First-time Entrepreneurs: The Litmus Test

Every entrepreneur was a first-time entrepreneur once. So, it seems odd but its true that support for first-time entrepreneurs is not that great. One reason is simply that odds are not in the favor of first-time entrepreneurs.

There is anothe problem though that often gets overlooked. First-time entrepreneurs sometimes can get into “fantasy” mode. Without proper guidance, they can go off on a wild-goose chase and think that they are working VERY hard on their idea but because of <add something like economy, market conditions, outsourcing, luck etc.> they are not going anywhere.

Here are some observations from the field as I meet a number of first-time entrepreneurs.

Here is what they say: I BADLY want to be an entrepreneur
What they might actually mean: Actually, I just want the glory associated with being an entrepreneur minus the hard work
My $.02: If you want to be an entrepreneur, please take some action. Wanting to be, thinking about it, planning for it alone won’t help.

Here is what they say: I am not investing any money. It’s all sweat equity
What they might actually mean: I am really not sure about what I am doing. If the company goes south, my hard earned money is safe. I lose NOTHING.
My $.02: If you are not putting in your money, you might actually not start the company. Please don’t quote some exceptions where somebody started with $100 and made it VERY big. It might happen so does lottery winnings. The second thing to note is that TIME is a big investment and there is an opportunity cost associated with it. Third thing to note is that when you are just investing time, think about the alternative use of that time. What would you have done with that time if you were not working on this anyway? If what you would have used your time was not that important, you were really not “investing” your time.

Here is what they say: The founders have not worked out how the pie will split. We know each other for a long time. We will figure that out later.
What they might actually mean: This is a painful topic to address. The farther we can push this out, the better it is.
My $.02: Working out this item is VERY important as it is the basis for setting expectations. On one extreme, there is a tendency for all founders to think that they are all equal. On the other extreme, there is a tendency for all founders to think that they should have the biggest piece of the pie because they are adding the highest value. The farther you push this apart, the harder it is to come to a reasonable agreement.

Here is what they say: I am just waiting for a cool idea. Everything else is ready.
What they might actually mean: I am not ready yet.
My $.02: Don’t wait for the “best” idea. There is usually none. Instead focus on building a great team that can execute.

Here is what they say: I really don’t care about the position. For now, I will be the CEO
What they might actually mean: I want to be the CEO. I will worry about it later if I have to step down. By that time I might have grown into that position anyway.
My $.02: It is VERY hard to ask people to step down from their positions be it CEO or any other senior positions. Think hard before you dish out titles. They mean something.

Here is what they say: I have a big enough network. Getting business is not easy.
What they might actually mean: May be exactly what they said.
My $.02: However, the assumption is flawed. Your current network may value you as an employee of a big company. They trust you in that role. Does not mean that they will trust you in your new role as an entrepreneur. Rather than fantasizing about it, you can validate that with one or more of your contacts.

Here is what they say: We had a great meeting with the VCs
What they might actually mean: VCs are in love with their company and soon we will be discussing the term sheets.
My $.02: Unless the money is in the bank, the money is not in the bank. Most of the times you will have a “great” meeting with the VCs even when they think the idea is crap. So don’t read much into how they made you feel at the end of the meeting. What actions they take after the meeting is what determines whether it was really a “great” meeting.

First-time entrepreneurs are unfortunately viewed under a microscope. So they have an added responsibility to face “ground reality” every now and then.

Have a great Wednesday!