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6 Startup Lessons from Twitter’s IPO

By Features FOXBusiness

Twitter’s path to a $14 billion IPO is every startup’s dream - but the company that cornered the micro-blogging space had just as many mistakes as victories in the seven years it took to get to this point.

Website outages, a revolving door of CEOs, lack of direction - these are just a few of the mistakes the company struggled with as it tried to dominate the social media market. At the same time, the company’s founders were brilliant at developing an irresistible product, tweaking their vision to suit the market and marketing the company early on.

Many startups today see the rise of Twitter and other tech  companies as a business model for their own young companies - but is this leading many entrepreneurs down the wrong path? What sort of business lessons does Twitter’s success offer today’s entrepreneurs? And what aspects of it need to be avoided?

Here are six things every startup should learn from Twitter:

1. Don’t Bet on a Moonshot: The biggest lesson that entrepreneurs should take away from Twitter is that this type of success is very rare - like making the NFL or NBA draft - so don’t bet on it happening to you. These days, a sort of ‘startup mania’ seems to afflict many young people, but for all the wrong reasons. They idolize the meteoric trajectories of companies like Twitter - that went public - and others like Tumblr, Summly, Meebo, Embark, etc. that sold out to bigger companies. 

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For many startups today, the mantra/business-model seems to be “get big or get bought,” as entrepreneurs aim for fast rollouts and early cash-outs of the companies they launch. Entrepreneurs need to realize that early cash-outs are a rare exception - the norm is many years of hard work. Start a business for the right reason: because the work interests you, you want to run the show, and you plan to spend the next 20 to 30 years making your company the best it can be.

2. Find the White Space: Twitter didn’t get started until the social media field was already crowded - MySpace and then Faceboook dominated. So how did they distinguish themselves in an already competitive market?  By satisfying an unmet need, or ‘white space’ in the market - in this case, a simple, stripped-down micro-blogging platform that was singularly focused on enabling social conversations and news sharing. No startup can thrive until it finds its own white space. Ask yourself, is my product or service duplicative of others? What is the distinguishing factor that sets me apart? If you can’t answer that, you need to make big changes, fast.

3. Don’t Miss the Pivot: At some point, every startup will have to deviate from its original course in order to keep up with the needs of the market. This is called “pivoting.” Twitter’s founders did it. Originally, they’d set out to build a podcasting service called Odeo - but then Apple added podcasts to iTunes, and their idea became obsolete overnight. Every successful startup must learn how to tweak its vision and product/service offering based on what’s really happening in the marketplace, what the competition is doing, how customers are responding (or not responding) and how current trends change. Look for these organic clues in your business and be prepared to pivot quickly to keep up.

4. Build a Good Product: It goes without saying that a startup should focus all of its energy on building a really great product or service - but many entrepreneurs lose sight of this along the way, as they become distracted with marketing, investor pitching and building up their organizations. Twitter made this mistake too - the company delayed much-needed code and infrastructure upgrades to take the site’s web architecture beyond the original prototype; and, as a result, periodic site outages plagued the company for years. These technical glitches could have been disastrous for the company. Startups must prioritize the product or service they’re offering above all else. Constantly look for ways to improve it, streamline it, deliver it better, fix glitches, etc.

5. Have a Strong CEO: Twitter is well-known for going through a string of chief executives. That isn’t necessarily a bad thing: because each time, Twitter’s founders, and later its board, chose a new CEO who would do a better job of fixing key problems and leading the company forward. One of the biggest mistakes a startup can make is to be too egalitarian - particularly when it has multiple founders. A startup isn’t some magical creation that’s going to reinvent the business model; it’s a business just like every other business, and it needs to be run that way. A startup will eventually implode if it  doesn’t have a strong chief executive and/or management team with the power to execute key decisions and kill projects that aren’t working.

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6. Profitability: How much emphasis should you place on profitability in the early years of your company? These days, many startups take the example of Twitter, Facebook and other tech juggernauts that advocated the “be cool instead of making money” approach while launching their products. This worked well for them as a venture capital strategy - i.e., hide the bottom line numbers by focusing on user growth and popularity. But that strategy has already worn thin with many VCs, and guess what? 99.5% of startups won’t even get VC funding, according to the Small Business Administration. 

Most of you will get your seed money from bank loans, credit cards, personal savings, family and friends and profits you reinvest back into the company. The cold hard truth of business is that a startup has to focus on profitability from the beginning, or it won’t be able to cover its operating costs, hire more staff and grow. It will also need to show a strong bottom line and solid business fundamentals when trying to secure a loan.

Amish Shah, founding partner of Sierra Maya Ventures, is an early-stage technology investor, entrepreneur, startup consultant and founder/CEO of tech-recruiting firm Millenium Search. He started his first company at the age of 25, making it profitable in the first 90 days. 

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