• At least half of startups fail — but it's not always clear why.
• The implications of startup failure can be dire. Just 12 startups that failed in 2018 took $1.4 billion in venture-capital funding with them
• We asked founders and investors whose companies have died about the most common reasons — and how to avoid them.
• Those reasons include blindly pursuing your passion and not being able to meet investors' standards.
• You can avoid those problems by pairing passion with preparation and by thinking carefully about raising venture money.
• Click here for more BI Prime content.

That won't be me.

In the nearly two decades he's spent teaching business-school students and aspiring entrepreneurs, Noam Wasserman has heard that phrase more times than he can count. Even if students aren't so audacious as to say it out loud, he knows they're thinking it.

Avoiding difficult conversations with your cofounder around splitting equity? Letting passion and excitement cloud your judgment? Few entrepreneurs believe it could happen to them — or that it could lead to the death of their startup.

Wasserman is the dean of Yeshiva University's Sy Syms School of Business; he previously taught at Harvard Business School and the University of Southern California Marshall School of Business. Business Insider recently sat in on a Founder Bootcamp presented by the Yeshiva University Innovation Lab in New York City.

From 8 am to 4 pm, Wasserman ran through a deck on the science of startup success and paced between desks in a basement-level conference room, moderating the debates that sprung up between entrepreneurs in the crowd.

Some thought starting a company without cofounders was advisable; others disagreed. Some were convinced that a founding CEO should see the company all the way through an exit; others were open to the possibility of replacing that person.

Above all, Wasserman advised the entrepreneurs present to look at case studies in which founders ran into problems and to consider how they'd handle the situation. Simply by acknowledging the risk of startup failure, they're arming themselves against it.

In fact, Wasserman said, a simple motto can keep entrepreneurs on their toes as they review the challenges that other startups have faced.

When this is me.

Most startups fail

It's hard to measure precisely the rate of startup failure.

The number is high, but probably not quite as high as you think. Global investment firm Cambridge Associates tracked about 27,000 venture investments between 1990 and 2010 and found that the rate of startup failure (defined as companies that provide a 1X return or less to investors, though VCs typically want much higher returns than that) has not increased beyond 60% since 2001.

And according to the US Small Business Administration, about half of businesses with employees survive at least five years.

Yet a single startup's failure can have powerful ripple effects beyond the founder's personal disappointment. As Business Insider's Paige Leskin reported, Pitchbook data found that just 12 startups that failed in 2018 took $1.4 billion in venture-capital funding with them. That's because VCs have to bet widely, knowing that few if any of their portfolio companies will produce the desired return.

And depending on how far a startup has progressed, an entire team of people may lose their jobs.

Read more: The startup founder's guide to letting people go efficiently and compassionately

So, how do you prevent (or at least minimize the risk of) startup implosion? Business Insider spoke to several founders whose companies have failed, as well as investors and business professors. In exclusive interviews, they told us about the biggest factors affecting startup death.

Our sources include:

• Henry Ward, founder and CEO of Carta, a platform for buying and selling shares in private companies. Ward previously founded Secondsight, a suite of investment tools that failed when he wasn't able to raise a seed round.
• Brian Scordato, founder of Tacklebox Accelerator, a program for founders who haven't yet quit their day jobs. Scordato is also the founder of three other startups, including a dating app and a recruiting platform for college basketball, that are no longer operating.
• Coleman Greene, founder of Sqord, a Techstars company that used technology to encourage kids to stay physically active. Sqord was purchased by Good Parents Inc/Kiddowear in 2019. Greene called this an "acquihire," an alternative to a wind-down that means the company was valuable for its team and not the actual product.
• Sahil Lavingia, founder and CEO of Gumroad, an e-commerce platform for artists and creators. Lavingia bought back his company from most of his investors and is no longer venture-backed.
• Daniel Ahmadizadeh, cofounder of Riley, a Y Combinator company that helped real-estate agents follow up with and maintain clients. Riley shut down in 2019.
• Tristan Mace and Scott Howard, founders of retail tech company Margin, which shut down in 2019.
• Patrick McGinnis, managing partner at the investment and advisory firm Dirigo Advisors.
• Orla Byrne, lecturer in entrepreneurship and strategy at University College Dublin.
• Ronald Mitchell, a professor of entrepreneurship at Texas Tech University.

Read on to learn about the most common causes of startup death — and how to avoid them.

The problem: Thinking you're the next Steve Jobs

Entrepreneurs have a tendency to be overly optimistic about their chances of success, research suggests. It's part of what keeps them going in the face of tremendous adversity — and part of what makes them attractive to VCs.

As Andreessen Horowitz managing partner Scott Kupor previously told Business Insider, he's actively looked for founders who were so confident in themselves they were willing to "walk through walls and do something that everybody has told them to their face is a waste of time or can never happen." 

Read more: The first-time founder's ultimate guide to pitching a VC

But this heightened sense of optimism and confidence can also work to entrepreneurs' detriment.

It goes back to Wasserman's observation: When founders hear about mistakes that other founders have made, they assume they'd never fall into a trap like that. And so they ignore valuable lessons that could save them time, money, and effort down the road. Or maybe save their business.

The experts' solution: Pay close attention to patterns in startup failures

A growing body of evidence suggests that you can learn to be a successful entrepreneur (or investor, for that matter) by studying patterns in the failures of other entrepreneurs.

For example, Mitchell, the Texas Tech professor, scoured the entrepreneurship literature and identified six key factors behind startup death: failure to innovate, create value, persist over time, make the utmost of scarcity, defend against people stealing your results, and remain flexible.

In a 2003 paper published in the Journal of Private Equity, Mitchell reports that when VCs applied a mathematical model using this six-attribute framework, the percentage of correct investment decisions was 65%, versus 52% when they relied on their own intuition. (In the context of this particular study, a correct investment decision meant backing a business that achieved profitability and still existed within five years.)

McGinnis' experience as an investor has showed him that many startup founders — secretly or not no secretly — see themselves as the next Steve Jobs. What they don't realize, McGinnis said, is that Jobs was more capable than the average entrepreneur.

So remember: Even if you learn from stories about Jobs, McGinnis said, "there's a bunch of things he never had to deal with that you probably will mess up."

The problem: Dismissing interpersonal issues as trivial

At the Founder Bootcamp, Wasserman suggested that people problems — i.e., issues within the founding team or between founders and investors — are the leading cause of startup failure. That's according to his own research on more than 6,000 startups and 16,000 founders since the year 2000, plus otherstudies he cited during the Bootcamp.

In particular, anyone starting a business with friends and family should know how risky it is.

As many as 55% of entrepreneurs in Wasserman's sample started companies with someone they knew. Yet Wasserman's research also suggests these partnerships tend to be the least stable founding teams. Partnerships between acquaintances or strangers (i.e., people you barely know), on the other hand, tend to be the most stable.

That's largely because friends and family often avoid important but tough business conversations (like splitting equity) for fear of damaging their personal relationships. When they finally do confront these issues, it's typically too late. Acquaintances, on the other hand, don't have to worry about damaging their bond because they don't currently have one.

The experts' solution: Understand and address people dynamics as early as possible

If you understand and address people issues early on, Wasserman said, you can prevent major problems as your company grows.

And if you're cofounding with friends and family, be sure to have those tough conversations before signing any contracts. Wasserman recommended planning for different scenarios in advance, and outlining those provisions in your equity ownership agreement.

For example, if one founder isn't able to contribute as much time or energy to the company as the other founders, they might lose a certain amount of equity in the business.

The problem: Blindly pursuing your passion

Passion — defined as positive and intense feelings about something meaningful — helps an entrepreneur weather the inevitable low points in their career. But it can also work to their detriment. That's because passionate founders are more likely to make irrational business decisions.

Ward learned that lesson the hard way. Before Carta, he studied market finance and ran a failed finance company: a suite of investment tools called Secondsight.

In an email to Business Insider, Ward wrote: "Secondsight was built from my imagination and then presented to customers that I assumed would be interested. They weren't." That is to say, Ward's excitement about the idea led him to misjudge the market opportunity.

The experts' solution: Balance passion with preparation

Ward took a markedly different approach when building Carta.

"I embraced lean, iterative development, and even talked to customers before we wrote any code at all," Ward wrote. He continued to maintain a "tight feedback loop" with customers, to make sure the product was in fact something they would use.

Ward also took the time to learn about product development. He spent the first two years at Carta "really learning how to build product and surrounding myself with product-oriented people," including investors and early employees.

The problem: Not having enough experience

An entrepreneur may inspire people with their passion. But in order to successfully execute on an idea, they still need industry knowledge or experience.

McGinnis said he's seen plenty of entrepreneurs forge ahead with a "passion project" in an area where they have minimal expertise. Maybe they love food, so they open a restaurant. "But if you've never worked in the restaurant industry," McGinnis said, "your chances of success are far lower than they should be."

Sure, an industry outsider can sometimes bring in a much-needed fresh perspective. But McGinnis thinks that scenario is the exception, not the rule. In fact, a 2018 working paper by MIT researchers found that the most successful entrepreneurs are in their 40s, largely because they've built up enough relevant work experience.

Read more: The glitz of 'entrepreneurship porn' leads startup founders to make fatal business mistakes. Here's how to avoid them

The experts' solution: Leverage the knowledge and skills you already have

You don't necessarily have to wait until your 40s to start a company. The takeaway here is that your chances of success are higher if you know a lot about the area you're working in.

When Scordato selects founders for Tacklebox, his startup accelerator, he looks specifically for people who have developed deep domain expertise over the course of their career. He's especially impressed by founders who have some unique experience — for example, if you're one of the only finance professionals who has traded a specific derivative.

Read more: The ultimate guide to figuring out how (and if) you should start your own company

"You should have been subconsciously preparing to build this company for a long time," Scordato said in a previous interview with Business Insider, "in a way such that your skill sets and knowledge bases have already distanced you from any competition."

The problem: Getting attached to your hypotheses

As a startup founder, you don't want to get overly attached to any particular business hypothesis.

Daniel Ahmadizadeh made that mistake at real-estate tech company Riley. In a letter to investors that he reproduced in a LinkedIn blog post, Ahmadizadeh said the company initially grew fast, but wasn't able to maintain customers. Riley would have done better to zero in on the sliver of real-estate agents who did stick with the product and figure out how to best serve them, Ahmadizadeh wrote.

Ahmadizadeh told Business Insider that too many founders get stuck on a hypothesis about what customers want and how they can best provide that. Even when their hypothesis is proved false, they stick with it.

The experts' solution: Take a scientific approach

Ahmadizadeh said early-stage founders should be running tons of experiments — and taking the results seriously. That might mean organizing focus groups to see whether your product is a bigger hit with, say, urban millennial dads or urban millennials without kids (or neither).

"What's most important is to get to a conclusion as quickly as possible," Ahmadizadeh said. "It's not really a positive or negative conclusion. It's just like a science project."

Scordato, the founder of Tacklebox, said the most successful founders look at the data, see what resonated, "and then focus very, very intently on that." You can think of it as a more extreme version of the Pareto Principle, or the idea that 20% of your efforts produce 80% of your results — so you'd be wise to focus on the 20% activities and ignore the rest.

The problem: Not being able to meet VCs' standards

Once you take money from investors, you're committing to meeting their expectations about the company's growth — specifically, that you'll return their money many times over. It's better to realize before you raise venture capital that this isn't the type of company you're building.

Lavingia came to this realization too late.

In a Medium post, Lavingia describes Gumroad's evolution: At 19 years old, he raised capital from top VCs and saw success with the e-commerce platform. But then growth stalled. His investors lost money.

Lavingia decided that, instead of shutting down the company entirely, he and his team would seek to become a profitable "lifestyle business," which can sustain itself without venture capital (and probably won't ever become a unicorn). He's since bought out the majority of his investors.

Today, Lavingia told Business Insider, Gumroad is hitting about $5 million in annual revenue and growing at a rate of about 40% per year — which is to say, it's still creating value for customers.

Riley, which raised $3.1 million in a seed round, also failed as a venture-capital investment, Ahmadizadeh said. It "ended up not being able to scale at the rate that is required to be venture-backed."

Ahmadizadeh made the decision to wind down Riley; in the letter to investors, he said he hoped to return 20% of their initial investments.

The experts' solution: Think carefully about raising venture money

Approaching your startup like a "business-school case," in Lavingia's words, can save you a lot of stress in the long run.

Specifically, Lavingia wishes he'd laid out a concrete business plan for Gumroad: "Within a year, within two years, within three years, these are the metrics that we need to hit in order to build a billion-dollar company." And just as importantly: "These are the ways that we're going to check each of these assumptions and make sure that it's true until we move onto the next step."

Had Lavingia taken these precautions, he might have realized he wasn't building a billion-dollar company — and might not have raised venture capital in the first place.

Ahmadizadeh also wishes he'd considered the downsides of raising venture capital.

Riley was "a very good small business, a profitable small business," he said. But because he'd raised millions in venture dollars, he couldn't, say, sell the company for $1 million when things got challenging. "It was all about growth, fast growth," Ahmadizadeh said, "but that's what we signed up for."

Read more: The ultimate guide to selling your startup for a boatload of cash, from founders who sold their startups for billions

The problem: Ignoring scary numbers

According to tech market intelligence platform CBInsights, the No. 1 cause of startup failure is not having a strong market need for the product or service. (That's based on 101 startup failure post-mortems by founders and investors.)

Oftentimes that's not because the founder didn't analyze the market; it's more because they chose to ignore what they saw.

Take it from Greene, who said that his experience at Sqord taught him the importance of being honest with yourself about the company's future.

Sqord raised a total of $5.2 million, then ran into trouble when they couldn't prove to investors that they'd built a sustainable enterprise model (i.e., selling their products to large companies). Ultimately, they sold the company to one of their customers in an acquihire, which is sometimes referred to as a "soft landing" for a struggling startup.  

The experts' solution: Be honest with yourself

Don't just look for "the metrics you're going to put in your next pitch deck," Greene said — i.e., the impressive stuff. "Make sure that you're really taking a deep look at all the good and the bad that's emerging from what you guys are building."

McGinnis, for his part, has seen far too many founders focusing on "vanity metrics," like their Instagram followings and press mentions. "Unless you're selling any products," McGinnis said, "it really doesn't matter."

Even founders who did put together a business plan start to "forget" how they defined success, McGinnis added. They "start re-forecasting if they fall behind."

That's partly because confronting reality can raise some uncomfortable questions. McGinnis offered an example: "If your goal was to create a $100 million business and now you find out that your business could only probably be a $5 million business, is it still worth it to you? And what should you do about that?"

What to do if you think your business is failing

Consider cutting your losses

As a startup scales, founders can fall prey to the sunk-cost fallacy, a term social scientists use to describe the tendency to stick with something just because you've already invested considerable resources in it. It's the classic case of "throwing good money after bad," like paying, yet again, to get an old, failing car repaired. Even if you know on a rational level that your company isn't working out, it's tempting to stay the course.

The story of Margin is a prime example of this phenomenon.

As cofounder Mace details in a blog post, Margin, the retail tech company, released its MVP just as credit-card companies started cutting card benefits. Margin then pivoted to an email-alias product, but by that time they didn't have the resources to sustain the company, and they shut it down.

Even though Mace and cofounder Scott Howard could see initial signs that the card-services industry was going to implode, they kept trying to make their product a hit.

"At the time, we were convinced that partnering with industry players was the best path for the company's success," Mace and Howard wrote in an email to Business Insider, referring to their partnerships with people like the former CEO of Saks Fifth Avenue and the cofounder of Gilt Groupe. "The reality is that partnerships with the world's biggest financial companies takes lots of time — time that startups don't have — and we failed to suspend that disbelief with ourselves."

A second fundraising round fell apart, Mace wrote in the blog post, and Margin didn't have enough capital to survive.

Get outside counsel

Byrne, the University College Dublin lecturer, helped explain why founders have a hard time being objective about their business: "You've invested so much to get this baby established, up off the ground, and grown." When you see market data that doesn't line up with your vision for the company, it can be hard to reconcile the two.

What's more, most companies go through rough patches and pull through. It can be difficult to know, Byrne said, "whether something just requires resilience, versus pulling the plug."

Still, Byrne added, "Every entrepreneur I've spoken to has said they regretted not making the decision to close their business sooner."

One way to avoid this mess is to get impartial advice. Byrne recommended looking for someone who "understands business thoroughly" and is as objective as possible when it comes to your startup's fate. Where you might find it difficult to honestly assess your company's progress, that person might say, "Look, this is what's really happening here."

