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Simple Advice for Startup Entrepreneurs
by Startacus Admin
Troy McConnell has 23 years of entrepreneurial experience.
Co-founding his first company, Image Technology, back in 1988, he is currently the CEO of AudienceFUEL. With a wealth of entrepreneurial experience we are delighted that Troy is sharing some of his knowledge with Startacus. Currently teaching at the School of Business at Wake Forest University in North Carolina, USA, we offer a big high five to Troy for the following simple BUT very valuable tips for startup entreprenuers. Over to Troy...
"I often get asked the same few questions by startup entrepreneurs. These are good questions. Here are my answers.
Is my idea a good idea?
I don't think anyone knows the answer to this but you. Lots of people, especially potential and existing investors, will give you answer. But, honestly, investors often see 50% to 80% of their investments fail. And that's when they like the idea. The reality is that ideas are a dime a dozen but action is where the value lies. That means what you do to move your idea forward counts for much more than the idea itself.
Now, there are very good rules you can use to learn whether you can develop your idea into a sustainable, profitable business. More on that in the future. But, right now, answer these two questions. Who are you and What do you want? As an entrepreneur, you are the most important person in the world (there, I said it). Your strengths, weaknesses, bias', abilities, network and personality color the decisions you'll make going forward. You need to be honest with yourself about what you know, what you are good at and who you know in the context of pursuing your idea.
How do I decide how much equity each founder gets?
Again, only you can answer. However, the decision needs to be coupled with an agreement between the founders that defines the following:
A. Someone is the CEO and everyone else isn't. Someone has to be in charge and, while the process for getting to a decision might be loud, at the end of the day someone has to own up to being the boss and set direction. Oh, and that means that if you're not the CEO, you have to either support (after arguing strenuously) decisions or leave. Simple.
B. No one gets all of their equity at the beginning. Look, people's lives and outlook change. Starting a company can be a nasty, stressful business - not everyone, after finding it out it's not like in the books or magazines you read, is ready to continue. So, setup a period of time - say 3 years - and every founder is vested their equity in the company over that period of time.
That way, if someone leaves after 3 months, they don't leave with 33% of the equity but only 3 months worth. If anyone leaves before they vest fully, then let their unvested equity be distributed to the founders who are left. The happiness of founders 2 years after they start a company is directly variable with how soon they entered into an agreement that has A and B above. It doesn't mean they are happy, it just means they are happier than if they didn't do it.
What was your biggest mistake?
Listening to the advice that I was "too hands on" and "too involved" in the business. Generally this comes from people with only corporate or business school experience. Look, as Steven Blank has said, a startup is not a small version of a big company. The value propostion is not well-defined. The customer is not always well-understood. The sales and marketing processes are in their infancy.
The energy required to move an object from a standstill to moving is much greater than the energy required to keep it moving. This is what you are doing. Moving a value-proposition from nothing to something. In a startup, you are the energy. So, go ahead and obsess over every detail to make sure they are right. Hey, it doesn't always make you the nicest person in the room but are you trying to make friends or create something?
How much will my company be worth?
Listen, focus on changing the world in some (big or small) way. Make someone's life better. Solve someone's problem. Then, let's chat.
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