I wrote the first part of the Wazoku story in a post for this site in June 2017 and it was well received so I have wanted for some time to sit down and build on the story from where I left off. The initial post was intended to be a more useful guide to some of the real-life challenges and approaches we took in the very early days of Wazoku, thoughts that could be useful for anyone interested in starting their own venture.
Those early months and years are a huge learning curve for everyone involved, the stakes are high, the energy levels are higher and the passion for change and the project in hand is unquestioned.
As founders, we all love our new business idea and we all believe we are going to change the world. However, we all also know the start-up failure rate is high. Assuming we talk start-ups (high growth, usually tech. ventures and not small business more generally), the most comprehensive analysis to date is Start-up Genome Report Extra on Premature Scaling, a project co-authored by Berkeley & Stanford faculty members with Steve Blank and 10 start-up accelerators as contributors, which analysed 3,200 high growth web & mobile start-ups and found that within 3 years, 92% of start-ups failed. That is a tough statistic to get your head around as you give up everything and start a journey into the unknown! Luck and hopefully some judgement means that Wazoku has now been trading for 7 years. We have grown in strong double-digit percentage terms every year of our existence. We are part of that 8% and I wanted to explore this a bit more and share some of what we did to keep the ship pointed in the direction we believe was towards our North Star!
Why do many start-ups fail? Of the 92% cited above who failed, 74% of those failed due to premature scaling. The temptation to ‘Go big or go home’, especially when people are offering you money to do exactly that, breaks many businesses. Premature scaling means spending money on marketing, hiring etc. either before you found a working business model (you acquire users for less than the revenue they bring) or in general spending too fast while failing to secure further financing. I have personal experience of all of this and things can get ugly, quickly. At Wazoku we were determined to try and avoid those particular waters but were still heavily focused on growth.
So, what did we do that is different? We are not the oracles of the start-up world. We do not know more than others. We do not claim to be better than others. Maybe we got lucky, we are certainly blessed to be where we are and doing what we do. Here are some reflections I have on the important aspects and actions we took around the time of our transition period from very early stage to an exciting start-up that has built a market and found product market fit. The holy grail of start-up speak!
We have always tried to keep it simple. If we find that others don’t understand it then we need to KISS (keep it simple, stupid!). At the heart of it all business is pretty straightforward. In order to grow we need to win new customers, we need to service those customers, so they stay with us, grow with us and advocate for us, we have to build product that delivers to the needs of our customer and continues to evolve in line with their needs and our growth ambitions and we need to do all this in line with the cost base and cashflow of the organisation. Get this right and your business has the foundations to sustain and thrive, get it wrong and it doesn’t. It is important to get the right metrics in place for your business and focus people on these. I met once with the team from Duolingo and I found it really interesting that they operate to two core KPIs as an organisation – the epitome of simplicity – these being daily active users and day 14 active users. Their whole company ethos is aligned to these 2 central KPIs.
At Wazoku we haven’t quite got things down to that level of clarity and simplicity. We have a set of OKRs (see below for more on this), but I would love to boil the business down to even more core KPIs, we just aren’t there yet. Is this something you have done well, I would love to hear any examples you may have.
Keep it lean
Don’t over raise. There is a tendency to rush towards investment, but as I highlighted above one of the biggest reasons for failure is premature scaling. I was talking to the CEO of one of the companies I have invested in recently and we were discussing the timing of his fundraise and the fact that they have got as far as they have on only $250k and are growing well, whilst one of their competitors has raised up to 25 times more, but are not delivering any better results, despite a much bigger cost base. The problem is that these businesses were not ready to scale and throwing more money at them didn’t help, quite the opposite. In these cases, the markets weren’t ready to scale faster, the businesses weren’t set up to scale and as a result costs ramp, pressure ramps, efforts go up but in a really unproductive manner and eventually the Jenga tower comes crashing down. I have seen this time and time again. I urge businesses to stay lean as long as you can and raise what you need. It’s good for you, your market and your shareholders, and sets the right foundation for longer-term success.
Work on your mission
It has taken us a long time to put our mission into words, and to be honest there were some pretty awful attempts and some not-so-fun off-site sessions as we attempted to work towards our mission.
Getting the words down can be tough, but beyond arranging words to speak to the external world why Wazoku exists, our actual mission hasn’t changed really since day 1. That is what I really mean by mission. Why do you exist. Why should others care. What is it about what you are doing that is plausible, backable, believable. You need others to buy in to your idea as much as you obviously do. Some of the best examples include:
- Google “To organise the world’s data and make it universally accessible and useful”
- Ikea “To create a better everyday life for many people”
- Nike “To bring inspiration and innovation to every athlete in the world. If you have a body, you are an athlete.”
What is yours? Does it tell the true mission of why you exist and work so hard to get your innovation off the ground?
At the heart of our mission today is the message of EveryDay innovation. This is a fundamental goal at the heart of our organisation. We all believe passionately in the capacity of everyone to be innovative. At heart we are all creative beings, though this may manifest itself in different ways for different people. This leads us nicely into the next topic:
Grow your talent
People are the heartbeat of a new venture. As the business grows, change to a certain extent is to be expected. However, there are people you will work with along the way who will be pivotal to the longer-term success of your idea and it is vital you recognise these people and continue to grow and nurture them through the evolution of the business. At Wazoku we have a number of people who have been with the company for over 5 years and we aren’t much older than that! These people have all grown with the company, from the early days and long nights of graft to the more mature business of today. They have held a number of different roles and have built their careers with the business, either in part or whole. Whether you are thinking of joining a start-up, scale-up or new venture inside a larger corporate, if you have never been inside one of these businesses before, what you will find will not be like anything you have experienced before. Some will love it and thrive. These are the ones you need to nurture and grow. Most will stay for a while and move on. Some will absolutely hate it. We have had all of the above in the past 7 years.
People are the single toughest part of any venture. Many think its money, but it’s not. Think about it, with the right people you can achieve anything, money guarantees nothing, but having the right or wrong people makes a sizeable difference.
If you get this right with the right people you can start to foster the culture and mindset that can supercharge your business. Instilling your teams with a curiosity and problem-solving mindset underpinned by a culture that supports experimentation, measured risk taking, continuous learning and embraces agile working practices is the golden ticket. It takes work, trust and leadership to grant and then reinforce through the right behaviours and KPIs.
At Wazoku we have taken time to invest in this and over time have started to really build a truly reinforcing culture and intrapreneurial mindset. We constantly challenge what we do, and everything is fair game. There is no status quo. We iterate and innovate constantly, and everyone has a voice in this process. I can tell you at any time where our innovation hotspots are, who is adding value, where our blockages are and have KPIs that are aligned to organisational Objectives & Key Results (OKRs) embedded within cross-functional working groups, we call Pods. We are not perfect but have made huge strides to instilling the entrepreneurial spirit of the founding team down into the whole team.
I would love to hear what others are doing and have found works for their organisations as they seek to develop a more holistic approach to the innovators mindset?