Keep the interests of  your employees, investors, and customers in mind

As much as your startup is your baby, you're not the only person with a vested interest in seeing the company succeed. Keep in mind that your employees, your customers, and your investors (if you have them) will also be hurt by the company's failure.

McGinnis has seen too many founders forget this part. If you're having trouble raising additional capital or you're running out of money, you must plan for your company's failure.

"Don't just run it to the point where you have no money left, because then you can't wind down the company appropriately because you won't have the money to do so," McGinnis said. Specifically, you won't be able to offer your employees' severance pay. "Always have a cushion of capital there to unwind the company."

Lavingia said he had his customers' best interests in mind when he declined to shut down Gumroad entirely. He imagined telling his customers he was shutting down because he wasn't able to fulfill his dream of building a billion-dollar company — even though the company was profitable and customers were making money. And he imagined those customers outraged, saying, "What the hell?"

You might also consider returning your investors' money if things aren't working out — something that McGinnis has seen happen just twice in his career.

McGinnis said leaving everyone in the lurch is generally a bad look; it "reflects poorly upon your investors and the other people that are part of your company."

But there's also a practical reason not to act selfishly: You might start another company some day. "If you screw people over," McGinnis said, "you inhibit your chances of getting those same people to work with you in the future."

SEE ALSO: Founders and investors reveal the ultimate guide to scaling a startup — and common pitfalls to avoid

Join the conversation about this story »

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• A misconception about entrepreneurship is that you work for yourself.
• Lyft CSO Raj Kapoor says founding CEOs in fact work for their board of directors.
• Kapoor thinks CEOs must constantly convince the board that they're competent, for fear of getting replaced. Executives in more traditional roles don't have the same worries.
• Click here for more BI Prime content.

In 2016, Raj Kapoor made a somewhat unconventional career move.

Kapoor was the first investor in Lyft and an early board member. He was also a serial tech entrepreneur in his own right. Then he accepted the role of chief strategy officer at Lyft, the massive ride-sharing company that recently filed to go public.

You might think Kapoor would shy away from jobs that require him to have someone telling him what to do. (In his current role, he reports to Lyft's CEO and cofounder, Logan Green.) Yet Kapoor has found that, in some ways, he has more autonomy as Lyft's CSO than he did as a startup founder and CEO.

That's because, at Lyft, he only has one boss.

A common misconception about entrepreneurship, Kapoor told Business Insider, "is that you don't have a boss. You actually do. It's a board."

Kapoor is right. At an early-stage startup, a board of directors must approve any "material" decisions that management makes, including granting or transferring equity, adopting an annual budget, and hiring or firing executives. And as a startup scales, the board of directors typically expands to include representatives for new investors.

Read more: The first-time founder's ultimate guide to navigating a term sheet and avoiding common pitfalls — with a sample from a major VC

So getting everyone on the same page can be challenging.

Executives can be more vulnerable than founding CEOs

One important difference Kapoor has observed between running a company and holding an executive position is that a founder CEO can never be "fully vulnerable."

From Kapoor's perspective, a board of directors' primary job is to make sure their company has the right leadership. Which means that the CEO is trying to convince the board "that you know what you're doing, constantly."

But as Lyft's CSO, Kapoor said, "I can sit down with Logan [Green], and I can be very vulnerable and open" about challenges. Instead of having to figure things out on his own, Kapoor can say to Green, "Hey, this is what's going on. What do you think?"

Research backs up Kapoor's point.

In a Harvard Business Review article, Noam Wasserman, dean of Yeshiva University's Sy Syms School of Business, writes that once outside directors join a company's board (which happens as the company grows), a CEO's job is at risk. Based on his studies of founding CEOs, Wasserman says that even when a CEO is performing well, the board may want someone more experienced to take the company to the next level, for example going public.

Kapoor, for his part, also relishes the increased opportunity for collaboration as an executive, as opposed to a founder CEO. "We're making decisions together as a team," he said. "As an entrepreneur, you're basically scraping by with whatever you can do."

SEE ALSO: The most common ways startups die and how to avoid them, from founders and investors who have failed

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• For some seniors, retirement is an opportunity to learn how to use computers and start their own small business — and they're doing it at New York's Senior Planet.
• The MIT Technology Review got a glimpse of Senior Planet, a community center and coworking space that hosts classes on everything from using computer programs like Google Hangouts to opening online shops on Etsy.
• Senior citizens are becoming an important part of the labor force — according to the US Department of Labor, Americans over 55 will be the largest group of workers by 2024.
• Visit Business Insider's homepage for more stories.

Some senior citizens move to retirement communities where they play golf or shuffleboard. Other seniors looking to be tech-savvy or start a small business go to Senior Planet.

The MIT Technology Review recently went inside Senior Planet, a retirement community and coworking space founded by Tom Kamber in 2006. At their Manhattan location, seniors can learn everything from finding the "on" button on their computers to creating their own websites. Learning these skills has never been more important for older people, especially as senior entrepreneurs are becoming a bigger part of America's economy.

One regular at Senior Planet, Michael Taylor, used to run an antiques store, but had no choice but to close up shop amid rising rent costs. Despite losing his small business, he had little desire to retire. Instead, he got his master's degree at New York School of Interior Design. As he said in the MIT Technology Review's article, he started going to Senior Planet to get help with website design for an already successful small business.

The research finds that older business owners are more successful — and that continuing to work actually helps mental health.

According to Babson College's 2016 State of Small Business in America report, 51% of small businesses are run by people aged 50 or over, up from 46% in 2007. And those small business are staying open longer than ones founded by younger generations: 70% of senior-run small businesses are still running three years after opening, compared to only 28% of businesses run by younger entrepreneurs.

There are also more senior citizens than ever. Millennials may be the largest group in the labor force at the moment, but older Americans are catching up. According to the US Department of Labor, workers over 55 will be the largest group, at 24.8%, by 2024.

Taylor, now 71 years 0ld, had seen his father retire at age 84. Suddenly having no work aged his father quickly, he told MIT Technology Review. "And I'm like, 'If that's what retirement does for you, I don't want it.' So I plan on working until God calls me home or just until I can't work any longer," he's quoted as saying within the article.

Some experts say that the best way to stay active and prevent the ill effects of aging is to never retire. According to a 2013 study by the Institute of Economic Affairs, a UK think tank, retirees were 40% more likely to be diagnosed with clinical depression than seniors who put off retirement, which indicates that work is good for mental health in old age. 

Entrepreneurship helps combat ageism, too. 

While many older Americans are still in the workforce, ageism is keeping them from landing jobs. According to a study by job site iHire, 53% of baby boomers have felt age discrimination at work, including having trouble getting jobs they're qualified for.

Taylor has experienced ageism firsthand. "I found getting a job is not that easy if you're not the 20, 30, or mid-40s candidates," he said in the article.

Senior Planet's goal is make ageism a thing of the past by erasing stereotypes of elderly people who can't use technology or learn new things. Senior Planet founder Tom Kamber told MIT Technology Review that aging does anything but slow you down. In fact, "your horizon is shorter — your dreams become more critical and urgent," he says.

Kamber believes that age is not a barrier to entrepreneurship or success, but occasionally, technology is. "When you're a senior, and you've got an idea, and you want to make it happen," he said, "somebody's got to help out a little bit."

SEE ALSO: Down with '30 Under 30': How the myth of the young founder is completely misguided — and leading to Silicon Valley lies

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• If you can't stop thinking about your business idea, that's a good sign that you should pursue it.
• That's according to Jaleh Bisharat, founder and CEO of the clean beauty brand NakedPoppy. She previously worked in marketing at Amazon, Eventbrite, and OpenTable.
• NakedPoppy also solved a problem that Bisharat had personally experienced: finding clean makeup products.
• Click here for more BI Prime content.

Jaleh Bisharat never planned to start a company.

For over 25 years, she held executive roles at big-name organizations like Eventbrite and OpenTable. She was vice president of marketing at Amazon in the late 1990s.

But today, Bisharat is the cofounder and CEO of the clean beauty platform NakedPoppy, which makes it easier to find safe, sustainable beauty products, all algorithmically matched to your precise skin tone.

She and her cofounder, Kimberly Shenk, a data scientist and former Eventbrite colleague who has served in the US Air Force, closed a $4.1 million seed round, which they announced in July. The founders just released their first branded product, Naked Poppy Clean Liquid Eyeliner, in addition to the roughly 400 other products they offer on their site.

It didn't occur to Bisharat until 2016, after she'd left Eventbrite and was considering her next move, that she wanted to launch a clean beauty brand, featuring sustainable makeup products without harmful chemicals. "Where was nothing I wanted to work on more, even though I knew that it's really a lot of work to create a company out of thin air," she said.

From there, the decision to build the company was simple, she told Business Insider. Bisharat relied on the same signs that have guided many successful entrepreneurs before her: She kept thinking about her business plan and it was the perfect way to combine her personal and professional experiences.

"I couldn't let go of the idea," Bisharat said. "And I knew that meant something."

Bisharat zeroed in on the intersection of her personal interests and professional experience

Bisharat's idea for a clean beauty brand stemmed from her own struggles. She'd been using clean makeup and skincare products — "crunchy granola makeup brands," she called them in a blog post— for years already, but they weren't always easy to find. "NakedPoppy happened because of a real problem that, for me, had not been solved," she said. 

And at that point in her career, Bisharat was well positioned to tackle the challenge. "NakedPoppy really is the intersection of my personal passion for clean beauty, for a more healthful way of living, with my professional background in e-commerce, technology, and brand building," she said.

Bisharat and Shenk created NakedPoppy to make the process of picking out makeup less time-consuming, and less overwhelming. To that end, customers fill out a questionnaire and send in a photo of their wrist, so an algorithm can find makeup that suits their skin tone. (There's also the option to choose products for yourself.)

Read more: The ultimate guide to figuring out how (and if) you should start your own company

NakedPoppy is designed to solve the problem Bisharat experienced for years

All NakedPoppy products are designed to have minimal environmental impact and have been vetted by scientists to have skin-safe ingredients. And the company has a patent pending on the online assessment that helps customers find flattering beauty products.

"NakedPoppy combines the highest standard for clean beauty with the curated personalized shopping experience that delivers recommendations like we've never seen before," Victoria Treyger, general partner at Felicis Ventures, which participated in the round, said in a statement.

If you can't get away from the idea, get going on the idea.

NakedPoppy's origin story recalls advice from Liz Wessel, founder and CEO of WayUp, which is a job platform for college students and early-stage professionals. Wessel previously told Business Insider, "If you can't do a good job at your job anymore because you're spending all of your time thinking about another job opportunity"— including being the founder of your own startup — "that's probably a good sign."

The fact that Bisharat has a personal connection to NakedPoppy may also bode well for the company's success. Some entrepreneurs think that founders who have firsthand experience with the problem they're trying to solve are more successful.

As Hint founder and CEO Kara Goldin previously told Business Insider, it's a question of stamina. "You start to lose interest if it isn't something that you really see is truly solving a problem for yourself or someone you really love."

Bisharat said it helped that she'd found an ideal cofounder in Shenk. It was that combination, Bisharat said, of obsessing over the business idea and "feeling like I had a cofounder and a partner in this that I knew would make it succeed."

SEE ALSO: The first-time founder's ultimate guide to pitching a VC

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• Some entrepreneurs have struck gold with their quirky, kitschy ideas for products, toys, websites, and more. 
• While fads like Beanie Babies and Furby come and go, if the timing is right, there can be serious money to be made off of a pop culture moment. 
• Here are 13 ideas that made some people ridiculously rich. 
• Visit Business Insider's homepage for more stories.

Lots of people have million-dollar ideas, but people rarely act on them. Mistakes, too, can sometimes even mean millions —  if the timing is right. 

For entrepreneurs, one good idea can prove extraordinarily fruitful — even if it's as silly as something like the Snuggie. The Slinky, for example, was born after a naval engineer made a clumsy mistake; meanwhile, the infamous Furby was crafted after its creator was introduced to Tamagotchis, and felt an overwhelming urge to pet it. 

Check out some other ideas that left people with millions.

SEE ALSO: The most famous invention from every state

DON'T MISS: From the internet to the iPhone, here are the 20 most important inventions of the last 30 years

Beanie Babies, created by Ty Warner in 1993, were the plush, bean-filled toy fad of the 90s. Warner's Ty Inc. reportedly made $700 million in one year, selling the Beanies for $5 a piece. By 1999, the company had over $1 billion in sales.

Warner made the decision to not sell the toys at nationwide chains like Toys-R-Us and Walmart, driving up the market at small, independent stores and creating a craze. Some stores even received instructions from Ty Inc. not to sell more than a certain amount to one customer. Beanies began going up on the resale market — many with five-figure asking prices.

Since its creation, it is estimated Beanie Babies were able to bring in nearly $6 billion for Warner. 

Today, Warner has a net worth of over $2.6 billion. 

Source: The New York Times, The New York Times, Forbes

Alex Tew had the idea for The Million Dollar Homepage when he was a 21-year-old college kid. He would sell 1 million pixels for $1 a piece in advertising space. The profit? You guessed it.

Million Dollar Homepage "sold out" just 4 months after it went up in 2005. It all came about because Tew was interested in making money while also attending Nottingham University in England. And after the site began to gain media attention and all ad space was bought up, he dropped out and began his career as a serial entrepreneur.

He has since gone on to co-found the newly billion-dollar unicorn startup and meditation app, Calm. 

Source: BBC News,Business Insider

What if you could wear a blanket? Scott Boilen, president of Allstar Products, had the same idea, resulting in the Snuggie. Since 2008, over 30 million Snuggies have been sold, raking in over $500 million.

Many people remember the silly commercials in the early aughts for Snuggies: a family at a sports game, all wrapped in blue Snuggies, surrounded by others bundled up in coats, beanies and scarves, cheering, arms raised. 

But some others remember the Slanket, which appeared on the shopping channel QVC and airline publication SkyMall years before the Snuggie. 

"We had seen products like these in catalogs for a while — even before the Slanket came out, I think," said Boilen to The New York Times in 2009. "And we thought if we could put a clever commercial behind it and offer it at a better value price, then people would buy it."

And clearly, it worked. 

Source: CNBC, The New York Times

The Slinky, created by accident by Richard James, is now in the Toy Hall of Fame, with over 350 million sold and profits reaching $3 billion.

James dropped a tension spring he was working with and watched it slink away across the floor — and thus, the Slinky was born. In reality, though, it did not happen that quickly: James spent over two years developing just how long the toy would be and experimented with different formulas to find the perfect slink-down-the-stairs toy he imagined in his head. His wife, Betty, went on to helm the Slinky business when he moved to Bolivia to join a cult. Betty died in 2009.

In her obituary, The New York Times found that the number of Slinkys that have been sold could circle the world over 150 times.

Source: CNBC, The Atlantic, The New York Times

Gary Dahl, an advertising executive, was known to joke. After listening to his friends talk about the perils of caring for a pet, he created the Pet Rock in 1975, putting nearly $6 million in his pocket.

He sold the rocks as "hassle-free" pets, complete with a pet training manual and a cardboard box fashioned after a pet carrier. The rocks were an instant hit and turned into one of the greatest fads of all time.

San Jose-based Dahl tried to replicate his Pet Rock success with other ventures, though everything else eventually flopped, including a book about the "untold story" behind the parody pet and another spoof on fitness. 

Source: The New York Times, The Mercury News

Furby, the nonsense-talking, furry, hamster-mixed-with-an-owl electronic toy, took over the 90s, but its popularity dropped off quickly thereafter. However, Furby remained a hot toy long enough to make $500 million annually at its peak.

Fun fact: The National Security Agency banned Furbies from its office in 1999, according to a CBS article with the same date, saying the children's toy was a "Chinese-manufactured spy" with the capability to listen in on conversations pertaining to intelligence.

Furbies do not have the ability to record, according to Roger Shiffman, the man who heads Tiger Electronics, which makes the toy. They are known, however, to frequently glitch — talking, walking, and vibrating without cues, sometimes in the middle of the night. Creepy.

Source: Thrillist, CBS

In the 1980s, Scott Stillinger invented the Koosh Ball — a rubbery ball with colorful fibers all over it. Hasbro bought the Koosh Ball for $100 million in 1997. Time magazine named it one of the greatest toys of all time.

The Koosh Ball came out of a want to have something in between the weight of a foam ball and a bean bag, according to a 1995 Los Angeles Times article.

As Stillinger's company grew, so did the size of the Koosh balls. You can still find over a dozen varieties of the Koosh ball today. And in 1995, business was already doing well: OddzOn, the original maker of the toy, said "millions and millions" have been sold at $5 a piece.

