Happy Ears and Sales Contracts

By my senior year in college I was working full-time on Hannon Hill both building and selling content management software. Just down the road there was a prestigious business school where I had networked my way into the IT director that was in charge of the website. After a great meeting with him, he said, “If you add kerberos for authentication, we’d be very interested.”

Naturally, my “happy ears” perked up and I thought that if we added that feature they’d be a customer. I emailed him after the meeting and set up a time to meet two weeks later. The night before our scheduled meeting to walk through the new kerberos module, I still hadn’t gotten it working (extra C++ code to go with the core PHP app). Undeterred, I stayed up the entire night writing code (literally!) and walked into the 9am meeting with a beautiful kerberos module. The potential buyer took one look, said they’d chosen another product, and wouldn’t be moving forward as a customer. I was devastated.

Positive feedback from a prospect doesn’t equal a sale (verbals are for gerbils). Ask for the sale before building the next set of features. Ensure the prospect is truly buying before committing more resources. Don’t make the common entrepreneur mistake: check for happy ears and get a sales contract before moving forward.

What else? What are some more thoughts on happy ears and sales contracts?

The Relentlessly Resourceful Entrepreneur

Earlier this week I was meeting with a successful entrepreneur that’s constantly getting things done. Every time I talk to him he’s moved the startup forward in a meaningful way and refined his thinking.

Normally, when I meet with a successful entrepreneur, they fall into one of two buckets: sales-oriented or product-oriented. Sales-oriented entrepreneurs are always selling something, even if it doesn’t exist yet (sell in advance of the roadmap). Product-oriented entrepreneurs are usually heads-down building the best product possible, often to the exclusion of other important activities (need to be paired up with a growth-oriented entrepreneur). Yet, this entrepreneur I met with didn’t fall into either bucket: he wasn’t focused on selling and he wasn’t focused on the product.

This entrepreneur falls into a unique bucket: relentlessly resourceful. Resourceful, defined as “having the ability to find quick and clever ways to overcome difficulties” sums it up perfectly. Entrepreneurship is about moving fast (quick) and constantly solving problems (overcome difficulties). Also known as cockroaches of the corporate world, these entrepreneurs just keep moving and don’t die.

Signs of a relentlessly resourceful entrepreneur:

  • Check-ins – Never afraid to ask for help, they also check-in on a periodic basis and come prepared with a specific question or idea for feedback. Every conversation you walk away believing that they’re going to take the feedback to heart and make something happen.
  • Updates – Proactive updates via email are sent several times per year in a thoughtful and valuable format. These entrepreneurs value relationships and seek to keep their network current and up-to-date on progress.
  • Recruiting – People are attracted to the entrepreneur and get pulled into help, even if there are limited resources or compensation. And, they consistently find new people that can help the mission, even if that person isn’t needed immediately.
  • Progress – Finally, the startup is always growing, winning new customers, earning industry accolades, and making great progress. Momentum is strong and it’s clearly a winner.

Relentlessly resourceful entrepreneurs epitomize the entrepreneurial spirit and continuously move their business forward. Look for these entrepreneurs in the community and work to help them achieve even greater levels of success.

Implications of Raising Venture Capital

Last week I was talking to an entrepreneur that was dead set on raising venture capital. Naturally, I wanted to understand more and asked a number of questions. Turns out, this entrepreneur just thought it was the next step to being successful. Venture capital shouldn’t be viewed as just another step in the startup journey — raising venture capital is a serious decision that shouldn’t be taken lightly.

Here are several implications of raising venture capital:

  • Growth – Startups are growth-oriented organizations. Raising venture capital takes the emphasis on growth and raises it to max — everything is focused on growth. If growth stalls, more money needs to be raised or the company needs to be merged with someone else that is growing faster. Grow, grow, grow.
  • Timeline – As soon as you raise institutional capital (as different from angel capital, family office capital, etc.) the business is now on a timeline to sell in as little as 3-5 years and as long as 7-10 years. No matter how you feel, the business has to be sold (or go public) in an effort to generate returns for the limited partners (the people and institutions that provide capital to the venture capitalists).
  • Partnership – Selling a piece of equity is signing up for a long-term partnership with the investor. The relationship should be viewed as a partnership and not merely as an investment. Only raise money from investors you want to work with indefinitely.

Raising venture capital puts the startup on a path to grow at all costs, and has serious implications. Most startups fail and most startups that raise venture capital don’t make any money for the founders. Entrepreneurs should deeply study the pros and cons of this type of capital and know that most of the time it doesn’t make sense. Yet, when everyone is aligned and the startup does well, it’s a beautiful thing.

Tie Opportunities to the Vision

The entrepreneurial grind continually presents new challenges, and opportunities. Do I double down on what’s working? Do I pursue this new idea that appears to be a bigger opportunity, but is more unknown? As an entrepreneur, especially one that’s prone to chasing the next shiny object (aren’t we all!), it’s easy to lose focus of the bigger vision.

