Focus for startups: the power of saying no

I am going to start this post with a story. I saw a friend last week that I had not seen in two years.  When I saw him last time, it was in a windowless basement office where he and his co-founders were working on an idea to disrupt a very mature market.  Fast-forward two years later, his company has a long list of marquee customers, employs 40 people, and has raised two rounds of venture financing. When I saw the product demo all I could think of was our last conversation; the product demo was exactly like he had described his vision to me – two years ago! Later that evening he told me that they had just turned down a very large sum of money from a prospective customer because it would have de-focused them from their mission.

I know what many of you are thinking, “oh…he must have gotten lucky”. While luck certainly plays a role, I would argue that “fortune favors the prepared mind”, as Louis Pasteur so aptly said more than a century ago.

How many of you have been in situations like this?

• We don’t have enough data points to pick a focus area yet

• But, these are all big opportunities, we have to execute on all of them

• I was on a demo yesterday, and the prospect asked for these five new features, when can we build them into the product?

• Our Board said we should also look into these three new areas

• We can’t give up yet, it might just work if we give it a bit more time

• Our biggest competitor is doing it, it must be a big opportunity

• None of our competitors are doing this, we have to pursue it

I am sure you can all add your own favorite questions. What is the point of all of this?

My point is that (especially if you are in a startup) you have to pick your battles (aka focus areas), test them, and move on if something is not working. Here is what I have learned the hard way:

• You will never have perfect information. Trying five or ten things at once is guaranteed to fail. You will never have sufficient resources to build out what you need to, in order to go against your larger competitors.  Use market data (if you can get it) or talk to your customers and prospects and pick no more than one or two.  Then give it all you got.

• Saying no to a prospective customer is hard, especially if you are staring death (aka insolvency) in the eye. Sure, getting just one more customer to sign up is great and your potential investors will love this marquee customer name, but how much will you have to invest to make them successful and what will you have to give up instead? And if you do make them successful, will that translate to success for your company?

• Knowing when to give up is even harder. You have been working on something for a year maybe longer, but nobody is interested. If only you had a few more months to perfect your product, find the right partner, etc. Now it’s time to wake up and face reality. It is obviously not working and you have to move on.  While you will undoubtedly be emotionally invested in this, you have to let go.

• Chasing the feature du jour will get you nowhere. With all due respect to Boards, nobody knows (or should know) your business as well as you do.  Chasing down a specific idea just because a Board member or advisor thinks you should has fewer chances of succeeding than winning a straight-up bet in roulette.

Saying no is the hardest thing you can do, but I can guarantee, focus is not hocus-pocus.