Peggy Aycinena is a freelance journalist and Editor of EDA Confidential at www.aycinena.com. She can be reached at peggy at aycinena dot com.
Startups: VC’s lay out simple rules of the game
October 31st, 2013 by Peggy Aycinena
This week, the roving seminar/networking organization Angel Launch hosted yet another session aimed at connecting fund-rich VCs with idea-rich startups. The afternoon event on October 30th was hosted by Draper University in San Mateo, and included a panel of VCs speaking to a range of issues, followed by a 90-minute pitch fest where small startups could buy a couple of minutes to showcase their companies in front of the panel and get feedback, and maybe even funding.
After 3 hours of listening in, it was a simple trick to assemble a short list of Do’s and Don’ts for anybody who has it in mind to start, grow, and succeed in creating a small business. The whole process sure seemed straightforward. It’s a credit to the VCs on the panel that they made it sound that way.
The Startup Game
* Rule 1: You should have no more than 3 founders in a company. When you get to 4, factions form and things will not work out.
* Rule 2: When you pitch to VCs, know your market, how your product is differentiated from other offerings already being sold, and how you plan to make money. Profit is everything, no matter the size of a business, nor the product being sold.
* Rule 3: VC’s don’t invest in service companies, only product companies.
* Rule 4: You need a Board of Directors to direct the business side of things, and a Board of Advisors to advise you on everything else. Find people who will be honest.
* Rule 5: Act at all times like you feel confident about your idea and your business plan, even if you don’t. Be strong. Anything less means that you will fail.
* Rule 6: Get a VP of Sales and a CFO as soon as possible. Pay your taxes!
* Rule 7: When the people you hire don’t work out, fire them. They’re not helping and you’re not running a charity.
* Rule 8: Know the difference between VC’s, Angel Investors, Crowd Sourcing, MicroVCs, Friends & Family, and Bootstrapping. Find a seasoned colleague to help you decide which of these should fund your startup.
* Rule 9: Network/Network/Network is to Startups what Location/Location/Location is to Real Estate. Get out there and talk to people.
* Rule 10: Don’t expect to pay yourself for a good long time. The money other people have invested (see Rule 8) in your company is for growing and sustaining the company, not for growing and sustaining you.
* Rule 11: Being the founder of a company is a lonely journey. Be prepared for isolation, stress and worry, disappointment, rejection and failure. If this sounds like your kind of fun, you are set and ready to go!