5 mistakes of entrepreneurs that bring down angel-funded startups to their knees
Congratulations. You have an idea. You see a big opportunity. Your “devil-may-care” attitude has indeed impressed an angel investor. Match is made. You got all the right people to drive the business. All of them have their skin in the game. You pooled up a portion of your personal resources and built the prototype. Your toil to find a committed investor culminated in finding an angel. There you go.
Without much ado of research and testing, with the proverbial Dame Luck smiling on you, your big day has arrived. Hello, mind you. You have not ‘arrived’. When it is said that the big day has arrived, your startup is launched. Now let the product/service do the talking and create the buzz. You need the high-decibel dolby system to blow your trumpet at an appropriate time.
With a view to enticing investments, your startup needs to be known in the ecosystem. Hello, mind you. It’s your startup that needs to be known, not you. We will discuss in the coming episodes on how you should not become larger than life, for your goal is to make the startup sprint and achieve the goal, not your personality cult.
Your product/service has begun to yield results in terms of returns. This is when you most likely were bitten by the “act-big” bug rather than the mite of “think-big”.
The five blunders/mistakes, irrevocable without hanging your head in shame, you have committed since then are as listed below:
- You thought the investment that came in at once is an avalanche of cash and that you just don’t have to look back. You hired an opulent premises with a sprawling corner office with a “worldly vision” to see everything across your office and outside too through the glass panes. The elegant chair that lures you to occupy it; the exclusive cassette air-conditioner — you don’t need to breathe the gases exhaled by the minions outside your chambers who work in a centrally air-conditioned huge hall dotted with numerous small and big, yet stylish cubicles; the multihued decor that adds a swag to your office premises; the play area for the “cheddi buddies” who come in round-neck Tee-shirts and torn jeans shorts, pierced ears and tattooed biceps; the large cafetaria for gossip-mongers, and the long balcony to let the human chimneys to smoke to their glory. All this, at whose and what cost?
- “Whoa!!! What a helluva taste to deck up an office, Mr. AAA (not a battery, but fully charged),” praises your brander. He doesn’t want to double up as your PR agent. He only does branding and marketing. He buys “space and time” for you in newspapers/magazines/TV Channels and Radios to perch you up on the higher pedestal. He wants to blow your trumpet for a fat cheque-plus 18 percent GST. Pandora’s box, that’s hidden behind your cash chest, is now open.
- You are no longer playing your cards close to your (cash) “chest”. The expense for PR plugs costs a bomb. The PR girl comes impressively dressed and asks you for a wifi password to cast the presentation from her fancy Macbook onto the large 4K TV in your conference room. Then her colleague clears his throat and runs you and your “senior management” team (save the shrewds of apes or pack of dogs or a murder of crows or any of that ilk as I have huge respect for all those who breathe on this earth) through a “power point” presentation. The “unwavering focus” of your leadership team in saying “come again”, “next slide, please”, “Oh! Gosh”, “how do we get the story across? Where is the stickiness?” is all music to your ears. They promise the moon, and even the sun with a sheepish smile on their faces, and the last slide (the cost of publicity) gives you a jerk. After all, your story needs to be sold to newsy parkers. End of the day, the largest viewed and circulated will take the cake and the others begin to frown and pick holes in your “story”. The inverted pyramid of five Ws and one H (What, Why, Who, When, Where and How) comes rolling like a monster towards you. It’s again a huge effort (cash) to mitigate the damage. By now, half the cake of the investment is over.
- While all this is part of the game, the thoughts of ostentation creep into your brain and begin eating it away bit by bit. You want to alight in front of that five-star hotel & convention centre in a swanky car – a fully-loaded SUV or a coupe – preferably a German-make. The guzzler portrays you as an investor rather than a seeker. This raises eyebrows in the community. The “angel” who invested in you begins to see a demon and act like a devil. He will want to have his chartered accountant on the board of directors of your company. The oily accountant comes with eyes that can instantly do a magnetic resonance imaging and present a report of prognosis to you and diagnosis to the investor. Further tranches from the money bags would not roll in to your bank account. People begin to talk about your company in a hushed tone behind your back. The desperate hiring, the loads of cash you spent on travel to foreign destinations without any aim, soaring credit card bills, drive you towards raising further funds.
- How do you do it? You start reading Mario Puzzo’s ‘The Godfather’ at that stage. When you meet the next big customer, you will want to “make an offer that he cannot refuse.” You lose sight on the fact that what he loses is a strand of hair, but what you could lose is a lifetime opportunity that can plunge you into perennial bankruptcy. To translate your indiscretion into action, you hire an advisor, who could be a walking bottle of Budweiser. He can intoxicate you with lofty promises and leave you in huge debt. Like, they say, what goes in has to come out. So, the advisor strips you and brings you to your knees and bids adieu.
And, you have seen many of your ilk adjudging others. My dear budding entrepreneur, do you even understand you wilted even before you bloomed? Defalcation of funds is a big no-no anywhere and more so in a startup. It’s after all, Other People’s Money (OPM), not opium for you to get high.
Guest authored by
A Saye Sekhar