Startupland - Book Summary

How can you navigate the shark-infested waters of the startup world?

Picture this: you've just concocted a phenomenal idea that could revolutionize an industry, or perhaps you have an existing concept that hasn't quite broken through yet. Either way, your goal is simple, yet colossal: to transform this idea into a thriving venture.

In the wide-open expanse of entrepreneurial landscape, the competition is brutal. It's survival of the fittest, as everyone is bent on turning their own groundbreaking concepts into successful realities. So, the pertinent question arises: How can you make your idea stand out in this fiercely competitive world of startups?

The answer lies in gleaning wisdom from those who have been there, done that. The author of this book takes you through his own journey of founding and fostering his successful company, Zendesk. From nurturing a budding idea to steering a blossoming US-based enterprise, the author candidly shares his own roller coaster ride, sprinkling in a wealth of advice on how you can catapult your own idea into flight.

In this narrative, you'll uncover:

- the attributes of a great investor,

- the significance of honing your team-building prowess, and

- the rationale behind the author's decision to transplant from Copenhagen to the United States.

Your initial forays might not lead to your final destination, and that's perfectly okay.

Imagine this scene: Christopher Columbus triumphantly returns from his voyage to the Americas, only to face scoffs from some of his contemporaries who claimed any ordinary Spaniard could have "discovered" the new world simply by sailing westward. To debunk their argument, Columbus posed a simple challenge — he placed a hard-boiled egg on a table and asked them to make it stand upright. After their repeated failed attempts, Columbus gently tapped the egg, flattening a tiny portion of its shell and allowing it to balance upright.

The lesson to be drawn here? It's straightforward to execute something once the method has been laid out. But when the way forward is unclear, it requires you to take a leap of faith, very much like launching a startup.

Starting a startup demands that you harness your entrepreneurial spirit to explore unfamiliar territories. Before breathing life into Zendesk — a software tool designed to amplify customer support capabilities of businesses — the author dabbled with various projects.

His first entrepreneurial adventure involved generating 3-D illusions from 2-D patterns using a software tool. He single-handedly managed every aspect of the business, from receiving customer orders to shipping out disks.

His next venture centered around a website creation tool which, unfortunately, did not survive the dot-com crash of 2001, teaching him his first lesson in failure.

One of the essential realizations in founding a startup is that not all captivating ideas are necessarily the best ones.

Initially, the concept behind Zendesk was met with skepticism. The idea of a business dedicated to enhancing help desks and customer support didn’t stir much excitement. Even Alex Aghassipour, who would eventually become one of Zendesk's key players, initially dismissed it as mind-numbingly dull.

Yet, Zendesk, much like many startups, demonstrates that an idea which might not seem thrilling at first glance can evolve into a highly appealing proposition when executed skillfully. Consider Dropbox, for instance. The act of sharing files isn't inherently exhilarating, but Dropbox has managed to make this commonplace task simple, engaging, and even socially captivating.

Be discerning when picking your investors.

Let's draw an analogy. If you were a youngster in a playground seeking some quick cash, you probably wouldn't turn to the school bully. They might lend you the money, but they'll surely demand it back with a hefty interest. The realm of startups isn't too different.

Not all investors make for good financial partners. Regrettably, fledgling startups often face limited choices when scouting for their initial investments. As you're starting, you'll encounter a slew of investors who are primarily self-interested. The optimal choice for your startup, albeit a tough one, is to decline such offers and persevere for a while longer.

The author, too, grappled with this dilemma when he was setting up Zendesk. The initial angel investor who evinced interest in his venture incessantly demanded an unreasonable amount of information and materials. Eventually, it dawned on the author that this was a scheme to exert pressure on the young team. The investor was well aware of their urgent need for capital and aimed to wrestle greater negotiating power by prolonging the investment decision and soliciting more paperwork.

So, where should you turn for investment? Sometimes, the most reliable investors are those within your closest circle — your friends and family. When Zendesk found itself cash-strapped, the founders appealed to their friends and families for investment. Word spread from their colleagues to the latter's bosses, leading to one individual investing as much as thirty thousand dollars!

But requesting financial support from your friends and family can be challenging. The author suggests setting modest expectations, refraining from allowing investors too much influence, and bracing yourself for potential disappointments — you may even lose a few friendships.

