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Tips from a VC: The Top Small Business Mistakes (part 5)
It takes a lot to become a successful small business entrepreneur. That great idea is just the beginning. You need a plan. You need a reliable team. You may need financing beyond what family and friends and your own hard work can provide. We were lucky enough to get some face time with Bob Davis, who founded and was CEO of Lycos and is now a leading venture capitalist with Highland Capital Partners. From his office in Cambridge, Mass., Davis tackled five major areas of small business investment.
In part five, Bob concludes his interview with a few no-fly zones to be aware of when you start to investigate funding options.
Staples: What are some of the mistakes that you see small business owners make most often?
BD: The biggest is marching ahead, raising capital and extending effort prior to doing the hard work to verify your idea for a company has legs. Some entrepreneurs dont research the competition, so they come in with an idea and they dont understand who else is doing something similar to it or how theyre going to compete with it, or even how well those competing products or services are financed.
Another seemingly obvious mistake that we see is an entrepreneur who hasnt talked to any prospective customers. They'll say to us, I have a great idea, but I dont really know if someones going to buy this or I dont know how its going to work or I dont know what theyre going pay for it.
Some entrepreneurs have not thought through a repeatable customer acquisition strategy. It's not enough to put your heart and soul into a product, have that first sale and then be done with it. This has to happen over and over, and over again in an affordable way. It's easier said than done.
Lastly, some entrepreneurs fail to develop a complete vision of the company they are building. They don't understand, soup to nuts, how the business will evolve over time. When they are doing their work, they seek only confirming evidence of their idea. They talk to five people that say Its great!, I love it!, It's wonderful! But when someone happens to say, No I dont like this and the response always is, Well Im done with you, and they move on to someone who reinforces their beliefs.
Staples: Any final advice?
BD: If you have an itch to live an entrepreneurial life, there is no better time than the present. It is not easy but none of the great things in life are. Do your homework, develop a prepared mind, build your team and then jump in with all you have. There are few greater thrills in a business life than watching a dream turn into reality. Those that have the courage to follow a conviction can be an inspiration to us all.
This was the final part of our five-part interview with Highland Capital Partners general partner Bob Davis. Please visit the first four parts of this exhaustive Tips from a VC small business series using the links below: