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05/20/20 | Founders, Menu-Homepage

Starting Something New? Be Safe Out There.

Why Shouldn’t Startupping be as Safe as The Appalachian Trail?

My retired mom took up hiking a few years ago. She’s actually in great shape and does these daily four hour hikes with ten pound weights in her pockets, just to up the ante. But she’s closer to 70 than 40, and I got a little nervous when she started talking about hiking the Appalachian trail or going for multi-day hikes in Canada. Luckily, she knows the ground rules of hiking safely: don’t go it alone, be prepared, turn back under certain conditions, etc.

Founding a company, like hiking, has gotten a lot more popular in the last twenty years. Unlike hiking, where there are well-known rules for newcomers to get started and essentially not get themselves into life threatening situations, the same guidelines do not exist for founders.

I know the perils of this personally. Luckily, I didn’t get my ankle stuck in a rock crevice and need to saw it off with a pocket knife, but on the other hand, my experience was not so different either. My first founding experience was not financially lucrative for me (I ended up with quite a bit of debt) and almost broke my marriage. It’s tough to admit that it went so badly, but I figure the transparency might help other founders. One of the biggest problems (in life and business) is not admitting when you have a problem…

Every so often, I’ll have a conversation with a founder who reveals that they’re selling their car to make payroll, or that they’ve got $50K in credit card debt. Or, more pernicious as well as more common: that they have spent half-year(s) chasing an idea without any traction whatsoever. I myself have bought into the go big or go home startup founder myths we carry around as a culture — but wish I had taken more seriously some of the warning signs around how to build without losing a leg. For example, there is no way you should be leveraging borrowed money on an enterprise that doesn’t have solid evidence of product/market fit.

Those who are least likely to have strong startup founder networks — underrepresented founders — are also more likely to go it alone or miss the warning signs, and this is a problem too. Founders who end catastrophically not only hurt themselves but also the startup ecosystem as a whole.

If you’re starting something new, here are some ground rules.

  • Don’t get into personal debt: only invest the money you can afford to lose. There are other ways to build besides risking your financial future.
  • Don’t sacrifice your health or important relationships: work is important, but not this important.
  • Don’t assume you’ll get funded quickly (or at all): Less than 1% of all startups raise institutional funding. Especially if you’re a first-time founder, it can be hard to break in before you have tangible traction. Make alternative plans.
  • Don’t ignore labor rules and taxes. (especially payroll and intern): These rules are serious and could carry stiff financial penalties for you as a founder. Again, there is no point in risking your financial future.
  • Don’t ignore market feedback. Be willing to pivot if the market feedback isn’t exciting and meaningful (ie a commitment to use or buy, and not just encouraging feedback.)
  • Don’t forget the difference between a company and a project. The difference between a project and a business is monetizability, and the difference between a business and VC fundable business is scalability and speed. Long live projects, with proper life prioritization
  • Don’t go it alone. The people you do this with matter more than anyone else.
  • Don’t forget you’re committing to long term relationships with cofounders and investors. Trust, respect, and integrity matter more than anything. Also, it’s essential to make sure that you can agreeably disagree.
  • Don’t spend more to grow than the growth earns you. It’s sometimes justified in the short term, but very rarely so in the long term. This is an example of revenue inefficiency, which I argue against.
  • Don’t optimize for valuation at the risk of overshooting your next round. If you do raise money, make sure your valuation expectations are reasonably pegged to an achievable valuation for the successive round.
  • Do ration and care for your energy, team members, and copilots â€” the pack survives. You’ll make it with them, or not at all.

Founding a company is the best, most rewarding thing I’ve ever done, and also the hardest. It’s why I love supporting my founders and why I can’t wait to do it again soon. My wish for you: keep building and stay safe out there!


This piece originally appeared on The Startup, and was published here with permission.

Parul Singh

Parul Singh

Parul Singh is a principal at Founder Collective, one of the first seed-stage VC firms in the country. There she focuses on early-stage investments across a wide range of industries, including enterprise SaaS, analytics, and digital health. She spearheaded Founder Collective’s investments in Embark Veterinary, AdHawk, Smalls, Elektra Labs, among others. Parul is a former developer turned product manager for venture-backed startups and media companies like the NY Times, where she helped launch the video and podcasting verticals and managed the video player on the homepage. Before joining Founder Collective, she founded a learning analytics company out of the MIT Media Lab. Parul is deeply involved in the startup ecosystem in Boston and in building support networks for entrepreneurs at every level. She is an avid spin and yoga devotee and bakes in her free time. She grew up in the Boston area and has an undergraduate degree from Harvard College and an MBA from MIT. Parul lives in Lincoln, MA with her husband and two young children.

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