Gregory Shepard on Engineering Startup Success Through Structure, Not Hype

[00:00:01] Welcome to the Startup Builders and Backers Show, a podcast which is part of the Tech Talks Network. I'm Neil C. Hughes and you may know me from the Tech Talks Daily Podcast, which covers a completely different topic every day around how technology is ultimately impacting our life, our work and even world.

[00:00:22] But the Tech Talks Network is a series of unique podcasts that drill down on unique subjects and showcase the voices right at the heart of tech startups. And in this series, I want to shine a spotlight on the energetic world of startups where bold entrepreneurs and visionary investors come together and create the world-beating solutions of tomorrow.

[00:00:47] So the conversations you can expect to hear on this show will dive right into the journeys of those building innovative companies and also the strategic insights of those who support them. Balancing the excitement of breakthrough ideas with the more pragmatic challenges of scaling a business. So if you're a startup founder, you get to learn from other founders some of the mistakes they learned and also some of the opportunities that they unlocked along the way.

[00:01:14] So I invite you to join us as we unpack the risks, the rewards and the realities of turning those groundbreaking concepts into successful enterprises. So whether you are an aspiring founder, a seasoned operator or just a startup curious, this conversation today is going to be packed with practical insights. Because we're going to unpack why nearly half of all startups will fail in the first 18 months.

[00:01:41] Why standardization and optimization are the secret source that no one talks about. And how thinking like an acquirer from day one could change everything. And if all that wasn't enough, Gregory and I are also hoping to finally meet in person at Cisco Live, which has just moved to San Diego this year. So if you are tuning in from San Diego or planning to be at the event, please slide into my DMs because I absolutely love meeting with listeners.

[00:02:10] Listeners like you wherever I am on the road. And of course, this podcast takes me. So there's an open invite there. I've spoken far too much already. This podcast is not about my voice. It's about my guests. So let's invite Gregory onto the show now. A massive warm welcome to the show. Can you tell everyone listening a little about who you are and what you do? I am Greg Shepard.

[00:02:34] I'm a serial entrepreneur, 12 startups and 12 exits for private equity awards for transactions between 250 million and a billion. I'm an author of the startup lifecycle, Forbes contributor, Forbes podcast host and TEDx speaker. I think I think that's enough. There's some more stuff, but that's probably enough. Well, a massive thank you for coming back on the podcast. First of all, we've got to say congrats on the book launch.

[00:03:03] I mean, what gap in the startup ecosystem were you aiming to close with this book, which is called, of course, the startup lifecycle? Yeah. Well, I mean, I'll tell you, I did a research project, a five year research project to find out why, when and how founders were failing to understand founder success and founder failure. And then I wrote the book based off of that data. The first thing I found was that there's two things founders need to know. That is where they are and where they're going.

[00:03:32] And that's the startup lifecycle. So when I did the startup lifecycle, there was a section specifically in the center. There's seven stages in the site lifecycle. And most people were going from vision ideation to product to go to market and then straight to growth. But there's actually standardization and optimization right before growth, right after go to market. And this was contributing to a lot of the founder failure.

[00:03:57] So understanding lifecycle and then adding those two stages to the lifecycle fundamentally changes the success to failure ratio. And one of the things that really stands out in the book is you emphasize that most startup failures are actually pretty predictable. So on behalf of every startup founder listening, what are some of the most overlooked signals that a founder might be heading towards one of those signals?

[00:04:21] What should I be looking out for? You know, what I found is that what they're failing for is less important than when they're failing because it has to do with timing and need. Right. So when you need something and what you need at that point. And so the first thing is that forty seven point one percent fail in the first 18 months and the rest of them fail over five years in the research I did was five years. So the first 18 months is critical in terms of the decisions that you make.

[00:04:51] Now, to answer your question, overvaluation was a really big one. So a lot of founders come in at the very beginning and they think, oh, I got to have my valuation really high so I don't get diluted when I raise money. And actually what they do is they forget that if you're raising a million. The investors don't just want a million back. They want ten million back or five million back. So the founders thinking, oh, I'm in for a million, but you're actually in for five or ten million.

[00:05:20] Right. So even if your valuation doesn't reflect that, that's what the investors actually want on a return. So they misunderstand the money raising to the valuation, these principles. So that's one of the big things that just that, you know, if you're an investor, you're going to turn down something that doesn't get you the return that you want, because in your mind, you're actually losing money as compared to what you could have made on the market.

