Are You ‘Hands On’ Enough To Succeed In A Startup?

Image via McCombs.UTexas.edu

There is no substitute for diving into the key details of a new startup. Executives from large companies have sometimes long forgotten how to do this (“My people will contact your people to work out the details.”). Others hire consultants, or outsource much of the real work. These executives won’t survive long in a startup environment.

An obvious reason is limited funds, but a more important reason is the need to know and intimately understand what is really going on in the business and the market. A diligent entrepreneur should certainly work the important details for his or her startup, especially when it comes to assessing any negative fluctuations in the business.

In his book, “Out-Executing the Competition,” seasoned executive Irv Rothman provides tips to corporate executives on how to dig in and “get their fingernails dirty.” I’ve taken the liberty of extending these for entrepreneurs, based on my own experience: Read more

Martin Zwilling , Founder and CEO, Startup Professionals
September 2nd, 2013

Good Advice, Bad Advice, Land Mines on a Path to Heaven

Having just read James Altucher’s Ultimate Cheat Sheet for Starting and Running a Business, I’m fascinated by a collection of bold, very well written, and remarkably unambigious advice, most of it great, some of it terrible. The effect is like a path to heaven with hidden land mines.

Read it, but don’t believe it. Think about each of the 100 points. Reject a lot of them. Be especially careful with the ones that are usually true but not in your specific case. 

And you’ll enjoy it thoroughly. Sometimes right, sometimes wrong, sometimes hilarious, it’s great thought-provoking writing on this subject. It’s one of the best blog posts I’ve ever seen, especially on this topic.   

That’s so hard to explain that I’ll just give you some examples, 10 of the 100 numbered pieces of advice, in no particular order:

  • Should founders vest? Yes, over a period of four years. On any change of control the vesting speeds up.
  • Should I ever focus on SEO? No. 
  • Should you go for venture capital money? First build a product, then get a customer, then get friends-and-family money (or money from revenues which is cheapest of all) and then think about raising money. But only then. Don’t be an amateur.
  • When should you have sex with an employee? When you love her [SIC] and the feeling is mutual.
  • Should you patent your idea? Get customers first. Patent later. Don’t talk to lawyers until the last possible moment.
  • Should you require venture capitalists to sign NDAs? No. Nobody is going to steal your idea.
  • My wife/husband thinks I spend too much time on my startup? Divorce them or close your business.
  • How do you get new clients? The best new clients are old clients. Always offer new services. Think every day of new services to offer old clients.
  • Should I do social media marketing? No.
  • How much equity should you give a partner? Divide things up into these categories: manage the company; raise the money; had the idea; brings in the revenues; built the product (or performs the services). Divide up in equal portions.

See what I mean? Good advice, and bad advice. Which is which? That’s up to you. 

The “funny” doesn’t show fully in those 10 examples, so look at these:

  • My customer called me at 5 p.m. on a Friday and said, “We have to talk.” And now I can’t talk to him until Monday. What does it mean? It means you’re fired.
  • Why didn’t the VC or customer call back after we met yesterday and it was great? They hate you.
  • Should I have sex with an employee? Stop asking that.

Take my advice. Read his advice. 

Tim Berry , Founder, Palo Alto Software
August 27th, 2013

Would You Be Able To Deal With A Startup Failure?

Image via TheConversation.com courtesy of Flickr/Alex.E.Proimos

If your first startup fails, you are about average. Most entrepreneurs fail on at least one attempt. Investors agree that an entrepreneur who has never failed probably hasn’t pushed the limits. What investors look for is not that you never fail, but that you learn from the failure, maintain a positive attitude, and work with integrity on the next one.

According to Harvey Mackay in his book “Use Your Head to Get Your Foot in the Door,” how to rebound from failure or rejection is an essential skill to acquire for success. His bullets are about job hunting, but I believe the principles apply equally well to starting a business: Read more

Martin Zwilling , Founder and CEO, Startup Professionals
August 25th, 2013

Are convertible notes typically issued along with stock in Series A?

No, because they are, by definition, two completely different things.

“Series A” is a shorthand way of referring to what is typically the first institutional round of investment in a company, made in the form of purchasing Convertible Preferred Stock. A “Convertible Note” is a loan to the company, in which the principal (and often the interest earned to date) converts into Convertible Preferred Stock, typically at the time of the Series A institutional investment round. Read more

Sayings From My Father

It is safe to say that my father has been, by far, the most important influence on my life as an entrepreneur. Back in the days of the dotcom boom, when I was in my 30s, I was delighted to be named a finalist for the prestigious Ernst & Young “Entrepreneur of the Year” Award in New York. It was no surprise at all, however, when my father actually won the award just a few years ago…when he was in his late 70s!

For as far back as I can remember, my father has served as my primary role model, showing by example the importance of impeccable integrity, hard work and dedication, creative business thinking and the need for maintaining a long-term perspective. Today, in his mid-80s, he is as energetic and engaged in the entrepreneurial life as anyone I know, creating new business and social ventures, and mentoring yet another generation of entrepreneurs.

