A shiver goes down my spine when I hear a VC refer to a portfolio company as “my company” or a CEO as “my CEO.” The implicit suggestion is that VCs are kings and the lowly founder is the grunt that exists only to humbly serve their capital-holding master. Ugh.

And, it goes both ways. It’s not uncommon for a founder to poo-poo the importance of investors since they’re not operating day-to-day.

As both an entrepreneur and a VC – I deeply believe that these perspectives are not only wrong, they’re foolish.

As a VC, I do understand why VC’s might claim seniority. After all, VCs typically join the boards of their companies and boards have the ability to fire CEOs. So, don’t CEOs work for them?

Furthering the confusion are the rights granted specifically to holders of preferred equity. VCs might be able to veto a sale or the issuance of any new security, so doesn’t the buck stop with them? Well…sometimes it does.

But hang on, entrepreneurs can easily point to another set of facts that suggest they are the heirs to the throne:

1. Founders typically own far more of the company’s stock than any single investor.  
2. They often represent half or more of the board, meaning that they’re the real bosses of their CEO-selves and equals to investors in the board capacity. 
3. And, founders usually have the loyalty of the team – meaning that they hold much of the fate of the company in their hands.

One could argue that this fact pattern makes founders the rulers of their startupland.

So, here’s the thing…when you zoom in on the complex relationships that founders and investors typically have, it’s really hard to tell who is actually the boss. Each party holds different types of leverage in different situations. It’s a carefully crafted relationship designed to protect both parties from risk factors there are specific to their role in the company.

So if arrangement between VCs and founders makes sense and there are mixed rights assigned to each party…why are we trying to figure out who is more important? Why do we care?

Well…we shouldn’t.

Perceptions of seniority or subordination by either party are just…well…perceptions. They’re useless and they don’t affect how the company is actually managed.

The reality is that investors and operators are PARTNERS in a venture. They’re each contributing different assets, with different rights in order to achieve a common objective: the creation of shareholder value.

All of the hubbub about seniority and subordination from both sides is a weak attempt to selectively looking at fact patterns that support egos. But, business isn’t about egos, it’s about progress.

So why is this an issue?

The main reason is that egos can make for bad work environments and unproductive relationships. Entrepreneurs don’t want to be insulted or talked down to by their investors. And, investors want entrepreneurs to respect their input and support their objectives. Egos can get in the way of true collaboration.

So what can an entrepreneur do?

First, you need to understand that all of your investors want and deserve your respect – they’re your partners after all.

Second, when you’re picking your investors you should seek capital from those that understand this concept. While taking capital from “bosses” can be a big downer, there is nothing better than obtaining the building a bench of highly supportive partners.

When you’re setting out to hire sales people it’s important to know what type of sale you’re making. While there are many distinctions in the types of sales that companies make, one noteworthy paradigm is what I call the Pro vs. Bro sale.

A “Pro” sale means selling to a professional audience in a professional way. Whether a small or large corporation, the rapport developed with the client centers around the quality of the product or service, the company’s reputation and the pricing. Generally, these are more professional settings and feel a little stiffer in style.

The other type of sale is what I call a “Bro” sale. Bro sales are done through more casual and social interactions. In order to do this, the sales person needs to meet the client somewhere casual, let their guard down and be much more of a genuine person (and less of a suit) to the customer. This allows them to develop a personal relationship with the customer. The bro sale comes from the heart.

Ultimately, the distinction between these two approaches is a function of the degree of interpersonal relationship developed with the customer.

While I naturally gravitate toward the latter (as it always feels better to me to get to know the people on the other side of the table) both approaches can work. What’s important is understanding what type of sale is going to be appropriate with your customers. If your customers are rigid and not open to developing a personal relationship with vendors, you should hire people who can navigate a pro sale. If your customers are people first and customers second, hiring a team of bro-sellers can pay big dividends.

When I was in High School I taped a picture of the next guy I was going to wrestle to my bathroom mirror. I stared him down as I scrubbed my teeth every morning. I was on a mission to beat him physically and mentally. It was a winner-take-all world, and I never learned to like losing.

My preparation for a match wasn’t unique. Frankly, I stole it from a cheesy over-watched 80’s movie. I’d bet that 20% of the homes on the block had a similar photo taped to the mirror. One of them probably was a photo of me.

That competitive perspective is beat into many of us, whether athlete or not, from a young age. We’re consistently setup in winner-take-all games in life. You get promoted or he does. You get the A or she does.

Our society figured out long ago that people are self-interested, making competitive dynamics effective at driving performance.

This is why when entrepreneurs land in the founder role they typically start staring down their competition.

While focusing on winning is good, real life is full of shades of gray. In the real world few systems have zero-sum outcomes – many players can succeed or fail simultaneously. For those of us trained to think myopically about conquering our opposition, we might miss an important nuance; while it’s important to out do your competition, their existence and their success is typically good for you and your company.

Put another way, you should try to beat your competition at the same time that you cheer them on. (Who said life isn’t complicated?)

