January 2, 2024

10 lessons from running a startup in 2023

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For Section, this was a year of recovering our own fumble. 

We grew rapidly during the pandemic and thought we had a venture-scale business on our hands. Then the pandemic slowed, people started going outside again, and consumer demand for our product contracted suddenly. We were left with a business designed for venture scale, without the growth to support it.

We spent this past year getting our business back into shape, and that was painful. It meant layoffs, scaling back our tech roadmap, and cutting parts of the student experience that were too expensive with not enough value. (We used to mail a course notebook to every student! Not anymore). 

We also had to admit that a single membership product, sold to enterprise on a recurring basis, was not going to be the way we got to $100 million in revenue – no matter how much that strategy appealed to us and our investors. Enterprise cut budgets, and we had to learn what Coursera, Skillsoft, and others learned before us – an edtech company needs a product portfolio at different price points and levels of transformation for different students. 

This was a hard year, but we’ve come out of it fitter and stronger. Here are 10 lessons that I’ve learned – hoping they provide some inspiration to you. If they do, let me know. 

Happy New Year, and here’s to a better 2024. 

- Taylor 

10 lessons learned

1. Groups don’t get there first. In summer 2023, our CEO Greg was convinced that we needed to build an ambitious AI curriculum and (probably) an AI-powered product. The rest of the leadership team – including me – wasn’t as sure. AI felt like a distraction and we already had a lot of new projects on our plates. Ultimately Greg had to make the decision, and push the team to get on board. If you wait to have consensus to make a big decision, you’ll be waiting forever. If you’re in charge, develop conviction, make the call, and be okay with being wrong. 

2. It’s easy to be a skeptic. At our public lectures on AI, there are always people in the chat calling out the risks of AI. And yes, AI has many risks and shortcomings today – hallucinations, bias, data privacy, etc. But skepticism can also be cowardly. Criticizing from a distance makes you feel smart, without exposing you to the discomfort of learning something new or taking more risk.  

3. If no one’s an expert, you can be the expert. One of our big concerns about building an AI curriculum early on was our lack of credible experts. Our brand is built around the credentials of our instructors (NYU Stern, Google, Meta, etc.), and there simply weren’t many credible business experts on generative AI. But we – as in myself and Greg – had the appetite and time to become experts on AI business strategy. So we took a risk that our students wouldn’t care about our AI credentials, as long as the content was good. Which brings us to the next lesson … 

4. Quality of thought is what matters. AI will destroy the advantage of “getting to a shitty V1 fast,” because everyone will have a shitty V1. The internet will be rife with AI-produced content that no one has bothered to edit. This year, we’ve found that the real differentiator isn’t production quality, credentials, or delivery format – it’s just quality of thought. Spend more time on your point of view and less time on all the trimmings. As gen AI floods our feeds with even more content in 2024, we’ll all value quality even more.

5. You have to resist the temptation to say “this is how we do things.” We started 2022 with more than 100 employees – now we have 22. Much of this hiring came on the backs of early decisions we made in how we built and marketed our product. For example, our initial course videos relied heavily on character animation, which required a ton of labor and a large animation team. We thought that was “this is what works well for us,” but as we’ve scaled back, we’ve realized we can be just as successful with lighter, more efficient motion design. Much of 2023 was about re-examining early decisions we made and testing more efficient alternatives, which helped us create a more efficient and sustainable business.

6. Project management is critical on a small, distributed team. Project management can look like a “nice to have,” but it’s essential on a small, remote team with a combination of contractors and FTEs. It’s been critical to our ability to do more with less. Before you invest in another marketing or product hire, make sure you have a strong project management muscle.  

7. 90% of the startup job is trying stuff. Company boards are looking for two things: a) a management team that sees the same reality that they do and b) a management team that acts on that reality every day. It’s important to weigh the risks of an initiative, but endlessly weighing risks is an excuse not to act. Startups have the ability to move fast and try things, so try things, or get replaced.

8. You have no idea what’s going on at other companies. It’s tempting to look at a competitor and think, “They’ve got it figured out.” But if you haven’t seen their CAC or P&L, you don’t really know what their business looks like. This year, multiple competitors told us, “We saw the success that you’ve had with recurring revenue, so we’re pivoting there too.” Ha - just as we pivot to a product portfolio that offers more transactional products, including workshops and bootcamps. 

9. You can be right, but run out of time before you win. If your business fails, it doesn’t necessarily mean your product isn’t right. It might mean you have a finite runway, and your customer isn’t ready to go all-in before your runway ends. We cut from 100 to 20 people to make sure we have enough time to experiment and find the right product-market fit. Once you make sure you have enough time, then ask the tough question: Can you find PMF and growth with this extra time, or is it time to quit? We have the time, and we’ve decided we’ll be able to build a valuable business here – it’s just taking longer.

10. We read about the ‘big moments’ in TechCrunch, but most of business is just waking up every day and doing it again. We build case studies on the ‘high moments’ in business – unicorns, bankruptcy, products that change the game, business models that disrupt industries. But most of business is just grinding it out day after day, and getting the payback later. It’s okay if your work doesn’t feel momentous at the moment. It all adds up to something.

Overall, 2023 showed me that we’ve entered a new era of working in startups – in a post ZIRP world, working at startups will mean smaller bonuses and longer hours. It’ll require employees with the motivation and grit to persevere through tough situations to build the company they want to build. But it also showed me that we have the team to do that at Section.

I’d love to hear your observations from 2023, and how you’re preparing your team for 2024. Drop me a note at taylor@sectionschool.com

Greg Shove
Taylor Malmsheimer, Head of Strategy