Patience, Grasshopper (Some Things Can’t Be Hurried in a Startup)
MUST raise capital now.
MUST hire team now.
MUST build more product features now.
Listen, I’m all for teams that run through walls and take the hill and press on toward the prize rah rah…but…
There are some things when building a startup that just take time. Pushing too hard or too fast in certain areas may lead to future regret. At Promus Ventures, we see these mistakes all the time:
1. Marrying up with a founder with whom there is no past relationship:
You don’t walk down the aisle to marry the man or woman of your dreams that you just met last month. A marriage lasts a lifetime, and you should think of your startup partners the same. Better personally know those in the boat with you and have watched them go through difficult moments in their lives. Newsflash: building a company is hard and there are more tough times ahead together, better be prepared.
2. Hiring someone good rather than someone who is great:
Character is the most important piece of every hire, and too often teams want to bring in needed talent too quickly. Hiring starts on day 1, and if you let this discipline lag you’ll find yourself behind the ball when a important slot needs to be filled. Don’t jump at the first good opportunity you see, and don’t make quick decisions because the candidate says he or she needs to make a decision in the next week. Move according to your schedule – if you’re good, people will wait for you, not the other way around.
3. Giving too much equity to nonfounders and advisors too fast:
We are all in favor of giving everyone in the organization equity, but be careful on how much and when. I’ve seen cap tables upside down even before the Series A, and it’s not pretty. Do your homework on what the market is paying to hires and advisors you want. It’s not about greed – it’s about being able to scale a business properly and bringing in employees that are smarter and more talented than the existing team (the key to hiring for what it’s worth). Only way to do this is to pay fantastic people what they are worth in the market and you’ll be surprised how much it takes to retain this cadre of people.
4. Bringing in the wrong capital:
Whether angel or institution, everyone who invests in your company should bring something to the table that is unique to the entire investor set (if they do what they say they will do is another story). Too many teams jump at the first investors that want to put capital in their business without waiting to talk to others that could be more value-added. Don’t believe that ALL you should be doing is building product and the faster the fundraising process is done, the better. It’s grueling (I know), but it’s unfortunate to say no to someone to whom you wished you could have said yes. Always try to leave a little space in the round 30 or 60 days post-close to bring in investors that could be helpful (any good investor will agree to this).
5. Mistaking following up with pestering:
Act like you’ve been in the end zone before. If you are an enterprise company and have been working for months to sign a large customer, endless calls and emails only make you look desperate. When raising capital, pounding investors asking to set up a call “in the next day or two” only signals that your round is not coming together well. Look for momentum from the other side in signing a deal or investor. Always ask the other party what their next steps are. People aren’t good at saying no (unfortunately), so if you detect any fudging, then followup later and move on.
Desperate startups and companies fool no one. Instead of wildly slinging yourself and your team at anything that moves, instead take a breath (!) and build a world class team, vision and product. You’ll always have to work for customers, talent and investors, but this time you won’t have to beg.
