Straight Talk for Startups: 100 Insider Rules for Beating the Odds--From Mastering the Fundamentals to Selecting Investors, Fundraising, Managing Boards, and Achieving Liquidity

by Randy Komisar, Jantoon Reigersman

Overview

"Straight Talk for Startups memorializes age-old best practices and empowers both experienced and new investment professionals to beat the odds."—David Krane, CEO, Google Ventures

"Straight Talk for Startups is filled with real, raw, and fact-based ‘rules of the road’ that you need to know when diving into our ultra-competitive startup world. A must read and a re-read!"—Tony Fadell, Coinventor of the iPod/iPhone & Founder of Nest Labs

Veteran venture capitalist Randy Komisar and finance executive Jantoon Reigersman share no-nonsense, counterintuitive guidelines to help anyone build a successful startup.

Over the course of their careers, Randy Komisar and Jantoon Reigersman continue to see startups crash and burn because they forget the timeless lessons of entrepreneurship.

But, as Komisar and Reigersman show, you can beat the odds if you quickly learn what insiders know about what it takes to build a healthy foundation for a thriving venture. In Straight Talk for Startups they walk budding entrepreneurs through 100 essential rules—from pitching your idea to selecting investors to managing your board to deciding how and when to achieve liquidity. Culled from their own decades of experience, as well as the experiences of their many successful colleagues and friends, the rules are organized under broad topics, from "Mastering the Fundamentals" and "Selecting the Right Investors," to "The Ideal Fundraise," "Building and Managing Effective Boards," and "Achieving Liquidity."

Vital rules you’ll find in Straight Talk for Startups include:

• The best ideas originate from founders who are users
• Create two business plans: an execution plan and an aspirational plan
• Net income is an option, but cash flow is a fact
• Don’t accept money from strangers
• Personal wealth doesn’t equal good investing
• Small boards are better than big ones
• Add independent board members for expertise and objectivity
• Too many unanimous board decisions are a sign of trouble
• Choose an acquirer, don’t wait to be chosen
• Learn the rules by heart so you know when to break them

Filled with helpful real-life examples and specific, actionable advice, Straight Talk for Startups is the ideal handbook for anyone running, working for, or thinking about creating a startup, or just curious about what makes high-potential ventures tick.

Product Details

ISBN-13:	9780062869074
Publisher:	HarperCollins
Publication date:	06/05/2018
Sold by:	HARPERCOLLINS
Format:	eBook
Pages:	304
File size:	1 MB

About the Author

Randy Komisar is a venture capitalist with decades of experience with startups. He is the author of the best-selling book The Monk and the Riddle, about the heart and soul of entrepreneurship, as well as numerous articles on leadership and startups. He is also the co-author of Getting to Plan B, on managing innovation, and I F**king Love that Company, on building consumer brands. He taught entrepreneurship at Stanford University and is a frequent lecturer at universities, as well as a regular keynote speaker on entrepreneurship, innovation and leadership. He joined Kleiner Perkins Caufield & Byers in 2005 to focus on early stage ventures. Prior to that he created the role of “Virtual CEO” to partner with entrepreneurs to help them and their businesses achieve their potential, serving as Virtual CEO for such startups as WebTV and GlobalGiving. He was a co-founder of Claris Corp., and served as CEO for LucasArts Entertainment and Crystal Dynamics. Randy was a founding director of TiVo and Nest.  He served as CFO of GO Corp. and as senior counsel for Apple, following a private practice in technology law. He has also served on dozens of private and public company boards and advises such organizations as Road Trip Nation and the Orrick Women’s Leadership Board.

JANTOON REIGERSMAN is a seasoned financial operator with extensive experience in startups and growth companies. He serves as Chief Financial Officer of publicly traded Leaf Group (NYSE: LFGR), a diversified consumer internet company. Earlier in his career, he served as CFO of Ogin Inc., investor and member of Goldman Sachs’ European Special Situations Group and investment banker at Morgan Stanley in their mergers and acquisitions team. He is a Fellow of the inaugural class of the Finance Leaders Fellowship and a member of the Aspen Global Leadership Network.