However, even if you've already amassed adequate funding, don't hastily dismiss a prospective investor.

After securing sufficient funds for their business, the founders of Zendesk were approached by another potential angel investor. Instead of turning him away, they welcomed his investment. This allowed them to pursue their growth aspirations even more aggressively, and also added an experienced financial collaborator to their team.

Selecting a fantastic team — and battling to keep it intact — is key.

Think back to your school days. Did you engage in team sports during physical education classes? Which teammate added the most fun to the experience? Was it the star player who scored all the goals single-handedly, or the one who made an effort to involve everyone and ensure a good time for all? Unsurprisingly, it was the latter.

Startups function along similar lines. Those possessing the knack for building and nurturing teams often turn out to be the most successful entrepreneurs. However, maintaining the cohesion of the team is seldom a walk in the park.

During the early stages of Zendesk, its three founding members faced a stiff challenge. Given that they were working pro bono, their focus on the project often wavered as they battled to support their families with limited financial resources. It required a formidable commitment to stick with Zendesk as opposed to opting for safer, more financially secure pursuits.

The author managed to keep the team intact by offering one of the founders a modest salary — even when the company's coffers were virtually empty. He recognized that preserving unity was critical, even if it meant risking financial insolvency.

However, achieving consensus within a team can prove difficult, particularly in precarious situations. Zendesk hit a rough patch when the need to secure substantial funding led the founders to sell company shares. This effectively reduced the founding members to a minority among the stakeholders — a difficult pill to swallow. The newfound board members even wielded the power to dismiss the founders, should they choose to.

Amid such tension, the author once lost his cool. Unable to convince his two partners to accept the transition, he lost his temper during a meeting, eventually storming out. What followed was an uncomfortable silence for a few days. Eventually, though, things started to mellow down. The team members gradually acknowledged that securing major funding was their only viable path forward.

The United States stands tall as a startup haven.

Phrases like "fake it till you make it" or "winners never quit," quintessentially American, might initially irk outsiders. American optimism can appear overly ambitious, yet it has played a significant role in fostering an exceptional startup environment. Succeeding with a startup calls for a firm belief in the potential of risk-taking.

Consider this: virtually all major internet-based businesses — and the internet itself — took root in the United States. Compare that with Denmark, which during the early 90s had but a solitary internet provider with exorbitant dial-up rates. American cities, San Francisco being a prime example, adopted the internet far sooner and displayed immediate enthusiasm.

San Francisco dwellers were leveraging the internet for communication, advertising, and food delivery while most Europeans were yet to familiarize themselves with email.

What's the reason? The United States tends to attract a wealth of innovators and high-profile investors. Naturally, it was the optimal location for the Zendesk team to scout for their first investors, given the burgeoning American startup scene.

Following the launch of Zendesk, the author attended a TechCrunch summer party in San Francisco. He was astounded to discover that almost every attendee had either heard of or was utilizing his product, and were all working on their own startup ventures. The author felt more in sync with this community than with the comparatively conservative startup scene back in Copenhagen.

Hence, it didn't come as a shock to the Zendesk founders when their initial major deal necessitated the company's relocation to the United States. When they reluctantly accepted venture capital funding, the offer came with a stipulation: Zendesk had to shift base to Boston, home to the venture capital firm. Though Boston wasn't their first choice, the author managed to persuade the team to make the move.

Your startup venture will invariably affect your family life.

Entrepreneurs frequently find themselves engrossed in their professional commitments. Their daily work schedule can often extend beyond 12 hours, and even their off-duty moments are dominated by work-related contemplations. This lifestyle can pose significant challenges for their families.

One critical aspect is the financial risk associated with a startup. The author personally experienced this during the establishment of Zendesk. He found himself deep in credit card debt and even dipped into his retirement savings. Additionally, he was personally accountable for a $50,000 loan. He was perilously close to bankruptcy, standing just two weeks away unless additional funding was secured.

In an attempt to shield his partner, Mie, from stress, the author chose not to divulge the complete extent of these issues.

