When I started out becoming an entrepreneur, I set out to make profitable businesses. I was fascinated by selling software development: it was easy, I could money and I turned a profit every month. I was able to travel the world, save lots of money each month and have lots of fun.

Turning a profit every month is great. That means your business is default alive, instead of a business that loses money – that’s default dead. By default dead, I mean: if you don’t improve things, the company dies.

When I ran my profitable software business I had a few employees. I worked a bit more than the average person – probably around 50 hours per week. While I was ambitious for my business, I was not in a hurry. What I didn’t do today, I could do tomorrow.

Running a profitable business felt great. I always prioritized other things in life. I traveled the world & saw countries. I was in great shape. I often tried new things. I partied more.

It was A LOT of fun.

Writing this, I kinda miss this.
Fast-forward 4 years, I’ve since built businesses that have lost money every single month. I’ve not turned a profit for 4 years.

My first venture company was Monera. After becoming 40 employees, my partner and I went bankrupt in a pretty brutal crash.

Now, during the last 2 years, I’ve been on the same journey with Likvido. Unlike Monera, however, Likvido is doing really damn well. We have a really solid product customers love, fast growth and we’re days from signing a large seed investment that will be announced widely soon (I’m very confident that TechCrunch article on my goal list can be checked off 😉 ).

Losing money every month is not bad. It can also be a choice. When you run a company like Likvido, our goal is to become the global leader in our space. To become a “global leader” – you need to grow at insane levels. To grow at insane levels, you need to invest a lot. When you need to invest a lot, you also spill more money. You’re not as efficient per dollar as you could be, but you raise a lot of money to make up for that inefficiency.

And this is what I wanted to write about:
“How does it feel to run a venture-backed business, Likvido?”.

Here are some of the things I’ve met during the last year I wanted to share:

Fact of life in a venture-backed business:
3x yearly growth

What makes venture brutal, is the underlying expectation: you need to grow 3x year over year. If you have 1 million USD revenue in 2019, you need that to become 3 million USD in 2020. If you have 10 employees, you will typically need to be 30 employees.

This is of course oversimplified. But you cannot run away from the underlying fact: it’s not healthy for a business to triple yearly. Yet, you do it anyway to scale fast enough.

This underlying fact cascades to a lot of challenges in your business. It’s those challenges I wanted to write about.

Fact of life in a venture-backed business:
Everything is a bit of a mess

I’m by nature someone who loves coming into an office, and everything is just working. I love it when the customers have a great (consistent) experience. I love it when the application has no obvious bugs and doesn’t have down-time. I love it when sales say the correct things to potential new customers.

Forget that in a venture-backed business. Everything is a bit of a mess.

Why?

The underlying 3x growth year criteria really fuck you up. Take an example number such as “number of received customer support emails”. If they 3x as well every year, that means you need to hire new supporters – and more and more of them. Whenever someone is new in their support job, what happens? They give worse answers.

The answer for this particular example is then: you need a formal training program for them.

Oh yeah? Who the **** is going to develop that? Me? I’m busy with not replying to customer support tickets.

This gets back to the fact many startups don’t have the capital to hire experienced people. That’s why you also typically higher younger people, that don’t have the experience. When you then get enough money to hire the senior hire, you get two problems: 1) Suddenly the junior employee gets a boss – they might not like that and 2) It takes A LONG time from job-post to having your experienced role hired – easily 4-6 months.

The customer support is just an example. It’s like this in every department. Of course, this gets better and better as you get better processes & training – but then you scale 3x again and your situation just changes again: new products & new markets. I don’t believe this ever gets easier for you as a founder.

Fact of life in a venture-backed business:
Lots of changes on your team

Another big problem with venture-backed startups is that your business model typically changes a lot. At Likvido we originally thought we should sell to medium to large companies, and had hired staff to support this target audience.

Later we found out, our sweet-spot if customers with 10-50 employees. What happens with your employees who were good at supporting larger customers?

They quit. Or you end up firing them.

In addition to the skills, some employees love the state when you’re 3-10 people at the office. When they support have their own team, and cannot participate in all meetings anymore. Then they want to quit.

You can try to keep these people (we’ve managed to do with a few!), and that’s really important because they’re the only one having the history with the company.

But it’s just another fact of life: you have a much higher turnover (and hiring) frequency than normal companies.

Fact of life in a venture-backed business:
You cannot keep doing what you did 6 months ago

There is a saying in venture-backed business, that every 6 months, your business is totally different. I find that is very true. Roughly every 6 months, my (and my co-founders) tasks have changed completely.