Here’s why:

When your competition succeeds they can help you be more successful. Here are some examples:

• When your competition teaches customers how to use the new type of service, they make it easier for you to sell. 
• When your competition validates the business model, it can be easier for you to raise capital from investors. 
• When your competition achieves liquidity (through the public markets or otherwise), they might want to buy you.

And…there’s another reason. When your competition scales, they’ll likely become bureaucratic making it easier for you to out-maneuver them. If they’re not going to wake up one morning and leave the market so that you can acquire all of their customers, you might just be better off if they succeed to the point where you can beat them.

I just came across this TED talk. Very interesting thinking about human psychology that has implications for product and pricing decisions.

Enjoy.

Any plan to transform an entire country into a thriving startup ecosystem is a lofty goal for a mere mortal. Despite that, Fernando Napolitano has set out to do just that.

Fernando organized a conference in Rome that took place this last Friday. This one-day event was a call to the government, captains of industry, academia and entrepreneurs to come together to transform Italy in three years. While the mission seems daunting, he garnered support from many of Italy’s most prominent leaders. Through the course of a single track of speakers and panels he brought four ministers of the Italian government (Trade, Education, Foreign Affairs, etc.), the CEOs of the eight largest corporations in Italy (AlItalia, Enel, MediaSet and others), Presidents of Universities and the US Ambassador to Italy.

My role in the day’s events was to speak about how community is a key ingredient of a startup ecosystem. Drawing on my experiences with the Columbia Venture Community, the New York Venture Community and what we’re doing at Kohort, I tried to impart two bits of wisdom:

1. Communities are essential as they provide peer education and they help would-be entrepreneurs overcome their fears of taking risk. 
2. Communities need to be built by entrepreneurs.

While it seemed everyone in attendance was excited about the mission and the massive support that the event garnered, there were a few folks at the event who expressed their skepticism about the viability of such radical change.

While I suspect that Rome will not transform into Silicon Valley over night, Fernando is already having an impact. Through his Fulbright BEST program, he has already incubated several dozen startups.

The skepticism is not unfounded, however. In order to change an entire country it will take the effort of more than a few. But, if other people stand up and follow the lead of Fernando, change can happen.

If you’re reading this and want to stand up and help carry this mantle, let me know – Fernando and I are working on parallel paths.  It is my hope to spread the model we built for the Columbia Venture Community and the New York Venture Community to every university and region that will take it (including those in Italy).

If we act, we can drive change. Don’t be afraid.

  

Magicians know all about the use of distractions. Flash something shiny over here, while they change something over there. Like lemmings we, the audience, stare at the flashiest thing in sight, unable to see the dull and mundane.

Here's the problem. Your product is flashy. No matter how drab the colors, the pupils of your customers, partners, and investors will feel the gravitational pull of your product in any conversation where it's present.

Want to talk strategy? Well, you better hide your product under your mattress. If it glimmers into the consciousness of your audience, you'll have to revisit strategy another day.

Products are so distracting that once they rear their lovely head, your audience will have trouble re-focusing on another topic.

Once upon a time, I tried to brainstorm with my investors about contacts that they might have in particular customer segments. Foolishly, I sought to warm them up with the latest view of my product. Two hours of feedback on colors, buttons, and approaches ensued. No matter how hard I tried, they would not let the product leave the stage, ensuring that they didn't have time to contemplate how their Rolodex might be helpful.

Products are exciting and fun. Too exciting and fun. Whether you're speaking to your team, investors, or customers, you'll need to be selective about when you let your product attend meetings...because it will always get all of the attention.

This post originally appeared on Inc.com

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When I left my last job and set out to build Kohort, I laid out a few personal goals. One of them was simply to always work with people that I like and that I hoped would like each other. When you get to pick the team you can prioritize things like that.

When I started hiring I wondered if this approach was too self-indulgent.  I now believe, that it's the cornerstone of building a great culture through your founding team.  

While focusing on hiring people you like doesn't mean that you ignore talent, skill-set and beyond, it does mean that once you find the *right* person for the job making sure they're a fit with the culture is worthwhile.  

Good culture = happier team.  Happier team = more productivity, easier recruiting and a more fun work environment for everyone (including me).

So far so good. I really love our team. They’re all people I hope to stay friends with. Our recent trip to SXSW really confirmed this.  Living with other people is hard. Habits and ticks typically becoming annoying quickly. But that didn’t happen. We worked hard and found ourselves laughing morning, afternoon and night.

I only hope that we have a reason to travel with the rest of the team next time. Laughing that hard is good for the soul.

My mom used to say: 'The things you own end up owning you.' While there's probably a psychological argument buried in there somewhere, there are some tactical implications of this phrase.

When you buy something, you're also stuck protecting, maintaining, and supporting that product or service. You become its caretaker. And taking care of things, of course, costs more money.

