“I wake up everyday wondering, “what’s messed up today?” I know it’s something, but I don’t know which company is screwed up and has a big issue today. I’m just waiting to find out.”
As a business mentor, David sees his job as part psychologist and part camp counselor. “That’s a big part of what we do; we relay our own experiences, or we bring people in from our massive global mentor network that have had that experience.”
Over 1,500 startups have gone through Techstars. Which means David has seen it all. Here’s his unsexy but practical advice for entrepreneurs in year one and two.
Build back office systems that are ready to scale
There’s a temptation to view administration and systems like flossing—I should probably do it, but maybe later. Having a disorganized back office, however—even when that “back office” is just you and a spreadsheet—will hurt your growth and might haunt you.
“When you’re young, you’re vulnerable and unsophisticated,” said David, referring to how infrastructure often takes a back-seat in the early days. He learned that the hard way through neglecting the boring stuff at Techstars early on. But gaps in infrastructure eventually brought significant challenges to the company.
“We had people carrying the weight instead of building a scalable infrastructure, and so we had some cases of money wandering out the door—minor cases of phishing and things like that. We just weren’t very locked-down in the early days, we didn’t have good processes.”
While those issues are now resolved, David would do things a little differently if he could do it over it again.
“What I wish I had known is it’s important to do it right from day one, and not just put it in a shoebox and figure it out later. Even today we deal with issues from year one and year two that were poorly documented, poorly accounted for, that would never happen today because we have a CFO with public company experience and much more infrastructure.”
Invest in the least-fun parts
Having messy records can cost entrepreneurs more than they realize when it comes time to fundraise, a lesson Cohen had to learn the hard way.
“It’s really important to over-invest in legal, finance, and things that aren’t the fun part for entrepreneurship early on. Not having enough data or doing enough financial planning can jeopardize the business, because you go to talk to investors and they say ‘well, what’s the history look like?’ and if you say something and they do their due-diligence and find out it’s not right, they won’t trust you to run a business.”
Though it can be expensive—especially for a bootstrapping startup—there are certain investments that shouldn’t be delayed. “Who wants to pay for lawyers? Nobody, but if you don’t, your intellectual property isn’t yours and your documents aren’t right and financing won’t happen, because things are too messed up and it freaks people out, and the same is true with accounting,” he said.
This newfound appreciation for accounting led Cohen to invest in Bench. “They all have the same problem. We encourage our customer base of startups to look at offerings like Bench and make sure they get that help early on.”
Surround yourself with the right people
Cohen’s final piece of advice: don’t underestimate the value of the people you surround yourself with, including your co-founders, board members and mentors. “Being a CEO is the loneliest job in the world, we’ve all heard that quote, because there’s just nobody to talk to.”
Having staff you can trust to get the job done is vital, but David believes it’s just as important to have advisors that won’t sugar coat the truth. “If you have a good board of directors, you surround yourself with people that are aligned, they’ll tell you things directly.” And if you’re too small to have a staff and a board of directors, find a business mentor who will speak up when they notice something’s off.
As a board member and mentor, David considers it his responsibility to give the straight-talk. “It’s just that radical candor and directness, if you don’t have a good board that is functional you’ll never hear that.”
David explains that when they’re doing their job correctly, mentors can help anticipate your future problems based on their past experiences.
“The key advice I always give entrepreneurs is to surround yourself with good people,” he said. “I have so many mentor stories of companies that doubled their exit value because a mentor helped them negotiate it; it can be worth millions, or tens of millions, even hundreds of millions to have the right people around for those moments.”
More stories you might like:
- Chip Wilson, Founder of lululemon
- Lyndon Cormack, Cofounder of Herschel Supply Co.
- Payal Kadakia, Founder of ClassPass
- Brian Scudamore, CEO of 1-800-GOT-JUNK?
- Charles Chang, Cofounder of Vega
- David Cohen, Cofounder of Techstars