Table of Contents

Introduction xiii

Part 1 Mastering the Fundamentals 1

Rule 1 Starting a venture has never been easier; succeeding has never been harder 3

Rule 2 Try to act normal 6

Rule 3 Aim for an order-of-magnitude improvement 8

Rule 4 Start small, but be ambitious 10

Rule 5 Most failures result from poor execution, not unsuccessful innovation 13

Rule 6 The best ideas originate with founders who are users 17

Rule 7 Don't scale your technology until it works 19

Rule 8 Manage with maniacal focus 21

Rule 9 Target fast-growing, dynamic markets 23

Rule 10 Never hire the second best 25

Rule 11 Conduct your hiring interviews as if you were an airline pilot 29

Rule 12 A part-time game changer is preferable to a full-time seat filler 31

Rule 13 Manage your team like a jazz band 34

Rule 14 Instead of a free lunch, provide meaningful work 36

Rule 15 Teams of professionals with a common mission make the most attractive investments 38

Rule 16 Use your financial to tell your story 40

Rule 17 Create two business plans: an execution plan and an aspirational plan 42

Rule 18 Know your financial numbers and their interdependencies by heart 45

Rule 19 Net income is an opinion, but cash flow is a fact 50

Rule 20 Unit economics tell you whether you have a business 52

Rule 21 Manage working capital as if it were your only source of funds 56

Rule 22 Exercise the strictest financial discipline 58

Rule 23 Always be frugal 61

Rule 24 To get where you are going, you need to know where you are going 63

Rule 25 Measurement comes with pitfalls 66

Rule 26 Operational setbacks require swift and deep cutbacks 69

Rule 27 Save surprises for birthdays, not for your stakeholders 71

Rule 28 Strategic pivots offer silver linings 73

Part 2 Selecting the Right Investors 75

Rule 29 Don't accept money from strangers 76

Rule 30 Incubators are good for finding investors, not for developing businesses 78

Rule 31 Avoid venture capital unless you absolutely need it 80

Rule 32 If you choose venture capital, pick the right type of investor 84

Rule 33 Conduct detailed due diligence on your investors 88

Rule 34 Personal wealth ≠ good investing 90

Rule 35 Choose investors who think like operators 92

Rule 36 Deal directly with the decision makers 95

Rule 37 Find stable investors 97

Rule 38 Select investors who can help future financings 99

Rule 39 Investor syndicates need to be managed 101

Rule 40 Capital-intensive ventures require deep financial pockets 103

Rule 41 Strategic investors pose unique challenges 105

Part 3 The Ideal Fundraise 109

Rule 42 Raise capital in stages as you remove risk 110

Rule 43 Minimizing dilution is not your fundraising objective 113

Rule 44 Don't let a temporary fix become a permanent mistake 116

Rule 45 Pursue the lowest-cost capital in light of your circumstances 118

Rule 46 Escape the traps of venture debt 120

Rule 47 Choose one of four approaches to determine how much money to raise 123

Rule 48 Always have your aspirational plan ready 128

Rule 49 More ventures fail from indigestion than from starvation 129

Rule 50 Never stop fundraising 131

Rule 51 Venture capital moves in cycles 133

Rule 52 Fundraising takes more time than you think 135

Rule 53 The pitch must answer the fundamental questions about your venture 138

Rule 54 Make it personal 145

Rule 55 When pitching, carefully read the room 147

Rule 56 Use white papers for deep-dive follow-ups 149

Rule 57 Prepare your financing documents ahead of time 151

Rule 58 Obsessively drive to the close 153

Rule 59 Consistent communication is important in convincing investors 155

Rule 60 Milestones can solve irreconcilable valuation differences 157

Rule 61 Liquidation preferences will change your outcome 159

Rule 62 Do not take rejection personally 164

Part 4 Building and Managing Effective Boards 167

Rule 63 Boards are deliberative bodies, not collections of individuals 168

Rule 64 Conflicts of interest and conflicting interests are elephants in the room 170

Rule 65 Your board should be operational rather than administrative 175

Rule 66 Small boards are better than big ones 176

Rule 67 Lead investors ask for board seats; qualify them first 179

Rule 68 You need a lead director 180

Rule 69 Add independent board members for expertise and objectivity 182

Rule 70 True board diversity is a competitive advantage 184

Rule 71 Each director must commit to spending meaningful time 187

Rule 72 Review director performance regularly 189

Rule 73 Your chief financial officer has a special relationship with your board 191

