The Startup Rules I Broke (and You Should Too)

May 24, 2021

The Startup Rules I Broke (and You Should Too)

As someone who has helped lead a successful funding round for a VC-backed startup, I have a pretty good idea of what it takes to get a VC to buy into your vision and cut you a check.

Yet for my current project, Epilocal, I decided that I didn’t even want to go down that path. In fact, I ruled out VC funding from the moment I started.

This is not to say that I have anything against VC’s. I think that they fill a necessary role, but that role is very specific. VC’s exist to find and fund the businesses that need capital in order to compete in a huge market.

In my case, I didn’t need any money to get started - I’m able to do all of the work in my business currently and I have built up a personal runway over the years that gives me the freedom to work for some time before getting significant sales. And I’m not trying to target a huge market - in fact, my market is pretty niche. (local news sites and other small online publishers)

Once I removed the thought of VC funding from my mind, what I found is that it empowered me to think differently than the way most people think about startups. This is because the majority of information you will read on the internet about startups is geared towards your wannabe blitzscaling, world dominating unicorns.

While there was very little information out there for people who are following a more gradual and modest path to building a business. What this means is that you will often find yourself breaking the so-called “rules” or the dogma that has been established over the years by the most influential and successful VC’s.

Don’t get me wrong, their rules are still very valid if you’re trying to be the next Mark Zuckerberg.

But if you’re not, and I think the more people in the startup community should come to the realization that they’re not - then you don’t actually have to follow the rules. In fact, following their rules may take you on the exact opposite path of where you want to go.

Read on for some examples of rules I’ve personally broken and why you shouldn’t be afraid of breaking them too.

You don’t need a team

As a solo-founder, I started off by breaking one of the cardinal VC-rules that says you can’t build a successful startup on your own. Nevermind the research that says solo-founded companies are twice as likely to become profitable as companies with multiple founders. No, what this rule really means is that VC firms will not fund startups with just one founder.

This is because VC’s don’t just care about if you can get things done. Seeing multiple co-founders shows a VC that this person can sell their vision to other people and it gives the VC insurance in case one of the founders burns out and decides to leave.

But if you’re not interested in VC funding, you don’t have to do things just to impress VC funds - you just want to do things that get the job done. And adding founders to the mix adds meetings that slow you down and adds risk of conflict that you can derail your progress.

If you can do the work on your own, there’s no reason why you can’t just get started on your own. Please, don’t be one of those people who goes looking for co-founders on forums - do you really want to jump into a relationship that many people equate to a marriage like that? A lack of a founder doesn’t need to hold you back

Just do it yourself.

You don’t need a huge target market

One of the main things that VC’s are looking for is a huge target market, usually at least $1 billion, that you can address through your startup. The reason for this is simple: VC’s invest in multiple startups with the understanding that some of them will fail, some of them will not grow very much, and a couple will make it big.

Given the fact that VC’s need to provide returns to their investors that are far better than the stock market to justify their worth, they need those few winners to make it very big. As a result, the standard strategy for VC funds is to look for startups to invest in that can “return their fund.”

What this means, is that every startup invested in by a VC fund should theoretically be able to grow big enough to create the returns for the entire fund.

So you see lots of funds that chase after the small number of companies that can actually compete in these huge markets. You also see lots of startups that stretch the truth and try to show that they can create these huge returns when they are never going to be able to do it in reality.

Don’t fall into this trap. Avoid the huge markets - you will have big competition and will struggle to break in. As a small business, it’s all about niches and finding the small target market that you can own.

And don’t make the mistake of thinking you are one of the big guys - if you haven’t already taken multiple rounds of VC funding you’re not there yet.

You don’t need to “get out of the building”

One of my biggest pet peeves when it comes to the startup ecosystem, is the amount of startup coaches out there spouting the same recycled wisdom from Steve Blank or the Lean Startup about how you have to “get out of the building” and talk to X potential customers before you even start building your idea.

What frustrates me about this advice is that I’ve seen it deter lots of people from making any real progress on their ideas. Often they give up altogether because they think that since they can’t find enough people to interview, then entrepreneurship must not be for them.

Let me be 100% clear about this: talking to people and writing their comments down on post-it notes is not not a mandatory part of entrepreneurship. It is a process used to learn about your customers before you know how they are actually engaging with your content and using your products.

It does apply to startups who are looking for seed and pre-seed funding, since at these stages they have no traction and maybe no real product yet. As a result, they need to show some proof that in the form of talking to people, to mitigate the risk that the VC will invest a lot of money to solve a problem that doesn’t exist.

But if you are not looking for VC funding, you don’t have this risk! The only thing you are risking is your time. And as long as you are not building something in secret for a year before releasing it, you aren’t risking all that much.

For my project, I’ve built lots of little products and produced a lot of content around the same theme. If one product is a bit of a miss, it’s ok since they only took me a couple of weeks to develop and can always be turned into something free that will make my content more popular.

All the while as I’m doing this, I’ve attracted potential customers who are eager to talk about the challenges in their space that I can learn from. By doing some work up front, I was able to prove that I am willing and able to solve their problems so they trust me - as opposed to someone who “got out of the building” with just an idea and can’t hold an intelligent conversation with their potential customers.

Bottom line: the purpose of up-front customer interviews is to de-risk ideas that need lots of capital to get started. If that’s not your case, start building and keep learning about your customers as you do it.

It doesn’t have to be boom or bust

As mentioned before, VC’s are looking to fund companies that can capture huge markets. As a result, they’re not interested in building businesses that can comfortably sustain founders and employees.

If they can’t get an exit that contributes to their returns in a set period of time, then it is a failure. Period.

As a result, VC’s would prefer for a startup to go bust early if it doesn’t have a chance to become a big winner. This way they can focus their attention on the startups that do have a chance of making them money.

This creates a binary option for most VC-funded startups, either you make it big or you lose everything. But if you’re not taking VC funds, you don’t have to think this way at all. You can take as many years as you like to grow slowly and sustain yourself and a few employees along the way.

At some point, you might want to sell your business and move onto the next thing. But exits aren’t just something for VC-funded startups anymore - there is actually a growing marketplace for smaller businesses, especially SaaS products. You can see lots of examples over on Indie Hackers of people who sold side-projects or small products in the $10k - $500k range.

A payday like that might not make you the next Zuckerberg, but it would make a big difference to the rest of us.

And in the end, not only is that achievable, but it is possible to do while keeping other priorities in your life intact, like making time for family and yourself. There’s no rule that says entrepreneurship has to be a non-stop hustle and a 24/7 thing.

Often with VC money, the stress of expectations turns it into that. But if you don’t have that stress from an investor, why create it for yourself?

It’s ok to go slow, it’s ok to have modest targets. You can create something small that earns you a great living. Don’t try to be something you’re not just because other people are doing it.

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