By: Nina Mermelstein
Part II of an Ongoing Series — 5 Things Entrepreneurs Wish They Knew Before Building Their Companies
As part of my mission to get into the headspace of entrepreneurs, I’ve continued to have in-depth discussions over coffee with a variety of digital health founders and CEOs to hear about their experiences firsthand. We’ve covered everything from early successes and challenges to lifestyle changes and resources utilized.
In my first article, I shared the insight I gained on the initial phase of an entrepreneur’s journey (see Part I: Taking the Leap). Since all of the entrepreneurs I’ve engaged with have experienced some form of growth, whether it was in terms of fundraising, team size, customers or users, I also wanted to get a sense of the different obstacles they encountered in getting to where they are now. Furthermore, I wanted to understand if, in hindsight, there was any knowledge they wish they had to best tackle those challenges.
I asked all of the leaders a very open-ended question— what do you wish you knew before building your business? Since we still lack a time machine (I’m working on it…), I received a variety of candid responses to my question that I pared down into five themes that I’ve shared below.
1. Manage Your Own Expectations
The importance of managing your expectations came up in the majority of my discussions. These leaders are incredibly mission-driven and often have personal health experiences that underpin their businesses. Their passion can also be coupled with the impatience of wanting to see the results of their work right away. In an incredibly high-stakes, complex industry, with longer than average sales cycles, the foresight to manage expectations becomes even more essential.
One first-time founder echoed the necessity for managing expectations as it relates to timing. Her initial vision for the business involved securing a certain number of customers and team members within two years. She soon realized that she needed to re-adjust her mindset regarding the speed for business growth. After three years since founding the company, she now has a much more robust product and business model and is finally seeing that anticipated growth.
Another entrepreneur shared how she has experienced the pressure for immediate growth from both the investor and founder side. During her time as a venture capitalist, she watched many companies succeed and fail in the digital health space based on their speed to market. She witnessed founders underestimate the uniquely long sales cycles and she also saw the external pressures that investors often place on founders to produce immediate results. She watched companies that raised huge amounts of capital and had great leadership teams run pilots before they were ready and eventually shut down. When building her own business, she almost fell into the same trap. She had an innovative idea that began gaining momentum and she wanted to hit the ground running. Instead, she took a step back, recognizing that there were many things that needed to be done first, beginning with administrative processes such as creating the proper governance and legal structure.
2. Not All Advice Is Free
For many entrepreneurs, the network they build early on can lead to long-term customers, investors, advisors, and partners for their businesses. That being said, it is also important to be wary of some new relationships that can be harmful for the company over time.
One founder experienced this scenario when he set out to build his company and was connecting with different people who offered to help him in a variety of ways. Some of those people were genuine and well intentioned. Many became long-term trusted advisors and partners for the business. Unfortunately, there were also many individuals who approached him offering introductions to potential investors or customers only in return for official advisory board seats or shares in his business. Since he is a younger first-time entrepreneur, there were a number of instances where people tried to take advantage of him. Initially, he caught himself thinking “I can’t believe I’m only three months into building this business and this person can take me to the next level.” He quickly learned that he needed to be wary of the people who promise the world, whether they are investors, dealmakers, or even corporate development executives at large companies. While he still believes that every conversation is worthwhile and creates an opportunity to learn something new, he is much more wary of people who make big promises.
3. Patience Is A Virtue
Taking on an executive operator role at a company you’ve founded doesn’t always come naturally, despite having years of work and management experience. Even for entrepreneurs who have founded multiple businesses, they often have to adjust their leadership styles to effectively manage teams at different companies. For first-time entrepreneurs, the path to becoming a successful CEO and team leader can be bumpy and some executives forget to be patient with themselves as they grow into these new roles.
I spoke with a first-time founder & CEO who had a strong network of healthcare executives and was able to quickly assemble a world-class team that was distributed across the country. She soon realized that despite having recruited an extraordinary team, she wasn’t prepared for what it took to manage their day-to-day activities. She found herself spending multiple hour-long sessions coaching different team members each day, which took time away from her other necessary executive responsibilities. She is learning that it is all about motivating people and making them feel like they are bringing their best selves to work everyday, empowering them to work more independently. This often requires getting to know her team members on a personal level. With the help of trusted mentors and advisors, she is continuing to hone her leadership skills over time.
4. Roll with the Fundraising Punches
It’s not a surprise that fundraising makes it to the top of the list of challenges that founders face during the early stages of building their businesses. Some founders have experienced fundraising difficulties throughout their entrepreneurial journeys. However, many first-time entrepreneurs are facing unfamiliar obstacles with potential investors.
There is no true playbook for handling these “fundraising blows,” but one particular founder shared an interesting example from when her business was in need of “life support” funding and how she handled her precarious situation. She was working with an angel investor who had completed their due diligence and was about to sign on the dotted line. The investor pulled out right before what was supposed to be a relaxing Thanksgiving holiday. This founder had thought the investment was pretty much a done deal, so this news was completely unexpected. Instead of taking it personally or dwelling on the lost capital, she immediately went back to the drawing board. Knowing that she needed to secure financing to sustain her business, succeed for her existing customers, and support her employees, she had to focus on what was next. This mentality and thick skin enabled her to move on and successfully secure funding from new investors.
5. A Sticky Situation: Mixing Business with Friends & Family
Consulting with close friends and family during the early stages of building a business is natural. They are the trusted people you go to for advice and support in all aspects of life, so of course you would come to them for something as personal as starting your own company. I spoke with a founder who chose to bring two of his children into his business early on. Their comfort with one another and honest communication was of great benefit to the company culture.
On the other hand, I’m sure we’ve all heard the horror stories of friends and families that have been torn apart by going into business together. Since my profession involves interviewing executives across the healthcare industry, I’ve heard my fair share of these stories involving leaders seeking capital or business partnerships from friends or family and then watching those relationships fall apart.
I spoke with an entrepreneur who faced this common predicament when deciding whether to co-found her digital health business with her best friend from childhood. Since they were concerned about whether their friendship would transfer well to becoming business partners, they each spent time separately thinking about their vision for the business and strategies around growth, company culture, and other fundamental concepts. After spending several days apart thinking about their personal visions, they came together and compared notes. Once they realized that they were aligned, they decided to start their business together. They continue to use this method for making any big business decision – thinking about it separately at first and then coming together to make sure they are on the same page. They never anticipated that their initial process as friends would develop into a very important business strategy.
At the end of the day, entrepreneurs will never have all of the answers and nobody can truly prepare them for the constant challenges they face while building their businesses. Based on my discussions, I believe that the ability to “block and tackle” should most definitely be included in the founder job description. Entrepreneurs have to constantly be nimble as their companies evolve while maintaining dynamic energy around what they are building.
My coffee chats have provided me with incredible stories about the early successes the entrepreneurs experienced, whether it was making a key hire, raising significant capital, or gaining traction with the number of users or customers. Other founders mentioned positive feedback they received from early customers or users about their product or service that reinforced the importance of what they were creating. While all of these leaders have experienced some failures and had to overcome a variety of obstacles, they have also taken the opportunity to celebrate their early wins, both large and small. These short moments of recognition have helped propel their businesses forward.