Tag Archives: entrepreneur

Don’t Oversmart Your Startup’s Business Plan

A couple of weeks ago, I retweeted a Brad Feld post titled “Startup Cost Projections for First-Time Entrepreneurs.” The passage that interested me the most was:

The biggest mistake first time entrepreneurs make is that they fall prey to the idea that they need to put together a five year P&L forecast and cash flow projection. I can guarantee – with 100% certainty – that this model will be wrong. As an investor, I don’t really care about this; rather I want to see how you are thinking about getting to “the next stage” of your business. You get to define the next stage, what it’ll cost you to get there, and what things will look like when you get there.

I think this is critical advice every entrepreneur needs to follow. And the post reminded me of some of the things potential clients send me.

About once a month, a startup founder will send me a “5-year business plan” with a cap table that anticipates 4+ rounds of funding. Typically, the future cap table will estimate what each founder’s future ownership will be down to the 1/100th of a percent.

I suspect that the majority of these 5-year business plans come from entrepreneurs with corporate/consulting/finance backgrounds. These new entrepreneurs are quite skilled at producing such documents and are eager to use these skills at their startup. While such skills are an asset, their importance is minimal in the early stages of a startup.

As an attorney, I really don’t need to see multiple excel worksheets of projections. And an entrepreneur, regardless of their background, does not need to be creating a projected cap table with four rounds of funding. If you do this, you are spending time working on something that will be incorrect.

As Brad mentions in his article, work on the implementation of your idea. How is your startup going to reach the next stage? How are you going to sell, etc.?

Don’t oversmart your business startup’s plan. Figure out the answers to these shorter-term questions and the long-term numbers and cap tables will work themselves out.

The Superbowl Example of “Stay Ready”

Back in January, I wrote a post about how entrepreneurs should always stay ready for potential opportunities (rather than get ready once they pinpoint one). Well, today seems like the appropriate day to provide a real-world example of staying ready.

I met Jared Retkofsky in the fall of 2008. Jared is the long snapper for the Pittsburgh Steelers. Rather than tell you Jared’s story, I believe these 2 articles do a fine job:

Special Skill Gives Steeler a Moment To Savor (NY Times)

Pittsburgh Steelers’ Jared Retkofsky took long road to Super Bowl (Chicago Tribune)

The articles fail to mention that after Jared spent his work day moving furniture, he would head over to a local practice field and practice his snaps late into the night. And Jared practiced even though the NFL season was halfway over, team rosters were set, and no try-outs were scheduled.

But thanks to those nights, he was ready when opportunity arrived at his doorstep.

So here’s a guy who, in less than 12 hours from now, could be hoisting the Lombardi Trophy. That’s 3 months from moving furniture for $12/hour to being at the pinnacle of the NFL. And all because he chose to stay ready when no opportunities were in front of him.

Regardless of the outcome of today’s game, he’s a great example of how opportunities are only realized if we are ready for them.

Going All In

I see a lot of entrepreneurs struggle with the decision to go all in and make their startup a full-time job (i.e. quitting your “Office Space” job). I had a similar decision when I decided to go out on my own.

3 years ago, I walked into Fidelity, cashed out all of my retirement funds (complete with penalties, taxes and crazy looks from the Fidelity employee) and started my law firm. Ironically, my new law office is located right next door to the Fidelity.

It wasn’t an easy decision at the time. I had a new mortgage and a 3-month old. But I figured there would never be that “better time” to start a new firm/company.

In retrospect, it was probably pretty stupid to launch a law firm without any clients or local contacts. But the back-against-the-wall nature forced me to work hard and give everything I had to my company.

I’d say about half of the startups I work for have founders with day jobs. And I don’t find anything wrong with that. We each have our own reasons, pressures, and risk tolerances. I respect decisions either way.

But there are 100 reasons why a startup can fail. And if you aren’t working full-time at your startup, there’s now 101.

Making Dallas the City of Angels

I could use more palm trees here in Dallas and while I’m at it a Togo’s. However, the “City of Angels” reference in this post’s title is about bridging the gap between entrepreneurs and angel investors rather than going “Under the Bridge.”

