Entrepreneurial Scars
Entrepreneurial Scars
Common Entrepreneurial Mistakes (and I have made all of them and some of them twice)
Depending on building a viable business through funding from an Angel or VC.
Your chances are actually .5% to 4% depending on who you talk to. It is rare that someone will come in and "save you". Learn to bootstrap your business the first year so you can get customers, revenue and prove your model. Establish a proven track record.
Projected revenues are based on market size.
You need to show how you can build your revenues from the ground up with the appropriate sales and marketing strategy. To say that you will capture .5% of the market is not a good answer. Don't compare yourself to other publicly traded companies in the market place. Remember, most of them have more capital than you ever will to support their business.
Competitive advantage based on "quality" of product or "first to market".
You need to assume that someone can always build a better mouse trap than you. Don't bank on the fact that you are the best game in town for a long term competitive advantage...remember a thing called "reverse engineering"? All of the time...
Talking to any investor about your plan.
Talk to only those who are truly interested and are able to fund your plan. Don't over shop your plan. Don't be afraid to ask for the order (will you invest in my business?).
Waiting until you are out of money until you start to raise capital.
Remember that if you run out of cash, you are out of business. Many call this a "near death " experience. It is best to always have 6 months of working capital in the bank to cover any contingency. This will prevent you from having to negotiate investment terms when you are desperate and the investor feels "pushed" or has an extreme advantage. Remember how banks love to lend people money that do not need it? The risk is perceived to be lower.
Not focusing on the investors return.
Be able to answer simple questions like: How much money is required to make a profit? What is my return on investment? What is the exit strategy? Be able to appreciate that the investor has alternative places to put their cash.
About the Author
Barry J. Moltz has been running small businesses with a great deal of success and failure for 15 years.
He co-founded Prairie Angels (www.prairieangels.org) which invests in local seed stage companies. Barry is also on the Advisory Board of the Angel Capital Association (www.angelcapitalassociation.org), which is the national professional alliance of angel groups. His first book, “You Need to Be A Little Crazy: The Truth about Starting and Growing Your Business” describes the crazy ups and downs and emotional trials of running a business. It is in its fourth reprint and has been translated into Chinese, Russian, Korean and Thai.
Barry is a national recognized speaker at 100 business events a year. He has received numerous awards such as Angel of the Year, and was inducted into the Entrepreneurship Hall of Fame. In 2001 and 2002 he was chosen as one of the Top 100 people in Chicago’s Hi Tech community. He was appointed by the Illinois Governor in 2005 to serve on the board of the Institute for Entrepreneurship Education (IIEE). He also teaches entrepreneurship at the Illinois Institute of Technology (IIT).
Moltz has written articles for many national publications. He writes a column, "The Business Bunker" on small business for E-Prairie (www.eprairie.com) and for a local Chicagoland newspaper, “The Business Ledger”. He also provided content for another book, "Attracting Capital from Angels" by Dee Power and Brian Hill. (John Wiley and Sons- 2002). The book captures his advice on what angels look for when investing in early stage companies. Moltz also wrote a chapter in the book, “State of the Art: American Angel Investing”, (The Darden School, The Batten Institute).
Moltz has recently completed the foreword for Penguin Books’ new “The Complete Idiot’s Guide to Business Plans” to be published in October 2005.
Additional facts and Barry’s contact information can be accessed at www.barrymoltz.com.
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