Accession Point Blog

I had the privilege of hearing Gabe Zichermann, the CEO of beamME, speak to a group of young entrepreneurs about company road maps.  He made a great analogy between starting a company and the Portuguese explorer Ferdinand Magellan.  What Gabe so rightly pointed out that for all intent and purpose both expeditions are death missions.  You start with an unproven idea, load up a bunch of supplies (likely the wrong ones, because you are only guessing on what you need), convince some crazy friends to sign on to the voyage and off you go.

Venture capitalists, much like the Spanish Crown of Magellan’s day, are more than willing to share some tidbits of advice, pay for a portion of the voyage and send your behind out in to rough waters to sink or swim.  The venture guys are in the business of funding super high risk voyages with hopefully high rewards.  Not sailing – that’s all you baby!

What do you need to survive the voyage?  You need a road map!  So what does that need to have in it?

1. Any tools you can get a hold of from experienced explorers – they have documented their path and you can learn from their mistakes, there are a tons of great books, websites, etc.
2. Learn everything you can about the waters are setting out into – your competitors and the market forces that may eat you for lunch
3. Enough provisions to last 24 months on your journey – enough capital, enough customers, enough energy.  By the way since you don’t really know if you are going to make land, don’t worry about what happens in the 25th month you might be dead
4. Great navigation skills – your ability to stay focused on the signs of landfall will be your most important asset.  Repeatable customers are your land, find those and you will find riches.
5. An easy way to know if you are still going the right way.  Magellan had a sexton and checked it every night.  If nightly is too much, at least check your path monthly.  Getting off course will always kill you.
6. You will hit rough waters, icebergs and storms – there is no way to avoid them, so be ready.  Stay vigilant, practice in your mind how you weather a storm and don’t give up when it comes.  Personally believe you have to weather three huge storms before you find land and most people give up the first time it gets really hard.
7. Know what land looks like and head towards it as soon as you see it.  Dream about repeatable customers and steady cash flow, describe it to friends and develop signs to know you are close.  Interestingly enough, some people don’t do this and thus never steer towards it.  Repeatable customers are your land, which is where you will find riches.

While the early explorers were braver than most people in their day, they were NOT crazy.  They brought with them whatever maps they could gather and a sexton to chart the way.   You would be completely insane to set out on the most expensive, most time consuming, and bravest mission you have ever done without a company road map.

Remember, your venture capitalists are likely to let you explore for a while.  Sooner or later if you are not heading towards land, they will lose interest in your voyage.  Eventually they will not even care if you come back alive.

Do you have a company road map?  What does your land look like?

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Just recently there was a job posting on TheFunded.com from a start-up software company in the Bay Area looking for a CEO.  In the list of necessary qualifications was;

“We seek people with “scar tissue”. We want to know that you understand start-ups and have dealt in the past with the dozens of different kinds of problems that every start up has.”

When I started in playing the high finance world of venture capitalists, I had no battle scars. I believed that people worked together for common causes and VCs wanted to help you grow your company.

Picture sunny days and birds singing.

Now picture a hunter shooting those birds…

That pile of chirp less feathers could be your dream if you’re not careful.

As grown-up and sophisticated as we think we are now over our ancestors, (think Geico caveman commercial), life really hasn’t changed for a million years. Especially when it comes to the world of business and “money”…

Here the harsh reality: If you wanna play in the VC world of start ups, you need to live Darwinism in real time.

The weak and naive get crushed. Only the strong survive. Remember those cave drawings of the dude with the spear stabbing the leaping lion? You have to be that guy.

