Startup!: Beyond the Myths to the Reality of Starting a Company by Kevin Schehrer, Hardcover

Product Details

ISBN-13:	9780971771406
Publisher:	ROI Press
Publication date:	03/01/2002
Pages:	251
Product dimensions:	6.10(w) x 9.10(h) x 1.00(d)

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1. INTRODUCTION

There is a lot of romanticism swirling about the startup world, and with that comes conventional wisdom that would be better called myth. One such myth is that good people and good ideas can always find venture capital (VC). Venture capitalists and entrepreneurs who have received venture capital are always good for a quote to this effect. However, depending on where we are in the venture-capital cycle, there are typically only a few hundred seed-round venture-capital fundings per year. Is it possible that in a country with 280 million people there are only several hundred good ideas per year? Moreover, with a typical VC track-record, only 10-30% of those will succeed to their full potential. Were there really only 30 truly good ideas in a year?!

Since there are many more than a few hundred good ideas every year, the reality is that many, many good ideas do not get funded by venture capitalists. Moreover, your odds of getting funded by venture capitalists while you are at the idea stage, no matter how good your idea is, are pretty low.

So what do you do? Throw your hands up, keep your day job and put Dilbert cartoons on your cubicle walls in quiet protest? No, you can do what hundreds of thousands of entrepreneurs do every year�start your own company. But, unlike most of those hundreds of thousands, who will fail, you should prepare, plan, take action and be resourceful so that you greatly increase your probability of creating a successful company with or without venture capital. This book was written from my experience of being involved with more than one hundred startups, seeing summaries or plans for many hundreds of startups, meeting hundreds of bright entrepreneurs, venture capitalists and other investors, and having equity in a number of companies. The discussions in this book are not based on surveys or statistical analyses. Throughout this book I will use real-world examples to illustrate my points�with particulars altered to respect confidentiality.

This book is about how to get from an idea or a list of ideas to the point at which you have made a commitment and started your company. Unlike most books on startups, this book isn�t focused on raising venture capital and going IPO (initial public offering). I do, of course, discuss financing, since in most cases you will need it at some point in your company�s growth.

This book is about moving prudently through the stages of starting a company�and choosing which company to start�so that when you make that commitment you are more likely to succeed. As you probably also have guessed from the opening paragraph, I will not keep repeating conventional wisdom that flies in the face of reason and I will dispel these myths where appropriate.

Early-stage investors, entrepreneurs, team members and corporate intrapreneurs will benefit from this book. I start from the pre-startup stage�the stage at which the reader may be thinking of starting a company. There is a lot of information about this stage available on the Internet, in magazines and in books. Unfortunately, much of it is not very useful, is inaccurate or is trite. In this book I give the entrepreneur a from-the-trenches perspective. I cut through all the bromides and conventional wisdom to get at what matters. I try, wherever possible, to bring the reader to action. I assume that the reader is serious, wants to take action and wants to achieve results�this is not an academic exercise.

I make absolutely no effort to be politically correct. I have a point of view backed up by my experience of starting companies and I have no qualms about expressing that point of view. I try to save you, the reader, the trouble of following conventional wisdom, making the same errors that many others have made and then having to adjust course in response to reality.

Most startup books fall into one of three categories:

They say they are about starting companies, but thumb through these books and you will find that they are really about raising money. Some of these books can be useful but they are not really about starting a company.

They focus on the mechanics of starting a company: how to set up an office, how to do an operating agreement, how to buy business cards and letterhead�these books can be quite helpful but they won�t have much impact on your ultimate success.

They are somewhat academic studies of past results or compilations of quotations and interviews. The best among these can provide interesting insights but don�t speak directly to the topic of starting a company.

I don�t think you will find any other book that gives you such practical advice on which you can take action, that takes a point of view, that cuts through the noise and that dispels some of the common myths.

In Chapter 2 we will take a close look at you. We'll do this so that you do some self-examination to determine the types of opportunities to which you will add the most value, and the opportunities you will find most satisfying. This section will also help you to think about how long you might stay with a company and how your transition within the company, or your exit from it, might look. A lot of this will tell you what it is really like so that you can imagine yourself in those entrepreneur-shoes. In this chapter, many questions are posed so you can determine whether being an entrepreneur will be an exhilarating source of energy (as it will be if it is a good fit), or a scary, destructive experience (which it could be if it is a bad fit).

