10 Useful Tips for Entrepreneurs and Startups (After Running One Into the Ground)

If you came to this post hoping for “ten clean tips for a clean startup journey,” I’m going to disappoint you. The ten tips below are the ones I would have actually paid for at twenty-two, when I was raising money for a gamification company called RewardMe and trying very hard to act like I had any idea what I was doing. I didn’t. I learned most of this the expensive way.

RewardMe peaked at about eleven times the offline-commerce performance of our nearest published competitor, closed a $1.5M sales deal with a national chain, and then folded after a combination of personnel, funding, and legal issues. I stepped down as CEO. Octalysis Group is the company I built next, and the consulting work I’ve done over the fifteen years since has tested every one of these tips against other people’s startups too.

The ten below are the ones that have survived both rounds of pressure. They aren’t theory. They’re the version of the advice I wish someone had handed me before I capped my round at $1.05M, and the version I now hand to founders who walk into Octalysis Group sessions looking the way I looked at twenty-two.

⚡ Speed Run Notes

• Pick a problem you’d care about even if it never made money. The startup that doesn’t need to make money is the only one that survives the eighteen months when it doesn’t.
• Hours-on-task in a chosen specialty beat years of generic experience. The OP-resume principle says ten thousand hours focused beats a decade scattered.
• Black Hat closes deals; White Hat builds trust. Know which one you need this week, and never fabricate the cap that makes Black Hat work.
• Pricing is a positioning move, not a math move. The price tells the customer who you are before the product gets a chance to.
• The hardest decision is admitting your startup isn’t working. The harder that decision is to make, the more it accelerates whatever you build next.

Table of Contents

About the Creator of the Octalysis Framework

Yu-kai Chou created the Octalysis Framework after studying gamification since 2003, years before the term entered mainstream vocabulary. As a Human-Systems Architect & Behavioral Designer, his framework has been applied by LEGO, Microsoft, Porsche, Coca-Cola, Salesforce, and MrBeast, impacting over 1.5 Billion Users.

Chou has taught the Octalysis methodology at Harvard, Stanford, Yale, Tesla, Google, BCG, and IDEO.

His work has been cited by Harvard, Stanford, MIT, Forbes, Wall Street Journal, Wired, US Department of Energy, NIST, NSF, NCBI, US Department of Education, ClinicalTrials.gov, and 3,700+ more academic publications. Explore his books here.

Before Octalysis Group, I founded a gamification startup straight out of college called RewardMe (the previous incarnation was wig.com), raised about $1M, scaled it to roughly eleven times the offline-commerce performance of our closest published competitor, closed a $1.5M sales deal with a national chain, and then watched it fold after a tangle of personnel, funding, and legal issues. I stepped down as CEO. Almost everything in this post is a lesson I learned the expensive way during that run, then pressure-tested over two decades of consulting founders through the same decisions.

Why I’m Allowed to Write This Post

I’m not allowed to write this post because RewardMe succeeded. RewardMe didn’t succeed. I’m allowed to write it because I made roughly nine of the ten mistakes below myself, watched what they cost, and then spent fifteen years at Octalysis Group watching other founders make the same nine mistakes in slightly different costumes. The tenth mistake is one I avoided, and the avoidance is what kept the lights on long enough to learn anything at all. If a tip in this post sounds like a strong opinion, that’s because it has a price tag attached to it that I personally paid.

Tip 1: Pick a Real Problem You’d Care About Even If It Didn’t Make Money

The startup you’d build for free is the only one with a chance of surviving the eighteen-month stretch when it isn’t paying you. Not because passion is magic. Because in month nine, when the original investors have stopped returning emails and the metrics aren’t moving, the only fuel left in the tank is the fact that you’d still find this problem interesting if you were unemployed.

I cared about gamification long before I knew it could make money. I’d been writing about behavioral design and the Octalysis Framework since 2003, when calling something “gamification” got you a polite nod and a quick subject change at parties. By the time I started RewardMe in 2010, I’d already done seven years of free work on the underlying ideas. Those seven years were the reason I could keep going through the worst stretches of the company. The work was already its own reward before any investor agreed it was.

