Startups Aren't A Fashion Show

This is part of my Series on Entrepreneurial Culture.

A good friend of mine who played in the NFL once told me that the biggest difference between the college game and the pros is the ferocious speed and the sheer density of the players. This stunning contrast was most often encapsulated for him during the course of the many outrageously violent collisions in which he participated. He has remarked on several occasions that the dramatic impression established in those first few days in the pros has never left him. Simply put, the NFL is a reality-check and a wake-up call to anyone and everyone associated with it. You absolutely need to put it all on the line and there is no place to hide. Just looking the part isn't enough, or, to borrow an oft-repeated football phrase, players who are "built like Tarzan and play like Jane" simply don't last very long.

I would hazard that the world of startups and entrepreneurship is very similar. If you want to build a successful company there are simply no excuses or shortcuts. It simply has to be an "all-in" approach that's all about commitment. Putting together a nice powerpoint presentation, executive summary, market analysis and making a nice pitch doesn't mean very much. So don't get lulled into the little self-congratulatory bubbles out there where it's all about "presenting to VC's" and 'honing your elevator pitch' and doing the business plan competition circuit.

Remember, startups are not a fashion-show or beauty contest- it's all about executing in the marketplace.

For better or for worse, the same applies to getting funded these days. Many first-time entrepreneurs have a deep misunderstanding about the investment climate out there and not only waste a lot of time seeking capital before they are ready, but also hurt their company's reputation in the process. More than ever, angel investors and VC's want to see a product that you have launched in the marketplace before they will even consider funding a startup. There are legions of people running around with beautiful and well rehearsed powerpoint presentations that describe pre-product and pre-revenue businesses with essentially the same pitch: "If only you would give me $___, I could build this."  On very rare, outlier-type occasions an investor will back you anyway because he or she thinks you have amazing potential- but remember, this is incredibly rare!

Imagine now how different your pitch would be if you could show investors your product, your customers, your adoption, etc. That first impression would be so dramatically different! Think about it- you have struggled, boot-strapped, put your own sweat and sometimes money into making this real. Most investors will immediately respect you for this, whether they like the business or not.  It distinguishes you immensely- especially in these tough times.

Below are a couple of quotes I will end with from some of the 'pro-level' guys out there. I insert them here both as a reality check, a challenge and perhaps to fire you up. I like these guys because they don't put a veneer out there and let you know exactly what they are looking for or what they think.

"If you’ve made an amazing product that I should consider for one of my ten yearly investments please send the URL of this product to------------ and cc me -------------- to get the ball rolling. No business plans, models or decks–I won’t open them. I only invest in real products built by killers. I don’t invest in powerpoint decks or bullshit business models–show me the product!"

Jason Calacanis

"The startup is a magical place. It's a place where expenses are someone else's problem..... It's a place where you can spend other people's money until you figure out a way to make your own..... The problem with this magical place is it's a fairy tale....

.... So don't use the idea of a startup as a crutch. Instead, start an actual business. Actual businesses have to deal with actual things like bills and payroll. Actual businesses worry about profit from day one. Actual businesses don't mask problems by saying, 'It's OK, we're a startup." Act like an actual business and you'll have a much better shot at succeeding."

Fried & Heinemeier-Hansson in Rework

Entrepreneur Alert: Don't Choose the Wrong Song!

This is part of my Series on Entrepreneurial Culture.

Sometimes, when Simon Cowell tells American Idol contestants that "you chose the wrong song" or "that was a bit indulgent", it makes me think of entrepreneurs I've seen jumping into the wrong business without enough thinking and preparation. Often, the Idol contestants will sheepishly nod in agreement or mutter some sort of wistful explanation such as "well, the song really spoke to me", or "I saw it and just started playing it in rehearsal". Simon, more so than the other judges then will often remind the contestants that they are actually participating in a competition.

It's of course great to be enthusiastic, but one thing I've learned over the years is that one has to save that enthusiasm and energy for the right opportunities! Starting a new business is such a massive commitment that simply being "enamored with the idea" does not suffice. Too many entrepreneurs looking for their next business look at opportunities through the prism of their eagerness to get cracking right away and don't ask the hard questions about the market, customer adoption, the competitive landscape, etc. Inevitably this leads to a lot of wasted time, money and enormous disappointment. So if you are between start-ups and by nature an incredibly enthusiastic person, here are some things to consider:

• For once in your life, just take your time- do your diligence and don't rush into a new venture
• Put out a lot of feelers and meet with lots of people who see a lot of deal flow in your community
• Surround yourself with a few sober, experienced advisors who can help you assess things
• If you have no domain expertise in the proposed venture no matter how cool it sounds, it's probably a bad idea- so be really careful
• Approach this in-between phase professionally and impose a disciplined approach on yourself
• As candidate opportunities arise talk to potential customers, investors, domain experts and develop a keen understanding of the addressable market, the competition, barriers to entry, capital requirements, etc.