Source: Time, Los Angeles Times

Big Mouth Billy Bass, the famed talking fish known for hanging inside garages and living rooms, was created by Gemmy Industries in 2000 and went on to make millions. Though revenue was never disclosed, some reports estimate the decade's best gag gift made $100 million.

It took two years of tinkering for creator Joe Pellettieri to get Billy Bass just right — the moving head, the motorized tail and mouth, all in perfect harmony while singing "Don't Worry, Be Happy," and "Take Me to the River."

Today, you can buy an Alexa-enabled singing bass from Amazon for $40.

Source: Entrepreneur, TechCrunch, The Hustle

Ken Hakuta became a millionaire in 1985, thanks to his Wacky Wall Walker — an eight-armed, slimy toy resembling an octopus, that, when stuck to the wall, looked like it was walking as gravity pulled it down. Millions were sold.

But Hakuta didn't come up with the idea for the toy itself. He bought the rights for the original Chinese toy his mother sent him for $100,000 and began marketing it in the DC area.

Sales crawled along until a reporter for The Washington Post stumbled upon his product and wrote about it. The buzz from the article began one of the greatest marketing fads of all time. Within just a few months, more than 240 million were sold, netting Hakuta about $80 million.

For years, you could find the toy in cereal boxes, like Corn Pops, but today you can find them on Amazon and some independent toy stores. 

Source: The Washington Post

The Chia Pet — clay figures filled with water and coated in seeds that sprout greenery — is a cultural icon. You can buy a chia pet of a dog, cat, bunny, or even the president. The company sells 500,000 every holiday season. At $16 a piece, that means millions of dollars every year.

The Mexican herb chia explodes with luscious springs of green when watered.

Creator Joe Pedott credits the idea to his home in San Francisco and an agent at his ad firm's butcher of the name, ultimately leading to its infamous jingle, "Ch-Ch-Ch-Chia!" heard for years on television commercials well into the 2010s. The toy was even included in a New York Times time capsule.

Source: Smithsonian Magazine

In 1963, Harvey Ball drew a smiley face outlined with a circle and filled with yellow for $45 to liven up buttons and badges. He never trademarked the design, though. Today, SmileyWorld owns the design and makes over $250 million a year.

Ball first drew the happy face for his PR company's client, State Mutual Life Insurance. The only money he ever made from the simple sketch was the two-figure dollar amount they made selling it to the client.

Two brothers, Bernard and Murray Spain, stumbled upon the unrealized potential of the smiley. Wanting to start a novelty store, the Spains bought the legal rights to the mark along with the now infamous tag-line, "Have a nice day." The brothers began slapping the image on everything possible — including, most famously, the to-go plastic bag. 

Source: VICE

The Magic 8 Ball has been an enormously popular fortune-telling toy for decades. Albert C. Carter came up with the idea (tube-shaped, at first) in the 1940s, basing it on one of his working-clairvoyant mom's fortune-telling tools.

Originally called the "Syco-Seer," Carter partnered with a local store owner, Max Levinson, who brought the idea to his brother-in-law, Abe Bookman, for mass production. Their newly-formed novelty company, Alabe Crafts, began selling the Syco-Seer, which was granted a patent in 1948.

Unfortunately, Carter didn't live to see his device become a massive hit in the novelty toy world — but Bookman went on to redesign and rebrand it several times, resulting in the black billiard ball we all recognize now. Today, the Magic 8 Ball is owned by Mattel, and the toy company says they sell a million Magic 8 Balls every year. 

Source: Mental Floss, Adweek

While people have been playing with hoops of varying materials all throughout history, the modern plastic Hula Hoop was invented by Arthur K. "Spud" Melin and Richard Knerr, cofounders of the Wham-O toy company.

Melin and Knerr got their idea for mass-produced hula hoops from Australian schoolkids using bamboo hoops for exercise. The two started manufacturing brightly-colored plastic hoops in 1958, selling them for $1.98 a piece. The idea took off almost instantly — 25 million Wham-O Hula Hoops were sold within four months. Melin patented it in 1963.

Source: Wired, History

• Potential startup entrepreneurs can oftentimes get swept up in the excitement of their ideas, products, and services and make some devastating, yet common, mistakes.
• Underestimating the amount of time and money needed to get your company going can lead to serious cash flow issues down the line. 
• And failing to adjust to the market and respond to consumer needs can also ensure a startup's failure. 
• Here are some of the biggest mistakes entrepreneurs make when trying to get their startups off the ground.
• Visit Business Insider's homepage for more stories.

You've got a great idea, you're brimming with enthusiasm, and you're pretty sure that the world is going to beat a path to your door to buy your new product or service. 

But the road ahead will be filled with speed bumps and potholes, from outside competition to legal disputes within your own company.

To help you steer clear of at least some of them, we asked several successful entrepreneurs and experts for their take on the biggest mistakes that startup entrepreneurs make and how to avoid them. 

Here are the biggest mistakes entrepreneurs make when trying to get their startups off the ground.

SEE ALSO: 11 people reveal what they wish their bosses knew about them

DON'T MISS: We asked pro résumé coaches to name one thing they wish everyone knew

They underestimate how much time and money getting off the ground will take

So you think you've squirreled enough money away to get you through the lean — read "poor"— startup days. Think again. 

"I think we underestimate how long things will take and how much money we will need," said Francine Glick, founder of Water Journey. "I think it takes twice as long and costs three times as much as we assume it will." 

Make sure you've got some extra financial padding. Hang on to that full-time job a bit longer while you work on your startup in your free time. 

They take too long to launch

"You can plan and research forever, but the key is to just get out there, and then there will be natural feedback and momentum to carry you forward," Thomas Donohoe, founder of Level Agency, told Business Insider. "You don't have to have everything perfect and figured out in order to launch."

In fact, if you labor over your idea for too long, you may be wasting time creating something that's not quite right for your customers. Get what you're offering in front of them and let them help you create what they need most.

They fail to begin with the end in mind

"Entrepreneurs often begin with excitement and optimism thinking they will do whatever it takes to succeed," said Michael Fellows, founder of Broadway Lab, a software development company. "Taking time to plan your vision, mission, values, and how your service will be differentiated from the rest will create focus and effectiveness." 

Adopting a big picture approach from the outset will force you to ask tough questions sooner rather than later, and will give you a roadmap to refer to when things get rough. 

They don't research their competition

"Although it may seem counterintuitive, you want competitors," said Heather Huhman, fertility consultant and serial entrepreneur. "You don't want so many that the market is saturated, but enough that your first touchpoint with potential clients (or) customers isn't educating them about the need for your product or service."  

Competitors validate the market for you. If there aren't any, you may want to ask yourself a key question — is the problem I'm trying to solve widespread enough to warrant creating a business to solve it?

The fall in love with their idea too hard

"Founders fall in love with their ideas and often don't do the hard work needed to figure out exactly who else is in love with what they are selling," said Adam Mendler, entrepreneur and CEO of the Veloz Group. 

Of course, you should be passionate about your business, but founders who are too emotionally invested often ignore the warning signs that they're missing the mark. Remember that if your product or service is not getting traction, it's not the customers' fault — it's yours. 

They don't evolve when they should

"It's important to stay objective and read the market," said Shama Hyber, founder of Zen Media. "Don't be afraid to pivot if you find that your original ideal isn't taking off as you'd hoped." 

Respond to what the market needs rather than what you want to give it.

"Remember," she said, "YouTube originally was meant to be a dating website. The founders eventually realized the market didn't want to date via videos — but they did want to just upload and share videos. The rest is history." 

They neglect legal protection

So you're starting a business with a college friend, you've written your plan on the back of a napkin, and sealed the deal with a clink of your glasses. Great, but don't neglect the next steps. 

"Often people are so excited about getting the business up and running that they're hasty and forget to do things like a founders agreement, employment agreement with early employees, proper privacy policy, and other compliance-type items," Stephanie Kaplan-Lewis, co-founder of Her Campus, told Business Insider.

Failure to address these beginning steps can come back to bite you years down the line.

They assume they need to raise a ton of money right away

Entrepreneurs often think they need to raise outside capital right away. But the bottom line is that you're much better off beginning by earning money on a smaller scale for your startup. 

"There's always a way to validate a concept on a small scale and small dollars, whether it's with a small digital campaign, farmer's markets, Kickstarter, et cetera," said Zach Zelner, CEO of PupSocks. "Until you've got 100 passionate users — which can usually be acquired by word of mouth — you're not ready to grow."

Once you've proven that there's market demand for your product, potential investors will see your company as more valuable and it will be easier to raise money.

They spend too much, too soon

Fancy offices, Aeron chairs, and expensive lunches? Forget about it. You'll bleed yourself dry before you even make your first sale. Likewise with hiring a staff.  

"It's a warm and comfortable feeling to have dedicated full-time staff. It makes you feel legit," Justin Beegel, founder of Infographic World, said. "But it will eat you alive if the economics don't support having that number of people on payroll." 

And guess who'll go without a paycheck if cashflow gets dicey? You. Keep your organization lean until you reach a revenue level that can truly support employees.

• It doesn't take every billionaire a lifetime to build their wealth.
• Business Insider rounded up some of the best pieces of advice the world's richest millennials have given, from productivity tips to managing money.
• They offered advice on taking risks, embracing challenges, and staying true to yourself.
• Visit Business Insider's homepage for more stories.

Of the world's 2,153 billionaires, 53 are millennials.

That's according to Forbes' annual Billionaires List. As defined by the Pew Research Center, the generation includes those born between 1981 and 1996, or those aged 23 to 38 in 2019.

These billionaire millennials didn't spend a lifetime building wealth and success — they achieved it in a much shorter time frame.

Read more: Meet the world's richest millennials, who have a collective net worth of more than $235 billion

Business Insider rounded up some of the top pieces of advice a few of these millennials have given in recent years, ranging from the meaning of money to productivity hacks and ways to grow a business.

From Mark Zuckerberg to Evan Spiegel, here's what some of the world's richest millennials had to say.

SEE ALSO: The 7 best lessons successful people taught us about money in 2018

DON'T MISS: 7 of the best pieces of advice self-made millionaires shared about money in 2018

Not taking risks is a recipe for failure.

In a 2011 interview at Y Combinator's Startup School in Palo Alto, California, Facebook co-founder Mark Zuckerberg said he had no idea what he was doing the first few years of Facebook, CBS reported— mistakes are inevitable, and you don't get judged by them.

"The biggest risk is not taking any risk," the 35-year-old said at the time. "In a world that's changing really quickly, the only strategy that is guaranteed to fail is not taking risks."

Don't be afraid to ask for help.

In a talk at NYU, Airbnb cofounder Brian Chesky, age 38, advised aspiring entrepreneurs to aggressively seek help and advisors, reported Kerry Close of Inc.

"Every time I didn't know how to do something, I figured there's someone who does," he said. "Some of the best entrepreneurs are the most shameless people in the world."

Always view things as opportunities.

Cofounder and president of payments software Stripe John Collison always keeps an eye out for opportunities — even if it seems there aren't any.

"It's easy for people to think the best opportunities are taken,"the 29-year-old told Wired in 2017. "I absolutely don't think that is true at all. My advice to my younger self would be not to be too okay with the ways the world is broken, and instead see them as opportunities."

He continued: "For instance, I don't think anyone's particularly happy with their mobile-phone provider. If a better provider were to come around, I don't think anyone would be particularly surprised."

Save your paycheck.

The importance of saving money is nothing new, but it's timeless advice for a reason.

"I really save all the time, I've always done that," 23-year-old Alexandra Andresen, co-owner of Ferd Group, said in a 2014 interview with a corporate magazine published by Ferd. "I save when I get weekly wages and cash prizes I win at events, or if I get money as a gift for my birthday. It allows me to buy something I really want, like a purse or a pair of shoes, without having to ask mom or dad for money."

Stay free of distractions by keeping your phone on silent.

In an interview with Entrepreneur, Chris Wanstrath shared his best productivity tip — and it's quite simple. The 34-year-old GitHub cofounder keeps his phone on silent all the time.

"I don't need to constantly be pulled out of the moment," he said. "I learned that from writing code. You lose your train of thought and can't jump back in. The less distractions you have, the more you can do a good job on what you're doing. You already paid the cost of ramping into the zone, you don't want to pay it again."

Keep moving forward, even when things get tough.

Cofounder and CEO of Pinterest Ben Silbermann, age 37, isn't one to give up. If there's a challenge ahead, you shouldn't take it as a sign to quit.

"My general advice is to keep going even though there are a lot of things that are telling you not to, he told Business Insider in 2016. "The reason there's no simple answer is because it's kind of told in retrospect."

He added: "You should bias toward keeping going unless you're not personally in the position emotionally or financially where you can do that."

Don't listen to other people's versions of success.

"You should get rid of other people's voices in your head," Pavel Durov, the 34-year-old founder of the app Telegram Messenger said in a 2017 interview with The Huffington Post. "We're so much influenced by people around us. Our relatives, our friends, what they believe is success and not and what is good and bad. We should get rid of that completely."

He added: "In a way, we should start to ignore everything that other people think or say about what we are doing. After that we should just focus on what we need."

Life isn't about money.

There's more to life than money, according to cofounder and CEO of Snap Inc., Evan Spiegel at the 2018 Code Conference, CNBC reported.

"Obviously, life is not about making money. Life's not about winning awards. It's not about winning competitions or whatever," he said. "Life is really about having an impact on the world, changing the way that people experience the world, changing the way that you experience the world."

The 29-year-old continued: "I think for me, one of the things that I worry about is that businesses very quickly reduce problems to numbers. They think about themselves in terms of numbers and they get obsessed with driving numbers. I think the interesting thing about humanity and about values is that these are things that can't actually be quantified."

• Hiring people to join your company is a great sign — it means you're growing and ready to accomplish big things.
• But how do you figure out the right roles to fill? Business Insider spoke with six startup founders to understand how they built their teams from scratch.
• Their advice is to find people who are highly adaptable and don't share the same skill sets or perspectives as you.
• They also recommend tapping into your network to find great hires because chances are those individuals trust your vision and work ethic.
• Click here for more BI Prime stories.

Hiring the first employees to join your startup is an exciting step that indicates your business is growing. But knowing which roles to fill first and where to find the right people can be daunting, as these decisions have the power to propel your company forward — or cripple it.

In addition to the cost and outlay of time it takes to locate and attract the right employees, there's also an emotional component to consider. As Anna Fader, founder of Mommy Poppins, a leading online resource for family travel and local activities, pointed out, after doing everything yourself, it's hard to relinquish some of the responsibilities. 

"It can feel as emotional as handing your child over to a stranger," she told Business Insider. 

As difficult as it may be, making the right first hires is critical to building a strong foundation for success by filling in skill gaps. Onboarding employees frees up founders to delegate so they can focus their attention where it's most advantageous — ultimately, advancing the company to the next level.

We asked startup founders to share their strategies for making solid first hires.

Address your most pressing needs first

Karthik Sridharan is the cofounder and CEO of Kinnek, a software company founded in 2012 that connects small- and mid-sized businesses with reputable suppliers, and received $3 million in seed funding after graduating from the AngelPad accelerator program. He explained that he and his cofounder Rui Ma decided to begin expanding their team based on what was most urgent to get done.

"We based that decision on our most pressing need as a company, which was to expand our product's capabilities and features as quickly as possible," Sridharan said. "Our first three hires were all technical. We hired three people who had engineering/development backgrounds, but who were also proven problem-solvers who had incredible critical-thinking ability and would be able to help us iterate on our product quickly as we learned more about what our users wanted."

For Philip Lang, the cofounder and CEO of Triplemint, a New York City-based, software-powered real estate brokerage founded in 2013, making a tech hire was also a top priority.

"Our first hire was a CTO," Lang told Business Insider. "As a technology-based company, it was important to start with a technical hire to build the foundation of our company. After that, we hired salespeople to start to generate revenue."

Other times, knowing where to begin can be as simple as considering the structure of your business.

"We knew our core product was content, so hiring an editor-in-chief was the first priority," said Michael Rothman, the cofounder and CEO of Fatherly, a leading digital media brand for dads which launched in April 2015 and currently has over 3 million Facebook followers. "Second priority involved finding the most relevant and widest possible distribution for that content, which meant hiring an audience development resource. Following that, we needed to monetize our audience and our content so we looked to hire a sales lead."

Hire to fill your skill gap — not to mirror your own talents

Smart entrepreneurs learn to "hire their weakness" first, said Fader, who launched her site in 2007. Mommy Poppins, which now attracts over one and a half million users each month and reaches over 10 million people on social media annually, has grown to 20 full-time employees.

