I read two articles today that each deal with a specific stage of starting a business. One stage that we've partly gone through, and another that we are currently going through. The first is an article by Paul Graham of Y Combinator called Why to Not Not Start a Startup. Aside from the bad title, it is a pretty good article that breaks down 16 reasons why people avoid starting a business.

One excerpt that I especially liked was this one from point #7 called No Idea:

We put little weight on the idea. We ask mainly out of politeness. The kind of question on the application form that we really care about is the one where we ask what cool things you've made. If what you've made is version one of a promising startup, so much the better, but the main thing we care about is whether you're good at making things. Being lead developer of a popular open source project counts almost as much.

This point echoed something that I have touched on before: Ideas are a dime a dozen, execution is the key. Rarely is your idea going to be a completely original one; and if it is a good one, be sure that someone else is probably thinking the same thing. But you differentiate through execution. And really, execution is the hard part. Being able to execute an idea is vital to a business, and if your business is made up of people that do more walking than talking, than you are on the right track. You can remain agile in idea, and efficient in execution. But if your co-founders are the opposite, you might need to re-evaluate the arrangement.

In points 12 and 13 Paul goes on to talk about the start-up structure and the uncertainty involved with starting a business.

In a good startup, you don't get told what to do very much. There may be one person whose job title is CEO, but till the company has about twelve people no one should be telling anyone what to do. That's too inefficient. Each person should just do what they need to without anyone telling them.

Well, if you're troubled by uncertainty, I can solve that problem for you: if you start a startup, it will probably fail. Seriously, though, this is not a bad way to think about the whole experience. Hope for the best, but expect the worst. In the worst case, it will at least be interesting. In the best case you might get rich.

Very true. Both of these are things that you'll learn to love and hate during the start-up phase — depending on your mood that day. Sometimes the structure is completely liberating, sometimes the responsibility is stressful. Sometimes the uncertainty is thrilling, sometimes it's very scary (especially when you have bills pilling up and an extremely tight cashflow). And that love/hate phenomenon also seems to be affecting my thoughts on Paul's next point.

No one will blame you if the startup tanks, so long as you made a serious effort. There may once have been a time when employers would regard that as a mark against you, but they wouldn't now. I asked managers at big companies, and they all said they'd prefer to hire someone who'd tried to start a startup and failed over someone who'd spent the same time working at a big company.

First off, I'll have to take Paul's word on the fact that managers at big companies prefer start-up experience over big company experience. I think the spread on that question is probably pretty high. But regardless of whether or not this is universal truth or not, I actually like the idea of being blamed if the startup tanks.

What I mean is that, for the most part, you have a pretty big effect how things work out. Being "to blame" means that you succeed or fail based on your actions. Sure there are external forces, but in general you have a great deal of responsibility. Your success is not at the whim of a manager who is more interested in keeping his corner office than pursuing progressive projects, or the board of directors who feel that "market analysis fails to yield positive results as to the consumer response of blah blah." In a start-up, you make these decisions. You are the decider™. That is actually a great feeling (and again, something you'll also dread — depending on your mood), even if it means that success and failure rests on your shoulders.

The second article I mentioned was by Ryan Carson. On his blog he talks about knowing when to expand your business by hiring employees. The conundrum is this: Do you sacrifice growth for cash flow security, or do you add employees at the risk of short-term cash issues. I think this is the second biggest hurdle after deciding to start the business.

We actually find ourselves in a similar situation right now, and it's an obvious Catch 22. There are times that I feel we are creating a ceiling for ourselves by limiting what Seen Creative can do, to what Zack and I can do. There is only so much work two people can accomplish. To help solve this, we can bring in other people. But that leads to a huge cash flow pinch, something we are in less of a position to withstand right now than Ryan and Carson Systems (which for the time being, makes our decision a little easier).

But in general, the leap from no employees to one, is a huge one. And it's a leap that entails more than just dealing with the new salary expense (the details of which require a completely separate blog article). This transition from a co-founder/equity situation to a co-founder/equity plus employee situation is extremely intimidating.

What it comes down to is managing the risk. Just like everything else with running your business, it is about taking smart risks. I wish there was a formula for this, but there isn't. There are risks in both options, but Ryan and Gillian have decided that growth is the smarter risk. I'll be keeping an eye on the blog to see how it works out for them, and I hope it does. It is certainly something we are going to have to confront sooner, rather than later.