Startup Rule Number 1: Revenue comes first

02/06/13 23:07:00    

By Michael Mealling

Pipefish is my fourth startup. My first real startup was Refactored Networks. The idea there was to take some of the new tools we were buiding for RFID enabled supply chain management and take them down market to small and medium sized businesses. If I'd actually done some customer discovery I would have learned that UPS/Fedex package tracking was all they really needed. One of the other mistakes I made was to assume I could find investors when I needed them. So, after 6 months of developing a prototype with no revenue, I ran out of money.

Revenue should have been my #1 priority. Revenue would have given me the time to learn and pivot. In that particular industry there were tons of consulting opportunities where I could have been paid to learn what my target customers really wanted.

I've had several entrepreneurs at Hypepotamus ask me for advice and second only to “talk to your customers before you do anything” is “find some way to make money on day one”. Revenue is what keeps you free to do the other things your dream needs. With no revenue your options are limited and you begin to panic.

Pipefish has the funding it needs to make significant progress so you might think we should focus on the final product. But you don't learn that way and it means your fate is not your own. Economies go bad. Wars start. People get sick. Shit happens. Revenue is the only shield your startup has to keep that shit from taking everything down with it. So don't put it off.

Step 1: Discover your customers and your business model Step 2: Find revenue to keep your options open Step 3: Iterate until you validate your business model and then execute like hell.

Forget Step 2 and there's a good chance you won't survive long enough to find that valid business model.