• If you buy a new car, you'll need to get it insured…and washed. 
• Your new clothes need tailoring and then dry cleaning. 
• Your AC unit needs maintenance. 
• Your dog needs to see the vet.

Expenses snowball. One expense begets another. The true cost of one object is often far greater than the initial price tag would lead you to believe.

This is an important thing to understand before a founder opens up his or her checkbook to buy something for the company. While getting a new TV for the conference room seems to balance in your checkbook, you must also factor in the cost of installation, the complementary speakers, monthly cable fees, and maintenance. The full cost of ownership might not fit into a bootstrapper's budget.

This concept applies nearly everywhere in a company. It even applies to people. If you hire a new employee, his or her salary isn't the real cost to the company. You must also factor in employment taxes, benefits, office space, and equipment, to name a few.

The trick to managing expenses while bootstrapping in the early days of a start-up is to always look around corners. Before you turn a new direction and make a purchase, peek—and think through—what's in store.

This post originally appeared on Inc.com.

I just landed back from my trip to SXSW. It was a lot of fun but it was also inspiring. The energy & passion to drive change bubbled up from every street corner, dive bar and seat in conference.

The highlight of the trip for me was the panel that I participated in. The topic was “Creating Entrepreneurship Communities In Your City”. The panelists were all rockstars who have had a major impact on our startup ecosystem.

• Paige Craig has become the godfather of Silicon Beach,  
• Nick Seguin operates like a community puppet master from the perch of the Kauffman Foundation,  
• Andrew Yang is transforming college grads into entrepreneurs through Venture For America,  
• Marc Nager is infusing innovation support groups through StartupWeekend’s massive program,  
• Jeff Slobotski has breathed more life into the Omaha region, 
• Brad Feld (who couldn’t make it) has helped transform Colorado, and  
• Shane Reiser and I are on a mission to bring startup communities to every university and region in the world.

While most panels hypnotize audiences into yawning, this panel had soul.

The question that got me thinking the most was “what makes a community successful?” The usual responses come to mind – capital, educated talent, etc. The missing piece that bubbled up from the conversation is the community itself.

Communities not only give entrepreneurs the ability to access resources and find teammates, but also provide the alleviation of fear. Starting a company is scary. It can be terrifying to leave the safety of a steady paycheck, especially when your friends and family think you’re throwing away a career and jeopardizing the wellbeing of your family.

This is where community can provide a dose of sanity. Meeting with other sane people who have chosen the startup path and hearing their words of encouragement can accelerate the rate with which new founders will fall from the branches of your local corporations and into your startup ecosystem.

Entrepreneurs are people - and for anyone straying from the herd alone can be overwhelming.  As a result, creating a community that simply allows would-be-entrepreneurs to join a different herd (rather than go solo) is one of the major keys to bringing startupland to your hometown.  

Simply put - get people together.

I had a whiz-bang financial model when I set out to ramp up Kohort, the social media start-up I co-founded. But even the best formatting and niftiest Excel tricks won't overcome the wrong inputs in your expense line.

Here are the top five expenses you could easily forget to plan for:

1. Benefits & Employee Taxes: If you haven't made payroll before you might not know that the government charges you for employing people. The taxes vary by state and city, but be ready to pay above and beyond salaries. In addition, if you offer your team benefits, which you'll likely need to do in order to be competitive in the labor market, that'll add to the bill.


2. Office Brokers & Equipment: When you get your first office (which might take a while, even after a seed round), the building will typically pay the broker fee. There are some instances, however, in which the building won't pay it and you'll need to. You can probably avoid this fee by asking brokers about it upfront, but you ought to set aside a little money for it if you're planning to get an office during the horizon of your budget. The other thing to consider is office "fitup" costs—furniture, electrical wiring, Internet installations, cleaning, and appliances. You might end up paying for these in addition to monthly rent…and it can easily exceed tens of thousands of dollars.


3. Property & Casualty Insurance: Another line item that blindsides most entrepreneurs is insurance. There's insurance to cover you if your programming code doesn't work, insurance to protect your board members from lawsuits, and life insurance on "key" employees (founders). Insurance can add up. In the early days of the company, you could be looking at a $10,000 to $15,000 annual insurance bill.


4. Trademarks & Domains: While most of us budget for legal fees tied to corporate formation, partnership agreements, and investments, there is a sneaky set of expenses that lurk around the corner if you're building a consumer-facing company. If you have a brand you'll want to protect, you'll need to file for a trademark, which can quickly run you a few thousand dollars, even on the cheap. Furthermore, you might find yourself needing to gobble up all of the domain extensions relating to your brand to ensure that there isn't a gambling site being operated offshore on your URL. If you rack up all of the offshore domains you might add $3,000 to $5,000 per year.


5. Software Services: You and your team will need to use services to build your company. One company will need to host your website, another party will charge you to provide an email service, and if you have developers they'll need to license development software. While these expenses usually won't break the budget, they typically scale with your team. An incremental hire could cost more than you think.

 This post originally appeared on Inc.com.