"It takes a certain amount of self-confidence and honesty to identify your flaws, but it can make or break your company," she noted. "When I decided to see if Mommy Poppins would be more than just a hobby, I spent one day making calls to see if I could sell ads for a camp guide that didn't exist, on a site nobody had heard of. I was able to connect with six camps and sold six $250 ads, but the next day I placed ads for salespeople. One of the three people that started with me from that ad is still with me 11 years later."

Similarly, Joanne Domeniconi, cofounder and chief discovery officer of The Grommet, an online marketplace and product discovery platform that launched in 2008, said she and her cofounder Jules Pieri prioritized hiring talent that filled gaps in their own experience.

"In our case, that was web design and development, videography, legal, and accounting," she said. "As cofounders, we wore every hat that we could to save resources for hiring talent to do the things we couldn't."

Some founders are tempted to hire their mirror image. But instead, Sridharan, who currently has 30 people working full-time in Kinnek's Manhattan office, suggested hiring employees who have complementary skill sets to those of the company's founders. 

"Don't double-down on skill sets and perspectives that are extremely similar to your own," he said. "You need a diversity of thought and a variety of creative minds to solve difficult problems. As a founder, this helps you reduce the company's exposure to your own idiosyncratic weaknesses."

Look for 'intellectual athletes' who are adaptable 

For many founders, it isn't always clear where they could benefit most as there are often competing needs in the areas of marketing, engineering, product, and sales.

Entrepreneurs who find themselves facing this challenge should "hire all-rounders, intellectual athletes who can adapt to different roles and are quick learners," said Sridharan.

"That is what is often needed by early-stage companies for their first several employees: people who can iterate quickly, adapt to changing contexts, and are comfortable with many degrees of freedom," he added.

Lang, who closed a $4.5 million Series A funding round in 2017, said that six years after launching, his company still has a few people who've stuck with them since the beginning, which he attributes to one key trait. 

"The common thread in all of these hires is adaptability," he noted. "It's often said that startups turn over their employee base several times during their lifetime because the people needed to start a company are very different from the people you need when you get to the next stage, and so on. A few members of our team have proven to be highly adaptable and have grown with the company; their roles have changed over the years, but their attitude towards change has remained the same, so they have proven invaluable."

How do you know if a potential candidate embodies that sought-after flexibility? Lang recommended looking at potential hires' resumes to see how they have adapted in previous roles and if they have changed roles or responsibilities within a company.

"One of the best questions for this is asking a candidate what they were hired to do, and then asking them what they actually did as a follow-up," he said.

Sridharan said he likes to ask prospective employees: "Tell me about a recent project or initiative where you had the most all-encompassing impact on all aspects of the project."

"Here, we're looking for situations where the candidate has had to think about several cross-functional aspects — from planning to marketing, from design to execution, from technical aspects of a project to business aspects," he explained. "We want to see evidence of the candidate being hungry to think about all angles, and move out of their comfort zone."

Sridharan added that he looks for candidates who are leaving their current roles primarily because they want to have more of an impact on the trajectory of the company they work for. 

"It gives us confidence that the candidate will be successful at Kinnek because they are specifically seeking an experience outside of rigid structure and hierarchy," he noted.

Find people who believe in the 'big picture'

Larry Kim, founder and CEO of MobileMonkey, a Facebook Messenger marketing platform launched in 2017 and used by over a billion people every day, currently staffs 30 full-time employees. He told Business Insider that, when you're an entrepreneur, the most important thing you can do when building a team is to find people who believe in the vision. 

"I have three unicorn growth marketing principles for growing a business. Number one is be somewhat delusional. This extends to the entire team. Unless you believe in the big picture, you won't be able to persevere through the challenges of creating a unicorn business," said Kim, whose first company, Wordstream, was acquired by Gannett for $150 million in 2018. 

Rothman agreed that founders need employees who believe in the shared mission and are "passionate about the brand to their core."

"There are several people who not only drank the Kool-Aid, they became the Kool-Aid," he said about his staff. "They've become integral parts of the company culture and a through-line to the best parts of the company's legacy."

In addition to believing in the vision, you've got to hire people who have "the audacity and passion" to help build it, despite the fact that the odds are against success, said Domeniconi. 

"Candidates who do not exhibit an entrepreneurial mindset tend to have a harder time navigating the uncertainty and constant change in a startup," she said. "Non-believers, especially influential ones in a new business, can kill it." 

Remember that past experience isn't always an indicator of future success

It seems reasonable to assume someone who's previously been adept in the role you're looking to fill will be a great hire. But when it comes to the startup environment, all bets are off.

"When you're just getting started, it can be tempting to hire the person who you think has done it before," said Lang. "I've found that just because someone has worked for a competitor or has been in a similar position in the past doesn't mean that they're the right fit for your company. The skill set that it takes to build a role or department can be very different from the skills that it takes to manage one that already exists, so it's important to be clear about the requirements for this position."

Rothman added the best way to mitigate risk is to hire proven assets who understand the stage of the business that you're in and the attendant lifestyle implications.

"If you're starting a company, you're not going to be working nine to five, so if you worked with someone amazing when you were both at a company with 1,000 people, their amazingness may not translate to a highly demanding environment with five people," he noted.

So you know what you need — how do you find people?

Once you've determined which role you'd like to fill, how do you go about finding the right person for the job? 

The old saying "It's who you know," holds true, according to Kim. 

"Most success usually comes from tapping into your current network," he said.  "MobileMonkey's COO and CTO both worked with me at WordStream."

Sridharan added that finding the right people when you're a small startup during its nascent stages can be extremely difficult.  

"During our first year of operation, my cofounder and I did not have an HR professional on the team to help with recruiting," he said. "We did not have a famous employer brand that would attract incoming applications from candidates. And we had never hired anyone before. So we relied on the candidate pool we knew best — our own personal and professional networks." 

Kinnek's first 10 hires consisted of people Sridharan and Ma went to college with or previously had worked with. 

"This was helpful because during that early stage, there is a lot of inherent risk in the company, and we had very few proof points and very little traction," Sridharan said. "We needed to hire people who had some prior reason to trust us and knew we were competent operators."

Rather than hire full-time employees initially, Domeniconi explained that they used contract talent — another route you can take if you're low on budget or haven't fully defined your needs. 

"Starting with contractors helps to avoid beginner mistakes and helps you hire better later," she added. "Ultimately, many of our contractors joined us as employees."

Elizabeth Alterman is a freelance writer with more than 20 years of experience in digital and print media. Her writing has appeared in The New York Times, The Washington Post, Realtor.com, and more.

SEE ALSO: How to handle letting an employee go when you're the founder of a small startup — while keeping everyone's dignity intact

READ MORE: I helped launch an 'Uber for lawn care' startup that failed miserably. This is exactly how I knew when to give up — and how we were able to pivot to launching a multimillion-dollar company within the same year.

Join the conversation about this story »

NOW WATCH: Ray Dalio shares what he's learned from his succession plan at the world's largest hedge fund

• An exclusive preschool in Singapore, inspired by Silicon Valley, is promising to teach children skills to survive the digital age.
• The school's six programs are each themed after career paths, for example, an engineer, an athlete, and a chef.
• The programs aim to teach children the skills associated with the given career path, such as entrepreneurship, coding, public speaking, teamwork, design thinking, and cooking.
• "More than 50% of the jobs that [sic] exist in the next 50 years don't even exist today," said Trehaus founder Dr. Elaine Kim.
• The founder claims the skills offered by the school's program will help prepare children for the digital age.
• Visit Business Insider's homepage for more stories.

An exclusive preschool is promising to teach tots skills like grit, adaptability, and empathy to survive the digital age.

Trehaus preschool in Singapore, which accepts children between two months and six years of age, told Business Insider that it will be accepting its first intake of students in September.

According to the preschool, costs $1,867 per month for a full-day program and $1,711 for a half-day program.

After adding in various fees and a refundable deposit, the cost of enrolling a child in Trehaus under the full-day program will set parents back $22,680 per year.

Calling itself a "Silicon Valley-inspired preschool", the school's curriculum was designed by early education experts from institutions including Stanford's Bing Nursery and Silicon Valley's Khan Lab School.

Read more:A robot that teaches children to code was just crowned the best startup in Europe

The school's six programs are each themed after a career path — CEO, engineer, philanthropist, athlete, creative, and chef — and aim to teach children the skills associated with it, such as entrepreneurship, coding, public speaking, teamwork, design thinking, and cooking.

Trehaus' school head Carolina Sam said that grit, which "encompasses determination, toughness, and resilience", would help children look at failures and mistakes in a positive way.

"This plays a large role in their ability to be successful in school and in life," she added.

She said that children would be taught about grit through a "no failure, only feedback" policy that encourages them to work on their abilities and treat failure positively.

Read more:It's possible to learn a new language while you sleep, according to a new study

Teachers also teach children to take calculated risks, expand their comfort zones, and learn emotional skills, such as how to self-soothe and self-regulate.

Apart from a bilingual English and Mandarin program, Trehaus is also offering a pure Mandarin immersion program to give students a head start in reading and writing Chinese.

Trehaus founder Dr. Elaine Kim said the preschool hopes to prepare children for "a future disrupted by technology", where soft skills become more important than hard skills.

"More than 50% of the jobs that [sic] exist in the next 50 years don't even exist today," said Kim. "The skills children learn in our program will prepare them for this future."

Read more:These warning signs could mean your child is depressed, according to a child psychiatrist

To help children gain skills quickly, "loving" and "nurturing" teachers will act as co-parents, Trehaus said.

The school boasts a teacher-child ratio of 1:5, which is at least twice as much as the recommended minimum.

In comparison, the country's government guidelines stipulate that preschools must have a teacher-child ratio of at least 1:12 for those aged two to three, 1:18 for those aged three to four, 1:20 for five-year-olds, and 1:25 for six-year-olds.

SEE ALSO: Starbucks has opened a 'coffee sanctuary' featuring a coffee nursery and lavender lattes

Join the conversation about this story »

NOW WATCH: Mexico has just one store where you can legally buy a gun and it's located on a heavily-guarded military base

• Rejection is inevitable when launching a business, and knowing how to bounce back better than ever is key.
• Business Insider spoke with four founders who have launched media companies, breweries, and digital marketing and fitness software services to learn how to overcome the toughest of obstacles.
• These founders have been rejected countless times by VCs, investors, and banks, and have struggled to get their initial ideas off the ground. Today, they're all running thriving businesses.
• They emphasized doing your research, learning when to pivot, finding the right team, and — ultimately — reminding yourself that your idea will work as important steps to take when faced with failure.
• Click here for more BI Prime stories.

Getting rejected, whether in our personal lives or in business, isn't fun. And if you're an entrepreneur looking to attract investors, generate revenue, and scale your company, you know that the stakes are even higher — and rejection all the more terrifying. 

Building a booming business is every entrepreneur's dream, yet only one in 12 people actually makes it happen, according to a report conducted by Startup Genome. And while we hate to believe it, rejection along the way is practically inevitable. 

Business Insider spoke with four inspiring founders about their stories of (countless) rejection and how they bounced back to become even more successful.

SEE ALSO: You started a company — now what? A startup founder's guide to hiring your first employees.

The founder who turned 37 rejections and an unexpected pivot into a thriving business

Todd Saunders and his cofounder Dan Pratt had been on the AdWords team at Google for two years when they came up with the idea for their company AdHawk, which aggregates companies' digital marketing data and offers advertisers one-click optimization solutions, in 2015. 

When they were first starting out, "we had no product, no engineers, and no revenue," Saunders recalled. But they knew there was a product-market fit. 

In the same year, the two entrepreneurs joined the Techstars accelerator program, and AdHawk was the earliest-stage company there. Because ad tech was both a competitive space and an industry many investors had been burned by in the past, Saunders and Pratt faced rejection time and time again.

And the rejections didn't stop after they completed the accelerator program — the duo was rejected by 37 more VCs. 

"It was a pretty tough pill to swallow, but for us, we believed in what we were doing. We had talked to enough customers that we understood the problem, and we solved customers' pain points," Saunders said. 

So they kept at it, and eventually they had their first commitment from an investor for $100,000 — until a week later when he dropped out because he wasn't confident in the investment. Not only was this a blow to the company, but it meant the founders had to face the other people who had signed on as a result of this initial investor. 

"It's terrifying. It's something that is humbling and a little bit humiliating," Saunders said about the experience. But the duo knew what they had to do. 

"When we found out the investor backed out, we went to our lead investor and were very honest about it. We had no other choice and it was honestly the best decision we made. Our lead investor ended up putting in more money to cover the rest of the round and was more than excited to do so," Saunders said. 

At this point, they had heard from multiple investors that they needed to focus on one industry because they didn't think the business would survive in the competitive market if it focused on small businesses in general.

Their first customer, FloorForce, helped them do just that. 

"Through working with them we saw a huge opportunity to offer a fully vertical SaaS solution to an underserved niche," Saunders said. 

After working with FloorForce as a customer, AdHawk acquired the business in early 2019 — something the two entrepreneurs had never predicted. 

Once AdHawk had a niche (the flooring industry), things took off. Those 37 investors who rejected them were now looking to get in on their latest round of funding, which totaled $13 million. The company has now raised a total of $17.7 million in funding, generates $23 million in recurring revenue each year, and employs over 100 people. 

"Don't go out looking for a niche. Keep your head down and focus on building a great product and testing it with many different types of customers. Let the market and customers tell you they want it," Saunders advised other founders.

The founder who defied industry norms, got rejected from the bank twice, and bootstrapped his business to success

When Garrett Marrero (25 at the time) told his friends he wanted to move to Hawaii and start a brewery, they thought he was crazy. When he approached the bank with his idea, he was turned away for financing right out of the gate.

But Marrero believed in his idea, and bootstrapped the company with the help of his cofounder and now wife, Melanie Oxley, and their families. 

The couple was able to round up about $500,000 to kick start Maui Brewing Co., but it wasn't easy. Marrero's mother contributed money from her retirement fund and his grandmother helped, too. Oxley had to refinance her house in Sacramento and use money from her 401(k), while her parents mortgaged their home. 

The brewery was one of the first to can craft beer — an idea that didn't sit well with many beer lovers. So, the couple spent a lot of their time early on in the business educating customers about their product. 

They would hand out samples of their beer and explain to customers that by canning the beer, they were protecting it from light, ensuring it had a low oxygen content and ultimately keeping the beer fresher for longer. Plus, it was better for the environment. People eventually bought into the idea. 

Read more:I was a millennial finance analyst at a huge investment bank in NYC. This is how I launched my own multimillion-dollar business in under 18 months.

Four years after the initial rejection, Marrero went back to the bank and got rejected again. At the time, banks were coming out of the real estate bubble and were very risk averse. 

"It was a really defining moment for me," he said. 

He realized that the banks were the only people who were making him feel bad about his business (now that customers were on board), and he knew he had to do something differently to get them on his side. So Marrero chose to go looking for a different bank that would support him. Soon, one replied to Marrero welcoming him to go through their typical application process — but he didn't want to be just another candidate in the pile. 

He told the bank: "You need to come to me because I need to show you what we're doing. I need you to see who we are, what we do, and what we've built."

The chief credit officer flew over and Marrero shared his vision and exactly how they were going to get there. His uncommon approach worked: After the meeting, he was approved for a loan of approximately $2 million for equipment and working capital. 

By stepping outside of the norm, Marrero was able to fuel growth for the company and help get it to where it is now. 

"Be clear and concise on the papers, but grab [investors] and bring them to your space. Show them who you are, share your passion, and always keep financing options open," he said about pitching your business and finding the right bank to partner with. Today, Maui Brewing Co. is recognized worldwide for quality and innovation and employs over 800 people. 

"You have to be laser-focused on where you want to go, but how you get there is absolutely going to change." he added.

The founder who saw potential when investors didn't and waited patiently for the tides to turn

Jon Werner started working on Bones in Motion — an app that pioneered using GPS in mobile phones to deliver real-time fitness experiences — in 2003. At a time before all cell phones were sold with built-in GPS systems, this idea was extremely innovative, but it also left many VCs wary. 

When Werner approached investors, he kept hearing the same thing: "We love the idea, but nobody is going to run with a phone."

That isn't exactly something you want to hear when you've drained your 401(k) and sold your home to support your dreams, but Werner dug deeper. He knew in-phone GPS was on the way. 

"We stuck to our guns, we talked to our customers, we did our research, and we kept going," he said. 

Werner and his wife (a runner in the family who helped spot the need for the app) continued to meet with runners to understand how they were tracking the distance and pace of their runs, if they listened to music while running, what carrier they used, and how much they would pay for an app that could record their speed, distance, and calorie burn. They would also go to popular running trails and collect data on how many people were running with devices to further validate their idea.

