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April 6, 2004:
The Ten Commandments of
Entrepreneurship in Chicago
Spring means
Passover and Easter. Spring also means the return of my religion:
golf. I thought it would be interesting to try to meld all these
divergent subjects, but since ePrairie doesn’t pay me the big bucks
to pontificate about golf, I’ll have to limit my sermon to the
religion of entrepreneurship.
I therefore
reveal to you, these 15…no, 10, 10 Commandments of Entrepreneurship
in Chicago!
-
Thou shalt not whine about the
lack of venture investment in Chicago
If I hear one
more smarmy little wiseacre whine that “VCs don’t invest in Chicago
companies,” I’m gonna throw up. I am so sick and tire of people
complaining about this, because, as far as I can tell, the people
who complain the loudest are the ones who have the least worthy
business plans.
Chicago has a
long and distinguished history of entrepreneurship and business
building. If you can tap into that vibe, I can’t help you. Chicago
was built by people who had nothing. They were hustlers. They were
willing to hustle to make a buck. They were adept enough to find
things people actually wanted to buy, and then they sold those
things to that target market.
Stop trying to
sell solutions to a market that doesn’t demand your pipe dream. If
market demand, and service that. And stop standing on the sidelines
waiting for manna from heaven (venture capital), find clients first,
build a business, then seek expansion capital
The lesson
here: If you want venture capital, become a venture worthy company
-
Thou shalt not compile a PPM
As most of you
know, early stage entrepreneurs should not waste their time
compiling PPMs. The PPM for the early stage entrepreneur is nothing
more confusing activity with accomplishment. PPMs should only be
compiled and shopped by companies that have actual operating
histories.
The lesson
here: PPMs and pipe dreams equal pipe bombs. This is a bad thing.
-
Thou shalt not misrepresent
your company
This is one of
my biggest pet peeves (along with people who drive slowly in the
left lane, and idiots who sit on weight machines watching TV instead
of using the machine). Misrepresenting your company occurs when an
early stage entrepreneur does dumb things to make his company seem
larger. Instead of being honest and saying, “I’m in my garage
trying to get my first client,” this entrepreneur likes to blur the
lines and misrepresent the facts.
Examples
include the use of stock photography on websites. If I see one more
website with that woman with the headset, or the two men shaking
hands, I’ll choke. These people do not work for you, why are they
on your website? I also despise when I don’t get straight answers
to simple questions. For example: entrepreneurs often blur the
distinction between actual revenue and forecasted revenue. I have
seen too many companies that claim to have, say, $2 million in
sales. When I dig a little deeper, I find that they actually have
$100,000 in sales, and they’re hoping they close that $1.9 million
deal on December 31.
The lesson
here: Get out of my way when you see me on the highway, and don’t
believe your own over inflated hype.
-
Thou shalt not talk air other
people’s dirty laundry in public by using a certain scurvy little
gossip worm’s “newsletter”
There is a
poison in Chicago’s venture capital/high scene. It is personified
by someone who has never raised a dollar from VCs, has never run a
real business, has never built then lost then rebuilt a fortune
(heck, he’s never built a fortune),and has never amounted to
anything, yet feels it is his duty to “dig” into “real” stories and
provide commentary on things he knows nothing about. Out of one
side of his mouth he whines that Chicago VCs don’t take enough
chances. Out of the other side of his mouth he delights in the
failure of companies and people and investors who have taken wild
chances.
This person is
the biggest flim flam artist in Chicago. He’s a carnival barker
whose caravan consists of the disenfranchised and immature whiners
of Chicago’s scene. He reminds me of a smart child who delights in
getting the grownups to laugh by saying rude and outrageous things.
But there is no substance offered here, only a long line of caustic
half truths and lies, peddled by a snakeoil salesman masquerading as
someone who thinks he’s a valuable resource.
The lesson
here: Find real entrepreneurial resources in Chicago. There are
plenty. I’ll give you a hint: They’re the ones that eschew
publishing anonymous attack emails.
-
Thou shall network like crazy
You can never
have to big a professional network. Hit the events, it’s actually
pretty easy to make a name for yourself, provided you 1) have
something to offer, and/or 2) you’ve actually accomplished
something. And by “accomplish something,” I mean making a pile of
money for yourself via entrepreneurial activity. Until you make a
pile of money, all you can do is “be someone who has something to
offer.” See Commandment 7 for more details.
The lesson
here: Get out there and meet people. Don’t be a wall flower. The
world will not come to you.
-
Thou shalt not be a not be a
nuisance when thou networks with others
There is a fine
line between networking and being a pain in the rear. Yes,
networking is very important. But don’t pester people once you’ve
made their acquaintance. Just because you’ve meet one of the
scene’s luminaries (e.g., people with money), that does not mean
you’re buddy-buddy with that person. You can’t force yourself into
someone’s personal network just because you’ve made a professional
connection. You have to let those things develop naturally.
