To take their startup to the next level, every founder must at some point decide to go “all in” and focus all their energy, attention, and sometimes money, on their company. Sometimes this means quitting your day job or taking a leave from college. It’s a scary leap, so you want to be sure you’re making it at the right time and for good reason. The choice is made even tougher by the fact that, on top of your own excitement, you may be seeing overly enthusiastic and misleading messages about how other entrepreneurs did it in the media.
There’s this romanticized notion of founders like Mark Zuckerberg, Steve Wozniak, Steve Jobs, Larry Page, Sergey Brin, Bill Gates, and many others dropping out of school when they had a eureka moment in their respective companies’ histories. But the “entrepreneurial dropout” is mostly a myth, with the reality being much more complex (not unlike the overnight success myth I busted in a previous post).
Briefly, let’s look at Zuckerberg and Wozniak…
Zuckerberg launched Facebook (first called TheFacebook) in early 2004 as a social network for Harvard students. Within a month half of undergraduates were on the network and Zuckerberg knew he had something powerful. He expanded to other area colleges and universities, then other Ivy League schools, then further in the higher education landscape. By December of that first year, the site boasted a million users and had expanded to colleges across the US. Early the following year, it grew further to include international schools, too. In 2004, Facebook made a little less than $400K, and in 2005 they had $9 million in revenue. The company first got Series A funding in April 2005. All the while, Zuckerberg remained enrolled at Harvard, having negotiated some leave time to shift more of his focus to Facebook without having to totally drop out of college. In fact, he didn’t definitively leave college until November 2005, nearly 2 years after the start of the site and its first milestones.
Steve Wozniak — the less widely venerated Steve behind Apple — designed and built the Apple I and Apple II, effectively revolutionizing personal computing. He was, at the time, working in Hewlett-Packard’s scientific calculator division and aimed to stay there for the rest of his career. He wanted to be a lifer, and tried multiple times to get HP to buy his designs and prototypes. They didn’t think they had a market for it, so he and Jobs worked on it on the side until some pretty big deals started brewing and he could no longer ignore the fact that momentum was propelling him toward giving Apple his full time and attention. Wozniak went all in well over a year after he’d first started his successful journey of building and designing at Apple.
Even Larry Page and Sergey Brin of Google fame didn’t leave their Stanford PhD programs the minute they had developed the algorithm that would become the backbone of Google. They only did so when Google started consistently receiving 10,000 searches per day. Before that, they had tested the market to see what offers they’d get for their technological breakthrough, but when those were low and it didn’t seem like they’d get very far at that moment, they went back to Stanford and kept plugging away at their project. They worked, refined, waited, then when there was no other choice, left the safety of graduate school to really kick Google into high gear.
We want to think of successful entrepreneurs as brash, bold risk-takers, but they often aren’t. They are, more accurately, risk-mitigators. Most carefully and heavily weigh the risks they are about to take, financial and otherwise. Instead of jumping head-first the moment they have an idea, they spend time testing what works and honing that, and take calculated small risks along the way. Entrepreneurial expert Dr. Joe Johnson writes about “hybrid entrepreneurs” who keep their day jobs while perfecting their side hustles. The research he and others cite shows that founders who didn’t go all in right away had a 33% higher success rate than the ones who flat-out left their jobs to start companies.
Before going all in, it’s vital to do ample market research, make your product solid, fine-tune your business plan, and really know what you’re getting into. Understand the risks and figure out how to lessen them.
In the story of Apple, it’s plain to see that Wozniak wasn’t willing to take the risk of quitting his Hewlett-Packard job before being sure there was a market for what he had designed. He knew, for example, that the Apple I was not going to be the thing that made the company break out, so he built upon it for the Apple II. He iterated and reiterated. Then, he went to the hugely successful corporation for which he already worked, which had resources, to gauge interest. Even though they rejected him, he knew he had something. But he did not leap until that something was more tangible.
The truth is most successful entrepreneurs don’t go all in until they have to. But how do you know when that is? Here are some signals:
Proof of traction: Some define traction as when a startup moves from the blade of the hockey stick and starts inching up the climbing line of the shaft. Simply put, it’s when you know, through data and numbers, that your business is viable for attracting a high user base and growth. Set targets in advance. When you know that your startup has traction, you can consider going all in. Not before.
Remember also that it isn’t just about your startup’s ability to acquire new customers at a steady and quick rate. It’s also about your customer retention. A company doesn’t have traction if it gains 10,000 users in a month, but loses 9,900 of the ones it gained the month before. That should give the founder pause about going all in. If you hemorrhage users at close to the rate you add them, your business model may not be viable and you may need to do some tweaks to your business plan, or even your product or innovation.
Let’s revisit the story of Facebook. Zuckerberg could have looked at the fact that half of Harvard had joined his site within a month, and abandoned his studies to give his time fully to the project. That might’ve been a mistake though. Instead, he ensured that users were continually going to the site versus just signing up, plus tested it at other schools to ensure it wasn’t a fluke. Even then, he did not go all in and drop out of Harvard the moment he realized his innovation was being rapidly adopted on the handful of Ivy League campuses. Or when he saw how popular it was at other colleges across the country. He didn’t even go all in when it had reached 1 million users. He waited until all indicators pointed to the fact that he had no other choice.
By the time he left Harvard for good to devote himself 100% to Facebook, he had raised over $13 million from investors, tweaked the name of the site from thefacebook.com to facebook.com, and had ample proof that not only did Facebook have the potential to grow its customer base, but that it was a sticky site that could also keep them coming back. And even then, he coordinated with Harvard to allow him to take a leave of absence from the school versus entirely dropping out.
Advisors, mentors, and your team: Startups need more than capital to thrive, they need people with different perspectives and expertise to help guide their vision along the way and help point them in the right direction if they stray. They also need a solid team of people who can perform all the necessary functions of a company — from building to marketing to business development to accounting.
Before you drop everything else and throw yourself fully into your startup, take a look around at the people who are helping make it work. Be sure you have a smart, stable, core group of people who can take care of the essentials of building and sustaining a business in a real and measured way. It may be a skeleton crew, but if it’s a good crew, it’s enough.
If you have a great team that gets results, good growth and retention metrics, your experienced advisors tell you it’s time, and demands are such that you can’t avoid it any longer, it’s probably time to go all in.
The bottom line? Make sure you have a sustainable business in every sense of the word, not just a great idea, before you take the leap.