The test for a young founder: if the bank deleted your runway tomorrow and you had to take a normal job to pay rent, would you still spend your nights and weekends on this problem for the next three years? If yes, you have a real startup idea. If no, you have an arbitrage idea, and arbitrage ideas have a half-life shorter than your patience.

Tip 2: Find Your Three — A Co-Founder, A Mentor, An Honest User

The single best operational decision I made early in RewardMe was building three relationships at three different layers of the company. You need all three; one or two won’t do.

The first is a co-founder you can fight with and reconcile with. Not a friend. Not someone who agrees with you. Someone who will tell you your strategy is wrong on a Tuesday and still be in the office building it with you on Wednesday. If you’ve never had a real disagreement with your co-founder, you don’t have a co-founder, you have an audience. Test the relationship under real stress before you incorporate.

The second is a mentor who isn’t on your payroll. Mentors who get equity or fees have an incentive to keep telling you what you want to hear. The best advice I got at RewardMe came from people whose only stake was that they’d been in my chair before and didn’t want to watch me make the same mistakes. I’ve written before about how being “too young” is mostly a function of not having sat next to enough older operators; an unpaid mentor is the fastest way to fix that.

The third is a user who’ll tell you the product sucks. Not five users. One. Someone whose business or life is impacted enough by your product that they’ll send you an angry email at 2 AM when something breaks. That one user will save you from a thousand polite users who churn silently.

Tip 3: Hours on Task in a Chosen Specialty Beat Years of Generic Experience

I wrote a whole post on this called how to create an overpowered (OP) resume, and the principle is the single most useful thing I learned in my twenties. The young founder problem isn’t that you don’t have experience; it’s that you have the wrong unit of experience. People your boss’s age count their careers in years. You can’t compete on years. You compete on hours-on-task in a deliberately chosen narrow specialty.

By the time I was twenty-two, I had probably ten thousand hours of focused study on motivation design and behavioral psychology. That’s roughly five times what most twenty-two-year-olds had on any topic, and roughly equivalent to what an industry expert in a different field had after fifteen years of normal employment. The hours weren’t impressive in absolute terms. They were impressive because they were stacked in one direction.

Pick the narrowest defensible specialty in the field you actually care about and pile hours into it before you start the company. The startup gives you leverage on those hours; it does not give you the hours. If you skip this and try to learn the specialty inside the company, the company is paying for your education with its runway, and the math rarely works.

Tip 4: Black Hat Closes Deals; White Hat Builds Trust

The single most important framing for a young founder running negotiations is the difference between Black Hat and White Hat motivation in the Octalysis Framework. White Hat Core Drives, including Core Drive 1 (Epic Meaning & Calling), Core Drive 2 (Development & Accomplishment), and Core Drive 3 (Empowerment of Creativity & Feedback), build long-term trust, durable relationships, and the kind of partner that sticks around for the second round. Black Hat Core Drives, especially Core Drive 6 (Scarcity & Impatience) and Core Drive 8 (Loss & Avoidance), close deals.

You need both. You need them in the right order. You start every relationship on the White Hat side, because that’s how you get an investor or a customer or a candidate to want what you’re offering in the first place. You finish the relationship on the Black Hat side, because wanting isn’t acting, and most warm conversations die quietly somewhere between “this looks great” and a signed agreement.

The mistake young founders make is reaching for Black Hat too early, before the other side has any real White Hat reason to engage. The other mistake is staying in White Hat forever, hoping that if you keep being inspiring the deal will close itself. It won’t. Identify the moment a warm conversation becomes a stalled conversation, and switch motivational gears the day you notice the stall. The cap email I wrote during the RewardMe round (covered in my fundraising post) is the canonical example.

Tip 5: The Cap Email Works Only If You Have a Real Anchor

Tip 4 is dangerous if you skip Tip 5. Black Hat without honesty is fraud, and the only thing that distinguishes the cap email from fraud is whether the cap actually exists.

When I told the investors who’d been ignoring me for a year that the round was closing, the round was closing. Three investors had already wired $650K. The cap was a real number on a real cap table. I capped at $1,050,000 in the end and turned away investor money to prove the cap existed. Every investor who came in after the cap email did so knowing the deal had real scarcity, because it did.

