WHAT I KNOW NOW THAT I WISH I KNEW THEN

 

Stephen Bloch, MD (General Partner, Canaan Partners):  As a first time entrepreneur in 1994, I was founding CEO of Radiology Management Sciences (RMS) a pioneering company managing the cost and quality of medical imaging for HMOs. Today radiology benefit management is a billion dollar industry. Subsequently I founded or invested in four other early stage companies. Since 2002 I have been a venture capital investor with Canaan Partners focused on healthcare investing. Here are a few of my takeaways:

  • RMS sought to trailblaze both a new product and a new market. This is a doubly tough task. Even though the product vision may be perfect, new markets take time to develop.  Healthcare products are especially difficult to pioneer because the market stubbornly resists change.
  • Don’t invest too fast or too much until you prove the core business model.
  • It often takes 5-10 years to really understand if you have a sustainable business. 
  • Make sure you have access to enough capital to weather tough times. They are certain to come. Use every dollar as if it’s your last.
  • RMS initially hired an enthusiastic but inexperienced team. There is no substitute for experienced managers who can engineer success and know how to prioritize. Be uncompromising in finding the best and incent them well. 
  • RMS would have benefited from outside advisors and a board of directors. Building strong and useful external relationships like these will pay dividends, especially when your business faces uncertain choices. 
  • Be patient and never stop pushing your business forward. Especially in new markets, business prospects often look unclear and take time to evolve.
  • Always have options and backup plans. 
  • If the business plan isn’t working, don’t be afraid to make dramatic changes. If you feel the business is stuck, perhaps it’s time to have someone else lead.

Anne DeGheest (Managing Partner, MedStars and HealthTech Capital) – The best angel investors are really “mentor capitalists” at heart, investing capital for not just a financial return, but the opportunity to share their experience and networks. They are driven to do whatever it takes: fixing the product bugs, changing market strategy, dedicating themselves to getting the company off the ground, investors, advisors and/or board members.

The entrepreneur’s relationship to such people must be based on openness and honesty: sharing the good, the bad and the ugly. Often entrepreneurs fall in love with their ideas and cannot answer the famous “So what” questions: what is the value proposition?  Who make customer decisions? Who pays and why? The entrepreneur has to articulate clearly why there is a large market that has to have this new products now. Proactive investors, advisors and board members can help answer these questions.

Often the right people for these relationships are industry veterans who have built a business in the entrepreneur’s industry from the ground up, and have known failure as well as success. As “business architects”, they can teach the intricacies of market strategy and finance. They often seek both stock for their “sweat equity” and preferred stock for own cash investment.  This aligns them with founders and other common shareholders.  Properly recruited they can be one of the biggest factors in a business’s success.

About DeGheest – Anne was part of the founding executive team of Nellcor (a division of Covidien), MedPool and OmniCell (Nasdaq: OMCL), and helped grow new entrepreneurial divisions of large corporations like Johnson & Johnson, Baxter, Medtronic, and McKesson. She is an active investor with Life Science Angels, an angel group focusing on funding early stage medical devices and biotech start ups and in 2010 founded HealthTech Capital, a group of private investors dedicated to funding and mentoring new start ups at the intersection of healthcare and computer/consumer electronics. She was part of the founding executive team of Nellcor (a division of Covidien), MedPool and OmniCell (Nasdaq: OMCL), and helped grow new entrepreneurial divisions of large corporations like Johnson & Johnson, Baxter, Medtronic, and McKesson. She is an active investor with Life Science Angels, an angel group focusing on funding early stage medical devices and biotech start ups and in 2010 founded HealthTech Capital, a group of private investors dedicated to funding and mentoring new start ups at the intersection of healthcare and computer/consumer electronics.

 

Jack Groetzinger (Co-Founder, Seat Geek):  Should I get a corporate job or start a company? It’s a decision that preoccupies Dartmouth seniors every year. Three years ago, I was one such senior. Ultimately, I wanted to spend my career as an entrepreneur. I dreamed of doing a web startup. But it seemed like reckless arrogance to forgo career experience at some of the most sought-after entry level jobs in the country. I was torn. In the end, I caved. I took a consulting job at Bain & Company and worked in their Boston office for a year before leaving and founding a web startup – the fate I’d wanted all along. I’m currently the Co-CEO of SeatGeek, a web application that provides price forecasts and analytics for the secondary market for sports and concert tickets (i.e. resold tickets).

 I am frequently contacted by current Dartmouth students and recent grads struggling with the same sorts of decisions—should I take the safe corporate route or strike out on my own?  Should I leave my cushy job for the thrill of a startup? There are no easy answers. I think the choice usually boils down to a person’s tolerance for (or enjoyment of) risk. There are a few things I’d consider if I could rewind three years and start over: 

  1. Don’t do a startup for the money. If your primary objective is to get rich, take a safe corporate, consulting, or banking job. Wealth is far from certain for entrepreneurs, especially tech startups like SeatGeek.
  2. Give up all balance in your life. The highs are higher and the lows are lower than anything I experienced in the corporate world. Startups are all-consuming. I’ve dropped nearly all hobbies and interests for SeatGeek. I’ve lost touch with friends. If you want to have a well-balanced life, don’t even consider doing a startup. 
  3. If you’re doing a tech startup, you have to be willing to learn to code. Business-minded folks who want to do a tech startup often try to find a technical co-founder to do all the coding. I think that’s a mistake, particularly for young, scrappy entrepreneurs who don’t have lots of capital or decades of business experience. The success of tech startups is tied to the company’s product, so it’s important that the founders have a hand in crafting it.  Learning to code passably is easier than most people think; my co-founder (Russ D’Souza ’07) taught himself in less than six months.
  4. The best way to learn how to be an entrepreneur is to be an entrepreneur. I figured I’d be better prepared to run my own company if I first soaked up consulting knowledge at Bain.  That was misguided. I learned a lot at Bain, but much of it does not apply to the startup world. I would have been better prepared to start a company if I’d spent my first year out of college working in the startup world.

 I won’t be returning to a big company anytime soon. I prefer sailing my own ship. But I realize the over-taxing lifestyle isn’t for everyone. That said, if you’re a graduating college student contemplating turning down an attractive job offer in order to do a startup…do it! If you think running a startup might be a blast, it probably will be. Breaking free from the corporate recruiting race takes courage – more courage than I had as a senior – but that sort of disregard for conformity means you’ll be starting out as an entrepreneur on the right foot.

 

 

 

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