Startup Advice

Yes, the CEO of your startup is an idiot.

imagesEarlier today a Quora user asked me if it would be appropriate for an employee to let his CEO know that he thought he was a bad CEO. The question made me laugh, so uncharacteristically I answered it. It occurred to me that all CEOs are bad, but some seem good because they’re supported by great teams. I contend that if your CEO either is or seems like an idiot you suck as an employee, but I am getting ahead of myself.

When I was in my twenties and started working for other people it never took much time for me to realize that everyone I worked for was completely out of touch. The problems we faced were so obvious I knew that if I were in charge I could easily fix everything. It made me realize I couldn’t work for other people. I knew that I needed to start my own company. Of course the moment I did I realized how much of an idiot I had been. Being a CEO is perhaps the hardest job you can imagine. If everyone would simply do exactly when you told them everything would work splendidly. The problem is that you aren’t hiring robots, you’re hiring humans who have their own agendas.

CEOs have three primary jobs. The first is to ensure that there is enough money in the account each month to make payroll. The second is to recruit the best and brightest employees to join his company. The third is to enunciate a vision and SOMEHOW convince his team to help him execute that vision. The third is by far the hardest.

Assuming you are not the CEO, your job is to help the CEO execute on his vision. Agree or disagree as long as you accept a salary from the company you owe the CEO and the company 100% loyalty. Seriously. If you don’t respect the CEO or aren’t willing to help him be successful you need to leave the company ASAP. It is up to the board of directors and shareholders to fire the CEO – not you. Instead of taking the time to complain about him, work with your peers to find ways to help him be more successful. He IS an idiot unless you can help him win. You’re an idiot if you can’t help him be successful. Help him win and you’ll win. Or quit already. But don’t, please don’t, keep complaining about how your CEO sucks.

 

 

Finding a Co-Founder: Fadi Bishara CofounderNetwork, Part 3

Over the past few weeks I’ve been reaching out to services that help entrepreneurs find co-founders to conduct interviews with their founders for another project. Here is my third interview:

143dd12Name: Fadi Bishara
Title: Co-founder and CEO
Company: Blackbox.vc formerly CofounderNetwork

Q: Why did you start Blackbox.vc/CofounderNetwork?
A: I started the network because I knew many founders with successful track record who were interested in launching new ventures but did now have the mean and network to find and engage ideal cofounders. I thought with my experience in the talent search and selection for startup, I could connect members in an efficient way based on knowing the persons and making the connection (manually) based on that.  Such match is difficult to be automated and based on keywords and data algorithm.

Q: Why are co-founders important?
A: Cofounders are crucial in getting any project off the ground, no matter how talented an entrepreneur is, s/he still needs to have another person who joins their mission.  Several reasons could be listed:
a) if a founder has a difficult time convincing another founder to join a project, the viability of such project/idea is questionable and would make it much harder to convince investors to take capital risk and support the project.
b) investors have a ‘hit by a bus’ theory, so they are concerned if they invest in one person, what might happen if the person is no longer able to fulfill the promise for personal of health issues in order to build a team and carry on the vision.
c) often founders have bold and daring visions, where the line between genius and insanity is blurred, to validate a basic test of reality, two or three cofounders are more likely to be in agreement on a vision that is real and possible although big and ambitious yet still grounded in reality.

Q: What is your single best piece of advice for founders looking for co-founders? 
A: My advise to founder when looking for cofounders is to never view cofounder as someone they can “hire”. The choice must based on the following 3 criteria in the order:

  1. cofounders must have full trust and respect for the other founder(s)
  2. cofounders must have common motivating value (build to flip, or build awesome product, or build to make an impact and change the world)
  3. cofounders complementary personalities and skills

Once you’ve convinced yourself you’re onto something compelling enough to quit your job it is time to convince someone else to quit their job and join you as a co-founder. First, realizing there are very few successful startups that started with a single founder is important. Starting a company is a lot of work and your going to need a lot of help, but more importantly if you can’t convince your friends to join your team you might take a step back and take a good hard look at your plan.

Finding a Co-Founder: Shahab Kaviani of CoFoundersLab, Part 2

Over the past few weeks I’ve been reaching out to services that help entrepreneurs find co-founders to conduct interviews with their founders for another project. Here is my second interview:

22959f1Name: Shahab Kaviani
Title: Co-founder and CEO
Company: CoFoundersLab
Description: CoFoundersLab is a Maryland-based startup focused on bringing together entrepreneurs with the aim of launching a startup together.

