Some Advice to Foundering First-Time Founders

You’ve come up with your big idea that is going to disrupt an old, tired, stodgy industry. You filed your C Corporation papers, created a cap table, have models, projections, and budgets. You read and reread read the Holy Trinity of startup reading: Thiel’s Zero to 1.0, Ries’s The Lean Startup, and Moore’s Crossing the Chasm — and threw in Christenson’s The Innovators Dilemma for good measure. You listened to every podcast of The Pitch and, in a weak moment, even watched a couple of Shark Tank episodes. Your friends and family raise brought in enough to get you and your small, intensely dedicated team some cheap rental space.

Now you’re off and running, going 180 miles an hour, have a protype demonstrating proof of concept, had some early-adopter sales, got meetings with Seed Capital VCs, and heard lots of encouraging keep-us-posted-when-you-have [fill in the reason you’re not getting funded here].

Yet, after all that effort, you’re suddenly getting nowhere.

You’ve gone from Founder to foundering.

So what’s the problem?

Having worked with, for, and advised to numerous first-time Founders as well as starting my own companies, I have seen a consistent pattern emerge as they hit this stage of their business. It cuts across almost all sectors, applying to virtually all first time Founders. If misery loves company, this qualifies as a party. It’s not these newly minted Founders are making big mistakes — those folks wash out pretty quickly — but rather they keep applying what got them to this level, thinking it will continue to move them to the next level.

It won’t. However, there are some simple fixes that can move the first time Founders from ‘foundering’ to getting to the next level. Here are my top-5.

(1) Dispense with Business Pithy Maxims, Nostrums, and Aphorisms. We’ve all heard these. You know, “Fail fast and pivot” or “If it ain’t broke, break it.” The list could go on ad nauseum. Unfortunately, some Founders fall into the habit of clinging to these cliches, using them as a basis for their management and decision making process. It as if these clever catch-phrases are core business principles, the wisdom of the ages.

They are not.

Let’s break down the ever popular “Fail Fast And Pivot.” If you are failing fast, before you pivot — and risk pivoting into another failure — take some time to carefully understand what’s not working and why it’s not working. Go through every part of your business, from overall strategy to every line of code to find what is working, what is failing, and most importantly — why? Keep a fully open mind; the impediment may be not be something you are doing but rather something you aren’t doing, a missing piece.

Then you can make an intelligent decision as to whether pivoting makes sense and, if so, to where you want to pivot. If you are wise, you can learn more from failure, mistakes, and missteps than you ever will from success.

(2) Following Unicorn Rules. Every Founder wants to be the next unicorn or thinks they are going to be the next unicorn. Totally understandable. Who doesn’t want to casually read through the Robb Report looking for their next Lamborghini as they sip cocktails lounging on the deck of their 200-foot yacht anchored in the Mediterranean? No surprise, many Founders pore over unicorn companies looking for those key lessons that will bring them similar success.

Give it up. The reason these few companies with billion dollar exits are called unicorns is because they are exceptionally rare. The reason the unicorn is a unicorn is because it is unique, a confluence of brilliance, timing, and luck. They are not a roadmap to success; if there were a unicorn business model to follow for sure success, every startup company would be a unicorn. Which they are not.

The better startup businesses to study are what are I call the “EM” Companies — the “Exit Multipliers”. Not quite as sexy a moniker as unicorn, but far more attainable. Better to focus on companies that rarely hit the top of the popular business feeds, yet exit at strong multiples that make their Founders and VC investors wealthy. I’d rather learn from a series of companies that consistently exit at 2x to 10x than the one company that hits the 1,000x.

(3) You Can Never Do Enough Homework. I cannot emphasize this enough. Founders are often experts in their given field, but ignore other aspects of their business or delegate it off and forget about it. Don’t do that. Business success is often based in being on the right side of a knowledge imbalance. Learn and understand every nook and cranny of your business, its products, its operations, the market it competes in, and other market verticals in the sector. Read every contract, understand every process, follow every market development. No detail is too small to ignore.

If this sounds overwhelming, it can be. The way to stay on top of the information flow is to refine your information flow reporting process, be it a daily briefing from an internet scrape or a weekly team meeting to review targets and sprint results. You have to be the weight that tips the knowledge imbalance scale in your favor.

(4) Giving Away Equity. I hear this so often that if I had shares valued by this, I’d be rubbing elbows with Elon Musk. I get it. Founders fear losing control of the companies they worked so hard to start or fear misvaluing the shares they are selling and end up with millions less than they feel they could or should have.

Let’s get something straight. You are not “giving up equity” when you are selling a part of your company. You are selling an investor a piece of your company for what is likely a much-needed cash infusion that will catalyze your company forward. Finding capital is hard. If an investor thinks you are valuable enough to put some of his or her hard earned capital into, take the compliment.

And the funding. Of course negotiate the best deal you can, but if you keep thinking that you are giving something up and zealously hold onto ownership in hopes of organic growth, you better be really sure you can grow as fast ‘organically’ as you can with a cash infusion. Why? Because your competition, who sold some of their company for a capital infusion you could have had, will use those funds to condense their growth path from months to days — and will pass you by.

(5) Project Time is Exponential. First time Founders often misjudge the time it takes to get things done. This creates unrealistic deadlines, overpromising and underdelivering, and a lot of undue stress that only impedes progress. Let me be very clear. Everything will go slower than you think it will. If you think something will take an hour, it’ll take two. If you think it will take a day, it will take two days. A week can rapidly become a month. You get the idea. If something goes according to schedule or even ahead of schedule, take it as a blessing.

That doesn’t mean you throw up your hands and let serendipity take over. There is an answer. Set yourself up a Gantt chart and track the time it actually takes to get things done. This identifies where the friction spots are, including your own misperceptions. Now that you have those, you can plan accordingly — or retool where there are unnecessary time-eaters and wasters. A company isn’t delivering product on time? Find a new one. A software engineering team can’t hit their “sprint” deadline? Get software engineers that can.

(BONUS POINT) Network, Network, Network. So often I see opportunities missed because Founders don’t effectively network. In case you haven’t figured this out yet, an introduction can open a door faster than a thousand knocks. That door may be for capital, to help find the right advisor or Board member, to hire a key new team member, or just to get tickets to a show or a game for a client.

How do you get those introductions? You have to build your contacts as aggressively as you build every other part of your business. Your email contacts should be so full you need a new terabyte memory drive to hold all of them. Your LinkedIn connections should be in the thousands. Every video webinar is a chance to connect with others that share your interest in the webinar topic and could be great resources. Ask for lists of attendees at every conference you go to. You may get it or may not, but ask. Use Salesforce or similar CRM to make sure each contact is carefully categorized, including where you met the person, what their professional role is, what school they went to, what they seemed knowledgeable about.

As you build your contacts, stay in touch with them regularly. Make sure they are on your weekly ‘business update’ email list so you can keep them posted on developments both in your company and the industry. Get them on your Twitter feed and Instagram account. This is a two-way street. Get on their Twitter fees and Instagram accounts. ‘Like’ their LinkedIn posts and repost them.

In Closing….

If you are a first time Founder — or even an experienced serial entrepreneur — apply these easy correctives as necessary to get your business to the next level. And closer to buying that next car you see in the Robb Report.