10 Rules of Thumb for Startups



In my more than 20 years as a serial entrepreneur and investor, I have seen a few common mistakes among startups and entrepreneurs. Here are some tips to fix those mistakes:

  1. Know What You Don’t Know

When I visited New Zealand, I found that majority of their small and medium-sized enterprises had no board advisors at all. This is the problem of most startups: they don’t know what they don’t know. Most startups feel that asking for help is a sign of weakness.

My advice is to have board advisors (comprised of people from different industries with diverse backgrounds) whom you can engage a couple of hours per week. Likewise, attend quarterly board advisory meetings where you present and account for your accomplishments, plans and goals. Having a board of advisors can help you learn the questions you do not know.

  1. Keep People Informed

Start monthly newsletters.

The first newsletter should have about eight sentences.  Send the newsletter to your board advisors, as well as to existing and potential investors. The goal is to keep them informed of events and challenges in your startup. When you need capital investments, these investors will be ready to commit funds since they know and understand how you are running the business.

The second newsletter should be equally as short as the first. Send it to your distributors, suppliers, partners, executives, fans and customers.

  1. Budget Your Operations

Work closely with an accountant, and try to have a budget for your next month operation or next year. You will best understand your business expectations.

  1. Build Your Strategy

Focus on your strategy, and stick with it. Though you may change your plans, just realize that you can only do so much. Focusing on your strategy will be your biggest challenge, but it should also be fun.

  1. Identify Your Competitor

A competitor is a good sign of a robust market. Identify direct and indirect competitors. The competition will tell people where your company stands and what sets you apart.

  1. Focus on the Why

Identify what drives people to buy your product or use your service. Focusing on the ‘why’ can motivate you to accomplish things you have never done before and help you pursue your goals.

  1. Look Ahead

Entrepreneurs seeking capital for their businesses should look forward to exciting new developments in 2014. New laws will open up more opportunities and new ways to secure financing and get funding.

  1. Take Advantage of New Technologies

Social media and internet technology are instrumental to all new ways of financing. You might find a new market or niche altogether.

  1. Write a New Business Plan

Writing a new business plan with an executive summary will help you focus and stick to it. Prepare a concise, two-page executive summary.

The world’s largest pension fund ADIA showed me that executive summaries have two pages, maximum, with up to six addenda.  It should contain: name of company, state of incorporation, year incorporated, shares outstanding, compensation offered for capital, industry sector, executive names, geographical area and address.

Include the full bio of your executive team in the addenda because investors are always looking for a team. The first sentence of the first page should explain exactly what your firm does. I pass on too many deals many times when I cannot figure out what the firm does in one sentence or one paragraph.

10. Plan and Practice Your Pitch

Practice your presentations in front of a mirror. People love to get instant feedback from everybody in the room. Initially, do this with friends and people you know.  Practice makes perfect.

These are just little things startups often miss. If left undone, these can be their biggest mistakes.

Reprinted with permission.

Image credit: CC by blinking idiot

About the author: David Drake

David Drake is the founder and chairman of LDJ Capital, a private equity firm based in New York City USA, and of The Soho Loft, an event-driven financial media company. He is a  founder and former executive board member of the US Crowdfund Intermediary Regulatory Advocates (CFIRA) and the US Crowdfunding Professional Association (CfPA).  Fluent in 6 languages and born in Sweden, he is a strong advocate of innovative investing such as the US JOBS Act (Jumpstart Our Business Startups Act), lobbying for it in both the USA and at the EU Commission. He was a U.S. Commerce Department delegate at the Transatlantic Economic Council forum in Brussels and Rome on July 2012 where he met with european ministers and national legislators.  David presents regularly as an expert on financial innovation and impact investing at 150+ annual and international events.  He writes regularly for a number of online publications including Forbes.com, peHUB.com and Equities.com.  David Drake also hosted the HBS Club of NY, Trail Blazers and Best Buddies Carnegie Hall Charity events for many years.

You are seconds away from signing up for the hottest list in New York Tech!

Join the millions and keep up with the stories shaping entrepreneurship. Sign up today.