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Author: Josh Payne

25 Lessons From Running a Profitable, Venture-Backed Start-Up For Six Years

25 Lessons From Running a Profitable, Venture-Backed Start-Up For Six Years

Six years. The tweet below from Jason M. Lemkin pretty much sums it up. You start, you hustle, you make progress, you grow, the market shifts, you start all over again albeit on a new level within the same game.

 

What makes the start-up game the greatest game on earth is that the chess board recreates itself every day in new unanticipated ways. Nothing stands still — there are new entrants below you, bigger companies above you who now see the opportunities you’ve unearthed, and all the while you must change the tire on a moving car.

Given those challenges, I document a few lessons learned (Year 1Year 2Year 3Year 4Year 5) for other entrepreneurs on the same arduous path. There is nothing that can fully prepare you for the journey that lies ahead, but this is some of what I’ve learned and I hope it helps you in your endeavors.

Why listen to me? I’ve been in the thick of launching, running, and growing a start-up for the past six years as the Founder and CEO of StackCommerce. In that time, we’ve grown from $0 to $40m in annual revenues, profitably, on less than $1m of venture capital raised. In 2017, we acquired one of our competitors, Joyus.com, who raised over $65m in venture capital.

startup founder anniversary cake

1. Cannibalize Your Current Business

Given how fast technology evolves today, you must shift before the market does. This seems like an obvious point, but while you’re in it…you get caught up. There are countless examples of “temporary” business models or hacks that work for a while, but then that trend or technology gets passed by in what feels like a blink of an eye. Think about historically top performing companies like Zynga (fb apps), Groupon (daily deals), and Blockbuster (dvd’s) — they dominated until the game changed and were caught focusing on the “old way”.

The only real shot you have of overcoming this is to cannibalize your current business with a new product/feature that leapfrogs your current offering. There will be a lot of pushback from your team because most of them would rather improve “what’s working” in lieu of the challenge of losing focus on the core business. It’s a valid argument and takes a lot of trust on both sides to get through.

One thing we do to flush out these types of “moonshot” ideas is running bi-annual “Hack Days”. People get a chance step away from the day-to-day and work on side projects / features / culture hacks that they don’t typically have time for. This year, our hackday resulted in one of the most important features we’ve every released!

2. Life Will Happen to You

When I started Stack, I was single and could spend 100% of my time however I wanted. I dedicated almost my entire thought process 24/7 to my start-up — happily. A few years later, I got engaged. Then I got married. Then we had our first child. Then we a second kid. All within three years! Talk about life happening.

For me, the transition to fatherhood initially felt like an attack on my identity as an entrepreneur. I simply couldn’t juggle everything. But in time, I saw how the challenges of constraining my time and energy forced me to be more purposeful and hire more talented leaders to push forward.

Whether your life event is the birth of a child, the loss of someone important to you, a health scare, etc … realize that you are not a robot. You are not immune to life outside your start-up. When life does happen to you (and it will), the important thing is that you’ve built a team that can carry your vision forward with or without you. For many years, I made our business dependent on me and manifested that in my team. I’m still untangling that mess. But, now I have other life priorities that outweigh what I believed was my only priority for so many years.

3. Concentrate Your Resources

When building your initial MVP, it’s crucial to ensure that you’re building for a large, growing market. For instance, when we first built StackSocial it was purely for desktop Mac software apps. I didn’t know it at the time, but that market would get eviscerated by the shift from desktop to mobile app adoption. We quickly expanded into other categories such as online learning, games, gadgets, etc…but instead of going deep in one area, we went wide across categories. This is incredibly tough to do.

Starting in a niche is smart, but if the market you are in is “too small”, then you constantly have to chase new buckets of revenue. Going deep in one category enables you to “do less, better”. So, while that new field looks like greener pastures, it will be much harder once you get there than simply improving upon and expanding within your current market.

4. Better, Faster, & Cheaper?

Not a chance. You’ll be lucky to be one of those and if you are great, you will likely be two of the three. Know which ones you are and own it. Your company values and mission should align to your priorities and will ensure that everyone in the company knows which ones you’ve chosen.

