Negotiating investment terms with potential investors is tremendously challenging, usually because of the power imbalance between investors and startup leaders. It is a grim feeling when the excitement of finally getting a term sheet for a potential investment (a milestone that has often required many months and tremendous effort to accomplish!) is coupled with an investor declaring some version of the following when the startup CEO starts asking questions about some of the more onerous provisions in the term sheet: “There is no negotiation on this term sheet.” “That term is not negotiable ..read more

Owning the majority of the voting shares enables you to control your own destiny as a startup CEO, right? Wrong. 51% is not the magic control button you might think it is. The reality is that a pre-profitable startup is at the mercy of its ability to attract investors for the financial fuel to keep running. Many founders and first-time startup CEOs suffer under the illusion that somehow stockholder voting rights provide control over the startup’s destiny and the CEO’s job security. I think the source of this perception is often news articles about pivotal proxy fights at public companies or re ..read more

A classic concern expressed by high-potential startup investors is ensuring that someone with business acumen is at the helm of the startup. How do you demonstrate that you are someone that investors can trust with their funds? Investors putting their resources at risk on the potential future success of a startup want to be sure that its leaders know how to build a business successfully. While most high-potential startups have exciting technology innovations at their core, leading-edge tech is not enough to build success. Translating that technical innovation into the foundation of a multi-fac ..read more

The ebb and flow of markets, including fundraising markets, often has nothing to do with you. Yet it can be disconcerting when it feels like all of a sudden you are alone in a woods full of crickets, so being aware of fundraising seasonality can help. When I began raising money as a startup CEO, my relentless focus was on accomplishing my goal of securing the resources we needed to build our startup successfully. Fundraising is like sales. You identify likely targets, reach out to them to begin a conversation and try to attract interest, handle seemingly endless questions and objections, and c ..read more

Startup leaders must become adept at figuring out what is happening in their worlds. What are the signals, and what is the noise? This is one of the profoundly complex leadership tasks because figuring out the direction to take the organization depends on how accurately you can perceive and then translate that perception into positive forward movement. Many years ago, when we were deep in the development of a sophisticated electronic instrument, I remember peering over my co-founder and CTO’s shoulder as he gazed intently at the screen of an oscilloscope (a type of electronic test instrument t ..read more

Investors’ and Board Members’ view of a startup’s inner workings resembles peeking into another room through a keyhole. Why? Because there are so many things whirling around inside a startup, and there is no practical way for an investor or Board member to keep up with all the moving parts. Even when doing due diligence on a potential investment, there are still too many nuances and moving parts to develop a perfect picture. Think, for the moment, of the following factors that make this true: The startup has a whole team of people working full-time accomplishing various tasks to problem-solve ..read more

The passion of a first-time founder who is often pursuing something uniquely personal is captivating. Yet, the learning curve for successfully building a high-potential startup is so steep that investors gravitate towards experienced serial entrepreneurs as a way of de-risking their investment. Yet, there is a balancing act since all startups have multiple dimensions of risk. Let’s unpack some of the differences between first-time and serial entrepreneurs. I will never forget some of my conversations with investors as a first-time startup CEO in the early 2000s. One VC said, “You should recrui ..read more

The decision to stop is difficult. Ideally, one decides in a timely fashion and then professionally executes the startup’s wind-down. Surprisingly, this is the exception rather than the rule, so let’s discuss why it is worth doing. Startup success statistics show that there will be far more failures than successes. However, success stories get virtually all the press, so figuring out what happens when a startup ends its run isn’t easy. I started learning the surprising truth from talking with corporate lawyers who see the inner workings of many companies and investors who bet on many high-pote ..read more

In my last post, I discussed the powerful motivation that drives entrepreneurs to found and build a high-potential startup and the odds against building a successful startup. Most startups do not make it, which means that many entrepreneurs will someday face the profoundly difficult decision to stop and abandon the attempt. What does that look like—and why is it so hard? The decision to stop pursuing something you have poured a great deal into is psychologically difficult. Change is hard. Facing failure and loss is hard. Letting go is hard. Telling others bad news is hard. And deciding to stop ..read more

What motivates entrepreneurs to pursue building high-potential companies? Making money? Independence? Making a difference? The answer might surprise you. Reflecting on potential motivations for building a high-potential startup reveals that some reasons are more durable and sustaining than others when considering commonly cited possibilities. Possible Startup Founder Motivation #1: Build Extraordinary Wealth Quickly Our media culture celebrates the wild success of some entrepreneurial businesses. There is endless lauding of self-made billionaires. Yet, when you examine the statistics, creating ..read more