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The 8 Deadly Sins of Start-Up Companies
Compiled by Janet Watson
Last week I attended a panel discussion sponsored by the Tampa Bay Technology Forum's (tbtf) Emerging Company Network. The topic was "8 Deadly Sins of Start-up Companies" however some of these sins are not unique to start-up companies and we felt the information was of enough value to share with the Nperspective base. The presenters are all well respected professionals and included Angel, Venture Capital investors and an Investment Banker:
� Stewart Bertron - Guide Capital
� Drew Graham - Ballast Point Ventures
� John McDonald - Hype Park Capital
� Travis Milks - Stonehenge Capital
Here is the summary of the 8 Deadly Sins:
1. Running out of Cash
a. You need to stay on top of your sources of cash - including good sales visibility and prompt collections and your expenses. Understand that the cost of capital is inversely related to the need for capital.
2. Lack of Self-Awareness by the Entrepreneur
a. Make sure that you honestly and continually evaluate who you are and what you are capable of accomplishing - sometimes you need to step back and bring in others to complement you and your team.
3. Lack of Focus
a. The passion and focus, which is necessary for an entrepreneur, can take away from the focus required to accomplish what is needed for success. How do you manage your day to day activities? How do you maintain focus on the company's strategy and not get caught up in other great ideas? How do you leverage limited resources? What are the advantages of picking one vertical? If you can pick a vertical that no one else is in, are you able to define the landscape there for your competitive advantage?
4. Not having the ability to articulate the differentiators of your company to your customers, your potential employees, and potential investors
a. You must be able to explain clearly to everyone that you speak with why your company is different, why and who would want to buy from you, what the differences are in the market place and understand all segments of who is competing with your company.
5. Not financing the right way
a. Use the right form of financing for the stage in the business cycle
b. Keep the capital structure simple
c. Don't take capital from people you aren't excited about having on your team
d. Think about the right amount of capital that you need. If you take too much capital it is dilutive, if you take too little it takes too much time away from your business to keep going back for more.
6. Not spending enough time on focusing and maximizing the right key relationships
a. Build a high quality board
b. To borrow credibility you can build an advisory board of well-known and highly respected professionals from your community or industry
c. Invest in relationships - focus on how I can help those identified with their goals - personal or professional.
7. Not implementing the right financial systems, controls and policies early enough
a. Co-mingling of personal and business expenses can cause significant problems, including issues filing tax returns.
b. Failure to use an accounting system can cause issues i.e. complying with GAAP and revenue recognition.
c. Not hiring an accounting firm for audits and using an outside firm to close the books. Clean books and audited financial statements are an asset when trying to access capital to grow the business.
8. Not presenting the company well to the outside world
a. As the owner of the company you need to be a good spokesperson for this company. If you have problems with public speaking, presenting, clearly communicating this issue needs to be addressed so that you are able to be successful in growing your business and accessing capital to grow.
Please contact Janet Watson at (813) 317-3460 or
jwatson@npcfo.com
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