Q: Why did you start CoFoundersLab?
A: I saw how popular startups were becoming in around 2010, and noticed how many new accelerators were sprouting up, along with the increasing in early stage investing. I thought to myself, how can this work if the failure rate for startups is so high -estimates are 75-90% failure rates. When I studied why startups were failing, I learned from Dr. Noam Wasserman at Harvard in his book, Founders Dilemma, that the biggest culprit of failed startups are founder related. If I could just help people find a better matched co-founder we could really create value for startups, investors, and the jobs that would follow.

Q: Why are co-founders important?
A: Co-founders help get you through your tough days, they also compliment you by bringing skills you’re lacking in. I think the moral support is so important. If you are raising outside capital, most investors want to see teams as compared to single founder companies.

Q: What is your single best piece of advice for founders looking for co-founders? 
A: Take this decision very seriously, and be pragmatic about. CoFoundersLab will help you take personality assessments, skills inventory, etc. to inform your decision so you make your choice more with your head and less with your heart. I would add that finding someone respects your craft and there’s a very high level of mutual respect is essential to a healthy partnership.

Once you’ve convinced yourself you’re onto something compelling enough to quit your job it is time to convince someone else to quit their job and join you as a co-founder. First, realizing there are very few successful startups that started with a single founder is important. Starting a company is a lot of work and your going to need a lot of help, but more importantly if you can’t convince your friends to join your team you might take a step back and take a good hard look at your plan.

Finding a Co-Founder: Oliver Bremer of Founder2be, Part 1

1401776Over the past few weeks I’ve been reaching out to services that help entrepreneurs find co-founders to conduct interviews with their founders for another project. Here is my first interview:

Name: Oliver Bremer, @iguero
Title: Co-founder and CEO
Company: Founder2be
Description: Founder2be is an entrepreneurship-related social networking website for co-founders. A match making service for prospective entrepreneurs, it enables individuals with different skill sets to connect and work on ideas to launch startups together.

Q: Why did you start Founder2be?
A: I started Founder2be because I was looking for a co-founder myself idea. I realized how difficult this really is and while there are a lot of people interested in startups, there simply was no good way of bringing them together.

Q: Why are co-founders important?
A: Having a co-founder is important because starting a startup is hard enough all by yourself, because you need someone you to challenge you and you can challenge him or her, because the discussions you will have is what turns your initial idea into what will ultimately become successful and many more.

Q: What is your single best piece of advice for founders looking for co-founders? 
A: Finding a co-founder is probably the hardest part of starting a start-up. Never give up, always keep looking, and don’t wait with turning your ideas into reality until you find a co-founder. Instead keep pushing ahead, keep your eyes open at the same time, and your co-founder is much more likely to find you.

Once you’ve convinced yourself you’re onto something compelling enough to quit your job it is time to convince someone else to quit their job and join you as a co-founder. First, realizing there are very few successful startups that started with a single founder is important. Starting a company is a lot of work and your going to need a lot of help, but more importantly if you can’t convince your friends to join your team you might take a step back and take a good hard look at your plan.

Focus your investors before they distract you. . .

funny_seagull_poo_aa101Yesterday I was listening to one of the entrepreneurs I mentor telling me a story about one of his favorite investors/directors. The investor is what I call a ‘seagull’ – he flies in, shits on you and flies away. I must admit that I am horrible at managing investors and board members – my advice is to do as I say, not as I do. Here are a few ideas for both investors and directors (often the same folks):

  • COMMUNICATE regularly with each investor/director by sending a monthly progress/update email. Spend 30 minutes detailing all your accomplishments, challenges and go-forward plans. You don’t want to wait until your next board meeting or until they email you asking what the hell is going on.
  • ASK each investor/director for help each month. Think about how each investor/director can help you – perhaps with a product launch, a candidate for employment or a business development deal. If you keep them busy they will be a LOT less likely to get in your ‘business’. One of two things will happen – you will get much needed help or he will hide from you.
  • MEET (in person or via phone) with each director PRIOR to each board meeting. Show him your agenda and ask him if there is anything he’d like discussed at the meeting. If there are controversial issues to be discussed determine where he stands. If he’s on your side enlist him to meet one-on-one with directors who might not be on board yet PRIOR to the board meeting.
  • DOCUMENT each interaction with your investor/director. The day after your board meetings email an overview of what happened and what decisions were made to each director. You will approve the minutes at the next board meeting, but you’d be surprised how time can change your perception of history. Do the same thing EVERYTIME you engage with your investor/director – a quick followup email detailing what was accomplished and what everyone has committed to do is VERY important.

Let me know if you have any ideas to improve your investor/director relationships.

How big is your market?

Each week I’m working closely with my TEN companies and there has been a recurring theme recently – understanding the ACTUAL size of their markets. Has an investor ever asked you this question:

“How big is this market?”

If you’re like me you’d say something like:

“According to Forester the XYZ market will be $20B by 2016.”

