Old Advice is Good Advice – Keep it Simple

Authors: StartupPercolator

As founders, you are likely very familiar with the multitude of obstacles that a successful venture must overcome:  financing, management, creation and protection of valuable intellectual property, marketing, and building profitable and sustainable customer relationships.  Another obstacle that is well known yet rarely labeled as such is “complexity.”  In building a new venture, the old adage “keep it simple” remains an important philosophy.

Keeping it simple provides several advantages, including the following:

•  Simpler is easier to explain and, therefore, easier to sell:  How many times have you heard a pitch where after 10 minutes you are still not sure what the company does, how it makes money, or why it needs your help?  The simpler you keep the concepts and goals of your business plan the easier it will be to persuade your target audience, whether they are investors or customers, to buy in.

•  Simpler is more efficient and less expensive:  A new venture involves an extraordinary amount of time and effort.  Each new task introduces new costs, and the accretive effect of trying to accomplish several tasks at once can be a very dissuasive power acting against your success.  Realize that tasks must be prioritized to remain efficient and cost effective to avoid being trapped by the enormity of the project.  Try making a list of all your objectives and the costs and benefits associated with each, and then pick one or two primary objectives to address first.  While capturing 10% of the market would be wonderful, in reality it starts with the first successful sale.

•  Simpler allows for future complexity:  Once you have taken the initial steps to lay the framework for your venture, you can then fold in additional complexities as, if and when needed.  But without that simple framework, it becomes too easy to lose your way.  For example, giving equity to employees and consultants is a useful tool to compensate and incentivize individuals who are helping you build your business, but if you skimp on the initial step of setting up the plan and devising a strategy for the use of stock options and grants, it is easy to find that you have imprudently given equity away.

A new venture provides plenty of reasons for complication.  This tip is not to say that complexity should be avoided at all costs.  Rather, this tip is to encourage you, knowing full well the obstacles before you and the likelihood that those obstacles will raise costly complexities at each turn, to keep it simple, especially in the beginning, and to redouble your efforts to build the framework for future complexities.

How to Prepare for an Equity Financing

We have covered in past FTTWs how to value your startup and how much capital to raise. Once your startup decides to pursue equity financing, you should start to prepare for the investor due diligence process. On the business side, you will need to prepare a business plan and should take steps such as obtaining management references, interviews and background reviews, customer/user references, technical/product reviews, financial statements and business model reviews.

What Every Startup Needs to Know

On Wednesday, June 26th, Perkins Coie’s Palo Alto office hosted the startupPerColator event, “What Every Startup Needs to Know.” Lowell Ness, a Perkins Coie partner in the Emerging Companies & Venture Capital (ECVC) practice, moderated a panel which included Herb Stephens of NueHealth, Thomas Huot of VantagePoint Capital, Jennifer Jones of Jennifer Jones and Partners, Yuri Rabinovich of Start-up Monthly, and Olga Rodstein of Shutterfly.