The startup ecosystem in Dallas is discombobulated if not broken. “Underperforming” would be a kind word to describe Dallas relative to other startup communities. To improve the Dallas startup scene, a group of people in Dallas came together to form a group as follows:

The basic idea is to form a group designed to a) generate LOCAL dealflow for angel investors, b) assist entrepreneurs in the creation of fundable startups and c) provide investment capital for startups. Instead of charging angels and entrepreneurs a fee to participate require that they instead invest their time.

If you are interested in helping organize this group I invite you to attend. At this time we are seeking a) angels with experience, b) angels without experience, c) entrepreneurs interested in helping and d) entrepreneurs interested in pitching. The idea is not to create an angel group in secret or without the input of entrepreneurs, but to instead create it by and for all parties.

The first meeting was last week and it went pretty well. We’re in the process of defining the vision (i.e., do we change the world or change one entrepreneur/angel at a time) and laying out the ground rules. In other words, the group realizes planning is essential to ensure an entrepreneur-angel improvement in Dallas.

From what I’ve experienced, Dallas investors are comfortable investing in real estate and oil & gas deals–but not in traditional startups. Maybe it’s because real estate and oil & gas deals tend to be structured as limited partnerships, and therefore the deal documents and language therein for startup investments might be too foreign for Dallas investors. Or maybe people in Dallas just know more about real estate and oil & gas.

Any thoughts on this from the Dallas crowd?

Enthusiasm is Not a Substitute for Caution

This morning was my son’s first day of school and he was extremely excited to get going. In fact, he would have ran across the street to his school without looking if I hadn’t stopped him. His elation overtook his ability to evaluate peril. This reminded me of how entrepreneurs can rush into a startup without taking the time ascertain and address potential issues.

For example, co-founders can let their passion and enthusiasm for their startup (and trust in their co-founder) substitute for practices that will protect and enhance both them and the startup company. I wrote an article about issues co-founders should discuss titled “Keep Your Startup Co-Founder Closer.” Check it out if you haven’t already.

The Entrepreneur Also Rises

I had some free time this weekend and watched “Empire of the Sun” starring Christian Bale and John Malkovich. The movie came out in 1987, but I saw it for the first time Saturday.

The premise of Empire of the Sun is that an aristocratic British child is separated from his family (living in China) at the start of World War II after the Japanese invade China. The child is forced to live on the street and is eventually interned in a Japanese POW camp.

I’m glad I did not see Empire of the Sun when it first came out, because I would not have fully-understood the characters’ emotions. In fact, I would have likely grouped the movie with other “where are the parents?” movies like The Goonies or Adventures in Babysitting in the late 1980s.

While I was a child in 1987, I have 2 children in 2008. My experience as a parent helped me understand the anguish of losing a child.

However, there will be situations where you (and I) will lack experience and be at a disadvantage in understanding another person’s emotions and subsequent decisions. In these situations, you must do your best to put yourself in the other person’s shoes. How would you feel and react if put in the exact same situation? Answering that question before every negotiation or interaction will yield positive results for your startup.

As an entrepreneur, it may feel as though the world consists solely of you and your idea. And for a period of time, that may be true. But eventually, and in order for you to implement your idea, you will have to interact with and rely upon many individuals and groups. And they will all come with their own sets of emotions, decisions, and priorities.

For example, when hiring an employee, you should understand that no matter how many stock options you throw at an employee, those stock options will not feed his or her child for some time (if ever). Thus, an employee’s hesitance to accept stock options in lieu of other compensation may not have anything to do with his or her view of your startup’s future. He or she may just have a child to feed today.

In the startup world, reducing egocentrism and increasing empathy will have positive effects for your startup when dealing with employees, vendors, co-founders, or venture capital firms. By better understanding others and their motivations, you will increase the potential for agreements. Focus on the reason and not the answer. You may be able to find a way to make it work.

Keep the Bridge Burning to a Minimum

A few months ago, I was on a conference call with opposing counsel to negotiate a client’s deal. Things got a little heated (the only time I’ve ever experienced a hostile communication with another attorney) and eventually I got hung up on. I was about to call the attorney back and show him what I learned from 15 years of listening to gangsta rap, but thankfully I didn’t.