Instead of asking “should we do X or Y?”, the better question is “where does X fit in our vision and what’s the priority?”. Only by constantly comparing the opportunities to the vision, and regularly reprioritizing them, does clarity become possible. Yes, occasionally the vision itself needs to change, but that doesn’t happen too often, especially as the startup grows (watch out for organizational whiplash).

The next time an opportunity emerges, tie it to the overall vision, and use that as a lens to determine importance.

What else? Have you seen an opportunity assessed independent of vision?

The Entrepreneur’s Financial Sacrifices

Over the last two weeks multiple entrepreneurs volunteered to me that they emptied their 401k retirement savings to fund their startup. While that financial sacrifice seems extreme to many people, to some entrepreneurs it’s the only way forward.

Reflecting on my journey, at one point I had $50,000 in personal credit card debt for Hannon Hill. Our company was doing well, but still sub-scale, and we desperately needed to invest in certain areas. I made the choice, fully self aware, that if things went badly I was on the hook for the debt. Yet, I pushed forward with the full belief that we’d make it and the company would thrive. Everything turned out well but it was scary for a period of time.

Entrepreneurs make a number of financial sacrifices, and here are a few of the more common ones:

  • Salary Cut – Taking the plunge from being employed at a regular job to being a no-income entrepreneur is brutal. This is often the main reason people that want to be entrepreneurs don’t do it.
  • Credit Card Debt – Banks aren’t in the business of lending unless there’s already a valuable asset in place so many entrepreneurs resort to credit cards. I like to think that Capital One is the number one non-family funder of entrepreneurs in the U.S.
  • Retirement Plans – Programs like 401k plans incentivize people to save for retirement, but they also act as emergency savings accounts which can be tapped for any reason at great penalty. Entrepreneurs use these retirement plans as seed capital.
  • Skipping Mortgages/Student Loans/Other Required Payments – Some entrepreneurs purposefully skip payments of other loans or bills in an effort use the temporarily saved cash to invest in the business, often resulting in a negative impact to their credit score. One entrepreneur would purposefully blur an account number on their payment checks so that the check couldn’t get cashed right away, thereby buying more time to be able to make the payment (not ethical but did work).

Financial sacrifices are a difficult and challenging part of the entrepreneurial journey. As with most things, the more struggle to make it succeed, the more rewarding the outcome.

What else? What are some more financial sacrifices?

5 Traits of the Most Successful Entrepreneurs

Yesterday I was reflecting on some of the most successful SaaS entrepreneurs I’ve had the chance to work with – Rigor, SalesLoft, Terminus, Calendly, Teamworks – and what they had in common.

Immediately, five traits came to mind:

  • Big chip on their shoulder – All of these entrepreneurs had a prior startup that failed – every single one. Now, there was something to prove.
  • Unwavering belief they’re going to make it work – With a high locus of control (very rare!), these entrepreneurs truly believe they can control their outcomes.
  • Irrational tenacity – Hard work and effort are critical, especially in conjunction with the overall belief that success is possible (too many people believe they’ll be successful without putting in the requisite work).
  • Extreme resourcefulness – Begging people for help, figuring out how to do something at 1/10th the normal cost, and constantly moving things forward with limited resources are part of the formula.
  • Continuous desire to learn – Regularly asking for help, reading books/articles, and sharing experiences (EO, YPO) come naturally to these entrepreneurs

Entrepreneurship is terribly difficult. The most successful entrepreneurs I know have an innate quality where they just know they’re going to make it work, no matter how hard it gets.

What else? What are some more traits of the most successful entrepreneurs?

Excellent Meetings and Communications Recommendations from Tesla

An internal Tesla memo from Elon Musk on Tesla Model 3 Production was just leaked to the public. In it, there’s an excellent section on productivity, specifically around meetings and communications. From the memo:

– Excessive meetings are the blight of big companies and almost always get worse over time. Please get of all large meetings, unless you’re certain they are providing value to the whole audience, in which case keep them very short.

– Also get rid of frequent meetings, unless you are dealing with an extremely urgent matter. Meeting frequency should drop rapidly once the urgent matter is resolved.

– Walk out of a meeting or drop off a call as soon as it is obvious you aren’t adding value. It is not rude to leave, it is rude to make someone stay and waste their time.

– Don’t use acronyms or nonsense words for objects, software or processes at Tesla. In general, anything that requires an explanation inhibits communication. We don’t want people to have to memorize a glossary just to function at Tesla.

– Communication should travel via the shortest path necessary to get the job done, not through the “chain of command”. Any manager who attempts to enforce chain of command communication will soon find themselves working elsewhere.

– A major source of issues is poor communication between depts. The way to solve this is allow free flow of information between all levels. If, in order to get something done between depts, an individual contributor has to talk to their manager, who talks to a director, who talks to a VP, who talks to another VP, who talks to a director, who talks to a manager, who talks to someone doing the actual work, then super dumb things will happen. It must be ok for people to talk directly and just make the right thing happen.

– In general, always pick common sense as your guide. If following a “company rule” is obviously ridiculous in a particular situation, such that it would make for a great Dilbert cartoon, then the rule should change.