1. Every word you speak matters.

Congratulations. I don’t know whether you realized it, but you are now an actor.

Your stage is your office.

Let me give you an example.

I was in my office late one Friday afternoon. We had our company meeting lunchtime earlier in the day.

Jeroen, our VP Engineering walked into my office. He said, “One of my guys was worried because you frowned when you answered the question about revenue.”

“I frowned?” I said. “I don’t remember frowning.”

“Yes, he thought you frowned. And so he thought things were really bad.”

I was laughing at this point.

But this anecdote just shows you how everything you say, everything you do, every gesture you make, every email you send, all of it will scrutinized over and over by your team.

Your team will look for meaning where there is none. Your team will wonder why you left the office at 4:30 PM?

That’s why you are now an actor. You are literally on stage every second. You don’t have the luxury of taking even a second off.

 

2. No, the market doesn’t immediately notice you exist.

I think one of the most jarring things for me was just how difficult it is to build a following and a brand for your business. And what makes it even more jarring, in my case, is…

I knew going in was going to be hard. And I was still surprised at how hard it is.

You’ll be ecstatic the first time you get 100 visitors to your website in one day.

You’ll be ecstatic the first time you get a customer. You’ll truly understand why restaurant owners frame that first dollar bill they get.

 

3. Getting to $1M/Year in revenue is really, really hard.

I had built several businesses from $0 to greater than $100M before I started my company. So I had pretty high expectations that getting to $100M was the goal.

Little did I know how unbelievably hard getting to just $1M/Year would be.

You underestimate everything when you start a company. You underestimate how much money you need, and you’ll underestimate how difficult it is building a brand.

So is it any wonder that you’ll be surprised at how difficult it is getting just $1M/year in revenue? It shouldn’t be, but it is. But…

 

4. It’s hand-to-hand combat when you’re trying to win a big deal.

Martin, one of our best engineers, said to me, “It’s hand-to-hand combat getting a big customer to buy your products.”

Martin was right. It can be really difficult getting big customers to buy your products.

Think about it: All your competitors want that business too! That’s why it usually is a better choice for startups to go after underserved markets that might be a little smaller.

 

5. Hiring a great VP of Sales is unbelievably hard…

And hiring a great VP of Sales is unbelievably important.

We cycled through three VP of Sales in four years.

The first VP of Sales was a co-founder who would have been great but he just didn’t have the energy and drive necessary to do the job.

The second VP of Sales just wasn’t strong enough. He tried really hard, but family issues derailed him.

The third VP of Sales came highly recommended but was the wrong guy.

Why were we so inept when it came to finding a great VP of Sales?

I have to step up and take the blame. I was the CEO who hired all three VPs of Sales.

The reality is that a really great VP of Sales is not going to be interested in working at your startup until you get to some level of scale. The job isn’t meaty enough for a great VP of Sales, and it’s not worth the challenge.

So you’re better off without a VP of Sales until you get to scale. That was a big surprise.

 

6. Expect some sort of power play every time, every single time you are about to close your funding.

One of the saddest things to me about my experience building our company was the drama around each fundraising event. And I don’t mean the external drama of dealing with investors because you expect there to be drama dealing with investors.

I mean the unexpected internal drama of dealing with employees and cofounders leveraging the fundraising to attempt to get various things (usually more money or power).

For example, two of my co-founders (one was a friend for over 20 years) demanded that I create an “Office of the President” with them or they would quit. All major decisions would be agreed to by the three of us.

I refused, and they backed down.

“I’ll quit if I don’t get what I want,” is the threat. Your answer always has to be no after listening to their grievance. Always.

It will take all of your skill not to give in because losing a key employee before you close funding could cause you to lose your funding. It’s tough, I know, but you have to find a way through the abyss.

 

7. Your investors likely will have surprisingly little sense of urgency over you closing your funding,

You’ve just signed a term sheet. You’ve been raising money for close to a year and funds are really low.

You want to get the money into your bank account as fast as possible before your new investor changes their mind. Plus your new investor is excited to get started putting their money to work.

There are millions of dollars at stake, but your existing investors move like snails. You have closing documents that need their attention and they delay signing.

A day goes by. And then another day goes by before they sign the documents.

All the while you are sweating bullets to get your funding closed. That’s the sad reality that you are the only one with a sense of urgency to close your funding.

 

8. That’s when (and why) you need to become a polite pest.

You have to follow up on every detail with every investor to get the round closed. You’ve got to make the extra call to the lawyers. And you’ve got to send the extra email to nudge your investors along.

 

9. You’re likely to learn what the zone of insolvency means.

Have you ever heard of the zone of insolvency? Sounds kind of like the twilight zone, doesn’t it?