To show my point, try to see my list of responsibilities below. It’s worth saying I have a commercial co-founder who manages everything around funding, sales, marketing, and finance.

My responsibilities in Likvido:

  • Jan 2018-June 2018: Smash a prototype together, launch it, get our license and get our first customers.
  • Jul 2018-Dec 2018: Adapt prototype to customer requirements, talk to customers, hustle customers and revenue at any cost, spec tasks to the first freelancer
  • Jan 2019-June 2019: Hire the first developers, manage support department, build processes, launch features.
  • Jul 2019-December 2019: Scale development team, implement sprints, tweak product a lot, scale operations team to manage themselves without me, hire people in different departments
  • Jan 2020+: Now I need to scale my own product team to +10 employees, and make sure our new head of support and head of operations succeed in their jobs.

At every role in the company, because of the 3x growth, the role changes. I’ve been lucky enough that I’ve been able to “scale myself” the whole way so far – but it’s just important to understand “testing your MVP prototype” is VERY different than having 1:1’s with 10 developers in a day to make sure they perform – and it’s 1.5 year between those two scenarios.

Who knows? Maybe I’m not the right fit in 18 months because the role changes so much. I obviously hope I will be, but it’s just very important to look at yourself in the mirror and know there is a huge difference every 6 months.

Fact of life in a venture-backed business:
Long working hours & it’s not enough to get to “inbox zero”

At my profit company, I used to have inbox zero and all my todos solved when I went home.
That felt great!

In a venture-backed business, you can work 24 hours per day, and still be far away from having done the things that you should be doing. Everyone who has been a manager knows that you can always do more for your team, but as a founder, you always have so, so many things you can do.

What this essentially boils down to, is you need to be really, really good at prioritizing. Of course, it helps to work (really) long hours, but when that doesn’t allow you to “finish your todo” – it’s extremely easy to prioritize the wrong things, and not what is most important right now.

I’ve come to believe that prioritizing your todo is the number #1 most important thing. So important I want to share a pretty long example of a recent prioritizing we made:

Recently my co-founder and I had such a talk about priorities. We have a really good customer that pays 3k USD a month for our product, which used to be a very large percentage of our revenue. This customer is not in our target audience but is happy with our product. It’s not a customer we can replicate.

However, the customer has a large problem and needs us to drive to their office (4 hours away) and meet them to discuss this issue. My reaction was that obviously our new client success manager and my co-founder should go right away and save the customer.
My co-founder said something that made me change my mind: “Lars, this customer was extremely important to get where we are today. But, look at our budget. What got us here, will NOT get us there. We cannot scale this type of customer, and if we focus on this customer we will NEVER reach our goals. I will NOT go meet this customer, and our new client success needs to focus on the customers that make us reach THIS budget. Losing this customer is a good thing for us”

What this essentially boils down to, is that having the right priorities, are often better than working 24/7. And if you work 24/7, you get stupid, and you will more likely make the wrong decisions.

So yes, you have to work extremely hard – but just remember the trade-off.

Do I enjoy running a venture-backed business?

Running a venture-backed business is hard. Really hard. It’s A LOT of hours, it’s a lot of very hard decisions and you can always do things better. You’re “default dead” because you’re essentially burning money every month, at least until you’re cashflow positive. We’re after 2 years getting to a stage where we’re closer to being “default alive“. We have a very solid monthly revenue which is quite predictable, so we could turn around things if things went bad. But this is a really new thing, and 6 months ago that was not the case.
Still, this fact of life is still hard.

However, intellectually, it’s the most amazing job I could imagine. It’s challenging, you learn a lot & you meet amazing people. I get to hire people smarter than myself and building a product that helps thousands of companies (and hopefully soon, tens of thousands). That part is absolutely amazing.

Day-to-day, I think it would be “funnier” to have a normal company or job. I think I would live healthier. I would travel more. I would date more girls. I would see my friends & family more often. I would experience more new things. This website & blog would actually be updated instead of being a wasteland without updates.
I would definitely spend fewer hours in the office.

Yet, why do I continue?
That’s because I get someone else. I get something deeper than “fun”. I *love* going to work every day. I *love* building our product. I *love* hearing stories from our customers. I *love* building our team.

But is venture-backed companies for everyone? Absolutely not. Nor do I think it’s good for your health (physically or mentally).

Can I recommend it anyway?
If you’re up for the challenge – hell yes.