It’s not so simple. In my experience there are three types of venture capitalists – lazy investors, smart investors and crooks. Lazy investors expect a big return on investment without lifting a finger. Crooks will wait until you need some promised capital, refuse to give it and then swoop in to buy the company in a fire sale.
Best are the smart investors, who sit on the board, give you great advice, introduce you to their networks, are supportive, understand your industry, and hold you to account – and who give you money when you need it. These type of investors are gold.
Sure – but it might not result in a sale. Companies are complex beasts. They spend at certain times of the year, buy in certain volumes, buy from different parts of the business – in fact have all sorts of requirements that could confuse you.
Software manufacturer Aconex learnt the hard way. It set out to develop document management software. But the procurement software was a big purchasing decision for companies, and a very hard sell. So Aconex changed direction. “Fortunately software for storing and exchanging documents was an easier decision for companies to make,” says founder Leigh Jasper.
Map out the buying patterns and habits of your customers. Understand the tricks of the trade. Can budgets be split across departments? Can a deal be restructured so the executives at the top do not have to sight it and juniors can sign off? It’s insider knowledge, so seek out experienced players and ask for advice.
On day one, you might. But often the biggest regret of entrepreneurs is the business partners they chose. Often companies are started by a couple of mates throwing some spare change into the biscuit tin. The roles are never clearly defined.
As the business grows, usually one partner emerges as the clear leader. The others need to accept this and fall in behind. But usually the opposite happens.
John Randell, who runs A1 Rubber, says the biggest problem in his first business was business partners. “Everyone puts their hard earned money into it, they all expect to run it, and therefore there wasn’t a clear management in the business. Removing partners is actually far less frustrating. You’re only responsible to yourself,” he says.
The other major trouble with business partners is a difference in ambitions. One wants to reinvest in the company to grow fast, the other wants to pull the money out to support a lavish lifestyle. Or one wants to build a juggernaught and the other wants to pick the kids up after school. How do you suss out your business partner? Lots of meetings before a formal shareholders document is signed.
This is just the top seven deadly start-up myths: There are 20!
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