Want to innovate and create a startup? | by Mark Burgess | Nov, 2022 - Medium

Some blunt retrospective notes from the front line…

You have a good idea, and you want to make it your life's work, or perhaps you want to change the world. You never did anything like that before. Where to go? What to do? Here are some notes, based on my own experiences, about the startup landscape and commercialization of software. They don't try to beautify the struggle. They summarize conversations I have with would-be founders as well as my own experiences.

Entrepreneurs are a special breed. Inventors even more so. Inventors want to bring their ideas to others, but may struggle to break into the world of business for several reasons. The prevailing narrative in startup land is that the founder always becomes a problem in the end, because he or she won't let go of their (child) idea. They won't to do what's needed to make it a commercial success. There's sometimes a little truth in that, but it's not only the founder's fault. In reality, it's the tension between the founder's focus on the ideas and making the world a better place, and attracting money from clients and investors to sustain and grow a business. This conflict of interest is where the source of the trouble often begins. Sadly, the world rarely wants something new — it usually just wants slightly new wrapping. For a founder sustaining might be enough; for investors, growth is important — because growth means a larger return on investment.

The Innovator

It takes a certain kind of personality to take the lead — to start something. Jumping into someone else's project is relatively easy. Starting a new business is not like opening a predefined franchise outlet or a café, where all the plans have been designed in cookie-cutter style. We should always be mindful of Machiavelli's observation:

"There is nothing more difficult to take in hand, more perilous to conduct or more uncertain of its success than to take the lead in the introduction of a new order of things, because the innovator has for enemies all those who have done well under the old scheme and only lukewarm defenders in those who may do well under the new."
(Machiavelli, The Prince)

When moving into business, you step into the arena of competition. You are even competing against things and people you wouldn't expect. You might not think people should lump you together with another business, but they will. You need to finance your operation, and that isn't easy. Making money is only easy if you already have money. If you're used to working for a large and stable organization in public or private enterprise dealing with costs and bootstrapping will come as an unexpected stress.

If you're lucky, you've done a lot of development in your spare time and you've financed a lot to begin with. But getting your wares into a marketplace, where they can be seen, is a new level of difficulty. That costs money too! It's why people look for investors, who put can money in to gamble against future profits.

Money

Money can come from grants in the public sector, but these typically waste much of your time for writing applications, reports and following rigid rules about deliverables. Public money often ties your hands more than freeing you to work — you end up an administrator rather than an inventor. The alternative is private money, selling shares in your company, or getting a loan from a bank. Loans have high interest rates and aren't very sustainable, so that leaves VCs.

Venture Capitalists (VCs) invest in companies to make a profit. Their terms typically come with fewer time wasting duties than public grants, but they will eventually expect to sell their shares at a profit, by selling the company or by turning it into a public company (IPO). This can bring a good focus to bear on company discipline, but it also leads to conflicts of interest. Making the choice of how to finance the bootstrapping of the company is no light decision. On the whole, I think a reputable VC is the better option.

In technology, it used to be possible to start a company just by writing software or developing a product in a garage. But now it's harder. You're competing against Big Tech companies that suck up talent and can afford to pay people well. You need idealists to get started. Everyone has to expect to work long hours for little money, usually in exchange for a share in the company. Most people won't get much for that in the future, but it's a valuable and humbling life experience!

Google has changed the dynamic of technology forever. Google, Microsoft, Facebook, etc, and companies like these, now effectively stifle startup innovation because they can own it all. Although they fund a few companies in Silicon Valley, they can easily start internal projects with their huge resources. What they do naturally gets more attention from Google fans, because it can afford to be quite good. In practice, they operate as cargo cults for technologists, some of whom become disillusioned and escape, but then go to work for other cargo cults — either because it's the only way to get paid, or because they actually prefer the life of being a team player with a boss, not being exposed on the front line of risk. Some users won't even accept a technology if it isn't stamped with the approval of these tech giants.

Startups can be stressful in a different way. There's shelter and certainty in working for a big corp. Not everyone realizes how hard it is to figure out where their wages will come from, when they stand alone. Success requires a basic level of skill, good networks to money, and a lot of luck.

For me, starting a company was the only path of escape from a poorly paid dead-end job at a university, so I was willing to live on "dried bread 'n' scratchit" (as my grandmother used to say) for a while to get started. University research life was about living from begging-round to begging-round for public funding, and not having the freedom to actually innovate, because of bureaucratic constraints. It left me feeling like one kind of charlatan. So I tried to become a different kind. Maybe I could make money by myself, and use that to fund my research. It's been a hard slog, but to some extent, after many years, I've succeeded. Still, never a day goes by when I don't have to worry about where the next money is coming from.