While my siblings and I have had the privilege of growing up under his direct tutelage, many other people have had the benefit of his distilled life experience, because one thing he is not shy about is sharing advice. Indeed, his seemingly endless store of one-line advisories has served as the soundtrack for the lives of his children, his grandchildren, his employees, his protégés…and anyone who has ever come within his orbit. Here, in honor of Father’s Day, is a selection of his timeless advice for entrepreneurs; some original, others relayed from heroes of his such as Twain, Churchill, Plato, Shakespeare, Santayana and Montaigne, as well as his own father and brothers:

You can get anything done if you’re willing to give away the credit. This was driven home to me when I was a teenager. I watched from a ring-side seat as he single-handedly conceived, implemented and succeeded at pulling off a brilliant, entrepreneurial, off-the-wall solution to a problem that saved an otherwise-doomed $100 million project. But at the ribbon cutting ceremony, a dozen other people, including the Mayor, were showered with credit while my father’s name was not even mentioned. I was absolutely devastated, but he was quietly and calmly proud, pointing out that…

Plato’s definition of ‘beauty’ is “fitness to the end in view.” …and his end game had been to save the project, not be honored by the mayor. The moral of this is to have a clear idea of what you are trying to do, and then focus on getting that done. In many ways this is a precursor of the Lean Methodology concept of the Minimum Viable Product: don’t be distracted by surface appearances or unnecessary features; start by solving the immediate problem with a “beautiful” solution.

Your actions shout so loud I can’t hear what you’re saying. One of his many admonishments on the subject of integrity, the point is that one can talk a good game, but at the end of the day it is what you do—and only what you do— that actually counts. Integrity means practicing what you preach, saying what you mean, and living up to your promises and exhortations with your own actions.

You only get one chance to make a first impression. He first told me this in seventh grade when I moved to a new school, and I have come to realize how important (even though it seems ridiculously obvious) this is in virtually every business environment. When people meet you for the first time, whether investors, customers, or potential partners, YOU are in control of what they begin to think of you. Once that first impression has clicked, it is damnably difficult to get people to change their mind. This is now a standard part of my presentation training seminars for entrepreneurs, because in a venture pitch your target investor will likely start making up his or her mind about your opportunity before you are two or three minutes into the presentation.

Negotiate iron-clad contracts…and then put them in a drawer and forget them.
I have relied on this one virtually every day of my entrepreneurial and investing career, and preach this to all of my own protégés. My father is one of the sharpest business people I have ever met, but also the straightest shooter. He stresses over and over how critical it is to ensure that the underlying paperwork in any deal is in your favor and gives you negotiating leverage when the chips are down…but then points out that “with great power comes great responsibility”, and you will always do much better by using the power to dictate fair terms for everyone, rather than taking advantage for yourself.

Trust everyone, but cut the cards. The corollary, from Mark Twain, suggests going into every discussion and negotiation assuming good intentions on everyone’s part…but not being naïve about it. In my own entrepreneurial career I’ve taken this even one step further. My corporate motto has always been “everyone gets one chance to screw us”, because if I limit my exposure on the first interaction, it will be the cheapest money I ever spend to find out who plays fair and who doesn’t.

It’s one thing to piss on my back, but don’t try to tell me I’m sweating. This one comes from an old-time construction superintendent with whom my father himself apprenticed, and it again boils down to honesty and integrity. Whatever you do (or whatever someone else does to you) should be done clearly and with no obfuscation. Own your actions, and don’t try to fool yourself or anyone else with false rationalizations. (As in “its perfectly ok to pirate music and movies against the express wishes of the copyright owner, because I’m actually helping them by giving them added exposure…”)

Every tub should sit on its own bottom. That is, examine each action or relationship independently, and don’t mix yourself up by conflating unrelated activities. For example, if you are considering taking in a strategic investment, analyze the equity investment independently as one piece, and the strategic contract as a separate one. Similarly, when considering a problem, break it down into the smallest possible components and figure out how to solve each one on its own. Quite often a seemingly intractable problem can be handled with two or three simple actions.

Nice guys don’t always finish first…but you should act as if they do. History has shown that bad things happen to good people, and if one runs around maintaining “nice guys always finish first”, you will (a) be disappointed, and (b) convince people that you’re hopelessly naïve. But the fact is that if the “nice” is combined with other characteristics such as “effective”, “smart” and “hardworking”, nice guys often DO finish first, and have an easier time and more support from those around them.

If three people tell you you’re drunk…lie down anyway. Mark Twain’s advice about having a decent respect for the opinions of others is something that I remind myself about nearly every day. Entrepreneurs are almost universally convinced that they are bearing the Word of God, and that anyone who disagrees with them must therefore be either an idiot or invincibly ignorant. I am certainly no exception to this belief, but after nearly four decades in business I have come to realize how true Twain’s words ring. While it is critical for entrepreneurs to have faith in their own visions, it is equally critical to listen to what the market and other smart people are saying. Coachability, flexibility, and a willingness to listen to (if not heed) good advice are some of the key things that I look for an as an investor.

Happiness is the exercise of one’s vital powers along lines of excellence. Last but not least, George Santayan’s perceptive view of personal fulfillment (what Abraham Maslow discussed as “self actualization”) pre-dated by decades the concept of “flow”. Exercising my ‘vital powers’ as an entrepreneur, an investor and a mentor makes me one of the happiest people I know…just as it has for my life role model.

*Original post can be found on Wall Street Journal Blogs @ http://blogs.wsj.com/accelerators/2013/06/16/david-s-rose-sayings-from-my-father/ *