Meet your Milestones

You need to implement processes to set and meet milestones.  We'll be adding more content in this chapter soon.  But here are some ideas to get you started:

• Clearly define your goals with dates attached
• Plan - lay out the steps (with dates) required to accomplish each goal
• Assign names - make sure someone has clear responsible for completing each step
• Get commitment - make sure each task owner commits to complete the task, on time
• Track accountability - review headway toward goals weekly
• Meanwhile, watch cash - be sure you don't run out!

10 Lessons from a CFO

Thank you to Mike Osborn for contributing this excellent list of lessons-learned from a CFO's perspective. This is well worth reading and pondering.

1. Define personal objectives up front -- honestly -- as it will drive key decisions relative to growth objectives and outside funding
   • Bringing in outside investors is an irretrievable step with profound implications
      
2. Strive to finish initial product and produce sales before initial external equity funding - This is the single most important thing you can do!
   • Figure out ways to generate revenues and cash - sell the products you have to anyone who will buy them
   • If a potential customer with cash says "Can you do this?" -- say "yes" and then go home and figure out how...
      
3. If founders don't include someone with experience (preferably sales experience) in the market being addressed, add one ASAP -- critical if you intend to acquire outside funding
   • Got to understand total market size as well as its segments
   • Got to understand market segments and where your product is positioned
   • Got to understand competitor strengths and positioning relative to the segment you're addressing
   • Got to sell your product to actual customers who will pay you
     • Validate assumptions about selling points, competitive offerings, pricing, value proposition, customer buying and funding process, sales cycle
        
4. Fill glaring management gaps early; focus on skills CEO does not possess
    
5. If liquidity objective is merger, ID potential acquirer targets and strategy early, maintain awareness of probable strategic fit (value, positioning)
   • This usually falls out of your analysis of your markets
      
6. If either IPO or merger is liquidity objective, invest in back office early
   • Strategic business plan
   • Detailed operating plan and monthly management reporting
   • Clean financials (revenue recognition, quality earnings)
   • Audited financials
   • Scalable operating systems and processes
     • Manufacturing, inventory, cost accounting
     • Product/project management
        
7. Invest in service providers with broad experience and deep resources (you'll need them to move quickly and avoid mistakes)
    
8. Acquire the discipline of a Board of Directors (start with an Advisory Board, move to formal BOD when outside $s come in)
   • Acquire Board members that fill gaps in your experience base and interact with them frequently
   • Solicit their input to your tough problems; don't hide bad news, make them your partner in figuring out solutions
   • Also, a good Board will force you to:
     • Clearly define strategy
     • Make commitments, track results
        
9. If you're the founding CEO, ask yourself if you possess these leadership characteristics; if not, fire yourself and hire one who does:
   • Vision (where are we going?)
   • Force of will (set priorities, make decisions, over-ride dissent/second- guessing/diversions outside your priorities)
   • Physical energy and emotional strength sufficient to sustain 24/7 engagement for 5 years or more (it's not a part time job)
   • Comfortable with experienced functional managers who know more than you do about their functional areas (beware of promoting from within in early stages -- who will do the OJT?)
   • Classic management skills and discipline (establish objectives, assign responsibilities, reporting progress, holding accountable)
   • Delegation skills (leverage yourself through others)
      
10. Know the motives and objectives of those you ask to invest in your company
    • Four levels of venture capital investors
      •      In stitutional venture capital (professionals investing other people's money) 
      • Sophisticated angel capital investors (invest directly, but typically have a group filtering deal flow)
        • OEF's Portland Angel Network is an example of this; Seattle's Alliance of Angels is another example
      • Individual angel capital investors who invest directly
      • "Friends & Family" investors who invest because they know and trust you
    • All experienced venture capital investors will focus on six key variables, so have answers before you look for money:
      • Size of the market being addressed (is the market opportunity large enough to support $100MM business?)
      • Product strengths relative to competition (who is the current or potential competition and how are your products different?)
      • Customer value proposition and sales cycle (why will the customer buy your product (urgency) and how long until revenue is realized (sales cycle)?)
      • Strategy for obtaining and protecting market dominance (proprietary technology or scale/execution?)
      • Years of relevant experience in management team (has the team had experience in doing what they're proposing to do?)
      • Track record of CEO in achieving results in startup environment (can CEO manage rapid growth?)
    • Understanding institutional venture capital investors
      • They work for their investors and are judged/rewarded on the basis of ROI, period.
        • Their loyalty is to their investors and their personal measures of success, period. Not you, your company, your products, or your personal vision. Just financial results.
      • They'll pay more if they're competing for the deal
        • Always work to create more than one alternative; create the fact (or illusion) of competition for your deal

9 Financial Mistakes that can Kill Your Startup

18 Mistakes that Kill Startups

As you're thinking about starting a company, the links below are good food for thought.  You might start with Paul Graham's essay: 18 Mistakes that Kill Startups.

And I'd suggest you come back and review these cautionary tales every 6 months or so. You might be glad you did!