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10 steps to avoid startup hell

Old news: most startups fail. So how do you reduce the risk of failure? There are 10 steps that focus on reality, but ultimately boil down to one: follow the money.

The program in 10 steps

How can you avoid startup pain, suffering and death? Here are ten steps:

  1. First, get rid of start-up myths. While it’s obviously exciting to chase dreams, dreams have to be brutally tempered by reality. Think about what is possible, not probable, but possible. Manage your expectations, the expectations of your team and especially of your investors. Grand Slams mostly happen in movies. Unicorns are almost impossible to find.
  2. You need to understand the technological world you are entering and the market your solution will address. Really, you need to understand technology trends and consumer and business markets – and what your competitors are doing. Why the emphasis on domain understanding? Because I’ve met far too many PEVC entrepreneurs and CEOs who know next to nothing about the technology they’re investing other people’s money in. A lot of them would say they don’t need to know anything about technology – I know that, because they’ve said it publicly – but believe me, they do need to know. much more than they do. Otherwise they are just market players which is fine until the market music stops. What do the people in your orbit really understand? It’s good to know.
  3. Beware of entrepreneurial pitch men and women who are nothing more than pitch men and women. I’ve seen too many in action and, frankly, I often feel like I need a shower after their presentation. Everyone knows that success is often influenced by how connected, casual, and attractive entrepreneurs are, not by what they know about the technology or market they want to enter (and perhaps invent). I know, you might be thinking, nothing new here. But never forget that human beings are constantly intrigued and interested in what is considered “attractive”. Style and substance is just as important, regardless of the “attractive” style. Regardless of how many showers you take, make sure you know the difference.
  4. Innovators, entrepreneurs and investors need to understand the whole start-up/build/exit process – which is usually distorted by players with conflicting agendas. As you build and grow your business, pay attention to business basics, organize your team as matrix project managers, and be sure to let the world know you exist with every digital tool in the box. Learn more about alternative valuation methods and models. Learn about the terms of the agreement and take time with your operating agreement (OA) and encourage your investors to do the same. Don’t plant landmines in your OA designed to kill investors who ask perfectly reasonable business questions about the state of your (and their) startup. Don’t take money from friends, family members, or “stupid” angels unless you’re ready for the relationship to end.
  5. Be transparent: never hide anything from your team, your investors or your clients. Keep your “necessary evils” – VCs, lawyers and investment bankers – at bay, but manage them carefully. (Which is of course a conundrum.) They see you as cash cows, nothing more, nothing less. Learn the basics of finance, accounting, digital marketing, and analyzing your performance. There is no substitute for knowledge.
  6. Know when you are good, bad and dying. When you are good, proceed with caution. When you’re wrong, correct quickly and decisively. When you die, accept it with grace and do whatever you can to ease the pain of your team, your investors, and your customers – the stakeholders who made the journey with you, a journey that went wrong. ended. It happens a lot. In fact, it happens most of the time. Your personal and professional reputation will be defined by how you handle failure (as much as how you handle success). Handle failure well because that’s where you’ll likely end up. If you handle failure poorly, it will live with you forever. Dream of success but plan less.
  7. Along the way, you have to wear a big mirror to assess who you really are, what you really know, how you are perceived, and how you organize and run your startup. Watch it often and invite objective professionals – not sycophants – to tell you what they see.
  8. You need to be objective with your team. I guarantee some of them are weak (or worse). Do you know who they are? Do you have a Consiglier? Will team members tell you when you’re screwing up? If you don’t have truth people around you better find some to help you scrub the team.
  9. Remember there is a limit to what you can control. Financial markets are collapsing, key people are leaving, investors are growing weary and government policy is uncertain, to put it mildly. These and other events cannot be controlled. So focus on what you and your team can control or at least influence.
  10. Finally, there is a principle that is undeniable. This is the one you should apply to your entire startup life: follow the money.

A point of view

Obviously, this 10-step program describes a point of view. I’m sure you could find entrepreneurs, venture capitalists, lawyers and investment bankers who believe that they exist to create lots of jobs, that they are the champions of innovation and entrepreneurship in the world, that without them essential products and services would never reach the market and that they are the real drivers of the digital economy. Some of them actually believe these things when they move from one reality warping field to another. VCs win even when their investors don’t. Venture capitalists finance their vacation homes with the costs of start-up (and liquidation) transactions. Investment bankers sell valuable assets — or dump worthless ones — for generous fees. No, my friends, it’s – and always has been – about the money.

The perspective is simple: technological innovation and entrepreneurship are routes to wealth, just as oil, land and physical retail were routes to wealth in earlier economies. But since the paths are mined, you have to understand the minefields. If you don’t, you’ll explode – unless you get some awesome luck and become a one- or two-hit wonder. But, as they say, luck is not a strategy.

Digital success is tough, but most of the world’s most valuable companies are technology companies. Then the opportunity presents itself. But again and always, just follow the money.

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