Sevin Rosen Funds.


Back to the Future: Lessons for Entrepreneurs
by Jon Bayless

The unprecedented growth in Internet-based businesses broke all the rules of technology venture funding. Today, everything has changed again -- or changed back again. Startups need to take a page from the lessons entrepreneurs and investors learned in the 80s and early 90s. There's plenty of money still available to fund innovation, but more is being required from entrepreneurs seeking that funding. I've learned a lot during my 20 plus years investing in and working with technology start-ups.

The following is my advice to entrepreneurs who are planning, funding and building their business in today's tough market environment.

Adjust your own expectations to current market realities when working with investors to obtain funding.

Remember, the important thing is building a valuable business over time, so don't be too hung up on the initial valuation. Getting the right investors on your team immediately adds value to the company and also increases your probability of success. When you build a valuable business, everyone wins: you and your investors.

Listen to all your constituents when working on business planning.

Be willing to adjust your company's IPO strategy and timing based on feedback from the financial market and your investors. It's especially important to maintain a flexible approach to the timing of the IPO because the market environment can change from month to month.

Focus on the quality of and chemistry with your investors.

You'll be working with them a long time, so be sure that they've had experience with up and down market cycles. They also should be solidly committed to supporting your venture through unforeseen changes in market conditions that affect your overall strategy or business plan.

Build some real conservatism into your plan.

You need room to maneuver in case the market for your product doesn't develop as quickly as you anticipate. It takes time to build a customer base and develop solid business partnerships, and you need to plan for setbacks. Communicate your long-term plans with employees, investors and the market to build internal morale and market credibility.

The management team is an especially critical factor in any venture's potential success.

Your team members must have complimentary skill sets backed up by demonstrated success in their respective careers. It's best if they've worked together and know how to respond when the rubber meets the road. You need leaders with strong emotional IQs that allow them to remain calm and levelheaded when forging business deals or working on big customer sales.

Develop products for the near-term market opportunity.

The most important task is to get a product to market and then see how your customers respond. Don't try for perfection: let your customers help you create a better product with their feedback and input. An 80 or 90 percent solution with sales revenue is better than a 100 percent solution released after a competitor has already established marketshare.

Flexible planning and realism are the watchwords for today's entrepreneurs. Remember that your ultimate goal is to build a business that provides value to you, your employees, customers and investors. Value comes from solid technology, good management, careful planning and patience, virtues that are essential in a tough market environment.