[00:05:47] So that's one of the things. The other thing is that they oftentimes and this is a big one is in the data. It says I ran out of capital. Right. Which is a pretty high level. It's more of a question than an answer. So I said, OK, why did you run out of capital? What happened? Right. One of those things was overvaluation. The other one of those things is not understanding what you need to do at the right time.

[00:06:13] So they will start paying for software or hiring people or doing all kinds of activities that cost money earlier than they actually should. And they also will hire like fancy executives and the fancy executives, although may have a big title and so on and so forth, that don't know how to roll up their sleeves and do the work. So what they'll do is they'll hire other people. Right. So now you've got somebody managing people when when the company is really tiny.

[00:06:42] You don't need that. You need somebody that can actually get in, roll up your sleeves and do the work. Those are some of the things that I found. There's a whole list of them in the book. But those are some of the things that I found which were just just, you know, mind blowing. And some of the other ones were mind blowing as well. I just don't want to take the whole podcast to talk about that. Well, you come to the right place because I love busting myths and misconceptions on here.

[00:07:08] So can you walk me through some of the key phases of the startup lifecycle and how they differ from that traditional idea to IPO narrative that we've been spoon fed over the last decade and beyond? Yeah. Well, first of all, I got to tell you, after seeing the data, I think IPOs are like if you fail, you do an IPO. You know, they're not like it used to be that you do an IPO because you're successful.

[00:07:31] But if you look at the past IPOs, when you do an IPO, the people that are looking at stock, they don't know the business. Right. So they're blind and they're running based on numbers. Well, it's easy to manipulate the numbers. Right. So that's one of the things. Now, if you look at the vision stage, this is like I have an idea. So what is your business? Who is interested in both your product and your business? And why would they be interested in your product and your business?

[00:07:57] And when these sort of data points are the vision stage, then you go from the vision stage into the product stage. And this is where you go from having a prototype, which could be anything made out of clay. It just has to look at has to show what it's going to do to a pilot, which has to function to an MVP, a minimal viable product, which has to actually work for customers. And then you go into go to market and go to market has many, many stages as well.

[00:08:24] These little micro stages that you go through where you go back and forth, back and forth, testing things. Right. And a lot of people think that go to market is an advertising campaign, but they'll say, oh, I'm going to be advertising in Google or something. And I'm like, that's not a go to market. That's just an advertising. It's like part of a go to market, but definitely not go to market. Go to market understands that your business also ties to service.

[00:08:50] So when you go to market, you have to have an understanding of how it's going to impact service because it's like a waterfall. Marketing goes to sales. Sales goes to service. So the predecessor to the previous functional area inherits the problems that get moved down. So if you blindly move into go to market without understanding how that's going to impact service, then you end up having a problem in service. You just kick the ball down the pitch, you know?

[00:09:16] So what you have to do is you have to really look forward and attach these three functional areas together. So that was a big problem that people didn't understand this, this whole idea. One of the most fundamental problems that I ran into had to do with after go to market, people always go to growth. What they don't understand is that the problems that they have in go to market. Now you're a young company. You haven't really looked at KPIs.

[00:09:42] You're just getting started and you move right into growth and your problems grow with you. So any problems that they haven't recognized, which they haven't recognized any because they haven't looked for them, move right into growth with them. And then they grow at the same time as the business. And a lot of businesses go out of business because of that. So these startups will move blindly in, start selling under pressure from the investors and then boom, blow up their company. And then they can't recover.

[00:10:09] Another one is not understanding the exit at the beginning. So I get into these debates all the time with people. And this happens at the same stage where especially investors, they'll be like, no, you want to go straight to growth. Let's go. Let's go. Let's go and grow value, you know, or it's too early to talk about acquisition. It's too early. We got to skip over. We got to go. We got to go. We'll talk about acquisition down the road. Here's the problem with that. An acquirer buys a company for one of two reasons.

[00:10:38] It's called a synergy, right? And it's one of these two reasons. So one of them is either make money and the other one is either to save money. It's pretty simple, right? It's one of the two equations. The majority of synergies are to make money and they make money because they already have a bunch of customers. So they may have thousands of customers on one side. You may have 25 customers on your side. They're not interested in the number of customers you have. They're interested in whether or not your product can be sold to their existing customers.

[00:11:09] Because that is a make money strategy. And that's the CAC to LTV. So the customer acquisition cost to lifetime value ratio. They've already paid for those customers through the customer acquisition process. But now in order to grow their lifetime value to make it so that instead of making $1 off every customer, they're making $50 off every customer. They have to add more products. Does that make sense so far? Yeah, yeah, 100%.

