Tips on Starting Up from Dharmesh Shah of Hubspot

On December 9, the Boston TLP class was treated to a talk by Dharmesh Shah, founder of HubSpot and the popular blog OnStartups.com. The Getting Funded Competition had been a fast and furious VC negotiation round and it was great to have a dynamic speaker like Dharmesh to keep the energy going. Dharmesh has founded several software start-ups and he shared some of the lessons he picked up along the way.

Partnerships with big companies are unequal

He cited his experience of partnering with a big company (which eventually acquired his previous start-up) and described the challenges of working with them. So watch out for big partners, particularly ones that have no precedent of partnering with smaller companies!

Starting a company with family or close friends

Another big DON’T here – based on his first start-up with his younger brother, where they both felt they had to treat each other without regard to the relationship, creating undue pressure.

Power of a modest liquidity event

Two paths lie before most entrepreneurs – to either bootstrap a company by taking no outside capital (which often yields a bigger piece of a smaller pie) or to accept institutional financing (and end up with a smaller piece of a bigger pie). Dharmesh believes that bootstrapping may lead to a better outcome personally, but one should decide based on whether the business can achieve its goal without VC capital.

Risk

Don’t spend too much time on the technology risk; focus on market risk instead!

Don’t scale prematurely

Don’t prepare for potential problems too early by building team and technology for future scenarios (go at the right pace)

Building a great team

Early on in a company’s life, hiring generalists makes more sense than specialists.

Build a following early

Connect with potential users through blogs and LinkedIn, but be careful to limit the commercial spin if you want to build credibility.

Think Simple

Learn to say No (e.g. setting up 2 pricing schemes and optimizing too early usually carries a hidden cost)

Cardinal Sins

1. Losing objectivity (e.g. keep management debating both sides of important issues)

2. Keep investors and employees separate (if you invest in your company, separate the two roles and treat your cash the same way as other angel investors’).

These are just some of pearls of wisdom I took away from the talk – Dharmesh’s blog discusses these issues and more in detail. Visit OnStartups.com for more, and Happy New Year everyone!