Focus

Who's important? Simple answer - you don't know!

I go for a walk just about every day along the ocean where I live. I wear old jeans and an off-the-shelf dress shirt most days. I run into people dressed in all sorts of attire. Almost never is there a suit, but there are often new / dressy / sports apparel outfits, old ragged clothes, sweat pants and shirts, dresses, slacks, hats from fancy to old fisherman, and you name it.

I say good morning to everyone in as nice and friendly a manner as I can muster. And I mean it! If I know someone I will ask how they are doing, and if someone asks me, I will answer non-automatically. To me, everyone is as important as anyone else. You can never have too many friends.

Several times in my life, I have offered help to a stranger for no reason other than I had the time and they looked like they needed help. It has never turned out badly, and in some cases, it has ended up as a friendship that lasted. Nobody was a Rockefeller (as far as I know), and certainly nobody has chosen to leave me a fortune as a result, but it wouldn't matter if they were.

It's called being a Hench. Treat everyone like you wish you were treated.

What's important? Same answer - you don't know!

Actually - not - for your business at least. While it's hard to predict the future, the past is a pretty good indicator of what's important. The sun will come up tomorrow, and of course that is vitally important to life on Earth, but not necessarily something you need to worry about for your business. If you are in the solar power business of course...

Here's the thing. You only have so many hours in the day. If you spend too many of them on tactics and in anticipation of what might happen, you will run out of time and not have it available to spend on other things. On the other hand, you don't get time back. So doing something with all of your time, what do you choose to spend it on?

The time you have allocated to your business is the thing you should try to optimize. And this goes for everyone that works for your business as well.

Time management

There are thousands upon thousands of articles, books, papers, studies, and other stuff on time management. If you spend your time reading it you are misallocating your time. Read it before you start a business, not when you are trying to execute on the race that is what angel funding supports.

The opportunistic business

Most startups go through opportunistic phases. They are trying to find their niche, trying to make their first few sales, and any opportunity that comes, they jump at. That's fine. But that's now what investors fund. Investors fund business with a plan that makes sense.

The problem with opportunistic businesses is not that they fail to find and exploit outstanding opportunities. It's that they succeed at finding them. Lots of them. And they chase one after another leading to small successes. And thus the businesses succeed in making sales and a profit. And that's the problem.

Why is that a problem? Several reasons; (1) each tactical success consumes resources that could be spent on strategic success, (2) that's not what they were funded to do so they are misspending the inventor's money, (3) those tactical successes are at the expense of strategic successes, and the strategic successes are where the big returns for the big risks come from, and (4) worst of all, the tactical successes provide what seems to be a viable path forward when it does not reach the desired goals in the desired time frames.

The systematic business which pivots

The angel investor is normally investing in a plan that has been shown to them to be able to scale at a particular pace and produce an exit in a particular time frame for a particular valuation. That is the business they invested in. Each diversion from this focus usually means a slower and less likely path to the desired exit.

But every business finds problems en route and adapts over time. That's called a pivot. It's a strategic change caused by an assumption that is proven to be wrong. It could be proven to be wrong in a good way or a bad way. If the assumption is X sales of thing A and Y sales of thing B per month and you get 2X+Y sales, that's a good thing in that A is doing better than expected while B is doing as expected. The pivot might be to increase the effort to sell A and ultimately drop B, or it might be to spend more effort on B and less on A because evenness of the sales is strategically important. Or it might be to review the plan and see if there is an even better thing to do. That's a pivot. An adaptation a assumptions are turned into realities, and the assumptions should be made clear in advance, measured in reality, and validated or invalidated as the business executes

An example from right now

A firm that presented to Keiretsu Forum in the last 6 months and is now being funded and is part of the way through their round. They are starting to execute on their plan, and have an opportunity that they were aware of long ago to increase sales to some customers by building something that they cannot presently buy, in order to resell it and bring added value to their customer base.

The added value could greatly benefit their business including helping to build their recurring revenue and customer base, but it is not the reason they were funded and not part of the explicit plan they are executing. They have the opportunity to outsource the build and give away ownership and some of the profits from the thing in exchange for exclusive sales rights in a territory for a time, turning the build into a channel relationship.

This decision is being made today. Different advisors have advised the CEO to build vs. buy. One says "buy" and focus on what you are doing rather than side-tracking yourself. Another says "you could make more from the build than without the build". The CEO has already shedded another opportunity in order to focus on the business. And now the time has come to decide. Today, Jan 1, 2017, the CEO has to make up their mind.

No second chance

We don't know what the "right" thing to do is. And whichever the CEO chooses, we won't know if it was "right" later on, because we don't get to repeat the experiment taking the other choice. The CEO will decide (as all of us CEOs do), will be second guessed no matter which way they decide and what happens, and that's just how it is.

My advice? It's simple. Focus on what you are trying to achieve at the strategic level, make and follow your plans unless and until they start to have problems, give up other opportunities that diffuse your main focus, and only adapt when you figure out the adaptation is an actual improvement on the original plan.

In summary

Unlike most lifestyle businesses which do lots of opportunistic experiments and adapt all the time, and unlike large enterprises which can afford a range of experiments to test out different assumptions and business models, angel funded startups normally have too little resources and too little time to stray far from their pre-defined path. They win by focussing on the target they have laid out for themselves and avoiding all of the opportunistic distractions that lay before them.

If you are angel funded, focus on what you are doing to the exclusion of anything not directly relevant. When in doubt, keep your focus and don't diffuse your efforts even if they look like great opportunities. Pivot when you learn something that improves the model or its execution, but don't chase every opportunity out there.