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Startup Playbook

Decision-making frameworks for building and scaling a company.

Core Principle

  • When you compete to be the best, you imitate
  • When you compete to be unique, you innovate

Seed Stage

There is one guiding principle for operating at early stage: find profitable product-market-fit while keeping costs as small as possible.

The game

  • Product market fit above everything else

How to operate

  • Adaptability over process
  • Ignore the minutiae — everything is 80/20
  • Spend as if you will never be able to raise again

Mental models

Be patient for growth, but impatient for profitability

When the winning strategy is not yet clear, be patient for growth but impatient for profitability. Don't spend a lot of money in pursuit of the wrong strategy. Once a unit-profitable strategy is found, flip: be impatient for growth.

Your first idea will be wrong

93% of companies that ultimately become successful have to abandon their original strategy. Successful companies succeed not because they had the right strategy at the beginning, but because they had money left over after the original strategy failed. Don't assume your idea might fail — expect it to fail.

MVP vs MLP

  • Low competition markets: Solving a problem/need → Minimum Viable Product
  • High competition markets: Building a better product → Minimum Loveable Product

Growth Stage

As soon as a company has found product-market fit, it can move into a growth stage.

The game

How to grow without breaking. Be the best — find the 5% that's missing.

  • Scale while keeping product solid
  • Focus on sales
  • Economies of scale: gain customers, retain good ones, trade up bad ones
  • Economies of scope: upsell and increase offerings without increasing costs

How to operate

  • Build systems
  • Be detail oriented — everything 20/80
  • Focus spend on sales and removing competition

Mature Stage

The game

Capital allocation. The game shifts to return per share.

Five choices for deploying capital

  1. Investing in existing operations
  2. Acquiring other businesses
  3. Issuing dividends
  4. Paying down debt
  5. Repurchasing stock

How to raise

  • Internal cash flow
  • Issuing debt
  • Raising equity

Mental models

  • Divest unprofitable initiatives
  • Buy back shares when undervalued
  • Don't pay dividends if you can earn a better return for shareholders

Resources