A New Day
Funding start-up entrepreneurial efforts is always a challenge. Your best day is the day when everyone agrees to the next round of funding and puts their money in. Today is such a day. Your worst day is the day you are low on cash and you have to tell the board and investors that you will need to begin shut-down processes tomorrow if funding is not obtained. Yesterday was such a day. The schizophrenia is quite stark. I always swear that we will not leave funding until the last second ever again. And yet, without the pressure of a finite deadline, nothing seems to get finalized. Everyone wants maximum leverage and maximum leverage is obtained when everyone is eyeball-to-eyeball and looking out over the abyss.
Many things get agreed to during the sausage-making of a funding process. I always memorialize them since there is a tendency to forget all too quickly in the flush of new money. Everyone remembers their own favorites and no one remembers the other guy’s favorites. It’s my job to remember all of the agreements and implement them in short order. At the top of the list in almost any exercise like this is expense control. Regardless of how high your burn rate, it can always be lower. The trick, of course, is to cut to the bone, but not into the bone. I enjoy the process of expense cutting following a traumatic event. Everyone is so happy to still have a job that it is simply easier to jump on expenses at a time like this. Zealousness fades quickly, so you must get on it right away.
This period of being flush is also a good time to review and update the task list of things that everyone has committed to do and the deadlines and deliverables to which they have committed. This reinvigoration can provide some of the best momentum for the next steps forward any business can get. The key is to be sure to retain focus. The flush of new funding can also cause people to revive old hobby-horses that may not be on the critical path to success. Generally, doing what you promised to do for investors is what they care about most. Doing something worthwhile but random may get you a few salvage points, but it is more likely to be seen as pure luck rather than determination and sound process.
Start-ups are the elixir of modern business. Everyone wants to work in a start-up because it is exciting and follows the old epic odyssey of finding one’s fortune. It certainly is hard work, but it feels less like work and more like a mission. While many young people right out of school these days want to work in start-ups and while a case can be made that one is most able to accept the risk of a start-up when one is young and without significant obligations, I favor the idea that an early career in the trenches of an established business is best. It is there that one can hone the fundamental skills of business, whether those are financial modeling, marketing process or sales skills. Not having the trauma of funding uncertainly is helpful to focus the mind on the fundamentals one must master before one has a real contribution to make. I also think that people who have worked in a large enterprise for a while value the freedom and sense of collective purpose more than young professionals do. I also think that the natural leavening of wisdom helps the start-up process.
This particular new day has an added feature to it, a change in corporate governance. Nothing benefits a young company more than keeping things fresh and keeping them fresh in terms of governance is almost as important as continuity in governance. We happen to have the best of both worlds right now. We are expanding the board from three to five and we have gone through a recapitalization with shares moving to a more balanced and equitable holding. We have gone from one person holding close to 60% to four people holding 90% much more evenly and no one above 28%. That is simply a more stable ownership structure that establishes a firmer ground for future funding. Add to that the motivation for the recap was to allow the prior founder to pursue other interests and there is generally a natural and healthy progression in the company.
Now none of this makes it more or less likely to succeed technologically. It helps financially, but the technology remains in the hands of the scientists and engineers. That remains a function of realizing on the central vision established by the founder and now being pursued at ground level by key members of the staff and management team. The managerial imperative is to maintain focus and motivation at high levels and to do so with openness, candor and honesty. I got a call from a consultant today suggesting that she has a new service on blindspotting. The concept is that company blindspots hinder progress. That would be hard to argue, but it would be equally hard to suggest that young companies can’t figure out their own blindspots. Self-awareness is an important managerial trait, maybe the most valuable. I always remind myself of that Marcus Aurelius trick of having a slave on the chariot behind him reminding him that he’s not as good as he thinks he is (technically, “Remember you are mortal”).
So, we have a new day, a new governance structure, a new budget, new money in the bank, and yet again another chance at immortality by creating the next great technology that will change the world. It will be a good day.