Most advice out there for tech entrepreneurs comes from investors and the advice is from the point of view of an individual or fund who wants to maximize their profits.
Areas where an entrepreneur and investor’s goals are not aligned:
- Entrepreneur wants to keep more equity, investor wants more equity for themselves.
- Entrepreneur wants more control in the form of board seats and less or no preferred stock with it’s rights. Investor wants to have levers to be able to block exits, fire CEO’s and so on.
- Entrepreneur may not want to get acquired. Investor wants an exit with a short time horizon that is low risk and easy to implement (IPO’s are onerous).
- Entrepreneur should be doing everything to serve the customer as their target market.
- Investor wants to groom company for acquisition in many cases, so growth, being a credible threat and a beauty contest is the priority.
- Entrepreneur wants to learn how to be a CEO on the job. Investor thinks they already know and interferes with a very necessary learning process.
There are others.
So I don’t think there are any resources, at least none that I’m aware of, that mentor entrepreneurs with the goal of helping them retain maximum (perhaps all) equity and control of their business.
A mentorship program that does not seek equity in the companies they mentor – and where giving away equity is seen as a fail – would empower entrepreneurs to get further along before they seek funds, if ever. It would create stronger early stage businesses and be very good for for the economy and for customers.
We need to be creating Tigers, not Cows in our entrepreneurs. I’ve seen people who were generating 5 figures a month as a three person team – and customers who loved them -stop doing that so that they can “be a startup in Seattle”.
I suspect part of the problem is entrepreneurs themselves. Many live in a ‘permission’ culture where they need to get the OK from an incubator to get permission to create a tech startup. Why not just incorporate the company yourself and start building product and business model? There’s nothing stopping you.
Signing up for an incubator or participating in startup events and programs feels like forward movement, but that traffic from press releases after your first round of funding is not from customers and it goes away after 48 hours. Those investor phone calls to mentor you and those group sessions with other entrepreneurs aren’t going to teach you how to create something unique and useful for your customers – they’re going to take you away from doing that.
Tech startups are really simple:
- Solve a real problem. It helps if it’s one you have so that you can understand your customer a little better since you’re the first customer.
- It needs to be one you can charge money for. If you can’t and there are no other revenue generating options, do something else.
- The people you’re charging need to be a growing group.
- They also need to spend money – the more the better. It helps a lot if they’re using your product to solve a business problem because it’s much easier to spend if you’re a business and to spend more.
- You need to be able to be the best in the world at what you’re doing. If you can’t be, then go do something else.
- It’s OK if someone else is already doing what you’re about to do, as long as you can do it way better or way cheaper them.
- You must find a way to tell people about your product or service. Here are a few ideas:
- Using your product causes people to tell their friends or customers about your product.
- Create a mailing list by providing information that very closely targets the people you want to tell about your product. This takes months, so plan ahead.
- Write blog posts that are useful or controversial and appeal to your target market and promote them on social media.
- Release data that is new in the form of blog posts or white papers. Then hit up journalists directly. They’re always looking for sources and new and surprising data is a source.
- Incorporate yourself to protect yourself.
- Trademark your name. Don’t listen to the naysayers. I’ve been sued over TM and sent my own C&D’s. You might be too.
- Get an awesome but reasonably priced attorney. Don’t hire a big firm and throw equity at them. Get a small lawyer with big firm experience. Generally when you interview corp counsel they’ll give you a 30 minute call they don’t charge for. You’ll learn a lot talking to 3 or 4 lawyers.
- Nolo is your friend for everything legal. My first startup was sold and I incorporated it myself. When the due diligence came back, I felt like it was proof that I’d created a real corporation without completely screwing it up.
- Don’t quit. Even when the going gets tough. Even when you’ve invested your life savings and your 401K and are now living with your in-laws in your 30’s. Still, don’t quit. I speak from experience.
It’s going to get very very tough. Kerry and I (my wife and co-founder) call this the “valley of the shadow of death”. Don’t give in to others who tell you you should be “burnt out” or “aren’t you suffering from burnout”.
Humans are very tough creatures. You may confront challenges while you’re being an entrepreneur that are far tougher than entrepreneurship is. You can handle it. Put your big boy or big girl pants on, square your shoulders, take a deep breath and deal. Again, I speak from experience.
Exercise. Your health is the most important thing. Don’t take the attitude that you need to work like a slave for a few years so you can live like a king for the rest of your life. That’s bullshit. Entrepreneurship is a marathon and you need to make it sustainable and so take care of your health. Watch what you eat and get exercise at lest 3 times a week. If it’s crunch time, it may help to eat the same 3 healthy meals pre-prepared on Sunday all week long. That way you don’t have to think and you can’t screw it up.
Creating and growing a business can give you a lifetime of happiness and the kind of fulfillment that is indisputable. As my friend Joe once said when we had summited Rainier together: “You know what? No one can take this away. ”
Footnote: For a long time I was a solo entrepreneur with a co-founder and even had a profitable exit. I ran my newest company for a while without investors and was so anti-VC that I even started a blog called novcrequired.com. Then I connected with an amazing investor who gave me just enough mentorship, amazing introductions, a Series A round and then stepped back and watched us screw it up, figure it out and then thrive.
He continues to serve on our board and we’re lucky to have him. I think my story is rare. I also think founders should take the solo route for as long as they can and have a goal of never raising money if they can avoid it. Making software does not require any capital investment. You’re not building an oil rig. You just need to code and ship.
So do it, solve a real problem, charge for it, make your customers happy and build a job creation machine that changes the world.