October 25, 2007

Let it go, Bill!

Last week I blogged about burning boats. Today, I’m addressing the case of an entrepreneur who has burnt his boats, given it everything he’s got, and failed because of pride.

I’ve spent extensive time over the past few days with an entrepreneur who needs to face a bitter reality: He has a great idea that he will never make successful.

We’ll call him Bill.  He’s been working on his project for 20+ years and has yet to turn the corner.  He can’t bring himself to walk away because people continue to tell him what a great idea he has and how big it could be.  The people Bill is talking to are telling the truth.  His idea is amazing and it works.  With the right management team, Bill’s company would have a high probability of success.

He has had several offers from investors/experienced entrepreneurs with successful track records to buy a controlling stake in his company, but Bill refuses to give up control of his baby.  He insists on being the one to lead the company and will not hear otherwise.  It’s his idea, he’s done all of the work so far, and ain’t nobody going to take it from him.

I’m sharing this story because I’ve heard so many like it from dozens of frustrated entrepreneurs.

I hope Bill will find someone who will take control of his business, help it reach its potential, and let Bill maintain a small ownership stake.   However, I’m afraid his window of opportunity is passing him by, and it may be too late for him to succeed.

Do you think like Bill?

Burn baby, burn!

We have talked recently about the importance of having enough runway to get your company through each stage of its life.  During the startup phase it is obviously very important to use your money sparingly and to cut corners where you can.  That being said, you do not want to scrimp on the things that MAKE your company what it is.  Too often web startups do not protect their servers whether it be through missed backups, poor IT staff, or other issues.  If you are a brick and mortar business, having a fire hazard for a building often takes out businesses that otherwise would have survived.  If your business relies on something completely, make sure that it is solid and that you have protections around it.  Just ask this startup company about this issue.

Whether it be leased equipment, buildings, servers, financial, or legal, make sure you are looking out for quality.  The last thing you need as a struggling startup is to be taken down by a fire, hackers, lawsuits, or broken equipment.  While certain things are out of your control, most are at least partially avoidable.  In the fast world of dreamy eyed entrepreneurs, these things are often forgotten.

How to help your startups

As your portfolio expands, it often gets hard to juggle board meetings and helping the individual companies.  As a recent startup, FundingUniverse would like to give a few thoughts as to what a new company most needs from an investor with little time.

1. Expert advice from those with experience in a certain discipline.  This means that specific advice about an area of the company will be more productive than advice about a company as a whole.  We often see startups that are constantly reminded of their overall shortcomings, but who never receive specific critiques on what exactly they are doing wrong.  Most companies know they are doing something wrong from a high view, bring it down for them and they will have a much better chance of correcting it.

2. Encouragement is key for any startup.  While critiquing is important, if it is not followed up with encouragement, entrepreneurs will often stop listening.  If you have the chance, respond to press releases and praise companies that have launched new projects or services.  It is best if these come unsolicited because it shows your ongoing interest in the company.

3. Help keep the focus of the entrepreneurs.  Often entrepreneurs can get bored of staying the course with a company and try to go beyond what is good for the company.  Try to encourage the company to stick to a plan and only add to it when absolutely necessary.