Guy Kawasaki is a Honolulu-born entrepreneur-investor-mentor-evangelist and a Bestselling author of books like “The art of social media “, “Enhancement “and many more. He represents Mercedes-Benz as Brand Ambassador and had been on the mentoring panel of many Blue-chip tech and non-tech companies. Being an evangelist to “Apple Computers” has been an ace introduction for Guy for a long time. Now he’s mentoring a graphic design company “Canva” and doing public speeches for corporate and other organizations. A Stanford and UCLA alumni, Guy Kawasaki, is now giving it back to the entrepreneurs as he has been on almost all the sides of a developing company/start-up.
Let us now look at Kawasaki’s “Top 10 mistakes Entrepreneurs make- & the solutions”. Precisely and very minutely Guy voices the art of pitching, business plan making, talking since during investors meet.
(This article is an excerpt of Some of the speeches given by Mr. Kawasaki at various public platforms.)
1. PITCH: TAKE A BIG NUMBER AND MULTIPLY IT BY 1 % (AT LEAST)
Talking of Business pitches, the average founder makes a pitch which feels like the investors and the other panelists are making fools out of themselves. The conservative approach of an entrepreneur, Guy mocks that “conservative” word. Most naïve founders pitch like that- they just think that they could just simply address the 1% of the total market and they come with a big blunt number. Well, according to Guy, this is a big blunder.
The solution is “Always Calculate and Pitch Bottom Up Analysis”. Calculate the minimum keeping in mind to sustain or survive in business. When you do that, you actually end up finding that the bottom-up approach is much more realistic and it is vastly different from the number you got from the “multiply by 1%” approach. Research says that you are going to be much closer to that bottom-up analysis number than that of the “multiply by 1” big number. He says, you have to be realistic and you start from the bottom. From his experience, Guy shares there was not a single big or small start-up he worked with which did justification to its financial projections in the last many years.
2. SCALE TOO FAST
This goes back to the mistake no1. Because of the conservative 1 %, they start burning the money in hand. Investments in people, infrastructure are essential but not at level one. In board meetings – you then justify how you are going to achieve that target within 6 -9 months and again you have more demand coming in, etc. Ultimately after 5-6 board meetings, your investors won’t believe you.
The solution is “Eat What You Kill”. You have to make it a mandate with yourself and your team, that you don’t get a coffee machine, pantry, fancy office, a receptionist or anything of that sort unless you earn that by doing more sales so that demand is way too higher than the supply. Guy says don’t scale too fast, he adds that he had never seen a start-up die because it couldn’t scale. First, do the sale, then build everything around it.
3. FORM PARTNERSHIPS
Forming partnerships at level 1 of your start-up shows you have no sales at the moment. Concentrating on getting other companies on board is a bizarre decision. Guy emphasizes again – sales fixes everything. Forming partnerships shift focus, attract time and money investments, you got to make people happy for nothing. All these are not required when you are booting up, you need to fix your income vs expenses graph first.
The solution is “Increase Your Sales”. Focusing on sales and other marketing avenues to maximize your income is the only way to survive in a competitive economy. While pitching, entrepreneurs often say -they have partnerships with so and so the company and prove their authenticity, this is just to avoid the topline statistics. The investor is purely interested in sales first, if that’s taken care of then you can talk about everything else. Guy says the ideal number of times you talk about your partnerships in an investment pitch is once.
4. FOCUS ON PITCH
Too much of preparation makes a dull and recited presentation. And spending weeks on making your pitch perfect isn’t going to help you in the pitch session. This perfect pitch will prove their one percent theory (Mistake no1), they will ultimately and anyway connect the dots to prove their point and make the pitch boring and rhetorical.
The solution is “Focus on Prototype”. According to Guy, at some point all the pitches are similar, all are going to say they have a proven tech, world-class team, etc. Everyone will explain in an excel spreadsheet with tall charts so that they justify the numbers. If you can dare to be different and make your prototype so strong that you don’t have time to adjust fancy adjectives in between words, your chances are high. So focus on the prototype. Guy goes on to say- the ideal pitch for an investor is simply to explain- “let me show what it does”. It’s all about the prototype and the demo, and sometimes existing early users.
5. PITCH- TOO MANY SLIDES
They often make it look cozy and explanatory, while too many slides, in any case, is boring to everybody.
