Part 1: Before the startup, Ideation phase & Co-founders.
This post was authored by Berlin Founder Institute Mentor Ben Jones, and was originally published on Medium.
🌱 Before you start
1. Be sure that you want to start a startup
Most people’s think that they will get rich, be their own boss, have impact and change the world. Let’s unpack these.
2. You probably won’t get rich
Most startups fail and during the early years you typically have to accept a lower salary than you would do working for another company.
3. Your real boss is the VC market
Yes, you will be your own boss, but consider the following. If you follow the typical startup path, you will make losses for the first ~5 years and then make lots of money later. This means that the ‘boss’ is in effect the VC market as you will need to raise money each year.
4. Good bosses serve their employees
Also, if you’re a good boss, you will care about your employees deeply and be working for them as much as they work for you. This comes with challenges like firing people you like.
5. A startup doesn’t automatically translate to impact
Yes, you can change the world and have a tremendous impact, but often starting something new creates less impact than joining something that is running e.g. the 200th employee of Facebook created the Like button! This is also the reason that it’s normally more effective to donate to a charity rather than start your own.
6. Creating and growing a startup is one of the most exciting and rewarding things you can do in your professional career
But it’s going to be a tough journey! A great book on this is “The hard thing about hard things.”
7. Even if you do everything right, you still might fail
That’s just how it is.
8. Understand that even if you fail, it’s not time wasted
It’s a great thing to have in your CV! We love hiring people who have entrepreneurial experience.
💡Ideation phase
9. Don’t starting building too early
Most founders have a build-bias — they like to jump in and build things before properly validation. Don’t do this! Invest heavily in validating your idea. The Lean Startup is a great resource for this.
10. Don’t pick an idea just because you think it’ll work
Pick an idea that will work AND you are super passionate about it. This will be the next 5 years of your life!
11. Accelerators and incubators are often a great idea
This is especially for first time founders, but pick wisely as the quality varies massively. They will give you structure, critical feedback on your idea and most importantly network and investor opportunities.
12. No one is going to steal your startup idea
Tell everyone about it and get their feedback.
13. Seek out people who have viewpoints you don’t want to hear
Not just people (like your Mom) who will say how great you are.
14. Strong opinons loosely held
Have a hypothesis and believe in it deeply, but be flexible to switch to the next hypothesis as you ideate.
15. Don’t get too emotionally attached to your idea
I wasted a lot of time on previous startups by doing this. It will cloud your judgement and lead you to jump to conclusions too early.
In our first office we used to have ‘crazy iBeer’ nights where we would drink beers and come up with ideas! One of the ideas eventually turned into Bitwala / Nuri.
🤝 Co-founders
16. Look for people who…
a) can get shit done b) have high resilience c) have a high capacity for growth and self-improvement AND d) you love spending time with
17. Do a project together before you found the startup
Would you get married to someone after the first date? A great idea for a project is some user validation e.g. creating a landing page or interview 10 potential customers.
18. A co-founder leaving is not the end of the world, but plan it!
Just like in marriage you should have a prenup, even if you can’t imagine breaking up now, think through how a split might look and make a a plan.
19. Get a technical co-founder on board
You should find someone who can live and breathe your tech no later than the end of the MVP phase.
20. Take time to understand the values and motivation of your other co-founders
What are the overlaps? What are the differences?
We loved hanging out, talking about bitcoin and did a bunch of projects together before we founded Bitwala / Nuri.
21. You don’t need co-founders to start your startup journey
There are programs that you can join where you find co-founders along the way e.g. Founder Institute (a good list here)
22. Being a solo founder is possible, but it’s tough.
Lots of VCs don’t like it. There’s a truck index of one! Also, it’s a massive challenge and you will appreciate having someone to share it with!
23. Tension between co-founders is healthy to a certain extent
But make time and space to explore this in a healthy way. Thing left unsaid tend to grow in size and significance over time.
24. Don’t sweat the small stuff
Joerg and I used to argue about small details of the office. We should have been arguing about more important stuff.
Part 2: Personal development & Work/Life balance
🎓 Personal development
26. Prioritise personal development
You will need to aggressively scale yourself as a human being if you want to enable your company to scale. You should…
27. Read
Read blogs. Read books. Join or create a reading group with other entrepreneurs.
28. Write
Blogging about something you learned is a great way of formalising your thoughts. It also doubles as great material for investors, people you’re trying to hire. I share this article with pretty much everyone who I’m interviewing.
