Genuine VC: Seven Founding Sins

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September 7, 2005

Seven Founding Sins

Over the past couple years, I have been involved with and close to a number of both successful and unsuccessful startups. To me, the most exciting (and most perilous) times in a company’s life-cycle are the early first stages when it is just getting off the ground. The company’s founder(s) role is an essential one which carriers many risks for missteps. So I’ve compiled what I’ve learned to be the Seven Founding Sins – common mistakes which often divert entrepreneurs off the path towards success.

Inauthenticity. While there are notable exceptions, most successful entrepreneurial endeavors are sprung from a genuine idea born from true experience or direct & tangible observation. A founding team should not only have the relevant experience, but also immediate and authentic understanding of the end-users’/customers’ need. Blank-slate brainstormed white-board ideas rarely even deserve the material that they’re written on. Great ideas search for a great entrepreneur; great entrepreneurs don’t search for a great idea.

Sloth. It may seem obvious, but founding a company is not a full-time job. It’s a full-time life. And then some. And then some more. Only those who truly understand this notion have a shot.

Extravagance. A startup is just that – a startup. Without the full corporate infrastructure support, and more importantly, without extensive monetary resources, founders and employees must spend wisely. Even if VC financing has been raised, extravagant and wasteful spending by a few founders/leadership sets the tone for the entire organization. Jet-set lifestyles are appropriate after the liquidity event, as employees treat resources with the same respect that those in power do.

Taciturnity. Rapid progress and constant adjustment in a new endeavor requires continuous communication of these changes. Founders need to ensure that all of the constituents who are involved in making the company a success – co-founders, (prospective) investors, advisors, (potential) customers, employees, analysts, press, bloggers, professional service providers, etc. – are regularly updated with an accurate and realistic assessment of both developments and challenges that affect them specifically.

Greed. Holding too tightly to the percentage of ownership figure doesn’t allow room for a company to attract the leadership, employees, and investors that will maximize shareholder value – including the founders’. A flourishing startup endeavor requires investing equity in others to generate substantial return.

Arrogance. There is a fine line between a beneficial pride of confidence and a dangerous arrogant hubris. Founders must realize the limits of their abilities and seek help/input about when others on the team are more informed or in a better position to make decisions. Letting others control activities frees founders to contribute where they can best – in whatever role that may be. Nobody, including a founder, is always right.

Indecisiveness. The beauty of a startup is that there are endless possibilities. The difficulty is to concentrate on one opportunity, not every opportunity. The sooner that a new company can find its focus and make strides, the better. Of course any new company necessitates flexibility, but there is greater risk in trying to be “all things to all people” than succumbing to rigidity. In the end, tough choices are indeed tough, founding entrepreneurs need to make them.

Posted by on September 7, 2005 3:39 PM | Permalink

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» Genuine VC’s Seven Deadly Founding Sins from Texas Venture Capital Blog
David Beisel details Seven Deadly Founding Sins for startups. Check out the full post here or if don’t have time here they are in short form: Inauthenticity Sloth Extravagance Taciturnity Greed Arrogance Indecisiveness I s... [Read More]

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» Seven Founding Sins of an Entrepreneur from Digital Media Review
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» Genuine VC: Seven Founding Sins from Churbuck.com
Genuine VC: Seven Founding SinsFred Wilson points out this great post by David Beisel. Like Fred, I've added Beisel to the blogroll.The sins are: Inauthenticity Sloth Extravagance Taciturnity Greed Arrogance Indecisiveness ... [Read More]

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» Seven Founding Sins from Business Opportunities Weblog
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