I wrote in my last post that “not all fails are created equal.” In the context of a startup, it’s good to fail, as long as you (1) fail quickly and (2) fail cheaply.
The fails you want to avoid are those you don’t have to make, and by definition it’s hard to know what these are your first time around.
I wrote about #15-11 earlier, but here are 5 more mistakes that you don’t have to make as a young entrepreneur. Enjoy!
#10: You pay for things that could be free.
You need certain business services to get your company off the ground. These services fall into lots of categories, ranging from financial to legal to CRM.
As a rule, spend 30 minutes researching the free alternatives to all the great paid products people will throw at you. The HBS Startup Tribe has listed some here. For legal docs specifically, Goodwin Procter has created a Founders Workbench and the National Venture Capital Association has its own stuff as well.
In general, good venture lawyers will give you free advice if you’re nice to them. They know you can’t afford them now but want to build a relationship over time.
#9: You didn’t practice your pitch.
Practice makes perfect. Don’t delude yourself that you can wing it. VCs ask tough questions and will quickly find the holes in your story.
A few tactical tips. First, pitch a close friend. Then ask him to introduce you to another friend you don’t know at all. Pitch him. A little bit of distance will make it feel real, but you can still feel comfortable revealing the intimate details of your business since you’re only separated by a single degree.
Also, be honest with yourself about the weaknesses in your plan and be prepared to address them. Anticipate the arguments you’ll get, and be sure you have the data on hand to back up your counterargument.
#8: You don’t tell a good story.
Why do storytelling and pithy communication matter? It’s not just for raising money. Stories help you recruit the best talent, and stories help align organizations around specific goals.
How do you know when your story sucks? The first sign is that people don’t know what you’re talking about. You may assume that they “just don’t get it,” but the alternative explanation is that you’re not explaining it well.
#7: You know nothing about the investors across the table.
It’s not an ego thing, but I always raise a yellow flag when an entrepreneur knows nothing about me. Heck, if we’re talking on the phone, at the very least I have your LinkedIn, your company website, and our email thread simultaneously on my computer screen.
You should do as much due diligence on your investor as he does on you. If not, you run the risk of signaling that you don’t do your homework. So, take the 5 minutes to read through our bios, LinkedIn, portfolio company websites, blogs, twitter feeds, etc.
#6: You make stuff up instead of saying “I don’t know.”
I know it seems like investors expect you to have perfect information, but we don’t. You can’t. Don’t feel pressured to answer every question definitively. Sometimes, the best answer you can give is, “Gee, I don’t know. But, here’s the information I’d need to know to answer that question, and here’s how I would go about getting it…”
I’ve said it before, but startups are experiments. If you knew the answer to an experiment a priori, you wouldn’t be doing the experiment in the first place. Be intellectually honest about what you know and don’t know, and investors will want to trust you.
Stay tuned for #5-1 coming up soon!