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Read This If You’re Ready to Start a Company Now

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Chet Kanojia is used to taking on the big guys.

A few years ago, he found himself embroiled in a Supreme Court fight to shake up the broadcast television world through his startup, Aereo. He lost that fight against media giants like CBS and Comcast but like a true-blooded entrepreneur, he’s back with a new company called Starry. 

That persistence could be traced back to his early days starting a company at the worst possible time: during the dot com crash. Kanojia founded Navic Networks right when the bubble was thinning in 1999 and despite lots of scars and bruises, eventually sold it to Microsoft for a tidy sum.

Anyone even thinking of starting a business now when it seems like another global crisis is brewing would do well to listen to Kanojia’s battle-tested advice. Here’s an excerpt of our recent conversation:

Q: Does this stock market turmoil remind you of what happened in 2007 and also in 2000 when the tech bubble burst?

It’s hard to make an apples-to-apples comparison. The 2000 bubble was a strange one, as you could almost see it coming, like a car accident about to happen. Consider that you had these online companies with little to no revenue, let alone profits, pouring massive amounts of marketing money into offline media. It just didn’t jibe.

Honestly, I think 2007 caught most people flatfooted, except maybe for folks in the finance industry. The massive contraction in the economy was felt deeply across all industries–which was much different from 2000.

I know everyone wants to talk about an impending “tech bubble”–but I’m not sure that you can draw any real comparisons to 2000 or 2007.

I’ll admit, it feels a little alarming when large institutional investors are investing in startups like Jet and others, but you have to look at the reasons why and what’s driving that investment strategy.

Sarbanes-Oxley and other rules have made it challenging and onerous for companies to go public. That means good private companies choose to stay private longer. And, as a result, institutional investors can only build substantial positions in these companies by investing in them while they’re still private and at later stage. It’s an unintended consequence of the regulatory environment and consolidation in the institutional investor space. Does that mean it’s a recipe for disaster? I’m not convinced that that’s the case. Public markets do have a way of holding companies’ feet to the fire, but remember it’s not always a surefire way to determine the health of a company. Let’s not forget that Enron and MCI were all public companies before their demise.

Q: You built a company during the worst time when the tech bubble burst. Was that one of the worst moments in your career or alternatively, was that a thrilling experience (even if it was scary?).

Building a company is not what I would call ‘thrilling’ to me. It’s always a grind; it’s always hard work, no matter what. The question for me has always been, am I doing something I love?

I founded Navic in 1999 at possibly one of the worst economic times to start a technology company. But, ultimately, that didn’t dissuade me. For me, it was the choice between having the freedom to chase your ideas or work for some massive, sterile corporation. That made the choice easy to go and build something of my own.

Building your own business is hard, but it’s very, very satisfying. You have moments of thrills, like when you land your first big customer or partner, but you also have deep moments of despair when you lose a customer or when some product you develop doesn’t quite hit the mark. That revolving door between thrills and despair is sometimes a twice-a-day cycle that you have to prepare for.

What I learned from starting a business in these tough conditions was important:

1. Keep your expenses as low as you can while making forward progress.

2. Set a target to get to revenue and then cash flow breakeven.

2. And once you get there, just know it’s gonna be okay.

Q: What lessons did you learn from that time?

1. Cash flow beats everything

2. You can always cut more expense than you think

3. No one will bail you out in a hard time, except your customers–not your investors, not your friends, it’s your customers that can help pull you out of hard times. And, just to be clear, don’t confuse the user of your product with who customers really are.

Q: Do you think any of those experiences apply to what’s going on now where it seems like tech is also going through a slowdown? Do you think it could get as ugly as 2000?

I don’t think anyone really can say with a certainty what a tech slowdown will look like or that it will or won’t ‘get ugly.’ I think if people follow the principals of good business in both good times and bad that will create stability. To me, those core principles are: take care of your brand and your people, allocate your capital judiciously and focus on getting and growing customers that are not dependent on the economic cycle. These are all common sense and good business principles to live by.

Q: What advice would you give to anyone starting a company now? I love contrarian pieces of advice so anything beyond the norm would be great!

An old friend and mentor of mine always used to tell me, your purpose every day is to create a customer. Every feature, every product you develop should create a customer. He also taught me that creating a customer is fundamentally different from getting a customer. Creating a customer is about creating value for that person or that business. So the question I wake up to everyday is how am I going to create a new customer? And the answer is always: by developing something meaningful that adds value to their lives.

If you like this article, you’ll love my new podcast, Radiate, featuring interviews with CEOs, entrepreneurs, and thought leaders. You can click on new episodes on iTunesSoundCloud or on my website. www.betty-liu.com. Here is the RSS feed too. And please don’t forget to REVIEW the podcast or contact me at betty@betty-liu.com

 


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