I attended a talk hosted by the Harvard Business School in New York City where the guest speaker was Tim Draper of Draper Fisher Jurvetson (DFJ). He is a top tier VC whose funds have invested and exited several well known global companies such as Skype, Overture.com, and Baidu.
Tim’s talk was extremely insightful and there was one specific quote that stuck in my mind. Tim has launched Draper University – a rather innovative education format that fuels the spirit of entrepreneurship in students from all over the world for a semester. A group of students from Draper University were on a field trip and met with Elon Musk. They asked him what advice he had for future entrepreneurs. Elon apparently smirked and said, “Don’t do it!”
Ask any successful entrepreneur and he will probably say the same thing. But, they all did it! And they will tell you that the fruits of starting up something that you own are sweeter. However, it is not an easy walk in the park. I can tell you that first hand. In this article I will share a few lessons that I think can be of help to you as an entrepreneur.
1. Not all ventures will succeed
In fact most ventures fail but it is that failure which creates true entrepreneurs. Those who give up after failure are the ones who will never make it as entrepreneurs. Those who dust themselves off and rise from the ashes are the ones who have the winning instinct and they will be the ones who succeed.
2. Plans are important
Having a business plan is essential. Having a gut feel is critical and having a capable team is fundamental. At the end the way the movie plays out is: The plan falls apart, the company’s direction pivots, the financial projections are never met, but if the fire in the belly is still ON and the leadership’s drive has not diminished (at least in the eyes of the team), then the team will stand by you and build on the vision that you all set forth on and you will ultimately have a business that will make you and your team proud! The basic rule to remember as expressed by most VCs from their experience is that double the money and time that an entrepreneur has planned for, and if it still makes sense, then invest!
3. Entrepreneurs need to look at their own financial capability
You need to see whether you have access to at least a year’s worth of finances to continue to keep their own kitchen running. If not, don’t do it. Build the financial base until you have at least that much buffer to sustain yourself through the first year of burn.
4. Get a buy-in from your family, spouse
You can even ask some peers before deciding to start up a venture. If they are all supportive, half your challenges are then taken care of. You won’t have to deal with your family or spouse nagging “I told you not to do it…”
5. Have faith in your idea, God and yourself
You must not waver in this. There will be so many curve balls thrown at you through your journey that you may wake up in the middle of the night in a cold sweat, but keeping the faith will carry you through.
6. Keep your costs low
Fixed overheads must be rationalised to be at the bare minimum. Unnecessary overheads can kill your venture faster than anything else. Be smart and efficient.
7. Fundraising is ‘your’ job!
If you are looking for money, no one can be as convincing as you – the founder. Go at it yourself and exhibit the passion that only you can. Remember that your confidence is what will convince investors. They like to see that you know your stuff, you know how to build it, you know how to scale it and that you are able to pick the best people and motivate them to join you on this journey.
It does take courage and conviction to become an entrepreneur especially if you have been used to working as a professional and receiving a monthly cheque. There is nothing more unnerving than the realisation that ‘you’ are now in control over your own destiny and that you alone can either make it work and get paid or not.
I can think of several examples where people have woken up to an idea, quit their job and set up a business. Very few of them realised that they don’t have the finances to support themselves during the course of time it will take them to build the company. Halfway through it they realise that they are in trouble and just simply give up. That is tragic because the passion was there to succeed but there wasn’t enough thought given to planning and the ‘what if’ factors.
What if it takes me longer to build my company? How will I survive then? Do I do a down-round? If so, will I lose credibility? Will I lose control? Etc. These are all questions that are best planned for before starting up.
The flip side to this is that the idea catches on sooner than expected and then some entrepreneurs end up like a deer caught in the headlights. This is a good problem to have only if you are open to asking for help in areas where you may not feel all that comfortable with such as finance, corporate governance, sales, marketing, etc. It is better that you know and appreciate your weaknesses rather than convince yourself that you can do it all.
In such a situation, always turn to people you trust and get them to advise you. Tell them what you are faced with and most probably they will have some ideas for you. You need to ask for help and be prepared to take it.
In fact, one of the things to do in the early days is to constitute a board of advisers who you can turn to when things get tough or when unexpected opportunities arise and you need help. Selecting a good panel of advisers is key, so that they are able to give you that 30,000 foot overview and help guide you in the best and the worst of situations.
If you end up starting a partnership, then constituting a board is advisable. Even if it is a small company, the discipline of conducting board meetings and voting on key decisions is what will help the company long term to maintain corporate governance and a record of decisions that were made.
I can’t emphasise this enough. Having a strong finance person is absolutely critical to laying the foundation and building a solid business. It is not just an accountant that a business needs. It is a finance person who shares your vision and is a partner to you through your journey.
There are several other lessons that I can list here but those are valuable lessons that you should experience and learn from. It’s no fun if you are told everything to watch out for and don’t learn from some mistakes.
Lastly, the world has immense respect for entrepreneurs… who succeed!
Karim Rammal is President, Unicorn Consulting and a serial entrepreneur. www.linkedin.com/in/rammal