It’s fair to say that Silicon Valley all-star Guy Kawasaki knows a thing or two about startups and entrepreneurship, and last week he took a moment to share some of the biggest mistakes he sees entrepreneurs make with the audience at Pause Fest in Melbourne.
Here’s part two of Guy Kawasaki’s list of the top 10 mistakes entrepreneurs make. You can catch part one here.
6. Too many pitch slides
Despite his belief that entrepreneurs should spend most of their time focusing on prototypes rather than pitch decks, Kawasaki told the Pause Fest conference he knew the majority of listeners wouldn’t listen to him on that point.
With that in mind, he offered some advice to entrepreneurs regarding the length and design of their pitch decks, saying most use “far too many slides”.
Kawasaki swears by the “10-20-30” rule: the optimal number of slides is 10; these should be able to be presented in 20 minutes; and the smallest font size anywhere in the deck should be 30 points.
“If you do this, your presentation will be better than 95% of people in the world,” he said.
7. Proceeding serially
The mindset of many founders is serial, said Kawasaki; they’re focused on raising money, then writing software, then making sales, and so on and so forth until their company goes public or the founders otherwise exit. But this viewpoint can be highly detrimental.
“The life of an entrepreneur is that you have to proceed parallelly, which means you are hiring people, making sales, writing software ∞ doing all of this at once and pushing 10 carts down the road at once,” he said.
“If you can’t wrap your mind around this you’re going to have a very difficult time being an entrepreneur because life is not serial for an entrepreneur.
“Entrepreneurship is not only not a sprint, it’s a marathon. But it’s not just a marathon, it’s a decathlon marathon.”
8. Too much desire to retain control
“Founders think that they and their buddies, the other founders, always have to add up to at least 51%, because if they control 51%, in some mystical board meeting they can always boot out the other investors or make a decision, do things their way because it’s their company,” Kawasaki said.
“This is delusional.”
Kawasaki argued the desire to retain control in this way is a figment of founder’s imaginations because control over the company becomes irrelevant as soon as outside investment is accepted and founders have a fiduciary responsibility to those investors.
“I have never seen a board meeting where there were decisions that came out 51% – 49%, it’s almost always unanimous, and sometimes wrong,” he said.
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“What you should focus on is making a bigger pie, which is to say, it’s a lot better to own about 0.5% of Google than it is to own 51% of a little crappy company that goes broke.
“Focus on making the pie bigger, not on how much of the pie you own, because at the end of the day if you create a company in the billion-dollar range, whether you own 7% or 5% you’ll probably make more money than you’d ever thought you’d make.”
9. Reliance on filing patents
Filing numerous patents for an idea or concept can lead founders to believe they are more protected than they are, said Kawasaki. And while he stressed he was not advising to not file patents, the action of filing one does not automatically make a company defensible.
“You should file it because someday you may have patents that are valuable — but do not believe for a second the patents that you file make you defensible. Quite frankly you probably don’t have the time or money to defend your patents,” he said.
“It’s not about filing patents, it’s more about success.”
Many companies cannot file a patent for their business model, the investor said, but that becomes irrelevant when looking at their level of success.
“Success breeds defensibility. I’d rather be Facebook with no patents than a company with a lot of intellectual property with no market share,” he said.
10. Hiring in your own image
Young, male, and white founders will more often than not hire other young, male, and white employees, said Kawasaki, but this stilts development, holds back diversity in the tech sector and eventuates in “weakness”.
“You need diversity. You need different genders, sexual orientation, races, creeds, colours, height — you name it,” he said.
“Don’t hire in your own image, hire to complement. If you’re good at engineering, hire someone who can sell. When it all comes down to it, there are only two skills in a startup: someone’s got to make it, and someone’s got to sell it.”
11. Being friends with your investors
Finally, in a bonus point, Kawasaki — an investor himself — warned founders against getting too friendly with their investors despite the common line from venture capitalists that they invest in people, not companies.
“I don’t know how to break this to you, but you are a means to an end for an investor. They want to give you a dollar, and get back $20 — that’s what you represent,” he said.
However, investors are also a means to an end for founders, he said. While they’re wanting to get back $20, entrepreneurs are looking to do that and “keep a bunch for yourself”.
“I’m not saying you should hate your investor, but it’s not about friendship. So instead of becoming friends with your investors, you should exceed your expectations,” he said.
“Ship on time or early. Exceed your revenue forecast. If you do all those things it won’t matter if you’re friends or not because you’ll be one of the few bright spots in their portfolio.”