One of the things that has always annoyed me about most investors’ blogs is they seem to be completely void of what frankly can often be the most difficult part of launching a company: dealing with the emotional side of the equation. A prime example is when you reach an existential crisis with a co-founder or early employee. These people are like family. You’re joining a fraternity together trying to launch a company and the personal bond is typically much stronger than in larger organizations.

What makes these situations even more difficult to deal with is that as an entrepreneur you’re thrust into this strange emotional paradox. On the one hand you need to be highly skilled at establishing empathy with people, and on the other you need to be very level headed when making difficult high pressure decisions that effect someone else’s life. Essentially what that means is you need to be very good at feeling other people’s pain and yet when you’re in a position to let someone go you need to be able to absorb and push past that anxiety to make a rational decision. …

It’s never a good sign when after a call with an entrepreneur one investor says to the other “I promise you he wasn’t that crazy on my first call with him.” That’s actually a direct quote from me earlier this week. Now I don’t bring this story up just to poke fun at an entrepreneur, far be it from me to ever do that. There would be no StartFast without the incredibly talented, driven, and passionate founders we work with.

I wanted to highlight this story because it epitomizes a very common trap entrepreneurs fall into when pitching their business to the outside world (not just investors). Founders are always straddling this difficult line between being imbedded in the weeds of day to day operations while at the same time carrying with them a large and often abstract vision for the company. That means when they’re describing what they’re doing to people on the outside one of two things usually happens: 1) they dive too deep into the details in which case everyone gets lost without context, or 2) they jump to their higher level vision in which case no one can wrap their head around what your company looks like in the real world. …

This is an actual conversation I had with an entrepreneur earlier this week:

Entrepreneur: “I think we are bit later stage than when you guys typically invest.”

Me: “I’m not sure I would agree actually. You have an experienced team but you are a pre-revenue SaaS company.”

Entrepreneur: “Well yeah but I’m really confident in our sales-pipeline.”

Me:

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One of the most fascinating parts about my job is that I get to speak with so many successful (often very successful) entrepreneurs about their journey. Each story is very unique and you can’t help but marvel at how things turned out the way they did. That’s because the most common pattern I’ve recognized in all of my conversations is that the path to success not only isn’t straight, it sometimes takes a complete nosedive off a cliff followed by 3 or 4 times of falling on your face before eventually clawing your way to success. In fact much of the time their CV essentially reads as “founded 3 total flops followed by a unicorn”. …

StartFast typically works with companies that have raised < $3MM prior to the accelerator so it’s fairly common for me to work with founders who are thinking about raising money from “friends and family”. These are accredited investors within your personal network, such as the stereotypical rich uncle or successful college friend who are willing to invest in your company during the high-risk early stages.

While this is very common and often essential to a company’s survival, I’ve also seen an unfortunate number of cases result in either stunting the company’s growth or putting it in financial jeopardy due to totally avoidable errors on the part of the investor. …

The co-founder relationship is unique from any other. Regardless of how you came to know each other, once you become co-founders there is a special bond that forms. After 12 weeks of working with a team in our accelerator, in many respects you get to know them better than their parents. You see them at their highest highs and their lowest lows. You get to witness the full spectrum of a person’s personality, intellect, and emotions.

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This is why it really pains me when I meet with entrepreneurs where one co-founder is full-time and the other(s) are part-time. On the face of it, it’s completely natural for this type of arrangement to form. Startups have a tendency of colliding head-on with your personal life in a way that typical day jobs don’t. …

We specialize in working with experienced founders so the majority of pitches I hear tend to be from entrepreneurs that have every right to be confident in their background. They may have run companies before, have years of industry experience, been an early employee, or just graduated from Wharton with their MBA. So you’d think I’m jumping into the lion's den here when it comes to working with founders with big egos but truthfully, I’ve found little correlation between a founder’s background and their level of arrogance.

Unfortunately, that means this problem is pretty pervasive throughout the entrepreneurial community and it’s an important point to address because an entrepreneur’s job is primarily dealing with people and an investors job is primarily to invest in people. The impression an entrepreneur makes during a pitch can have a tremendous impact on their ability to raise funding. If even one prospective investor walks away saying “what was with that a-hole!?” that’s a needlessly missed opportunity! It had nothing to do with how lucrative your business was and everything to do with how you presented yourself. …

Who is the salesperson’s worst nightmare? It’s not someone who isn’t interested, it’s not even the diva customer who wants all the bells and whistles for free, it’s the person who says “let me get back to you” or as I like to call them “Time Wasters”.

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The challenge here is not with how to deal with Time Wasters. Most of the time the solution is really simple; put them on a drip campaign and perhaps one day they will express sincere interest. If they don’t, then they’re just sitting on a mailing list not costing you anything.

The difficulty is that Time Wasters have a tendency to create a false sense of hope for a group of people vulnerable to confirmation bias. The reason I like to call them Time Wasters is because they lull entrepreneurs into thinking that they are interested but are never willing to commit. As a result, founders are led down this horrifically long and sometimes arduous road with zero hope of success. …

Differentiation is another topic where founders can learn a lot from considering the perspective on the other side of the table. As a founder you often have a relatively narrow focus: your specific company operating in your specific market. When a founder looks at their competitive landscape, it’s easy to take a cynical perspective of any other company. I used to do this myself all the time! Of course, you believe “you’re doing it better”! So do the others guys. So let me tell you something that should sound pretty obvious in retrospect. …

One of the most tragic occurrences in the start-up world in my opinion is when a founder fails to raise funding for totally preventable reasons. In other words, they’re addressing an important problem for a big market, have a unique, valuable, and defensible value proposition, etc. but then totally drop the ball during an investor conversation.

It’s no secret that investors place a significant weight on the founding team. Every investor panel discussion and VC fund’s website will inevitably mention something related to why they only invest in the most skilled/experienced founders. It may seem repetitive or cliche’ but the reason this is so common is because start-up investing is inherently high-risk and yet there is very little data to base the investment decision on. Investors therefore try to decipher how much confidence they should place in the founders’ ability to make their vision a reality. …

About

James Shomar

Tech Entrepreneur | Investor | Autocross Racer | Program Director https://startfast.net

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