29. Leverage peers
Find other founders to share and grow with. You need these people as your friends won’t fully understand what you’re going through.
30. Get a coach / advisor
Their role is to a) help you zoom out of the operational short-sightedness and structure the bigger picture b) help you to grow into the leader you need to be
31. Become a coach / advisor yourself
This is a great way of giving back, but more importantly it will force you to reflect on what you’ve learned.
32. Keep a work journal
Write down what you achieved that day, what you can do to make tomorrow even better and any learnings that came up.
33. CTOs have the most difficult growth trajectory
Their role changes the most throughout the life of the startup. Read why here.
I aim to read one fiction and one non-fiction book a month
🧘♂ Work / life balance
34. Hahahahahha. Really?
This one is tough…
35. Understand that you need to put yourself first
Anything else will learn to burnout.
36. Putting yourself first is hard
Understand that it’s easy to say “put yourself first”, but very difficult to. Understand that if you don’t, you are counting down the days until you get burnout or worse.
37. Get a therapist
(In addition to the coach) Get the company to pay for it! It’ll be worth it.
38. Identify who can support you in your circle
Having a partner and /or good friends you can share with is crucial. I haven’t seen statistic on this, but I would guess that co-founders in a stable relationship perform significantly better than those who don’t.
39. Set limits and expectations with your co-founders
Do you agree that you should take 28 days vacation a year without checking email? Stick to it and hold each other accountable.
40. Learning to switch off is crucial
Switching off is really difficult for most founders. Things that work for me: have a wind down ritual e.g. change clothes, listen to a song, go for a walk, have 10 minutes of alone time before going onto social activity. Having separate work / personal phones can also help.
Taking vacation is even more crucial if you struggle to detach during evenings and weekends.
Part 3: Communication, Scaling & Structure, Culture & Hiring
📣 Communication, scaling and structure
41. The startup will feel like a different company every 6 months
You will and should have a new job every six months.
42. Over-communication is better than under communication
There is no such thing as the right level of communication.
43. Keep the organisation structure simple by default
Creating different groups creates communication overhead.
44. Be transparent (but optimistic) by default
Employees really appreciate it when you share sensitive stuff like how a board meeting went and it’s less effort than creating information silos.
45. 1-on-1s are critical
I recommend having a template. Mine was asking them to talk through: 1) Top priorities 2) Concerns / challenges 3) Mood out of five 4) Team mood out of five 6) Any topics to discuss. BUT also keeping it open and treat it as a dialogue. It’s one of the only spaces that people have to communicate informally and that’s where the important stuff comes out.
We have a Monday morning ‘jour fixe’ where we give updates. We as clevel try to share as much as possible.
46. Create and maintain a lean strategy
A good basic strategy setup for a seed stage company consists of the following artifacts
- Problem — what is the status quo
- Vision — what would the ideal future look like
- Mission — our role in going from problem to vision
- A brainstorm on “what does success look like for us in 10 years” which should be condensed into ~5 long term goals
- Company OKRs derived from the long term goal
- (Once product market fit is there or nearly there) A north star metric with health metrics — The most important KPI to orientate success around e.g. monthly active users balanced by health metrics e.g. %age new users
47. Hierarchical OKRs are a great way of aligning a company
From the company OKRs you can then derive team and individual OKRs which feed up into the company ones.
🎖Culture
48. Celebrate successes
Even the small ones! I know companies that ring a bell every time they make a sale, then the team would gather round the bell to congratulate the team member and learn how he closed.
49. Translate successes for the company to successes for the team
e.g. at Nuri we gave our employees Urban Sports Club after we closed a funding round.
50. The culture will and should evolve from the founders
Be aware of this and shape it.
51. Company values are a good way of codifying the culture
These should come from the founder values and the shared vision of the kind of company that you want to create.
The Nuri values.
52. Values should be constantly talked about and activated
This can be achieved through a) evaluating candidates against the values b) measuring performance in part by how that employee lives the values c) giving awards or calling out examples of someone living the values
53. Culture is a self-fulfilling prophecy
Talk actively about it and what it means!
54. Culture will suffer through hard / busy times
e.g. fundraising when the mood is down and management is distracted. Proactively anticipate challenges to culture e.g. rapid hiring, funding rounds. Think about how to mitigate them.