The predatory version of this email is sent every Friday by founders who fabricate the cap. “Closing the round Friday” with no anchor investors. “Last spot left” when there are infinite spots. The recipient might fall for it the first time. They will not fall for it twice, and the founder community is small enough that “the founder who lies about scarcity” becomes a tag that follows you for years.

The test before sending any urgency message: if a recipient asked for proof of the cap on the call tomorrow, could you produce it? If yes, send the email. If no, don’t, and go fix the underlying reality first. Octalysis founders who do this honestly close rounds in weeks. Octalysis founders who do this dishonestly burn relationships in months.

Tip 6: Pricing Is a Positioning Move, Not a Math Move

I priced RewardMe wrong for the first eighteen months because I priced it the way every business school case study tells you to: cost-plus, with a markup that felt fair. The result was a price that signaled “small vendor, easy to negotiate down, probably will fold,” because that’s what fair-feeling cost-plus prices signal in B2B.

The pricing decision that worked for us, eventually, was the one that ignored the math entirely. We picked a number that signaled to a national-chain customer that we were the kind of vendor they were used to writing checks to. The number happened to be roughly four times what cost-plus would have produced. The first procurement officer who saw it pushed back, and we held the line. Three months later, the same officer signed a $1.5M deal at that price. The price wasn’t expensive; it was credible.

For a young founder, the rule is: your price tells the buyer who you are before your product gets to. Cheap prices position you as a risky, replaceable vendor regardless of how good the product is. Confident prices position you as a partner, even when the founder is twenty-three. Pick the number that matches the position you’re trying to occupy, then build the product to deserve the number. Don’t run it backwards.

Tip 7: Ship Before You’re Ready, Launch When the First Ten Will Recruit the Next Ten

“Ship before you’re ready” is good advice that is half the answer. Shipping is when version one of the product is in front of users. Launching is when you start spending marketing dollars. Founders confuse these two and spend launch money on a product that isn’t ready to be launched. The bridge between them, in Octalysis terms, is Core Drive 5 (Social Influence & Relatedness): your real virality test.

The signal that you’re ready to launch is not “the first ten users like the product.” It’s “the first ten users are willing to recruit the next ten for you, unprompted.” Liking is cheap. Recruiting is expensive. Users only do the expensive thing when the product has solved a problem they’d be embarrassed to keep their friends ignorant of.

At RewardMe we shipped in roughly six weeks. We didn’t launch publicly for another nine months, because the first batch of users would tell us they liked it but wouldn’t introduce us to other store owners. Once they started doing introductions on their own, we knew Core Drive 5 was active and the product was ready to absorb a marketing budget. Spending money before that point would have bought us churn, not growth.

The tactical version of this rule: every time you onboard a new user in the early days, ask one question after they’ve been on the product a week. “Who else should be on this?” If they can name a person and offer to introduce you, you have CD5. If they say “let me think about it,” you don’t. Don’t launch until the answers shift from the second to the first.

Tip 8: If You’re Optimizing for Short-Term Metrics, You’re Probably Black-Hat-Only

I’ve written about how shallow gamification produces bad shifts in motivation, and the same logic applies to startups. If your weekly metrics are all engagement, retention, and conversion in seven-day windows, and none of them measure whether users are getting more capable or more autonomous over time, you’ve built a Black-Hat-only product. It will spike and then collapse.

The collapse usually arrives somewhere between month nine and month fifteen. By that time you’ve optimized your funnel hard enough that every remaining user is responding to fear-based or habit-based triggers (Core Drive 6, Core Drive 8) rather than to genuine value. New users churn faster because the product feels manipulative. Old users churn slowly because they finally notice. Your numbers go from great to terrible without an obvious cause, because the cause is the design, and the design has been the same all along.

The Octalysis Group rule we use with clients: every Black Hat metric needs a White Hat counterpart on the same dashboard. If you measure daily active users, also measure weekly user-initiated value created. If you measure retention, also measure user-skill-growth or user-autonomy. The pair forces you to see the trade-off you’re making. You can still choose Black Hat in a given week. You just can’t pretend you didn’t see it coming.

Tip 9: Don’t Pay Co-Founders, Don’t Pay Employees in Equity

This one I learned from the Octalysis distinction between Right Brain (intrinsic) and Left Brain (extrinsic) motivation, applied to your team’s incentive structure. The mistake almost every young founder makes is to flip the two: pay co-founders cash because cash feels real, and pay employees equity because equity feels generous. Both are backwards.

