By David A. Wise
Having the wrong investors may be a worse problem for an entrepreneur than having no investors.
That bit of advice was among those a panel of experienced entrepreneurs shared with attendees of a panel discussion on avoiding “killer mistakes” at the Wisconsin Entrepreneurs’ Conference Tuesday in Milwaukee. The conference runs through Wednesday and includes a series of panel discussions and presentations aimed at helping entrepreneurs be successful.
Tom Still, president of the Wisconsin Technology Council, which is sponsoring the event, said about 350 people pre-registered and there was a sizable number of walk-ups. He said that’s about the same as last year and that he was pleased with the turnout given a roughly 23 percent decline in attendance at conferences nationally. “Even is the new up,” quipped Still.
Kelly Fitzsimmons, CEO of HarQen, told attendees it’s important to choose investors wisely, lest one trade a problem of having no money with one of having a bad investor.
“It can actually tank a business because you as an entrepreneur may lose your passion,” Fitzsimmons said.
She noted that it can be hard to walk away from an investor, “but there is such a thing as wrong money.”
Bob Wood, co-manager of Wisconsin Investment Partners, warned that finding and dealing with investors can be “very diverting” and result in the entrepreneur having to do more accounting, reporting and sitting in board rooms answering to investors.
“Be prepared for your company’s culture to change,” Wood said.
GrayOrb President Ted Lasser stressed the importance of having a backup plan to financing a startup beyond getting a major investor. He noted it may be necessary to cobble together money from family, friends and strategic partners in order to advance a company.
“Always have a backup plan,” Lasser said. “You want to try to find the least resistant path to success to raise some money so you can continue this dream you have.”
Lasser noted that he’s mortgaged his home more than once to fund his early ventures.
Greg Meier, vice president of PhysioGenix and CEO of Lansare Corporation, urged entrepreneurs to set milestones in a product or company’s development that will demonstrate progress and make an investment less risky to investors.
“You’re tying to create leverage in the negotiation,” Meier said. “To create leverage, reduce the risk.”
Other advice panelists shared: have an exit plan to share with potential investors; identify real customers early on instead of a hypothetical market; become comfortable with being the chief salesperson or partner with someone who can fulfill that role; choose employees wisely and don’t be afraid to let go of those who are not working out; craft a company policy manual early on; become involved in entrepreneurial networking groups such as BizStarts Milwaukee; and be prepared for extra work if your success depends on a two-step sales process in which you must first convince people there is a problem and then that you are the right person to solve it.