It has been two years since I started my job in private equity. Since then, I have worked with some fantastic individuals; Brian Rudolph from Banza, Daniel Katz from No Cow, and David Friedman from Epic Burger. Learning from these entrepreneurs drastically changed my views on what is important for early-stage businesses.
1. Outside Investors are NOT Evil
One of the biggest mistakes is delaying raising capital for as long as possible. Asking others to fund your company always seemed backward to me. I would think to myself, “If it your business is viable, then it should fund itself.”
If that is the case, why raise money at all?
However, venture capital and private equity are crucial to the success of any start-up.
(1) Allows your company to expand without the use of loans and the constraints that come with it.
(2) More importantly, you get experienced leadership and advice. VC and PE professionals have experience scaling a company, solving operational problems, and monitoring financial performance.
2. Focus on Sales
When I think of progress, I think of lines of code written, number of products, or features launched. It is easy to get attached to building these out. I have a technical background, and some habits are tough to break. One of these habits was an interminable focus on product quality and development. Unfortunately, these do not make you money.
Product quality is only as useful as the sales it creates. If the quality of your product is causing you to lose customers, then work on that specific area. Ask your customers to give you feedback during the fix, and continually follow up with them on what barriers to purchasing your product are.
You should put the rest of your focus instead on the sales. Measure success based on the sales impact, and it will force you to focus on what customers want.
We had this specific problem at Banza. When the company was founded in 2014, the founders were focused on designing one product after another. Unfortunately, the company was not gaining shelf space or traction online. Sales were stagnant, and the company needed to change direction.
I eventually helped build out a sales team and get the company in front of customers like Whole Foods and Kroger. Sales shot through the roof the next year, and the product was on shelves across the U.S. and Canada.
3. Do NOT Quit Your Job
It is well-known that venture investors do not like to invest into part-time startups. If you want VC money, you will certainly have to quit your job and go full-time.
However, having a full-time job outside of your startup actually increases the odds of survival by 33% after 5-years.
I have the belief that if you cannot pay yourself at your startup, you should be employed somewhere else full-time. Ideally, you should get a job at another startup. Your day-to-day experience will teach you about their mistakes, which you can implement in your venture.
In addition, getting a stable job will decrease the burn rate of your startup, increase its runway, and give you the luxury to make long-term decisions, e.g. delaying capital for strategic reasons.
I believe early-stage founders having or getting full-time jobs is not a bad thing. In fact, it may be in the company’s best interest.