I hope this helps. Let me know your thoughts.

When in Start-Up Hell, Keep Walking

Firewalker

This is part of my Series on Entrepreneurial Culture.

Let's face it- sometimes, no matter how much you prepare, anticipate and execute- things can go terribly wrong in your start-up. It's happened in varying degrees to every entrepreneur for sure. Sometimes though, you get hit by an absolutely devastating blow that comes out of nowhere. It's the start-up equivalent of a ten on the Richter Scale and it ain't pretty.

An entrepreneur friend of mine recently got hit with one of these punches and I shared with him the experience I had in my first company of having been hit with not one, but with two of these seismic knock-out punches over the seven or eight years I was building out treatment facilities across the country.

The first time around the Director of Blue Cross/Blue Shield & Medicare of a certain region (which I will not name) gave us his approval in writing that our treatment would be covered in-full for our patients should we open a facility there. On the strength of that official letter I re-located, hired a terrific staff including therapists, physicians, admin folks, etc. and signed a six-year lease on a 3,500 sq. ft. facility, (committing to it with a personal letter of credit!), and got to work. Before we knew it things could not have been going better and everyone was absolutely loving life. Our team was humming along, patients were getting much needed help and were incredibly grateful and it was just pedal to the metal for everyone. And then, a few months into this charmed existence- suddenly and without warning, the hammer blow came:

We received an official letter from BCBS/Medicare telling us they would no longer cover our patients' treatment. No reason was given. In the region we were in this was equivalent to a death sentence for the business.

When something like this happens in a start-up, everyone, especially the founders, get shaken to their core. All the herculean efforts of the past however many months and years seem all for naught. It is a physically sickening feeling that does not go away for a very long time. I'll bet a lot of you have been through something like this. It's a time when the temptation to fold up your tent and go home is at its strongest. I went through all the negative emotions that bubble-up- outrage, anger, hostility, and worse frankly. Thankfully some better part of me prevailed and at some point in the ensuing days I decided that this would not stand. We were going to fight this.

Basically I was in start-up hell and decided that we were going to keep on walking...

Over the next 12 months we waged an all-out battle for survival. We steadily closed deals with all the HMO's in the region, cut costs wherever we could including lowering everyone's salaries, (I didn't have one myself), lobbied congress intensely, organized letter-writing campaigns, enlisted the assistance of support groups and national advocacy organizations, law firms, physicians, patients, journalists, you name it- and all this well before any of us had even heard of the internet! Everyone chipped in and performed tasks they never imagined they would be doing when they first joined the company. In some ways it was beautiful and humbling to be a part of this sort of inspired effort.

After twelve months of this unrelenting siege, our opponents finally reversed their decision and relented. Of course it never is quite so simple. It probably took us another 12 months to get back on our original stride, recoup what we had lost- and this doesn't even account for the psychic, physical and emotional damage of going through such an experience whether one realizes it at the time or not.

What a nice story, right? Well, a few years later, despite taking extra precautions with all sorts of official guarantees, and with a new facility in an entirely different state to which I had relocated once more, the same thing happened to us all over again.

You guessed it... I kept on walking.

And the buddy of mine I mentioned above? Yea- him too- he's walking.

The Ideal Venture Capitalist: Top Ten Reasons Sherlock Holmes Fits the Bill

This is part of my Series on Entrepreneurial Culture.

If you’re in the mood for a really enjoyable film I recommend you see Guy Ritchie'sSherlock Holmes. In it he uses the latest movie-making technologies to literally bring-to-life 19th century London in all its dark immensity and brooding menace- from the elegant halls of parliament to the ornate rooms of masonic temples to the labyrinthine sewers beneath the city. The sets and staging in and of themselves are a masterpiece and are simply breathtaking. I think the production designer should be nominated for yet another Academy Award.