3 kinds of role

There are several dynamics to consider for a founder. Which kind are you? A company needs basically three kinds of role to succeed. That's because good ideas aren't profitable if no one can understand what to do with them or monetize them.

There are three gods you can choose to worship, when you select your role in a company, and three very different kinds of people you'll meet:

• i) technology/innovation,
• ii) product/service,
• iii) financing.

These gods each exact their tributes, and they're in direct competition with one another. Their supporters might pretend to be aligned in the beginning, but that cooperation will eventually come undone once money and customers are in play. Technical founders naturally want their idea to succeed, but having the best idea will not generally make the best product and will not lead easily to the best financials.

Truth is, most people are conservative when it comes to selecting novel solutions (especially in Europe). They won't jump at the chance to do something different. So most startups go to USA where people are more open minded, as well as open to innovation and risk taking.

You can't always tell who prays to which god…

The Money Men

Because nothing can get started without the world of finance, i.e. access to money, finance ultimately controls the show. The safest way to start is to work directly with a buyer and build step by step, supply in tandem with demand. Company experts despise this "lifestyle" approach to growth though, because they are looking for ways to grow profits and become rich. Finance is dominated by elite social networks: rich people, and people who pursue MBAs hoping to get rich. Many of these are further associated with elite universities, like Stanford or Oxbridge alumni, etc. There's a huge amount of snobbery lurking in plain sight. It's a cliché, but it's not wrong.

Then there are MBAs, people who pay for a degree to try to penetrate these networks, learning a simple minded approach to business that favours the pursuit of money and old fashioned command and control elitism. Their modus operandi is to exploit founders' ideas to try to attract and then siphon off money — to use entrepreneurs as a passport to their personal success. If it isn't obvious to you, it's well documented in books like The Golden Passport.

If you are not one of this elite group of money men (usually men), you never will be — unless you get very lucky and become rich along side them. They may associate with you out of convenience while looking to extract money from you, but you will only be a kind of useful "pet" to them. They might respect you on one level for having a particular skill they can use, but they will despise you on another level because you need their money.

Everyone in these circles "knows" that the rich custodians got their own money because they (or their families) were smarter and braver than the poor unsuccessful people in the world. Luck didn't have anything to do with it! Of course, this doesn't always show on the surface (thank goodness). They usually present as polite and groomed, but never forget that this tension is bubbling at their core, just as technology of service might be at yours. As soon as you aren't potentially useful to them, they will drop you like a sewer rat.

Newly successful people are often more arrogant about their good fortune. You can't get angry at such people, it's just the nature of their business.

Money-minded people will play along with you and help you to form your startup, while pilfering from you at the edges, usually through invisibly manipulating the company finances in favour of perks, and by taking high salaries while limiting the wages of more technical people behind the scenes. They will oppose anything that goes against the generic MBA recipe for making money, or that doesn't favour their own agendas. This feels awful for the founders, but it's like asking ants not to steal your lunch. It's just the way it is. The joke is that sales personel and leadership are coin operated.

CEOs will always stay close to finances or they get replaced. If they try to place principles ahead of profits, they won't last in their jobs or the next funding will not be forthcoming. They need to show results to the investors, and pay everyone's wages. This can eventually pit the CEO and investors against the original innovator. Technologists and product designers who need access to money networks will often try to ingratiate themselves to financial people. They might switch their allegiance amongst the 3 gods, but they can never really bridge the gulf between them.

All this can be confusing for a founder, who wants to make the best invention succeed — to nurture it and perfect it, and perhaps show that they aren't just a one-trick pony, that they can invent new things again within the company. But, once you're in business, changes to (or new versions of) the technology are only secondary concerns — sales and service come first. Even MBAs don't always understand this — they think sales are poor because the technology is poor, and point the finger of blame to the technical people. Trust with either investors or paying customers is what makes someone give you money in the end, and trust builds from frequent attention and keeping promises — the elements of a good relationship.

The common narrative is that the founder is always a problem in the end, because he or she won't let go of the idea. In reality, it's a lack of attention for customers that distorts priorities. Sales people understand this, and often try to tell their bosses, but they seldom listen, because they have their own ideas. A founder's interest in new ideas and making the world a better place, rather than seeing business as providing a service, adds to fuel this source trouble, even if the intention is good. Technological invention is just not how you make money. Trust is how you "make" money. Actually, only banks actually make money — everyone else just tries to attract money from someone else that has it in return for some song.

Once you have a startup running, you should basically forget about technology and innovation. It's only about execution for more than half your team. Trust is how you "make" money.

