April 2014

Why That Ex-IBM Exec Could Be One Giant, Cash-Guzzling Liability to Your Startup

Picture this.

Young, starry-eyed startup founder comes in to pitch investors for funding.

He clicks crisply through his deck. He describes his product (patent-pending, of course), its features, benefits, and how 1% market share is enough to place everyone in the company on the Forbes list of richest people in the world.

Then the team slide comes up on the screen and the entrepreneur puffs up his chest, clears his throat, and announces that (just so you know) the CTO (or some other C-Suite position) of the company is an ex-IBM executive (or an ex-HP executive, or any other big, public company).

He pauses and looks around the room proudly. Almost as if he was expecting a standing ovation.

Oh, by the way, the company has raised $20 million so far, burned more than 50% of that on overhead (logo design, focus groups, salaries, and such), and hopes to have a minimum viable product in 24 months. Just as soon as this round of funding is completed.

See any problem with this picture?

Several actually. Let’s address just one today.

If you haven’t taken your product and service to market, if you do not yet have product-market fit, hiring an ex-Google COO to impress potential investors will almost certainly spell doom for your startup.

Here’s why.

One, your startup IS NOT a smaller version of a big, public company (HT Steve Blank). Your social media startup and Facebook are two totally different animals. One is a cute, needy kitten; the other is a full-grown lion. Your startup (the kitten) has different needs and needs a different set of competencies than a fully-functioning company.

Second, drawing from one above and quoting Ben Horowitz in his must-read book, “the job of a big company executive is very different from the job of a small company executive.”

To a big company executive (used to big budgets), that $2 million you plan to raise to take your product to market is just furniture allowance.

Former big company executives come with big company habits that could be deadly to your startup. Habits like sending everything to focus groups, analysis paralysis, bureaucracy, ego mania, and waiting for things to happen instead of making things happen (among others).

Bottom line: buyer beware.

Yes, you might need an Eric Schmidt or Sheryl Sandberg for adult supervision, however, hire one with your eyes wide open and only when your startup has taken off and is approaching cruising altitude.

Business Investment Questions Answered

So the other day the founder of one of our portfolio companies did a business investment product demo before some investors.

Impressed with the product, the investor, however, observed that the product might be too clunky for shipping. He wondered if it were possible for a product to fit a certain shipping parameter that he was sure would give the already-impressive product another edge in the market.

As told by Brett, everyone agreed it would be worth the founder’s time to explore possible solutions to address the investor’s suggestions. Then the product demo was continued and wrapped up.

This was at about 4 pm.

By 2 am the following morning, the founder had the answer for the business investment questions.

He has completely re-invented the product?to fit the ideal weight and shipping parameters required to take the product to market.

The founder was following in the footsteps of the best WHY-driven entrepreneurs. His WHY is iron-clad. He has seen his target market’s future and his product is a bridge to that future.

For this founder, with such a strong WHY, the HOW is a matter of time, resourcefulness and focus.

How about you? Have you figured out your WHY yet? Why are you building your product, service, and business? (Hint: I hope it’s not just because you see an opportunity to make fast money).

Here’s why having a strong enough WHY is imperative to your startup’s survival:

Starting a business investment from scratch is hard and risky work. If it were not, every employee in Dilbertville would start one. When all hell breaks loose (it’s payday and your account is in the red, a key client cancels and leaves a gaping hole in your projections, the current iteration of your product fails, your spouse gets jealous of the time you are spending on the business and call the nearest $99-divorce lawyer), your WHY might be all you have left to see you through.

If your WHY is strong enough, no HOW can stop you.

 

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