I've worked with more than a thousand technology-based organizations so far in my engineering and entrepreneurial career. Some for many years, others for only a day or two. Several hundred of them have been consulting clients, with probably close to half fitting the U.S. Small Business Administration (SBA) definition of a small business entity.
One of the advantages of reaching my 66th birthday this month is having had a long time to observe recurring patterns and archetypes among all those organizational interactions. One fundamental truth is that every business is in one of three states at any given time: growth, decline, or stagnation.
Business cycles, technology disruptions, and a host of other variables all have an effect on what state a business is in. But in my experience the largest determinant is the leadership team - particularly if the founders are still running the show in the case of small businesses.
Here are the eight key questions that founders have to answer along the way that have an outsized impact on the trajectory of their company. These are based on both my observations of other founders, and my personal experiences as a serial entrepreneur.*
#1: Why Are You Founding a Company?
People start companies for a variety of reasons. There is only one that results in a sustainable business: you (and your co-founders if you have any) can provide something that others need, want, and will pay for that results in a net profit for your business. Beyond that, the ability to scale and protect your competitive advantage will make the difference between thriving versus surviving.
- Good Signs: The Venn diagram of your core skills, passion, and market need overlap to the extent that you can't stop yourself from trying.
- Red Flags: You are thirsty to get rich, want to show everybody how successful you are, are running away from an unpleasant career situation, think you have the best idea ever with no validation, and a host of other bad reasons that will generally not end well.
#2: Who Are Your Co-Founders?
Start-ups can waste valuable time coming up with a business name, playing the "C" title game, and deciding how many shares each co-founder gets. The only co-founders you should ever start a business with are ones who have critical skills, experiences, resources, and knowledge that you don't have. Their impact must be exponential not just additive.
- Good Signs: Your team is always accelerating with the pedal to the floor in ways and with results you didn't think was possible.
- Red Flags: You keep debating who should be the C-whatever-O and who should be in charge of what.
#3: Where Are You Aiming?
Where are you planning to do business, focused on what products, and to which customer segments. If you can't answer that question with validated customer data, don't quit your day job. Make your core offering as narrow as possible. Start-ups that think they can be everything to everybody never get out of the gate.
- Good Signs: Customers are coming to you asking how quickly they can get your products or services before asking how much it will cost them.
- Red Flags: You can't fill out a simple business canvas model that describes how your company works.
#4: How Do You Raise Funding?
There are a variety of ways to fund a new enterprise and they all come at a cost. Some examples in the order of how much control you will retain (most to least): bootstrapping, bank loans, angel investment, and venture capital. Think very carefully before taking the "friends & family" route unless you don't value those relationships. And never max out a bunch of credit cards to fund your start-up if you don't like the idea of eating cat food and living in your car when you can't pay them off.
- Good Signs: You're bootstrapping from services and other revenue streams while simultaneously collecting customer verification data for your target business model.
- Red Flags: You're spending all your time working on pitch decks and lining up investor meetings, and then bullshitting answers to their questions because your business idea is half-baked (or just plain sucks).
#5: Are You Growing a Business or Your Ego?
This one needs to be answered on a continual basis. The "genius with a bunch of helpers" syndrome is legion in the start-up and small business world. If you can't put the vitality of your business ahead of your ego it will never reach its potential. Nor will those helping you to run and grow it (see next question).
- Good Signs: You are never the smartest person in the room, and you spend most of your time in service to what your team and business needs to succeed.
- Red Flags: If you often think (or worse, say out loud) "I'm the only one who can do this" or "nobody else gets what we're doing here".
#6: What Kind of Culture Are You Enabling?
Choose your carrots (incentives) and sticks (disincentives) carefully, and modify them quickly when unintended consequences or counterproductive behaviors arise. Lead by example. Your leadership behavior will mold the business culture more than anything else. Words and other business "comms" are ignored and eventually reviled if they don't match leadership behavior.
- Good Signs: Your team brings you bad news knowing you will appreciate their candid feedback and provide the support they need to get things on track.
- Red Flags: No one makes a decision without your explicit consent because you haven't provided them with the requisite authority that matches the accountability you've burdened them with.
#7: When Can Your Company Run Without You?
