The Entrepreneur Insiders network is an online community where the most thoughtful and influential people in America’s startup scene contribute answers to timely questions about entrepreneurship and careers. Today’s answer to the question, “What should budding entrepreneurs know about building a business?” is written by Joel Hyatt, CEO of Globality.
After starting four companies and teaching entrepreneurship at Stanford Business School for five years in between my entrepreneurial endeavors, I now have some strong opinions about what budding entrepreneurs should know about building a business.
Be passionate about the goods or services that your business will provide
Seeking wealth as the only purpose of your entrepreneurial activity will not serve you or your stakeholders well. You’re inevitably going to encounter hard times. And by “hard times,” I don’t mean the usual mistakes, false starts, wrong decisions, etc. I mean the unpredictable obstacles that even the best planning by the best people could not have anticipated.
When confronted with tough obstacles, people in it for the money will likely decide to move on to “easier” opportunities. But if you’re in it because you’re passionate about the company’s mission and purpose, you will see your way through those obstacles no matter what it takes. This is good for your investors, employees, and customers—and you. You will not merely be working on a startup, but on a cause. Mission-driven cultures are fun and fulfilling. Money-driven cultures are not.
Know what you know and know what you don’t know
And don’t be too certain about what you know. Seek partners and employees whose skill sets are different than yours. I founded all of my companies together with a partner, and in each case, my partners had skill sets that I didn’t. You should be extremely unsatisfied if you’re the smartest person on your team.
Attract the very best people you can, and empower them to add value by not instilling fear of failure. Instead, enable them to thrive by supporting their experimentation. Insist that they make new mistakes, not the same mistakes.
Determine the key success factors necessary for your company to succeed
Then determine which of those factors you have and which you do not. Develop a plan to get the ones you lack, be they capital, talent, materials, etc. Then get them. And be realistic about the amount of financial capital you will need. That amount is likely a significant multiple of what you think it is, which is why you should always try to raise a lot more money than you believe will be necessary.
Pick your investors carefully
Make sure you like them and trust them. Make sure they understand your vision for the company. Make sure their goals are aligned with yours. Be certain their investment horizon and expectations are realistic for your company. Don’t cede control to them. And if you do, give up your job as well. You’ll be happier that you did that than try to run what was once your company.
Don’t wait to raise money until you need money
If you do, then you won’t be able to maintain control of your company. Investors demand the control that they believe the circumstances mandate—or the control that they can successfully negotiate, which is actually perfectly appropriate. So giving up some equity to raise more money earlier is usually a smarter strategy than giving up control later because you desperately need the money.