So on Friday I got into a little Twitter thread about my response to Aaron Hillegass's anti-entrepreneurial blog post. Seems that some folks were having an issue with my use of the word "mediocre." It is never my aim to be mean spirited or offend. Poor word choice.
I wrote my response post before Nelson Mandela passed. When he did I saw this quote for the first time. It also came up in the Twitter discussion on my post.
"There is no passion to be found in settling for a life that is less than the one you are capable of living."
Mandela better and more succently expresses what I was trying to articulate.
The article is directed toward soon to be college graduates that BNR is trying to recruit. And while I disagree with the rationale that Aaron presents I actually agree with his conclusion. For the vast majority of college graduates the best thing to do is get a job. Get some real world experience. Pay down those college loans. If starting something is your thing look for some opportunity in the marketplace that your company or client is not willing to execute against. The insider idea.
The biggest issue I have with Aaron's logic is this statement:
"Having Enough is awesome. How would I define “Enough”? Enough means that you can take a friend out to a nice lunch and not have to worry about how much it costs. I have hung out with a couple of billionaires—my experiences indicate that being a billionaire is just incrementally better than Enough.
Thus, as you look at your future, the question should not be, “How can I become a billionaire?” You should ask, “Where can I get Enough?”"
I am calling BS.
For many people, myself included, having enough is not awesome. It is not going to help me achieve my goals. For some it is. Not me. And not for most entrepreneurs. Having enough to me sounds a little like being mediocre. And if you want to create wealth having enough is not going to do it. You can not create wealth from personal income.
“I knew when I was eighty that I would never, for example, think about why I walked away from my 1994 Wall Street bonus right in the middle of the year at the worst possible time. That kind of thing just isn’t something you worry about when you’re eighty years old. At the same time, I knew that I might sincerely regret not having participated in this thing called the Internet that I thought was going to be a revolutionizing event. When I thought about it that way… it was incredibly easy to make the decision.”
So go to work for Aaron or some other company. Learn. And when the time is right. If it is right for you. When you find that thing that you might regret not doing when you are 80. When you find your revolution. Go do it.
Don't hire your friends just because they are your friends. This, along with slow decision making, is portrayed as Ev's downfall and the reason for his ouster as CEO.
Have no mercy. When Ev pushes Jack out of the company he leaves him with a ceremonial board seat. Jack uses the seat as a place to plot his revenge and oust Ev.
Backup your application. At one point pretty far in there is no backup of the Twitter database.
People behave differently when a lot of money and power are at stake. What begins as a small team trying to do their best to start a company can turn into something much more complex pretty darn quick.
Fred Wilson comes across as a hard ass. Nothing at all like the friendly guy on A VC. Not sure if I believe the portrayal. Then again, people behave differently when a lot of money is at stake.
I don't know how accurate the tales are in Hatching but it is a darn good read with many lessons. Highly recommended.
There is a lot of startup events and conversations happening around Atlanta, it is exciting to see, but I am wondering: “is it really helping, honestly, is it helping create better entrepreneurs and more awesome businesses?”
The short answer is yes.
The longer answer is a little more complicated and I have written about it before (the link is worth the trip for the comments). My short take is that there are too many events, or to be a little more specific there is an opportunity for entrepreneurs to attend too many events if they are not disciplined in focusing on creating products, getting customers, and building companies. Attending events is easy. Those other three things are hard.
Since I wrote that first article on the subject back in 2010 I have moved from helping entrepreneurs to running a business. I have taken my own advice. I typically do not attend more than two events per month. I have also taken to following David Cummings advice on work life balance throwing out the word "average." No more then one evening event per week. It forces me to make choices and keeps me focused.
So a bright young entrepreneur walked into my office the other day. Interesting market. Has assembled a team. Built a product. Has significant user traction. And revenue.
He was looking to raise $400k with a pre-money valuation of about $1.6 million. Seemed reasonable to me. Asked me if I wanted to see his PPM. Uhh, not really.