Was I upset? Sure.

What it have felt great to go 2pac on the other attorney? Very Sure.

Would I have regretted it 2 minutes later? Extremely Sure.

Instead, I waited a day and called the attorney back. We ironed out the terms of the deal and got it done. Everybody was happy.

But here’s an even better example of why you don’t burn bridges unnecessarily: Three weeks later, another client of mine asks me to handle an acquisition. He gives me the contact information for the other company’s lawyer. You guessed it…the same lawyer.

If I had burned the bridge with that lawyer, it could have negatively affected my client’s current deal. Or, it could have gotten me removed from the transaction. Luckily, both were avoided.

As an entrepreneur, there will undoubtedly be frustrating moments where you will reach a boiling point and be tempted to let it rain fire on a co-founder, employee, vendor, or other 3rd party. In these situations, don’t throw your MacBook against the wall or burn bridges with other people.

Burning bridges is a short-term (emotional) solution with long-term implications. Of course, there will be situations where a relationship can not be salvaged, but those situations are rarities. And your startup will be better off the rarer they are.

Dallas Startup Happy Hour

I attended the Dallas Startup Happy Hour (sponsored by SpringStage) last night. This was the second time I attended but this one was especially great because I got to bring along one of my clients who is working full-time on his startup. He got a much-needed break from coding and was able to network and just otherwise talk shop with other startup entrepreneurs. Thus, if you are a current startup in the DFW area or maybe just thinking about it, consider attending a future Dallas Startup Happy Hour. It’s being held every other week at the High Tech Bar at the INFOMART Center in Dallas.

Here is the motivation for the event:

We are working to build a vibrant startup community here in Dallas every bit as interesting and dynamic as San Francisco, Boulder, Boston or Austin. The first step is engagement. If you are an entrepreneur (future, current or past) you should attend. If you are working for a startup you should attend.

I’ve had the pleasure of meeting many great people, including (but not limited to):

-Jason Hudgins of Droidworks
-Andy Chen and Andres Fabris of Traxo
-Brad Brawner of SportsJungle
-Bradley Joyce, web developer & entrepreneur
-Lincoln Murphy of Morph Labs (who helped me with the correct pronunciation of “mysql” and explained what “the cloud” is.)
-Scot Duke of Innovate Business Golf Solutions

Cancel all “Entrepreneur of the Year” Awards

Ernst & Young LLP filed a complaint yesterday in federal court against Entrepreneur Media, Inc. (publisher of Entrepreneur Magazine) alleging that Entrepreneur Media is infringing upon Ernst & Young’s “Entrepreneur of the Year” trademark registered with the USPTO.

For more than 20 years, Ernst & Young has bestowed an “Entrepreneur of the Year” award upon successful and innovative business leaders in the United States and around the world. Prior winners include Michael Dell (Dell), Steve Case (AOL), Jeff Bezos (Amazon), and John Mackey (Whole Foods).

In the complaint, Ernst & Young alleges that Entrepreneur Media first infringed in 1994. At that time, Ernst & Young objected in writing and Entrepreneur Media stopped using the phrase “Entrepreneur of the Year” in conjunction with a contest. In fact, Entrepreneur Media’s corporate counsel at the time thanked Ernst & Young’s counsel for “bringing the matter to Entrepreneur Media’s attention.” This 1994 letter is now Exhibit 2 of the 2008 complaint.

Now, Entrepreneur Media is currently running a 2008 Entrepreneur of the Year contest. And just like 14 years ago, Ernst & Young sent Entrepreneur a ceast & desist letter. But this time, Entrepreneur Media rejected Ernst & Young’s demand to stop using the phrase.

Enter lawsuit.

Ernst & Young seeks a permanent injunction, destruction of all Entrepreneur Media materials related to their contest, an order directing the USPTO to cancel Entrepreneur’s Media’s registrations, Entrepreneur Media’s profits from the use of the “Entrepreneur of the Year” mark, damages, attorneys’ fees, and any other relief the Court deems proper.

Like reading legal complaints? Click here to get the PDF of EY’s complaint.