Starting a business is hard. I know that first hand. I saw what the management team had to deal with when I was at PayPal (which I wrote about in my book The PayPal Wars). Following PayPal, I put nearly 6 years into my own company, World Ahead Media, and along the way I made nearly every mistake that an entrepreneur can make. World Ahead was a publishing venture that used new media tactics to market its books through online and offline sales channels. We carved out a specific niche for our products (i.e. current affairs/non-fiction with a pro-freedom editorial focus) and were able to use our online marketing tactics to attract lots of MSM coverage (e.g. CNN, Fox News, MSNBC, Daily Show, WSJ, NYT, LA Times), thereby letting us avoid doing any costly advertising. But it was still a tough business. It took us 4 years to reach $1 million in annual revenue and to turn an operating profit.
As the CEO, on a daily basis I had to monitor key metrics to figure out if we had the right product, marketing, and distributions strategies. But that’s the “important” stuff that entrepreneurs enjoy tackling, the kinds of market- and process-related challenges that you anticipate when creating a company. What I didn’t fully appreciate when I set out on this journey was the amount of effort that would go into the administrative needs of a young company. Those are the non-operating tasks that are critical to building a healthy business, but are at best on the fringe of an entrepreneur’s gaze as he surveys what his company will do. However, just because they aren’t directly related to the entrepreneur’s vision doesn’t mean that these sorts of responsibilities are unimportant. Areas that generally fall into this category include legal, corporate governance, human resources, and investor relations.
Let me tell you, I made a lot of screw-ups dealing with these administrative responsibilities. I could give you a laundry list of mistakes, and perhaps I will in a future post. But for now suffice it to say that as a young, first-time CEO I had my share of fubars. And with hindsight, I think the type of oversight that I regret the most — and have the least excuse for — was often failing to keep my investors in the loop. It’s an easy trap to fall into. Just getting investment capital is hard enough in the first place! And once the capital is finally in the bank, an entrepreneur instinctively shifts gears back toward his product and his market. While there are a few events that trigger communication with shareholders, such as distributing quarterly financials or holding annual shareholder meetings, it’s very easy to overlook your investors when you’re in the thick of things.
Since late 2008 I’ve been advising a number of startups and nonprofits, and during that time I’ve seen other entrepreneurs and founders make the same mistakes as me. I’ve also seen successful entrepreneurs reach out to their peers to coach them on this topic, so I know that I’m not the only one who thinks this is important. Last year, I heard Jason Nazaar of Docstoc give a great talk at a Dealmaker L.A. workshop on communicating with your investors. Recently, Dan Martell of Flowtown wrote a terrific blog post with templates to use for keeping advisors in-the-loop, and this could be applied to shareholders as well.
Helping entrepreneurs avoid these pitfalls is one of the reasons I’m starting a new venture called CapLinked. It’s still in development at the moment, but we’re in the process of building features that bring simplicity, reliability, and transparency into the relationship between entrepreneurs and their investors. Right now, we’re getting feedback from entrepreneurs and investors so we can fine tune our feature list. If you have a story you’d like to share with us, we’re listening. Hopefully we’ll be able to make one aspect of entrepreneurship just a little easier.