BEST PRACTICES FOR A SUCCESSFUL START UP
Having started two companies and been on the boards of several more, I have some first hand insights to what work and what doesn’t for early stage companies. While the following are my top four, there are certainly many others. And none of these are truly unique to me.
Similarly, there are always examples of companies who’ve done just the opposite and yet prospered immensely.
a) Amazon losing $7 on each book and making it up in volume,
b) Twitter not needing revenue and
c) Zenga raising money when its not needed.
So without further adieu, here’s what I look for as best practices within an early stage company:
Ideas are easy, Implementations are hard
While its imperative that companies be able to pivot based on customer feedback (see bullet point four below), its also important not to fascinate from idea to idea. When I hear companies worried about someone stealing their idea, I wonder if they realize how hard it is to actual get the idea off the ground. Most great ideas aren’t radical departures from the established baseline, just better implementations (Facebook to Myspace / Google to Yahoo).
Bootstrap as long as you can
Speaking as an Angel, I know that companies really do need capital to push their ideas forward. However, once an Entrepreneur takes capital from outsiders, there’s another whole agenda to work through. Instead, family, friends, and even customers and suppliers can be a good source of capital or credit. (Note, be wary of strategic investments to soon as that can restrict your options later on.) Only go to outside investors when you’re ready to tell them a plausible story that you can return 5 to 10 times their money in 3, 5 or 7 years. That’s their agenda.
Get a great advisory team
Having just bashed outside investment, allow me to build it back up a bit. With external capital, can come access to new customers, resources and suppliers. “More than the money” is the tag line of the Pasadena Angels. We bring industry contacts, a wealth of business experience and hopefully access to new revenue sources — a.k.a. customers. Make sure you get investors who can help push the company forward.
Focus on your product
All companies — from the largest to the smallest can get bogged down in the minutia. Not to say that executing and “minutia” are not important, but early stage companies rarely have problems more significant than generating revenue. Get those first customers — even beta customers that don’t generate sales — and prove a big validation point. People want to use the product. Of course, getting paying customers, and even customers that pay more than the product costs (can you say gross margin?) are part of the natural evolution of a company. But its those first customers — the early adopters — really give insight and prove whats value. Get out and interact, see what qualities of the product mean the most.