WP Engine Jason Cohen has a very viral entrepreneurship video on YouTube with 370,000 views. Someone said it was the best entrepreneurship share they had ever seen. The video was published several years ago, and Jason Cohen is pretty impressive - he has founded four companies that took off without fundraising or venture capital, generating over $1 million in revenue within a year.
Currently, Jason Cohen is still running his fourth startup, WP Engine (a WordPress hosting provider), with 200,000 customers and 1,200 employees. And since 2007, he has consistently blogged about his entrepreneurship insights, writing for 15 years.
One of his blog posts begins like this: Entrepreneurship skills are like kung fu. There are countless styles that work - like shooting stars, crescent moon knife, Buddha's invisible leg, and star master's spatula hand. But like fighting, no matter what, you'll take two punches. I can only teach you my style. Others can only teach you theirs. This is my style. He seems like an interesting person.
After taking the time to watch his YouTube video and most of his blog posts, I organized 28 notes to share with you. Some of it goes against conventional wisdom but is worth chewing on.
Jason Cohen’s Most Famous Video
28 Lessons From WP Engine Jason Cohen
- Before starting a business, don't worry too much about barriers to entry. You only need truly unique technology and insurmountable barriers when you want to build a company valued at over $10 billion. But few people can start companies like that and not everyone dreams of starting companies like that. To start a business, find something you're good at and then do it.
- We often talk about MVP - building the fastest minimal viable product prototype first, then testing if it meets market expectations. But remember, users hate buggy, incomplete prototypes. Users want polished products they can use right away. So a better approach is to build simple yet complete products. Not a 0.1 version of something complex, but a 1.0 version of something simple.
- There is no one best path, no standard answers. In the world of startups, for every case that "proves X is right" there is an opposite case that "proves X is wrong." How Jobs focused on user experience and called Microsoft products third-rate, yet Microsoft still succeeded. Learn from others' experiences, but don't blindly follow.
- Bet on what won't change long-term, then commit. Some argue the future is unpredictable, an excuse for having no strategy. While hard to predict how the future will change, it's easy to predict what won't change. Amazon is a prime example. Bezos identified "low prices" and "fast delivery" as two constants, and realized people will still want those in 10 years, so Amazon could and did invest billions towards those goals.
- If you want to build a startup that won't need funding, make it a "cash machine" from day one. Have predictable, stable revenue every month even if the team does nothing. 80% of startups can't generate stable revenue, so most take the wrong approach. Think about what products could provide you steady income.
- Abandon the "1,000 users" fantasy. Kevin Kelly said any creator just needs 1,000 true fans to make a living and create freely. But he admitted it doesn't actually work. One, it's very hard to get 1,000 paying users from zero. Two, it's hard to get users to spend $200 on you annually. Three, even meeting both conditions, $200K a year is barely enough to sustain a company now.
- Start with 150 users. You can definitely get to 150 users. If after a few months, you still don't have 150, accept the fact your company won't work. How? I'll share my real experience: Reaching out to potential target users on platforms got me 50, tapping my social circle got 25, and basic marketing like flyers got 75. 150, done.
- To build a "cash machine" company, start small: aim for $10K in steady monthly recurring revenue, meaning 150 users paying an average of $67 per month. This forces you to create real value.
- "Grow until profitable" is a nice fairytale. If not profitable from the start, it's often hard to become profitable at scale. Founders love assuming "We'll figure that out later." Generally, it's hard. And as a startup, even if you get funding, start thinking about profitability ASAP.
- Don't offer free trials. Free trials don't convert that well. Better to say, a 60-day refund is guaranteed, but payment is required now.
- For subscriptions, charge annually instead of monthly if possible. Use discounts, coupons, free months, and even more, distributor discounts to incentivize users to pay annually upfront. Users get a deal, you get revenue meant for the next 12 months sooner - win-win. Cash flow is king when running a business.
