Ten Startup Tips for First Time Entrepreneurs
Here, in no particular order, are my ten tips for first-time entrepreneurs.
- Recruit a co-founder. You don’t want to go through the startup process alone. Your first job as a founder/co-founder is to find someone who shares your vision and is willing to take the same risks you’re taking. If you can’t convince anyone to join you, you should seriously reconsider starting a company.
- Be frugal. Don’t rent an office, buy furniture, a phone system or office supplies. Conserve your cash for as long as possible. Leverage co-working spaces.
- Go through a startup accelerator. Apply to ALL of them. Being accepted by an accelerator is great social proof that you might be onto something. It is a great signal for investors.
- Don’t worry about dilution or percentage of ownership. Raise as much money as fast as possible. Never worry about valuation or dilution. Startups are basically zero sum, you’re either going to hit a homerun or fail. Negotiating the downside is just a waste of time. Get a reasonable deal and move on. Time is far more valuable than money in the startup world. Get the money in the bank and start building your company.
- Don’t be creative when it comes to raising money or organizing your company. You want your company to look like every other company startup investors have seen. Incorporate in Delaware as C-corp. Raise money in the form of a convertible note or a preferred equity offering. Do a seed round, an angel round and a Series A — don’t skip a step even if you don’t need the money. You need the social proof when you’re hiring employees, getting press and raising money from investors. Trust me, don’t get fancy here.
- Hire employees slowly and fire them fast. Take your time. Find the best people you can. Never make a rash decision. On the other hand, fire fast. The moment you’re convinced someone isn’t right for the team, terminate them. Don’t feel bad. This is a startup and everyone knows that startups aren’t about safety, they’re all about risk.
- Build relationships with investors BEFORE you ask them to invest. Get to know them. Ask them for advice. Tell them what your plan is and what steps you’re going to take. Follow up with them letting them know each time you achieve one of the goals you set for yourself. Build credibility with the investor and when it is time to raise that Series A you’re much more likely to get an investment from an investor who knows you than one you just met.
- Communicate with your board and your investors regularly. You should be emailing your board members individually each week. Giving them updates, but more importantly tell them how they can help you. Reach out to your investors in the same way each month. Stay on top of your board and investors or they’ll stay on top of you.
- Know your numbers. So many entrepreneurs don’t know how many months of cash they have left in the bank. You should know how much money is in your bank account down to the penny. You should sign every check, every time. Understand your burn rate and keep your board and investors in the loop so they aren’t surprised one day that you’ve only got three months of cash left.
- Celebrate the little wins. Startups are hard. They are a rollercoaster of emotions. When you get a win like a new hire or a new customer, take a step back and celebrate with the team. Celebrate when you have a great meeting with an investor. Celebrate when he gives you a term sheet. Celebrate when he funds. Your team is going to need the encouragement to be able to deal with all the negative stuff that is bombarding them constantly.