55. Culture can be diluted if you scale too quickly
BUT new people often bring great energy into the company and are keen to drink the kool aid
56. Make the office a fun place to hang out
If your employees are spending time together in their own time, you’ve done something right.
57. Encourage a grass roots approach to events and activities
Empower team members with small amounts of budgets to set up events. This way it’s more organic for the team and less work for you guys!
58. Go on company trips
Instead of massively overpriced Christmas parties
59. Get hoodies as opposed to T-shirts
Hoodies can be worn more times without needing to be washed.
60. Create key memories
If you ask Nurians what the highlights were for them they will most recall the parties and trips. Try to make these as special and unique as possible as it’s these moments that will stick in people’s head.
Our 2019 Christmas party. We had these in the office to save money for company trips.
👔 Hiring
61. Hiring is the most important activity
(Once you’ve moved past the idea phase and got your first funding). Understand that it should take a lot of time and spend that time willingly!
62. Hire for culture just as much, if not more, than experience
You can’t teach culture. Note: Hiring for culture is not just the ‘beer test’. Hire against your values.
63. Do a founder interview as part of the hiring process as long as possible
Don’t just get a ‘gut feeling’ for the candidate as founders tend to seek out similar (optimistic, visionary) people, but try something more systematic.
64. Hire people so smart they scare you
Give them a clear direction and empower them.
65. Aim to hire someone who will be useful for the next two years
You should always hire for the company that you will grow into, rather than the company you are today e.g. don’t hire someone who has only managed a 5 person team if you want to have a 20 person team by the end of the year. Also, don’t hire a very strategic, not hands-on director if you’re only a 5 person company.
66. Invest early in senior people who can build teams around them
Hiring junior people and then their superior adds an additional risk that they won’t get on.
The last company trip to Prague was epic.
67. Getting good people is hard
Spend budget on resources like executive hiring services and make sure you have a great proposition to lure them in.
68. Titles aren’t free
If you give early employees too high titles, it will make it difficult and painful to hire above them.
69. Become a great interviewer
After 100s of interviews, my favourite questions are: a) if you could have any job at any company in the world, what would it be? b) Tell us something that isn’t on your CV c) What’s your spirit animal
70. Think about ESOP early
No handshake deals about ESOP! Set up your ESOP early, create an employee-friendly programme and establish a system for how to distribute it. Like all compensation topics, it’s much easier to get this right first rather than try to fix it later.
Part 4: Fundraising Why, When, and How Much? The Process, Cap Table & Negotiations
🤑 Fundraising: Why, When, and How Much?
See also my article on: Early Stage Fundraising for European Startups: Amount and Valuation.
71. Understand what it means to take VC funding
And decide if you really want it. When you take VC funding you are implicitly committing to trying to become a unicorn (opposed to lifestyle business). This means you are expected to spend money unsustainably for the first ~5 years which means you will become dependent on finding the next investment round to survive.
72. There is nothing wrong with aiming to create a lifestyle business opposed to a unicorn
You have to take a deep look inside yourself and figure out what you want. See Basecamp’s story and the rather hilarious way it achieved a $100bn valuation.
73. The VC route is tough
If you’ve decided that you do want to go down the VC route, take a deep breath. This is not to be underestimated.
74. A funding round should get you to the next funding round.
You should take money that helps you create the success that will get you to the next stage so you can raise the next round. Think about what milestones you need to reach to go from Seed to Series A etc. You should raise for at least 12–18 months (18–24 months for seed and pre-seed) to give you enough time to focus on the business.
75. You will need more money than you think
Take it!
76. Don’t think too much about valuation.
It’s typically derived from factors like how much you’re going to raise. More info here.
Celebrating our 4th birthday. Make sure to organise fun events to break the tension of fundraising!
🎯 Fundraising: The Process
77. Fundraising distracts management
Understand that the management will be (very) distracted during the fundraising process. Make a plan to compensate for that distraction e.g. 2 co-founders focus on the raise, one focuses internally
78. It will take longer than you think to close your round
Be optimistic in mindset, but plan contingency strategies on how to increase runway e.g. reduce costs or a bridge round.
79. Fundraising should be ongoing
Fundraising should be ongoing e.g. building long-term relationships with investors. The most basic form is sending quarterly investor updates, but a better way is to create meaningful relationships with investors where you ask their advice and exchange information on what is happening in your space.
80. Be resilient
Some investor calls go well. Some go badly. Get over it.
