By Eric Ashman
I’ve spent my career helping CEOs and founders build great businesses. My focus has always been on the business of entrepreneurship: how to operationalize a founder’s vision and create the operational and financial infrastructure for a company’s rapid growth.
It’s hard to condense all that goes into building a startup into a single blog post and I’m certainly not going to try to do that. So here are my thoughts on the basics of operationalizing entrepreneurship. I have written longer posts on some of these topics, so follow the links if you want to read more.
Managing Cash Flow
Don’t Raise Too Much Money Too Soon
Raising money = dilution for you and your team. You don’t want your valuation getting too far ahead of your business metrics, or the path to the next round gets much harder. Too much cash tends to hide fatal flaws in achieving product/market fit, and when the cash dries up, you might find you’re Wile E. Coyote running 50 yards beyond the edge of the cliff.
EBITDA Positive Doesn’t Mean Cash Flow Positive
Cash is king, and way too many founders don’t understand the cash flow of their business, which means they are driving 100 mph in the dark with their headlights off.
Don’t Run Out of Cash
Once you understand your cash flow, you need to make an honest assessment of your runway (how much time before you run out of cash). Now cut that time frame in half, because nothing ever goes as planned. Then make sure you have a plan for funding your business beyond that runway.
Are you consistently and predictably generating cash? Have you achieved product/market fit? And you’re profitable? No? Then avoid the trap of the awesome office space. It’s a fixed cost that will limit your flexibility, and right now you need to stay nimble.
Investing in Growth
I’ve seen a lot of high value, high cash-burn businesses flame out spectacularly over the years. They raise millions on hype and bogus metrics they’ve spent a pile of money to achieve, only to realize at the end that once they stop spending, the customers dry up, the revenue shrinks and there is no path to profitability. Run lean and mean until you hit product/market fit.
Set Short Term Milestones
You’ll be surprised at how fast time goes by when your head is down building your business. You need to set guideposts so that you can pick up your head and see if you are on track, or if you need to make adjustments.
Build a Great Team For Where Your Business Is Today
Don’t over-hire for your needs today, or you’ll often end up with people on board that are too senior for the level of work that’s required to get you to the next set of milestones. Reevaluate your team regularly and be prepared to level up your org as your business progresses. Hire hungry, humble and smart.
Pay Attention to Company Culture and Diversity From Day One
Follow the no assholes rule. Build a team of diverse employees that you want to work with, that you will want to spend a lot of time with. Build a culture of respect, inclusion, and acceptance of learning through mistakes and failure. Focus on this early, or you’ll end up with problems down the road that are very hard to unwind.
Fundraising, Board Management, and the Path to An Exit
Your Investors and Your Network Really Matter
Your investors and your board should bring with them a large network of relationships. And you should be developing your own network: other investors, strategic partners, future senior talent. The path to a successful outcome is built on the strength of your network. Don’t ignore it.
You’ve Raised Venture Capital. What’s Your Plan For Making Them Money?
Venture Capital is not built on altruism. It’s a highly competitive business built on a VC’s ability to produce outsized returns for their limited partners. Once you take venture capital, their success is tied to your success. Don’t ignore this dynamic, and don’t lose sight of their expectations. This can get complicated very fast.
Take Care of Yourself
Do something You are Passionate about
Are you prepared to commit the next decade of your life to building this business? Is this a challenge that you are deeply committed to? So many businesses fail after an incredible amount of effort. It can be soul crushing. If you aren’t at least focused on a problem you truly care about, the journey can be excruciating.
Besides being a Launch413 advisor, Eric is the former President and COO of Group Nine Media, one of the world’s largest digital-first media companies, and the former CFO of the Huffington Post. With over 20 years of COO/CFO experience building great companies, Eric helps founders get through critical inflection points in their journey. Eric has a passion for building companies, putting together great teams, and partnering with founders to help them realize their vision. More about Eric here: ericashman.com