Finding Credible Help

I've once again had the opportunity to talk to a potentially great entrepreneur with lots of experience in his area of interest, and a credible idea that is really worth pursuing.  He's a scientist - a very good one, I think.

He admits to not being a business guy - tho he has grown a very nice business quite well for almost ten years.  And, as he starts to think about growing and expanding, he is facing the same challenge I see all too often in the Midwest - a dearth of people from whom to seek advice and experience.  (I actually had the same conversation twice today with two different entrepreneurs.)

How do you - the entrepreneur - figure out where the risks are in your plan, how to reduce or eliminate then, how to think about structuring, and what the most probable best course is?

Well, in the words of Bob Ryan, for one thing, "don't pee in the well."  That is, don't keep moving from one investor to another with a different version of the same plan tweaked and adjusted until everyone and his uncle has seen it and rejected it.  I blame this on weak "advisors" who have never actually done a startup and pass along self-serving (and usually fee-based) advice.  See this article from Guy Kingston, "When The Best Advice is No Advice."

And, do map the market.  Who might also be working on this, who is selling to these same customers, who are our natural partners, and competitors?  Have we used this logic based structure to figure out how big this market may be?  It doesn't matter if it's a $5, $50, or $500 Million market; but how we finance the business to grow will be almost entirely based on market size.  Don't think too big if the market won't support it, because you'll have a difficult time digging out from under the financing.  Don't think too small if the market will be big because you won't be prepared and will miss it.  I know that sounds a bit like Goldilocks and the Three Bears, but it is really true, nonetheless.

What's our plan for distribution?  (We used to call that sales in the olden days.)  I have yet to meet an entrepreneur who had sold a business who didn't say "I wish I had sold more." 

Launch, launch, launch.  If you are not at least a little embarrassed by your version 1.0 product you are probably launching too late.   We often over engineer while sales oriented companies grab the brass ring. 

When the risk-reward and timing is right, think carefully about what the investor's interests are.  Make some provision for the financing round after this one so everyone knows where they are going - together.  And present to the investors in a way that not only acknowledges their interests but sets up a partnership relationship that is good for everyone. 

And do map the advisors you need based on the skills you need in your advisory group, find people you trust, verify your instincts, then verify them again.

Here in the midwest (true others places too?) the number of advisors who have relevant entrepreneurial experience that can be organized and directed is awfully small.  Our angel group is now talking about helping startups, well, start up.  Kind of an incubator format with highly experienced folks. 

But, getting the right advice and the right commitment to an ongoing relationship not based on availability between other activities but rather on the needs of the business is critical.

Advisors have to be able to sell, to work their rolodex - and it had better be a good one - and to generally roll up their sleeves and be helpful.  Pontification is an overrated skill. 

I'd love to know what you think.

Comments

[Brian]

Great post! Sounds similar to the MU project that we worked on a couple of years back. Thought that came to mind while reading it was advisor compensation. While most advisors have something to gain through an equity distribution, what about those that contribute in other ways such as active recurring guidance sans equity? The consulting model seems short sighted and doesn't incent retention. Equity can be expensive and prove difficult in the flip. These folks deliver value - quantifying and compensating seems to be the tough part. Thoughts, Insights, Experience?