Blossom, Avery, and I were at dinner at Nobu in Palo Alto (pre COVID-19, of course). I look over at the table next to us and who’s there but Marc Andreessen and his wife.
No one was paying attention to them, and no one asked Marc for his autograph. It was just another day in the Silicon Valley.
Years earlier when Avery was around two years old, we went into Whole Foods in Palo Alto to get a smoothie. Who did we run into but Steve Jobs. Jobs didn’t have an entourage with him.
In fact, everyone was completely ignoring him. Again, it was just another day in Silicon Valley.
My point is this. If two of the most famous entrepreneurs in the world can live anonymously, then you will too. If you’re in it for the fame and glory, then you need to think again. You’re going to be disappointed because it’s a myth that startup success is going to bring you fame.
That’s the first myth of about being an entrepreneur. There are many, many more myths. Let start with how…
A. You don’t have tons of people to talk to just because you’re the CEO.
In fact, there’s a surprisingly small number of people you can share your problems and concerns with. Let’s say you’re worried about the viability of your first product.
You can’t talk to your cofounders because there’s too much risk of your concerns spreading to your team. Then your team might panic because they think you don’t believe in the company.
You can’t talk with your investors because if they sniff that you have doubts, then they might think twice about believing you’re the right CEO for the company.
And you can’t talk with your significant other because you don’t want to scare them. That pretty much eliminates everyone you can talk to openly about your problems.
You’ll also likely notice that…
B. Just because people are laughing at your jokes now doesn’t mean you are funny.
Did you notice that since you became CEO, you suddenly became really funny. You can walk into a room, make a joke and everyone, and I mean everyone, laughs.
That never used to happen to you, did it?
No, you didn’t suddenly become Dave Chappelle or some other comic genius. Welcome to the reality of being a CEO. Everyone you come in contact with wants to get on your good side.
That’s why you have to guard against hubris setting in. And hubris can lead to more myths. For example…
C. Just because you want to raise VC funding doesn’t mean you will raise VC funding.
You decide it’s time for you to raise money. You develop your pitch deck and you start meeting with investors.
The problem is that no investor is offering you a term sheet. In fact, you can’t even score a second meeting.
“This wasn’t supposed to happen,” you say to yourself. “It’s supposed to be easy to raise money.”
That’s the problem. It’s not easy, nor is it preordained that you will be able to raise money. Most startups (think like 99% of all startups that try and raise money) fail to raise money from investors. Your startup might be one of the unlucky ones.
But let’s say you do raise money. It’s a myth to believe that your funding will magically close because…
D. No one will have any sense of urgency about closing your funding except for you.
You just signed a $10M term sheet. Congratulations. Your investors seemed excited about your company, but it seems like they are moving like snails to complete all the closing documents.
Why is that? Shouldn’t they be moving fast because they want to make money?
Sadly, you’re going to learn that the only person that has a sense of urgency about closing your funding is you. You’re going to have to push everyone every step of the way to get money in the bank.
Oh, and speaking of myths, it’s likely that…
E. The special voting rights you negotiated giving you board control even though you own less than 50% of the equity doesn’t mean your investors will keep you as CEO.
You did a great job negotiating, and your investors agreed to give you voting control of your company. Things haven’t gone well since you closed and your investors are growing concerned.
But you’re not worried because you control the voting rights of the company. There’s nothing your investors can do, right? Wrong.
Um, remember that next round of funding that you’re going to need to close in about 12 months? Yeah, that one. Well, if your investors want, they can tell you that you’re no longer going to be CEO if you want your company to have more money.
Just ask Travis, Uber’s ex-CEO about how having voting control of his company kept him as CEO. It didn’t for Travis, and will not for you. The best chance you have of staying CEO is by executing your plan.
Let’s say it’s a few years down the road and you want to sell your company. It’s a surprise that…
F. Just because you want to sell your company doesn’t mean you will have any buyers for your company.
I worked with someone recently who had a strategy to consolidate a market segment by acquiring the “Mom and Pop” companies that dominated the segment. The strategy was very sound because “Amir” was the only bidder for a particular company.
That meant Amir usually paid less than 1X the top line revenue of the company he was trying to acquire. He could set the terms and the existing owners of the business were grateful he was interested.
This is yet another reminder that just because you believe you are the owner of a valuable commodity doesn’t mean that anyone else believes the same thing. Here’s another reminder that is a big surprise for first time CEOs that…
G. You don’t get to work on only cool stuff as a startup CEO.
You’ve started building your team, and you’re building your first product. This should be a really exciting time, and it is. Yet you keep getting involved with all this mundane stuff.
For example, you purchased a refrigerator for everyone to put their lunches. Now someone is complaining that their lunch is getting stolen.
So, you dig into it and turns out to have been a one-off honest mistake. Then the next week you find out that Chris and Tom are fighting. It’s becoming so disruptive that you will be forced to take action.
Welcome to being a CEO. It’s not all fun and games. In fact a large part of being a successful CEO is managing the people issues that come with running a company. You’ll quickly find that the job will eat you alive if you don’t embrace managing people issues.
But here’s a people issue that will be a positive surprise. It’s that…
H. Your investors actually want you to make a living wage.
One of my original cofounders, “John”, was so paranoid that he thought that any investor we dealt with was going to want to screw us on literally every little detail. It didn’t matter whether it was our salaries or the type of stock options we would grant employees, everything was always going to be worse-case for us.
So it might surprise you that most investors (there’s always a small group in any category that wants to hurt you) really do want to treat you fairly. And starts with the need for you to make a living wage.
I’m not saying investors are going to sign off on a $500K/year salary for you (they will not), but they will sign off on a fair salary. After all, if you have to worry about paying your own bills each month, then you’re not going to be at your best running the company.
Speaking of other investor myths…
I. Your investors do not want to replace you as CEO.
It’s actually quite simple. Your investors know that the odds of your company succeeding go way down if they remove you as CEO.
There is all this inherent knowledge you have of the company that can’t easily be transferred to a new CEO. The risk goes up, way up, if you are replaced.
At the same time this doesn’t mean you will get a free pass from your investors (see answer E above). But all you have to do to keep your job is just execute your plan. You’ll be the one CEO in your investors portfolio of companies they can rely on if you execute your plan.
You’ll have to figure out how to gain market traction to grow your company. This leads to the next myth..
J. That TechCrunch interview you just did isn’t going to give you the bump in revenue you thought it would.
Oh, you’ll likely get a bump in traffic, but that bump might last for less than a day. Then the value of your TechCrunch interview is out the window.
It’s tough to gain traction. It takes a relentless and consistent effort to grow the awareness of your company. One interview isn’t going to be enough.