Friday, May 16, 2014

Two That I'd Avoid

I love working in the Sandbox collaborative space.  It's very close to home, I've got 24/7 access, and I'm infinitely more productive in a professional environment than I would be back at the ranch.  Plus, being around other entrepreneurs is a good thing...usually.  It's a great way to trade stories about things have worked well, or gone badly, and to get truly important information, like knowledge about the all-you-can-eat buffet at Fox Hall.

Even though I'm not an angel investor, it's possible that someday I could be. Much more likely, I'll be in some other sort of position through which I can mentor others along, and at times I'll be able to act as a gatekeeper, or at least a gatekeeper's assistant (recently, I got to help read some of the Summer 2014 Accelerator applications, which I loved doing).  

Here are two things I'd advise entrepreneurs to ditch:

(1) Using "I don't pay myself a salary" as a badge of honor.  In so many pitch contests, business plans, and other applications, this gets thrown around like it's some sort of noble statement worthy of bragging rights.  It's not.  If your business doesn't generate enough revenue to allow you to pay yourself, then fine, but that's not a sustainable endstate.  If that's the case, you need to be thinking -- urgently -- about how to fix it. Either find an investor, cut your costs, raise your prices, or cut bait.  

You might imagine that a statement like that conjures up thoughts of "dedication" and "forbearance" among the people hearing it, but on the other side of the table, people are asking whether you're describing a business or a hobby.  Even if it's just a small initial amount that you'll peg as a percentage of top-line revenue, or even if it's a draw on your LOC that you can sustain the interest/principal on via your revenue, or whatever other structure you can cook up, don't neglect the fact that you have personal costs.  And if you really can get by for the time being without seeking outside funding (which could trigger a loss of control), or improving bottom line (maybe your prototype is still in development) then your salary-less state is a fact of life.  It's not an indefinitely-sustainable one, though, so be careful about framing this as some kind of a positive...it's not.

(2) "I could tell what I do, but then I'd have to..."  This really just happened.  I really just heard this nonsense.  It's like, hey Bro Namath -- if I ask you what your start-up does out of basic, conversational politeness, just be vague: "..We're a B2C app developer.." "We're trying to build anti-spam protection into smart refrigerators."  "We use Pinterest to enable predictive analytics for the Mercantile Exchange."  

If the questions get too hot and heavy, just demur.  Say it's still in development.  Say you're still figuring it out. Say you won't know until you beta test in August. 

Say ANYTHING.  But don't say, "Sorry, Broseph Stalin, but it's totally secret.  I can't talk about it, but it's going to be really cool when it launches."  You might've muttered something about a non-disclosure agreement, or said something else about the generalities, but honestly, I stopped listening once you dropped the 'secret' bomb.  

And guess what, buddy?  A real secret squirrel is so secret....that he doesn't tell you he's a secret squirrel.  

The cousin at the Thanksgiving table who says "State Department" when your grandmother asks about work, and then follows that with some generalities about overseas postings might really be doing something high-speed.  But the one who says, "I do government stuff at Langley...and I can't talk about it," is ANYTHING BUT.  Trust me on this one.