While VCs weren't sold on the idea yet, customers were. The app continued to gain traction and was attracting customers in Europe, Asia, and Japan. Werner had created partnerships with many carriers, and had to work directly with them to get the app onto their customers' phones since there was no such thing as an app store yet. 

While Werner was hard at work, the tides began to change. In 2008, shortly after the birth of smartphones, he started receiving more interest in Bones in Motion from investors. 

"Adidas was the third company that we had mergers and acquisitions discussions with. At this point of our funding, [with] the crash of September 2008 and the advent of the iPhone opening up to developers, we were in a very accommodating posture," Werner said. 

In 2009, the app was acquired by adidas and became the foundation for the adidas miCoach app, which provides expert tips, personal training plans, and performance tracking to customers. Werner joined the adidas team for over nine years, and is now focusing on his newest venture, KOYA Innovations. 

"We were totally committed to the fact that we believed this was something that was going to take off — and thankfully it did," he reflected.  "VCs — while they're smart and they've got money — they don't always know everything."

The founder whose first startup tanked before he found the right team and the right strategy

Do you ever have an idea you just know will stick? Brian Weiss created his first startup, TickHive, with that exact mentality. 

The app, when he launched the idea in 2015, was supposed to be the world's largest sports and music ticket archive with features that engaged and excited fans to compete and win prizes. The team was confident in the idea, but when they approached multiple investors they came out of meetings empty handed. They kept hearing that the team they had was not strong enough to bring the business to the next level. 

"Investors want to invest in a company where that company comes first to all founders," Weiss said. His business partners all had other full-time jobs and TickHive was a side project for them. This brought to light something Weiss had intuitively known for a while — he didn't have the right team, and he couldn't keep trying to connect with investors while shouldering most of the work. Weiss decided to put TickHive on hold and went back to working as a consultant. 

Read more:I helped launch an 'Uber for lawn care' startup that failed miserably. This is exactly how I knew when to give up — and how we were able to pivot to launching a multimillion-dollar company within the same year.

But the failure to get his project off the ground the first time didn't hold him back. With the introduction of legal cannabis, he had another idea and knew exactly how he wanted to run his business this time around. 

"The failure of my previous startup has allowed me to surround myself with the right people — a good cofounder and a good team," Weiss said. 

He started off the venture as the sole founder, and took his time bringing on the right cofounder. He also began to create relationships with freelancers and content creators who could support his business while not being hired on full time. 

In his last venture, he had spent too much time trying to figure out how to get things just right, instead of taking action. This time, he immediately built a website to get L.A. Cannabis News off the ground. By early 2018, he was accepted into the CanopyBoulder cannabis accelerator, and that is when he brought on his cofounder, Talia Rubin, who was just as committed to the success of the business as he was. 

The website, which features news, policies, and content around cannabis culture, now garners over 30,000 visits per month, has nearly 70,000 newsletter subscribers, and just recently started to bring in revenue through advertising, paid content, and jobs boards. 

"Most founders think they can do everything themselves, but they can't. I realized that with building a company and having the right tools, I was able to start to hire the right people I needed to not only execute my idea but then be able to scale that idea to the next phase. Founders should be able to delegate — it's okay to ask for help," he explained. 

Deja Leonard is a freelance writer and founder of The Good Report. She writes about business, technology, and women's issues. You can find more of her work at www.dejaleonard.com or say hello on Twitter @dejaleonard3.

• Time is money — and nothing saves you time when running a business like stellar tools and apps.
• Business Insider tapped founders from 19 companies to share their favorite resources for keeping their businesses running effectively and efficiently.
• These entrepreneurs delivered on the best tools for managing your inbox, organizing tasks and deadlines, handling customer service requests, keeping on top of sales and inventory, and more.
• Click here for more BI Prime stories. 

Time is an entrepreneur's most valuable resource (besides money, of course), and some of the most successful startups count on outside help to manage their time in the best way possible.

"The best advice I received as an entrepreneur starting my first company is to follow the two-by-two rule, which is [that] it's going to take twice as long to achieve whatever I want, and it's going to cost twice as much," entrepreneur, angel investor, national bestselling author, and tech CEO Kim Perell told Business Insider. Her advice? "Focus on three areas of the business where you could invest a little bit of money and earn a significant return in a short period of time."

For business owners looking for assistance in organizing their inboxes, keeping track of sales, and responding to customer service requests (and then some), we tapped founders from 19 brands to share the cost-effective and time-saving tools that help keep their businesses running effectively and efficiently.

The best tools for email 

"The only thing I wish I did, looking back, is keep organized from the very beginning," Zachary Quinn, the president and cofounder of mission-driven apparel brand Love Your Melon, told Business Insider about starting his business.

"Something that's helped me with this is an app called Superhuman, which has done a really good job of reorganizing my inbox. You can schedule emails [and] follow-ups, and quickly and easily remove the clutter of messages that pile up by 'snoozing' messages that don't require an immediate response. It keeps you focused on completing tasks that come in and then moving to the next one in the most efficient way possible." 

On the other hand, Luigi Picarazzi, president and CEO of Digital Media Management, a full-service agency dedicated to managing high-profile individuals, brands, and theatrical movies across digital platforms, loves to keep things simple with the classic Gmail app.

"I love Boomerang for Gmail because it allows me to send [an] email so that the recipient receives it at a later date," said Picarazzi. Also, he added, "it allows me to spend some time in the evening clearing my inbox without flooding other people's inboxes in the process."

The best tools for staying organized

"We have used dozens of digital tools for project management, communication, and lead management, but nothing has had all of the features and flow that we need," said Scott Wilson, former Nike creative director and Cooper-Hewitt Design Award recipient and now the founder and CEO of CBD-based wellness brand WellBeings. "Many of them have caused more headaches than help. 10,000ft, however, has worked well for our project planning, resource management, and time-tracking."

While less of an app and more of a device, Supergoop! Founder Holly Thaggard, who helped lead the suncare brand to over $40 million in revenue in 2018, can't live without her Apple Watch. It's "the perfect tool to make sure I don't miss any of the important stuff," she said. "It keeps texts from my daughter, flight info, and meeting reminders all in one place. Plus, the UV index on the home screen is the perfect reminder to reapply sunscreen all day!"

The best tools for time management

"It's important for me to stay connected with my team, but it's equally as important to make time to unplug," said Jordana Kier, cofounder of the feminine care subscription service LOLA. "Now that I also have a baby at home, I've had to figure out how to best manage my attention day-to-day." Kier relies on tools like Google Calendar and the snooze feature on Slack to organize her time and set boundaries. 

Christiane Lemieux sold her company DwellStudio to Wayfair in 2013 and is now the cofounder and CEO of direct-to-consumer home furnishings brand The Inside. Her go-to productivity tool to manage her time effectively? Trello. 

"It houses my daily brain dump of everything that needs to get done that day, where I can then visually stack-rank in order of priority and timelines. My team loves it because it's a super non-invasive way for them to get urgent priorities in front of me. Every night, I stack-rank based on importance and due date, which allows me to hit the ground running the next morning and create efficiencies for my team and myself," she said.

The best tools for digital marketing and customer service

Trisha Roy, founder and CEO of window-covering company Barn & Willow, uses Klaviyo for email segmentation management. "Email is one of the most powerful tools to convert your site traffic into customers. We love Klaviyo's segmentation, and the kind of insights we get about our different customer groups is absolutely crucial." 

Bhupi Singh, founder of Spanish-made shoe brand The Spanish Sandal Company, loves Returnly for handling customer service issues. Because the return rate in the shoe business is high, Returnly "allows customers to manage their return online without having to talk to customer service," said Bhupi Singh. "Customer emails and phone calls have dropped dramatically" since he adopted the platform.

Jenn Kapahi, cofounder of trèStiQue makeup, is also a big fan of Zendesk. "As a small brand, it's extremely important to us to hear feedback from our customers to make sure we are always giving them what they need. Zendesk allows us to communicate with them seamlessly," she added.

Claire Mazur and Erica Cerulo, cofounders of fashion retailer Of a Kind, count on Help Scout for customer service support and Loomly for social media marketing. And Health-Ade Kombucha Cofounder Vanessa Dew, who has raised $7 million in venture funding for the tea drink, loves Domo for tracking data. 

"Now that we have a lot of people, customers, and data flying around, it's easy to have analysis paralysis," said Dew. "The Domo interface helps dashboard and benchmark all of those metrics and data in one place so that I can access from the web or through the phone app anywhere in the world."

The best tools for design 

"When I first opened my studio in 2005, my biggest investment was Studio Designer software," said decorator Christine Markatos Lowe, principal of Christine Markatos Design. "It is an indispensable tool specifically designed for the interior design industry to help in managing budgets, expediting, client billing, and job profitability. It's organized in a logical manner by client and room and has many features, such as the ability to add notes throughout the tracking process. We use it daily to keep our projects moving along!"

Christina Samatas and Renee DiSanto, cofounders of interior design firm Park & Oak, said that Ivy is invaluable in helping them stay organized and aligned. "This cloud-based business management software made for designers has accounting features that help us when creating proposals, crafting invoices, and organizing payments. It also has a project tracking tool, which is incredibly helpful for managing deadlines and for keeping project-related information aligned and organized," they added.

Interior designer Bria Hammel, founder of Bria Hammel Interiors and of home furnishings brand Brooke & Lou, credits Design Manager for helping her build her business. "DM has so many features that we use on a daily basis, like project management, creating purchase orders and tracking shipments, accounting, pulling reports, and checking inventory. We use this tool to log and track hours for billing our clients as well. This software was created for interior designers, so it has everything you need to run your own firm," she said.

Betsy Vohs, founder of design agency Studio BV, loves the sketching tool Trace. "I use it with my iPad Pro, and it's the best collaboration tool to share design ideas quickly and digitally," she said. "We were previously using 'Trace Paper' as designers to sketch on drawings. With Trace, we can now do this seamlessly in a digital format. It makes our lives easier and our clients love it, so it's a win-win."

The best tools for ecommerce and sales

"We rely heavily on a handful of tools to help us systematize various aspects of our ecommerce business," said Mazur and Cerulo of Of a Kind. The founders use Stitch Labs for inventory management and Streak for Gmail-based project management — and are big fans of Google Drive.

Jordan Jones, founder of lifestyle gifting company Packed Party, which just announced a partnership with Whole Foods, also uses Stitch Labs internally to manage their physical inventory and ever-growing customer list on the wholesale side of the business, "and it has been a lifesaver for me," said Jones. "We scaled the wholesale side of our business really quickly, so connecting these customers to what we had in stock was important to our business, and Stitch Labs made this easy for us to do."

Lori Coulter, president and cofounder of the direct-to-consumer fashion brand Summersalt, finds Shopify and Glew vital for ecommerce success. "Shopify makes it easy to customize your virtual store, no matter how big or small your business, from browsing to check-out, while GLEW helps manage the analytics behind the operation. We're able to get reports and capture customer insights in the form of real-life data so our team can streamline the experience for future shoppers," she explained.

Emily Jackson, founder of activewear company IVL Collective, said the industry-specific tool rewardStyle has been crucial for her success. "It has not only been a place to link and share our products, but has also allowed our influencers to make money and be incentivized to share the brand, too."  

Jeanne Kneen, founder and CEO of luxury home decor brand Kneen & Co, uses Lightspeed to organize inventory, pull quotes, generate sales reports, and more. "Our comprehensive POS software is absolutely invaluable to our team," said Kneen. "Everything from product information to client purchase history is at our fingertips. The more you can do with one platform versus spreading information across many applications, the better."

Wilson of WellBeings also uses Pipedrive for tracking leads and new business opportunities. "The desktop and mobile interfaces are very similar and easy to use," said Wilson. "The visual drag-and-drop cards allow you to organize all the deals in your pipeline to track workflow and progress, and it also integrates with email."

Allison Duncan is a freelance journalist based in Minneapolis, MN. Her work has appeared in The New York Times, The Wall Street Journal, Vogue, Fast Company, and the Cut, among others. Read more of her work here, and follow her on social media at @allisonpduncan.

SEE ALSO: The quick, no-nonsense guide to bootstrapping your startup to success, according to real founders who did it

READ MORE: How to deal with crippling rejection while launching a startup: 4 founders on how they bounced back and built thriving businesses

Join the conversation about this story »

NOW WATCH: Animated map shows how cats spread across the world

• Sharing living space has become an unexpected trend with millennials, and according to the commercial real estate firm Jones Lang LaSalle, global funding for co-living has increased by more than 210% each year since 2015.
• Reza Merchant is the CEO of The Collective and Gunther Schmidt is the founder and CEO of Quarters, both co-living organizations capitalizing on this new form of real estate.
• Together, they've raised over $2 billion to fund their companies, and credit their success to properly educating their investors on the market and the value co-living can offer customers.
• Their advice for aspiring entrepreneurs is to find investors who you trust and get along with, because those strong relationships matter.
• Click here for more BI Prime stories.

Sharing living space, much like a residential WeWork or "adult dorm," has become an unexpected trend with millennials, sparking the attention of investors in the US and globally. 

The movement has disrupted the real estate market exponentially. According to the commercial real estate firm Jones Lang LaSalle (JLL) , global funding for co-living has increased by more than 210% each year since 2015, grossing more than $3.2 billion. Thus far in 2019, $800 million has been secured for co-living companies.

"Co-living is emerging as the affordable and flexible solution to housing, as it gives tenants access to short-term leases with shared common spaces and amenities," Dana Salbak, associate in real estate, market research, and analysis for JLL Middle East North Africa (MENA), explained to Business Insider. "Basically, this gives more people access to the same amount of space (this achieves optimal density in development) and offers convenience, flexibility, and great networking opportunities, all of which are values and experiences sought by millennials and Gen Z."

The UN predicts that by 2050, 68% of the world's population will live in urban environments. "It's no secret that there is a housing crisis all over the world," Reza Merchant, CEO of The Collective, told Business Insider. "Ten years from now, [co-living] will be its own housing class, which offers a significant and much-needed solution to a broad swath of the population."

Reza Merchant and Gunther Schmidt, the founder and CEO of Quarters, are two entrepreneurs leading this co-living movement. Schmidt founded Quarters with his childhood friend and business partner, Michael Ambros, and the two have secured two back-to-back funding deals — $300 million for the US and around $1.1 billion for Europe — the largest-ever single investments in co-living for both markets. Merchant has raised more than $850 million in funding.

Business Insider sat down with Schmidt and Merchant to learn more about how they each have raised a billion (or close to it) in funding as they break into this niche market.

Both Schmidt and Merchant got their start in co-living via a need for better (and cheaper) housing options

With a natural knack for entrepreneurship, Schmidt started his first venture at age 14. "I was always interested in starting my own business," he recalled. Convincing his father to drive him to a nearby factory that produced German Bifi salami snacks, Schmidt bought the salamis in bulk and sold them on eBay. The factory manager caught on to what young Schmidt was doing and refused to continue selling to him in bulk, which put an end to his brief stint in the sausage business.

Later on, he put aside university to try his hand at entrepreneurship once again. Schmidt and his partner Ambros founded eKomi, a ratings and reviews website. "Backed by Goldman Sachs, eKomi now has more than 15,000 customers and is Europe's largest independent provider of transaction-based reviews and ratings," said Schmidt. 

Today, the two run The Medici Living Group, a PropTech company that develops and innovates real estate living concepts, with Schmidt overseeing Quarters, a wing of the company. The Medici Living Group was born out of a need the two partners saw at eKomi. With foreign talent moving to Berlin to work for the company, they realized they needed a better relocation process. They launched a workforce housing offering that took the hassle out of moving to a new city, where employees had their own private bedrooms but shared communal spaces. Though not called co-living then, Schmidt and Ambros had cracked into this niche market and saw the opportunity to create another business.

Merchant comes from an entrepreneurial family and he, like Schmidt, stumbled into co-living because of a housing need of his own. Like most recent graduates, the London School of Economics alum found rent prices in London to be astronomical. "I felt isolated by it all, and recognized how many of my counterparts felt the same. It was then that I really saw the gap that exists in cities all over the world, and our mission was born: to build and activate spaces that foster human connection and enable people to lead more fulfilling lives."

With some friends, Merchant set up a small business in 2011 against a £1,600 ($2,591) bank overdraft. They let and serviced a four-bedroom houseshare and it quickly and organically grew. Today, that property is their Old Oak property that houses over 500 people in West London, "some of who[m] have lived there since its 2016 opening," he said.

The two founders together have raised over $2 billion. They credit their drive to educate investors about the co-living space as their key to success. 