Of course this answer is complete bullshit. The real number – the one YOU need to understand is very simple.

Total # of customers * price = market size

market-sizeMy conversations with my TEN companies are confidential so I can’t really give you any specific examples from them, but I can reveal to you a conversation I overheard this morning while writing this post at Cafe Express on McKinney. On the right side of the table in a blue button down shirt an investor sat and asked the entrepreneur on the other side of the table how big the market was for his fitness/gym mobile application. It was clear he didn’t really have a rational answer – he said BILLIONS (the US gym market is actually $21B). I was REALLY tempted to walk over to the table and tell them the actual market size – Hint, it’s not $21B. It took me five minutes to come up with a rational answer – all you need to do is ask the right questions and type them into Google.

First, I asked Google how many health clubs there were in the US. The answer? 30,500. The entrepreneur has two different revenue models – one selling to the software/application to the gym directly and the other taking a cut of fees generated by each user of the application. Assuming the software is sold to the gym at $150/mo and assuming you sold to every gym in the US the total market size for this business would be: $54,900,000/year.

Assuming, instead, that the software generates a cut of every member at a particular gym you need to know how many people in the US have gym memberships. Google says there are about 50,000,000 people paying for gym memberships – so assuming you generate $1/member/month the total market size for this business would be: $600,000,000/year.

So the BEST CASE market size for this business would be between $54M and $600M. But you need to be rational – what percentage of the market do you REALLY think you can capture? 1%? 5%? 10%

Assuming 1% the best case market size = $6M/year
Assuming 5% the best case market size = $30M/year
Assuming 10% the best case market size = $60M/year

Grabbing 10% of the entire market in the next three to five years would be a HUGE feat so we can agree the best case market size would be less than $60M. Now that we understand the potential market size for each revenue model which one would you pick? The first model enables you to focus on a MUCH smaller customer base – i.e. a universe of 30,000. It also puts the onus and responsibility of getting their customers on the app at the feet of the gym owner – the startup gets the money no matter how many members actually use the app. So this model might be easy one but you’d be trading potential upside in exchange for ease of implementation.

Of course my point is not about this particular thought exercise, but in general – do you REALLY understand the real size of your market? If you don’t you’re missing a real opportunity. Get busy…

 

 

 

 

 

Update on ‘TEN’ my Mentoring Program

Ten-Logo-2Back in April I announced my mentorship experiment I called ‘TEN’. The plan was simple, find ten entrepreneurs and spend a year working with them on their businesses. The idea was that by spending MORE time with FEWER entrepreneurs I could make a more significant impact AND have more time to work on my own startup. Time for an update.

After announcing the program I had more than 40+ applications and quickly selected the first ten with plans to bring them on over three months. To date I have ‘turned up’ five entrepreneurs, had three drop out before starting and had one fire me. The companies include:

  • 3 Tech Startups (two seed funded)
  • 1 Medical Startup (seed funded)
  • 1 Real Estate Business (going concern)

I’m charging $1,000 a month (12 month commitment) and ask for a modest ‘advisor’ stock option. Next week I bring on the final entrepreneur from the original ten and I’m not sure if I will try to replace the four open slots. If someone REALLY wants to get in I will consider opening one of the slots, but its definitely going to be on a case-by-case basis.

As for the entrepreneur who ‘fired’ me? As Kevin O’ Leary would say, “You’re dead to me!”

d38m5pp

In all seriousness, I only spent an hour or two talking to the entrepreneur and we discussed the various options. He was convinced he wanted to raise more capital and ‘run’ his company. When I found out he had an offer to buy the company for a REAL number I made the case that he could do BOTH – i.e. take his money off of the table and run the company. He thought about it for a week or two and decided to take my advice. He then informed me that he didn’t really need anymore help. My only thought? KARMA IS A BITCH. Seriously, if you’re about to negotiate a seven to eight figure deal isn’t that the moment when you’d actually want some advice – especially advice that only costs you $12,000! I have attempted to buy and sell several companies – sometimes I was successful and sometimes I wasn’t – but in each case I came away with useful experience. Anyway, I got my ego bruised a little bit on this one, but life goes on.

Announcing ‘TEN’

For more than five years I’ve been actively involved in the Dallas startup community. During that time I have advised scores of entrepreneurs; however, I’ve often wondered how valuable my advice really was. For example, in the last thirty days I have ‘touched’ almost 100 different entrepreneurs. Touches include emails, voicemails, texts and face-to-face meetings – 100 unique connections over 30 days. I’m giving advice, making suggestions, referring employees and investors, but there is no way I have enough information about 100 entrepreneurs and startups to give any sort of valuable advice and I wonder how valuable my referrals are? What do I REALLY know about these people/companies? Truthfully, I have no idea. Additionally, I am spending a LOT of time providing this potentially dubious advice – maybe 20 hours a month. I decided that something MUST change so I am starting what I am calling TEN.

