Sunday, April 28, 2013

Sunday’s startup maxims

The FT is publishing a series of case studies to assist entrepreneurs: the latest profiles the strategy behind  Amici’s East Coast Pizzeria.  It looks deceptively simple:

The strategy. To assess the opportunity, Mr Cooperstein considered the following questions: is there a compelling unmet need; is there a large market; is there sustainable differentiated positioning; can there be a scalable business model; why us – is the team uniquely positioned; and why now – what is the timing of the opportunity?

The reality is a lot more challenging.

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After a weary week on the road (and a decisive one ahead), I’d add a  few practical thoughts to the academic strategy.

-- No business ever truly a ‘going concern’, without risk for the next 12 months, secure in revenue and funding.  Cash flow is always fragile; resources are never enough to address opportunities or problems.

I never understood this working for someone else…

-- When people believe in you and your business, success leads to success, a positive buzz that  draws in money and attention. But, and it can happen in a flash, a negative perspective can be crippling.  People and money become scarce, supporters ask how long you plan to continue, and staff find better things to do (and throw sand in the gears along the way). 

Stay confident, have a backup plan, and keep finding a way forward so they don’t look for the way out.

-- When the Founders fall apart (and it will happen as soon as the ‘big money’ organizes a Board),  you can mediate agreement on facts, but you can’t restore trust.  The Unknown-Unknowns just keep everyone worried that they’re getting screwed, and reminds them that it’s the last chance to get their piece of the pie.

Don’t lose sight of why you went into business, and don’t lose consensus. Once the lawyers arrive to broker a peace, it’s war.

-- If negotiations get rough, take a time out, but don’t walk away from the table: A cooling off period can last months. 

Similarly, if you get agreement, get it written down and signed: it’s fragile and lost if people have a chance to sleep on it.

-- Boards…

    • Are mentor and cheerleader, judge and jury.
    • Assert themselves when provoked.
    • Need balance (and more experts than investors).
    • Only credit outcomes, not effort.
    • Protect shareholders above stakeholders.
    • Need their members to be sunsetted.
    • Amplify the good times and the bad times.

-- Don’t assume that silence means that people are cunning or  crazy; they’re likely just distracted or indifferent.

-- Be critical of the denominator in any ratio.

-- Don’t let it get to you when angels invest more in their car than in your business. 

-- And…

In hindsight, I only wish I’d tumbled on to what works, sooner.

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