StartupBritain reports that in 2015, 608,110 new companies were incorporated in the UK, a 25.6% increase over 3 years. Some of these are businesses that don’t get lured in by the ‘startup halo’. For those that do, there is a plethora of startup pitching events, conferences, competitions, government schemes, accelerators and incubators, often promising access to investors, speakers and for the starving kind (99.9% of startup founders) free pizza & beer.
As startups have become a commodity in today’s economy, everyone wants a piece and credit for their success. For outsiders, naturally, the challenge is in finding the unicorns. For startups, the challenge is to shine the brightest and attend every possible event, hassling and looking charming and smart. In the process investors get bored of seeing the same pitch over and over again and become desensitised. Startup founders on the other hand get distracted from clarity on the business, revenue generation and very often start following VANITY METRICS which generate no money and burn through limited marketing budgets.
‘Startup’ is just a glorified word for an SME (small medium enterprise).
Sexing your startup up won’t generate money; attending conferences, winning awards and having 200,000 followers on Twitter is not an indicator of success. That small coffee shop in your favourite seaside town is not a startup, has not raised money, generates 100 times more revenue than you do, has 70% repeat customers and zero followers on Facebook. It probably has a higher survival rate too because the business owners are focused on sales rather than presenting in front of a bored audience in startup capitals.
Here are our 10 personal reasons why you should stop taking part in beauty parades and spend more time building your business:
1. Too Many Startup Pitching Events — Please, MAKE THIS STOP
Startups attend hundreds of events in the hope of meeting ONE investor who will write ONE cheque on the spot. That person is also Elon Musk and he thinks you are the best thing since sliced bread (right!).
A quick search on Eventbrite results in 1,059 startup events in London alone. Thankfully not all events are on Eventbrite or you would need a month to sort through this.
Unfortunately most of these startup events are attended by the same people. Your ideal investor is not there either and the ones who are did not bring their cheque books. Very often the best of companies won’t be pitching at these events and the best of investors won’t be there either. You have to actively seek them out and fly to see them.
Do attend if someone you are after is really attending and ask for proper 1–1’s with the people that can help your business. Instead of startup events, you could focus on going where your customer or partners are. The Winerist team often attends wine tasting events where we can meet many prospective clients such as wineries and wine lovers (this part of the job is really hard;-).
2. Fundraising — SELL YOURSELF!
Fundraising involves a lot of schmoozing and selling ‘yourself’. Yes, ‘yourself’ and not the business because it is first about the founders and second about the idea.
Fundraising is also an emotionally draining process which can last 3–9 months. If your business is going through a hectic stage, be careful what your prioritise, especially if you are generating revenue.
Fundraising is like courtship.
Both parties shop around and there is no loyalty nor certainty. Be prepared for rejection. A lot. Keep ‘courting’ till you find the right match. Not every investor will be right for you and your startup won’t be right for everyone, so just move on quickly and never let the business out of sight. As Napoleon Hill said: “The best way to sell yourself to others is first to sell the others to yourself.”
Some fundraising setups could be compared to ‘pimping’ (in the nicest way possible). Many fundraising angel and crowdfunding platforms work on a success fee basis, if they find an interested investor for you have to pay them a % fee (usually between 5%-10%). Don’t do multiple platforms, as the amount of time to prepare the funding materials, the video, the events is time consuming. Choose one that suits your business, where angel investors love your product / industry and could be your final customers.
Of course every business would benefit from an injection of capital but as a startup your #1 focus should be on building the business and break-even, so stay focused and don’t get distracted! If you are cash positive investors will come to you.
3. Startup Conferences — Business in the Dark Hours
Each and one of these has its merits but the format is usually (please forgive us) rather boring. Startups that recently completed Series A/B/C, some VCs, some tech journalists, some award chasers, some digital gurus and a lot of geeks showcasing their latest wearable technology. And very few women…
Everyone is looking for PR! In the background there are hundreds of other startups desperately trying to mingle and network with investors and pitch their business having paid £500 just to attend. You will probably end up sending hundreds of emails and tweets before the event hoping to get a meeting. But most business is done in the dark hours, so make sure you are on the guest list of the coveted conference after parties ready to party and down a few shots.
Raising money at conferences can be costly and counterproductive. Be very smart about which conferences you want to attend and who you want to meet. We learned that it can be wiser to spend this time with your customers learning what they need and drive sales accordingly. Single out the 10 people you want to spend time with and take them out for a drink rather than following them with the rest of the herd at the conference.
4. Women & Startups — Expect the Unexpected
This is a really controversial one. We are not going to go burning our bras in Trafalgar Square, but let’s face it: it’s still tough for women in startups. A 2014 study by MIT, Harvard and Wharton universities, found that men are 60 per cent more likely to get funding than women, other things being equal.
Many industry players are very much aware that women are under-funded and under-represented in the startup world. How many times have you been to events with all male representatives on the panel? OR on the opposite side an all female panel or all female pitching events? This is not helping gender parity, but it only divides women and men even more. Women entrepreneurs should pitch alongside men because they deserve to, not because they are women. In true honesty, we often got meetings and pitching opportunities just because we are women, and there is a huge PR benefit to help women. Was it time well spent? Probably not.