The lesson
here: If you want to break into a higher tier social/professional
circle, make the type of money that that circle has.
-
Thou shall have something to
offer
Commandment 5
mentions “have something to offer.” What I mean by this is, short
of being a successful entrepreneur (and for this purpose I define
success as making a boat load of money), wannabe entrepreneurs can
be valuable by having something to offer. This means offering
resources, help, and assistance to other entrepreneurs. You don’t
have to be a millionaire to be helpful. If you’ve tried the
entrepreneurship game a few times and crapped out each and every
time, you can be valuable by learning from your mistakes, and
helping others to avoid those same mistakes.
I’m a big
believe in helping others as much as possible, without asking
anything in return. I believe if you are helpful enough to others
(without demanding remuneration), good things will eventually happen
to you. If you sincerely want to help others, and you do a good job
at it, you will build credibility far beyond what you put on a
resume. If decision makers know your name, and they have positive
feelings associated with your name, then you have built a very power
brand for yourself.
The lesson
here: If you’re only a taker and not a giver, it won’t be long
before you wear out your welcome.
-
Thou shall be willing to work
thy rear end off
The best thing
about entrepreneurship is being able to work half days. And you
even get to decide which 12 hour half of the day you want to work!
Since most entrepreneurs have to wear many different hats, and most
of those hats are full time jobs, most entrepreneurs especially work
multiple full time jobs. There is no way you’ll be able to get
everything done that needs to be done if you only work 40 hours a
week.
The lesson
here: If you have a 9 to 5 mentality, forget entrepreneurship.
There are 168 hours in a week, if you are not will to work as many
of those hours as possible, you’ll never make it as an
entrepreneur.
-
Thou shall only seek investors
who actually invest in your space
If you are
early stage (e.g., pre-revenue) don’t waste your time with VCs.
Let’s go through this again. Friends, families (and fools) invest
in pre-revenue deals. Angels might invest once you have some sales
tractions. VCs only invest once you’ve proven the model…and that
model better scale like a monkey on crystal meth being poked in the
rear with a cattle prod.
If you have a
viable going concern that you think you can grow to a substantial
business, make sure the investors you contact actually invest in
your type of business. If you are a software company, it is
unlikely a VC firm that only invests in lifescience deals will
invest in your company. If you are a
The lesson
here: Know what type of company you have, and what stage it is at.
Find the right investors at the right time.
-
Thou shall understand
accounting
Much like
economic illiterates, I can smell accounting illiterates from a mile
away. If you don’t know the difference between a balance sheet and
an income statement, it is time to take some accounting courses at a
college. If you believe accounting doesn’t matter, you will be
taken advantage of at every turn.
Or worse,
you’ll inadvertently do something illegal. A few years ago a friend
sent me a proposed cap table for a deal he was working on. In this
table he listed the existing investors, how much money they had put
in, and the number of shares they had. He then had a second section
showing the proposed second round, with new investors and new
dollars. The trouble was all the stock was being sold for a buck a
share, and in order to show the first investors some appreciation on
their investment, the entrepreneur was planning to issue more
shares! All told, he was planning to issue these people over 2
million shares.
I asked a
simple question: “How many shares are you authorized to sell?”
The answer:
“Dunno.”
Turns out the
company was authorized to sell only 1000 shares. As I pointed out,
selling more shares than you are authorized to sell is called
securities fraud. This Kellogg grad retorted by saying the company
was private, so securities law didn’t apply.
I was
speechless (which is news in and of itself). What are they teaching
in Evanston?
The lesson
here: Accounting is the building block of business. You better
speak the language. Or you will be speaking with the SEC.
And the special
11th commandment…
-
Thou shall seek clients with
the same voracity that thou seeks investors.
Here’s a novel
idea for the bevy of Chicago early stage entrepreneurs. Instead of
flying around town with the same shopworn business plan in hand,
instead of attending the same shopworn networking events with the
same shopworn people who are not in any position to buy anything
from you, make phone calls to actual client prospects.
The lesson
here: Selling stock is not the only way to raise money. You can
raise money by trying a novel idea…selling product.
Continuing
and concluding…with our holiday theme
These
commandments are based on my oft painful exercises in
entrepreneurships. I have made many of these mistakes, and worse
still, I see many people making the same mistakes that I (and other
entrepreneurs) have made over the years.
Chicago
entrepreneurs who fail to adhere to these commandments will be
visited by the ghosts of failure; past, present, and future. Those
who adhere: may your businesses be fruitful and multiple and scale.
Has your company been profiled by Bill Snow? Send
an email to introduce your company:
bill@billsnow.com
About the author
Bill Snow runs this site. If you haven't figured that out yet, I can't
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