In Chapter 3, we'll move on to discuss how to screen opportunities� both to find one that is right for you and to find one that will allow you to achieve your goals. The premise of this chapter is that you need to think like a good, but time-pressed, investor to determine quickly whether an opportunity warrants further due-diligence and detailed planning. Whether you ask anyone for money or not, you'll need to convince yourself, vendors, employees and customers that this is a great business-opportunity. Each section in this chapter ends with a series of questions and has some exercises that are best done quickly (in less than ten minutes) and will be useful both in the quick evaluation of an opportunity and as the basis for planning, if that is warranted.

Chapter 4 is about planning. It is not a �How to Write a Business Plan� chapter. It has four primary purposes:

gathering the information you need as part of further due-diligence and doing analysis on an opportunity

creating a blueprint for what you need to do to make your company successful

finding the holes in your thinking

making sure that the disparate thoughts and information that you have about an opportunity actually are consistent and reinforcing. Of lesser importance, it can serve as the basis for creating a communication document that can be used internally, for investors, or simply to clarify your own thoughts.

Chapter 5 covers testing the model. Here you explore how to prove out�without spending a lot of time or money�the risky bits that you discovered in your planning and due-diligence phases. This is a step that entrepreneurs might be tempted to skip. Many do so because they think that they need money alone to succeed. Many others skip it because they fall in love with the potential before fully exploring the reality. To put this in perspective, this is the type of work that today�s more cautious investors will expect you to have completed.

You will need help from other people and need to make other preparations before starting your company or asking serious investors for money. Chapter 6 will take you through some last-minute preparatory thinking so that when you make the commitment to start you have everything in place to allow you to hit the ground running�in the right direction.

Chapter 7 is about investors and their relationship to entrepreneurs. It discusses the various types of investors, the pros and cons of each and what to expect from them. It also, of course, discusses how to approach investors for financing. This chapter has a lot of hard-earned, experiential information that will save you learning your way past the myths on your own.

Chapter 8 comprises a series of tips and techniques that will help you in running your company from day one. It is an overview of what I call �foundation-setting�, which is often neglected but can have a huge impact on the probability of success. Foundation-setting covers principles, culture, milestone setting, communication and keys to success. Also covered here is how to use process without it paralyzing your small enterprise.

In Chapter 9 we�ll take a look at two entrepreneurs. We�ll briefly take a look at their backgrounds, then at how they got into their current businesses. Each entrepreneur�s story includes quotes from the entrepreneur in which they share their wisdom and lessons learned. This chapter will give you some insight into what it takes to be an entrepreneur and start a successful business. You will see that starting a company is something that you can do too if you so choose.

Over and over in this book I will stress that you need to use your head, that you have it within you to do what you need to do but you need to take action and you need to take responsibility. I will not give you any magic potions or foolproof rules to success because there are none. There is an entire industry based on pretending that there is, but I would rather you were successful than simply felt good after reading this book. The planet is littered with consultants dispensing advice such as the following, which is an actual quotation from an anonymous source in a newsgroup: Just make sure a declining economy doesn�t pull your sales staff�s morale down with it. Consider these attitude-enhancing tips:

Stay positive. If your salespeople smell fear, they�ll start to worry.

Rev �em up! In a soft market, salespeople are getting beaten up every day. It�s your job to inject a positive attitude into their lives. Leave them encouraging voice mails or pager text messages.

Be a cheerleader. Make a big deal out of every sale. Celebrate successes to motivate your team to keep on winning.

This type of advice is only slightly better than a financial advisor telling his client to buy low and sell high. Good advice? Yes. True? Yes. Accurate? Yes. Useful, insightful or added value? I�ll let you answer that.

This book will have achieved its goal if it helps you achieve your goals generally, but, more specifically, if it gives you a few key-insights, if it dispels some myths and if it helps you find a great opportunity to join or start.

I also very much hope that you find this an enjoyable read. Starting a company is one of the most enjoyable and rewarding things a person can do�I hope that I have conveyed my love of starting companies, while deliberately avoiding the content-free happy-talk found in many media about startups.

First Chapter