Here are 21 things we don’t say out loud to entrepreneurs. They’re never said out loud because they’re assumed among the initiated – but not the naïve or first-time entrepreneurs. They’re offered here in the form of “advice.” (They’re also a little brutal so you may want to warn some entrepreneurs who might be offended by the content.) So to all of the start-up entrepreneurs out there, here’s some advice:
- Plot your path to personal wealth well before you launch. You should think about how to get rich – filthy rich – before you write a line of code or define the service you plan to bring to market. All of your investors do exactly the same thing every time they write a check. You’re starting a business because you want to create generational wealth, not because you want to open free medical clinics in the third world. Does it matter that most start-ups fail? No. You should believe you’re the exception, and that you will generate unimaginable wealth in a few short years. If you die, you die. But you should not die without dreaming about a house in Tuscany and a private jet to get you there. This is why you never sleep.
- Think about who will buy your company or how to sell your company to shareholders through an initial public offering (IPO). You should think about this at the beginning of your journey, not along the way or toward the end. Despite what the focus police tell you, you should think about exits every damn day.
- Develop (or buy) some intellectual property (IP) you can monetize. It’s essential to any differentiation argument you make. Without IP there are no real barriers to entry. While you may have first mover advantage, it will not last very long when the incumbents come for you. Remember Tesla?
- Learn how to make “opaque” promises to investors; learn how to speak greed.
- Create products and services that sell into huge markets. Sure, there’s money in legacy system upgrades, but there’s more in AI. The best business? Smart software to companies or – better – to the masses. There’s nothing better than sticky software that customers find almost impossible to escape.
- Build a team that’s greedy and smart, and if it’s not, re-build it. If you’re sentimental, you will fail. If there was ever a time to be a wise guy, this is it. Take no prisoners.
- Respect the roles that luck, timing, personalities, relationships and randomness play in the start-up process. You should assume a chaotic, unpredictable journey. If you’re a planner, you’re not an entrepreneur. If you can take a punch, you have a chance.
- Don’t waste time with people who cannot help you launch, build and exit – or people everyone thinks are jerks. Since you will be judged by the professional friends you have, avoid Professor Bozo, Incompetent Charlie and Mean Carol. Avoid close talkers, low talkers and people who talk too much.
- Make sure you’re aware of what’s happening around you – because there’s always something happening around you! Death, illness, divorce, family, sex, drugs and drinking among other events impact the success or failure of every start-up. Deal with everything quickly and without remorse. Guilt is an anchor around your neck. You’re not a therapist or a parent. You’re a founder, fundraiser and CEO.
- Tall, attractive people with the right hair, personal and professional connections, country club and university pedigrees are essential to success, regardless of how many times you’ve heard about meritocracies – which, by the way, have never existed. Harvard, Stanford and Oxford graduates are better than graduates from universities with 100% acceptance rates, though you should know – if you don’t already – that degrees get you in the door but never guarantee success. The real value is the confidence they generate with investors who have all heard about Harvard, Stanford and Oxford.
- Remember that many Managing General Partners of large private equity venture funds and Angel investors know very little about technology. Play the game. Treat them like they’re smart, even when your head feels like it’s going to explode. But make damn sure that you and your team understand every nuance of every emerging technology you plan to use to launch your start-up.
- “Pitching” is a huge, permanent part of your life. If you cannot pitch persuasively, you will not survive – which, by the way, is why many start-ups die. Learn to pitch with the best or get out of the Shark Tank.
- Remember that business models are temporary and revenue projections are hypotheses. Don’t spend any time refining a business model template that will be obsolete the moment the your products or services hit the market. The only time you should engage in “templating” is when your investors insist. Then check all the boxes as sincerely as you can while assuring them that templates are always helpful, even though they’re not.
- The display of “passion” is necessary because investors have passion on their due diligence checklists, not because it predicts to success. They need to tell everyone at the Monday morning Investment Committee meeting that you’re passionate, really passionate. So display it.
- Don’t ever take money from friends or family unless you’re prepared for the relationships to die over money – which they will the moment your start-up dies.
- Never abdicate legal and banking matters to your part-time Chief Financial Officer (CFO) or your part-time General Counsel. You must educate yourself. If you rely completely upon CFOs and lawyers, they will exploit your ignorance.
- Beware of “good guy” references. I cannot tell you how many times professionals who were described as really, really “good guys” turned out to be rude, self-serving and incompetent.
- Communicate frequently with your investors and directors. Do not divide-and-conquer – a popular technique among naïve entrepreneurs. Provide whatever materials they request – especially financial records.
- Outsource your CMOs and salespersons. Most of them bring experience that’s irrelevant to your company. Start-up sales performance is almost always poor, so be prepared to pivot – a lot. One thing to remember: even though you’re a start-up, do not give away much equity to full-time sales and marketing professionals. Make them earn it. The confident ones will welcome performance-based equity. The bad ones will want as much equity as they can get before they make their first sales call.
- Accept the equity distribution conundrum for what it is. While you want to incentivize key persons with equity, you also want to protect as much as you can for yourself, some co-founders, a few of your rocket scientists and future investors, regardless of how sure you are that climbing valuations will justify a growing cap table. Balance “good greed” with practical incentives management.
- Look in the mirror every day. Are you cut out for this? Can you make really tough decisions? Can you fire your friends? Can you tell white lies – and really black ones? Can you work on three hours sleep? Can you ditch family obligations? Can you travel at a moment’s notice? Can you do all this and a whole lot more? Look in the mirror before you start.
Now we’ve said it out loud.
