Interesting read by First Round Partner Rob Hayes sharing experience on hiring, fund raising and strategic vision.
‘Hayes started investing in early-stage startup founders a decade ago, and he always gets the same question: “What should I be doing right now?” Through this experience, he’s narrowed down his answer to three things. Patzer did a brilliant job at all three, and notably the most important thing on the list: Hiring the right people. “The other two are don’t run out of money and always have a North Star,” says Hayes.
While each of these pieces presents a huge challenge, this framework can be very powerful. “Founders who achieve these goals always succeed,” says Hayes’
I particularly like the piece on cash management:
‘DON’T RUN OUT OF MONEY
Only think in terms of cash.
Hayes advises founders to form a strong cash management plan. Right after a round closes, the champagne’s flowing and everyone’s excited — the last thing you want to do is sit down and chart out how to spend that money over the next 18 months. You certainly don’t want to think about fundraising all over again. But you need to.
“Things might seem like peaches and cream, but you have to ask yourself immediately, ‘What if things don’t go exactly as I expect them to?’”
His advice? Consider putting a venture debt line in place, and if you do, try to forget about it just as fast. “You want it there, but don’t plan to use it,” Hayes says. “It only costs a few thousand dollars to set this up, and hopefully that’s all it will ever cost you, but it will give you peace of mind.”
When he asks to see entrepreneurs’ cash management plans, he often sees this debt line included in runway calculations. This is asking for trouble. “You want the debt there, but you have to know what your business and your spend should look like without it. Pretend the money doesn’t exist. Don’t even talk about it or you’ll treat it like a rainy day fund you can dig into. Don’t let optimism blind you to the need for a rainy day option all the time.”
“Founders should be worried about cash on-hand all the time. Even if employees love you, they won’t stay if you can’t pay them.”
Your cash management plan also shouldn’t include assumed or projected revenue. “I hear it all the time, some founder saying, ‘This is where revenue will start flowing in, so we can do X, Y and Z,’” says Hayes. “I want to see a cash plan that assumes absolutely zero revenue, because you never know.”
One of the best things you can do is share your cash plan (sans debt line and revenue) with your investors and advisors. It builds immediate accountability. You want to make sure that if something happens, someone will be there to ask, “What the hell? What happened?”
“It’s crazy how often people miss this,” says Hayes. “In the early days, know that it’s only about cash. That’s all the money you have to spend and should be spending.”
Read on to learn:
- Why you should spend more than 50% of your time on hiring even if it feels like the wrong choice, and how to get the ball rolling.
- Concrete plans to protect your runway and minimize fundraising time.
- What it means to have a North Star and how to define your own.
http://firstround.com/article/Heres-the-Advice-I-Give-All-of-Our-First-Time-Founders
Andromede Ventures 