Questionable Advice Given to Entrepreneurs
Here are a few examples of bad advice entrepreneurs have been given.
Everyone has an opinion, be careful which ones you listen to
My grandmother used to tell me that everyone has an opinion, be careful which ones you listen to. I think that same advice holds true for entrepreneurs. There are lots of other founders/advisors/friends/mentors/investors/etc. that provide advice. While there are great nuggets in there, be careful of receiving bad advice. Always check the credibility of the source, why they give that advice, and how it applies to your specific situation. Here are a few examples of bad advice entrepreneurs I have recently met with have shared as truths.
You should/must raise VC money
A lot of folks assume or are told to go raise money from VCs. When I ask entrepreneurs why they are raising money, the answer is often some form of well I want to build X and need money. While raising from VCs is right for some entrepreneurs, for most it is not. Think about what lifestyle you want, can your business generate VC returns (think simple math of can an exit return the VC fund), and are other early options like angels, friends & family, or non-dilutive alternatives better?
You have to pitch 100s of VC to get one
While this may be true, I would propose another approach first. Rather than generically reaching out to everyone (and not standing out from all the noise), instead target a few select firms where you match their thesis, like their culture, they could add value, etc. Then go all out for warm intros, well crafted emails, and be sure to meet with them multiple times before you need money (lines not dots). My guess is you will have a higher rate of success AND spend a lot less time and frustration through the process.
My customer told me to build it
Customers will almost always ask for more product features. I have been burned and seen many times where potential customers say go build XYZ and we will buy it … yet they never do. Feedback from paying customers is infinitely more valuable. Be careful just automatically building more features because a customer said so.
Product must be perfect before launching or nobody will buy it
Another variation of above is an entrepreneur who hasn’t launched their product yet, but just needs a little bit of money to add some more features that are needed before they launch. They wait for the perfect product … hint, the product is never perfect : ) Instead release a version that solves one problem for one ideal customer profile and get it in their hands for feedback. It’s amazing what you will learn!
Growth above all else
While growing your business is important, remember that growth at all costs with high burn and poor unit economics can lead to cash flow/funding trouble, especially in a down market. One simple rubric to think about to balance growth and profitability is the Rule of 40.
Another entrepreneur/company/competitor did XYZ, so I should to
Be careful of falling into the comparison trap … just because someone else did something (raised at $X valuation, went through Y accelerator, launched new product feature Z) doesn’t necessarily mean you should copy it. Maybe so, but focus on what you can control and make the right decision for your company. Remember, all the flashy headlines you read don’t necessarily mean things are pretty on the inside : )
Go build an app first, and then you will get customers
I have product-market fit and thus am ready to scale
Just because a friend tells you they love your idea doesn’t mean you have product-market fit. Be careful fooling yourself into believing you are ahead of where you actually are.
Investors must sign a NDA to hear your pitch
As I have written before, there are many practical reasons why VCs don’t sign NDAs and why they don’t usually make sense for entrepreneurs. Remember, someone somewhere in the world also has your idea (and you are naive if you don’t believe that). There are plenty of good ideas in the world, what matters more is the execution.
So when you get advice on starting your business, make your own judgment on how valuable and applicable that is to your startup. Be careful treating bad advice as truth.