Co-founders shouldn’t be paid in cash beyond ramen-survival levels, because the thing you want them motivated by is the long-term outcome of the company. Cash makes them think like employees. Equity, alignment, and shared destiny make them think like owners. If your co-founder needs more than survival cash to stay, you don’t have a co-founder. You have an early employee with the wrong title, and the title will create governance problems later.

Employees shouldn’t be paid primarily in equity, because the thing you want them motivated by is the next two years of competent execution, not a possible exit five years out. Equity is too abstract for most people to feel weekly. Cash is concrete. A senior engineer who’s underpaid in cash and “rich on paper” will leave the moment a competitor offers them market salary, and then your equity grant has bought you exactly nothing. Pay employees market cash. Use equity as a small alignment top-up, not a substitute for compensation.

This is one of the few decisions I got mostly right at RewardMe, and it’s the reason the team stayed together longer than the funding did.

Tip 10: The Hardest Decision Is Admitting Your Startup Isn’t Working

I had to make this decision at RewardMe. Stepping down as CEO and accepting that the company wasn’t going to be the venture-scale outcome I had pitched was the hardest professional decision of my life up to that point, and the year leading up to it was the most painful stretch of my career. I delayed the decision longer than I should have. Most founders do.

The reason it’s so hard is that everything in your founder identity is set up to fight against making it. You’ve told investors a story. You’ve told employees a story. You’ve told yourself a story for so many years that disbelieving the story feels like a personal failure rather than a financial one. The decision to admit the startup isn’t working requires you to detach your self-worth from the company’s outcome, and almost no one is ready to do that on the schedule the cap table demands.

The thing I wish someone had told me at twenty-five: the harder this decision is to make, the more it accelerates whatever you build next. Not because failure is romantic. Because the muscle of “I can look at reality and act on it even when reality contradicts my identity” is the single rarest muscle in startup land, and the only way to develop it is by exercising it on something real. Octalysis Group exists, with the reach and impact it has today, because I made the hard call on RewardMe. The company that came after the hard call is unrecognizably more grounded than the company before it.

The Single Hardest Decision (A Reader Self-Test)

If you’re a founder reading this and you suspect your startup might be in the bad zone, here’s the test I run with founders in private Octalysis Group sessions. It is short and it is brutal and it works.

Ask yourself three questions, honestly, with a phone timer set to thirty seconds for each:

1. If a different founder pitched me my exact company today, with my exact metrics, would I invest?
2. If my best engineer told me they were leaving for a competitor next month, what would my first reaction be: panic, or quiet relief?
3. If the company shut down next week, would my life six months from now be worse, or honestly better?

If you answered “no, relief, better,” you already know what the next decision is. The post you’re reading isn’t going to make the decision for you, and neither am I. What I can tell you is that I waited too long when I was in your seat, and the waiting cost me roughly twelve months of life I don’t get back. The day I made the call, the next chapter started. Octalysis Group, the books, the consulting work I love now, the life I have today. None of it would exist if I’d kept defending the previous chapter for another six months.

If you answered “yes, panic, worse,” your startup is alive, you should keep building, and you should re-read tips 1 through 9 with the same honesty you just used on tip 10. The tips work in any order. They only work if you’re willing to apply them to the company you actually have, not the company you wish you had.

You’re twenty-two and you’re scared. I was you. Build the thing. Make the hard calls earlier than I did. Don’t fabricate the cap. Pay your engineers in cash. Find the one user who’ll yell at you when something breaks. And when you eventually have to choose between defending the previous chapter and starting the next one, choose the next one. The reader self-test exists because the next chapter is always closer than it looks from inside the previous one.

Related Reading

• Black Hat Motivation in Fundraising — The Cap Email That Closed My Round
• On Being “Too Young” to Build a Real Company
• How to Create an Overpowered (OP) Resume
• The Octalysis Complete Gamification Framework
• Actionable Gamification — The Book

If you want this analysis applied to your specific company, the Octalysis Group runs private founder sessions at octalysisgroup.com. The fuller treatment of the motivational-design ideas behind these tips is in Actionable Gamification, which goes through all eight Core Drives chapter by chapter.

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