In the long run, your ultimate goal as a founder is to work yourself out of a job, ideally with a good exit or succession plan. Hire, support, and provide career development and growth for your team members. Then reward their results and help them find the best path to reach their highest potential within your business. Otherwise, they will become demotivated and the most valuable individuals will leave.
- Good Signs: You continue to find more time to think strategically and enjoy activities and personal relationships outside of the business because you hired and promoted people more capable than you.
- Red Flags: You believe you are the only one who can run your company properly and have made it a self-fulfilling prophecy by denying anyone the opportunity to prove you wrong.
#8: Are You Making the World Better?
Otherwise, what's the point? We all have a limited lifetime with an unknowable end point. When our time is up, the only thing that remains of real importance is the impact we've had on others.
- Good Signs: When your company is mentioned in the media, you are generally eager to share it with anyone and everyone.
- Red Flags: At non-business gatherings you hope that no one asks what you do for a living.
Footnote
* In early 2023, I started a webinar series on liquid hydrogen systems. Shared a bit about my career and entrepreneurial journey in the first session along with the vision for my current company (see video excerpt below).
Postscript
This article summarizes a few lessons I learned as a serial entrepreneur since 1995, along with decades of working with and for many organizations of all types and sizes.
One of the many pithy quotes attributed to Mark Twain is "History Doesn't Repeat Itself, but It Often Rhymes". In addition to this article, let me share a story that seems to be very closely rhyming with the AI market right now.
In late 1998, a startup company wanted to license one of my electronics thermal management NASA patents. They invited me to join them on customer discovery meetings with several Silicon Valley heavyweights to explain my technology. We received great feedback during our visits with HP, Intel, AMD, Apple, and Stanford University.
The company founders had backgrounds in investment banking, IBM engineering and marketing, and LIGA microsystems fabrication expertise. Our west coast visits helped to firm up draft term sheets from several of the most well known Sand Hill Road venture capital firms. The stock market was on fire and we were ready to jump in and make our mark.
A few months later, the dot com bubble burst and there was blood in the financial streets and huge holes in every investor's portfolio. Venture capital firms were clawing back whatever they could from grossly overvalued vaporware companies in their portfolio and shredding term sheets.
The fiber optic cable infrastructure had been so overbuilt that ~90% was unused for most of the next decade. No one got any funding for new big idea ".com" startups for quite awhile either. Of course, the major paradigm shift that internet hardware, software, and business models represented eventually occurred several years after the dot com carnage.
Timing is everything, but you will only know if you got it right in hindsight. There are many start-up variables that you cannot control or even predict. So it's best to control the ones you can to improve your odds. I hope this article helps with that, especially for the new generation of technology disruptors.
Author Bio
Matt Moran is the Managing Member at Moran Innovation LLC, previous Managing Partner of Isotherm Energy, and creator of H2 Sage™ resources and tools for hydrogen systems. He's been developing power and propulsion systems for more than 40 years; and first-of-a-kind gas, slush, and liquid hydrogen systems since the mid-1980s. Matt was also the Sector Manager for Energy & Materials in his final position at NASA where he worked for 31 years. He's been a founder or key contributor in seven technology-based startups; and provided R&D, engineering, and innovation consulting to several hundred organizations. Matt has three patents and more than 50 publications including his online Cryogenic Fluid Management guide and Decarbonizing Mobility with Liquid Hydrogen SAE report. He has created and taught liquid hydrogen courses, webinars, and workshops to global audiences.
Matt Moran is the Managing Member at Moran Innovation LLC, previous Managing Partner of Isotherm Energy, and creator of H2 Sage™ resources and tools for hydrogen systems. He's been developing power and propulsion systems for more than 40 years; and first-of-a-kind gas, slush, and liquid hydrogen systems since the mid-1980s. Matt was also the Sector Manager for Energy & Materials in his final position at NASA where he worked for 31 years. He's been a founder or key contributor in seven technology-based startups; and provided R&D, engineering, and innovation consulting to several hundred organizations. Matt has three patents and more than 50 publications including his online Cryogenic Fluid Management guide and Decarbonizing Mobility with Liquid Hydrogen SAE report. He has created and taught liquid hydrogen courses, webinars, and workshops to global audiences.
