What makes a successful startup?
There aren’t too many startups like Google and Facebook or even carsales, Seek and REA and the stats tells us that 9 / 10 startups fail (remember 90% of statistics are made up) so my definition of a “successful startup” is growing into a profitable, sustainable business and/or having a successful exit.
I’m sure every one is different in terms of the steps they took, road they traveled and end result so here’s 7 vital things that I found were fundamental to Digital Motorworks Pty Ltd (DMi) being a “successful startup” in 1999:
Identify the market opportunity.
As this will be your focus. This seems simple and it is more than wanting to do something because it’s what you know or to be your own boss. There has to be a gap in the market that you can fill or simply do it better and most importantly, it has to make commercial sense. The market opportunity for DMi was the gap of an independent inventory aggregation and dealer web services player for the big media players wanting to propel their online automotive sites, especially once Reynolds had made the decision to keep their inventory capabilities in order to push carsales (remember the quote “If it is this f&@king hard for us imagine how f&@king hard it is for them” in my post The Hard Decision carsales Had to Make).
Develop (and live by) the Business Plan.
My business partner is a finance guy and started us off straight away with the discipline of creating a financial business plan. I found that by thinking about and collating all the costs upfront and ongoing that we would incur, forced us to articulate a plan for getting money through the door (i.e. revenue). We went hard on the costs and realistic on the revenue because the costs were always going to be incurred but the revenue had to be earned! The importance of this step and ongoing revisiting of it cannot be underestimated.
3 Securing finance.
Most companies need to raise some money to get properly going, be it from family, friends, VC’s or the bank. Most certainly with the latter two and most probably with the former two, the before mentioned business plan is imperative. My business partner and I each secured finance to be used as working capital through the bank as second mortgages on our houses and the business plan was critical to making this process as straight forward as it could be.
Getting out of your comfort zone.
This is stating the obvious because you literally have to do everything no matter what your previous experience or expertise. Almost as soon as we started we were served legally by our former employer. Now this threw me straight out of my comfort zone and made me confront it head on which we did and got through, growing me enormously. My business partner took up a short term contract to get some money through the door with Esanda as they were trying to build Eauto.com.au while I pulled together our technology infrastructure and worked the sales process to secure our first client. This was again jumping out of my comfort zone as my background had only ever been technical. With the help and guidance of my business partner, I made it through the other all the better for the experience and most importantly, it secured the immediate future of our startup business.
Working bloody hard.
Again, this is stating the obvious but until you are in the position where the business survival rests on what you are doing, you don’t really know what hard work is. We just didn’t have enough hours in the day to get through everything we needed to. While my business partner would travel backwards and forwards from Adelaide to Melbourne putting strain on his family life, I would be working on securing clients by day and through our technology requirements by night. Mouth ulcers were a common side effect for me; and those don’t kill you!
Having a passion for what you do.
This one cannot be underestimated. It’s one thing to work bloody hard and it’s another to work bloody hard on something that you have a real passion for and love. We both loved doing what we were doing and our passion for it shone out as I’m sure it helped us secure new clients. This was when I learnt that I could sell anything – if I was passionate about it.
Having the right business partner.
It is ok not to have a business partner, in fact some people believe that you have to have 100% control to make something work. For DMi I had 2 business partners – a former colleague and Digital Motorworks Inc out of Austin, Texas. Having the guys from the US was vital in our time to market and helping us to secure our first big client. They provided the technology platform which I then had to take on, setup, maintain and adapt to Australia and later transform from auto to jobs. This was a great leg up but everything else was on our shoulders in Australia as a startup.
For me getting a startup off the ground with the experience and confidence (or lack thereof) I had at the time, having a business partner on the ground with me was vital. I have referred to my business partner multiple times in the previous points because we really did work as a team. First thing was that I probably wouldn’t have gone into this on my own or been able to get through without his expertise, experience and being able to talk things through. His background was finance and sales in the automotive space. My background was technology in the automotive space and playing/coaching football. We made a good team because our skills complimented each other, we had the same goals and we actually had a good time doing it.
These 6 things were vital in making DMi a success. We were profitable within 6 months, grew to employ over 30 permanents and 60 casual employees and had a successful exit. We were no carsales or Seek or REA but then again they are no Google or Facebook either.
Nonetheless, we started a business from scratch and made it as one of the 1 out of 10 to succeed. For me, that was pretty successful.