Table of Contents
John Lauer is your archetypical serial entrepreneur. While most famous for founding Zipwhip—sold to Twilio for a whopping $952 million (based on the closing date stock price)—he’s been founding companies since 1997 (including through the 2001 and 2008 crashes). Zipwhip was founded right before the 2008 great recession. A charismatic quick-talking visionary (and my former competitor), he now shares his best advice to founders navigating the current rough waters.
Editor’s note: This is the ninth in a series of guest posts where people from all walks of life share their best advice in times like these. A big thanks to the leaders who volunteered to share their life experiences. Reflection on the past is a deeply personal exercise. The willingness to share it with the world, especially in the written form, is a commendable act of vulnerability. For this alone, they have my deepest gratitude.
My Best Advice
My best advice to my fellow entrepreneurs is to focus, focus, focus.
I remember the painful day in 2001 arriving at the office of my first startup and the bank auctioneer was busily plugging a microphone into his portable speaker system. The Aeron chairs had tags hanging on them. The Dell rack servers were laid out like dead bodies with lot numbers across the sparkling new push-button height-adjustable desks that my developers loved. I was 26 years old, had built the business to 70 employees, generating $6M/year in revenue, and just finished a gorgeous new office. But, it was all over. The cash inflow wasn’t matching the outflow.
I had taken my eye off the ball. I was spending too much energy trying to spin out a product business from the service business. We were a web application development company that built the first ford.com and gm.com websites. We were the internet darling of Detroit. I started the consulting business because I believed that service businesses can be great long-term sustainable empires much like the great service businesses IBM and Deloitte are today. Instead, after achieving great milestones in my first business, I became enamored by the next shiny thing–building a product business. I was sick of quoting hourly work and frustrated with customers expecting free scope changes. I was disappointed with how hard it was to recruit amazing developers who were interested in service contracts.
I ignored advice from my management team. I wanted to build a hit new software product. I wanted it to generate a reliable recurring revenue stream. I was so excited about building the new product, and believed so deeply that I could make it work, that I let the core business atrophy. Instead, I was listening to an auctioneer rattle off the starting price for the conference room table. I learned my first brutal lesson for any entrepreneur and one that I promised to never repeat. I believed we were focused as a tech software business, but in reality, I wasn’t focused enough.
Years later, at my 3rd startup, this inability to focus would come back to haunt me. We already had hundreds of small businesses like dentist offices, hair salons, and tutoring centers happily using our app. We charged them a simple $100/mo for the software and it was starting to add up nicely. Our confidence was growing that we were onto something amazing, but I wanted more. We pitched to a major enterprise customer a deal to pay us $100/user across 200 users rather than just $100/mo per business. What CEO wouldn’t want that?
Like most enterprises, the customer had a long list of feature requests and like all entrepreneurs willing to solve a problem, I said yes. They awarded us a $20k/month contract. It was an amazing win. It was going to transform us. It would enable us to hire more salespeople and developers and create a new segment. The future was bright. We had finally cracked the code on the enterprise market. How could I have known that instead, it would become a boat anchor tied around the company’s neck that I still regret to this day?
We knew that small businesses were willing to be early adopters where our cutting-edge product could flourish, but enterprise businesses were known to be late adopters. Would it work? We may have found the rare enterprise willing to be a first-mover, but would any other big players be willing to take the leap of faith and text-enable their entire call center?
That answer was no. We were five years too early to the market. The enterprise business didn’t have legs. We didn’t have enough cash to pursue it. We struggled to add the requested new features that a call center needed for the product to work correctly. Our beachhead customer got increasingly frustrated. My development team didn’t want to spend any more time on the features. We let the call center code languish. We would try to add new features as efficiently as possible, but when the customer would call wondering when we would release new versions we had to dance around the timelines. Then, 24 months later, they canceled. It was over. I was devastated.
Looking back, the customer canceling was the best thing that ever happened. We had been diluting our efforts across two uniquely different businesses, and it was hurting us more than helping us. I wish I had the foresight to realize pursuing an enterprise segment at the same time as a small business segment was unfocused and shut it down two years earlier because we wasted millions of dollars on that new enterprise business. Fortunately, the small business segment was growing like gangbusters, so we were fine in the end, but in hindsight, I should have been pumping our cash into the core business.
I thought we were focused on building texting software, but I realized that the aperture of focus wasn’t narrow enough. I thought I had learned my original lesson years ago at my first startup of focusing, but it’s not enough. To truly be a great business you need to focus, focus, focus.
It’s hard to give an entrepreneur your “best” advice because I could fill a book with hundreds of gold nuggets that I’ve learned along the way. From advice on how to pitch VC’s for money, how to not get discouraged when the bastards grind you down, how to adeptly allocate stock to employees, or how to build a sales team that matches your small business customer segment, if I had to pick the “best” advice it would have to be Focus, Focus, Focus.
As entrepreneurs, we are unfocused at our core, which is why we solve problems, but to make a successful business we almost have to rebuke who we are in our deepest inner gut. We have to check ourselves at the door. The moment we see ourselves erring in our focused path, we have to catch ourselves. That’s our cure.
Now when I’m brushing my teeth in the morning, I ask myself in the mirror, “Am I focused enough?” I remind myself, “I’m not Superman, I don’t have unlimited funds, and I can’t solve all the world’s problems.” This self-audit gives me the humility to pick a smaller problem–a focused problem. I’ve learned that it’s not necessarily the amount of money I’ve raised, the people I’ve hired, or how good my marketing campaign is. Instead, I’ve come to realize it’s Focus, Focus, Focus that becomes my most powerful weapon for building a startup.