The solution is “The 10/20/30 Rule”. The simple fundamental rule, as per Mr. Kawasaki is to follow this rule. It says every investor pitch must not have 10 slides, time to explain shouldn’t be more than 20 minutes and finally font size shouldn’t be too small-the ideal size is 30 points. To make it very simple for everybody in the room, just present it as simple as the 10/20/30 rule. And take off fast like a rocket. Quick introductions are what is sought not beating around the bush explaining you and your team’s ancestry.
6. PROCEED SERIALLY
What this basically means is a start-ups journey theoretically has to be in order. Work on the idea-get seed funding-then makes the prototype-ship it to customers-get another round of funding-recruit people-build infrastructure etc. Well, this method doesn’t work in real life. An entrepreneur’s life is always zigzag and so is the new venture. It never works if you proceed methodically all the times.
The solution is “Proceed Parallel-ly” It is not a serial world, so you have to do everything parallel-ly. You have to time-slice and do multiple jobs at a time. Recruit, build, market, engage socially and struggle, you have to hustle every day for this.
7. RETAIN CONTROL
This is always highly mistaken. To control isn’t to micromanage things. Your goal of finance, funding, ideation, the effort isn’t to retain control of your company. As you are the founder, so retain at least 51 % or the lion’s share. Well, everyone knows it. On a calculative basis, it’s understood to have a majority of the stake. But is doesn’t work like that in reality, there are no board meeting decisions taken on the basis of majority in a startup. It is always consensus building, collective approach. Entrepreneurs, here tend to forget that they owe it to the company, which is an independent entity. You as a founder are working for the company and you have big responsibilities. Guy also goes on to say, at this stage, don’t take outside money, because otherwise, you will be working for someone else from day 1. And this isn’t good for your less ripen idea.
The key solution here is to “Make a Bigger Pie”. It is always good to have 2% of a $100 Bn company rather than to have a 51% of a $0.2 Mn company. Computing 50% each if there are 2 co-founders isn’t real. Because you have to allocate 50-60 percent for investors and future employees of the company. So make a bigger pie so that ultimately your chunk will be more valuable.
8. START WORKING ON PATENTS / INTELLECTUAL PROPERTIES
Patents are the worst way to defend your business. Many think that filing a patent is to secure the product or service. But litigation is time taking and expensive, the time you invest to win the case is much value to you. On the other hand, your patent doesn’t guarantee that there will be no infringements in the future as there are a lot of patents filed every day. The most stupid answer, as per Guy, to the question – “what makes your company defend-able” is “we have a patent”.
The solution is “Make Real World USPs” for your company. Unless you do that it’s really difficult to be in the game. Use success for defensibility, as in, you may have some lead over other peers, you may show the expert team for the product, you may get to have early market access. These create value for your company. So unless it is the Biotech industry, which is an exception, patents don’t help you much.
9. HIRE IN YOUR OWN IMAGE
This is one of the biggest mistakes founders do all the time. They have an illusion of people of their caliber and goodness. Recruiting people who are like you will get you going in the short run. But you have a bigger vision in mind, so you need to act very smart and find people who complement you.
The solution is “Hire to Complement”. You want a lot of diversity, you want people to manage things which you cannot manage yourself. If you are a coder, then partner with a strategist, marketer or if you are a sales guy hire a tech nerd so that he or she makes your life easier. People love to work in such environments where they are able to share their expertise. Hence always hire to complement. You can go and hire people who are not your age, not your color, not your expert league, have a lot of diversity to solve daily problems.
10. BEFRIEND YOUR INVESTORS
This is of no help anyway. Being friends with your investor won’t fix up a bad deal. This is just a hoax. Investors / VCs are simply doing a business with you, and this is the hard truth. They don’t need your friendship and you neither. It is just a give and take relationship. They give you their money and you grow it and give it back to them in one way or the other.
Rather you focus on the solution which is “To Exceed Expectations”. It means always promise less than what you can deliver to the investor. Here should be conservative. If you promise $ US 5 Mn a month as revenue but getting close to that you are a loser. But is you say you are going to get $US 3 Mn and you exceed it even by 5 %, you are a winner. Everybody loves winners.
The very essence of entrepreneurship is to exceed your own. Good Luck.