In my last blog I talked about keys to success. I covered “thinking big” and “corporate culture.” Today I am going to cover two other areas: capitalization and people
Points 3: Capitalization is a nice big word with a lot of dollar signs around it. And if it has a capital ‘C’ that’s good but if it has a lower case ‘c’ it’s not so good!
I have dealt with a lot of lower case ‘c’s’ in my career. Being a new venture person, I can’t tell you how many times I have been in businesses that have started off being under capitalized and never really had the opportunity to break through because of lack of proper funding.
I am jealous of people who have had “the touch” and raise capital easily in spite of faulty or not-fully-developed business plans, or for that matter, who never had an economic model that worked (the last dot.com craze at the end of the 1990s had a number of companies that eventually went out of business because they lacked a revenue model that could sustain growth).
But, please don’t walk away from a great idea just because you are un-capitalized! Instead, develop a bootstraps approach. That particularly makes sense if the cost of funds is too high and you want to avoid dilution. But remember, without sufficient capital, exploiting the market is difficult, takes time away from your core business, and causes heartbreak and anxiety. So really think about your capitalization and what type of dilution you can tolerate.
Point 4: People are always your most important asset. This is the second point I would like to make. You need to remember that your employees figuratively ride the elevators down every day. How you are going to protect and nurture them?
Which takes us to the next point! What about hiring? How do you hire and what do you look for? Are your new hires smart enough? Do they have the intellectual skills to process and adapt? Intellect is fine but, do they have common sense…which, as we all know, isn’t very common? Do they have proven experience and have they overcome adversity in the past?
Furthermore, are they apolitical? If you are starting a new business, you need people who are prepared to tell you the truth. In small companies, you don’t need a yes man but rather someone who is going to give you the straight skinny.
To summarize, in starting a business you need to be reasonably capitalized and you need smart committed people who are willing to call it like it is.
See you again when I cover points 5 and 6.