For the Sherlock Holmes aficionados out there, I’ll also venture to say that Robert J. Downey, Jr. is terrific in this latest incarnation of the great sleuth. He brings an athleticism and playfulness to the role that is a fresh twist to any cinematic adaptation I have seen. I have an inkling that his performance would bring a smile to the face of the venerable Basil Rathbone and perhaps even to that of the great Holmesian master, Jeremy Brett himself, were they still living.

I too came to this film with a sensibility that I did not have when I first encountered Holmes as a young boy reading Conan Doyle. I was of course neither an entrepreneur or an early-stage investor back then. Not surprisingly, this time, soon after leaving the theater something I had never considered before really hit me. I was struck by the realization that Sherlock would have made an amazing venture capitalist! "What a perfectly silly notion my dear Watson!", he would no doubt have replied. But I would have to insist and say that VC's and Angel Investors young and old would do well to emulate some of Sherlock’s best qualities. Here they are as I see them: 

1) Complete and Utter Attention to his Clients:

When he meets with someone, his total absorption in their presence is legendary. (He would, for example, never dare distractedly glance through his mail when receiving a guest- as many a VC are criticized for doing with their smart phones.  He also is incredibly respectful and courteous to his clients, always responding to their telegrams promptly. 

2) Immensely Perceptive and Observant:

LP’s looking for capital efficient managers take heed! Forget about your GP’s spending money to perform diligence on entrepreneurs. With Sherlock as the Managing Director, he can tell you a person’s entire story and background after the first meeting! He takes the meaning of due diligence to another level entirely.

3) He’s a World-Travelled, Experienced Entrepreneur Himself:

Worried (as Hoegaerden is) about “sub-prime VC’s”? Holmes is no newly-minted, blue-blazered-stiff-of-an-MBA just off the VC conveyor belt with no life-experience. He’s traveled the world, has enormous wisdom and runs the 19th century equivalent of a garage start-up consultancy with Dr. Watson.

4) Massive Intellectual Curiosity, Great Erudition:

Here’s a VC who doesn’t rest on his laurels and past accomplishments. He is constantly learning, reading, studying and staying abreast of new trends, the news, the latest technologies. He is the first Western martial artist, a naturalist, an amateur chemist par-excellence and an early adopter of the newest technologies and techniques available.

5) Loves the Big Idea, Huge Risk-Taker & Admires Disruption:

Here’s a true innovator not content with following the herd and investing in the latest incremental fad. He himself is disrupting the law enforcement industry with his own super-lean startup! The bungling bureaucracy of Scotland Yard and Inspector Lestrade are no match for Holmes’ home-grown operation with a staff of two, (three if you include his landlady, Mrs. Hudson).He’s confident and capable enough to trust his own vision and therefore is ready to tackle the biggest, toughest, most elusive problems in the marketplace!

6) Great Mentor, Coach and Board Member:

He leads by example, has intelligently advised innumerable clients and has helped Watson hone his now considerable skills as a crime-stopper. He anticipates events, predicts how people will react and has a keen sense of danger. Such a mentor could help any entrepreneur with the sales, marketing and hiring process, not to mention with the design of an effective strategic plan. He would make a great Board Member.

7) Great Ear for the Customer:

When it comes to understanding the views of the man on the street, no one is better than Holmes. He’s as comfortable in the elegant drawing rooms of 221B Baker Street as he is on the vilest lanes of London, has roughed it in disguise many a time and is known to have eyes and ears throughout the city. He has no allegiance to class, no patience for pomposity and judges a person on their individual merits.

8) Driven with Enormous Energy:

Here’s a guy who loves his job, pulls all-nighters regularly and will take almost any meeting. He’s relentless and ultra-determined when trying to solve a problem and this is infectious to the entrepreneurs he funds and advises.

9) High Standards & Innate Sense of What is Right:

Holmes is always very exacting of Watson and those around him, but never more than he is on himself. He takes on each engagement with an enormous sense of purpose and sense of what is inherently right. As many have said, he has his own sense of justice that is at times distinct from the rather blunt and un-nuanced version often displayed by his lemming-like colleagues at Scotland Yard.  A loyal teammate with an unfailing moral compass, he is an enormous asset to the companies in which he invests.

10) Sense of Humor:

Lastly, as Robert Downey Jr. exemplifies so well in the film, Sherlock has a terrific sense of fun and playfulness and mischief- rarely taking himself too seriously. It is always disarming and endears him to Watson and many of his clients.He is respectful and yet irreverent all at once.

