A Dose Of Realistic Optimism
Netpreneurs Learn How To Prevent Startups From
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Bankruptcy Information on the Web
VA -- July 20, 2000) Starting
an Internet business today is not what it was in the heady days when
almost everyone thought “if you build it, they will come.”
Omnipresent headlines about astronomical IPOs have been
replaced lately with the almost as ubiquitous “crash and burn” or
“dot.bomb” stories. The
press’ gloom and doom is certainly overdone¾most
analysts agree that the Net remains a phenomenally fertile ground for
new business ventures¾but
there’s no doubt that VCs are becoming more diligent, markets have
shifted and more than a few high flying companies have been brought
down to earth.
“Being an entrepreneur today is not for the
faint of heart,” remarked Patty Abramson, Managing Director of the Women’s
Capital Growth Fund, at this morning's Netpreneur.org
Coffee & DoughNets meeting, “It's not just, ‘let's go out and
start a business and we are sure to make it.’”
All companies face challenges and market moves.
Startups are more fragile, however, less able to weather a long storm,
and the storms that Net startups face are faster, more violent, less
forgiving and change direction more frequently.
A panel of experts at this morning’s meeting provided some
tips for navigating rough waters, or at least for avoiding the eddies
that others have suffered before. Joining venture capitalist Abramson
were attorney Mike Lincoln, Partner at Cooley
Godward; accountant Jon Shames, Partner at Ernst
& Young; serial entrepreneur Jamey Harvey, CEO of iKimbo;
and publisher, entrepreneur and board member Esther Smith, Principal
at investor relations firm The Poretz
According to Lincoln, there are two kinds of
factors that cause businesses to fail¾those
you can control and those you can’t.
The latter includes things like market trends and the
advantages of your competition, which, even if you can’t control,
you had better know about and be prepared to respond.
The former includes things like the quality of your execution,
company focus and exit strategy failures.
Regardless of which you are facing, and it’s probably both,
Shames sees five areas to pay strict attention to if you’re going to
have any shot at success or survival:
leadership: pay for
the best management team and build a strong web of advisors
founders ever bring their companies from idea all the way to IPO, so
know when to bring in the people who can take you to the next level
cash: take it when
you can get it and long before you need it; building a company almost
always takes double the capital you anticipated, and requires twice as
long to raise
revenues: as the
Internet space has moved back to basics, revenues are once again the
key metric for success¾go
for them right away, bring on the best salespeople and listen to your
accountant about reporting rules
exit strategy: plan
for and pay attention to liquidity events; statistics say that it
probably won’t be an IPO,
despite your plans
How can you tell whether you’re on the right
track? Smith advised
finding new and appropriate metrics that show whether or not you’re
hitting the mark. Benchmarks
like page impressions won’t replace revenue anymore, but you’ll be
okay if you can show that you’re on what she called the
Path to Profitability. For
example, are you simply closing deals, or are you maximizing them and
leveraging the relationships? Abramson
offered a tool that she uses with portfolio companies¾scenario-building.
Have you asked yourself what you’ll do if you don’t make a
certain projected milestone or target number?
These kinds of questions can help you find the balance point in
“realistic optimism.” That’s
the catchphrase, all agreed, which has replaced the market’s earlier
According to Harvey, who has founded three
Net-based businesses, when an idea works, “you usually know it
pretty fast.” He added,
however, “At every company that I have started there has been a
moment when you realize what you are doing isn't working.
That is the moment of greatest opportunity that an entrepreneur
can ever have. It is in that moment when you get to re-create yourself.”
Whether that’s an opportunity or simply
necessity, all panelists agreed that flexibility and adaptability are
the keys when facing tough times or changing dynamics.
Lincoln said that it is essential for netpreneurs to be,
“decisive and nimble.” He
cited the example of SingleShop,
“a company that saw that the B2C space was a challenge and quickly,
before the market downturn, repositioned itself into more of a B2B
play, and has done very, very well since then.
One problem that founders and entrepreneurs have¾although
sometimes it's also a good trait¾is
to have blinders on and charge full speed ahead.
It’s bad when they fail to see the point at which you need to
scrap your plan or model and move in a different direction.”
That’s the inherent contradiction behind
“realistic optimism,” but who ever said that life,
entrepreneurship or the Internet was going to be clean and easy?
The right path for a certain market situation may be exactly
the wrong one for another, still the panelists offered pointers,
advice and examples for a variety of circumstances, all captured in
the edited transcript.
Of course, you’ll need more than that to avoid the land mines
every entrepreneur faces, so it’s essential to build a network of
people who can help with your particular challenges.
“If you are doing it right,” said Harvey, “you have a
team, you have a board, you have advisors who can help you, but do not
hesitate because things move very fast in this world.”
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