“100 Insider Rules for Beating the Odds”, from Mastering the Fundamentals to Selecting Investors, Fundraising, Managing Boards& Achieving Profitability.
Topics for Startups: Publisher’s Website, Book Review, Timing, Financials, Investors, Fund-Raisers, Board of Directors, Profitability, Vision, Summary.
In Straight Talk for Startups, Venture capitalist Randy Komisar & Finance executive Jantoon Reigersman shared the “secrets” they’ve gathered “from decades of being on both sides of the table—originally as entrepreneurs looking for advice and more recently as mentors” As they caution, “You must be fluent in all issues facing entrepreneurs if you hope to win” (p. xx).
From the Publisher’s Website for the book: Authors walk budding entrepreneurs through 100 essential rules—from pitching your idea to selecting investors, to managing your board, to deciding how &when to achieve liquidity. Culled from their own decades of experience, as well as the experiences of their many successful colleagues and friends, the rules are organized under broad topics, from “Mastering the Fundamentals” and “Selecting the Right Investors,” to “The Ideal Fundraise,” “Building and Managing Effective Boards,” and “Achieving Liquidity.”
“To an outsider, Starting a company looks easy. Just wake up with an idea, tell your friends, and convince one or two people to partner up; take your pick of top-tier venture capital investors, build a product, get swarmed by offers, and sell to the highest bidder. But you & I know it isn’t really like that”.
Beginning of the Book Review: It’s actually in the last sentence describing the book (for those “curious about what makes high-potential startups tick”) that got my attention and piqued my interest. You see, I do not run, work for or have any plans for creating a Startup. The closest I’ve ever come to a Startup is watching Entrepreneurs on TV’s Shark Tank. The “Sharks” are tough, self-made, multi-millionaire & billionaire typhoons, who invest in the best businesses & products that America has to offer. I’m writing this review from the perspective of someone who’s simply “curious” about how startups work. Because Straight Talk for Startups is written as a List of Rules, it doesn’t “flow” like when reading a standard/usual business book. And since it uses a list (100 Insider Rules), it’s only fitting that I select a handful (one or two from each of the five (5) parts that the book is divided into), and quote and talk about them below.
Part 1: Mastering the Fundamentals
Rule #5, Timing (p. 13): Most failures result from poor execution, not unsuccessful innovation. “Timimg is critical. If you are right about the market but wrong about the timing, you will fail just the same” The Authors said that Steve Jobs’ under-appreciated strength was his “uncanny ability to never ship a product before its time”. Jobs killed off the Newton project (which had been struggling for years), but kept the talented people working in the area and redirected them to target digital music, eventually leading to the iPod. “It was a decade later that Apple introduced the iPhone, a quantum leap from the Newton. The technology was finally cost-effective, the market had been primed to carry [Apple’s] entertainment in their pocket, and, by adding a cellular radio and a clever touch interface, Jobs finally had what he needed to deliver on the promise of a connected online communicator”.
Rule #18, Financials (p. 45): Know your financial numbers & their interdependencies by heart. You might think that these rules are generic advice, but you would be wrong. Rule #18 offers a prime example of the detail-oriented wisdom shared. The authors offered a quick primer on how the financial numbers (ie, income statement, cash flow statement, balance sheet, working capital schedule, debt & cash schedule) work together. They said that as an entrepreneur, you need “to be able to drill down into the components of each element [in the financial numbers] so you understand. For instance, why revenues have increased rapidly (more customers?) but your operating margins have shrunk (ie, discounts to accelerate sales, customers not as profitable as expected, etc.)”
Part 2: Selecting the Right Investors . . .
Rule #31 only if you Absolutely need them (p. 80): “Remember: Venture Capital comes at a price, in the form of a meaningful percentage of your company. So you have to be prepared to part with a significant portion of your company to even attract an average VC. Venture Capitalists will impose certain controls on what you can & cannot do without their approval, such as sell the company or issue new shares”.
Part 3: The Ideal Fundraiser
Rule #42 Stages (p. 110): to reduce Risk. If you raise more money than you need in an attempt to remove the leap-of-faith risks too early, you will pay a big price. Given everything that you still have to prove & accomplish, on a risk-adjusted basis, your valuation will be too low to provide you & your team with a compelling upside after you absorb all the dilution a ‘one-&-done’ round would entail. Simply stated, you are too risky at the start, to raise all the capital you need at an attractive price”.
Part 4: Building & Managing Effective Board of Directors & Advisors
Rule #65 Operational vs Administrative (p. 175): You want business people, not bureaucrats. You want a board of strategic thinkers with strong operating backgrounds, who are willing to work hard to make your Startup a success. They need to be informed, available, knowledgeable, & engaged.
Part 5: Achieving Profitability
Rule #87 Investors’ & Founders interests often conflict (p. 231) Investors may argue against the sale of a Startup below a certain price—even when it would provide a respectable outcome for all. Investors expect a larger multiple and return on their investment and are willing to roll the dice to get more” At the end of the book, in the Epilogue, the Authors shared their “Cardinal Rule” which is . . .
“Always ask yourself Why?” “Know why this Startup is important to you. Why it should be important to others. And, given the low probability of success for any venture, why it is nevertheless worth failing at (if you do). Of course you don’t want to fail. Success is always preferable to failure. But if you fail, will you feel you wasted your time, or will you take what you learned & try again?
Vision vs Sweat. You don’t just need a good Vision for your Startup; you sweat the details & manage complex operations. You watch every nickel and are strategic about who you raise it from. You persevere through good times & bad. You assemble trusted advisers, mentor, & boards to keep you verify your ideas and their guidance from their experience. You don’t just visualize it; you work it – hard – to make it happen.
Summary of the Book: The authors said “Reading about what it takes to start & run a company – in particular – the wisdom, intuition & experience needed to be successful, as well as collecting the best advice from advisers, mentors, & boards, allowed us to capture these 100 rules. It was an extraordinarily informative experience.
NOTE: Based on the Wisdom shared by the Authors, anyone—not only entrepreneurs—can benefit from the tips & guidance in the 100 Rules from Straight Talk for Startups. Even if you’re not an entrepreneur or know anything about startups, if you’re just curious about what makes a startup venture work, then I think you’ll find Straight Talk for Startups to be a fascinating read.
Comments: Do you know any other good Rules for Starting a Business?
from Workplace Psych 10 June 18 enhanced by Peter/CXO Wiz4.biz