We all understand the "startup struggle" part of the process, but how does that other part, where we make a bunch of money work?
Doesn't it seem to be the case that there's endless lore about the early startup days and then the end where the company gets big, but not much clarity about what happens in between?
It's kind of like one of those "comeuppance" montage scenes (Wall Street's Bud Fox come-up is my personal favorite) that shows the time-lapse of the Founder struggling, and then all of a sudden on top with all the fancy things.
I've interviewed countless Founders of every possible industry who have "made it" and I always ask them the same question: "When did you realize you were about to be successful?"
They always say exactly the same thing "I didn't. It just eventually happened."
I say this to point out clearly that it's not the seminal event we think it is, like ringing the bell at our IPO. In fact, it happens so quietly that we often don't notice it's actually happened at all. Just one day we start making payroll and then keep making it, and then out of nowhere, we see a profit. But it's very rare that we knew it was going to happen.
Wait, what? Did I just say "7-10 years" to make this successful? Yes, my friend, I sure did. While we love to regale ourselves with tales of startups that became monsters virtually overnight, the truth is it takes at least 7-10 years for a business to mature and start throwing off that sweet cheddar.
The pattern I've seen in my own companies and a bunch of others is often the same. In the first 3 years, we realize what we thought we were going to build, and who we were building it with, was totally wrong. We refine, pivot, switch gears, whatever we want to call it.
After that in years 4-7 we hopefully start to focus on what the business should actually be and begin building a repeatable, scalable company. But that doesn't mean we're making any profit in that time, because we're still trying to invest in the infrastructure to get it there.
Then after Year 7 or so, we're building the right business and our investments start to pay off. So yeah, if we're in Year 2 and a half right now and we're wondering when we're going to make a down payment on a new house, it's gonna be a minute.
The other thing they don't put in the brochure about being a Founder is that if we ever get paid (and hopefully get rich) we most definitely get paid last. Long before we can take sweet distributions or ideally some sort of proceeds of a sale, we're going to have made everyone else rich first.
The money will go toward paying staff the most money they've ever made (probably not today, but in the future for sure). It will go to investors in the form of liquidation preferences during a sale, and eventually, it will go to us after everyone else is paid up and there's something left over.
Everyone loves to point out the disproportionate earnings successful Founders have when things go well, but they sort of get amnesia when asked about how long it took for that sweet wealth event to happen. But that's OK because whether we like it or not, we're never going to forget what it took!
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Wil Schroter is the Founder + CEO @ Startups.com, a startup platform that includes Bizplan, Clarity, Fundable, Launchrock, and Zirtual. He started his first company at age 19 which grew to over $700 million in billings within 5 years (despite his involvement). After that he launched 8 more companies, the last 3 venture backed, to refine his learning of what not to do. He's a seasoned expert at starting companies and a total amateur at everything else.
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