I spent some time at Orrick's "Top 10 Start-Up Mistakes" event this morning, part of their Total Access series. Despite their size Orrick is a great law firm for early-stage companies (they have a dedicated practice for that group under Don Keller, who was partner on my first startup in the late 1990's) - unlike some other tech law firms who have become too big and arrogant for the little guys.
Panelists today were Ann Miura-Ko of FLOODGATE (formerly Maples Investments) and Howard Hartenbaum of August Capital, along with George Garrick, CEO, Offerpal Media and Gary Swart, CEO, oDesk.
As we know there is no limit to the ingenious ways people find to royally screw things up - as a start-up or anywhere else. As one panelist put it, experience is what you get when you fail to get everything else you wanted so, in lieu of learning the hard way, learn from others! In order of importance, most important to least (of the Top 10), here's what the panel said. I'll cover some of them today and some in my next post.
Mistake #1 (The Worst): Burning Your Bridges
Paraphrased, this came out more as "live by your word and act with integrity". Interesting #1, this, because its not limited to startups, obviously. In the world of startups, however, there are many inexperienced people, sometimes significant personal money at stake, lots of uncertainties and a huge amount of trust needed between investors, boards, founders and employees to pull it off.
This can cause people to behave, lets say, in a manner which is less than desirable or ethical. And outsiders sometimes take advantage of this (example quoted: Facebook's and Microsoft's habits of structuring acquisitions to offer more value to key people they want to keep going forward, vs. the deal already agreed between the investors and the founders/employees).
The point comes down to this. As you go into this with your team - all of the stakeholders - keep your word, make sure everyone feels good and properly treated and take care of your reputation. If you shake hands and then do something different it will come back to haunt you.
Mistake #2: Not Focusing Nimbly
Focus is critical in startups. Its very easy to get distracted, or overreact to outside factors. That said, the reality is that things change as you go along. So you need to be highly focused, yet nimble enough to change tack if something happens to significantly impact your plan. Fact is, many successful startups never set out to do what they ended up doing.
Ann Miura-Ko from her investments: Chegg was Craigslist for Colleges - until Facebook started doing it, so now it's textbook rentals for students; Circle of Moms was started as Circle of Friends by two young, single (no kids) guys as a way to create groups on Facebook, so when Facebook started doing the same thing they focused on Moms as one of the key active large groups that formed under their prior plan. (Hmm, notice a theme in Ann's investing??).
Focusing nimbly was also defined by one panelist as being able to say what you do clearly, in one sentence. Focus certainly, not sure about the nimble ...
Mistake #3: (Not) Letting Your Investors Become Your Trusted Advisors
This one actually focused more on developing the right dynamic between you and your Board/investors. A consistent theme was along the lines of "well, you (the CEO/Founder) are in charge and you need to run the company", with of course the caveat that if we don't like what or how you do it then we'll take you out. Reality is that you need to pay a lot of attention to who you take as your investors and how the dynamic will play out. Many investors have two completely different sides - when things are going well, and when things are not. So check out both sides with people who have worked with both sides - before you take the money.
If you need more help from your Board or investors its OK - to a point. Introductions to potential partners? Great. Taking over running the business - not good. It all depends on the timing, the relationship and the needs. Generally investors want you to listen to what they have to say, but not be told what to do (otherwise they should get someone else). So you have to figure it out but with their advice and input.
This also helps with one key point: never surprise your Board! Always keep them in the loop, knowing what's going on.
Mistake #4: Not Having Trusted (Valuable) Advisors
Naturally I like this one (becoming a trusted advisor - and earning that role - is one of the ways I help startups myself). And I agree with it because even experienced entrepreneurs don't know it all. They tend to know a few things well, and the rest has to come from around them - the team, the investors/Board and the trusted advisors.
In this case "trust" means "valuable". They need to add true value. If they are just names on paper to look good then they're just endorsements -and largely worthless. They need to be real help to you. You should hire an advisor the same way you hire an employee - carefully, with reference and other checks. Paid or unpaid, cash or stock, depends on the value and the role.
However advisors will get frustrated and move on if you don't know how to use them, receive the advice and know how to parse and act on it. This does not mean blindly following the advice. But if you ask for advice then please accept it and decide how you will use it. And don't try and do it all yourself.
More in the next post!
