The number of new entrepreneurs has increased significantly in the past 20 years.
Led by the siren’s call of freedom, calling all the shots, and making more money than a 9-5 may provide, more and more people are drawn to the entrepreneurial lifestyle.
But is being an entrepreneur all four-hour workdays and corporate lunches? RSnake spoke with William Whurley (aka Whurley) Founder and CEO of Strangeworks, to find out what it really takes to found a successful company.
What to Consider Before Starting a Company
According to Whurley, the ideal founder is someone “with a very high tolerance for risk, that is willing to become consumed by their idea and become part of their idea.”
Whurley said life as a founder isn’t for the faint of heart.
At one time, he missed so many payments on his car it was almost repossessed. “Hundreds and hundreds of issues pop up in a start-up. It’s an extremely difficult pressure cooker. If you have a lot of anxiety, it might not be the thing for you to do,” he said.
It’s also important to consider your reasons for wanting to start a company carefully. Whurley explained money is not the most important factor to consider. “It’s not about the money, it’s about the freedom,” he said.
Some people are drawn to entrepreneurship for status. Whurley cautioned that having too much ego is counterproductive. “As a founder, especially if you’re in a CEO role, you should strive to learn from the people that you work for… you’re underneath them, you’re not above them,” he said.
He went on to explain that learning about every team member’s role in the company ultimately builds the founder’s credibility. “It’s not only good for the culture of the start-up, it’s good for you,” he said.
Do You Need a Degree?
Whurley does not believe a university degree is necessary for entrepreneurship. “I don’t have a formal education,” he said. In his opinion, people without higher education tend to be hungrier for success.
However, he is not against university degrees, “I don’t think there’s a problem with formal education,” he said. He went on to say that in some cases higher degrees, like PhDs, can help open doors to funding.
Ultimately, if you want to start a company, Whurley advised, “Don’t quit your job, don’t ask an investor for a million dollars so you can still get your 150k a year salary, eat ramen noodles, work nights and weekends… just go do it.”
Starting a Company in a Downturn
However, when it comes to venture capital valuations, Whurley believes the market was inflated. “These valuations didn’t fall, these companies just got appropriately valued,” he said.
Whurley also stressed that investment is only a part of the big picture for a company. “A CEO’s job is not to find money, but to make money,” he said. “Until you do that, it’s a game of imagination.”
According to the Harvard Business Review, in a downturn, it’s important to focus on the essentials, not the “nice to have” expenditures and nurture strong relationships with existing clients.
The Ins and Outs of Venture Capital
Many entrepreneurs dream of a big investment from a venture capital firm. There are pros and cons to this strategy.
On the plus side, venture capital firms can provide important start-up funding to companies that are still new on the scene. Sometimes, they also provide mentorship and can make valuable introductions.
However, the money comes with some strings attached. The firm may want a relatively large share of ownership in exchange for the capital they provide, and may want a voice in decision-making.
Whurley explained it’s important for entrepreneurs to research firms to ensure their company is a good fit for the firm’s investment model before initiating meetings.
H3: Venture Capital Alternatives
Venture capital firms are only one way to secure funding as a start-up. There are other avenues to consider.
∙ Traditional bank loans
∙ Crowdfunding campaigns
How Important is Culture for Start-ups?
Whurley believes culture is vital to the success of a new business. He said, “Start-ups are a team sport. You cannot do it alone.”
When he founded one of his early companies, Chaotic Moon, he partnered with Mike Erwin, a colleague he had known for over a decade. “You find those people who are almost friendships… and those are the people you try to bring in first,” he said.
In terms of deciding how to build the company, Whurley used the analogy of a puzzle.
The entrepreneur is the first piece, each partner or team member is another. Entrepreneurs must take an honest account of their strengths and weaknesses, and then build the puzzle to complete the company. Do you need to work with someone who is good at sales? Or accounting?
Then think of people in your network whose strengths will complement yours.
Whurley actively looks for ways to ensure new hires will work well with existing teams. In his current company, Strangeworks, the entire company must meet and sign off on candidates before they are hired. With a company of 100 people, this is still possible.
However, Whurley believes the same process could be used by departments or teams in a larger company.
He also uses a unique recruitment strategy. “I prefer to target people rather than to take resumes,” he explained. He went on to say he carefully observes people in his field, and then invites them to apply. He uses the same process for recruiting the advisory board.
Protecting Your Intellectual Property
Many entrepreneurs, especially in the tech sphere, are eager to patent new ideas or products immediately. Whurley advises against this.
He explained, “the patent system is broken.” Even with patents in place, large companies can violate rules, and it’s too difficult for small companies to prosecute because they don’t have the resources. He also noted patents can help large companies reverse engineer products.
Whurley recommends an easier and more cost-effective way to ensure intellectual property is kept safe, “Don’t tell anyone.”
However, Whurley is not entirely against patents. He explained once a company has the resources to execute patents without causing undue strain on a company’s budget and personnel, then the time is ripe to consider them.
Navigating Mergers and Acquisitions
Once a start-up gains a measure of success and is noticed by larger companies, the question of mergers and acquisitions can arise.
Whurley advises selling a start-up earlier rather than later, “I think entrepreneurs should sell the company as early in the company’s life-cycle as possible, and here’s why, because they own more,” he said.
Of course, some people may not be interested in selling at all. Not everyone wants to be a serial entrepreneur. If you enjoy your work and have a reasonable expectation it will continue to thrive, you may decline an offer to merge or sell.
Founders are not the only people who need to weigh in on decisions of this kind. Talk with your partners and your board before taking any steps. And remember to consider your employees’ needs too.
The dream of being an entrepreneur doesn’t always match the realities. Whurley sees magazines like Fortune as “romance novels for start-up companies… It’s all revisionist history,” he said.
Before starting your own business, do an honest self-assessment to determine if you have the time, dedication, and risk tolerance to stick it out.
If you’re looking for an honest look at life as an entrepreneur, check out RSnake and Whurley’s whole conversation. You won’t be sorry.