Tom Tunguz’ five keys to building a successful company

Edited excerpt from Why The Bubble Question Doesn’t Matter by Tom Tunguz:

1. Think long term. No matter the uncertainties and the fluctuations of the market, the business must survive. To survive, a startup must build a differentiated product that customers want to use and buy. The company must offer the best product in the market.

2. Manage your cash effectively. The business must achieve profitable unit economics; only invest substantial dollars in marketing efforts with positive return on investment; curtail unnecessary expenses; collect cash from customers religiously; maintain an upside and a downside plan that ensures the business enough cash to survive in the downside case.

3. Only hire the right people, and grow the team when justified by the needs of the business and the incremental revenue possibilities.

4. Mitigate churn. Companies ought to build the best customer success organizations, structure pricing plans properly, plan the right product roadmap, cultivate a diversified customer base, and ensure customers achieve positive return on their investment.

5. Raise capital opportunistically to amass a war-chest large enough to achieve your vision. Position the business so that it can always be in a good position to raise capital or cut costs to achieve profitability quickly, should the need arise. This means running an efficient go-to-market organization.

(1) Tom Tunguz is an authority on SaaS businesses. But I think this advice is relevant to every business.
(2) On “Think long term” — see How Amazon resists short-term thinking.
(3) On “Mitigate churn” — see Product strategy — retention trumps acquisition and Sustainable growth vs. growth hacking.

2 thoughts on “Tom Tunguz’ five keys to building a successful company

  1. Pingback: For SaaS startups — how to avoid increasing costs inefficiently and prematurely | A Founder's Notebook

  2. Pingback: Why you shouldn’t raise too much money in your early funding rounds | A Founder's Notebook

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