[00:11:36] And some of it sounds so obvious, but it's mistakes that people make time and time again, isn't it? Oh my God. So then what they'll do, right, is at the very start of it, they will not realize that they have to make sure that the customers that they're onboarding are the same customers as the customers that their acquirer has. Actually, a few days ago, I was a keynote and somebody asked this question, investor, and I got into a little debate with this investor. And I was like, would you ever build a product without having a customer?

[00:12:05] Well, if your whole company is just a product to your acquirer, why would you build a company without having an acquirer in mind? Right? So you need an ideal acquirer profile, just like you need an ideal customer profile. If they match, if your customer and your acquirer's customers match, now you have a synergy. But it's not like you could do that like five years down the line. You know what I mean? You just go, oh, now I'm going to start thinking about my acquirer. You have to do it from the start.

[00:12:30] So that's a big, big mistake that they make right before the standardization phase. So we have vision, product, go to market, standardization, growth. Then you have exit, right? Or optimization, growth and exit. So standardization is where you look at your business and you look at how your business is functioning and you do a best practice, which is just how something is done, who's supposed to do it and what success looks like. Right?

[00:13:00] Plain speak. Super, super like as if somebody is talking to you. Click here. Do this. Go here. Click that. Enter this in. Done. Right? Like that kind of a thing. Well, when you do that, you realize where your problems are so that your problems don't come with you. Right? So you realize where they are because you're documenting it. And so you find it just like if you're editing a document, you find your typos. Right? But you couldn't find them unless you went over it afterwards.

[00:13:29] So then in the next stage is where you do optimization. This is where you take all of the stuff that you've written down. You look at it and say, oh, maybe this person shouldn't be opening four tabs. Maybe we could change the sequence or create some software or something to make it more efficient. Now you have optimization. That's for margin. Then you go into growth. And now you actually get economies of scale. You know where the expense line is going down as the income line is going up instead of them paralleling each other. Does that make sense?

[00:14:00] Yeah. And not only that, what I also noticed about you when researching you in alignment with your book that we're talking about today, startup science.io. That's all about systemizing success too. So I'm curious, how does your platform complement the book framework and ultimately help founders apply it in real time and avoid making those mistakes we're talking about? Oh, thanks for asking me that question, man. You give me an opportunity to talk about it. I appreciate that.

[00:14:28] So what I did is when I wrote the book after five years of research, I had like 5,800 pages of data. It was a monster, right? It took me four years to write the book because there was so much data to like sift through, you know, and then I had to put together this pattern and then draft the book based off of that. So what I did is I took all that and I put it into the platform. What I was trying to do is I was trying to create a single point.

[00:14:57] If you're a founder where you can go and get everything instead of the, there's a huge fragmentation of our industry. So if you're in our industry, you have to go over here for investors. You have to go over here for mentors. You have to go over here for everything. And it's all, you have 15 logins and all these expenses. I wanted to create something where everything was in one place. So the platform has 215,000 investors. It's got mentors.

[00:15:21] It's got classes that you could take that mirror the book and have a lot of stuff that isn't even in the book. There's grants in there that you can find. There is all kinds of things like your podcast. Any startup podcast is in there. Every startup YouTube show associations, foundations, everything in the startup ecosystem in one place. So that way a founder can come into a single place and get submersed into the startup ecosystem.

[00:15:48] So the platform was a way to augment the book, you know, to add some more benefits on. And in my research, I also learned that you've been involved in building, scaling and exiting multiple startups. So it's clear you've your stripes out there in the field. But I'm curious, what are those experiences or war stories most shape the insights in this book? Oh, there's tons of stories in there about things that you. I mean, you know, I'm no different than any other founder.

[00:16:18] I started off with nothing. Yeah. You know, we were poor and I climbed my way up with my fingernails in the beginning, you know, just holding on for dear life. And then after you sell a business, you get re invigorated and then you do another one and then another one and then another one. And it gets easier and easier every time. But, you know, I went through the dot bomb. I went through the 2008 recession.

[00:16:43] You know, now we're experiencing this ridiculously horrific president we have. And, you know, going through that struggle with all this craziness. So it's been like, you know, it's like you learn constantly, even if you're really good at doing startups, the market sometimes has other plans for you. You know? Yeah. Yeah. The market has other plans for you. What's your take on the current startup climate, especially post 2024 funding resets, etc.

