A man wished to purchase an Ass, and agreed with its owner that he should try out the animal before he bought him. He took the Ass home and put him in the straw-yard with his other Asses, upon which the new animal left all the others and at once joined the one that was most idle and the greatest eater of them all. Seeing this, the man put a halter on him and led him back to his owner. On being asked how, in so short a time, he could have made a trial of him, he answered, “I do not need a trial; I know that he will be just the same as the one he chose for his companion.”
A man is known by the company he keeps.
Many believe that the number one reason a start-up fails is due to cash flow. Why wouldn’t they? Cash is king and it’s repeated over and over in B-School textbooks.
I’m certain it’s wrong. Well, at least, partly.
You see, cash flow is the result, not the cause of failure.
The cause of poor cash flow is spurned by what the people within the start-up do with the resources and capabilities they’re given. If they produce zero cash, the venture may fail. Of course, there are external factors that weigh into the equation that are natural to the market (political risk, technological risk, economic risk (e.g. right now), society risk (fads)).
At the end of the day, if the start-up cannot create either a competitive advantage in (i) cost (e.g. acer netbooks), (ii) differentiation (apple), or, (iii) both (very rare), and doesn’t bring in cash, it fails.
Start-ups are hard. They’ve been likened to a roller-coaster. And, with good people or with bad people, it’s likely you’ll experience the roller coaster. Why not experience it with good people?
It’s hard to choose good people for your start-up. You must have good instinct.
But how do you tell if you have a great person within your start-up?
1) They must be great at what they do: They must love it. They must be one who absolutely loves their occupation (whether it be investing, management, programming, designing, etc.).
2) They must take out their anxiety on their competitors, not their company: Start-ups are tough as it is. There’s not need for drama. If things get tough, take it out on your competition, not on your co-workers. If you have an individual that does this, you’ve got a winner.
3) Big picture mindset: If you know you don’t have a big picture mindset, you’ll quickly adopt one by joining a start-up. A big picture mindset shows through when times are tough–especially if you’re bootstrapping. The biggest challenge is not to raise money, but having the wits and guts to do without it.
With my portfolio companies/projects I’ve been fortunate enough to have great people. Hopefully we can grind it out in 2009 and continue our growth.
To the entrepreneurs and bootstrappers out there, good luck in 2009. This year will determine who the true entrepreneurs are.
Be sure to contact me for any questions or random funny stories.
Oh yea, and don’t be an Ass.
