What? You thought I was just going to go after the Dumb VC? You know what they say about people who live in glass houses.
Nope, I’m coming for you, Dumb Founder. And this is easy to do.
The reason? The dumb founder in these stories is me. This is a catalog that I plan to add to as I share more on the mistakes I’ve made, and as I undoubtedly make more.
You think starting a company is talking about it
Once in a while I’ll hear a nontrepreneur say this:
Everyone I’ve talked to really likes the idea.
When you say that we know you will never start an exciting company. We know because your process is talking not doing. We know because in that statement you show you don’t understand innovation — which by definition is about having a founding premise which is non-consensus.
Dear Dumb Founder, stop thinking entrepreneurship is talking when it is actually tinkering. Stop getting input on your idea and start getting input on your product. Stop talking and start doing.
My self-help guide on how to avoid this: Tinker Don’t Talk.
You treat your investors like shit
These people back you, you become successful, and then you forget who got you there in the first place: your founding investors. You don’t offer them updates or the honor of your attention because you’re too busy for them now.
You weren’t too busy for them when you were dying for them to invest.
You’re like that nerd in high school who blossoms in his late 20s, finally starts dating cute girls, and forgets that he was the captain of the scholastic bowl team and a card-carrying member of the math team. You would have been on the chess team, but you’re not that good at chess.
Dear Dumb Founder, remember where you came from — treat your investors with class. Just because you have a cash-flow negative company with an over-priced top-line valuation doesn’t mean you can forget where you came from. It means the opposite. It means you need to work harder at remembering.
My self-help guide on how to avoid this: The Oracle and the Jedi.
You raised money and you don’t know what to do with it
You finally raise venture money, of course without a pro-rata look for your angels. The only problem is that you have no idea how to translate that equity capital into accelerating your growth.
You’ve taken on dilution. You have capital in the bank. But you’re not hitting the financial plan you cooked up to get the capital raised, and you don’t know what to do about it.
Dear Dumb Founder, what are you going to do? As the Denzel Washington character says in Training Day:
You know you’ve done f-cked up now.
Here’s what you’re going to do: you are going to make it worse by using drugs. You start over-marketing your shitty product. When you realize that’s not going to work, you decide that the company should do something else. You start talking about “what you really want to build” because you’re not up for the challenge of executing against what you actually have in front of you. You claim the first idea was really just a way to get to the second idea, which is like having kids because what you really want is grandkids.
Dear Dumb Founder, you made this bed, now sleep in it. Make the company that you started work. Just do it. Nobody cares how.
My self-help guide on how to avoid this: Start-Up Drugs.
So let’s recap:
You don’t know how to start a company because you talk too much. You think being a founder is about networking vs. product. You convince some angels to invest who are your best friends in the early years but who you ignore the minute you find the real money. Once you’ve buried the angels under the preference of the venture money, you realize your financial plan was a joke and you don’t know how to translate the equity into anything. So you start vaporizing capital and creating distractions. Your company exists on the backs of investors vs. actually being a good business, and so you find a way to make money off of the smokescreen by selling secondary shares.
In the worst cases, you take the smokescreen public at yet another overblown valuation, and it tanks. But why do you care? You’re rich and on several advisory boards.
Dear Dumb Founder, innovation is when everyone wins — not just you. It means your employees love their jobs, your investors get an awesome return, your customers love your product, and the company can actually stand alone on its own two feet because it’s a real business.
Don’t be late for your panel! Did you ever notice that the entrepreneurs who are building great companies aren’t available for the panel?
From 2007 to 2011, I sat on a dozen panels a year. I was the captain of the Downers Grove North scholastic bowl team from 1995 to 1996.
Start-ups are my favorite thing in the world because they are the direct collision of fantasy and reality. I love the one I am building and I love investing in them via Red Swan. My Dear Dumb posts ruffle some feathers because of their tone. I hope you view it is a rhetorical device to get people’s attention. I realize some will think me arrogant for writing in this way. For those I hope you’ll consider that gratitude and humility are emotions I engage in occasionally as well. Gratitude and humility here: on mentors, on cofounders, on mistakes made, and on women. Mostly gratitude for those who disagree vociferously and speak up as such: our competing ideas are all we have.