Editor’s note: Veteran entrepreneur and investor Donald Thompson is a regular contributor to WRAL TechWire. His columns are published on Wednesdays.
RALEIGH – Startups are hard work, beginning to end, but especially in those first few years when every decision feels like a make-or-break moment. Of course, the internet is overflowing with advice for how to survive your first year of business, but much of it comes from business analysts who are watching startups fail or succeed from outside. As a seasoned executive with two decades of experience leading and growing firms through multiple recessions, I’ll tell you: most of those articles offer only table stakes. From the inside, things are so much trickier.
No matter how much experience you have, as a leader, you have to stay nimble and responsive. Keep your eyes open for the best path forward, and be ready to move quickly. I won’t pretend to know what works for every business, but I will share what has worked for me in pushing past obstacles to build a foundation for success, despite the chaos of 2020.
This is a topic I’m also exploring on The Donald Thompson Podcast, so I hope you’ll join me there as well.
Leave space for things that are outside your control
My team and I launched the The Diversity Movement (TDM) in fall 2019. I’ve been in the startup space multiple times throughout my career, and every journey is different. What I love about startups is their young and scrappy energy. They’re lean and resourceful. They force you to stay agile, and I like that sense of staying on my toes. Still, it’s difficult not to know what might be coming next.
Starting anything from the ground up can be daunting, and we certainly did not intend to start our business just before a worldwide pandemic. Yet those are the cards we were dealt, and I’m always determined to play my cards well. I remember last April, when TDM was featured in an Adweek article, the byline read “some would say launching a new business right now is straight-up crazy.” A year later, we have a solid, seven-figure revenue, a team of seventeen high-performers, and we’re just starting to go after investment.
When you’re building out your initial business plan — your game plans and targets and strategy decks — you have to leave space for the unexpected. Especially if you’ve already been in business long enough to know what works, there’s this tendency to prefer what’s tried-and-true instead of exploring new methods or ideas that might work even better, so we sometimes grow inflexible over time. Your previous experience, your successes and failures will make you think that you already know how something is supposed to be done, but you have to resist that thinking to stay flexible. Listen to what the market is telling you, and stay open to new learning.
Over-hire in talent and experience
The second thing I think we’ve done really well at TDM is intentionally over-hiring in terms of talent and experience for each role. Many times, startups are just trying to stay slim, financially, so they hire lots of interns and junior talent. We have some young professionals at TDM, but in key positions, we over-hired for the stage that we were in financially. We took some risks there to make sure we had people who were ready for the aggressive growth that we are working for.
Typically in the past, when I’ve bootstrapped my businesses, I just hired what I saw in front of me. I hired for the skill that was necessary at the moment. But by doing that, I baked in some future challenges for myself because, when we grew quickly, we would outgrow the capabilities of our team. Maybe I’d hire someone who was a good tactical player, but they were weak on leadership skills. So, six months or a year later, when I needed to put them at the head of 4 or 5 or 10 people, they couldn’t do it. They were good at the job I hired them for, but because this is a startup, the job changed quickly.
For me, the lesson was to overinvest in skills and experience for the job I needed to fill, knowing those people also had the skills and experience to scale.
Build your evidence before you raise funding
I know this isn’t the usual advice, but I’d say: bootstrap your startup as long as you can before you ask for investment. Why? Because then you can not only talk theoretically about what you want to build and achieve but also talk realistically about all the things you’ve already accomplished. How have you proven yourself? What evidence have you collected that shows you’re already on a rocket ship to the moon?
When you come to the table with investors and you can show legitimate case studies, sales numbers, pipelines, and data-informed strategies, you’re much more likely to get the funding you need. For TDM, we wanted to be able to say not just “oh, we’re planning to build a mobile app” but “here’s the app we built; it’s out there in the world with thousands of users; download it yourself, and go try it.” We wanted to have not just a roadmap of online courses we were planning to roll out over the next few years but ten full courses they could enroll in immediately, see the sales, and understand how we were tracking.
So, we delayed fundraising as long as we could and built a big evidence file of case studies, clients, sales patterns, etc. to prove the path we’re on. I don’t want to say it’s easier this way, because raising funds is difficult under any circumstances, but when people are asking questions that require evidence-based answers, we have some of those answers. In fact, we have a lot of those answers. And that allows us to be in a stronger position when we’re sitting at the table with investors.
Also just to speak plainly about it, when it comes to venture capital and private equity, over the last decade, the numbers for people that look like me have not been great. In fact, according to Reuters, “The share of U.S. venture capital going to Black-founded companies stood at just over 3% of the $147.6 billion of 2020’s overall deal volume, the data shows. In the past six years, that percentage has not budged above 5%, even though about 10% of U.S. companies are Black-owned, according to U.S. Census data.” What that means to me is that I need to be more prepared — overly-prepared. I need to have more evidence on the table ahead of time so my potential for success is undeniable.
Move fast by slowing down
This is a big lesson that I am still learning: you have to slow down so that you can move fast. TDM is a for-profit business on a mission to make big, systemic changes in the world. In essence, we help our clients to shift their workplace cultures so they can reap the business benefits of diversity, equity and inclusion. But, that also means we have to practice what we preach. It means we have a tremendous responsibility to our own employees to build a great culture within TDM — one that other companies can point to and say “oh, so that’s how we can do this right.”
Every Friday, our entire company comes together to talk through what’s working, what’s not, and where people need help. Also, every two weeks, we host an external speaker for an hour-long training session that focuses on the specific skills we want our team to be sharp on. That’s because, over the years, I’ve learned that if you don’t communicate early and well, you end up wasting so much more time in crosstalk, rework, and misunderstandings.
In startup culture, it’s easy to run fast, but it’s also important that you take the time to slow down and get level-set. Make sure that people understand their role, their responsibilities, and the resources they have at their disposal to meet those responsibilities. Building culture from the ground up is no small task, but it’s definitely easier than course-correcting a culture that’s already not right. We invest in culture by slowing down and taking time to prioritize what’s important in the long run. We spend lots of time in training, and we celebrate progress.
If you’re leading a startup through its first few years in the midst of this pandemic and social reckoning, what are you finding that works — or doesn’t work — for your team? And if you’re already on the other side of those critical years, I’d love to hear your perspective as well.
Every business, every leader, and every situation is different, but when we share what we’re learning, we start to see themes. By working as a cohort, we can navigate the pitfalls more effectively and move forward, together, more intelligently.
About the Author
Donald Thompson is an entrepreneur, public speaker, author, podcaster, and executive coach, recently named one of Forbes’ Next 1000: Upstart Entrepreneurs Redefining the American Dream. He is currently the CEO of Walk West, an award-winning digital marketing firm, and co-founder and CEO of The Diversity Movement, a technology-driven diversity, equity and inclusion consultancy. He is also a board member for several organizations in healthcare, banking, technology, marketing, and sports, a Certified Diversity Executive (CDE), and a thought leader on goal achievement and influencing company culture. Connect with Donald on LinkedIn and hear more leadership lessons by tuning in to The Donald Thompson Podcast.