7th February, 2018
For everybody with a startup, there are at least three people with advice about how you should run it.
While the vast majority of this advice is well-meaning – and not all advice fits all startups – we talked to three startup founders about advice they’d received that turned out to be complete tosh.
Co-founder of Mentorloop, Lucy Lloyd, told The Pulse that there was no shortage of people willing to give you help and advice – but you should avoid those charging for it like the plague.
“To early stage founders out there we’d say: do not pay for advice.
“Not with cash, not with equity. At [that] early stage, you need to have the best understanding of the problem that you’re solving, and the customers that you’re targeting.
“When you’re very early on nobody can provide quality enough advice to replace that research, and there are plenty of awesome people who will help you without asking for money. “
Lloyd also said founders would be well advised to ignore commonly held wisdom that you should always go back to existing funders before going out for a second round of funding.
This, she said, meant that you were essentially validating the same idea against the same audience. Plus, it’s not always wise to constantly ask for cash.
“Your early investors have backed you at the longest odds, repay that by not reaching into their pocket at every opportunity,” said Lloyd.
Co-founder of social enterprise YGap, Elliot Costello, said the main bit of bad advice he’d been given (aside from being told that his crazy ideas wouldn’t work) was that a startup needed plenty of capital to grow a business.
“What I see is ‘you need money, you need money, you need money’,” he said.
The downside of having access to capital (and it’s not a bad problem to have) is that it means startups are robbed of the crazy thinking sometimes borne of necessity.
“There have been plenty of companies who have made a go of it without a lot of cash in the bank because it allows innovation and creativity,” said Costello.
“I see a lot of advice around which says that you need a lot of working capital to be successful, but having access to cash can sometimes stifle innovation because you have that fall-back.
“I’ve never seen a non-profit with too much money, and I think if we did have cash we’d probably do it totally differently.”
READ MORE: Bootstrapping to fund your startup
Meanwhile, co-founder of Law Squared, Demetrio Zema, said startups were often advised to pitch early in their lives.
“We tend to see ‘pitch for investment early’, which I don’t think is a good idea,” he said.
“It’s about solidifying your team, about your model, being sure you’ve got something that’s workable to go to investors.
“You’re dealing with somebody’s money, so going in with a half-baked idea is reckless.”
He said part of the desire to bag backers as quickly as possible was a desire to go to market as quickly as they could – something Zema also said was bad advice.
“There’s this thing about wanting to go to market quickly, so you can either succeed or fail quickly – but I’m not a huge believer in failing fast,” said Zema.
“I think when you’re playing with somebody else’s cash particularly, you shouldn’t just go to market or chase further investment as quickly as you can.
“You need to validate the idea first. That doesn’t mean you need to have a bunch of customers, but it does mean consulting with independent individuals about what the idea might be and getting a market around that.”
READ MORE: 4 tips for pitching to a venture capitalist