Founders, Valuation, and Startup Success: A Guide

By Ryan Dominic Sy; Managing Partner, Bull Run Consulting Co.
This article first appeared on Startup Insights.
Photo by Annie Spratt on Unsplash.

Startup founders possess a unique blend of essential qualities: grit, passion, and mental fortitude. These three attributes serve as the driving force behind their entrepreneurial endeavors, allowing them to conquer obstacles and navigate challenging terrain. However, these traits alone are not sufficient.

The journey to startup success demands a set of social skills often referred to as ‘soft skills.’ These include kindness, patience, and empathy, which are typically cultivated through personal growth and life experiences. Without these soft skills, your team may be motivated solely by financial incentives and perhaps your vision for the company. But, you will soon discover that people seek more than just monetary rewards.

The above-mentioned qualities are essential for achieving success in the world of startups. But what does ‘startup success’ truly entail? Is it defined by the highly anticipated ‘exit’ that industry insiders often discuss? Is it about the rapid expansion in scale and scope or the size of the workforce employed? We don’t think it’s any of these.

Instead, we argue that startup success is when you attain peace of mind at a some point during the entrepreneurial journey. Pinpointing exactly when this sense of tranquility is reached is difficult, as every entrepreneur employs their own unique methods to manage and control their company.

True peace of mind emerges when you can ensure the ongoing stability of your business. It becomes evident when all essential systems are in place, and your workforce operates proficiently. It becomes a reality when you recognize that the positive impact you’re making is sustainable, signifying that you are on the right path. One thing is unequivocal about attaining startup success: it’s the ability to sleep soundly at night, assured that the problems awaiting you on your desk in the morning are manageable.

The early years of startups are tough. There’s no question about that. So how do you attain such level of clearheaded calmness? It is impossible, you say, to achieve this while hustling and grinding day after day. After all, the amount of risk startup founders are taking in order to build a company from scratch means they have to give it their all – blood, sweat, and tears. So it is impossible. Until it’s not.

You need first and foremost to understand that your startup has to be solving a problem. It is as simple as that. We tend to over-complicate things and that makes the problem solving process less cost-efficient. Oftentimes, accessorizing with bells and whistles gives you more headaches than profits. After all, at the end of the day, you need to be running the business profitably for it to be sustainable.

The typical venture capital model of investing incredible amounts of money in unprofitable startups with good future potential is widespread. Many exceptional startups have succeeded with it, for sure. However, for the rest, this practice constructs their business like a house of cards. They scale so quickly without solid business fundamentals, and then it reaches a point where everything falters, leaving the entrepreneurial founder with the headache of running a massive losing operation. While they may take pride in securing the ‘series A’ funding, at the back of their minds, they are uncertain and insecure about how to effectively allocate the capital. The pressure from the VCs to deliver positive results adds to the tension they’ve already placed upon themselves.

That is not where you’d want to be. You’d want to enter the big leagues prepared and clear-sighted about how your growth is accelerated. This is achieved by maintaining a level-headed decision-making process right from the early stages of your startup. Solve a problem, stick to the basics, generate revenues and profits, iterate, and keep things simple. Discipline plays a crucial role in startup success. It’s the kind of discipline that keeps you grounded and focused on the core business, preventing you from spreading yourself too thin. With discipline comes peace of mind because it makes you more aware of what to expect and how to handle it.

We often hear many startup founders express unwavering confidence that VCs will fund them, just as they have with other high-profile startups with barely any revenues. We hear it all the time. We question their ultra high valuations while operating at a loss, and the answers are the same, brash and self-assured. They say they don’t worry about it because other tech startups in the US have done so successfully in their extremely high funding rounds. They say that it’s their future potential for growth that you’re investing in.

What they fail to understand is that there are actually many investors and VCs fighting each other out while trying to grab a share in those such startups in Silicon Valley. For some reason, they just want those startups so bad. That situation simply raises the price. The law of supply and demand applies in the financing of startups as much as it does in commodities. The more investors demand it, the higher the valuation gets. So ask yourself whether many investors really crave your startup. If not, try to be more reasonable in evaluating it.

Those founders who misunderstand this believe that they can just raise their price based on how they evaluate their own company without any regard to how many investors would actually like to invest in it. This misguided confidence leads them to a months-long, or years-long, wait for their much-needed capital. The longer they wait, the greater their opportunity cost becomes, and the more their competitors grow stronger.

Your approach to building your startup company should be simple and straightforward. Avoid over-complicating your processes, products and services, and your approach to financing. Make small wins and repeat. Pay close attention to managing risk. Lastly, keep yourself grounded and avoid delusions of grandeur.