The number one reason for dreaming of startup success is the prospect of substantial financial reward in a relatively short time. Money earned is good. Although the financial result is the most tangible, maybe there are other aspects of success worth thinking about.

For example, if your role in the company is related to product management, you’d surely want your product to succeed. But what if your contribution is great but the product only gets minimal traction in the market? What if the company achieves financial success but your contribution to that success is questionable? Are there measures of startup success, beyond financial reward?

Let’s explore with an example I lived through.

From an Idea to a Selling Product, Through Hiccups

Four of us rented a suite of three small rooms on the first floor of a local shopping mall: the founder, two lab technicians and me. It was my first startup. The founder, a scientist, started the company on the strength of his physics-based patent and the demo of a concept system. Personally, I found it all absolutely fascinating: the physics (lasers, solid-state devices, X-rays) and the system (analog/digital electronics, optics, mechanics, software). It was an opportunity to bring a breakthrough product to the market. All we had to do was productize the concept for a range of medical applications. So, we rolled up our sleeves.

Soon, there were a few more of us and we moved to a bigger place. But it became apparent that, while the system worked as needed, the physics part did not, or rather, not well enough.

Previously, other than an MS education in electrical engineering, I had no experience with much of the physics involved. But, what do you do in a startup? You do what’s needed. So, I rolled up my sleeves some more and disappeared, with others, in the lab room for months. I was trying this, trying that, shooting hundreds of X-ray images, designing/debugging control boards, writing software to control experiments, testing, testing, and testing.

We learned a lot and pushed hard but could not achieve the required image resolution and, when our potential "white knight" corporate partner closed its doors, so did we.

But, we discovered that the tester we built could be useful as a quality testing tool for integrated circuit manufacturing foundries. So, a new company was formed from the ashes of the first one, with the same crew and lead investor, chartered with productizing the tester. Things moved fast and we had about 20 people on board by the time we shipped our beta system to early adopters.

About four years from day one in the first company, we began to realize revenue for our product. On the way, I found a nice solution for a problem we had with the tester’s probe (which we patented), helped define requirements for the product, wrote its theory of operation, all marketing collateral and application notes, supported early adopters at their site, and tested, tested, tested. Not long after, I left the company.

Why did I leave? I concluded there was no growth opportunity for me because the target market was tiny with no prospects of it growing.

When I look back and wonder if those four years were a success, the following comes to mind:

• The company made it as a business, but a tiny one (it continued as a small privately owned company for 10+ years before being acquired).
• I sold all my shares back to the company when I left, gaining about one-month's salary.
• I made significant and recognized contributions to the product and the company, though some of the recognition came later when I was not part of it anymore.
• I learned a lot. Some of it was useful in my later work, some completely useless.
  • On the plus side: Understanding startup founding, funding, issues and operation has been useful, several times. The experience of defining and introducing a new product and working with partners, prospects and customers. All the software work. The confidence gained in working with a broad range of issues.
  • On the negative side: I didn't work on anything related this deeply to physics again. This physics experience never directly helped me advance my career.
• I developed a small circle of professional friends, though I have not worked with them since.
• I consider the time spent on this a very interesting adventure, though I wouldn’t call it the ride of my life.
  

Objectives and Outcomes

What does one think about when joining a startup? Sometimes, it’s just the relief of getting a job. But whether it’s the only job you were able to get or the one you’ve been dreaming about for a long time, you can’t avoid thinking about expected excitement and big rewards, eventually. Often, excitement dominates to the point where you don’t think realistically about personal objectives and possible outcomes. But it may be worthwhile to consider them, carefully. Not only to prepare for possible unpleasant surprises but to create a useful personalized guide through the turbulence that comes in a startup.

How does one approach creating such a guide? The best way is to clearly articulate your personal objectives and contrast them with clearly identified business outcomes that one may expect in a startup. What would you call a success and is such a success a realistic expectation given the possible outcome?

Personal objectives

There are three categories of personal objectives when joining a startup.

Awesome ride: If you join a startup voluntarily, you are not adventure averse. To the contrary, you may crave it. You want the risk taking, you want to deal with the unexpected, and you want to match your skills, energy and determination against tough problems and competition. That’s who you are. But, what would you really call a “ride of your life?”

Would it be defined by the speed of action, decision making, and changes? Would it be the constant progress, a non-stop consistent positive change? Would it be the camaraderie of your peers and managers, forged through fierce teamwork and mutual help “under fire?” Or, would you call it an “awesome ride” only if all three were present in your experience?

Career boost: In any job, one hopes to gain more experience, learn new skills, better prepare for the next job. A startup is not a place to learn, it is a place to execute the skills you already have. True to an extent but, unless it’s your last job, you will look at your startup experience as an opportunity to boost your career. You could learn a lot that is applicable to your particular professional field or became widely known in your industry.

Earned success: Perhaps the most important objective that drives us is the achievement of earned success, financial or otherwise. I’d even go as far as to say that this is the true essence of a startup. It’s a simple and natural thing: “Work hard, and through effort create new value.” So, what constitutes an earned success worth talking about? Is it tangible results, something you achieved that’s clearly of value and thus not debatable? Or is it key contributions, results of your work that saved the company or enabled it to grow rapidly? Or perhaps it is the (large) financial reward that you’ve earned and received.

Business outcomes

The company may be founded for many reasons, but it’s funded for just one: financial gain. Naturally, the best outcome for the investors is an initial public offering (IPO) or an acquisition with a substantial premium over the investment. But, there are other outcomes to consider. A bad one is closing the doors and writing the investment off as a loss. A curious one is survival, where the business continues on as a private company, without getting enough traction in the market for an IPO or acquisition.

IPO / Acquisition: If the startup does well and its target market is big enough to warrant an expectation of large revenue and profits, the startup will go public by offering its shares for trading. To investors and startup employees with options, that means they can cash in their shares and realize a profit. Some IPO’s are more successful (achieve higher share prices) than others but an IPO is always a clear success for the company. Is it also your success? What kind of a success?

Many startups are acquired, usually by financially stronger players in the same industry, without an IPO. For a product manager, one particular type of acquisition may be of concern: When the company is acquired for its technology rather than for its product. Often the product is killed and the technology is used in other products. Another type of acquisition is when the acquirer’s plans change after the acquisition, and both the product and technology are discontinued. Given the various possible aspects of an acquisition, are you likely to consider such an outcome a success?

Closing the doors: Sounds like a failure, not a success. True, it is a failure from the financial point of view. Investors lose money, employees lose their jobs, managers get a dark mark on their reputation. But, is there a chance that you may achieve a measure of personal success, even in this case? What if everything was moving well but the company closed simply because the market changed unpredictably and the company could not adjust? Or, a powerful competitor emerged, that was impossible to beat? Or simply macro-economic waves washed the company away as cash-strapped investors lost their appetite and cut their losses. Could you possibly call such experience a success? Maybe.

Survival: In tough economic times, survival is a success of sorts. Investors don’t lose their money, even if they don’t make much (if any) and it may take a long time to recover even the initial investment. Employees don’t lose their jobs, even if things aren't as exciting or promising as they once hoped. The company tends to "slow down" when it enters survival mode. Some people leave. Some get discouraged and turn negative. But perhaps there is a silver lining here? If the company survives, you can continue to contribute, learning more, and growing your network. Depending on the magnitude of these achievements, is this success for you, even if the financial wealth is not part of it?

There may be other business outcomes, for example a re-direction, a turnaround, that’s very successful for the company but a disaster of sorts for you personally. That can happen when the company business model or target market changes and your specific strengths lose their special value. But this can also happen as part of any of the three main outcomes discussed above.

Compare and Decide

When you are at a startup, you’re often inside a whirlwind. You may be too busy to consider what’s actually happening with the company and with you personally. I think it’s always good to take a step back and consider how your personal objectives match up with possible outcomes. Do it when you join a startup and do it again when you are working in the middle of it all. Are your objectives realistic, given where the startup is headed? Which of the objectives are most important to you? Which should you focus on?

The matrix below has my answers to the question “Is a given objective achievable, assuming a likely outcome for the company as a business?”

I used a question mark (?) in several places because the answers are not black-and-white. Certainly, in cases of company closure or mere survival, the chances of reaching your personal objectives may be reduced. But they are still there. It just depends on you and the company’s situation.

A final comment: Why am I questioning financial reward in case of IPO or acquisition? Assuming you do achieve tangible results and make key contributions, you should expect a well earned and substantial financial reward if the company does conduct an IPO. But, you may get no financial reward at all if the company is acquired, for a loss or minimal gain for investors. Have realistic expectations.

Summary

Startups are exciting in their promise of success but unpredictable in character. That’s their charm and their curse. We can mediate the curse to an extent by carefully considering our success objectives and possible business outcomes. Once you recognize this you can better navigate the stormy waters of your startup and focus energy on what makes the most sense: objectives that are most important to you and achievable.

One final check: When all is said and done and you look back at your time at the startup, are you proud of what you did? That could be the real indication of your success.

© Copyright 2010 by L. Kurt Reiss. All rights reserved.

L. Kurt Reiss managed products at multiple startups and companies large and small, such as Interactive Supercomputing, Cascade Communications and Lucent Technologies. Focusing on technology ranging from niche products to a global market-leading product family, Kurt contributed to and led product management and marketing teams through all product cycle phases. He is the author of FOR PRODUCT SUCCESS – A Partnership of Two Managers and the What and Why of It. Kurt provides product management consulting services at PathwaysFPS.com.