Page 115 - Harvard Business Review (November-December, 2017)

MANAGING YOURSELF ARE YOU SUITED FOR A START-UP?

limiting yourself to three areas; otherwise
your search will become too broad.
Pick a city. Not everyone can relocate
anywhere for work. But for those who do
have that flexibility, I recommend thinking
very carefully about where you’d like to
live. If you’re not currently based in an
entrepreneurial hub such as Silicon Valley,
New York, Boston, Los Angeles, Tel Aviv,
or Berlin, you should consider moving to
one—not only for the job you are about
to take, but to position yourself for the
next several jobs, since start-up life can
be fluid and unpredictable. These hubs
are tight communities, often clusters of
local universities, established technology
companies, venture capitalists, and
successful entrepreneurs. Each has its
own pros and cons, quirks, and vibe. For
example, L.A. blends media, entertainment,
and technology while offering the benefits
of the beach and an active lifestyle. Boston
is the world’s best intersection of health care
and information technology and represents
a more professional environment. Tel Aviv
is the cybersecurity capital of the world
and crackles with raw energy. Figure out
in which place you’d like to settle and systems, look for businesses in later • Team. Is the founding team compelling?
build relationships. Once people choose a funding rounds. If you’re an improver and Can its members articulate a vision that
start-up community, they tend to stay. Your operator who wants slightly more stability inspires you and others around them? Are
coworkers in one company could become and a higher salary, a highway-stage they of high integrity? Would you want to
your cofounders in another. company—perhaps just before or just after work with them again in their next company?
Pick a stage. When describing the an IPO—is the right choice. • Market. Is the market in which the
various stages of a start-up, I often use Pick a winner. This step—choosing company is operating huge—that is, greater
a road-building metaphor. In the jungle a company that you think will be a huge than $1 billion in revenue potential? Is
stage you have no idea where the paths success and therefore provide you with it experiencing some kind of disruption
are. You’re surrounded by a tangled mess; tremendous growth opportunities—is that might lead to opportunity for a new
you grab a machete and hack away. Many the hardest to get right. Even the most entrant? How crowded is the market,
use the term “preproduct/market fit” to brilliant and experienced investors in and does this start-up have a sustainable
characterize this nascent period. In the dirt the world are wrong more than half the advantage over the competition?
road stage the path is bumpy and winding, time, and whereas they have the benefit • Business model. Are the unit
but it’s there, and the goal is to move down of holding a portfolio of companies, you economics—the ratio of net revenue to
it as quickly as possible. You’ve developed get to pick only one to work for. How can costs for each customer or product unit—
a well-defined product and are pursuing a an outsider identify the likely winners attractive? Can the company articulate and
clear market. You’re starting to figure out in a given domain, market, and stage? compare the lifetime value and acquisition
your business model and addressing the One way is to ask a handful of insiders. cost of each customer? Does its business
early challenges of growth. In the highway Find the top three VCs, angels, start-up model include network effects—that is, will
stage you’re speeding down a straight lawyers, and headhunters in your target value grow as the network of users does?
open road. You’re improving operations geography and ask them to name the three If the company already has customers,
incrementally while executing, scaling up, hottest start-ups in your chosen domain do they appear loyal and provide growth
and iterating. If you are a risk-taker and a and stage. Pressure-test the companies on potential, or are they churning out?
figure-it-out person, the jungle phase is their combined lists by looking for more Discuss these issues with the advisers
for you. You should focus your search on evidence of success and momentum. Do from whom you solicited recommendations
seed-stage or Series A–funded companies. your own due diligence, using the simple and with others who have experience
If you’re someone who enjoys building criteria that we venture capitalists employ: across multiple start-ups and whose

152 HARVARD BUSINESS REVIEW NOVEMBER–DECEMBER 2017