For us, this involves taking the team for a full day off-site where we take a look back and see how we’ve evolved as a team and how our mission, vision, and values need to evolve as well. This year we hired an Executive Coaching Firm, Novus Global, to run a workshop on the topic with us.

It’s not cheap, but it’s well worth the investment.

People who are inspired with a deeper mission will continue to fight long after those who are only focused on the tactics. If you notice your team zoning out, it’s likely because they aren’t connecting the dots of their “daily grind” to a more meaningful reason to do the work. Connect your personal reason for being to a shared goal and you will see a different response.

Last piece of advice, own your trade-offs just as much as you do the traits you are claiming and pursuing. The more you attempt to be everything to everyone, the less people will know who you are and it will dilute your brand and your mission.

To wrap things up, here are a few #humblebrags on my team and some accomplishments over the past year:

6th Year Highlights:

  • 2017 Finalist for ‘Best eCommerce Strategy’ — Digiday Publishing Awards
  • 2017 Best Places to Work in LA by LA Business Journal & Comparably.com
  • 2017 Finalist for the Los Angeles EY Entrepreneur of the Year Award
  • Partnered & integrated shops on 50+ new prominent publishers including CNN, Mashable, CBSi, Gannett, Scripps, & others
  • Acquired Joyus.com (who raised over $65m in venture capital) to expand into video commerce and add to our women’s lifestyle offering
  • Grew registered members on our platform to over 5.5 million members

Onward and Upward! #stackup

JP

21 More Lessons from Previous Years:

Year 1: (4)
Year 2: (4)
Year 3: (4)
Year 4: (5)
Year 5: (4)

4 Leadership Lessons for Founders After Running a Startup for 5 Years

4 Leadership Lessons for Founders After Running a Startup for 5 Years

This time five years ago, I founded StackSocial, what is now StackCommerce. Each year for the past four years I’ve shared a few lessons (Year 1, Year 2, Year 3, Year 4) for other founders who are on the same arduous path. It’s been humbling, it’s been exhilarating, and I’ve grown in ways that I couldn’t have imagined. This year I’m back with 4 more leadership lessons I’ve learned over the past 12 months … perhaps the most important ones thus far.

Before I get to that, I want to give you a few highlights (#humblebrag) of my team over the past year.

StackCommerce Turns 5!

5th Year Highlights:

  • Grew the team to 60+ people while remaining profitable (on just $800k of capital raised in 2012)
  • Built out an incredible management team with experience from companies including Google, Gilt, Fab, Headspace, and Pivotal Labs
  • Expanded into our 4th Vertical: 1. Tech, 2. Men’s Lifestyle, 3. Education, 4. Women’s Lifestyle … with plans for 5th.
  • Grew our user community by nearly 50% to over 3.5 million registered members
  • Adopted five insanely rad office dogs: Bill Murray, Kiley, Cowboy, Zooey, and Uni

But, beyond all of that, the biggest highlight over the past five years is that we’ve not only created a successful company, but also a culture, a family, and a movement. I couldn’t be more proud of the blood, sweat, and tears that this team has put forth to help better the lives of our vendors, publishers, and customers.

Now, as promised, here are 4 lessons learned over the past year:

1. Empathy is the most underrated virtue of leadership

Like many entrepreneurs, growing up in my 20’s I revered Steve Jobs. I admired his take no bullshit, take no excuses, accept nothing but the best, and demand perfection, slant on life. I expect it of myself and so, why shouldn’t I expect it of my team? Shoot for the moon and worst case you end up in the clouds, right? But, with people, that’s not always the case.

Perfection is a tough standard to meet.

Putting that standard on yourself is your right. It’s probably not a smart one in the long run, but if you want to live with high bouts of anxiety, tension, and stress in pursuit of your ultimate satisfaction — that’s your right. But to project that onto others in pursuit of perfection often times causes us to remove all sense of “understanding” of someone else’s circumstances. That lack of empathy can hurt. It can really alienate people in a way that you may not foresee.

I’ve had some major setbacks in my life and as painful as they were — they have been a great asset to me. They taught me how fragile the human spirit is and in those moments how much we all need comfort, understanding, and encouragement … not a hard-ass with unreasonable expectations. Finding an acceptable balance in the pursuit of greatness and empathy with yourself and your team will help you endure because, frankly, you are nowhere near as good as Steve Jobs, so stop trying to mimic something you are not.

