By Joyce Chuang (Marketing Coordinator, Orrick, Herrington & Sutcliffe LLP) For those who have started a company and have seen the challenges first hand, you have an idea of just how much energy and effort goes into creating and building a company. Not only do you have to worry about establishing it, but at some point you’ll have to find investors to fund it, build a team, hire and fire employees, and so much more.
What if someone could provide you with a road map for it all? We can’t, but we can offer some suggestions and advice.
Our panel with Joe Kraus from Google Ventures (Founder, Excite), Kevin Chou (CEO, Kabam), Phil Sanderson (Managing Director, IDG Ventures), and Gary Kremen (CEO, Sociogramics & Founder, Match.com) offered some great insights to common mistakes that startups (and their founders) make.
Here’s a re-cap in a nutshell:
- Approaching venture capital too early and not looking for alternative sources can be harmful to your company – Friends, family, super-angels, vendors, and strategic investors can provide meaningful alternatives to raising capital. This is something entrepreneurs forget at times. Just make sure that with family and friends, they understand that they are investing to lose. There’s a high probability that they may never see the money again, which most of the time they’re ok with anyways.
- Be prepared when presenting to an investor or VC – Keep your presentation succinct and to the point. Tell them about your successes, talk about the competitors in your market, identify the problem, and discuss the solution. This should take no longer than 12-15 minutes. Do your research on the investor, don’t ask stupid questions. The goal of the first meeting is not to get the investor to understand every detail, it’s to get them excited about your team/company.
- Lack of persistence -- Getting to “yes” on funding and overall business plan. Joe Kraus from Google Ventures: “the VCs job is to say ‘no’, it is the entrepreneur’s job to make it a ‘yes’”. Too many entrepreneurs often stop at “no” and give up. Don’t give up. Being persistent is key.
- How are you going to make money? – What is your business plan to make money? Do you want to scale or make a profit? These are things to think about beforehand. If you want to scale, what is the cost of customer acquisition and keeping customers?
- Lack of Good Advisors: Not building a team of advisors including VCs and partners and trusted advisors – Enough said.
- Having a financial strategy and exit road map – One of the common mistakes entrepreneurs most oftentimes make is not focusing on the key business objectives. You should be looking ahead at every closing or milestone and preparing for the next step. When you’re closing Series A, prepare for your Series B pitch deck.
- Not knowing when to move to plan B: When to pivot to business? – The initial business plan is not an end all be all. Entrepreneurs sometimes make the mistake of committing too much on an initial business plan (or too little). As Phil Sanderson said it this morning, business plans will change throughout the life of a company. Don’t be afraid to pivot.
- Scaling too fast – Be wary of this, grasshoppers.
- Hiring and getting the right team and advisors – Laying the common mistakes for these out on the table: a) under hiring and settling is never a good thing, b) pinpoint who on the team knows how to make money – not knowing this one can be a problem, c) no one ever wants to be the one to shrink the team or downsize, but sometimes it must be done, d) think about who you’re putting as members of your board, and e) keeping bad performers and not firing early enough when you should, is bad for the company and for you as a founder/CEO.
- Putting relatives and friends on the management team – Be careful about doing this. It’s great to reward those you love with a piece of your company (for all the blood and sweat they’ve shed for you since forever, not to mention support), but remember that this entails great power for them and large risks for you and the company.
All the advice above was due in large part to our panelists this morning.
If there is any key piece of information to take away from it all, it was that being persistent is a must and understanding that opportunities lead to other opportunities is crucial. To watch the video of this presentation, check back next week.
This post was originally posted at Total Access Resources.
About the guest blogger: Joyce Chuang is the Marketing Coordinator for Orrick, Herrington & Sutcliffe LLP. She devotes her energy to Orrick's TOTAL ACCESS, an educational program providing entrepreneurs complimentary business, tactical and legal education throughout the Silicon Valley. In addition to events and education, TOTAL ACCESS offers entrepreneurs networking opportunities with leading industry CEOs, venture capitalist, prolific executives, and Orrick attorneys.