Rule 74 The founder should choose the best CEO available 193

Rule 75 Find a coach 197

Rule 76 It is the CEO's job to run efficient, productive meetings 199

Rule 77 Don't "oversell" your board 202

Rule 78 Board agendas should look like this 205

Rule 79 Prepare thoroughly for board meetings 208

Rule 80 Use your daily management materials for board meetings 210

Rule 81 Too many unanimous board decisions is a sign of trouble 212

Rule 82 Use working sessions and committees to reinforce your priorities 214

Rule 83 Your board should spend time with your team 216

Part 5 Achieving Liquidity 219

Rule 84 Build companies to last, providing liquidity along the way 220

Rule 85 Liquidity is not limited to initial public offerings and acquisitions 223

Rule 86 If you go public, don't slip and fall 229

Rule 87 Investors' and management's interests in liquidity often conflict 231

Rule 88 Individuals need liquidity, too 233

Rule 89 Your valuation will have a local maximum 235

Rule 90 Ventures aren't just bought; they can also be sold 238

Rule 91 Choose an acquirer; don't wait to be chosen 240

Rule 92 If you want to sell your business, you need to know the decision makers 244

Rule 93 Determine whether you are a good fit for an acquirer before contacting them 247

Rule 94 Know your acquirer's acquisition history in detail 249

Rule 95 Make yourself visible 251

Rule 96 Build a relationship with potential acquirers; don't cold-call 253

Rule 97 Be ready when they are 255

Rule 98 Success is not linear 259

Rule 99 Prepare for your lucky break 261

Rule 100 Learn the rules by heart so you know when to break them 267

Epilogue: The Cardinal Rule 269

Acknowledgments 275

Editorial Reviews

Straight Talk for Startups memorializes age-old best practices and empowers both experienced and new investment professionals to beat the odds.” — David Krane, CEO, Google Ventures

“Straight Talk for Startups is filled with real, raw, and fact-based ‘rules of the road’ that you need to know when diving into our ultra-competitive startup world. A must read and a re-read!” — Tony Fadell, Coinventor of the iPod/iPhone & Founder of Nest Labs

“Not only one of the most useful and fun books ever written for founders, but these 100 rules will help any manager become wiser and more effective—and anyone with a passing interest in the human side of business will find this book a delight to read.” — Robert Sutton, Stanford Professor, author of Good Boss, Bad Boss

“It’s never easy to launch a new venture, but this book accelerates your learning with advice from experts who’ve been there and done that. Read it cover to cover to save yourself from making rookie mistakes that upend all too many big ideas.” — Elaine Paul, Chief Financial Officer, Hulu

“Straight Talk generously shares the collective wisdom of decades of startup leadership and investing.”  — Mihir Desai, Mizuho Financial Group Professor of Finance at Harvard Business School

“Aspiring entrepreneurs are hungry to combine knowledge with experience, mentorship, and character.  Straight Talk for Startups provides a PhD in entrepreneurship.” — Professor Tom Byers, Endowed Chair Entrepreneurship Education, Stanford University

“Straight Talk’s venerable best practices provides global startups outside the US with the advantages of a Silicon Valley insider.”   — Jennifer Li, CEO of Baidu Capital

From the Publisher

Straight Talk’s venerable best practices provides global startups outside the US with the advantages of a Silicon Valley insider.”  

Jennifer Li

Straight Talk generously shares the collective wisdom of decades of startup leadership and investing.” 

Mihir Desai

Not only one of the most useful and fun books ever written for founders, but these 100 rules will help any manager become wiser and more effective—and anyone with a passing interest in the human side of business will find this book a delight to read.

Robert Sutton

Aspiring entrepreneurs are hungry to combine knowledge with experience, mentorship, and character.  Straight Talk for Startups provides a PhD in entrepreneurship.

Professor Tom Byers

Straight Talk for Startups is filled with real, raw, and fact-based ‘rules of the road’ that you need to know when diving into our ultra-competitive startup world. A must read and a re-read!

Tony Fadell

It’s never easy to launch a new venture, but this book accelerates your learning with advice from experts who’ve been there and done that. Read it cover to cover to save yourself from making rookie mistakes that upend all too many big ideas.

Elaine Paul

Straight Talk for Startups memorializes age-old best practices and empowers both experienced and new investment professionals to beat the odds.

David Krane