Quarters is set to expand — and fast. Their 2019 investments were backed by CoreState Capital Holding S.A., the company's partner on their $1.1 billion fundraiser for their European expansion. And the W5 Group, the family of successful European entrepreneur and real estate investor Ralph Winter, is their partner on their $300 million fundraiser for their US expansion. 

Schmidt explained that he didn't have to convince investors to back Quarters per se, but rather  had to "educate" them on how shared living helps fill the need of affordable housing in dense urban areas while solving the issue of urban loneliness. "We talk about the desires of millennials and how our product is perfectly suited to their needs and desires," he said. 

So, what does a pitch deck look like for a company that has raised over $1 billion? "Keeping it short and addressing the pain points we're committed to solving within the first few slides is essential to capturing a potential investor's attention," said Schmidt. "The rest of our deck is focused on articulating our strong sense of belief in the business and a leadership team that can execute on the vision." 

He adds that "at the end of the day, concise, clear, solution-focused content wins. We remain focused on relaying the straightforward 'what,' 'why,' and 'how' of Quarters. We do this by solving the variable equation: lower-than-market rent, product appeal, and technology, and then utilizing our immense passion to curate a community."

For Merchant, raising $850 million was about "being persistent." The company has some of the largest institutional private equity groups, lenders, and pension funds backing it, which include Cheyne Capital, Reditum Capital, and Creandum. In trying to convince investors to back The Collective, he details that they aimed "for a healthy balance of the traditional pitch, showing our returns, and the metrics most investors expect, while putting a high emphasis on baseline education in order to explain the trajectory of the co-living sector, its benefits, and how we differentiate ourselves from other players in the space."

Merchant recalled when Amazon decided not to build its headquarters in Long Island City, a decision that could have affected investors looking to fund The Collective. "In the midst of escalating discourse, we closed on our Long Island City project despite Amazon pulling out of its new HQ plan just weeks prior. Our investors got to see our unwavering passion on full display, not just because the fundamentals of the investment were solid, but because of our commitment to Long Island City's thriving community," he explained.

One issue Merchant has faced in raising funding, like Schmidt, is educating investors on what co-living is. "It's a relatively new category, nascent in almost every market," he said. "There are a lot of questions tied to whether the concept has proven itself in the market. This was challenging earlier on, but we have grown significantly since our inception in 2010 and we feel we have been able to provide tangible success stories — we currently own and operate the two largest co-living buildings in the world. Investors have been underexposed to this alternative housing class and we have been working hard to bring its value to life."

He adds that building strong relationships has been key to the process. "We're highly conversational and our belief in our product runs deep, so we usually bring investors to all future sites to share our curiosity and enthusiasm around a given neighborhood," he said.  

Their advice for aspiring entrepreneurs is to find investors you can trust and get along with

So what's the two real estate mogul's advice for raising funding for your business? "I have learned that raising capital is all about ensuring that you find the right investors that will pair well with your company," said Schmidt. "While potential investors typically come armed with their own set of questions, it's paying attention to the right line of questioning that signifies a fit." 

He added that the discussion shouldn't be centered on your idea's merit. "The conversation should focus on evaluating the risk and determining how it can be managed," he explained. "If you need to twist yourself into a pretzel to convince a target of your value, it's likely time to move on to the next."  

Merchant agreed that it's key to find true partners in your investors. "It's about finding investors who embrace your vision and who you enjoy spending time with," he said. "Then, it's essential that you do whatever it takes to deliver on the commitments you make. Crucially, you have to show through your own actions that you're willing to put your neck on the line for what you believe in … This is the foundational reputation and track record that will continue to unlock future funding."

While it feels good for both Schmidt and Merchant to have raised plenty of capital, their goals are focused primarily on delivering something that will benefit urban living for all. It's not just about company growth, but about "enabling a state of individual and collective wellbeing for our member base," said Merchant.

Allyson Portee is a tenacious and driven communications consultant and business and fashion contributor. She has written for Harper's Bazaar Arabia, Vogue Arabia, Idealog, EuroNews, CommsMEA, The Diplomatic Courier, the Washington Diplomat, and Propel Women. Having lived in the US, Spain, the UK, Germany, and Lebanon — and having travelled to over 20 countries and many cities — Ally has an international awareness and love of cultures. She has reported on fashion, proptech, Syrian refugees, tech, US politics, and faith — areas in which she is passionate about. With a heart for people, you will often find Ally with a notebook in hand interviewing an inspiring mover and shaker somewhere in the world.

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• Raising millions, even billions, of dollars in funding is no small feat — but how you spend that money can drastically affect the success of your business.
• Business Insider spoke with eight startup founders to learn the biggest steps they took after raising capital and why they took those steps, whether they hired on new team members, purchased new software, or invested in product development, marketing, or design.
• Here are three crucial steps these founders outline in effectively allocating funding.
• Click here for more BI Prime stories.

In a 2018 article, The New York Times detailed how startups raising $100 million or more from investors, in what's known as a "megaround" in Silicon Valley, used to be rare but have recently become relatively common. In fact, according to data from PricewaterhouseCoopers and CB Insights, global venture-capital funding reached $207 billion in 2018. 

That's a significant amount of money floating around. So what exactly does a startup, presumably one accustomed to making more with less, do with an influx of $100 million? Or even of $1 million? We asked, and eight founders were willing to share with Business Insider the biggest steps they took throughout the fundraising process. Here's their advice for entrepreneurs looking to allocate their money wisely. 

Step 1: Set clear priorities and avoid overhiring 

In advance of even starting the fundraising process, Jordan Jones, the founder and CEO of the lifestyle gifting company Packed Party, first created a road map that detailed how she'd deploy the over $2 million in capital she ended up raising. "It takes so much money to make money, so being organized and having a list of what things needed the most capital, and how quickly, for my business was critical," she said. "I needed money to make more products and also needed smart people on my team to help get it done alongside me. Both required capital, and when looking at my laundry list of needs, these fell No. 1." 

Many founders touted the importance of prioritization when considering how to use your funds. 

"After my last round of funding, I focused on the one thing I knew we needed to drive growth: building a superstar team," said Cat Chen, the CEO and founder of clean fragrance brand Skylar who raised $11 million in seed and Series A rounds. "Prior to our last round of funding, we had a team of five, and we are now a team of 20. Initially, we built up our operations arm, then our marketing team, and finally, filled out our sales division."

Trisha Roy, CEO and founder of window-covering company Barn & Willow, raised $1.5 million in initial seed raises and said that, depending on the industry and how much is raised, anywhere between 20 and 40% of the initial raise could be allocated toward hiring. But, she cautioned not to over-hire. Instead, map out the needs of the hour to scale conversions, sales, revenue, downloads, sign-ups — whatever the metric most relevant to your company for the next phase of growth is — and budget toward it.

"Since we were building a direct-to-consumer brand, establishing a brand voice and a brand identity was critical," Roy said. "So, our first few hires were for brand marketing and influencer marketing. Customer success was the other team we invested time, budget, and resources in right when we closed the seed round. We wanted to be ready for growth, and these initial hires helped with that."

For Meika Hollender, cofounder and CEO of Sustain Natural, an all-natural sexual wellness brand with over $10 million in funding that was acquired by Grove Collaborative in August 2019, one strategic hire, versus a team, proved most important.

"After we closed our Series A, I realized it was time to hire an experienced COO and partner with someone who could really help me run the business effectively," she said. "Of course, and this needs to be clear, it's the entire team that made Sustain successful. But, when you're just starting out, partially due to being in the midst of proving your business model and partially because of funding, it's challenging to get really experienced leaders to join you. Having someone to truly lead the company with me, help with managing the team, and allow me to actually take a few days off here and there while knowing the business would move forward, really made a difference. It was the best decision I ever made."

And still, others chose to invest first in processes to support the current staff. For Vanessa Dew, who has reportedly raised nearly $50 million as cofounder of the tea drink company Health-Ade Kombucha, that meant upgrading operations. "We were at capacity and overflowing with orders, and we needed to build the product to fulfill all the demand," she said. "We bought machines, built out our new brewery, and then ultimately hired people for specific operational roles."  

A smaller amount of money for Dew, but still a "good amount," went to Health-Ade Kombucha's design agency to elevate the label with fun colors, big fonts, and an aesthetic that allowed Health-Ade to stand out on the retail shelf.

Step 2: Consider how you'll store your money 

Non-toxic cleaning label Blueland launched with $3 million in capital from a seed round led by Global Founders Capital and included investments from Comcast Ventures, Brian Lee (of the Honest Company), Nicholas Jammet (of Sweetgreen), Nick Green (of Thrive Market), Justin Timberlake, and more. After the raise, Blueland cofounder and CEO Sarah Paiji Yoo used some of the money to hire new team members and for product development. 

"Both are so foundational to everything we do and to scaling our operations," she said. "We are unique as a direct-to-consumer startup because our R&D is conducted in house out of our own lab in Montana. We have 16 patents pending, and it's growing, so there are meaningful legal costs associated with supporting our IP strategy."

But, she also put money in the bank — and quickly realized that money could be earning interest. 

"We shopped around for savings and money market accounts to find which banks offered the highest interest rates," she said. "The difference in annual income we could earn just from interest rates could support one or two full-time hires, so it was definitely an area worth spending time on. We also decided to get on Carta to help manage our cap table, issue securities, get 409A valuations, and stay compliant. It has already saved us thousands of dollars in legal fees and dozens of hours of my team's time."

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And, she explained, you're a stronger candidate for venture debt when you've just raised capital and have a large amount of cash in the bank. Venture debt can sometimes be a cheaper way for businesses to access additional capital for areas like inventory. "We spoke with a handful of banks to understand our options," said Paiji Yoo. 

Step 3: Save and spend like a startup

Even when it feels like the sky's the limit when you've locked down a lot of funding, it's smart to be fiscally conservative in the early stages of a business.

In December 2017, Daily Harvest, an organic, chef-crafted food delivery service, announced a Series B funding round of $43 million, led by Lightspeed Venture Partners and VMG Partners. Daily Harvest has also received investments from A-listers like Gwyneth Paltrow, Serena Williams, Bobby Flay, Emily Ratajkowski, and Haylie Duff.

"The biggest step I took after raising our Series B was to show everyone in the company that raising more money doesn't mean that we spend any differently," said Daily Harvest founder Rachel Drori. "I continued to focus on capital efficiency and operated the business with a disciplined approach."

Adam Ross, cofounder and CEO of skincare destination Heyday, used roughly 50% of the money from Heyday's $11 million capital raise to build more brick-and-mortar shops and another 30% to invest in his team through things such as talent acquisition and management, human resources, and operations. The rest went to data, content, and initiatives. 

But, he warned, "Lots of capital can make you lazy, and you can lose the entrepreneurial hustle and agility that got you there in the first place. It's important to keep reminding yourself of this when it comes to allocating your money. Just because you have it doesn't mean you need to spend it."

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• Ana Gavia is 26 years old, and the founder of the ecommerce startup Pinkcolada.
• She started Pinkcolada, which sells stylish, affordable, and high-quality swimsuits, when she was 25 and a student at La Trobe University in Melbourne, Australia getting a master's degree in podiatric medicine.
• Since launch, the company has brought in $1.7 million in revenue.
• Gavia shared with Business Insider how she got her start in her college apartment, how she grew the business through reinvesting her profits into production and marketing (and capitalizing on Instagram), and her advice for startup founders looking to gain similar results as her.
• She said that "I sacrificed everything in my life — relationships, friendships, social life, parties, my studies, and my sleep" to create Pinkcolada, and doesn't believe entrepreneurship and ecommerce is for everyone.
• Click here for more BI Prime stories.

A year ago, Ana Gavia was a 25-year-old college student with an idea: Why not launch an online swimwear business? 

Today, the 26-year-old has become a full-fledged entrepreneur as the founder and CEO of the ecommerce startup Pinkcolada. Launched from her house while attending university, the new venture generated a seven-figure turnover in just over a year of the company being established, after Gavia started the business with only $200. 

With sales driven primarily by social media and advertising, Pinkcolada has rapidly grown, already tapping into the international market. According to Gavia, as of August 2019, Pinkcolada had reached a sales growth of 216% since January 2018 and hit the $1.7 million mark in revenue.

"I have been entirely involved in my business every step of the way, from designing the bikinis from a sketch, building the website, taking photos of the products, editing the product images, integrating payment pathways, marketing [the products], managing finances, setting up shipping carriers, implementing software, picking and packing, [handling] customer service [and] admin — I've done it all myself and learned a lot along the way," she said.

How did Gavia scale a business to over $1 million so quickly, and while still a university student, no less? Gavia gave Business Insider the inside scoop on her successful ascent.

A business is born — at home

Ana's idea for Pinkcolada was born of necessity, or at least of personal fashion preference. She had been searching for swimwear that was "stylish, high quality, and affordable" but came up empty handed. Her inspiration to have the type of swimsuit she wanted led to her noodling around with digital designs. 

"I used to spend a lot of time on the computer just playing around in the Myspace days with HTML coding layouts, using Photoshop, editing and creating cool images, and making them look good," said Gavia. "It was something I always enjoyed during school when I was younger; I loved fashion design and art."

Yet what began as a small-scale hobby quickly grew legs. Gavia recognized that she could parlay her digital skills and her passion for design into a perfect ecommerce opportunity — one she could even execute on her own from home. "It was an introvert's dream!" said Gavia. 

Gavia initially wanted to focus on a wider fashion arena with her designs, including dresses and shoes, but because of her limited budget she decided to hone in on bikinis. "[C]lothing costs a lot to manufacture, [so] I decided to choose bikinis because they require little fabric, are lighter, and cheaper to ship," she said. "I also love the summer and all things tropical, so I thought, what a better way to express my creativity and love for summer than in swimwear!"

So, she said, "I went home and started doing research and drawing designs in my study. The initial research stage and development of my very first [swimsuit] designs started from my home, literally with just a few boxes."

Gavia came up with the Pinkcolada concept while attending a master's degree program in podiatric medicine at La Trobe University in Melbourne, Australia. To get the job done while balancing her course load, she would spend time working on her designs every day after she got home from the university. "I did a lot of research just by searching in Google Images and looking at photos for inspiration for designs, and learned what kind of bikinis were already out there," she said. "I saw a void in the designs that were [available] and realized that there weren't many fun, vibrant bikinis out there!" 

Soon after, Gavia expanded her efforts from sketching swimsuit designs to researching for distributors. "A lot of the distributors I found denied my small order and eventually I found one who accepted," she explained. Once she received her first batch of swimsuits, her next step was to take very basic photos of them in her study, three of which she showcased on a very simple website that she built. 

"I had very little knowledge of marketing at the time, and decided to stick with a basic plan of posting the swimsuits on Instagram and Facebook," she said. A few days later, she received her first order, and Pinkcolda was off and running. 

In the beginning, Gavia did everything manually, which resulted in inefficiencies. "I had no idea how to optimize the processes," she said. "It was very time-consuming and I didn't know anything about business or operating one." She recalled printing out shipping labels, cutting out each one, and taping each edge four times, one by one, for each parcel. "I didn't know what a label printer was and I couldn't afford one at that time either," she said.  

She may have been waylaid by processes, but she wasn't deterred.

"Once my first batch of bathing suits sold out, I reinvested my profits and purchases [for] a larger order. Once they sold out, I repeated and my business began to grow," she explained. "I ordered more swimsuits and improved my website." Gavia also prioritized researching the demand for her products. "I think that was kind of common sense to me, but I now realize that a lot of business owners don't ask their customer what they want before starting a business," she said. 

Gavia explained that from the start, she has funneled most of the money that the business generates into marketing, advertising, and production and design. Instagram is currently Pinkcolada's strongest and most engaging platform for driving customer engagement. 

The student becomes the entrepreneur

As a graduate student, she lived off campus, which gave her time and space to focus on her new enterprise from home. 

"I only had to be at university for clinical lessons, and most lectures were recorded and delivered online," she said. "I worked a lot of hours [from home] after and before university to manage and grow Pinkcolada." 

While her apartment study was her initial go-to place to conduct all of her business operations and sort and prep orders for shipping, she soon maxed out that space as her business rapidly expanded. So, in the style of Apple and Amazon, she moved the business's operations to her garage. When Pinkcolada's orders outgrew even her garage's capacity, Gavia relocated to a warehouse, out of which it operates today. 

In these early stages of the startup, Gavia was a solopreneur in the truest sense of the word. No one helped her with launching her company, and although she was still an enrolled student, she kept the news about the startup to herself while in school. "I didn't think anything big of it at the time and didn't anticipate its rapid growth, so no one knew about it," she said.

Even after Gavia extended her hours to include working on Pinkcolada on weekends as well as evenings, she soon reached a point "where it was obviously not sustainable." She had to decide between continuing her master's program or pursuing her startup full time. The startup won.