A PPM is a private placement memorandum. And in my opinion they should never be used by an early technology startup to raise funds. There are three reasons for this.
One is that they are costly. Just for the sake of discussion it is going to cost somewhere between $10,000 and $20,000 to get a real attorney to create a PPM. An argument could be made that the cost will be paid for out of the investment but investors rarely pay the attorney fees for a startup raising money. More often than not it is the other way around. The startup pays the investors' attorney fees.
Two, and perhaps much more importantly, generally speaking sophisticated technology startup investors do not invest in startups that have created PPMs. Angels and VCs tend to like to negotiate their own terms and have the round written on their own paper. When the startup has a PPM with checks already in it becomes too difficult if not impossible to get the types of terms they want in order to invest. Bill Payne has a nice post explaining the problem with private placement memorandums.
Three, sophisticated technology investors don't think entrepreneurs that have created PPMs are very sophisticated.
In all my time coaching entrepreneurs on raising money I can not recall one doing so via a PPM. They cost money and scare away smart investors. Just say no.
Back in the day when I used to listen to lots of investor presentations I was sitting in a room one day listening to a pitch with a group of angels and VCs doing exactly that. The entrepreneur got to his financial projections slide. Everybody started shaking their head yes. They liked the numbers.
At that moment it dawned on me that every time I saw numbers in that range I would see the same reaction from investors. I wrote them down in my trusty Moleskin.
The other day I was helping an entrepreneur with his financial model. And like a flash those numbers came back to me. I did not remember them but I knew where to look them up. My notes from December 2008.
While certainly not right for every startup these numbers seem to be pretty good guidelines for the type of ramp that early stage investors like to see in presentations. Fact of the matter is any number put together like this is purely a work of fiction and achieving them takes great execution and a little luck. Very few startups make it to revenue numbers like year four and five.
But if you are looking to pass the sniff test of early stage investors having a solid financial model with results somewhat in the range above will have you coming out smelling like roses.
Last night at the end of the work day I walked down the hall at Atlanta Tech Village to a The Founder Instituteinfo session. I did it primarily because I wanted to hear what The Founder Institute was all about.
It's good stuff. The Founder Institute rightly positions itself somewhere between Startup Weekend and tech accelerators such as Atlanta Ventures and Flashpoint. The group is set up to help gainfully employed thirty or forty something corporate director/VP types that have an itch to strike out on their own.
They take the folks that are accepted into the program, charge them about $900, and put them through a rigorous curriculum. A curriculum that gets them to the point of either stopping or to graduation. In order to graduate a founder needs their concept validated by program mentors, a business plan of some sort, work done toward a funding event, incorporate a company, and complete all the program assignments. Basically get them in a position to quit their day job.
During the meeting I was asked my thoughts on the program by an entrepreneur. My honest assessment is that their positioning is spot on and if someone has not started a company before this program seems to have the expertise and rigor to increase the odds of success.
If you have an interest you can apply here. The initial application can be completed in less than 30 minutes.
Alan Dabbiere wrote a most excellent article on the WSJ blog The Accelerators. A lot of folks (David Cummings and Stephen Fleming to name two) have been writing about why Atlanta is a great place to build and scale a startup recently but Alan really hits the nail on the head. This is from a guy that started and built two billion dollar market capitalization companies in the ATL. The money quote:
"Here you can start and build a great business, meet your first customer, access to a deep bench of talented individuals and the innovation produced by our great universities. At its core, Atlanta is also a great place to live."
Atlanta has the ingredients to start companies. Being a great place to live is just the cherry on the cake. That's why I'm still here.
It's kinda odd some of the discussions that I have recently had with early stage entrepreneurs about angel rounds. Folks wanting to raise $800k at a valuation more than $5 million. Seems a little rich to me and I said as much.
Well Silicon Valley Bank is out with their Q2 Halo Report. And sure enough the median angel investment was $590k with median pre money valuations at $2.5 million.
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The opinions expressed here are mine and mine alone (with the exception of comments by others of course). They do not represent the opinion or position of any other person or entity. All postings adhere to my personal values.