March 16, 2015
A startup accelerator will cost you a percentage of your company’s equity – or sometimes actual cold, hard cash – for one reason: mentors.
Last summer, Kellogg School of Management professor and angel investor Andrew Razeghi sat in on all the mentor presentations at Techstars Chicago, one of the country’s top-ranked accelerators. The result was Bend the Curve, a book coming out today with the top lessons from 22 Techstars mentors.
Each chapter features about five lessons from a successful entrepreneur – and, of course, they don’t all agree. “Like all great entrepreneurs, your job is to determine what works for you,” writes Razeghi. Sam Yagan, cofounder of OkCupid and Techstars Chicago, says the lessons in this book could have saved him $50 million in equity when he was starting SparkNotes.
Here’s a sampling of four lessons from Bend the Curve:
Jason Fried, cofounder and CEO of Basecamp
Don’t chase your highest-paying customer: As a startup, it’s tempting to chase after the cash and do whatever it takes to snag a high-paying customer. If they ask for more features, you jump to create them – until they change their minds and decide not to buy. “You are losing track of the original vision you had for the product. You’re chasing dollars that you might never get. And, even if you do get the money, they’ll want more from you.” To prevent this, Basecamp decided that no one customer would pay them more than $150 per month. They still listen to customers, of course, just not a customer.
Amanda Lannert, CEO of The Jellyvision Lab
Hire for personality, not skills: Although it’s tempting to hire employees for their skills, Lannert makes a concerted effort to focus on values, personality, and how they think. “There are many things I think you can teach, but they are mostly around functional skills. You can’t teach work ethic, attention to detail, and humility. You either have it or you don’t,” says Lannert. Jellyvision tries to gauge personality by having candidates write “the best cover letter they have ever written,” asking interview questions like “What do you want to be when you grow up?” and “What are three surprising things about you?” and using the lunch test: would they want to have lunch with this candidate for fun?
Chuck Templeton, founder of OpenTable
Manage a white-hot vision with a sub-standard product: “Let’s be honest, early on, your baby is ugly,” writes Razeghi. Early entrepreneurs have to navigate a constant tension between where they are and where they want to be, between a big, ambitious goal and the flawed reality of their current product. How do they draw customers in with the former and not put them off with the latter? Templeton’s advice is to be honest about your current shortcomings, and involve customers in the process of growth. If they contribute and feel invested – and see you make progress – they will be hooked.
Brad Feld, managing director of Foundry Group
Spend your board meetings talking about the future: At board meetings, you can talk about the past, the present, or the future. Unfortunately, too many board meetings get mired in the past and what went right or wrong. “Most board meetings are 80% status updates, 10% strategy and issues, and 10% administration. I’m fine with the 10% administration, but the 80% and 10% split on status vs. strategy should be reversed,” says Feld. Status updates can be sent to board members (along with other materials) beforehand, but the back-and-forth discussion about future plans is what makes a meeting so valuable.
Techstars Chicago applications open today – apply now!
Did you like this article?
Get more delivered to your inbox just like it!