StackCommerce Full-team Offsite in Topanga, CA

2. Communication is the antidote to almost every problem

Setting up formal feedback loops should be a top priority. When you are smaller, informal 1:1’s, happy hours, and one-off meetings can be enough to get a sense of people’s thoughts and give them the opportunities to let you know their thoughts. As you grow, implementing consistent channels for frank and/or anonymous feedback is vital to staying aligned with your team. Some of the things we have done this year include:

  • Management OKR Process — Quarterly Objectives and Key Results help align the entire organization behind the top metrics and KPIs. You’d be surprised how misaligned folks are until you get everyone in the same room. This also allows lower level managers to gather feedback from the bottom-up to help build consensus on what’s important to them.
  • 360 Degree Reviews — Everyone in our org gets anonymous 360 degree reviews from peers, their direct reports, and the layer above them. We’ve found that this can surface incredibly insightful feedback that helps the individual to understand how their actions are helping or hurting not only those that they report to, but everyone in the org.
  • Team Off-sites — Last November, we took the entire team on a 3-day cruise to Mexico. (WTF…I know, right?!) But, the investment paid for itself and then some. There’s something magical that happens when you get everyone out of the office. People relax…they let their hair down a bit and they get honest. And there is gold in those moments of honest, direct feedback. I’ve probably learned more about what my team thinks about the leadership of our company in those few moments then all my 1:1’s combined. Do not underestimate the importance of spending time away from the office as a team.

3. Have a non-business mentor

I have a team of awesome advisors and investors who are phenomenal when it comes to startups and tech. And when I have a business question….they are who I turn to. But, often times, the issues I have as a founder can’t be resolved in an excel spreadsheet. They are matters of the soul.

This job will rip you apart. It will bring you to your knees. I don’t care if you are Elon Musk or Marissa Mayer or Mark Zuckerberg … you feel pain… you have low days, low weeks, and, yes, even low months. The highs are higher than you can imagine and the lows are pretty low.

If you don’t have a personal, non-tech confident you can turn to — make it a priority to get one. Today, my wife and my dad are the two people I turn to when I’m at my lowest. And, everytime, without fail, they are there for me with doses of reality, empathy, and love.

Before I was married, when we were first starting launching Stack, I was really up and down based on the momentum of each day.I took every single day personally, and when you’re in that state, you need someone to vent and to let go. In those early days, I saw a therapist and it was the best thing I could have ever done. It helped so much that the therapist knew nothing about tech, because at the end of the day, my problems weren’t about tech, they were about emotions and feelings. Many of our problems are internal and not external as we might think. I encourage you to find someone, anyone, outside your tech circle to talk to and just let go.

4. Cash is King

Every startup has a different track. Ours is what I’ve coined as being “Seed-Strapped”. We raised a small Seed round of $800k back in 2012, but we’ve been profitable ever since so we haven’t needed to raise more funding. We’re not a completely “bootstrapped” startup, yet we also haven’t raised large rounds of institutional capital. Those two facts make a very unique creature in the startup world, but it’s a path that I would personally recommend.

Raising a Seed round gave us access to new potential partners, press, hires, and social capital that we needed to grow the business and it was well worth the dilution. But, instead of going the traditional route of raising more capital and further diluting my ownership and that of my team’s, we focused on staying cash flow positive.

Some may say it was a mistake and we could have grown much faster with capital, but I also know many hooks that come with that money. Hooks that I didn’t believe were a worthwhile trade-off. Easy capital does not equate to success and, in fact, can lead you to your demise by allowing you to go too fast too early before you figure out product-market fit. We’ve seen this all too often. Founders think that raising capital is like putting training wheels on a bicycle, but It’s akin to slapping a rocket on a tricycle.

Raising some capital gave us the connections and PR without the baggage and dilution that comes with raising large rounds of institutional money. The downside of this is that you have to be more disciplined in your spending. While your competition is moving into that shiny new office at $6.50 sqft/mo…you may find yourself subletting from their neighbor.

Regardless, the ability to stay independent, make your own decisions, and have your own path is invaluable. Take on capital wisely, even if you can raise more. I would advise you to take what you need and, if you can, get to profitability ahead of growing a few percentage points faster. Maybe that’s heresy in the startup world, but I’m a bit cynical after seeing too many startups grow quickly and fade even faster.

