Category: Entrepreneurship

At Pardot we chose to not raise outside capital and experienced the Benefits of Not Raising Outside Capital. With that said, I’m on the board of several fast-growing startups like SalesLoft and Terminus, so I’ve had the chance to see the other side. Not raising capital — if you can do without it — does make things easier overall, however it also makes it significantly harder to “win” the market.

Here are a few benefits of raising outside capital:

• Grow Faster – The number one reason entrepreneurs want to raise capital is that they see a chance to grow faster. Sometimes this is taking a model that’s already working and significantly expanding it. Sometimes this is investing ahead of expected revenue such that there’s an opportunity to scale faster and more efficiently. Regardless, growth is at the core of raising money.
• Helpful Board of Directors – A board is more work and structure but brings with it a good rhythm of planning and review at a high level. VCs are usually on 6-10 other boards so they can bring best practices and recommendations from experiences across a variety of startups. Boards provide entrepreneurs with help and guidance in scaling the business.
• Gain Marketshare – For most venture-backed tech startups, the game is to gain as much marketshare, and corresponding revenue, as fast as possible to either become a target for an acquisition or go public. While markets are rarely winner-take-all, they very much place a high reward on being the top three.
• Great Expectations – Once you raise money the clock starts ticking to generate a return on investment. This is motivating for many entrepreneurs and helps them focus on building a large, valuable business. Entrepreneurs are often ADHD such that outside investors can be helpful as a forcing function on the desired target.

Raising outside capital should not be the goal for the majority of entrepreneurs. Only in rare circumstances should capital be pursued and these are a few of the benefits that come along with it.

What else? What are some more benefits of raising outside capital?

In a few weeks I’m giving a talk to a group of entrepreneurs that have decided to eschew raising outside capital and focus on bootstrapping. With so much focus on TechCrunch and other publications about fundraising and venture rounds, it’s easy to get caught up in the belief that raising large amounts of capital is the only route. It’s not. Here are several benefits of not raising outside capital:

• Flexibility – Businesses change. Trends change. Being independent provides infinite flexibility to change course and pursue the best new opportunities. With no board of directors there’s maximum flexibility.
• Timeline – Without outside investors there’s no timeline on the business to sell after 5-7 years. Sometimes it doesn’t make sense to ever sell or there’s a desire to have a great cash flow business indefinitely.
• Quality of Life – Being an entrepreneur is already stressful enough. Once the business is working, there’s the option to focus on quality of life and less on the company.
• Expectations – With no investors there’s no expectation of building a large company at all costs. Expectations can be as high or low as personally chosen.

Overall, the biggest benefit of not raising outside capital is the ability to control your own destiny across every dimension. Control is what many entrepreneurs are seeking and not raising capital is the best route for that.

What else? What are some more benefits of not raising capital?

Now that we have the 7 Non-Standard Interview Questions from yesterday, let’s go up a level and talk about non-standard recruiting tactics. When an entrepreneur needs help with recruiting, I ask about their current tactics and it’s typically LinkedIn listings, job boards, and recruiters. Well, here are five non-standard recruiting tactics:

1. Culture Blog / Engineering Blog – At Pardot we used to have a culture blog called Pardot Wave where Pardashians shared stories and experiences to help prospective employees better understand our culture. At Netflix there’s an excellent engineering blog called The Netflix Tech Blog that highlights many of their open source contributions.
2. Sponsor Meetup Groups – Go to where the potential team members do their networking and continual education. For example, if recruiting for iOS developers check out The Atlanta iOS Developers Monthly Meetup.
3. $10,000 Employee Referral Bonus – Don’t do the basic $1,000 employee referral bonus. For really hard to find positions, make the referral bonus substantial (it’ll still be much less than using recruiters).
4. Public Career Fair – Host a happy hour at the local pub for anyone that’s interested in learning more about the open job positions. A casual group setting is a great way to meet potential candidates that aren’t ready to go through a full recruiting process but might be with a little more information.
5. LinkedIn InMail from the Entrepreneur – Found a good candidate on LinkedIn but haven’t received a response? Have the entrepreneur reach out with a personalized InMail message expressing how much they’d enjoy getting together and start the process that way.

Recruiting is a serious endeavor that requires tremendous effort to do well. Run a process with the basics and incorporate some of these non-standard tactics as well.

What else? What are some other non-standard recruiting tactics?

Continuing with yesterday’s post on Chronological In Depth Survey Interviews, I’ve enjoyed testing a variety of interview questions over the years. While there are a number of excellent resources with example interview questions available, I’ve found a few non-standard interview questions I like. Here are seven:

1. What did you do to prepare for this interview? More details.
2. Why do you want to join our company? More details.
3. How would you describe our product or service to a stranger on the street?
4. What are our core values? How do your values align with ours?
5. What are three things you like about your current company? What are three things you really don’t like? Why?
6. What are three things you like about your current manager? What are three thing you really don’t like? Why?
7. What’s your work style? In what type of environment do you thrive?

Remember that an interview should be a conversation where the interviewee does most of the talking. Combine these non-standard interview questions along with your existing favorites and the Chronological In Depth Survey Interviews.

What else? What are some more non-standard interview questions that you like?

For our video of the week we have Patrick Collison on Hiring at Stripe and the Role of a Product-Focused CEO. Enjoy!

From YouTube:
This is session 11 of Technology-enabled Blitzscaling, a Stanford University class taught by Reid Hoffman, John Lilly, Allen Blue, and Chris Yeh. This class features John Lilly interviewing Patrick Collison, the Co-Founder of Stripe.

Last week I met with an entrepreneur that had been working on a startup for two years and it was clear he was having a tough time. Late in the conversation I asked about the The Trough of Disillusionment and there was an affirmative that it was happening currently. After that, I saw Chris Maddern tweet this excellent graphic titled The Emotional Journey of Anything Great:

Steps along the journey, as taken from the picture:

• This is the best idea ever!!
• This will be fun
• This is harder than I thought
• This is going to be a lot of work
• This sucks and I have no idea what I’m doing
• #%@}!!!!!
• Ok but it still sucks
• Quick, let’s call it a day and say we learned something
• Hmm…
• Hey!
• Wow
• This is one of the things I’m most proud of

Every entrepreneur goes through dark times. Unfortunately, it’s part of the process but the ones that break through have a greater appreciation and resilience that makes it even sweeter.

What else? What are some more thoughts on this emotional journey of anything great?