“Despite the overwhelming odds, tomorrow came.”
- Rise Against, Tragedy + Time
I’m in the middle of two big changes right now: exiting my SaaS startup and settling my divorce. Perhaps it is because these two things are happening simultaneously, but I see a lot of similarities. I’ve been thinking about this all year and it seems clear. Startups are like falling in love.
In my experience, there are seven phases of falling in love. There are also seven phases of doing a startup. Each phase of love has a corresponding phase in a startup.
Men are visual animals. When we see a woman that is attractive to us, we pay attention. It could be purely physical or it could be personality enhanced. There is nothing more sexy than a woman with a great personality.
Before I created my first startup, I was a corporate executive. It turns out that is a tough transition, but I didn’t think so at the time. I was unfulfilled working in Corporate America. A lot of my friends were doing startups in San Francisco. It was incredibly appealing to me, especially in dot com one in 1998 through early 2000. Startups were hot. The idea of doing a startup was just too attractive to pass up.
When an attractive woman captures my attention, I want to learn more. Is there more to her or is she just a pretty face? Is she too hot to be approachable? Does she think her shit doesn’t stink? What does she do? What makes her tick? These are important questions. If she’s attractive, I must answer them.
The answers to these questions often lead to the next phase - infatuation. The stronger your imagination, the more powerful infatuation is.
In a short period of time, I’ve completely mapped out our future together. My imagination starts creating the future that I feel in my heart.
Ok, so you are working in the city, so we can stay here. You want two kids and so do I. You probably want to get married in a church with your family close by. You have an older sister so she can help plan the wedding. We will date for a while, where we will have more fun that human beings should be allowed to have. We will party, go to dinner, see a show, go snowboarding in Park City, and of course have ridiculously awesome sex every night. We will fall completely in love and it will be the best feeling in the world. Eventually, I’ll ask you to marry me. You will say yes. We will have a beautiful wedding. After a few years, we will move to the suburbs, where the schools are better, have two kids, raise them, see them off to college and live happily ever after.
That’s quite a dream for someone I just met.
The same holds for a startup.
Ok, so lead gen companies have a problem optimizing conversion rates in search marketing. The problem stems from the fact that it takes six months from the time the consumer fills out the form until they become a paying customer. This time lag makes it difficult, if not impossible, to fully optimize keyword bids all the way through to paying customers. As a result, search advertisers and their agencies only optimize up to form submit, which is obviously suboptimal, resulting in higher customer acquisition costs.
Our solution is a predictive analytics application that predicts which leads will convert six months in the future. With this new and proprietary insight, search advertisers can finally fully optimize their media spend by adjusting their bids based on predicted conversion rates.
Targus does some of this but their product sucks. It’s manual and the refresh rate is once every two years. Ours is once per day. Targus was purchased a few years ago by Neustar for $680 million. Our solution is better so we can build a $1 billion business, right? Right.
So, I’ll start this company, build a team, build an MVP, acquire a few enterprise customers. They will love our solution so much they will generate $1MM in SaaS revenue in the first year. We will use this traction to raise $5MM series A, even though we won’t really need the money since our EBITDA margin will be 45%. We will do it because we just want to grow faster. After building an awesome B2B SaaS business, we will sell it at 8x revenue for $1BN. Let’s do it!
That’s quite a dream for an idea I just came up with.
What can I say, entrepreneurs have great imaginations.
Nothing makes you fall in love faster than validation.
Validation is when the hot, sexy woman, who is the subject of your infatuation says she likes you too. Really? Oh wow. That is awesome. I’m in heaven. Let’s hang out. Let’s do something fun together and see where this goes.
Validation in a startup is when your prospect becomes a paying customer. When I received a signed agreement from our first customer, I swear it was better than sex. Seriously. Or at least, equally as good.
Validation is when your interest and infatuation is returned back to you. It feels really, really good. It feels so good because your dream is now one step closer to coming true.
Now that you have validation, it’s time to dive in and really go for it. There is no reason to hold back now.
