Just as karaoke machines created a nation of wannabe singers, and WordPress created a nation of wannabe writers, so the imperfect storm of global connectivity, crowd-funding, and America's protracted economic and employment malaise (aka Lagflation) have created a nation of wannabe entrepreneurs.
While there are many articles out there urging you to throw caution to the wind, chase your dreams, and “Go for it”… this is not one of them. Instead, this essay is like a Simon Cowell wake-up call for those considering becoming an entrepreneur and launching their own company.
In a world of Facebook friends cooing, “Believe and you will achieve,” this is the counterbalance – an adult, “eyes-wide-open,” practicum which draws back the curtain and cuts through the hype by zeroing in on the most controversial, misunderstood, and unspoken word in startups.
Confessions and Credentials
I begin with some confessions and credentials. I love startups. I love building things from the ground up. I love taking a blank sheet of paper and transforming fantasy into reality. But more than anything, I love the culture of the driven people comprising this community – that audacious brotherhood of courageous pragmatists – who combine an infectious, ambitious, and generous entrepreneurial spirit with a passion for progress.
After spending the first decade of my career marching through the corporate world, I've spent the past 13 years as an entrepreneur. I've launched five companies, written scores of business plans, investor guides, and industry white papers, and know firsthand the exhilaration of a public company exit.
I've raised capital and spent capital. I've consulted to private equity. I've pitched at “Stake and Egg” breakfasts and VC dinners, as well as conducting countless presentations to investment groups sporting edgy ironic names like ARCH Angels, JumpStart, North Coast Angel Fund, and Idea Stream.
My exploits have included forays into risk management, consumer products, corporate social media, commodities, bioinformatics, and commercial property, and I am currently a stakeholder in 7 startup companies. I've been interviewed on XM Radio, hung out with Robin Williams at CES, had products featured in GE's booth at RSNA, been on the Video Game Awards show red carpet, schmoozed in Studio 54, was showcased by MTV and Spike TV, and even had CNN cover a launch at COMDEX featuring a Bill Gates look alike. And yes, I've experienced failure and financial setbacks, and carry the scars from former business partners whose lack of integrity scuttled entire companies. I guess you could say I've been around the block so many times I can't remember my first rodeo.
The Dirtiest Word
It's been my experience that every meeting with a serious investor has what I call “The Moment.” You've just presented your brilliant, bleeding edge, “The next Facebook/Starbucks” idea, while boldly proclaiming, “Nobody else is doing this,” and thereby positioning your firm with that critical, “First mover advantage.” You've documented your industry research and market trends, you've smugly smirked at your, “Lack of any real competitors,” and you've detailed your product/service strategy, intellectual property, and price points.
And if that wasn't enough, you've fawned over the stunning credentials of your veteran, experienced, top-shelf, blue chip, management team, your launch plan rollout, and your estimated revenue, costs, and profit margins – complete with requisite hockey stick growth projections (which are – of course – “conservative”).
The meeting reaches an emotional crescendo as you confidently answer the tough questions regarding the amount of investment you are seeking, in exchange for the amount of their stake in the startup. And then there is “The Moment” – the moment they finally turn to the Excel spreadsheet on the last page of your meticulously prepared Investor Guide…and their eyes slowly scan down your projected expenses and use of capital…and then they stop…they ALWAYS stop…at the dirtiest word in startups – SALARY. You hope it will go unnoticed. You pray for a matter-of-fact nod…but it rarely comes. Instead, they lean back, and start asking a series of awkward, personal, and uncomfortable questions beginning with the word “So” (so as to appear disarming, benign, and spontaneous):
“So, how much have you already invested in this startup?”
A good question, for which you've got a good answer, but before you can reply, comes the kicker – “…not including your TIME,” – at which point, no amount of explanation regarding “opportunity costs” or “sacrificing family time” or “working nights and weekends” will suffice.