So here is my no-nonsense advice about how to survive:

1. Never fight alone. Get your self a great lawyer that represents founders and NOT VCs. To find that guy ask other founders who they have used. Don’t ask the lawyer for references; he will just give you only good people to talk to – those without scars.
2. Never go to battle unprotected. Make sure you have an employment agreement. I know you’re saying, “What is she talking about, it is my company and I am the CEO, why do I need that?” Here’s the deal – you need to have in writing what your own deal is, so that new VCs on the scene have an idea of what you believe are the key terms for you to work there. Writing trumps chit-chat. Just like “dude with spear” trumps “spear less running dude” in a tangle with the leaping lion.
3. Don’t simply focus on valuation and 51% ownership. The non-monetary terms will KILL you. I have seen so many outrageous non-monetary terms in term sheets of late. It is as if the VCs are saying, “we don’t like risk, so we’re going to put you under tight operating restrictions, so we can control what you do.” Being controlled is likely something you didn’t think you were signing up for. It’s hard to survive for long when the breathe is being crushed out of you.
4. Get help from battle-scarred founders. The great news about battle scars is that most people only have to get hurt once to remember to never to do that again. Hearing the lessons learned from others will help you know what to avoid. Reach out for help. And don’t waste other people’s time. Get to the point quickly .

You can get hurt if you choose to swim with sharks on your own. Sometimes pretty bad. This process can kill you if you let it. When you eventually exit your company for huge dollar amounts both you and your VCs will love each other again. So suck it up, watch your back and go play with bravery!

Want to share your battle scars. I’d love to hear them! Leave me a story (or two) below in the comments.

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A great friend of mine, Tonya Harmon, is another female venture capital serial entrepreneur in software technology—I have to point these women out because there are less than a dozen women of us in the DC metro area Tonya runs The Founder Institute in the DC area and I am a mentor there.  Launched by Adeo Ressi, the CEO of TheFunded.com, The Founder Institute is a new thing. Each week, CEO mentors (like myself) teach 30 to 50 of the best new and seasoned entrepreneurs on the “must knows to survive”.

So, my topic this week is on market research.  It’s funny how karma works.  I graduated from college with a degree in accounting and became a CPA.  When I was in school, I envied he marketing/communication people in my classes. They were always having fun while I spent time in my dorm room in the books.   So, I came to a conclusion that marketing research was completely bogus, and done by people who were not serious enough to get a real job.  Almost 25 years later, I actually get it.  Without market research you are just praying for luck.  Marketing people’s social strength is exactly what makes them successful.

Market research is about knowing everything you can about your customers, competitors, prices points, quality expectations, loyalty and size of the space you want to sell in, leading you to a justifiable and logical path.

When I started running my first large organization, I did three months of market research before I started executing anything.  I learned everything I could about our future customer base, learned how they buy, what they would pay, how long it would take to get them to say yes and even if they cared at all about my cool idea.  I must have talked to 25 potential customers.  My partners at the time thought I was completely crazy!  Why was I wasting time and not just selling?

Well, once I finally had enough insight, we launched.   Over the next nine months we grew the company from almost zero revenue to $5 million.  The patience and research paid off.  Things don’t always work like this, but doing the research and having a plan can certainly pay off.  Wishing you get lucky and win the lottery is okay for home life, but not when you’re running a company.

A little market research or a lot of luck – what have you done?  I’d love to hear your story.

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I recently spoke at a conference to an audience of young, talented entrepreneurs about inexpensive marketing tricks.  One of the examples I gave was about one of my first companies.   We were launching our first product and had almost no staff or money to make a big splash. We decided to do a personalized mailing to several thousand executives.  In order to make this work, we had to hand print and seal each envelope.  I told my audience how we rounded up our families to help stuff mailers.

My story was followed up by a question,  “So you are a mom, how do you balance growing your company, kids and husband, and venture capitalists?”  It made me smile.

Life is hard and running a company isn’t easy (as you can imagine).  It’s more than a full time job—it becomes your life..  To be good, you have to be ahead of the market needs, available to your customers and staff, keep your board informed of what’s going on and network.  Then if you are like me, you have to worry about the kids’ homework, food for family and all the home obligations – oh yeah then time for you.  If juggling all of this successfully were easy then everyone would do it, right?

Here’s the deal – Balance is what you make of it. Those who can’t multi tasks struggle with the concept of balancing your life.

