I take notes for this blog (and for other writing that I do). Most of my scribblings go nowhere but the circular file, but now and again a thought takes root and grows into something I hope merits reading (see last week’s post, number 12). There are lots of things that don’t merit full posts, though I wish they did. They nag at me because each of them says something about my perspective, in particular how I view entrepreneurs and their companies.
So here are five thoughts from my notebook:
- Read all you can, as much as you can, on as many subjects as you can. The half-life of knowledge (and market sentiment) continues to decrease. What you knew last night is open to question today. Style, approach, and value are more fluid than ever before. Which doesn’t mean that one must abandon all received wisdom, there is still the firm ground of truths and insights that endure, available in treasured books, articles, speeches, videos that continue to provide support and food for thought. An example: Grudin’s The Grace of Great Things is an thoughtful book on the subject of creativity and entrepreneurship – creation and disruption – that merits more attention than it received (out of print, used copies available from all the usual sources). Grudin’s writing has informed my work for three decades. One more: Sabine Hossenfelder’s book Lost in Math (not to mention her Twitter work @sdkh and her YouTube channel) is a testament to bravery and brilliance, and how one woman has, in short order, changed the world.
- Learn to appreciate both sides of the table. If you’re not living in your customer’s head (or recognizing that their problems are more important than your product’s coolest features), you don’t get what entrepreneurship is all about. Which is why I’m always touting Mark Suster (@marksuster on Twitter; www.bothsidesofthetable.com is the website). He’s a successful VC and entrepreneur and he offers perspective from both ends of the telescope. Principled, funny, and insightful – his philosophy of empathic investing contributes to our community writ large.
- Eliminate ‘unique’ from your vocabulary. I did an experiment in 2014. I tallied all the startup presentations/decks/one-pagers that used the word unique. Of more than 350 businesses that crossed my desk that year, more than 60% included the word ‘unique’ (not to mention the egregious and stupid ‘very unique’). And the numbers have not decreased. The word has lost currency. Potential investors have learned to ignore it or mark you down for it, as they will for bad grammar or spelling/punctuation errors in your deck. Fundamentally, nothing is unique. However clever you are, there are others doing/thinking what you’re doing/thinking, and there are substitutes in the market for what you’re developing. As Kendrick says, sit down, be humble.
- Startups that plan to scale don’t show EBITDA profit in year 3. Or year 5. If you’re looking to build a startup that sells in 3-5 years for $25M, claiming you’ll show a profit can be a good thing (though most investors will look at your financials with suspicion). Yes the promise of profits does show optimism and enthusiasm, and your desire to tell investors what they want to hear. If you want to (or claim to) scale beyond Ireland and the UK, however, you’ll need lots of money and it’ll take time. Smart investors understand and will be willing to ride with you. All too often I see companies with international ambitions deliver financials that scrimp on sales and marketing in order to make numbers dance prettily. Again, investors will immediately sniff out this kind of parsimony. You can be cautious or ambitious, you can’t be both. How long did it take before Amazon showed a profit? Or Tesla? Or Revolut? Uber has disrupted transportation but still loses money. If you’ve got big dreams, don’t short-change your company – or send mixed messages to investors.
- Interview potential investors. As an entrepreneur, you expect a grilling from potential investors. Smart investors will turn over every stone, explore every avenue, understand you and your business from every angle. Which makes sense, since you are proposing that they hand you fistfuls of dollars (or euros or other fiat currency). With a nod to Mark Suster’s Both Sides of the Table, you should be prepared to question the investors as well. This is an important relationship, one that will need careful management, one that shouldn’t be rushed, whatever the need for money. While they are busy doing diligence on you, your company, and your team, you should be doing the same on them. Talk to other investors as well as companies in which they’ve invested. Be willing to ask potential investors about style, successes, shortcomings. What is their approach, attitude, reputation? Who are the members of the investment team with whom you’re likely to have the most contact? Who makes the decisions at the firm? How many funds have they raised and where are they at in their current fund? Do they follow-on invest? Do they lead rounds or syndicate? Do you fit into their philosophy/portfolio? My overarching comment: don’t take money from people with whom you’d rather not dine. The best investor/company relations benefit from a solid foundation from day one, which assumes a measure of mutual respect.
I didn’t empty the notebook, though I found more to say than I had anticipated. Hope these are helpful, or at least encourage some disagreement. Have a great day!!!
Educator (Associate Professor) / Entrepreneur / Leader of angel communities /
Entrepreneur in residence at PorterShed and BioExcel