One foot in front of the other

Our goal at Gain Compliance is to create a valuable company. The measure of our success, ultimately, won’t be a passionate mission statement, great company culture, fulfilling work environment, compelling product, or mass adoption with satisfied customers.

Don’t get me wrong: I’m not discounting each of these as vitally important (except for the mission statement piece), but they are the means to an end. The ultimate measure of success for the company is the return it generates for investors.

In the startup world, here’s the hierarchy (low to high) of value creation for a startup.

  1. Idea: Yes, a good idea for your business is important. But, ideas — even the most brilliant ones — are essentially valueless. They are table stakes to play this game. An entrepreneur who “sells” a company at this stage is generally rewarded only with an offer of employment by the acquirer.
  2. Team: If you can build a high-functioning team with sought-after skills, you’re starting to create value. Even businesses that never make it past this stage are sometimes purchased for their talent, particularly if their skillset aligns with market demands. (Here’s a great discussion of the environment for “aqui-hire” deals from a few years ago.)
  3. Product: Make something that solves a real technology or business problem, and it starts to get interesting. Companies are regularly purchased before market launch for what they’ve built.
  4. Customers: Demonstrate that people are willing to pay for your product and you’ve removed uncertainty present at the earlier steps. Sometimes, you only have to show a trend of market adoption to realize the value of this step (as seen in the recent acquisition of Trello for 100x its forward revenue projections).
  5. Business: The greatest value is when you put all of the previous pieces together — team, product, and sales — and add customer support, finance, and administration.

This list constitutes not only the increasing value of a startup, but the escalating complexity and risk inherent in the milestones as well. Each sequential step, executed well, demonstrates traction and positive momentum. At the same time, the music also gets faster as you go: falter on any step and you degrade, if not destroy, the level of value you had previously achieved.

As I mentioned in an earlier post, while the market rewards — and investors demand — speed, it can be challenging to chart and follow a deliberate course.

On Valentine’s Day, Gain Compliance will be six months old. We are very much focused on showing that our idea (#1 above), in conjunction with the team we’ve built (#2), will produce great product (#3).

One step at a time.

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