As a startup lawyer, I get to work directly and act for various founders in my day-to-day professional life as a legal counsel. I’ve worked with founders across multiple stages of business growth ranging from a serial founder who has exited multiple ventures to a first-time founder struggling to figure out how to bring his idea to fruition.
What fascinates me during these interactions are the glaring differences in terms of the thinking process and approaches to problem-solving between a seasoned and serial founder and a first-time founder. For the first time, I’m going to share their traits and habits with you.
Seasoned founders have a team of trusted business advisers
I haven’t met a seasoned founder that doesn’t have a team of advisers on his speed dial.
In your entrepreneurial journey, you may end up with challenges all the time. A seasoned founder that got stuck on an issue could pick up a phone and call his trusted adviser who may be an expert in an issue he’s currently facing for advice on how to move forward.
The usual advisers that a founder would need in running a business include a startup lawyer, a tax agent, an accountant, and an experienced company secretary who understands your startup. For example, a company secretary that has gone through several funding rounds for his startup clients would help your speed up the funding round process as he is familiar with the compliance issues involved.
Young founders tend to choose the wrong advisers for their startups. You may likely rely on your colleagues or even friends’ and families’ recommendations for potential advisers. Considering that many of them do not even have experience in entrepreneurship and also the startup ecosystem in the first place, they may end up suggesting to you the wrong advisers. Your family friend’s lawyer who practices conveyancing (dealing in buying and selling real estate) or family law (like matrimonial matters) or even a company secretary that helped your uncle set up his construction company may not be a good choice for your new startup.
In my own experience, bootstrapped founders may likely think they can skip hiring a startup lawyer by choosing not to “lawyer up” as they may think it’s expensive or even a waste of time. If they don’t have any guidance and support from a mentor or an accelerator, they may end up focusing on the wrong things or even wasting time negotiating trivial clauses in a deal. Sadly, I’ve seen too many times first-time founders giving away crucial control and management rights in a company as they tend to rely on a counterparty’s lawyer instead which may likely be the investor’s lawyer. An investor’s lawyer is not your lawyer as the lawyer is representing the investor’s legal and financial interests. As a result, they tend to get a lousy deal or may even lose the startup.
Seasoned founders don’t rush into a new deal
First-timers rush in to sign off on a deal right away. We notice that they are some that don’t even bother reading the terms before signing a contract. They tend to fall into the traps of thinking every contract is a “standard” contract (when in fact, there’s no such thing as a “standard” contract). As a result, there may be legal landmines in the contracts that they’ve signed for their company.
Seasoned founders on the other hand won’t rush into a new partnership or a deal right away. First, they know that having an agreement in place isn’t about ensuring all parties will get a “win-win” deal but making concessions and trade-offs when it’s necessary. In fact, they may even be willing to make hard compromises to get a deal off the ground. They know it isn’t about winning small battles, but the actual war.
Seasoned founders also usually sign a deal with their both eyes open. They know time is precious and invaluable so they’re more strategic (as they tend to consult issues with their trusted advisers) by focusing on the key terms. Considering that they would have read some agreements in their life, they would know where to find these clauses and pinpoint the pertinent issues in a deal.
Seasoned founders are not afraid to walk away
From time to time, a seasoned founder knows that rejection is a common fact of a founder’s life and accepts that not all deals will work out. Unlike a first-timer, a seasoned founder won’t lose sleep at night because of just a rejection. Let’s take a look at fundraising for example.
A seasoned founder knows that getting an investor in your company is not just about getting the money but also finding an investor that shares the same understanding of your company’s goals. Further, the investor won’t just pump in cash but also have the necessary network to open doors to a new customer base or a new market. A seasoned founder knows to find “smart money”, not “dumb money”.
If a VC or an investor keeps on pushing a seasoned founder to close off a deal, he may even walk away from the deal. Logically, if they’re pushy now when they’re not even in your cap table, what makes you think that they’d be nice once they’re a shareholder in your cap table?
First-timers on the other hand try too hard to pitch and do everything they can (in hope of getting their business funded) to please potential investors. So when they finally get a term sheet for the first time after months and months of pitching to many investors, they may get tempted and excited to sign off the term sheet right away. This is where the problem starts.
The usual challenge that we realise is first timers may lack the experience to identify the correct category of investors for their business. In other words, a lot of them may pitch their startups to the wrong investors at the wrong stage of business growth. In practice, most early-stage startups end up getting funded by angels and families and friends. Therefore, if the founder did not get legal counsel, they may end up structuring the deal wrong. The worst part is if they relied on the investors’ lawyer to come up with the entire structure and document. They may end up giving too much equity and may even give up more management and control rights to the early investors than they should. This may be detrimental in your future funding round.
Seasoned founders focus on execution
Even Y Combinator’s venture capitalist Paul Graham said: “Get a version 1.0 out there as soon as you can. Until you have some users to measure, you’re optimizing based on guesses.”
First-time founders spend too much time on trivial stuff. While it is important to get the “right” colour scheme for your logo, it is more urgent to get your MVP (minimum viable product) to ensure you achieve a product market fit as soon as possible.
We’ve worked with many serial founders and we’re just amazed at how practical they can be when it comes to coming up with an MVP for their startup. Although they may have the money to spend as they’ve exited their previous venture, the seasoned founders would still just create a simple website MVP and wait to test out if the product or service can work.
First-time founders usually get excited and will jump right on to hiring a developer to create an app that will cost a lot of money based on the feature instead of just starting with a mobile responsive website.
Seasoned founders play the long game
Rookie founders waste their limited savings and end up reducing their cash runway by paying for expensive ads in hope that they can capture the market share for their startup. Gone were the days of ‘hypergrowth’ of the Ubers and Weworks of the world.
Seasoned founders instead focus on building organic growth first through building customer traction and getting customer feedback to further improve the product or service to better serve their customers. Smart founders are resourceful. They find partners in different verticals or sectors that may complement their offering through cross-selling of products or services. They focus on collaboration which will benefit customers through more offerings.
As a result, their company gets noticed through more positive feedback on social media through word of mouth. The visibility and press you get demonstrate that you’re great stuff and you’ll start attracting potential investors that want to have a piece of stake in it.
Seasoned founders know that building a great startup takes time. So they are willing to take as much time as they need to get the “right” stuff in place. They know the grave danger if they got the wrong founding team for their startup. They also know that just because a person may be his best friend doesn’t mean that he would make a good match for you in a professional business especially when running a startup. Handling the day-to-day grind and reality of running a startup is hard work. So a seasoned founder would take time to ensure that a startup consists of people with skills that would complement each other. They may even be willing to walk away if they think the deal on the table is a bad deal.
Summary
When you’re starting out, everything can be confusing. So spend the time to ask around (Linkedin would be a good place to get connected with potential mentors and advisers). You can ask around in the startup ecosystem or join an accelerator that may be a good platform to get up to speed on the trusted people that you can rely on for guidance. Also, there are also social media platforms nowadays like Facebook that have dedicated groups that would also allow you to get to know the startup community and service providers in the space.
Seasoned founders don’t have “special” skills or superpowers that make them more deserving to succeed in their startup than you except for several common traits. Now that you also know what they are, how will you address your business challenges now?