"It was a tough choice to make because I thought about if Pinkcolada failed, was temporary, or didn't work out," Gavia said. "I had already studied for my anticipated career for a long hard five years, so it was difficult to let go and risk it all with uncertainty." 

But, she added, "I...reminded myself that I was still young, and if I'm ever going to take the risk in my life to try something like this, the best time is now," she said. "I thought [if] worse comes to worst, I can go back to uni later on to finish my studies." (Gavia's student debts are on HECS, a loan payment program by the Australian government in which her debt is deducted from her income over time.)

Despite this challenging decision, Gavia hopes to keep a door open to the possibility of one day transferring the skills she has developed through her site to something medical related. (Gavia's undergraduate degree from Deakin University is in medical biotechnology and nutrition.)

"I love science and would love to go back and do some cancer research in my field," said Gavia.

Learning to make sacrifices and take a methodical approach led to financial success

When asked how she beat the odds and managed to launch a wildly successful startup so quickly when so many others fail at this task, Gavia first pointed to her dedication. 

"I sacrificed everything in my life — relationships, friendships, social life, parties, my studies, and my sleep," said Gavia. "I worked 120-hour weeks for an extended period of time, seven days a week, and slept in my office because it was simply 'time inefficient' to go home because I'd lose one hour of 'work time' commuting to and from work." 

She added that this type of work-life imbalance is "not something [she] would ever recommend to anyone," noting that she ran the business on her own until earlier this year. She now has three team members in Pinkcolada's warehouse and three working remote.

The second thing that Gavia pointed to was taking a methodical approach to her business.

"I tested what worked and what didn't," said Gavia. "I then made my decisions based on the results. I continued to do this across all aspects. I learn, I test, I evaluate the results, then I keep testing other variables and reiterating until it's refined as close as possible to perfect."

Based on her own experience, Gavia suggested that people in their twenties who aspire to a similar path should first figure out what their long-term goals and priorities are — and what sacrifices they are willing to make.

"Entrepreneurship is a very tough journey to embark on, and I think the term is used very lightly across my generation, particularly with social media glamorizing entrepreneurship," said Gavia. "A lot of people think starting a business is going to give them the flexibility to work their own 'hours' and open up a lifestyle full of opportunity and work-life balance. Anyone who's run a real startup knows that this is far from reality!"

Gavia offered the following advice: "You have to be prepared for the sacrifices, be completely fixated on your vision, and unbalanced in every way for a period of your life to get ahead and reach success," she said. "I would never 'recommend' anyone embark on that type of lifestyle, because the reality is that it's not for everyone. It's tough and pushes you as a person in ways you would have never thought possible."  

Passion is a must-have for any entrepreneur — but it's not always enough

While it would be easy to conclude from Gavia's story that ecommerce is the way to go if you want financial success, she expressed her view that it's best to take a career path that you're truly passionate about, rather than try to pick a lucrative field. 

"If you do something with the intent of just 'earning big money' and that's your motivating factor, then you are going to burn out pretty quickly," said Gavia. "You need to be passionate to be able to sustain your motivation over the long term to succeed." 

While Pinkcolada started as a small business fueled by passion, Gavia emphasized that she "never anticipated it to be[come] a million-dollar business," noting that swimwear and fashion in general is a very competitive niche.

"Passion alone is not enough," she summarized. "It's about finding a way to apply your passion in business to be able to make a living out of it. Follow your passion, put the pieces together, create the demand, and the money will come."

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• Artem Petakov is the president and cofounder of Noom Inc., a consumer healthcare company, but in 2005 he worked at Google.
• Petakov credits a lot of his experience working on GeoSearch, a part of Google Maps, with helping him launch his healthcare company.
• He shared with Business Insider the many lessons he learned while working for the tech giant (which, he added, is an experience that can't be compared to an MBA).
• He also revealed how he learned to speed up product development, be a good manager, and innovate, and how those lessons have carried over into his job today.
• Click here for more BI Prime stories.

Today, Artem Petakov is the president and cofounder of Noom Inc., one of the fastest-growing US-based consumer healthcare companies whose most popular service is a weight management program. Noom announced its $58 million funding round in May of 2019, and continues to see rocketship growth. It currently has more than 50 million users, and is adding an average of one and a half million new users monthly. 

But back in 2005, Petakov had a different gig — as a software engineer and tech lead at Google. 

During his time there, Petakov founded and later led the GeoSearch project, a part of Google Maps. "GeoSearch is a digital way to map locations and destinations online — an answer to out-of-date solutions like the Yellow Pages at the time," he explained to Business Insider. 

Inspired by Neal Stephenson's science fiction novel "Snow Crash," Petakov and his team at Google crawled geo-tagged, user-generated information on the web, extracted it, intelligently clustered it, and made it searchable on Google Maps.

Petakov credits the foundation that he gained at Google as being critical to his ability to launch Noom in 2011. Read on to discover the lessons Petakov learned while at Google, and how he leveraged these experiences to grow his own company. 

Working in big tech allows you to make a huge impact at scale, but at the cost of speed

GeoSearch, which Petakov worked on with a team he'd built himself from scratch, took one and a half years to go live in front of millions of users. 

"The impact is immediately higher, and you learn to do things at scale," he said of his experience building a product at a behemoth like Google. "You're also working with top-notch engineers who are often perfectionists, so the quality of work is incredible." 

The one drawback of working at a tech giant, he said, is that things move slowly. "Working on a project that needs to be sound on both the technical and legal side in order to do it at scale — it's unavoidable that the process takes a long time," he explained. 

Petakov said that reflecting on the inherent obstacles of large tech firms helped him do things differently and pick up the pace when leading his startup.

"When coming into a hyper-growth startup where you are impacting real-life users, the experience of iterating on a project applies, but you can also iterate much faster," he said. "At Google, it took me two months to build a demo and then one and a half years to get it out. At Noom, we launch a new, updated version of the platform about once a week on mobile, and launch many times a day on the web."

Being a good tech manager means valuing more than just your engineers — and knowing how to sell your ideas

Petakov learned that despite their talents, top-notch engineers can be hard to manage. "Because engineers were the only ones to run the show, Google was always stronger at technology and a little bit weaker at design and product marketing," he explained. In bringing this knowledge to a startup environment, Petakov learned to "appreciate all other disciplines outside of [my] role as well." 

Working at a large company also helped him discover the "the importance of spreading your message" as a manager. 

"I had to recruit my own people onto my own team," he explained of his role at Google. "When I had the idea for GeoSearch, I had to get executive buy-in organically." 

He added that knowing how to sell your ideas can be even trickier when you're running a startup, and credits his Google job as paramount in enhancing this skill. "At Google, you have all these resources and people at your disposal," he said. "At a startup, you have to get the talent to join first. You also need to advocate double the amount, since you not only have to convince people of the strength of your idea but also your brand at the same time." 

Having an MBA doesn't properly prepare you for innovating and building in the real world

"In an MBA classroom, everyone is encouraging you towards innovation and when those disruptive ideas happen, they are praised," said Petakov, who received his undergraduate degree in computer science from Princeton. "In the real world, disruptive ideas are met with hesitation and discouragement — not to mention lower salaries at the beginning. MBA programs can sometimes spoil innovative ideas, and not accurately prepare you for the experience in the real world. When you get rejected by your 50th VC, you learn a different strength on what it takes to sustain a disruptive idea."

The cofounder of Noom believes that many who enter the tech industry after completing an MBA program "learn to have commitment phobia." 

"Studying perfect case studies and completing short projects [in an MBA program] require students to constantly be switching focus, without ever needing to commit to and build an idea from start to finish," said Petakov. He explained that the amount of time that is necessary to invest in something for it to be good "is far more than is appreciated" in business school. "Most seasoned companies took 10 to 15 years to develop and evolve as startups," he said. 

Even though Petakov valued his time at Google, the ultimate payoff of growing from a tech giant employee to a company founder was gaining limitless opportunity for innovation and creativity.

"At Google, crazy ideas are welcome," said Petakov. "I thought I had crazy ideas until starting Noom, where in order to disrupt an industry like healthcare, your ideas need to be off the wall. You learn to disrupt the status quo."

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• Katrina Lake is the founder of the personalized-clothing service Stitch Fix, which passed $1 billion in net revenue for fiscal year 2018. She will also be a judge on the new season of "Shark Tank."
• She attended Harvard Business School with an idea of the company she wanted to start and focused more on practical experience than the degree itself.
• Business Insider correspondent Shana Lebowitz interviewed Lake about her mindset going into business school and how well it served her.
• Click here for more BI Prime stories.

Katrina Lake knew she would spend more time pursuing her goals outside class than in it. She applied to Harvard Business School anyway. 

The idea, Lake told Business Insider correspondent Shana Lebowitz, was to make sure she had a fallback plan just in case her big idea for a company didn't work. In this case, her plan B would be most people's unattainable plan A. 

"I went to school thinking I can be a mediocre student and just get by in school, but spend as much as my free time as I can on getting this company off the ground," Lake said. "I wanted to get the company off the ground and pay back my salary, pay down my student loans the day I graduate. And if I wasn't able to do that, then the risk profile of entrepreneurship wasn't going to be for me."

Lake went on to found Stitch Fix, a personalized-clothing service that continues to grow exponentially. The company went public in 2017. The service passed $1 billion in net revenue for fiscal year 2018, and based on its most recent quarterly report, it has raised its revenue expectations for fiscal year 2019. It sits at a $1.89 billion market cap as of this writing.

When Lake was considering business school, however, she didn't know Stitch Fix would succeed as spectacularly as it did. Lake has previously said she was risk-averse growing up and even thought about applying to medical school. That perspective on risk should be interesting to watch, as Lake is going to be a guest judge on the newest season of "Shark Tank."

Lake ultimately decided against medicine. She majored in economics at Stanford and got her MBA at Harvard.

The idea for a company in the retail space had already taken root by the time she applied to business school, but she didn't outright admit in her essays that she wanted to start a company.

"I think I said that I'm going to lead a company that is transforming apparel retail and I talked about the space and why I was interested in it, but even in my application essay I wasn't bold enough to say, I'm going to start a company," Lake said.

When she got to campus, though, she did everything around entrepreneurship that she could, in classes and clubs and everything in between.

"I was able to set goals and to have a plan where I could pursue entrepreneurship, but in a way that didn't feel like crazy, scary, disruptive to me in my life," Lake said.

The key, she said, is understanding the potential of your idea when you have it and then structuring a plan so that you navigate entrepreneurship in the best way for you. Lake's approach stands in contrast to the stereotype of the Silicon Valley dropout, and that's because she matched her path to the level of risk she would face along it.

"That was the way that I could find entrepreneurship tenable given my risk profile," she said.

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• Michael Coghlan is the owner and CEO of SimpleTerra, an e-commerce site that sells alternative-living solutions such as container homes and yurts, and the owner of other smaller e-commerce stores.
• This year, he'll bring in over $1 million in revenue, $400,000 to $550,000 of which he'll keep as his salary, and he'll funnel the rest back into his successful enterprises.
• Coghlan told Business Insider that the key to his success was a lot of hard work — and a few online classes that taught him about the e-commerce industry and analytics.
• He suggested that young entrepreneurs find valuable mentors and continue to improve their skills every day to reach the $1 million mark in their early 30s.
• Click here for more BI Prime stories.

The top 1% of American income earners make around $400,000 a year, so those who rake in salaries of $1 million or more are quite rare — particularly those in their early 30s. 

Business Insider tracked down one of these superhigh-earning people, Michael Coghlan, the owner and CEO of SimpleTerra, to learn how exactly he got there and how others could follow in his footsteps.

Coghlan, who is 31 and married with four kids, said this would be his first year clearing the $1 million mark. The majority of his income is generated from the e-commerce store SimpleTerra, which sells alternative-living solutions such as container homes and yurts and launched earlier this year. He additionally runs a few smaller e-commerce stores that are growing in sales each month, including Rec Room Hideout, which offers game-room tables, boards, and accessories. 

When it comes to finances, Coghlan takes 30% of the profits from SimpleTerra as owner compensation and funnels 70% of it back into the business. He expects to bank $400,000 to $550,000 as his salary in 2019, leaving around $700,000 to $850,000 to continue expanding SimpleTerra. 

Coghlan said a "decent chunk" of his profits went into what he called his "project" account. "I make savings accounts within my business whenever I have a new idea I want to try, and I have got this pretty big idea or project that I want to tackle in the next 12 months," he said. "I could reach out for funding or investors, but I am trying to build up that 'project' account to over $1 million on its own so I won't need any outside investment."

Whenever Coghlan doesn't have a big project that he's saving for, he tries to take 50% for owner compensation and put 50% back in for the growth of the business, rather than the 30-70 split. 

"While I know many companies believe growth is everything, and they pour every penny they have into growth, I think pretty darn highly of cold, hard cash in your personal bank account," he said. "So I try to keep a solid balance of growth and payments/bonuses to myself and employees to keep everyone pushing for more."

The path from volleyball coach to e-commerce CEO (with a few hiccups)

In his 20s, Coghlan had been happily coaching collegiate volleyball, but a change in his life situation made him rethink his career path. 

"When I was 25, I ended up having my first child unexpectedly," he said. "It wasn't until I had my daughter that I realized the job I loved was having me leave at 6 a.m. (before she woke up) and come home around 9 p.m. (after she went to bed). It was at that moment I began to look for alternatives to coaching." 

Coghlan said this career search resulted in his "stumbling" into e-commerce, which he became interested in specifically for its flexibility. "This is going to sound cliché, but I actually chose it so I could 'work from home' and 'be my own boss,'" Coghlan said. "I thought that making some money from home, so I could be around my family more, was going to be a piece of cake."

Read more: A 26-year-old college student took $200 and launched a $1.7 million swimwear business in a year out of her apartment. This is how she did it.

Within a month of looking for work to do online, he jumped in with both feet, launching his first drop-shipping store selling wine fridges and kegerators — but his haste had consequences. 

"It was a complete mess," he said. "I tried to rush things I didn't quite understand and ended up messing up my Google Shopping feed — the feed that gets your products shown on Google — so bad that I had to actually shut down the site and start from scratch all over again."

According to Coghlan, the problem was that his Google Shopping feed was "done completely wrong," so he had $300 wine fridges listed for sale at $3,000 and vice versa. This snafu resulted in tons of canceled orders and many vendors calling him upset that he was undercutting the minimum advertised price that was set. 

"Honestly, I had no idea what I was doing," Coghlan said. "But I could see the potential." He eventually took a course called Dropship Lifestyle that taught him the basics of e-commerce, web design, and paid ads so that he could improve his business savviness.

Through these early bumps in the road, Coghlan discovered that working from home as his own boss was actually not a piece of cake — in fact, it was quite the opposite.

"What I actually found out was that I was putting in more hours than my coaching job for less pay, when starting out," he said. "But I was happy because I was able to take a 30-minute break to have breakfast with my kids. I was able to stop working at 5 p.m. to 10 p.m. so I could see the kids and my wife, then get back to work from 10 p.m. to 1 a.m. and start it all over again at 7 a.m. the next day." 

His commitment to his new career paid off. Coghlan said he would never forget the moment he made his first real sale through that store. He woke up to it at 4:37 a.m.

"Making money while I was sleeping was actually possible," he said. "I just had to figure out how to do it consistently and without breaking my website in the process."

The 2 phases of growth that led to his millionaire status

The newly minted entrepreneur identified two phases of growth on his path to his current revenue level. The first phase he described as "simply trying to outwork everyone."

"I figured that if I put in enough hours every single day, I could work my way past my competitors," Coghlan said. 

To some extent, his plan worked, as he was able to save and then grow his wine-fridge store, getting it first to a $500 a month profit, and then building up to a $1,000 a month, $3,000 a month, and finally almost a $5,000 a month profit. 

Coghlan recognized, though, that more than hard work was at play in his success, noting an element of luck played into the equation through a chance tip from a vendor that caused his store to really take off. The tip was to sell a portable ice maker. 

"Not to sound like I grew up in the middle of nowhere, but I had literally never heard of it before," he said. "But it was $220 a pop, and I made $90 every time I sold one, so I said screw it and listed it on my site." 

The decision paid off, and Coghlan went from selling one ice maker a week to up to three a day within 90 days. "I thought I had made it," he said. 

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But it wasn't until his business reached what he described as the "second phase of growth"— incorporating analytics — that he started banking serious coin. 

"I can 100% attribute the growth of my sites the past few years to learning more about analytics," Coghlan said. "I took the Google Analytics course from Easy eCommerce Wins, and it literally changed the way I saw e-commerce." 

