In the first part of our conversation, Vanessa Wilson, who after a long distinguished career as an equity analyst on Wall St. became an angel investor with Golden Seeds and also teaches entrepreneurship for the Athena Program at Barnard College, outlined some first steps for emerging entrepreneurs to consider as soon as they get started. In the second part of our conversation, Vanessa warns entrepreneurs about not taking on too much, too soon. Below is an edited summary of her advice:
•Actively seek out customers; don't wait for customers to find you. "Build it, and they will come," rarely works as a marketing strategy. Even great products and services require targeted marketing plans to attract customers. With the Internet, many entrepreneurs are seduced by the idea that they can put something out there and the world will snatch it up. In pitches to investors, entrepreneurs often give short shrift to the all-important task of acquiring customers and the cost of acquiring customers. Plan on several sales strategies, and then feed the most resources into the techniques that work the best. Be flexible in your strategies; you may be surprised at what works -- and what doesn't! And don't forget about the back end of the sale. What happens if a customer is dissatisfied or just needs a bit of hand-holding? Marketing and sales strategies also have to address the important issue of customer service.
•Don't try to scale too big, too fast. Pushing to scale a startup with inadequate funding and a skeleton staff can be a "bet the farm strategy." You have to get the kinks out of your product and develop your face to the customer and your operating systems. Too many startups are so focused on beating the competition that they forget about execution. When you try to grow too fast, you may not have enough time and money to refine and retool your idea so it is ready for success as your customer base grows. Holding back some capital to build a new prototype, investing in more development or running a pilot study may be the difference between success and failure.
•Simplify your products to scale more efficiently; less can be more! As you scale, there have to be some points of leverage in your business model where technology replaces human capital, where tasks can be simplified to be handled by lower-paid staff and when the level of sales crosses over the break, even with overhead and fixed expenses. If you have to personally sell every customer, then your business can only grow as big as there are hours in your day.
•Create an advisory board to fill out your team. You don't need to worry about a board of directors until you seek an outside round of funding, but an advisory board can compensate for a minimal staff, while at the same time providing you with people with relevant experience and a full Rolodex. Seek out experienced executives, who are often eager to help young growing companies with advice and key introductions. This can save a startup a lot of time and money. Professionals in finance or law may be available pro bono before you can fill these roles with your own employees. Finally, a strong advisory board validates your mission for potential investors.
•Maintain an up-to-date shareholder register from day one. When people invest in you, it's up to you to keep track of them and their investment. Record exactly how much they invested, and when. Keep careful track of the amount of accrued dividends or interest. Maintain active contact points so you can reach shareholders with various communications. Once a quarter, or an agreed upon time frame, send them a newsy email to let them know about new clients or products or partnerships. They are cheering you on. If you stay in touch with either good or cautionary news, they are more likely to step up with great ideas or customer referrals -- and are more likely to participate in future funding rounds. Regular communications increase their confidence in you, and in their investment.
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