April 12, 2018 –
The myth that success happens overnight has seduced thousands of entrepreneurs over the years, despite all available evidence that this is rarely the case.
Take Lyft, the ride-sharing company, as an example. Was this truly an overnight sensation? Mayfield, where I’m managing director, led its series A fundraising in 2011 — when the company was already four-and-a-half years old.
Between 2001 and 2016, the average age of a company at IPO was 11 years old, according to data compiled by the University of Florida. That’s why, when we invest, the first thing we try to sort out is whether an entrepreneur is in it for the long run. You need to be up for a marathon, not just a sprint.
Over the past 50 years, Mayfield has invested in more than 530 companies, of which 116 have had IPOs and over 200 have been acquired. We’ve navigated disruptive shifts in markets and industries by leaning into a small handful of core beliefs, which have endured even as the business landscape changes.
We think these five rules are the keys to launching and building sustainable businesses today — for all types of entrepreneurs, across all kinds of companies.
Culture and values matter. In order to build a company that will last, you need a strong vision and mission. Importantly, this isn’t just about your product — it applies equally to the culture you build. Knowing what you stand for is the foundation that facilitates decision making, especially in times of stress.
Lyft is a great example. From the moment we first started working with the founders, making a broader social impact was important to them. Recently, when Lyft offered free rides to people attending anti-gun-violence rallies, it was just the latest in a string of decisions that all trace back to that commitment. Lyft can make these decisions fast because it understands its values. This can galvanize employees for battle against a larger rival whose moral compass hasn’t always been so fine-tuned.
Painkillers sell, vitamins don’t. Listening is at the heart of an entrepreneur’s journey. Making this a central focus helps ensure that what your company is building is a must-have product for your customers rather than just a nice-to-have. That means meeting with customers not to pitch them but to hear what their top pain points are.
Sometimes entrepreneurs can become rigid and attached to ideas that spring into their minds. They stop listening to the customer and build what they think the world needs. On the whole, that hasn’t worked out well for entrepreneurs. Successful companies make need-to-have products and are obsessed with listening to their customers.
Innovate across the value chain. Even after they’ve built their product and proven their technology, startups need to keep innovating. Sometimes, the most meaningful breakthroughs aren’t technology based.
Take, for example, SolarCity, another of our portfolio companies. It was selling and installing solar panels on rooftops, but the upfront cost to customers was prohibitive — people couldn’t afford the capital investment.
We watched as that market problem became a preoccupation for the company and led to an innovative new business model: the homeowner wouldn’t buy the panels but would lease them on a monthly basis, similar to how people pay utility providers every month. The insight that unlocked the business had nothing to do with technology.
Have a people-first philosophy. People make products; products don’t make people. It’s critical for entrepreneurs to keep this top of mind. It applies when you’re building your team: If you invest in your relationships with the people you hire, they’ll be motivated to bring on people they want to invest their time with.
It applies to customers, too — it’s not robots who are buying your product — as well as partners, suppliers and anyone else you do business with.
Don’t be a dinosaur. Successful entrepreneurs need to be able to adapt to new conditions and build a company culture that’s nimble. Most often, things are going to change and you need to be able to react to them.
This doesn’t mean pursuing multiple ideas at the same time. When we see entrepreneurs doing that, we think they lack focus and could fail. Our strong belief is that startups die of indigestion — not starvation.
But, at the same time, entrepreneurs need to be able to recognize when it’s time to evolve. This is where the rules culminate. If you listen to your customers and don’t just try to sell them, stay focused on solving their most important problem (whatever that is), look for ways to innovate beyond your technology, build great relationships and stay true to your core values, even when conditions change, you’ll know when shifting course can unlock new market opportunities.
These five rules have served multiple generations of entrepreneurs well. We firmly believe that they’ll help the next generation build sustainable companies, too — although, we’re always listening for ways to adapt them.
Image credit: Shutterstock
Originally published at www.forbes.com on April 12, 2018.