This week was the week of NYEW - a five-day conference organized by and for the entrepreneurs and start-ups. I attended the Wednesday session as well as two receptions on Tuesday and Thursday night. Let me tell you: the atmosphere in each location where I went was unbelievable: charged with energy, enthusiasm and motivation. I am an entrepreneur as well: I started my law practice three months ago, and am quickly realizing that running a law firm is just like running any other business, - you have to be a savvy and motivated business person first, and an excellent lawyer - close second.
OK, here is some of what I learned: entrepreneurs are a special breed of people who feed on challenge, innovation and are highly motivated to bring the product/idea to launch. They may not necessarily be the best managers, - once their company is established, many prefer to let others manage (hiring professional CEOs, CFOs, VPs of sales, marketing) and go explore and implement a new idea. Actually, venture capital firms that often have seats on the boards of companies in which they invest may very well fire a founder-CEO if they realize that the founder is not the best manager. Once the VCs or other investors invest, the main focus of the company is on maximizing the return on investment for all investors involved (including the founders).
An average company may go through several rounds of investment: first round(s) - seeding capital - would typically come from friends and family and angel investors, the later round(s) would be financed by VCs or private equity firms. So, how do VC choose the companies in which to invest? VCs look for a great business model, but most importantly, they look at the founders. They essentially invest in people who are building the company and hire those who will operate it in later stages of development.
It is believed that the best way to grow a company is through slow gradual success to ensure that the company is always prepared to enter the new stages of its development. If success is sudden and overwhelming, it can collapse the company and turn a success story into a disaster. For example, this may be the case if a start-up does not have sufficient inventory to meet the sudden high demand for its products or services. Another lesson that I learned is that if the market doesn't like the product initially, it never will, so the company is better off spending its money on modifying the product rather than on additional PR and marketing. So, it is important to remain flexible and be ready to change the business plan and/or the product at any time. Finally, VCs prefer to invest in "lean" companies rather than the "fat" ones. Translation: they prefer those companies that don't raise much or any money until they launch the product instead of the companies that have received early financing and have hired too many people, which may slow overall growth due to a shift in focus from implementation to management. And, of course, the valuation of the company is usually much higher once the product is launched.
In conclusion, I want to say that the NYEW events I attended made me an even bigger believer in start-ups and growing businesses - my prospective and present clients -because of the enthusiasm of their founders and the overall spirit of "yes, I can do it!", to which I fully relate.