The zone of insolvency is simply when your company has more liabilities than assets. In other words, you don’t have the ability to pay your bills.

You are likely to enter the zone of insolvency as you come close to closing your funding. Your attorney will make a big deal about entering the zone of insolvency.

Your investors will just shrug their shoulders. “So what, we’ve been there before. It’s nothing to worry about,” they’ll say.

But you’ll worry because it’s an indication of how close to edge your company truly is. And the scary thing is it will not take much to tip it over to the point of no return.

 

10. You’ll learn that 409A valuations are a joke.

You probably never heard of a 409A valuation before you started your company. Essentially, you hire an external person to determine the value of your company.

Your attorney will likely start pushing for a 409A valuation a couple of years after you launch your company because the common wisdom is that you need a way of setting the strike price of stock options.

Your initial option price is usually arbitrarily set at around $0.12 per share. Why? Because everyone else’s option price is around $0.12 per share.

But as you get bigger, you can’t just go with an arbitrary number anymore, can you? It makes sense until the valuation of your options suddenly jumps from $0.12 to $1.12.

Oops.

Now your new hires are pissed because the exercise price on their stock options is now a large number. You want to keep that number low, so your employees can make more money.

So you nudge your independent expert to come up with a lower valuation of your company. “Ah, that’s better,” you say to yourself when you see the new price of $0.17 per share.

 

11. You’ll find out your team is more resilient than you think.

One of the more surprising things you’ll likely learn is how resilient your team really is. I did.

The way you build up your team’s resilience is through transparency. Share with your team the bad stuff as well as the good stuff.

You’ll likely be surprised at the positive response your team has to adversity.

One word of caution before you lay your soul bare: Never show your fear or panic about what’s going on however bad it is.

You want to appear to be in control (remember you are an actor) even if you’re scared to death.

 

12. Your investors expect you to screw up…

 

…especially if you are a first time CEO.

I’ll never forget listening to some of the partners at the VC fund I was an Entrepreneur in Residence (EIR) talk about first time CEOs.

“And of course the CEO is going to make hundreds of mistakes” was the consensus view.

Your investors are expecting you to make mistakes. But there are three things you need to remember if when you make mistakes:

1. Never surprise your investors. In other words, don’t hide your mistake from your investors, and…
2. Tell your investors about problems before you have a board meeting. Then your investors will not be surprised by the problem in front of the other board members. And…
3. Learn from each mistake. Then you will not repeat the mistakes, and you’ll get smarter.

 

13. You really do have to be 100X better than your closest competitor to win.

You’re a small startup. The world has existed quite well with you and your company. The only way to cut through the noise is being significantly better than your competitors.

I learned this one the hard way:

• Our first products that were maybe 30% better than the competition didn’t sell well, and…
• Our second-generation products were 3X to 10X better and they sold well, but…
• Our third-generation products were 100X better and groundbreaking and they really sold well!

 

14. You will be obsessing about your company every waking moment.

You’re on vacation with your family, and what are you thinking about? The company!

You’re going for a run on a Saturday, and what are you thinking about? The company!

You’re at the movies and what are you thinking about? The company!

Your obsession with your company never goes away even while you’re sleeping.

 

15. Your investors trust you more than you realize.

“They’re actually going to wire $12M into our bank account,” I said to myself.

We had just completed the “documents” phase of our initial funding. We had signed all the paperwork. And here were these people that we barely knew about to wire us $12M.

I don’t know if that counts as a surprise, but it shows you the trust your investors are putting in you. Your investors know you may fail. And your investors know you may lose all their money.

But your investors are willing to wire you millions of dollars. And then they expect you to figure the rest out for yourself.

Is that crazy or what?

 

16. You’ll likely never, ever, ever want to work for anyone again.

Maybe this isn’t such a big surprise, but it certainly was confirmed for me after I sold my company.

I had no desire. In fact, I had a negative desire to work for anyone ever again.

I just couldn’t stand the thought of working for anyone. I’d rather starve than work for someone again.

That’s why it’s so hard for ex-CEOs to become VPs; potential employers know you don’t want to work for them either.

 

17. You will have people you trust turn on you, but…

You will have people you didn’t expect to help you time and time again.

We already spoke of the betrayal (see answer F). However, you’ll be amazed at the support you get in surprising places.

Like when the entry-level engineer stayed all night fulfilling sample requests without being asked.

 

18. You will never be closer to another group of people again in your career.

Building a company from the ground up is an intense experience. You go through so much and it’s so intense.

There’s a bond that forms between you and your team that will be there forever. And that’s why building a company is so special and so enjoyable.

For all the problems, for all the late nights, for all the near-death experiences, it’s the feeling that you and your team are doing something really special together. And nobody is going to get in your way.