In a startup, this means focusing all of your energy and resources on a single purpose - building a great company. Everything else becomes secondary.
Fueled by customer validation, you move forward full steam ahead. This dream really is going to come true! You can taste it! You know this business will be massively successful.
Yeah, you are probably getting ahead of yourself. But that’s the point. You aren’t acting rationally. You are love sick. You are like a runaway freight train and there is nothing that can stop you.
In your relationship, you are falling hard. You’ve been together a few times and it was like heaven on earth. She’s into you and you are into her in a big way. This feels good. This feels right.
Yeah, you are probably getting ahead of yourself. But that’s the point. You are love sick. She is your soulmate. You are like a runaway freight train and there is nothing that can stop you.
Every startup eventually runs into problems. The honeymoon period doesn’t last forever. Even with good customer validation, there are an infinite number of things that can go wrong. In the problem phase, you are now aware of at least one of them.
For my SaaS startup, we stumbled building a repeatable, scalable path-to-customers. Our first enterprise customer came on service relatively easily. It turns out the other enterprise customers we not so easy. In addition, the market we were in turned south and our customers’ businesses started shrinking about 15% year-over-year. Budgets were cut. CMO’s were fired. It was a bloodbath. It’s tough to sell a strategic solution when your decision maker just got fired.
In addition, our SaaS business started to look a little like a consulting business. Customers didn’t have the data we needed to drive our analytics. We needed to integrate their systems with our tech. These activities are consulting esque if not full out consulting services. How did this happen? I’m not building a consulting firm, I’m building a SaaS business! Our customer needs got in the way of our clear vision.
In love, you will eventually run into problems. No one is perfect. People want different things. People change over time. We are all broken. After infatuation and the buzz of validation wear off, you are left will the reality of your relationship and are faced to deal with whatever problems you discover there.
In startups and in love, the question becomes, can you deal with the problems that you’ve uncovered? Or are they too much?
The answer to those questions determine the fate of your startup, and the fate of your other love relationship.
Resolution or Rejection
Hopefully, you find a way to resolve your problems.
In a startup, this means coming to terms that I have an enterprise sales business with some consulting elements. Or, it could mean we are going to pivot to a new market that is more SMB and self-serve. If you can come to terms with these things, and stop being in denial about them, then your dream might still come true. It just might play out a little differently.
If you cannot, then the dream dies, right then and there. That’s it. If the problems are too great and you can’t deal with them, you will fall out of love. Without love for your startup, it will certainly die.
In love, resolution means coming to terms with the problems you’ve discovered in the relationship. How big of a deal is this problem? Is this an annoyance, or is it fatal? Can I have a healthy, loving relationship with a person who (insert problem here)?
If resolution is not possible, then get ready, this is going to hurt. Rejection is really painful. It’s painful even if you are the one doing the rejecting.
The reason rejection is so painful is because you are dealing with a tremendous loss. Do you remember the dream of your $1 billion company? Do you remember the dream of your blissful, loving relationship with this awesome woman and your two beautiful kids?
Well, I’m sorry to tell you, but that dream is gone. It’s never going to happen. It was a mirage.
The pain from the loss is almost unbearable at times. It will drive you crazy. It’s similar to the loss of a loved one. In fact, it is the loss of a loved one in your mind. You loved your dream and now it’s gone. You will go through the stages of grief. It’s going to take time to heal and recover.
Deciding to abort a startup is by far the most difficult decision an entrepreneur will ever make. It’s a decision to kill a piece of you. It’s like cutting off your arm because if you don’t, you will die. Deciding to break up with the woman you love is equally as painful.
After you have recovered, after you have healed, you can dream again. One day, you will think something like this.
“I love going to concerts. But you know what I hate about concerts? It’s hard to find someone to come with me. What if there was a new social app that would solve this problem by…”
Or you might meet someone, maybe at a bar or maybe through a friend.
“Wow, she’s interesting. I wonder what her story is.”
And a new dream begins. And the cycle repeats.