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Wednesday, June 15, 2011

7 DO's and 5 DON'Ts for Entrepreneurs (LA VC Revisited)

from Ryan Born





Ever since my post on Los Angeles venture capital, I’ve been getting a lot of email and phone inquiries from local entrepreneurs seeking advice. It’s not surprising because the post presently shows up #3 on Google when you search “los angeles venture capital” and the 100+ re-tweets and 20+ FB likes certainly helped solidify this position.

Typically the entrepreneurs that reach out want to meet in person and ask for advice. I try to disclaim everything in that I OFFER OPINIONS, NOT ADVICE. I’ve been compiling these opinions and figured I’d jot down the cliff note version here. Without further adieu, here are some strong opinions on various topics that have come up in my recent correspondences with local entrepreneurs.

7 DO’s:

1. Choose a freaking huge market. Don’t play around in a small market. If you can’t quantify the size of your market, that means it’s too small, especially for VC. Go big.

2. Quit your day job – sooner rather than later. If you want to build a business, it takes 110% commitment. You’re never going to get anywhere if you relegate your dream to a side project for nights and weekends. Quit now, not later or you’re only proving that you’re not as committed as you should be.

3. Learn to use an RSS reader. If you’re in tech but don’t use RSS, I fear for you.

4. Have founder vesting. There’s nothing worse than founders not having 4 year founder vesting in place, with or without outside investors.

5. Tell anyone and everyone about your idea. Ideas are a dime a dozen, execution is everything and you’ll learn far more than you could ever possibly lose by sharing your ideas with all.

6. Fire people as fast as possible. The second you think things are not working out. Fire away. You’ll never regret firing, you’ll only regret having not done it sooner. Everyone is replaceable.

7. Read Mark Suster’s blog. Pretty much every single question I get asked has an answer on BSOTT – “Both Sides of The Table”. The answer is already out there. Do your friggin homework.

5 DONT’s

1. Don’t raise money from non-millionaries. Raise from deep pocketed institutions and corporations.

2. Regardless of what the lawyers tell you, do not form an LLC. Lawyers love LLC’s. You know why? Because lawyers are not entrepreneurs.

3. Don’t have a 50 / 50 co-founder (or 33 / 33 / 33 for that matter). One of you needs to be in charge and be in control and if you’re the leader…the real entrepreneurial one bringing this thing to life, then it should be you. Founder shares must have vesting (i.e. be restricted) and be subject to a buy-sell agreement (aka pre-nup).

4. Don’t get caught up in all the press and attention your competition gets. It’s truly meaningless and in no way indicative of financial success.

5. Don’t raise a round of convertible debt (exception: if the terms are so Y-combinator style crazy in your favor that you’d be a dumb-ass not to take the cash). If someone wants to invest, they should set a price and take an equity stake. If you want a loan, you’d be asking for one or you’d go to a bank / credit card company.

Now each of these points could be a blog post of their own backed up with experiences and circumstances to help you understand why I’ve formed these opinions. Maybe I’ll get around to doing a deep dive on each item but for now, the cliff notes will have to do.

Now it’s time to get back to what matters most – executing.

Ryan Born is the founder and CEO of AudioMicro, Inc., which operates AudioMicro.com, ImageCollect.com, ChooseTattoos.com, and Cartoonsy.com. He was the VP Finance / Controller for WireImage, has served at PricewaterhouseCoopers, and is also a photographer who has had his images appear in major print publications from Rolling Stone to People Magazine. Born blogs about entrepreneurship and startups at RyanBorn.net. He originally posted this article on his blog. He originally posted this article on his blog.


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