Starting a company? Beware of false profits, which come to you in sheep’s clothing, but inwardly they are ravening wolves – Jesus

February 13, 2020

I was going to go with the headline, “A mousetrap always has free cheese”, but then I found this one. If you’re a friend of mine, I’m guessing the biblical quote seems a tad out of place. I’m hardly a zealot person, though after dealing with some unscrupulous types over the years, perhaps I have found religion. Only time will tell…

Proceed with caution the moment your napkin is complete

Starting a company is straightforward. You have an idea, you grab a napkin, you ask the bartender for a pen and you start writing. In that moment, you are a success, because the first test is simply to get the idea out of your head. Congrats. You just passed.

Now, I suggest you don’t talk to anyone until you’ve turned that napkin into a 10-slide pitch deck. Building that deck will force you to figure out if your idea has any merit to begin with. Once you’ve done that step, continue to proceed with caution.

You started the company because you have a great idea. Beware the Naysayers

Pitch deck in hand, you’ll start talking to people to see what they think. Remember, you’ve seen something that others haven’t, so they may not immediately get it. Don’t worry about that, keep moving forward.

When I started Syncbak, I met with a local VC fund. When I pitched the idea of live TV on the Internet, they looked at me and said, “It’ll never work. People aren’t going to use the Internet to watch TV.” They also suggested I work with a local startup incubator to refine my thinking. After a hearty internal laugh, I got up and thanked them for their time.

Had I listened to those guys, I would have either quit right then and there or I would have wasted my time with an incubator that could no more help me than the man on the moon. Follow your gut and trust yourself. When you eventually need help, get it from “been there, done that” people.

You started the company because you have a great idea. Beware the Yes-sayers

Ever since the movie Social Network, everyone wants to drink beer and write code all night with Zuckerberg. Admittedly, it is fun to be so consumed with a vision that you pursue it 24/7. It’s a rush to add people equally as passionate as you to the team. That said, being a part of a startup is not for the faint of heart. Make sure you only hire people who can keep pace.

By the time you’ve closed your first round of funding you’re feeling pretty good about yourself. You want to focus now on hiring people who not only see your vision, but that have the guts to challenge you from time-to-time. I think I’m better at that today, hiring people with guts, especially when compared to my early days. It feels great to hear someone agree with your every word, but that isn’t always what’s best for your company. Hire people who at the very least say, “Help me see what you are thinking.”

Now, about those ravening wolves and free cheese

Let me tell you why I loathe incubators. First, they give a false sense of success. That’s their job, because without you, they wouldn’t have a job. Think about that for a minute. Incubators are incented to say “Yes! Great idea!” to every idea they see. Believe me, not all ideas are great and not all businesses should start.

Second, incubators expect quid pro quo (something-for-something) in exchange for helping you out. After all, they’ve given you office space and helped you bang out a 10-page pitch deck. So, of course you should give them 30% equity, warrants, options, a board seat and whatever else they ask for. NO! Give them nothing. If you can’t figure out how to find a tiny little office for $200 per month and be able to build your own deck, don’t start your company in the first place.

Like it or not, sheep almost always turn into ravening wolves

If you’re truly onto something, you’ll be amazed by the growing size of your flock. Just know that you can say, “No. But, let me get back to you.” Term sheets are meant to be negotiated. Not all people who help you in the early days turn out to be ravening wolves, but all do have one idea in mind – to get as much of your stock as possible and for you make them rich(er). Just make sure the quid pro quo is actually quid pro quo. This is why I focus on getting strategic investors. We all have the same goals, there’s no free cheese and they aren’t ravening wolves, i.e. we’re in this thing together. 

Start with a vision. Get in touch with your purpose. Hire great people. Embrace the fact that you’re mad. Be a great listener and always proceed with caution.