Startups and angels: Along the way to success

How To Change The World

Top Ten Ways To Change The World

(from a new social entrepreneurship Honors Symposium, “How To Change The World,” Fall, 2009 at Marquette University)

1. Have a big, audacious goal.  Often, these are defined as the social impact you want to have.  Specific enough to be actionable, but BIG.  A recent visitor to Marquette, Jane Leu, had a social enterprise whose goal was to eradicate underemployment among immigrants!  That’s BIG.
2. Build a great team.  Get others committed to your enterprise on the team with you.  Reach for those who are passionate about the change you want – need – to make in the world.  
3. Know what you need to do well.  This often is called “core competences” but it really means understand the skills, abilities and experiences you need on your team to succeed.  Third world lighting?  Solar powered water pumps?  Human powered medical equipment?   You may need medical knowledge, engineering skill, marketing people.  Plan for how to get them.
4. Learn the market.  Why isn’t this here now?  What are the political barriers? Distribution challenges?  If you intend to improve literacy around the world with a web application, do the markets most in need have broadband access?  How would you get it to them?  Or are you targeting markets with access first?
5. Test, test, test.  Make no assumptions.  Everything you are using to build your social enterprise is either a fact or a hypothesis.  Document facts; test hypotheses.  
6. Reduce donor risk and raise effectiveness of committed capital.  How?  Testing.  Never attempt to roll out until you have tested.  Read “Three Cups of Tea,” about Greg Mortenson who tested every idea along the way to the incredible success he has generated.  
7. Gain wisdom by learning from the experience of others.  Not the opinion of others, but the hard-won knowledge born of trying to climb the mountain.  A pearl of great price.
8. Understand finance.  Never, ever “let Mikey do it.”  Know, yourself, how your venture is financed, what the alternatives are, and when you will know it is time to execute them.  And remember, there is always another way.  Giving up for lack of funding for plan A just means you haven’t thought about it deeply enough.
9. Engage the hearts and minds of others.  Take every opportunity to enlist, recruit, persuade.  And listen.  Incorporate this feedback.  Learn to sell and to revise.
10. For us at Marquette, remember Fr. Pedro Arrupe, SJ, 28th general of the Society of Jesus: “ Nothing is more practical than finding God, that is, than falling in a love in a quite absolute, final way. What you are in love with, what seizes your imagination will affect everything. It will decide what will get you out of bed in the mornings, what you will do with your evenings, how you spend your weekends, what you read, who you know, what breaks your heart, and what amazes you with joy and gratitude. Fall in love, stay in love, and it will decide everything.”  I had met Fr. Arrupe in his first year as general when he visited Marquette.  His words can change your life. 

--Tim

Starting Startups

So, Paul Graham is a brainiac.  He is a partner in a pretty much exclusively software seed stage fund, Y Combinator that you can read more about. 

He writes challenging essays at paulgraham.com (8 million hits it says!) that are very thought provoking.   Read Want to Start a Startup? carefully.

It's refreshing to see several of these ideas in print.   For instance:

1.  ...A way to fund a startup is to get a job.  This frequently starts as consulting - which is how RTMS, Inc. started.   We worked all day building market strategies for customers while we tried to embody our expertise on software that would expand the company's reach.  (This was 1989.)  Interestingly, the consulting business remained and is a mainstay even today.  They got better and better as the software application got more capable.   There's hardly a major US retailer they haven't worked for.

2.  Some angel groups charge you money to pitch your idea to them.  Needless to say, you should never do this.  Amen.

3.  One of the dangers of taking investment from individual angels, rather than through an angel group or investment firm, is that they have less reputation to protect.  I've seen that more than once, but I thought I was the only one talking about it.  The flip side is true, too.  Individual angels can get sucked into situations that a group's experience might have avoided. 

4.  Angels can allow founders to partially cash out if they choose to.  It's true; we've done this once.  It is very unusul and I wouldn't do it very often, but it's a possibility.

5.  Angels who only invest occasionally may not know what terms they want.  Paul goes on to develop the story of "vanilla" documents prepared by the angel's attorney.  When this happens, (due in part to the need to keep fees low) things get both left out and included that later wisdom will suggest should've been included or left out.  Groups tend to use more standard terms and -- more important -- develop an understanding of what they really do want.

6.  Like VCs, one of the advantages of seed firms is the advice they offer.  But because seed firms operate in an earlier phase, they need to offer different kinds of advice.  Good angel groups, too.  That advice is often both technical and srtructural.  Groups don't all do this.  Be sure and ask - for examples, not intentions.

7. ...the disasters of the Bubble showed that generic business guys don't make such great CEOs (in reference to replacement of founders.)  Yup.  Been there. 

8.  Angels like to invest in deals that come to them through people they know.  Absolutely.

9.  ...being slightly underfunded teaches them an important lesson: cheapness is power.  A low burn rate is a pearl of great price.  It provides lots of options that high burn rates take away.  In Paul's words "Spend little, and work fast."

10.  ...vesting (of founders stock) is a way for founders to protect themselves from one another.  It solves the problem of what to do if one of the founders quits.