In August, I was featured as the Preccelerator “mentor-of-the-month,” and one of the questions they asked me was, “What one piece of advice would you give to an early stage startup regarding your area of expertise?” I didn’t read the instructions very carefully, and I came up with more than one nugget of truth that I’ve personally experienced. In fact, I decided to create two lists: one from my start-up experience, and one from my UX experience. The UX list will be in another post. Here’s the start-up list:
- Don’t fall too in love with your amazing idea, and be WILLING to be wrong even when you are positive that you are right.
- Beware of well-intentioned people who do not know what they do not know, for they are the truly dangerous ones (my dad’s favorite piece of advice).
- If someone’s offering more money than you think you need—take it. It’s really going to suck if you run out of money before you get to cashflow breakeven.
- If your idea is really great then that means other people have probably come up with the same idea. That’s okay—it’s validation.
- NDA’s are overrated. Don’t ever ask a capital provider to sign one.
- Don’t take small amounts of money from a whole bunch of people. It’s a big headache, and a messy cap table can prevent you from raising future money.
- The investor with the smallest stake is usually the loudest and most annoying.
- Don’t take money from non-accredited investors. It’s not fair to take money from people who may not understand the risk or can’t afford to lose it all.
- Make sure that you are your partner(s) are compatible. It’s like a marriage, and the staff are your kids—sorta. The “kids” get really freaked out when “mom” and “dad” fight.
- Resolve conflicts with your business partner directly and quickly. Listen to each other.
- People start getting weird when a bunch of money comes into the company. Document everything and take notes.
- Pay people what they are worth at market salaries. Stock options ARE NOT a substitute for compensation. Stock options are compensation for the RISK of joining your start-up instead of joining a stable company with great benefits (another gem from dad).
- The market salary thing doesn’t apply to founders. Founders may need to “not eat” so that they’re employees can.
- Have a really good corporate attorney because s**t happens.
- Have a really good CFO—even if he or she is only part time. A good CFO will keep you grounded and could be the one who saves the company in a crisis. The CFO, according to killer CFO, John Hoang, is the “Keeper of the Business Plan.”
- “Advisors” don’t usually earn the generous stock grants that entrepreneurs seem all too willing to offer. Be sparing.
- Don’t add board members just because they’ve been really successful (i.e., made a lot of money). Some of these people have overly high opinions of themselves and don’t always know as much as they think they do. Do your due diligence on potential board members and investors. Talk to people who’ve had experience with them on their boards or cap tables. You need your board members to propel you forward with care, support, wisdom, and experience at least as much as with their money.
