If you want to build a high-growth entrepreneurial ecosystem, you must first create investors, capital, and mentors. Investors are the catalyst for changing a local ecosystem. Without investors willing to commit capital, companies that arise, either bootstrap (would have been successful anyway), die (from lack of growth capital), or move (to be close to the capital they find). Once investors are organized and capital is committed, then the work begins. There is no program in the collegiate environment that teaches entrepreneurship well. So, learning for an entrepreneur is on the job and subject to different rules than normal businesses. First, the deck is stacked against startups. They can never capture enough capital to run a business the way it should be run, so they have to learn to run it wrong the best they can. I think I can prove this mathematically, but I just have not put the marker to whiteboard yet to do so. Stay tuned!The upshot of this is creating an entrepreneurial ecosystem takes two elements in a collaborative learning process, nerds and people with money and desire to give back and change their community for the better. The important traits of a mentor are:

  • Expertise, experience, and willingness to share
  • Optimism tempered by experience
  • A desire to give back to the community and help aspiring entrepreneurs avoid pitfalls
  • Willingness to enlist others to help
  • Willingness to be a strong role model
  • Inspires others to engage, grow, and lead
  • Ability to constructively provide guidance
  • Respect for other’s opinions
  • Willing to provide tough love to entrepreneurs

We have found overtime there are certain truths that have become self-evident (this list will continue expanding, so check back often):

  • Entrepreneurs are optimists by definition
  • Entrepreneurs always want and fantasize about giving up less of their company then they must.
  • Every round of capital will cost you 20 to 30% of your company.
  • No investor will get involved until you have proven your technology works you have and you have a functional then scale model and a client who says they will buy it.
  • Build relationships, but don’t chase money until you are ready to take it.
  • Few will invest if you’re more than $250k -$500k away from launching your product.
  • Do as much diligence on your investor as he will do on you.
  • Taking the wrong capital is as bad as not having it.
  • You really only get one chance to pitch an investor. If the answer is not yes shortly, it is no. Move on.
  • Boards of advisory are good but only if they truly contribute to the business. Investors find little value in them.
  • Entrepreneurs must have barriers to entry if they wish to get investment. That could comprise a patent, trademarks and copyrights, or trade secrets, the latter of those three being the less valuable.
  • Beware of the rock-star syndrome! Once a young entrepreneur begins to believe he is successful, he tends to become “invincible.” A good mentor will help ground a team in a positive way.
  • Entrepreneurship is a full contact sport. Lead. Own the problem. Own the solution.
  • Cash is king – know your cash flow now and for the foreseeable future if you want to be successful.
  • Mistakes are part of the process. Don’t’ fear them. Learn from them. Create quick tests for your strategies. Execute.
  • Everyone in a startup is in sales. Act like it.
  • Ideas are useless without execution. Focus on execution.
  • Review your underlying assumptions of the business quarterly at least.
  • “B” players drag your organization down. Only hire “A” players!
  • Corporate culture is everything and it starts with the CEO.
  • Stay focused, but be opportunistic when the right opportunity comes along. Create a strategic hierarchy of priorities to help filter opportunities.
  • The role of the founder entrepreneur changes over time. Be prepared for it.
  • Don’t ignore corporate paperwork!
  • Staying “under the RADAR” is a recipe for disaster. Talk to anyone who will listen.
  • Never tell an investors that you only need 1% of the market to retire and live on the beach. Capturing 1% of any market is a Herculean task. Don’t telegraph ignorance.
  • IP is valuable, but don’t become obsessed about it. Build a solid business based on solid IP.
  • Entrepreneurs should be ruthless in your resource allocation. Spend every penny as if it is the last.
  • Never believe you can’t fail.

How to create a mentor program:

  • Organize a group of professionals from several walks of life that want to get engaged with startups.
  • Announce and hold “office hours” monthly in your community.
  • Work with local high schools, colleges, and universities to produce entrepreneurial educational programs.
  • Invite guest speakers on entrepreneurship to your community.
  • Engage your local media!
  • Hold “Shark Tank” events in your community.
  • Learn what a great deal looks like, smells, like and acts like. This is only learned through performing due diligence on other companies! Educate your mentees on these lessons.
  • It is your job as mentor to help these entrepreneurs understand how to grow their business to the point they can attract capital or clients.
  • Identify account, legal, and HR resources that will offer “Startup Packages” for young companies in your community.
  • Consider engaging an online accelerator program such as IdeaShares. These online platforms can provide great resources for your aspiring entrepreneurs to assess their own capabilities and the value of their intellectual property to decide if they have what it takes to be a successful entrepreneur.
  • It’s your job to ensure your mentees make good financial and business decisions.
  • Celebrate victories!

These are a lot of lessons learned about how to become a great investor and entrepreneur based on my own experience with seven different startups, some successful, and some not.

Become a great mentor and you’ll create new opportunities in your community!

For More Information:

This is published under the Appalachian Regional Commission POWER Grant, PW-1835-M

Copyright Appalachian Investors Alliance, Inc. 2018
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