5 Startup Myths…. Busted
So many startup myths. There are more than a few false beliefs that first-time founders painfully learn are not true. Here are five lessons that are more easily learned in print than in practice.
1. Pursue Your Passion – Pursue your passion as long as you are a multi-millionaire or your passion is bankable. If you have a passion for gold plated dog poo, than pursue your passion at your vocational peril. If you have a passion for getting rich, you’ll have a better chance of feeding your family than Mr Gold Plated Dog Poo but if you have a passion that is in demand, and has a higher purpose than “just making money,” like creating a greener world with the coolest electric car on earth or building a private space launch vehicle that exceeds the performance of anything NASA ever built, then you might be better off. Pursue your passion as long as your passion includes being able to feed, house and cloth yourself. You can passionately reinvent kickass anything you want but if nobody cares, you’re just masturbating. Startup Myths… busted.
2. I Must Keep My Idea Secret – The chances of you figuring out something that no one has ever figured out before are about the same as finding a unicorn that shoots rainbows out of its ass. Your idea most likely isn’t secret sauce. Ideas are worthless without execution. Everyone has an idea. In most cases a company’s secret sauce is execution. It’s your processes, your team, your leadership and your drive. Your idea is just an idea and unless your idea is really something magical like a fully implementable time machine, somebody probably is doing it and she who executes effectively with the utmost alacrity wins. Startup Myths… busted.
3. Equity Begets Loyalty – Equity doesn’t buy loyalty and yet it does beget dilution. It may give a team member a sense of ownership and yet nothing engenders loyalty as effectively as shared purpose and great leadership. Just as nothing destroys loyalty more than broken promises and inauthenticity, money or stock do not purchase quality humans. Lastly being a douche does cost loyalty points… even from other douches. Startup Myths… busted
4. Majority Stock Equates Control – Read the fine print. When you raise capital, you agree to a corporate charter which cedes certain controls to the board and certain kinds of decisions to the non-company members of the board. Hiring higher level executives usually requires board approval. Executive compensation is typically decided by the Board Compensation Committee, comprised of non-company board members (investors and independents). Firing the CEO is up to the board. If you believe that 51% of the stock equates to control, you might want to look into Salsa Labs… a company that appeared to be severely damaged by a difference of opinion between the founding controlling stockholders and the minority Venture Investors. Startup Myths… busted.
5. I Should Raise Outside Capital As Soon As Possible – As soon as you announce you’re looking to raise investment money you start a clock… stamp your company with a “Sell By” date. The longer you go without closing the deal the sourer your milk appears. Don’t go out to raise money unless you’re fairly sure that you crossed the risk hurdles you need to cross to raise capital successfully. Are there “like” companies in a similar space, at a similar stage of product development that have achieved similar customer traction that raised money?