Startups founded by women are also often regarded as lifestyle businesses, build to work around school drop offs and pick ups. Someone we met across the pond once said, it has to work around yoga classes and manicure appointments. The guy was an idiot. But he is also a well known investor who said this in a speech at a recognised higher education institution attended by women who were patronised for the nth time unnecessarily.
Being women means you don’t get the benefit of the doubt.
Marriage, pregnancies and children still raise subconscious questions in many investors’ heads. How are you going to juggle it all? Women are very much aware of these judgemental thoughts, so we work even harder than anyone else just to PROVE YOU WRONG. New research shows that startups with female executives are more likely to succeed.
In our case we are a mother / soon-to-be-mother and have been exceptionally lucky in that our current investors have been quite aware of the fact that we are women, have a biological clock.
5. Hiring — Kissing Frogs
Hiring is similar to fundraising — long, emotional and again you have to SELL YOURSELF and the company too.
With the large number of startups and VC money pumped into them, the best of employees are very picky — they expect market salaries, equity, a swanky office, with a ping pong table and beer on tap all day.
So if you didn’t just raise a massive $$$ Series A/B/C round you are not totally screwed, it just means you may not get the best of people and it will take longer. It’s tough to attract talent when you cannot pay them a decent cash salary. Yes, equity is good but who wants to work for free? Living in London and other startup havens is expensive.
Again it involves a lot networking to find such candidates and hope that you just hit it off and they will come and work tomorrow for you for free. DREAM ON! Expect to kiss a lot of frogs on the way…And even if you are lucky to get a CTO with the little resources your startup has, can you guarantee his loyalty?
6. Mentor Backlash
So your startup has some traction and you managed to find mentors who think will bring value to your startup. It’s very important to get mentors from your industry as they have more experience and knowledge on the sector. In mentors look for skills that your business needs whether that is tech, online marketing, PR etc. They are all very valuable but be CAREFUL!
The more mentors, the more you are likely to suffer from ‘mentor backlash’. Each of them has an opinion on what the company should focus on, KPIs, business model. In the beginning, you listen and try to make sense of it all.
More feedback is not necessarily better.
You are officially suffering from mentor fatigue. Go back to the board room with your team, clients and listen to your instinct again. You know your business best. Your clients can tell you how to make that business work better.
7. Product Market / Fit
This one is important. It’s more important to focus on your customers than your investors. Someone once rightly said: “$1 from a customer is worth $10 from an investor.”
Another favourite quote by Pete Drucker is:
“The customer rarely buys what the company thinks it sells.”
Start with the problem you are solving and the value proposition. Get your early adopters. Speak to your customers and listen to what they are saying. Don’t tell them you are a startup — consumers don’t understand that, focus on your product, achievements and media coverage. Then keep working relentlessly on the product, and finding the right product market / fit. Repeat.
And even if you get there you may still not have the double digits that VCs are looking for, but at least you are revenue generating and making your customers happy. That’s great news when most startups around you are generating zero revenues and burning 100k per month. No matter what traction, no money coming in = bad news.
8. Startup Training — It’s All About the Execution
Similar to a courtesan you would receive years of preparation in literature, dance and etiquette before allowed to make your first public appearance, but you still learn most things on the job. In the startup world same rules apply. Let us be clear: your previous job, whether banker or NASA astronaut will not give you by default the skills you need to run your own company. Even if you are a PowerPoint genius. They will certainly set the foundation of diligence and working hard but it’s your hunger and ability to adapt in the moment that will help your business.
You will also quickly realise that once you decide on your big idea, the execution is not such a no brainer as you thought in the beginning.
Guy Kawasaki put it well: “Ideas are easy. Implementation is hard.”
9. Let’s Talk Money
When it comes to money, the courtesans are up a level. As a startup founder, you get paid nothing or very little no matter how good you are and don’t live in mansions with beautifully manicured gardens.
Even if you are lucky to raise some funding you will never be able to pay yourself a market salary, because investors don’t believe you should and we don’t think you should unless you are generating a LOT of revenues.
10. EXIT is a Dirty word. OR NOT.
Like any courtesan you want out. With some money behind you, preferably off to do something that has nothing to do with your current occupation! That’s the problem with building startups and not businesses for life.
Although using the word ‘exit’ aka selling the business is in theory frowned upon. EVERYONE in the startup industry thinks about it. VCs, investors, startups, accelerators. They all think of how to sell this to the best bidder, for the largest amount of capital, with as little impact and risk to investors, VCs and parties involved. Frankly, it’s the founders who get penalised in the process. That’s why most exits are for an ‘undisclosed’ amount. Founders will often walk away with little money and little sense of satisfaction with the exception of a handful of exceptions. Most of these founders don’t look back and go to work for established companies. A small percentage set up companies again.
From our experience those entrepreneurs who build businesses and not startups are the ones reaping the benefits and enjoying the ride. If you like raising money, selling yourself, you are probably better off working for a financial institution. Or someone famously said, a charity.
So dear startup founders — beware of these pitfalls and don’t become the byproduct of someone else’s freak show. It’s time we make entrepreneurship about ourselves and less about others…Wishing you the very best, Tatiana Livesey & Diana Isac
The road to success is often a windy path.
Note: This is not a post to glorify prostitution or to criticise the startup industry, but merely a collection of our experiences over the past years as 2 women founders at Winerist in London.