- How to choose a market for bootstrapped startups? 1, the need doesn't have to be intensely painful but must recur, so you can charge repeatedly. Wedding planning is essential but not recurring. 2, avoid services needing real-time delivery, like wedding photography. 3, avoid fully customized solutions hard to standardize. Customization isn't a good business. 4, build ancillary ecosystems around mature products, like Salesforce. Users complain they add few features for years because Salesforce wants others to earn through add-ons - part of their ecosystem and strength. Five, choose big markets. In big markets, your product doesn't have to be the best to make money.
- Don't sell products claiming to "save time." People don't value their time, they'll do crazy things to save $2. Consumers don't care about time, nor do companies. So sell more value. Most directly, tout "improved efficiency" over "time savings."
- Avoid two-sided platforms matching buyers and sellers, like eBay and Amazon. Platforms juggle two businesses - bringing sellers to list products using their payment system and bringing buyers to transact. Needing to convince both sides is hard, a chicken and egg problem. If you succeed, you'll have barriers to entry. But for a bootstrapped startup, achieving some success in both markets is difficult.
- When a product is growing quickly, stay grounded knowing growth can't continue forever. It will inevitably hit a ceiling at some point. As the founder, don't get blinded by temporary success. Stay disciplined, and keep expectations realistic. And think about what more you can do to raise that ceiling further.
- User churn may grow exponentially. Losing 5% of users per month will halve your user base in a year. High churn means the business isn't sustainable - the need may be temporary, product-market fit poor, market conditions bad. But usually, it's because the product isn't good enough - missing features, too many bugs, lacks integrations, and not painful enough...
- If someone deployed code that crashed the whole system, the real fault is the system's lack of robustness and fragility, not the person - or at least not only the person. Every post-mortem in an organization should ultimately strengthen anti-fragility. Blaming individuals is easy but often lazy.
- Most acts of desperation prove farcical in hindsight.
- All startups mess up countless things. You must excel exceptionally at one or two key things to offset other failures. The bad news - you can't know in advance what those will be. The good news - most failures don't matter.
- Don't assume your competitors are smarter, faster, and more strategic, and make better decisions than you. Sometimes they do, but so can you. We tend to see competitors through their highlights and exaggerations. But that's not the full picture. As Pony Ma said, "Demand comes from understanding your users, not research, analysis, discussion, or competitors." Ignore the rest.
- Pricing directly determines the business model. People say to figure out pricing after the product launches. No - you should set at least a pricing range before designing the product. You can't provide heavy servicing for a low per-transaction business, the costs don't work.
- For SaaS, $0/month means maximizing growth over revenue. $10/month means people see you as the cheap version of something else - doable at scale but slow growth. $100/month is largely B2B, with expectations of performance and support. $1000+/month only works for mid-large companies, needing sales, customization, etc.
- Completing 8 things 100% is better than completing 10 things 80%. Maximize your one or two most important things through focus, not minimize downsides everywhere. Being 10X on one thing, then patching weaknesses, is more powerful than across-the-board competence.
- Make a "startup death clock." Based on burn rate and cash reserves, calculate how long your company can survive. The looming doomsday will force profitability and focus. Maybe your weekly to-do seems unimportant, but seeing the death clock will get the next software release out pronto.
- You won't sell your company for much. Selling the company is always an option, but easier said than done. Often the sale price is underwhelming. Plus antitrust regulations make selling to a tech giant unlikely now.
- Startups are an infinite game. Sam Altman, former head of Y Combinator, is uniquely insightful on startups. His last startup failed, now he's doing OpenAI. He reflects: "The market wasn't there, you can't force the market. You can have an idea, part of the job as a startup is you're trying to get ahead of the market, and sometimes you're right and sometimes you're wrong. You just keep trying. Sometimes you fail, and sometimes you make OpenAI."
- Decide what kind of company you want to build. Starting a company isn't the hard part, knowing yourself is. "Everyone wants to change the world. No one thinks of changing himself." Founders need the confidence to create something new and better, but great founders are confident without becoming rigid.
- Every rule has exceptions.