Our family solution to balance is we always talk about the balls in the air.  It makes no difference to my family if we are juggling my son and daughter’s preparation for their fall music performance or my presentation for an upcoming board meeting—we have to make it all work.  Since our children were small, we have had a group calendar where “all things happen”.   Each of us posts our individual obligations, to inform the rest of the family about what’s going on. And, now that we have MAC computers, we use the shared calendar function that Mac offers.  I have two calendars—one for work and one for pleasure.  The company can only view my work calendar.

The most important thing about balance for me is that I include my family in my “work” activities.  For example on nights when I am working late on a customer proposal or deliverable, my family comes to the office and we have a picnic dinner.  Or, when I hosted a lunch for Governor-elect Bob McDonnell during his campaign, I brought my daughter along.  We were able to spend time and she was able to complete an assignment her Civics class

For me, there is no such thing as balance—only group juggling.  Don’t worry balancing your life; just keep what’s important to you in your focus and incorporate your family into your job.  You’re family will love to be a part of making the success happen.

What about you?  How do you balance work and family?

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People ask me all the time – What’s the number one reason for your success? My response is my mentors. Oh yeah – my family too, but this is not about them.

I have been so privileged to have amazing mentors help me with my career. The right mentor should be willing to teach you what they know, hold you accountable for your actions, applaud you for your accomplishments and be a friend.

So how do you get a mentor? It only takes three steps:

Step 1: Figure out what’s the most important thing you need to know in order to get to the next big break through with your company or in your career.

Step 2: Research the best five people who fit your needs. Aim really high! If you want to be the best then you need to learn from the best.

Step 3: Ask them to help you and then LISTEN. If you don’t listen intently, and take their advice, they will drop you like a hot rock.

I have found that if you follow these steps, you will get connected with some amazing people. Most people genuinely want to help others, and they are proud of what they have learned. People want to share their life experiences. Most mentors are willing to take valuable time out of their day to spend it with you. You just need to ask and follow through.

Note: If you ask some one to mentor you and they say no, then that is a reflection on them–NOT on you. They may be too busy, or just mean – either way move on and let it go.

Mentors are the people in your life who are willing to teach you and jump in your face at a moment’s notice when you are slacking off. Everyone needs a kick in the a#! sometimes.

Do you have a Mentor? If not, I dare you to find one in 30 days.

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So a great friend of mine called me the other day. He is a CEO of a software company that he co-founded with a few friends ten years ago. Awhile back, my friend took some money from venture capitalists to grow the company. Since then the economy has tanked, and now they are looking to make some major changes.

The venture guys want to bring in new management, reformulate the board and basically redo employment agreements for all the founders. So, what do the founders think? They think that this may not be a bad idea. Since they will still own 51% of the common stock, they will not lose their assets while the company goes through an overhaul. Ding! Ding! I heard this story and the alarm bells went off.

I like to call this “How to Screw an Entrepreneur 101”—convince the founders that change is needed to help the company succeed instead of facing the fact that the market hit you upside the head and it will take time to recover.

There are FOUR ways to lose your company. 51% ownership should be the least of your worries. Here’s how it happens:

1) You lose the stockholder votes — 51% of the voting stock. Voting stock is tough to define if the company has raised money, so make sure you know the number. Often timesoutside money comes with a stock conversion that is different than the 1 share = 1 vote idea.

2) You lose the ability to approve financing — Often founders are required to give up the right to approve new financing without the approval of the current investors. The problem comes when you need money in a tough time, and your current investors do not want to take a write down of their investment, so they will not allow it. Without cash you may not survive.

3) You lose the board votes — If your board consists of five people and they are all investors, they have the ability to vote against you. This means that if you are trying to get a budget approved or hire a sales guy, they can vote against it. You may have limited ability to run the operations of your company day to day.

4) You lose your job as CEO — The new CEO must be given the right to hire and fire individuals at will in order to grow the company. No decent CEO would agree to anything less. If you report to a new guy and he fires you after 30 days then you will be left out on the street with no control over the success of your company’s stock. Now if the company raises a little money under the guise that the new “CEO needs more room to grow the company” then your stock is crammed down to less than 51% ownership – you lost your company.

Is your company facing a similar situation?

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