Sad though it may be, once you have a startup running, you should basically forget about technology and innovation. It's only about execution for more than half the roles of the company. Once the company starts selling, it's basically too late to change the technology anyway. You can only work on the presentation, bug fixing, and the customer service — which is what people are paying for in the end. Adding new features is even a distraction, unless your product was woefully incomplete in the first place.

Trust

Technologists may start out believing that people will buy the superior technology or product. Alas, that isn't true. People buy from the companies they trust to help them. They are the companies who serve their needs and don't cause them trouble. Trust is built up from managing personal relationships, not from perfecting abstract products.

Once you have trust, you can get away with a pretty shoddy product, but if you don't have trust, no level of product perfection will be a substitute for it. Competitors will try to undermine the trusted relationship you have, and supplant it with their own. You will probably do the same to them.

Many technologists want to prioritize perfecting technology, and making their own lives easier, leading to backlogs of complaints and support requests. Releasing too early and fixing on the fly, as continuous delivery, is even a recommended philosophy these days, but you need to be sure of yourself to do that. Climbing without ropes requires the ability to respond very quickly and assuredly to fix any challenge, otherwise you fall.

Product managers will now become the enemy of core technologists, working against them to pander to what the customer thinks they want, to simplify and normalize the hard work of innovation — essentially, to turn it back into what everyone already knows. Product managers can kill innovation by kowtowing to customers, who think they know what they need — though playing sycophant might not win you trust. And, of course, product managers may know what to do but not how to do it. They still need innovation on some level, but they don't always realize it.

Innovative technologies struggle to win. If they manage to get a foothold in the industry, that same industry will often spend a decade turning them back into that it had before. So it never truly pays to be seen as an innovator if you want monetary success. It's ten steps forward and nine backwards.

It's not about technology

Running a company is not about technology, it's about relationship management. Investors remain sceptical of innovators for this reason. They know they will not easily change their spots. The innovators, who do change their spots, often become VCs themselves, money men and women who can look down on a new generation of struggling innovators.

Personally, I feel this more than ever. In my latter years, I have the respect of technologists the world over, but many in business will not work with me, because they know I will challenge standard recipes like a Michelin inspector and demand a certain standard of excellence. At the same time, money makers do not think others are capable of more than one point of view or skill, because that's how they view their world. Their restrictive judgement is the key bottleneck in innovation, in both private and in public sectors.

In recent years, these tensions have been highlighted in the DevOps movement. Agile is another place where the issues get called out in a different way. There the narrative is that, if we could only find the right leadership method, everything would be fine. The truth is that no amount of DevOpsing or agility, and no management technique will make this perfect, because it's a relationship hierarchy issue, driven by the way finance works. It takes efforts throughout. Sometimes people call that workplace culture.

Good leaders (CEOs) are experts at projecting confidence, within an organization, but they actually have no real idea what they're doing in terms of success. They're great actors. Their skill is to surf on top of whatever is going on, creating a point of focus, being a figurehead that others will follow. They have to absorb a lot of unwanted attention from investors, placate the miserable technologists, and project the confidence that others need to keep going when everything is uncertain. When things go wrong, they can always blame someone or something else, so they have little to lose. They can always come back and do it again, because their skills at cohesion are valuable — more generically valuable than a specific technical skill or a singular business idea. An innovator won't necessarily survive like that.

Founders may be of different kinds, but they are more expendable. Some switch to following the money. Others settle into product development and may never feel truly happy with that, but — hey — it's a living (if you call that living). Extroverts may prosper in product and services. Introverts will never be truly good at that, since it's all really about relationship management. It involves a lot of talking and communicating. Get thee hence, extrovert!

Postscript

Starting and running a company is not for the feint hearted. You need a level of Zen calmness to navigate the turbulence. It helps to have someone to talk to. I actually spend quite a lot of time trying to help people in this, but it doesn't make men rich, because starting is very hard. How do you reach this Zen state? Unfortunately, you have to stop caring about your idea, and replace it with caring about customers. You're in the hospitality industry now. If you want to nurture your child, then do it before starting a company, then let it go. It won't always grow up as you wanted, but that's life.

It's tough love, but it needs to be said. I wish someone had said these things to me before starting a company. It's always easier to work for someone else than it is to captain the ship. So with that I wish you luck with your personal struggle.

These notes are blunt but they weren't made in anger. After many years, I can reflect with a brutal honesty to help prepare others for their journey. Surviving in business is not the same as making a good technology or even making a good product. It's about trusted relationships.

I hope that some of these comments might help others. Let me know!

Want to innovate and create a startup? | by Mark Burgess | Nov, 2022 - Medium