Mischievousholmes

Partnering with “Friends” in Your Startup: Good or Bad Idea?

This is part of my Series on Entrepreneurial Culture.

Lots of people worry about partnering with friends when they launch a startup. This is mostly because there’s an old saw out there, deeply ingrained in our collective consciousness about how the best way to ruin a friendship is to get a friend involved with anything having to do with money, business and the like. I’ve heard this meme repeated ad nauseam throughout the years in the form of “advice”, mostly from non-entrepreneurs, parents, grandparents and others who have never actually been involved in business. I actually think this should take its place among the annals of the most commonly dispensed worst pieces of advice given to entrepreneurs. In my view it’s just a gross generalization based on some seriously flawed views about business and friendship alike.

Obviously if you are thinking about partnering with anyone, let alone a friend, it should be because you believe that person will add a great deal to the business you intend to build. You should never partner with someone for the sole reason that you trust them and feel comfortable around them. Nevertheless, if you are considering partnering with someone who will bring enormous value to the new venture who also happens to be a great friend of yours, you are actually incredibly fortunate. Now you won’t have to spend any time worrying about your partner's character, capacities or loyalties and you both can focus 100% on building a thriving enterprise. To boot you'll have a trusted friend in the same foxhole as you embark on one of the most challenging aspects of human endeavor- a startup company.

There’s a slight catch, though. One thing you’ll absolutely have to do before making such a momentous partnering decision is to ask yourself whether this person is really a true friend of yours. As we all know, the word “friend” is a catch-all and can mean almost anything, as in "My good friend, the Congressman from the great State of ....". You get the picture I'm sure.

So let me replace the old saw above with abetter one: “Know who your friends are”. If it’s someone you’ve relied on for years through thick and thin, someone who’s loyal, unselfish, fair-minded and puts your interests right up there with his or her own- you are talking about a friend. If it’s someone you started following on twitter last month who tweets about the same cheeseburger you like at Shake Shack- it might be time to take stock of things.

Remembering Dersu Uzala, Siberian Entrepreneur

This is part of my Series on Entrepreneurial Culture.

It occurred to me recently that when you find yourself around folks that take great care to cultivate the particular ecosystem in which they dwell, the environment is always uplifting and enriching. A recent venture event I attended of this kind brought to mind that great character, Dersu Uzala, who Kurosawa immortalized in one of my favorite films of the same name.  So as to set the stage for my main point, I’ll recall now one of the early scenes from memory, so forgive me if I omit some details.

On a freezing cold night in the Siberian forest a group of Russian soldiers are suddenly joined by a mysterious Nanai tribesman as they sit warming themselves around a fire. He seems ancient and does not greet them as they sit in stunned silence watching him as he slowly lights his pipe. After some minutes he breaks the charged silence and strikes up a conversation with them. It turns out that this is the beginning of their remarkable adventure with this nomadic tiger hunter who serves as their guide through the wilderness. The men soon learn that wherever he goes he is looking out not just for himself, but for those around him and who might come after him. Twice he saves the lives of Captain Arseniev and his men by virtue of his great experience and wisdom and in one scene they watch with fascination as he leaves some food behind in a remote shelter for anyone that might stumble there after their departure.

The Russian soldiers never forget Dersu. If you’re able to rent the film from Netflix, I doubt that you will forget him either. Let me know what you think.

We who make our livings in the world of start-ups also dwell in our own precious ecosystem comprised of entrepreneurs, investors, advisors, inventors and technologists. It seems to me that how we tend to it and how we treat each other along the way will be the ultimate measure of how much we can achieve.

Etymology of the Word Entrepreneur

This is part of my Series of Entrepreneurial Culture.

I was actually thinking about the word entrepreneur itself recently and found this entry from Wikipedia interesting: http://en.wikipedia.org/wiki/Entrepreneur

“…The word "entrepreneur" is a loanword from French. In French the verb "entreprendre" means "to undertake," with "entre" coming from the Latin word meaning "between," and "prendre" meaning "to take." .... Entreprenuer also sounds close to a sanskrit word anthaprerna which means self motivation.”

One can sometimes learn a lot from the root etymologies of words. This one seems to boil it down to its essence quite well doesn't it? Entrepreneurs evidently “undertake” things and they are “self-motivated”. It’s quite an elegant word as well. Entrepreneur. Sounds better than under-taker :)