Anyone who tells you that it's easy to build a new company from scratch has never done it. The journey is complex, challenging and life-changing. If your company is based on a disruptive idea or technology, it's even harder.
As an entrepreneur, I've encountered a plethora of institutions and people who approach business the way they did it yesterday. In the beginning, people will tell you that your concept won't work. Nobody will buy it. You'll never be able to raise money. You don't know how to take it to market. And those are some of the nicer things you'll hear.
Over time you develop a thicker skin and take the bumps in stride. What has worked for us is a "zero-based" approach -- the assumption that there are no assumptions. It has helped me develop six basic tenets that guide everything I do.
• Your equity is your BFF. Raising money is often the most difficult part of being an entrepreneur. One of the most common mistakes I see with other entrepreneurs is beginning to fund-raise at a very low valuation. In the early stages, you need to raise money while simultaneously building value. Too often I see entrepreneurs awarding an investor a 30 percent to 50 percent stake just to get seed money in the door. That one act will haunt you for the life of your company.
It's essential to remember that you'll need multiple fund-raising rounds to succeed. When you do, keep each round's valuation as high as you can. Push the envelope. Raising early money from a too-low valuation impacts every subsequent decision and action. If you give up too much equity in an early stage, your own equity will continually diminish until you lose operational control of your company. Without that control, the vision you carefully crafted can disappear. Investors will tell you what to do rather than advising you. You'll also heavily dilute your first investors, who have taken the risk with you. Be loyal to them as well as yourself.
If you must give up control, don't do it early. Make sure it's late enough in the process for you to see the light at the end of the tunnel. At that point, your imprint on the company will be indelible.
• The right advice is always cost-effective. Cutting costs is a poor substitute for getting the best advice. Lawyers, accountants and consultants are expensive. If you have the right ones, they're worth every penny. The mistakes they'll save you can be worth their weight in cash flow.
• Protect your intellectual property like your company's future depends on it. Because it does. One of the first things I needed to do to protect my ideas was to write patents. If you have intellectual property, it's important to consult with your counsel and decide how to protect it. Together, develop a strategic plan for IP protection that addresses the myriad options. You can opt for a patent, a trade secret or to do nothing. You can choose to file multiple patents. You can file domestically, internationally or both.
The choices can be dizzying. Expensive, too. But ineffective IP protection costs much more. Owning "bulletproof" IP can afford you the best protection against companies that want to morph your idea or discovery into their bank accounts.
• Make sure your company answers a key question or fulfills an unmet need. As an entrepreneur, it's important to know the problem you are addressing in a way that makes it central to your mission. Ask around and learn as much as you can about your audience or market. Get specific, granular responses about their perception of your idea or discovery. Just because you feel that something is "new and revolutionary" doesn't make it so. Making assumptions about the need for your product or the "cutting edge" technology you are developing can cost you valuable time and money.
• Listen -- really listen -- to constructive criticism. Listening is hard. When someone's questioning your company's raison d'etre, it's even harder. When I'm asked to assess start-up presentations, I often see entrepreneurs get defensive when questioned.
Let's face it -- in the early stages, you'll receive a great deal of unsolicited advice. In a room with five people there are often 10 opinions with few of them worthwhile. The best defense against ill-informed well-wishers is to cultivate a key circle of people whom you trust and consider their counsel carefully. Concentrate on the message without judging the messenger.
• Think about tomorrow and focus on today -- at the same time. The landmines you don't see coming can undermine your company's future. While you're working at a furious pace, take time to think of potential obstacles or competitive challenges, even if they seem far-fetched. Looking ahead will help keep your company out of "crisis mode." It'll also increase the effectiveness of your resource allocation.
Regardless of the nature of your startup or entrepreneurial venture, never lose sight of your vision. You know why you started your company and, while you may not turn out to be the next Apple or Google, you can get there. I'm rooting for you.