The CEO described being able to track down (to the keyword) which search terms were bringing in the most money, and then doubling down on those keywords to make more money as a "game changer." He advised anyone who wants to succeed in e-commerce to follow in his footsteps.

"If I were to ask majority of e-commerce store owners how much it costs them to get someone to sign up to their email list, or what their top five revenue-producing keywords are, or what ad group is producing the largest ROI, I would bet less than 10% of them could answer that," he said. "Now, with all of my stores having tweaks made by analyzing the data and working hard, I am able to see growth I did not even think was possible five years ago." 

While Coghlan started out drop-shipping, he has now been in e-commerce for seven years and moved far beyond that format. 

"While I had some great success with drop-shipping, it was a couple years after I started down that path where I began doing Amazon FBA," he said. "Creating products that I owned, instead of being the middleman like I was in drop-shipping, and selling those companies I created really took my earnings to the next level." 

With that background, he launched SimpleTerra and today has 10 employees to help shoulder some of the load. "I took everything I have learned over the past seven years from drop-shipping, Amazon FBA, SEO rankings, paid ads, retargeting, and rolled it all into a single site," Coghlan said. "Everything I learned over the last seven years has allowed me to create my most successful e-commerce store to date."

Prepping in your 20s to earn $1 million in your 30s requires finding mentors and continuing to learn and grow

When asked which strategies he recommends to those just starting out, Coghlan offered up two main pieces of advice. The first is to find a group of friends or business colleagues who are "doing better" than you are. 

While Coghlan said he'd found a mentor figure in the Division 1 head volleyball coach he worked with in his earlier profession, once he started working online, finding a mentoring relationship became more difficult. 

So within his first year of changing fields, he sought opportunities to present at a few e-commerce-specific events to make connections. This helped him meet people who were already successfully doing what he hoped to do.

"Those events were my first access to other entrepreneurs doing the same type of work I was, but they were making five times what I brought home," Coghlan said. "Being able to pick their brains on a regular basis, getting little nuggets of knowledge from them, and taking their advice to help me skip past some of the earlier pitfalls they had — but I could avoid — really made a difference for me." 

Even now that Coghlan has matched the income of these high rollers, he continues to meet monthly with the group of successful entrepreneurs that helped him get started, and he recommended that others do the same.

"I met these guys at random conferences or forums I had attended over the past two years and am trying to learn more from them now, as they are earning three to five times what I make currently," he said.

Coghlan's second piece of advice is to continue learning and developing your skills. 

"I see so many people obtain a certain level of success and knowledge in their industry and just stop trying to learn anything else," he said. "Or worse yet, they drop something that could work for them to chase the next 'shiny object' that is going to solve all their problems." 

Coghlan added that he believed the reason SimpleTerra has become what it has today was because he took everything he learned over the past seven years and applied it in some way to keep growing his business. 

"It is not just paid traffic or SEO that is growing my businesses now," he said. "It is finding better ways to collect emails, setting up lead magnets, getting mini-commitments from our customers in the form of '$5 Tripwires,' working on our email copywriting skills to get better click through rates on the announcements we make." 

Read more: I went from earning $65 an hour to building a multimillion dollar business on my own in two years. Here are the 4 most important steps I took.

Coghlan had a clear recommendation for 20-somethings trying to pick a big-money career path.

"Obviously, I am going to sound a bit biased, but I do think if you have the stomach for it, it would 100% be entrepreneurship," Coghlan said. "Specifically, online entrepreneurship."

He also added that he couldn't have achieved this level of business success without a high level of support from his spouse. "To have four kids as young as we do, as I was trying to navigate making money online so I could be at home more with her and the kids, was quite trying at times," Coghlan said. "But her support and belief that it could be done did wonders in helping me pick myself up off the ground every time something I tried failed."

E-commerce is not a path for everyone, but it certainly worked out for him.

"I have gone from barely being able to put food on our table, to living comfortably, to putting everything I had saved up to purchase a home into a new business that was untested, to finally making more than I ever have," he said.

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• Daniel Lubetzky is the founder and executive chairman of Kind Healthy Snacks — and he's also a guest judge on the latest season of "Shark Tank."
• In an interview with Business Insider, the founder and investor revealed the traits that underlie his decision to invest in a startup.
• Lubetzky said he would never invest in a company that claims it has a social mission when, in fact, all it wants is to sell a product — and the social mission is just a means to sell the product. 
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The value of your company is inextricably linked to the value you offer the world.

That's how Kind Healthy Snacks founder (and "Shark Tank" guest judge) Daniel Lubetzky filters through startups when he's looking to invest.

Lubetzky founded his healthy-snack empire in 2004, and it's now estimated to be worth around $4 billion. The company produces snack bars you may have seen in your office kitchen or in grocery-store aisles. Lubetzky is an investor and an entrepreneur, and while he is appreciative of socially minded founders, it's not the only factor that causes him to back a startup.

"I, of course, have chosen in my journey to attach myself to ventures and investments that have a social-impact component because that's what gives me meaning," Lubetzky told Business Insider. "But I don't think it's a prerequisite for me, and it's not an absolute prerequisite for me to only invest in companies that have a social mission."

That's because the value that the company offers consumers via quality and other factors takes precedence over the social mission. In fact, the only thing that Lubetzky would never invest in is a company that claims to have a social mission when, in fact, all it wants is to sell a product — and the social mission is just a means to sell the product. 

As a founder himself, Lubetzky prioritizes fulfilling the dreams of the company founders he interacts with, regardless of the equity stake that he ends up buying in that company. He says his goal is to guide and empower the founders to fulfill the mission of their companies.

"I am very careful about choosing to partner only with people who are high integrity, that share the values of respect, integrity, hard work, and kindness," Lubetzky said. "They have to be someone I can believe in."

In the early days of Kind, Lubetzky established his own values as a founder by asking how the company could do kind things for its consumers. 

"We would give umbrellas to people when it was raining, or we would carry their groceries," Lubetzky said. "It was all us surprising our consumers with kind acts."

Lubetzky tied the mission, actions, and even branding of his company to a culture of kindness. It should come as no surprise that his No. 1 criterion for working with entrepreneurs is associating with people who share the same values. 

The multiplied impact of developing the need for social good in entrepreneurs also applies to culture. As Lubetzky put it, a founder's personality is often reflected in the company's culture, for better or for worse.

"You've seen in the news a lot of examples of people who are doing self-dealing," Lubetzky said. "Then you go into their companies and you get that feeling that the company's DNA is very much connected to that behavior. It really sets the tone."

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• Rousseau Kazi worked at Facebook for six years as a product manager before starting his inclusive workplace-communication tool, Threads.
• He told Business Insider that his time at the tech giant was just as valuable (if not more so in some ways) as getting an MBA might be.
• His reasons are that in tech, you're able to "experience the pain" and get a crash course in managing and running a business — things that can't necessarily be taught in the classroom.
• He's also found that some of his most valuable hires didn't have MBA degrees.
• Click here for more BI Prime stories.

At age 20, Rousseau Kazi started working at Facebook as a product manager, moving steadily up from intern to consultant to manager. 

That was in 2011. After six years with the massive tech company, Kazi parlayed the knowledge he gained at Facebook into launching his own company, Threads, an inclusive workplace-communication tool. Threads launched from stealth with a Series A funding round of $10.5 million led by Sequoia earlier this year, which also included a 50-50 gender cap table, something that the company strongly believes every organization should actively pursue in order to innovate and grow. 

Kazi believes that in order to continue to foster innovation, companies need to encourage more diversity and inclusion from the get-go. He cofounded Threads with the premise of fostering communication and collaboration between all people in the workplace, opening doors for everyone to share ideas and be heard. 

Two and a half years after deciding to go the startup route, the successful CEO and cofounder shared with Business Insider three reasons why he believes working for a major player in the technology industry just might be the best business education you can get — and not just because it's a path that pays you while you learn and doesn't cost upward of $70,000 to $80,000 a year like going to a top business school would (and that's just for tuition!). 

Reason No. 1: It helps you 'experience the pain' and learn to overcome it

Kazi said he had many experiences that helped him grow while on Facebook's product-management team. Whether he was learning that "most toxic collaborations come from people being ignorant, not malicious," how anger is "just how people get to be afraid without seeming weak," or how to ship products under "unbelievable" deadlines, each lesson was preceded by "humbling experiences of me making mistakes, causing thrash, having incredible mentors who helped me improve, swallowing my pride, and getting better each and every day."

These eye-opening moments, he added, won't necessarily come from a classroom setting; he emphasized that the insights he gained at the tech giant could be more powerful than what people generally studied in business school. "You can't fabricate that pain and growth; you just have to go out there and do it."

While Kazi didn't choose the route of an MBA, he has interviewed and managed people who do have the degree. "If the choice is between getting an MBA or doing a startup for two years [that fails], I would bet on the person who did the latter to join my company to work on product," Kazi said. "Growth hurts and is painful. The sooner you start the process, the faster you'll start learning."

Reason No. 2: It's a better and faster education for those looking to work in tech anyway

While Kazi said that working at a large company or startup was not necessarily better in all regards, he identified it as the best option if you wanted to end up in the product space — or start your own tech company. 

"This is for a few reasons," he said. "You often learn by doing, not reading. There's no right way to build a product or a team, just a bunch of wrong ways you need to work through."

Kazi added that because taking on a product-management role in a tech firm was "more of an art than a science," the experience could help you develop your skills better than book learning could, which is why many tech giants, Facebook included, invest in product-management starter programs. "You have to play to your strengths, learn about yourself and the type of leader you need to become, and then figure out your best style based on that," he said. "You won't do that as quickly in a classroom."

While interviewing product-management candidates at Facebook, Kazi chatted with plenty of MBA candidates who were a great fit for the role. But he noticed a discrepancy between applicants with industry experience and those with the degree alone.

"Throughout that process, there was a clear difference between people who tried building their own products or companies and failed [compared with] people who just took the classes," Kazi said. "If you've already gone through it, you have a better internal barometer to figure things out and ultimately make sure you build something people want, get it out on time, and that your team wants to work with you again once it's all done."

Reason No. 3: It gives you a crash course in managing people and running a business

In terms of leadership, Kazi pointed to his Facebook training as something that helped him understand the importance of culture and chemistry when building a team, and how to use narratives, visions, and storytelling to communicate effectively. 

"I learned how a leader isn't a visionary that stands in front of the crowd, but a catalyst that focuses on building systems and environments that help their team be their best selves," he said. "At the end of the day, I learned how to build great teams with strong personalities, how to give those teams an environment where they can do their best work, how to set a vision to help the team have an impact and realize their potential, and how to evaluate markets and solutions to make sure that what we're building actually matters."

In other words, when it comes to building, creating, and performing in a business, he learned what really matters.

SEE ALSO: The ultimate guide to whether you should go to business school or not, according to successful CEOs, founders, and execs who've had to make the choice

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• Adeo Ressi has founded nine companies in sectors like media and technology over his 25-year career.  
• In 2009, Ressi launched The Founder Institute, a business incubator and training program that has helped hundreds of startups raise angel and seed funds. 
• Ressi told Business Insider that founders need to reevaluate how much time they expect the fundraising process to take, saying entrepreneurs meet with 200 investors on average. 
• He also suggested that founders think about these three pillars of their business when distributing funds: hiring, product, and traction. 
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Adeo Ressi has been starting and leading companies since the dotcom craze began. His first venture, Total New York, was bought for an undisclosed amount by AOL in 1997 while his second company, methodfive, a web development firm, was purchased by Xceed in 2000 for $85 million.  

Since then, he has been advising entrepreneurs on how to succeed as a business owner. He sat down with Business Insider to talk fundraising, and his advice for startup founders figuring out their next moves after raising a round of funding.

Ressi explained that a lot of founders underestimate just how long the fundraising process can be. From preparing materials to actually securing and setting up the meetings, the process can take anywhere from 50% to even 100% of an entrepreneur's time. 

But he warned leaders not to get too swept away in the process. 

"The worst thing that can possibly happen, and I've seen it happen a lot, is your fundraising starts going really well — so you're spending more and more time fundraising — but because you're spending more time fundraising you spend less and less time on the business, so the business starts suffering. And if your business is suffering in the middle of fundraisers, the investors can lose interest," he explained.  

When it comes to actually going to investor meetings, Ressi cautioned that "you're going to kiss a lot of frogs to get to the prince." While some business teams meet with as few as 100 or as many as 300 investors to get a deal, he said the average falls around 200.

"Do the process right, it pays dividends," Ressi insisted. "When you try to shorten the process, it's almost guaranteed to fail."

To be as effective as possible, Ressi said entrepreneurs have to look at the whole experience, from setting up a board of governance to establishing a use of proceeds, as one prolonged action.

"Don't compromise, don't take the first offer you get," he said. "Go through a thorough process all the way to conclusion and you'll get the results you want."   

In his opinion, there are three primary spending areas that people should think about after fundraising: team, product, and traction. He broke these three categories down for Business Insider.

How to consider team, product, and traction when allocating funding — while keeping your investors happy

On the team side, it's important to think ahead (in other words, before fundraising) about who you want to hire and what area of the business they should be involved in. If a company is still relatively small, with some employees working part time, Ressi advised that founders keep certain people in mind that they already know they want to give additional responsibility to after raising funds. Not only does this reward hard-working individuals, it reduces uncertainty around new employees and the potential stress and cost involved in acquiring new people.  

"I'm a remote partner right now in a company builder that's getting started and we're doing exactly this," Ressi said. "We're raising a seed round, and as soon as that seed round is pulled together some of those members are going to join full time."

In the same way that promoting part-time workers diminishes potential surprises, Ressi advised against utilizing funds on untested vendors when thinking about product innovation or increased order sizes. Rather than reaching out to new, outsourced developers, stick to vendors you already have valuable relationships with. Different vendors can have varying manufacturing schedules, shipping policies, and labor requirements — key variables that can impact your own business' timeline in major ways.   

Ultimately, he said, instead of worrying about how untested queries will turn out, focus on making the things that are already working "go better, smoother, [and] faster," because that's what investors are supporting in the first place. 

Ressi also said that he looks at generating traction in the same way. In other words, keep financing what you're already doing well.

For example, social media ads are a powerful tool to bring more eyes to a company, but they can also be an expensive distraction. It's not that Ressi expects companies he's investing in to have everything completely figured out, but he wants people to already be aware of how tools work to their advantage before investing significant funds in them. 

"If someone says 'Hey, I don't really know what's going to happen with Facebook ads, but I'm going to do some experimenting,' I certainly wouldn't want to see a use of proceeds from my money that has 50% allocated to speculative investments like that."

More than anything else, he strongly suggested entrepreneurs avoid expenses that feel like a shortcut.

"As a general rule of thumb, something that I always regret is if I spend money to accelerate growth using classic shortcut techniques," Ressi explained. "I'm not saying that recruiters are bad, and I'm not saying consultants are bad, but if you're doing things for shortcuts right after fundraising, that can be pretty bad."

Reflecting on his own experiences, he counseled people to "take things a little slower when scaling right after you do a capital raise." It's okay to go out and hire new employees or immediately pour funds into a new feature, he explained, but it should be part of a larger, pre-existing plan that reflects the company's central vision. No matter how important the areas of team, product, and traction are, they're only worth spending on insofar as they help a business achieve a goal.   

"Of course you're going to hire people, of course you're going to work on product and work on traction, that's obvious, but you're doing all of that in service of a business objective," he said.

The simplest advice? Think in units

No matter how convoluted or complex a business may seem, Ressi believes most enterprises — whether they produce hardware, software, or services — can be boiled down to unit economics. 

Using the unit economic model, business leaders can break down their company and all of its processes into a series of simple assumptions and comprehensible units. Doing this enables entrepreneurs to have a better understanding of complex information like per-customer costs and the break-even point. While companies in different sectors have various factors to consider while assessing their business, the goal is to understand exactly what area of a business needs improvement.   

With simple questions in mind like, "How much does it cost to acquire a customer, and what is their lifetime value?" entrepreneurs can determine what processes are working and which need fine tuning. Comparing it to pouring gasoline into a thriving engine, Ressi said the best thing entrepreneurs can do is "take money to fund a well-known unit economic model."

"Demystifying that unit economic model is the difference between a smart use of proceeds and a bad use of proceeds," Ressi told Business Insider. "The job of a founder is to remove as much uncertainty from that unit economic model for whatever the business is."

Nick Kazden is a freelance reporter who covers everything from pop culture to politics. A graduate from UC Santa Cruz, he studied politics and history with a focus on American political institutions and 20th century authoritarianism. His writing can be seen in High Times, MTV, Wired, Vibe, and more.

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