Additionally, the author's work exerted further strain on his family due to a relocation from Denmark to Boston. Their arrival in Boston was marked by an unwelcome surprise — a broken air conditioner in the midst of summer. The family was forced to spend two months clad in their underwear as they navigated their new home.

The ordeal didn't end with the move to Boston. Before long, another relocation was on the cards, this time from Boston to San Francisco.

The move to the West Coast was triggered by a fresh $6 million investment deal with Benchmark, a San Francisco-based company. The family had to face the tumult of an abrupt move.

During one of their initial days in the new home, their children accidentally locked everyone out of the bathroom. Mie was ill, and the author was engaged in a two-hour battle to unlock the door before rushing off to work. As you venture into your startup journey, be prepared for chaotic episodes like these to become part and parcel of life.

The knack of adaptability and flexibility can guide you in hiring the right employees.

Anyone who has sifted through a stack of 80 resumes, all penned in the same arcane verbiage, knows the challenge of identifying the ideal candidate. Interviews can sometimes further compound the dilemma, with interviewees succumbing to nerves and either under-sharing or oversharing information.

Imagine navigating this process in a foreign country. This is precisely the situation the Zendesk founders found themselves in after their move to Boston, an experience that offered valuable insights.

The Zendesk team quickly discerned a stark contrast in how Americans and Danes conduct themselves during job interviews. The Nordic style, which the team was accustomed to, places a premium on humility. Flaunting one's abilities or suggesting superiority over others is frowned upon in Scandinavia.

The American penchant for self-promotion and showiness initially threw the Zendesk team off-balance. Taking these self-assured assertions at face value, they believed all the applicants to be remarkably talented.

The team soon realized the necessity to adapt their hiring approach, leading to the development of innovative strategies.

For instance, Zendesk's head of human resources, a former military officer, had an unconventional interview tactic. He would invite potential employees for a casual meeting at a nearby cafe. On the way, he'd walk at a brisk pace, testing their ability to keep up. He would also closely observe how they dealt with the bill. To gauge their resilience, he'd pepper the conversation with strong language.

Rather than questioning the applicants on their educational qualifications, Zendesk's recruiters focused on their travel experiences and ways of handling challenging life situations.

Embrace the inevitability of making mistakes.

Embarking on a start-up journey can feel like plunging off a ten-meter diving board. You might execute a flawless dive, or you might crash painfully into the water. And undoubtedly, you'll have to take multiple plunges before you truly master the dive.

Consider the early days of Zendesk for instance. The author experienced several stumbling blocks while seeking funding. At one juncture, while the company was still based in Denmark, he made a trip to the United States to meet a potential investor from a venture capitalist firm. Unfortunately, the timing couldn't have been more ill-fated: it was 2008, the year of the financial crisis. The housing market had collapsed, and banking giants like Lehman Brothers and Merrill Lynch had gone under.

The prospective investor and his partners were locked in a heated debate about investing in the author's project. Ultimately, they chose not to.

Another typical mistake startups make is neglecting minor yet significant details in the early years. This was a lesson learned when Zendesk hired Amanda Kleha, an ex-marketing manager from Google.

On her first day, Kleha arrived without a laptop, under the impression that the company would provide one. When she had to return home to fetch her personal laptop, she quipped about having indeed joined a start-up. This incident led the author to understand the need for a more comprehensive onboarding process.

The most detrimental missteps, however, are those that impact your customers. The author learned this the hard way when Zendesk proposed a price hike, sparking an uproar among their customers. Negative comments flooded the internet, posing a risk to the company’s reputation.

This episode made the author realize they had taken Zendesk's customer relationships for granted. While they had notified the customers about the price change, they failed to justify it. Consequently, the customers felt as though they were being charged for something they hadn't agreed to. Zendesk promptly issued an official apology and retracted the decision to increase their prices.

Wrapping it up

The central idea of this book:

The journey of building a startup is characterized by nurturing novel ideas and embracing risks, meaning there's no standardized recipe for success. Assemble a robust team, steer clear of dishonest investors, brace yourself for missteps, and adapt your plan when circumstances don't pan out as expected. You're bound to encounter unforeseen hurdles, just as the author did while shaping Zendesk. But remember, just like the author, you too can cultivate your startup if you remain flexible and dedicated to your vision.