One of the world’s most famous, and entertaining entrepreneurs, is Sir Richard Branson. After reading a number of his books including Losing My Virginity and Business Stripped Bare, I’ve become a big fan. For this week’s video, Richard Branson is interviewed by Chris Anderson as part of the TED conference. Enjoy!
Whenever I talk to successful entrepreneurs, I like to hear the origination story. Why did you start the company? What lessons have you learned along the way? Any near death experiences or crazy things you had to do to make it succeed? That last question is especially interesting in that it almost always reveals incredibly difficult times entrepreneurs have to go through before achieving success. Part of it is grinding it out, part is making personal sacrifices, and part is doing whatever it takes to make things work.
I like to call these collective traits the entrepreneurial killer instinct. Here are a few questions to potentially discern the killer instinct:
Building a successful company is incredibly hard. After talking to a number of entrepreneurs that have succeeded, the most common element among them is this killer instinct.
What else? What are some more thoughts on this idea that successful entrepreneurs have a killer instinct?
Entrepreneurs love building products. An idea comes to mind to solve a big problem and it’s off to the races to get it developed and in the hands of potential customers. Only, the hard reality sets in once prospects see it. There are actually three challenges that must be overcome: people, process, and technology.
The next time an entrepreneur makes it sound like a new venture is going to be easy, ask the hard questions, especially around people, process, and technology.
What else? What are some more thoughts on people, process, and technology for new products?
After last week’s post on 2015 Inc. 500 Software Companies, I wanted to dig in and see how funding for Software-as-a-Service (SaaS) startups compared to revenues. Here’s the data for the five fastest growing SaaS companies on the 2015 Inc. 500 list:
With this tiny sample size, there doesn’t appear to be much correlation between revenue for small, fast-growing SaaS startups and funding. What is clear is that it requires a tremendous amount of capital to grow quickly, since scaling a SaaS startup is expensive.
What else? What are some more thoughts on startup funding relative to revenue?
A16Z has a great post up titled 16 Startup Metrics that outlines many of key metrics investors look for and entrepreneurs often get incorrect. I’m guilty of this: when I went into one of my first investor pitches 10 years ago, I talked about revenue when it really was bookings, and the VC politely corrected me.
Here are the 16 metrics to test your knowledge before reading 16 Startup Metrics:
Every entrepreneur should read 16 Startup Metrics and understand the metrics applicable to their startup.
What else? What are some more startup metrics that are important?
After last week’s post on Early SaaS Loans Before Bank Credit Lines, a couple people mentioned Lighter Capital as an alternative lender that does revenue-based financing. The idea is that instead of the normal venture debt model, which is interest plus warrants in the business, revenue-based financing takes a percentage of revenue over a certain period of time, typically five years.
With a starting point of $1 million in revenue, an annual growth rate of 30% per year, and a fee of 10% of revenue for a $500,000 loan, here’s how it might look:
Simply doubling the initial money over five years results in a 15% internal rate of return, so borrowing $500k and repaying $1.2 million is just a bit higher when thinking of interest rates for a normal loan. I don’t know if this is exactly how Lighter Capital works, but I believe it’s directionally correct.
The next time an entrepreneur asks about alternative lending options, mention revenue-based financing as an option.
What else? What are some more thoughts on revenue-based financing for startups?
Back in college I’d routinely jump in my old Jeep Wrangler and make the 10 mile drive down the Durham Freeway to RTP for events and programs at the Council for Entrepreneurial Development (CED). CED bills itself as “the network that helps Triangle entrepreneurs build successful companies” and has 700+ member companies with 4,000 members. In Atlanta, we have a number of strong entrepreneurial non-profits:
Only, we don’t have a central entrepreneur organization that encompasses both tech and non-tech startups. As expected, there are a tremendous number of non-tech entrepreneurs in town. EO has a strong Atlanta chapter with over 100 members, but that’s limited to companies with at least $1 million in revenue. Where do non-tech entrepreneurs go?
Last week I had the chance to learn about Endeavor, which is a non-profit for helping high impact entrepreneurs (defined as ones that have the potential to scale and create a large number of jobs). Endeavor has chapters all over the world and focuses on mentorship, connections, talent, education, and capital. As different from most non-profits for entrepreneurs which are broad, Endeavor is extremely hands-on with a limited number of entrepreneurs in each city (e.g. 10).
Strong entrepreneur organizations are important for great startup ecosystems.
What else? For Atlantans, does Atlanta need a central non-profit organization for entrepreneurs? For non-Atlantans, is there a central non-profit organization in your city?
Patrick Lencioni is one of my favorite authors and I’ve written a number of posts about his books. His most important, and most popular, book is the The Five Dysfunctions of a Team. Every entrepreneur must read the book and learn the concepts. In addition to the book, the author has a great video with a number of stories and the key concepts. Enjoy!
From YouTube: Patrick Lencioni gives a talk at the HTB Leadership Conference 2013 at the Royal Albert Hall, London. His talk covers the five dysfunctions of a team.
In any given week I’ll talk to 5 – 10 entrepreneurs, on average. Many of the hey-let’s-get-together meetings are for advice on fundraising, hiring, and sales/marketing. Lately, it feels like the fundraising topic has been especially popular (a sign of the times?). Whereas a few years ago, most entrepreneurs would want to talk about raising venture capital, now more are focused on raising angel rounds, or the equivalent of a Series A round, but not from institutional investors. Naturally, I like to dig into some of the differences when thinking through the alternative financing approaches:
The next time an entrepreneur says they want to raise money, ask about angel money vs. venture capital and share some of the pros and cons of each.
What else? What are some more thoughts on raising angel money vs. venture capital?
In addition to the Atlanta companies on the 2015 Inc. 500 list, I’m also very interested in the software category. As expected, it’s dominated by B2B Software-as-a-Service products across a number of different verticals and industries. Here’s the list:
With 45 companies in the software category, it’s one of the larger areas of the Inc. 500. Surprisingly, over 20% of these software companies are marketing applications. I predict we’ll see continued growth in the marketing technology sector. Congratulations to all the Inc. 500 winners.
What else? What are some other thoughts on the software companies in the 2015 Inc. 500?
David Cummings on Startups 