This is James Currier with NFX, where a seed stage venture capital firm started by a group of entrepreneurs. The NFX podcast aims to discover for the founder community what it takes to build iconic companies. And this is the 9 habits of world class startups. Startups that grow into transformative companies do two things, Number 1, they nail the basics and number 2, they cultivate the right habits, their core operating principles. The first is mandatory.
If you don't get the basics right, In all probability, your company won't succeed. A list of things that we consider basics. Number 1, fundraising don't run out of capital. Number 2, ship. Don't just talk about it. Ship it. Number 3, customer focus live and breathe the customer experience. Number 4, growth, find an effective way to scale. Number 5, EQ, emotional quotient, higher Beller, and get along. Number 6, ethics. Stay legal. These are the basics.
In addition to getting these right, something that often goes unobserved is that world class companies embrace similar operating principles, which help make them revolutionary. When we see these habits and companies, we take special notice. Below are 9. There are more, but this is a good list to start. Number 1, have flexible curiosity. Be prepared to stretch what interests you.
Founders who only wanna do one thing usually end up failing inevitably, what ends up working is a little different than what they thought. Founders must have flexible passion. They can't be tied down to a single immovable set of tactics. Most startups have to learn and adapt. You'll likely end up serving a different customer in a different geography in a different way than you thought. Learn to expand your curiosity and acquire new interests.
Become interested in payments, not collaboration software, for example. This is a mental leap you'll likely have to take at some point as a founder. Number 2, make it a network. It doesn't have to be a social network or a marketplace. There are many types of network Whatever you choose, it's important to always be finding ways to switch your product from a single player mode to multiplayer mode as soon as you can.
If you do that, instead of having to deliver all the value to the customer yourself, you can set up a flywheel and have your customers create value for each other. Single player products increase their value to the user at a linear rate. Multi player networked products can become more valuable at an exponential rate. If it's not a multiplayer network of some kind, always be asking yourself, how do I build network effects?
If you can't build network effects, how are you defensible and how do you create value? Examples of companies that move to multiplayer mode after starting off single player include Apple. They added iOS, which is a 2 sided platform network. Amazon, they added a 3rd party marketplace, as well as data network effects via reviews, OpenTable, they started a SaaS software for restaurants and then opened it to a marketplace. Hipstomatic was a single player app.
Instagram cloned it and made it a network. Number 3, find the white hot center. In every market you're targeting, there's gonna be an irregularity. If you look rapidly and smartly enough, you will typically be able to find some subsection of people who are much, much hungrier for your product. A small group within your potential customer base that's highly engaged and motivated, people who are burning white hot for your product.
Sometimes those people aren't necessarily who you thought your target customer was. In fact, they're often what we call non utilizers, people who perhaps weren't using anything before, but for whom your product enables something transformative, typically, a, to get into business and start making money, b, to make more money than they were making before, c, to look good to others, or D, to accomplish some other goal that they couldn't if your product didn't exist.
Once you find this white hot center of customers, you'll be surprised at how fast can bleed into other segments from there. Amazon narrowly targeted readers as the quote white hot center in the online retail market and expanded from there to the, quote, everything store. Facebook started as a photo sharing for college students who had 50% daily retention a magnificent signal of white hot engagement. Opendors started with Phoenix, where there are only 5 types of homes.
Cell phones started with business people. The list goes on. Number 4 of habits of world class startups Beller compelling story As a CEO, you are storyteller in chief, telling your story in compelling ways and adapting that story to the audience and the moment is your most important job. It's what gets you all the resources to build your company. Your story is a narrative that everyone wants and needs to hear. It tells your customers what you can do for them.
It tells your investors what they're investing in and what they can brag about. It tells your employees what they're getting involved with. Why they're turning down a whole lot of other opportunities to join and stay with you. In the end, it even turns out that your story drives your own motivation, your own speed, your own excellence. I've seen companies that were her, and they were able to change the story. A new narrative transformed their energy, and the company began to turn things around.
It's incredible how much of a catalyst a well told story can be for startups. It's great to have a lot of real stuff, concrete accomplishments, and numbers that you can point to but unless you can also tell the story well, it won't lead to anything. So as a founder, you have to do two things at once. You have to do something that's real, and you have to tell the story about what you're doing in a way that isn't boring. Keep in mind that a story is just an account.
A representation of what you're doing, it's not an exact detailed reporting of the step by step chronology of events. This is why there's an art to storytelling. Learn to leave out the boring details. I get that it's hard to do. Because the boring details are the reality you live every day, and it's easier to just directly relay your experience, but you have to tell the story with the audience in mind, not you in mind. Think about what's interesting to them. Use their words.
Draw analogies to things they already know. Putting in this effort will repay itself with interest storytelling should be your number one superpower as CEO. The 5th habit of world class startups, the 11 of 13 rule. Is something I got from Dennis Hightower, who at the time was head of Disney International. He asked me why I wasn't doing something, and I responded by explaining the pros and cons of 2 different ways of doing it. Hopefully, he replied, you know, there are 13 ways of doing anything.
11 of them will work. Just pick 1 and do it. The best founders avoid over analyzing. As a startup, you don't have time, and the result will most likely be marginal. Pick away and do it. Be consistently decisive. Number 6, go full speed. Like an x wing fighter in Star Wars, your start up is small, so speed is your number one advantage. It is both the number 1 and the number 2 indication of your eventual success. Speed is a formula for success because rapid beats the competition.
Rapid results builds team morale leading to even more results. Rapid results generate more interest from the press, customers, perspective hires, etcetera. Rapid results increases your valuation. You could beat any grand master at chess if you could move twice every time she or he moved once. Speed gives you the edge. As a benchmark, you should be conducting 20 to a 100 experiments per month as a startup. Number 7, habit of world class startups. Start with language.
Most people say we'll build a product and then put language on it to explain it to people. This is backwards. The question is, what are you to your customer? For them, what's the promise of what you're doing? That is communicated with language. Our reality is structured by language, even if you don't have a product you can get a long way just with the right words. Languages is at the center of your company. It's not something you add later.
Languages is at the core of your company, even before your product The most high impact companies think about language first and features second. You can build a whole company on the power of a phrase. Find old friends became classmates.com. Free IQ test became tickle.com. It can also change how people think about your product, including how you yourself think about the product. The 8th habit of world class startups is to test and iterate. A startup is supposed to be a learning machine.
In order to learn, you have to love your data. No data, no learning. Early stage CEOs should obsess about metrics. You must be committed to measuring and analyzing everything. 20 to 40% of engineering time be spent on measuring and reporting systems. We've written before on the importance of KPIs and how to select them. Once you've identified the right metrics to focus on, metrics that could change what you do, use them to continually test and iterate.
And the 9th habit of world class startups look for 10,000 percent changes in important metrics. Don't settle for incremental changes. Always be looking for the 10,000 Most of us wanna feel good at the end of each day, so we lie to ourselves and say that improving a metric by 5% or 20% was a good day. But for world class founders, that's not nearly good enough. Have the character and drive not to settle. Keep pushing for 10,000% every day.
This is James Currier for NFX, and that was 9 habits of world class startups.