I don’t think of myself as a serial entrepreneur. Yet somehow over the past 25 years I have founded or co-founded four technology startups, advised other startup CEOs, sold companies, bought companies and invested in companies. I have always followed my own path and on that journey encountered my share of lessons learned, failures, and successes.
If you are thinking about a startup, or are involved in one, I have a few lessons to share.
Don’t raise money
Well, at least not in the beginning. It is virtually impossible to raise money to start a company. It is very hard to raise money even when you have a company. Just trying to raise money sucks up incredible time and effort that puts your business at risk. When you need money, you are in the worst possible negotiating position.
In my experience, you are better off to bootstrap your business as far as you can. Most entrepreneurs try to raise money too soon. You must prove your ideas, get customers, build revenue and understand your market first. If you need to get paid, do consulting work, or live with less. I once went two years without pay; it hurts.
When you have clients, revenue, a market and can support yourself, and if you can demonstrate compelling growth characteristics, maybe you should raise money — with a specific goal to accelerate your growth through sales, marketing and product investments.
Get a good accountant and do what they say
Unless you graduated with an accounting degree, and maybe even if you did, you need a professional accountant who has experience with startups. The financial decisions you make early on can help you grow and scale, or come back to haunt you later.
You need your numbers right and your finances in order. A corporation is complicated to run, and there are many pitfalls with LLCs. Taxes are a mess, especially internet sales taxes. You need to calculate your revenue, MRR, losses and taxes correctly from day one. Imagine, you are deep in due diligence with a buyer, and they discover your revenue has been calculated wrong for the past five years. Major downer.
Find a good lawyer, but make your own decisions
Lawyers play a critical role to advise you of risks, capitalize on opportunities, and of course, follow the law. The fact is, as a startup, for simple financial reasons you will use your lawyer sparingly — when it is really important: corporate formation, equity plans, a major contract, raising money, or ultimately, selling the company.
But mostly you will operate on your own so you need to get comfortable with that. A lawyer is there to advise you of risks, inform you of “what-ifs”, and protect you — but remember that you run the business, and you will decide what you need to be protected from. You might not like the terms offered by a major new customer, but at the end of the day if you need the deal, you will probably sign their agreement.
In June 2000, shortly after the internet bubble burst, I was weeks away from selling my company, and my lawyer did not like some critical terms. The buyer would not budge. My lawyer said walk away. I didn’t have another buyer and had one payroll in the bank. I thought long and hard about the risks, then signed the deal. It was my decision.
It’s the revenue, stupid
It is very hard to build a company without revenue, and even harder to sell one. I did it once, and the deal wasn’t very good! Revenue is the ultimate truth teller: “I have a great idea, people love it!” Oh? What’s your revenue?
As founders of a startup company, you may wear different official hats. But underneath it all, you are all chief revenue officers. Your number one priority is to find and build revenue. Revenue is the fuel for your company and with revenue, most other problems get solved quickly.
Just beware of “bad” revenue. You have a clear product vision, but then someone comes along, asking, “Well, can you take that and change it and customize it for us and integrate it with our systems,” and so on. This is bad revenue. You can’t use that work again, and it has no strategic value. Take it if survival is at stake, but know it will dilute your ability to execute on your core mission.
Leverage the network
Today’s entrepreneurs have incredible resources available to them. Leverage as many as you can: pitch camps, startup competitions, expert presenters, connecting with other entrepreneurs, social events, Alpha Loft and similar organizations.
The goal is to make people aware of what you are doing, hone your messaging, find potential clients, partners, employees, and to continuously learn and adapt your company to follow the opportunities and revenue.
New Hampshire is a great place to start a company. The pond is not so big you get lost, but it’s big enough to offer a wealth of people, resources, and opportunities to help you be successful.