Here’s to the next 5 years. Good luck and Godspeed.

Announcing Our Expansion into the Lifestyle Vertical & Introducing Citizen Goods

Announcing Our Expansion into the Lifestyle Vertical & Introducing Citizen Goods

After four years of focusing exclusively on tech products and publishers, we are thrilled to share that StackCommerce will now be offering our native commerce solution to lifestyle publishers, launching with a stellar list of partners including AskMen, theCHIVE, Digg, Rant, The Awesomer, Everyday Carry, and over a dozen others. These new partnerships expand our reach to more than 200 million unique visitors per month, and open an entirely fresh commerce opportunity to current and future partners.

We would also like to officially introduce Citizen Goods, our brand new lifestyle marketplace featuring curated modern products across home, outdoor, grooming, everyday carry, and apparel categories. Citizen Goods is the destination site for our lifestyle-focused partners that prefer an affiliate solution rather than an integrated Shop. To support Citizen Goods, we’ve also launched amazing new product features that allow for further customization of Shops with adjustable homepage heros, content modules, fonts, and navigation. With more advancements in the pipeline, we will continue to deliver innovative ways for our partners to truly personalize the look and feel of their Shops.

Native commerce is clearly resonating with tech and lifestyle audiences, as our member community within our network of Shops grew by 250% to more than 2.5 million members over the past year alone. The overall effectiveness of Shops is also increasing, and we’re proud to see publishers averaging six-figures of gross sales annually, and top partners generating well into the seven figures. This demonstrates the proven success online media sites have found with native commerce as a new and incremental way to monetize their content.

We believe this expansion comes at an ideal time for lifestyle publishers given the rise of ad blockers and decreasing effectiveness of banner ads. The key factor is that truly native commerce works not only from a financial standpoint as an alternative to ads, but also adds brand value by turning readers into loyal buyers who appreciate access to exclusive commerce content. With native commerce, we also eliminate the need for publishers to manage operations, shipping, sourcing, and customer service so they can focus on creating impactful content for their readers. We will continue to expand further into new verticals in 2016, pursuing our mission to revolutionize content and commerce across all online media categories.

Native Commerce vs. Native Advertising: Which One is Better for Your Brand?

Native Commerce vs. Native Advertising: Which One is Better for Your Brand?

You may be wondering how Native Commerce compares to Native Advertising, or perhaps whether Native Commerce is a type of Native Advertising. Rest assured, the answer to the latter is “no” — Native Commerce is its own beast, and it comes down to one crucial difference: Native Advertising primarily benefits brands while Native Commerce focuses on content creators.

Let’s think about Native Advertising and what it, in the most basic form, actually does. Ad exchange service Sharethrough defines Native Advertising as “a form of paid media where the ad experience follows the natural form and function of the user experience in which it is placed.”

Essentially, Native Advertising allows brands or content creators (through services like Sharethrough) to more seamlessly integrate their marketing and / or products into your content, with the intention of driving prospective buyers or readers away from your site. Breaking that down:

  • Making brands more likely to want to advertise to your audience — great!
  • Blurring the lines between your own content and that of an outside brand — not so great.
  • Taking your users off your site — bad, bad, bad.

Even the first point isn’t a real selling point. Brands always want to advertise with publishers that cater to the same audience — Native Advertising just makes it easier on the advertiser’s end.

Now let’s compare this to Native Commerce. Native Commerce allows publishers to seamlessly and organically integrate relevant products into their own content, so they own the customer’s purchase cycle from start to finish — from discovery to desire to checkout. Breaking that down:

  • Selling products directly through the content you’re already producing — great!
  • Monetizing in a completely transparent way that gives users direct access to products when they want them most — wonderful!
  • Keeping users on your site to buy instead of sending them somewhere else — hooray!

If you’re trying to figure out new, innovative ways to generate revenue from your site, don’t always feel like you have to give someone else center stage. With Native Commerce, keep everything under your brand — and generate more revenue — in the most seamlessly integrated way possible.

StackCommerce Year in Review, By The Numbers!

StackCommerce Year in Review, By The Numbers!

