Next Friday, October 14th, a group of experienced entrepreneurs from FounderCorps are doing a panel on the “Top Ten Mistakes Entrepreneurs Make.” I’ll be joined by FounderCorps members Alex Murphy, Dadi Akhavan, Donna Harris and Tien Wong. For those of you who can make it, we’ll be at the University of Maryland Technology Startup Bootcamp. The link for the event is here. I’ve participated in this bootcamp many times over the years, and I recommend it highly for any budding entrepreneur in the Greater Washington Region. Knowing my co-panelists as I do, I am sure that they will have lots to share. I know that they’ve made lots of mistakes over the years (as have I). It will be interesting to see who owns up to them….
In preparation for the panel, I thought I would provide my own list memorable entrepreneur miscues I’ve experienced first-hand. They are in no particular order, but are all based upon situations I have seen more than once, and in each case were fatal and unrecoverable mistakes. In many cases they provoked in me, or someone near me, a head slapping “what are you kidding?” moment. And, I’ve made a few of these myself – a free ticket to the Bootcamp for the first person who guesses which ones.
These are the ones that are cringeworthy – you just know they’ve happened and it is just too late to fix. Some of the ones that I see far too often:
- Selling Securities without Using a Lawyer. There are a few things that just shouldn’t happen. Giving a baby a machete is one of them; having an entrepreneur selling an interest in his business without a lawyer is the other. My (sad) favorite was an entrepreneur who posted an ad in the Washington Post for investments in his startup, and rendered his company unfinancable. If you don’t know why, please talk to a lawyer. They know and you should too.
- Not Agreeing on the Founding Equity Split before Meeting your VC. I had a founding team come into my office and have a fight in front of me on the correct equity split between them. As one co-founder broke a chair in my conference room and the other left, I remember turning to my assistant and saying “I guess that didn’t go so well….”
- Screaming at Your Questioner. I once had an entrepreneur yell at one of my colleagues for asking too many questions. I believe he said something like “will you shut the funk up!” It was something like funk anyway.
- Making up Numbers. Making things up can be good for Halloween, but it’s bad when you are meeting with knowledgeable people. Never assume your listeners can’t check facts. Or, that they don’t know the answer to what they are asking.
- Starting a Business without Vetting Your Idea. Entrepreneurs often start businesses around what bothers them. That’s fine, but sometimes they don’t reflect on the broader social trends shaping their lives. There is nothing more embarrassing for a founder than finding out that his business idea has been done already in other markets, or down the street. It’s worse when the entrepreneur has spent months growing the business without looking around and mortgaged his home.
- Not Protecting Intellectual Property. Some have suggested that IP rights are bad because they are used by “trolls” to stifle innovation. That strikes me like being against baseball bats because someone can get killed by them. IP in the right hands (the entrepreneur’s hands) is a way to defend against larger established competitors. So, don’t talk publicly about your “secret sauce” until you’ve made sure its secret. If you don’t know what I am talking about, ask a lawyer.
- Lying. Entrepreneurs are enthusiastic and prone to exaggerate. That’s OK. But, lying is not. Even a “white lie” can kill your credibility.
- Not Preparing Your Demo. If you are going to demonstrate technology, make sure it works first. Based upon my experience children, dogs and voice enablement technologies do what you want in inverse correlation to what you want them to do.
- Saying That You Have No Competition. Anyone who says that their business has no competition is either insane or lazy. Even the truly unique idea has competition, even if it is getting people to abandon the current “gold standard.”
And, two special bonus mistakes:
- Not Reading the Website. When an entrepreneur asks me for $25 million to bootstrap his startup (true story) and then threatens to punch me when I tell him that we provide the first $50 to $250K in capital, I am having a bad day. Or, perhaps the entrepreneur just didn’t use the internet.
- Not Reading the Signs. Most investors hate to say “no.” They fear that if they send the entrepreneur away, that they might miss the opportunity when the entrepreneur “figures it out.” Mistaking “come back when you have revenue,” or “call me when you find a lead investor” are not binding promises to provide a term sheet against future metrics (most of the time), but are VC-speak for “no.” Not being afraid to push the VC who gives you a non-answer is the largest source of entrepreneur time wasting and frustration.
My last observation is that whether the VC invests or not, there is no way that his reaction to your first pitch should be considered business advice. If you think that after 30 minutes the VC knows your business better than you do, you’ve both got trouble.