[00:17:11] What should founders be doing to adapt their strategies now? It will just feel a little bit chaotic at the moment. Any advice for founders around that? Oh, I think it's sort of like bunker down weather the storm. You know, I think that our our political climate here in the in the United States is just it's like we have a five year old stumbling around trying to. And I think that they have to they're they're making a lot of mistakes.

[00:17:38] And I think these mistakes are going to be reversed over time just because they'll realize that they are fundamental mistakes. And it's going to cost cost us our president the power that he so desperately seeks and our unelected vice president, Elon trash face.

[00:17:55] So I think that if you work over time and you understand that that there is a storm and you're in it, then you've got to put on put on a jacket, you know, put on your hoodie and, you know, get ready to walk through the blizzard. You know, it's going to be rough. But whenever these things have happened in the past, startups actually go up. Right. So typically there's a startup every 10 seconds, believe it or not.

[00:18:23] It's that's crazy. Right. In the world, every 10 seconds, as fast as I say that there's like three startups. It's just it's crazy. But they actually increase because bad climates mean layoffs. If there's no jobs means people starting businesses. So a lot of times the startup ecosystem can actually help every time the startup ecosystem can help economies that are struggling.

[00:18:48] So I think that now is the time to actually get in and start a business, even though it seems like the worst time. It's just like when people say, oh, I don't buy stocks when the stock market is at the floor. But that's when you should buy stocks. Right. Because it's going to go up from there. So from my perspective, I think more founders should get involved in doing startups. Just be cautious. Yeah, it's going to be hard to raise money, but investors will back good companies.

[00:19:15] If the stock market is down, what are they going to do with their money? They're not going to let it get eaten up by inflation and they're not going to just sit on it. Right. They're going to invest it. So we're going to see some increases in investments. Yeah, it's always confused me how the investment cycles work and the FOMO that goes with that, you know, a $5,000 Bitcoin. Nobody's interested. But when that coin is $100,000, people are rushing in to buy at the worst possible time.

[00:19:44] It makes no sense. But as for founders, many famously struggled to scale their startup very often because maybe they're maybe too eager, too excited and trying to do everything at once. So when it comes to avoiding that, any guidance that you offer in the book to help them maybe better prioritize effectively? The part I talked about was standardization and optimization. That is the key to scale.

[00:20:09] If you try to jump over that phase, you will run into the things that crush startups, which is that inability to scale, because let's face what scale is our economies of scale. Right. It means that you start to make more money as you move forward instead of, you know, just having top line growth. You're having bottom line growth at the same time. So it's all about margin. So how do you get margin margin comes from operations?

[00:20:37] So if you go through standardization and optimization, you're focusing on operations and margin right all the way down to the engineering and product level. So if you're if you're looking at getting ready to scale, then you need to go through standardization and optimization to set yourself up for scale. And as founders, whether the storm, like we said a few moments ago, they will need resilience.

[00:21:05] And the reason I bring that word into this resilience is before you came on the podcast, I read that you said resilience can actually be engineered. So can you share an example from the book that shows how structure, not just grit on its own, can help startups endure? Yeah, I think that generally speaking, you know, having being logical and trying to keep your emotions under control.

[00:21:31] You know, when you're doing this early stage startup and you've got everything on the line, it can be incredibly challenging to keep your emotions under control. But, you know, obstacles are the things you see when you take your mind off the goal. And what I do is I focus, I meditate quite a bit. And what I'll do is I'll see two tunnels. One tunnel is my forecasted future. And I visualize what my future will look like if I keep doing the same thing I'm doing right now. Then I have my manifested future.

[00:22:00] And my manifested future is what I want to have happen. And I walk through that tunnel and I look at the actions that I'm taking. And then I look at the end of it and that's where I'm going to be in six months. That's what my life is going to look like in six months or 12 months, what have you. So what I do is I try to take my manifested future and alter my forecasted future so that I get the outcome I'm after.

[00:22:23] That sometimes can help me emotionally calm down and also understand more clearly what the steps are that I should be focusing on instead of those ones that my mind, my tricky mind is telling me to focus on, you know, and and I think that that is key for me. It's critical to being successful. Wow. And as a big manifest guy myself, I absolutely applaud you for everything you've said there. And it's a tactic that I've not used myself.

[00:22:51] So it's something that I will promise to take away from our conversation today. But before I do let you go, I want to have a little bit of fun with you. We've talked about you, your book, your creativity, your startup life. But I'm interested in what has inspired you also. Now we have two things on this podcast.

