One of the toughest pieces of advice I usually give to the founders I have invested in is to understand when and how they have to make the transition from a high-growth-chasing startup to a lifestyle business.
Entrepreneurs feel like they “gave up”. Many actually prefer to shutdown their companies and decide to either get another job or start something fresh, instead of spending more time learning which of their assumptions were incorrect.
In this blog post I am going to try and make the case for why you should transition to a lifestyle startup instead of giving up and going to another “idea” or solve “another problem”.
If you decide to join a big company or to get another job, if you startup does not pan out, I understand that. I dont think you will enjoy the transition, but a less stressful, more defined and predictable life is something people crave for after the roller-coaster ride that’s in a startup.
If, on the other hand you choose to start a new company in a new space, with a new idea, I think that will be a bigger waste of time than pursuing the “customer development” efforts in a given space.
From my experience I can tell you that it takes between 2 to 3 years on average to learn the contours of any given industry, its players, the mechanics of how it works and the entire value chain. I call this the “happy learning phase“.
Usually at this phase the growth on what you learn is typically 10% day-on-day.
During this period, while you are trying to build an early version of the product, get a few customers and iterate on the “actual problem” that you have to solve. Even when you believe that you have a problem and some form of product-market fit, you will need time to find the early adopters, or to weed out the naysayers and to find your early wins.
Most entrepreneurs set up early goals for their startup which have certain milestones, one of which is fund raising. Associated with the fundraising metric are business metrics as well – # of customers, revenue, # of employees hired etc.
Contemporary wisdom puts a number around your growth: measured month-on-month – typically at 10% or 20% (as opposed to Conventional wisdom, which used to be focused on growth with unit economic profitability). Most entrepreneurs feel if they dont hit those growth metrics, then their startup is doomed for failure, even though most realize that not all startups can be unicorns.
If, however after a few months of less than your stated growth, you are inclined to throw in the towel and pivot away, the clock on the “happy learning phase” resets.
Which means you have to start on a new set of learning and the phase begins again. This usually means that you have to understand the market again, figure out the new landscape and finally make new connections.
When you are at the fork in the road when you have to decide between continuing at the startup, versus pivoting to a new idea, I’d highly recommend you turn the company into a life-style (consulting, teaching, training, etc.) business and spend time in the making-money-phase based on the happy-learning you did before.