Is Your Company Wearing Ripped Jeans

 In Raising Capital

Is Your Company Wearing Ripped Jeans?

Hiring an employee is, at best, a crap shoot. Interviews are like first dates – everyone is on their best behavior. And people are woefully inadequate at evaluating whether a candidate will be a good employee for the long haul.

To overcome this, employers use “objective” criteria, such as:
Though none are themselves indicators of success, the criteria can help easily identify candidates who don’t meet the minimum requirements. Rather than find the best candidate, they identify the worst of the pool so they can be removed from consideration.*

  • Prior work experience;
  • Education;
  • Common relationships;
  • Communications ability; and
  • Attire.

Even though you may not get the job, if you show up in a suit, have great experience and a top level education, you’re not automatically eliminated from consideration. You’re definitely going to be rejected, however, if you show up in ripped jeans and an old T-shirt.

This same process is also used by investors considering your company.

Because they have many choices and often lack the capability to pick winners, investors and customers identify and weed out clear losers based on obvious flaws.

So what are these “ripped jeans” obvious flaws?
Your company must ditch the ripped jeans and put on the suit to be taken seriously. You still might not get the investment. But, without the suit, you may never get to the point of discussing an investment.

  • Failing to have an expertise diverse team including business and technical employees, and experienced professionals and industry advisors;
  • Founders who don’t know their numbers, their market differentiation or their value proposition (‘We don’t have any competition. Really!’);
  • A focus on technology rather than the market and the business case;
  • Founders who don’t take advice and mistake arrogance for confidence;
  • A multi-billion dollar target market, where the business plan is to ‘get’ 1% market share (i.e., ‘All we have to do is get 1% of this $50B market!’);
  • Financial statements that don’t make any business sense (which are always characterized as ‘conservative’);
  • Little or no customer interaction (sales, pilots, users);
  • Founders with an extreme idea of their company’s value;
  • A 97-1-1-1% split of equity among the founders;
  • Founders who take unreasonable risks;**
  • Off-the-Internet, fill-in-the-blank legal documents that make no sense (my personal favorite for obvious reasons); and
  • Team members with the same last name as the founder and no prior experience in their job categories.

* We all do this in our daily lives, as well. If your neighbor drives a beat up car, you won’t see him as successful, even though his car may have no bearing on his technical capabilities or financial resources.

** More on this in another newsletter.


Special thanks to Randy Ellington of SmartWealth for the metaphor.

What’s Going On?

Earlier this month I helped a technology startup complete a $1MM angel round. It was a pleasure working with the founders. I’m very impressed by their team and look forward to their future success.

On Thursday of next week I’ll be speaking on a Funding Panel with a group of successful entrepreneurs as part of the Orlando Regional Chamber of Commerce (Orlando, Inc.) Entrepreneur’s Academy. The September Academy is sold out. I’m looking forward to the session and the opportunity to talk with the group. There’s something I thoroughly enjoy about the conversations I have with other entrepreneurs and business owners. It seems the focus is on growth and opportunity, and I usually learn something in the process.

I’ll also be on the Funding panel for the October Entrepreneur’s Academy. If, like me, you enjoy interacting with other entrepreneurs, you should consider attending. Tickets are still available for the October Academy.

Finally, I’m a mentor for two of the Starter Studio startups and have been going to some of their events. They have a packed schedule, including founder’s talks, where a founder tells how he (only men have spoken so far) got where he is today, including all the failures along the way. These are eye opening because we often see founders only after they’re “overnight” successes. If you’re interested in these types of events, go to the Starter Studio website for the schedule.

As always, there’s more free information at the Entrepreneurship Law Firm website and I’m happy to answer your questions and get your feedback.

I’ll be in touch soon.
Ed

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