[00:23:08] We have a book list, a wish list where people can come on the podcast and share their books that they'd recommend people listening can read and also a Spotify playlist where people listening can check out songs that inspire them. Maybe it's a walk on song, an event or just something that you love rocking out to. What would you like to leave everyone listening and why? As far as a book, I think getting to yes, it's an older book, but oh man, that book is a masterpiece. Sincerely really good book.

[00:23:38] I mean, I also like my book. I think this now seriously, it took me like four years to write it to start of life cycles. Really? I actually read my own book. I listened to it. You know, I listened to it on airplanes because sometimes I'm like, oh, I forgot I wrote that. Were you happy with who did it audible or the audio version? I think that generally I was happy, but you know, it's different when you have somebody read it because all they're doing is the inflections or punctuations. Yeah.

[00:24:05] But there are some points where I was like, please listen to me on this, you know, like, please, because what motivates me, you know, you have intrinsic and extrinsic motivation intrinsically. What motivates me inside is social and environmental impact. That's why I started this whole thing in the first place. I wanted to focus on social and environmental impact. You know, entrepreneurship evolves our world. It's not big companies and it's definitely not politics.

[00:24:32] It's entrepreneurs building things that are changing the world. So I think that we can change the world through entrepreneurship. And that's my focus. I tend to lean towards, you know, is what I'm doing right now helping those entrepreneurs that are marginalized become something? And most of them are in some way. Otherwise they wouldn't be entrepreneurs. Rich people don't need to build a business because they already have money. Right.

[00:25:00] So that means that the majority of entrepreneurs you are helping socially. And then on the environmental side, the things that we've seen evolve over time are pushed forward by startups, not by politics and not by big companies. So I think, you know, helping this little planet that we all share together, we always think about borders and countries and this sort of stuff. But really, we are all in this little tiny rock floating around in space together.

[00:25:27] And what we do affects you and what you do affects us and so on and so forth. So I think that if you are an entrepreneur, bless you, you are an angel. You just don't know it. You are the Navy SEALs of business. Right. It's the hardest thing you could possibly do. You are exceptional. Keep going, entrepreneurs. That is a beautiful, beautiful moment and incredibly powerful point to end on.

[00:25:52] But before I do let you go, anyone listening wanting to find out more information about you, about the book, about all the work that you're doing, where would you like to send everyone listening? You could go to my website is GregoryShepard.com. And there's a link there called founders. If you're a founder, you can log into the startup science platform and get access to all that stuff. You can log into the website.

[00:26:16] If you're listening and you're an investor or you're a mentor or you're a startup assistance program of any form. That is startup science dot IO. Excellent. Well, I will add links to absolutely everything. I do urge everyone listening to check out the startup lifecycle, a definitive guide to building and growing startups.

[00:26:37] But I think ultimately, if we zoom out from everything and the points you're trying to make and message you're trying to drive here, it encapsulates four years of your life of practical insights and a roadmap forward for entrepreneurs looking to build resilient, high growth businesses. So I will add it to our Amazon wishlist as well for people listening to check out. But just thank you for sitting down and sharing your story today. Oh, thank you so much for having you. Also, you're an amazing interviewer. I just really, really great.

[00:27:07] I appreciate that so much. Wow. Thanks to Gregory for delivering a masterclass in what it means to build with purpose, scale with intent and plan for success. All without getting lost in the noise of startup culture and his book, the startup lifecycle isn't just how to. It's more of a blueprint for building startups that last. And most importantly of all, it is grounded in experience and backed by data.

[00:27:36] He's got years and years of experience, four years to write the book backed up by hard data. And I think we all sometimes wish we could just tap into somebody's head and get all that experience, all that knowledge out of their heads and learn from it. And for me, that's what this book offers. And beyond all the frameworks and research, I think what shines through more than anything is Gregory's genuine desire to pay it forward to the next generation of founders.

[00:28:04] So I will be keeping an eye out for him during my time at Cisco Live in San Diego. And remember, if you are going to be there, too, don't be a stranger. Reach out. Say hello. Let's grab a coffee. But over to you. What stage of the startup lifecycle are you in right now? Are you struggling to scale trying to figure out your exit? What it is looking like and maybe just even thinking about getting started? Love to hear your story. That is what this podcast is all about.

[00:28:34] So please email me tech blog writer outlook dot com LinkedIn X Instagram at Neil C Hughes. So thank you for listening. As always, I'll be back again very soon with another conversation.