His creation was inventive, but not innovative.
It wasn’t until years later that this same product was repackaged as the now-iconic Post-it Note and took off like wildfire.
My point here is something that Salesforce’s (CRM) Peter Coffee and many others have insisted on: Innovation requires both invention and people adopting that invention. Silicon Valley, as well as my backyard in Waterloo, Ontario, is filled with founders building new technology. But if you’re not connecting with a user base, then you’re not producing much change—nor are you making any money.
Are you keeping money in the bank?
Without money, you have no people to innovate, grow your customers, increase revenues, or bring in funding to keep the virtuous cycle moving. Keeping money in the bank is critical to all of those efforts and should rank at the top of any founder’s priority list.
But what does it mean to keep money in the bank? For many businesses, that might mean simply being profitable and plowing those funds back into the company. But for most growth-oriented startups, that approach falls short. It’s key to embrace early on the idea that an initial runway of outside funding is critical to achieving scale.
How do you get funding? To be honest, I’ve never made a formal pitch to investors. Instead, I’ve always asked for advice and ended up with money. I constantly reach out to people, letting them know our goals and where we’re at. As people learn more about us, they see our progress over time and get excited to be part of our success. Funding, much like hiring, centers on relationships. When you pitch strangers, they don’t see your growth, and it’s harder to gauge your trajectory.
Growing a company is of course enormously complex, and I don’t mean to oversimplify. But by focusing in on these goals, I’ve been able to navigate through obstacles along the way and understand where my time and resources are best spent.