81. The perfect pitch structure
Pitching should follow this structure 1) Intro by investor — personal & fund including typical investment and stage 2) Personal intros by founders 3) Walk through deck / conversation about company 4) Call to action e.g. You: “I’ll be in touch for our round in Q4” or Investor: “I’ll get back to you after our IC (Investment committee). Also, ask the question: what would you hope to see when we talk again in X months? This is super revealing.
82. Be bullish, but casual during pitches
Remember, you’re hot shit. They would be lucky to be able to invest in you!
83. Your goal is the first term sheet
When fundraising, your objective is to get the first term sheet. Afterwards, everything will fall into place.
84. Milk investors for feedback
Try to milk investors for detailed, honest feedback. Often a follow up email or call after a rejection will turn “not the right stage for us” (default, bullshit excuse) to something insightful.
85. You can’t please everyone
Different investors will want different things. Group and categorise the feedback and figure out what to prioritise.
VC to founder translation — source
🧮 Fundraising: Cap table & negotiations
86. Finding a co- investor is easier than finding a lead
It’s much easier to get investor to “co-” (join a round) than to “lead” (set the terms of the round) and take on the Due Diligence process.
87. Investors are better at negotiating than you
They do it full time. You do it once a year. The only real way to create leverage is to create FOMO.
88. Don’t be too stingy with equity
On giving away equity: It’s better to take more money and go faster than to try and hold on to as much equity as possible. Your personal time is the most valuable thing. If this is going to fail, better it happens faster. The same goes for ESOP and hiring great people.
89. Avoid milestones where possible
Try to avoid milestones (e.g. receive second part of funding when you reach X users). They are dumb as you might have to pivot and distracting because you have to think about ticking boxes rather than what is best for the business
90. Get a personal / founder lawyer
This is in addition to the company lawyer. Make sure that the company covers the cost.
91. Everyone should contribute to the ESOP
Make sure the weight of ESOP is born equally by all shareholders. If this is not the case, there will be misalignment about how to incentivise good people.
92. Keep the cap table working
As much of the cap table as possible should be “working” e.g. active management and investors who will re-invest
93. Investors want to see the founders & management incentivised
Investors want to see founders properly incentivised. Typically, the founders should still have >50% of the company after Series A.
94. Consolidate your angels and small investors
Organise your angels and small investors into a shareholder pool to simplify the cap table once you get to Series A.
🎓 Investor relations
95. You are the boss!
Remember, you are the boss, not them! This can be hard as most people always had a boss. Good investors should empower and support founders to realise their vision. Typically, investors will become more pushy / micromanager when the company is going worse.
96. Talk early about internal rounds early
Discuss backup plan to fundraising (internal round) so there are no surprises later on.
Part 5: 🤔 Final thoughts
97. Fit everything into a story
Great companies have great narratives. Whether it’s talking to an investor or convincing someone to join the team, you always need to be storytelling.
98. Balance short vs. longterm tradeoffs
A lot of a startup is balancing short vs. long term tradeoffs e.g. should I pay this new developer an unfairly high salary because we are desperate for developers right now, but risk it blowing up in my face later on.
99. It generally gets harder.
A lot of founders think it will get easier. There are some things that become more comfortable e.g. higher salary, assistant to book your flights, but as the company grows larger in terms of people, investment etc. there will be more pressure, not less BUT it also becomes more rewarding. For me, the day I realised we were big enough to fill and entire bus was one of the proudest days of my life.
100. Reading learnings ≠ Learning
You can read this post and as many others as you want, but reading a lesson is not internalising it. Only through conscious and persistent work on yourself will you truly develop.
and a bonus one…
101. The most important lesson is to put yourself first
If you don’t do this, you’re just running down the clock.
Last last one…
102. Don’t forget to enjoy every minute of it
It’s an incredible journey. Don’t forget to look around and enjoy the view.
This guest post was written by Ben Jones, a Berlin Founder Institute mentor, and the Co-Founder & CEO/CTO of Bitwala (Nuri) - this article was originally published on Medium. You can read more here about how Ben Jones helps to support young startups from Seed to Series A.
Graduates of the Founder Institute are creating some of the world's fastest growing startups, having raised over $1.75BN in funding, and building products people love across over 200 cities worldwide.
See the most recent news from our Grads at FI.co/news, or learn more about their stories at FI.co/journey.