It’s been a great year for StackCommerce! Here’s what happened in 2014, as told via the numbers:

1.13M Orders Placed on the StackCommerce Network

1.4M Members Across the StackCommerce Community

200+ NEW Publisher Partners Including Business Insider, BGR, The Next Web, Slashdot, Android Authority, & Joystiq

300+ NEW Vendor Partners Including Rosetta Stone, NBC, Dashlane, Hubsan, DJI, Adobe, iDrive, Leap Motion, Ouya, & Shutterstock

100+ Million Monthly Unique Visitors Reached Across the StackCommerce Network

42,719,449 Deal Pages Viewed

3X Sales Growth from 2013 Holiday Season to 2014 Holiday Season

Top 5 Deals

Top Selling Bundle
The Name Your Own Price Learn To Code Bundle

Most Popular Freebie
The Mac Freebie Bundle 3.0

Most Popular Giveaway
The Epic iPhone 6 Giveaway

1 Company Rebrand
StackSocial Rebrands as StackCommerce to Double-Down on Native Commerce

33 People on the StackCommerce Team (28 pictured!)

stackcommerce_team

4,455+ GitHub Commits 

stackcommerce_contributors

3rd Birthday Celebrated

stackcommerce_3.0_cake

1 Mural Painted in the Office

stackcommerce_mural

Full Remodel of Office

stackcommerce_kitchen

1 StackHacks Hackathon

stackcommerce_hackathon

8 Surfboards & Paddleboards in Office

stackcommerce_surfboards

1 New Kegerator in Office

stackcommerce_kegerator

Thank you to all of our partners, friends, and to our families for making 2014 successful. We are looking forward to big things in 2015!

 

What Defines Native Commerce?

What Defines Native Commerce?

At StackCommerce, we refer to ourselves as a “native commerce” company, but what does that term actually mean? Furthermore, what exactly is involved when a publisher integrates native commerce into its online presence? How does native commerce differ from native advertising and “regular” e-commerce? Below is an overview of native commerce as we see it in 2014.

The intersection of content and commerce

In the simplest explanation of the concept, native commerce is the integration of e-commerce into the user experience of content sites or other non-commerce properties. This can take several forms and will vary based on the publisher, content and products involved. Possible integrations include:

  • running a companion store for alongside the content site that allows users to buy products from within the same brand
  • providing users with avenues to find and buy products from within or around site content
  • incorporating product links or widgets within reviews or editorial content

By providing consumers with the means to buy products they are already looking to learn about, discuss and engage with on niche content sites, publishers can close the loop and position themselves to best capitalize on their audiences.

Hyper-relevant, contextual products

A critical part of truly native commerce is the integration of products and consumer experiences that are specifically tailored to the user experience associated with a certain site. It’s the right products in the right place place at the right time.

For example, let’s say that KickSoccer.com is a content and community site where fans of different soccer teams can read content and news, and argue and debate on forums. A few key ways to describe this consumer would be:

  • very interested in soccer
  • passionate about their favorite soccer team
  • actively spends free time following/watching/playing soccer

Based on the characteristics of this particular target demographic, the obvious productopportunities are soccer jerseys for popular clubs, soccer equipment and even tickets for soccer matches in their area. All three products are clearly things that KickSoccer users will want to buy and, unless KickSoccer offers them the opportunity, go elsewhere to purchase.

An extension of your brand, not an interruption of it

One of the biggest concerns with advertorial or sponsored content is that publishers are essentially renting out the most valuable real estate on their sites to another brand. This is of particular concern with native advertising, but with native commerce, publishers can be innovative and helpful by providing access to highly relevant products and deals. As long as the writers, videographers and other content creators would genuinely recommend the products editorially, the integration of content and commerce can truly be seamless.

Let’s use the KickSoccer example again — if there is a great new soccer cleat being released and a KickSoccer writer gives it an authentic, raving review resulting in many of their readers wanting to buy it, KickSoccer can provide a better user experience by allowing them to quickly and easily purchase the cleats right from their website. No comparison shopping, no searching for a trustworthy online store  — they can purchase directly from KickSoccer, a brand they already trust. This is native commerce — targeted, relevant products and deals delivered to eager audiences in an organic way.