12 Learnings From My First Turn As Startup CEO

Referred by Rajesh
In December 2003 I decided to take the plunge and quit my corporate job to start a new company from scratch. Believe it or not, it was an easy decision. I had an idea and a certainty that there was a valuable company to be built around it. That company was Jobster, where I served as CEO until January 2008 when I helped recruit my successor, transitioned to vice-chairman of the board of directors, and turned my attention to starting a new company.

Back in December 2003 I had no reasonable idea of what was ahead ... what i did have was passion for the idea of Jobster and for the pursuit of starting and growing a business.

I learned many valuable lessons at Jobster which I will take with me as I start my next company and my next and my next.

Here are some of the key learnings that I hope will benefit many an entrepreneur:

1. The CEO's job is to create value. Determine early on what the keys to value creation are in your industry and map a path for value creation for your business. Return often to measure how you are or are not creating value. Weigh business decisions based on whether they contribute to value creation or not. Avoid paths that do not contribute to value creation regardless of how sexy or fun they might be. Narrow the focus as much as possible. Get one thing right then move on to the next.

2. Try to ride some powerful existing waves vs. just creating new waves. Find some big and important industry trends and ride on top of them. It is very very hard to create your own industry trends. Be careful about getting out too far ahead of any wave.

3. Technology companies are all about the product. Getting the product right is critical before aggressively going to market. We went to market too fast in Jobster's early days. Ultimately your technology company will be judged based on how good your product is and how your target users take to it.

4. Related to #3, the rapid iteration model (ship early, learn from usage, adjust) works well for consumer services but works not as well for B2B services. Consumers will let you learn with them over time. Paying business customers, however, have less patience for your learning on their dime.

5. Hire people who are passionate about the specific problems you are trying to solve. We raised money for Jobster in 2004 when few startups were being capitalized. We were early to social networking. We signed up 150 customers in the first 90 days of going to market. As such, we quickly became the cutest kid on the playground for startup enthusiasts and everyone in town wanted to work at Jobster. A problem, looking back at it, was that many people (not all) joined Jobster because they wanted to work at Jobster, but not because they were passionate about the specific business problems we were trying to solve. Getting this right is very hard but so important.

6. You must get close to your users and customers and live their personas. We often struggled with this at Jobster as not many of our product developers related to recruiters and had trouble walking in their shoes. Likewise, we often had trouble relating to jobseekers and truly understanding their pain, as many of our employees had never really looked for a job. It is critical that you live, sleep, eat, and breathe the personas of your target users. That's one reason for Facebook's success -- their employees use their product all day everyday. It's awesome to be able to build products for yourself. That's what I'm doing in my next company where I am the target persona.

7. The value of your company is directly related to your capital efficiency. Spend every dollar like it is equity. Preserve cash! Preserve cash! Preserve cash! Yes, you need to spend money to build a company and to make money, but every dollar misspent erodes your valuation. We overspent going to market at Jobster in the early days and while we thankfully were able to recognize this and adjust, we are still working at overcoming it. One of the things I'm most proud of at Jobster was our financial discipline in 2007 which enabled us to grow revenues by 50% while cutting our expense base by 50%. That's hard to do but is smart business and drives value creation. That discipline also forced us to (and enabled us to) develop lower cost product development models, and develop a lower cost model for traffic acquisition based on technology and seo instead of spending to acquire users.

8. In the early days, I highly recommend that you force your startup to be resource constrained. Spend as little money as possible until you get some significant product traction. In the early days, if you think you need $1M, take $500k and force yourself to make it work. Our first capital infusion at Jobster was a $2.5M seed round. That was too much and enticed us even in the very earliest of days to go too fast. Within 6 months we had 15 people. For my new company in the early days 3-5 people and at most $750k will do just fine for a long long time until we prove out the product.

9. Don't listen to outsiders who tell you to go faster and ramp sales and marketing. Instead, listen to your current customers and users. The best sign that you are truly ready to ramp the business is customer/user satisfaction. Understand customer/user satisfaction drivers and gaps before ramping sales and marketing.

10. Avoid field sales in favor of telesales. At Jobster we quickly learned that field sales cost twice as much to sell (longer sales cycle, higher salary reps), and that you could sell the exact same product over the phone faster, cheaper, and with a much lower expectation for after sale support.

11. Once you are in the market and have established some measurable and repeatable levels of success, #11 negates #8 on this list: Raise more money than you need when you are in the market and the terms are favorable. We raised $18M at Jobster in mid 2006 at good terms and that fundraising was absolutely key to our being able to make critical adjustments which have Jobster on solid footing today. In hindsight, I should have and would have raised $30M then. Businesses take time to develop and are bound to have rough patches. Having the capital to learn, adjust, and get through to the other side is critical.

12. Have fun. Everyone looks to the CEO everyday to set their own moods and expectations. Being CEO can be lonely -- someone once said to me that CEO is the loneliest job in the world as there are days that your board hates you, your employees hate you, your customers hate you, and your family hates you -- true. That's why you need to make sure to have fun every step along the way. If you are having fun, people will see that and they will follow your energy. Remember, behind every wrong turn is a better path. And remember, that the beauty of startups is that you get to try, try, try again and again and learn a ton along the way.