Ten-Logo-2My plan is to select 10 entrepreneurs I will spend one year coaching, advising and supporting. These entrepreneurs will be hand selected by me based on just a few factors including: how well I think we will get along, how coach-able they are, how relevant my experience would be for their business and how bullish I am on their endevour. Here is the plan:

  • 1 group meeting per month (2hrs+dinner, think EO, YPO, Vistage)
  • 1 one-on-one meeting per week (1hr)
  • 4 quarterly trips to Silicon Valley, 2-3 day (vc/angel networking)
  • 1 graduation retreat, Fri-Sun (city/venue selected by group)

The focus of these meetings will be on:

  • building teams, advisory boards, and BoDs
  • developing products and services (mobile, web, infrastructure)
  • raising capital
  • selling
  • marketing and pr

Interested? I’m going to charge you, a LOT. I’ve learned that people rarely value anything they get for free. I don’t plan to take on a single company that I don’t think I can add at least a million dollars in value within twelve months so hopefully you will be able to stomach the deal. The monthly fee for the engagement will be $1,000 (compare to a typical board member at $40,000/yr) plus a small equity component (whatever you are giving advisers). The term will be 12 months with a termination clause. If you do not want to continue for any reason you must pay the remaining term at 50% or find someone to replace yourself in the group that a majority of the group will approve. So basically you pay $12,000 for 100 hours of my time – a pretty great deal if you ask me.

I’ll be putting the first TEN class together in the next couple of months. If you are interested let me know by applying here: TEN APPLICATION

 

Investor Referrals – HELP ME HELP YOU!

Remember that scene from Jerry Maguire where he tells his client, “HELP ME HELP YOU!”

Each day I get a message from an entrepreneur asking for help finding an investor for his or her startup. The message goes something like this, “Working on the next big thing, can you refer me to a few local investors?” In variably I will put this request in my ‘to-do’ mailbox and forget to respond. Sorry? Not sorry? Here are 9 things I need so that I can you can help me help you:

  1. Explain the stage of the product/service: idea, prototype, mvp, revenue, growth, exit…
  2. Tell me about the team: how many people, functional skills, full-time/part-time…
  3. Explain the funding you seek: seed, angel, series a, series b
  4. Tell me how much you are going to raise: $100, $250, $500, $1M (whatever)
  5. Tell me the form of the investment: common stock sale, preferred stock stale, note…
  6. Tell me who you’ve talked to previously and their thoughts
  7. Tell me how you plan to spend the money – i.e. what are the use of funds?
  8. Tell me your future fund raising plans after this raise.
  9. Send me your fund raising docs (if available) and your deck (a must).

You may not have all of this information, but send as much as possible. Save me time. If I can help I will. If you make me send you an email asking for this information – well I’m not going to. I might send you this post and ask you to try again. But no hard feelings right?

Should you share your idea?

Top-secretYou’ve got an idea for the next big thing, a new iPhone application that could change the world, and you’re looking for developers and/or looking to raise capital. You are not entirely certain where to turn so you reach out to local entrepreneurs who have ‘been there and done that’. I get calls like these all of the time. Prior to 2008 most entrepreneurs here in North Texas were scared to share their ideas without getting an NDA in place beforehand. This put them at a HUGE disadvantage over their peers on the West Coast where collaboration and community have a long and distinguished history. Slowly but surely, the startup community in North Texas has morphed and has become very collaborative and supportive. But, every once in a while you’ll run into someone who is still clinging to the old, secretive ways of the past.

In fact, just yesterday I got a message from an acquaintance who told me he was working on a an app and asked me to put him in touch with local investors. I suggested he send me his deck and I’d make a few introductions. His response? He wouldn’t send it unless I signed an NDA (he obviously doesn’t read my blog). He explained that someone with experience could steal the idea in a second. I’m not sure why, but I felt really offended at the time. I guess part of the reason was that I was mid-move – surrounded by boxes and movers – but it felt weird to have someone asking for a favor AND at the same time explain that he didn’t trust me.

At the end of the day ideas are worthless – execution is priceless. When you’re starting a company you need as much help as possible. You need mentors, advisers, peers, partners, investors, vendors and friends. If you keep your ideas a secret it will be impossible for anyone to actually help you. Could someone steal your idea? Of course, but as I’ve said before your potential competitors are more likely to become partners. You’re far more passionate about your idea that anyone else – and most people want to partner with people with passion. Additionally, keeping your idea a secret may actually create more competitors. I explained my thinking in a post a few years ago, but Chris Dixon does a much better job explaining it than I did in his post, “Why you shouldn’t keep your startup idea secret.