Navigating Startup Expectations: Lessons from a Founder’s Journey
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Chapter 1: The Reality of Startup Growth
Many startup founders encounter a challenging reality, as illustrated by an entrepreneur I’ll refer to as "Jeff." A few weeks ago, Jeff reached out to share his experiences as he navigates his second startup after a lucrative acquisition of his first venture. While the previous success was beneficial, it has contributed to the current hurdles he faces.
Jeff’s first startup achieved remarkable success rapidly, leading to an acquisition offer he couldn’t resist. In hindsight, he feels it was the right decision, and I agree. However, this time around, Jeff is attempting to replicate that success under vastly different circumstances.
A year into his new venture, Jeff's ambitious goal of reaching $1 million in annual revenue fell drastically short—he hadn’t even made $1,000 in sales. Now, he finds himself depleting the funds from his earlier exit and facing the grim reality of dwindling resources and patience.
While it may be too late for Jeff’s current endeavor, there’s still hope for future projects, including yours.
The Myth of Exponential Growth
Many entrepreneurs believe that significant financial success is achievable for any startup. However, the reality is there’s no guaranteed formula for success in the startup world. Each venture is unique, and even the same founder can experience vastly different outcomes under different conditions.
Jeff’s lofty goals were symptomatic of a broader issue—his expectations were misaligned with reality. No founder invests significant time and resources into a project with the belief that it will likely fail. We embark on these journeys with the conviction that our ideas are valid, our execution is sound, and our businesses will thrive.
But this mindset can lead to setting unrealistic targets without a clear roadmap to achieve them. The notion of "hockey stick" growth is appealing, yet it often serves as a misleading placeholder presented to investors who expect to see it.
While such growth is possible, it typically requires identifiable catalysts to take place.
The video titled "The Money Expert: From $0 to Millions In 2 Years Without Any Hard Work!: Codie Sanchez" discusses the realities of startup growth and how to navigate the challenges associated with it.
Don’t Rely on Numbers Alone
When I inquired about how Jeff arrived at his $1 million revenue target, he responded with a barrage of figures—aggregated data that lacked context. What he couldn’t provide were the insights that explain how those numbers were derived.
I appreciate the importance of data, but one of the best pieces of advice I received from a founder who successfully took a company public was this:
"One of the biggest errors any CEO can make, regardless of their experience, is to observe early signs of hockey stick growth and assume the trend will persist."
In essence, expecting similar results from similar efforts is a flawed approach.
Jeff’s initial success led him to believe he had discovered a formula for success, but correlation does not imply causation. When he attempted to replicate that success with a similar strategy in a different market, the results were drastically different from what he anticipated.
Instead, Jeff should have adopted a trial-and-error method for his new venture, confirming the reasons behind his past success before attempting to replicate it. While leveraging a known strategy can provide a head start, understanding why it worked is crucial.
Experienced founders recognize that conditions fluctuate frequently—understanding these shifts is vital for making necessary adjustments. Without insight into why a previous strategy was effective, one may struggle to identify where changes need to be made.
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This article originally appeared in Inc. Magazine, where I write a weekly column on startup and innovation advice.