Don't drink the Koolaid
Keep your head down and focus on the business, not on reputation building.
Being a founder requires a degree of optimism, or delusion, regarding your chances of success. It’s a fact that most startups fail, but the belief that yours is the one that will succeed is a prerequisite.
It’s also important to instill this optimism in the team and your investors.
Even though it’s necessary, it is dangerous to get tricked into believing that you are as great as you need to project.
That’s what Kengyew and I called “Drinking the startup Koolaid”. It’s when you start believing in any indicators of success that might be worthy accomplishments but do not directly indicate the health of your business.
For instance, you might get an invitation to participate in a panel. That’s a nice ego boost, a good promotional activity, and gives you a platform for your optimism. However, it says very little about the progress of your business. The people who invited you probably know very little about how your business is doing. All they know about is what you’ve made public.
Similarly, having a really nice fat GMV number is also a nice ego boost that you can sell. However, without knowing the underlying metrics, it has very little meaning. Lots of companies have an impressive GMV but aren’t profitable. Does it mean you are progressing? Maybe, maybe not. For instance, you can inflate your GMV, accidentally or on purpose, by establishing a single buyer-supplier relationship that realizes no profit. It looks (and feels) good but is just the Koolaid.
It also means that you must not get caught up in startup-like activities where you can show-off, but that don’t do much for your business. Startup conferences often have little value to offer. Unless looking for investment, it’s much more productive to go to tradeshows where your prospective buyers and suppliers are rather than one filled with other startups.
Drinking the Koolaid also makes you less credible to investors. For instance, you might have a nice-sounding number of suppliers. But investors are smart and will ask if you have the proportional number of buyers and orders.
Not drinking the Koolaid means staying grounded about your chances and your progress. It means using external opportunities but keeping your head down and understanding where the real work lies.
While this is a lesson in staying on track, it’s also one of encouragement. You will often hear the positive news with nice sounding numbers from others. Don’t drink their Koolaid either. Their coverage, just like yours, is only the highlights. Under the surface, everyone is in nearly the same boat and experiencing nearly the same grind.
Previous Building a marketplace is like training for a marathon
- The Halo Effect by Phil Rosenzweig
A look into unreliable indicators of performance
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