One of the things I enjoy most about being an entrepreneur-in-residence (EIR) and working with entrepreneurs is their excitement and enthusiasm for what they do. Hearing someone talk passionately about their idea or new technology further inspires me to do all that I can to help them get to where they need to be.
However, establishing a startup is not an easy row to hoe. Excitement and enthusiasm may wane or even disappear for a time, as companies struggle to find their true identity and purpose and especially as they try to cover negative cash flow in the early stages before their new product or service is bringing revenue in from real customers. This is a scary time experienced by most startups. So much so, that it has a name – the “valley of death.” During the valley of death curve, additional financing is usually scarce, leaving the company vulnerable. It is during this time that a lot of startups risk going out of business. How an entrepreneur deals with it will determine the future of their endeavor.
Uncomfortable sweet spot
No doubt about it, there is a lot of pain at this point in a startup’s journey, whether it’s relational, financial or even physical. And I certainly don’t like seeing anyone in pain. But, it is at this juncture that my job as an EIR is most valuable. In other words, this is the point when our clients need us more than any other.
Aside from the most obvious solution of helping a client find sources of funding to help get them out of the valley of death, I think there are other things that an advisor can and should do to help a client with potential for great things. There are several things I can think of that help the process and keep everyone moving forward:
- Let them know we care. This is important. Going out on your own, even if there is a team, can be a lonely business. We want our clients to know they are not alone and that there is someone who truly cares whether they survive.
- We don’t let them fade into the woodwork. We keep a watchful eye on what’s going on and make temporary adjustments in negotiable areas where possible, such as rent and other overhead costs.
- We give them some tough love. It may be necessary to encourage and advise a client to take a hard look at their business. I compare startups to Clark Kent. Dig deeper, look further and underneath the surface, we might find Superman. This may require bending, pivoting and sometimes even completely scrapping an original idea, but a “Superman” idea might be in there somewhere, we just have to find it.
Trust the process
Today’s entrepreneurs are smarter and savvier than ever and their technology is changing the world. Enthusiasm, excitement and passion are important, but even more so are resiliency, flexibility and being open to advice. I’m here to help, but it works best if it is a partnership. And it’s not necessarily during the valley of death. Initially, there may be unclear goals, gaps in a business plan or the technology is not where it needs to be. At any of these moments, it would be easy for us to say no because there are so many unknowns. But we’d rather say yes. The rest will follow.