5 Lessons I Learned Creating a Million Dollar Tech Start Up

In 2014, me and a couple of my friends started working on creating a marketplace-based tech startup. In 2015, we got our initial seed funding from a renowned venture capital firm that valued our startup at $5MM. Today, I wanted to share some lessons I learned from that experience and hopefully provide some insight into what it is like to create a tech startup.

Lesson #1 It is extremely hard!

As a Software Engineer, you grow up hearing stories about companies like Google, Facebook, Dropbox, Uber and a ton more that went from garage or college startups to global tech giants. And it's hard to not dream about building one yourself. And there is nothing wrong with that. I thought the exact same way. What no one tells you is how much work it takes.

As a fresh startup, your first goal is to look for funding (unless you have deep pockets already, which we did not). Funding is hard. The media portrays the process has someone having this million dollar idea and selling the idea itself. This cannot be further away from the truth. More on this a bit later. But, in most cases, venture capital firms or angel investors expect to see a working product and some traction already. That makes it like the chicken or the egg problem. Building a production-grade product that already has market traction takes engineering and marketing resources, which are very expensive. That is the reason, startups look for funding — to gather resources that will help take the product to market. Because of this circular dependency, there is always this massive sense of urgency to build a production ready product, and build it with extremely limited time and resources.

When we were working on ours, I was also working fulltime at Microsoft with some challenging projects already. So, I basically had to go to work for 8-10 hours, come home, take no break, and work on the startup for another 10 or so hours. I had no social life, no personal life, just work, work, work. I barely got any sleep, with at least a few all nighters every single week. On a great day, I would maybe get 5 hours of sleep. On average, it was more like 2-4 hours. I remember my teammate deploying last minute changes for an investor pitch at 5 AM in the morning on Christmas day. Needless to say, by the end of 2015, even my health report clearly showed that this crazy work schedule had taken a toll. Almost all my lab tests were well into the red-zone.

Thankfully, all of our family members and significant others were very supportive and understanding. Even my dog did the best he could, although he tried a lot to get me off my chair and play with him.

Lesson #2 You need to pick the right TEAM and the right TOOLS

You are constantly working under so much stress and pressure that whether you have a cohesive team is what will make or break you. Tempers will flare, some unintended things will be said. That is almost inevitable. But a team that understands that and can continue normally when things settle down, will go a long way. Research shows that from all the startups that fail, almost 20% fail because of "team problems", which is surprisingly higher than "financial reasons" at 16%. And while your immediate team is what will directly impact your startup, your family members and friends also make a huge impact. They are your support system, and will have to endure the side-effects of you being under pressure all the time. Their understanding and support will go a long way as well.

Also, the tools. Building for a startup is not like building a mature production grade product. You are constantly treading this fine line between a functional product vs. something that you can iterate and pivot on extremely short notice. It is like building a series of MVPs instead of one single product. It is a fine balance, and the tools you pick will make a huge difference. This isn't necessarily the time to pick the best tools, but the tools that will let you execute most effectively. It is highly likely that your original product will completely change and you will refactor a lot of your product after you get reasonable funding. This takes me to lesson #3.

Lesson #3 An IDEA alone is worth nothing

Like I mentioned before, Hollywood and media in general like to sell fairytale stories about someone who woke up with a million dollar idea and made it big. First, it is a gross oversimplification of a process that is very long and arduous. And second, I would even go as far as saying that this is a complete myth. See, the best tech startups that have made it didn't build anything new. They just executed it much better. Google wasn't the first company to build a search engine. Ridesharing had been a thing long before Uber was even a company. And social networks like MySpace and Hi5 dominated long before Facebook come into the picture. Amazon wasn't the first company to sell books, and neither was Microsoft the first company to build an operating system. Having an idea doesn't mean anything. If ideas could sell, we would all be millionaires.

We first started brainstorming startup ideas all the way back in 2010. It was just 2 of us then, my close buddy and I. We wanted to create a virtual, but collaborative shopping experience, one where you could shop and try out things remotely, but as a group. A few more friends joined in and the idea morphed into social network, but one that is different from Facebook. That didn't really see much traction, and eventually a few of us left to pursue other things while others continued to push through. When rejoined the team in 2014, it had transformed into a demand marketplace. And in the next two years we pivoted many more times, from exclusive concierge services to an effective booking system for restaurants, eventually settling on shared dining experiences.

In fact, it is the rapid iteration and effective execution that gets your startup to places. Sure, a great idea on top of that helps, but it is by no means the most important part of a startup.

Lesson #4 Don't do it for the money

I wont blame you if you've dreamt of becoming rich from a startup venture. I think it is pretty normal to think that way. But, I urge you to resist that temptation as much as you can. Sure, it's great to be eventually rewarded for all the blood and sweat you've put into your company, but if financial reward is the only metric you are counting on, you will be very disappointed.

Our company was valued at 5 million dollars. Even at a 25% stake, I should then be worth at least a million dollars, right? Well, no. Because that is not how it works. See, the funding you get isn't for you, it is to invest in the company. In fact, it is quite common for founders to not even have a salary for many years until the company becomes somewhat profitable. And $5MM may sound like a lot, but that is just a valuation. The investment you actually get comes in rounds: seed, series A, B, C so on and so forth. In our case, our initial seed was around 300k, which again, sounds a lot. But even with all 4 of us taking no salary, that is barely enough to hire 1 additional software engineer for a year.

So, don't let the glorified one liners (like the title of this post, sorry 🙂) fool you. Building a tech startup, and any company in general, is a long uphill cash-strapped battle, one that very few even survive. This takes me to my final lesson.

Lesson #5 Enjoy the Journey and Don't Give Up!

Enjoy the process. The constant changes, the uncertainty, and the resource and management challenges. It's like a game. So, play the game, and have fun while at it. Or else, you will end up being miserable and eventually burn out.

The Startup Genome study from 2019 claims that 11 out of 12 startups fail. 7.5 out of 10 venture-backed startups fail. 20% of those fail within the first year! These are grim statistics, and the chances are high that your startup will fail as well. But, if you savor the process, you will come out of it a winner. Lessons I learned from my experience are invaluable to me. It teaches you about leadership, grit, drive and commitment, which you can easily transfer to any other aspect of your life.

Also, don't give up. Being an entrepreneur isn't an event, it is a lifestyle. You are constantly grinding out new ideas, trying to build new products. You enjoy those long hours, you love the process of creating things that can be useful to others. Keep at it and you will eventually end up on the right side of the statistics. After all, it says 11 out of 12 startups fail, so basic probability suggests that if you try to create a startup 12 times, one of them will likely turn out just fine, right?