Name and Current Occupation: Judy Robinett, investor, start-up coach, entrepreneur, super-connector
What is your start-up story?
I have a bit of an unusual start-up story. I was working as an executive at a hospital in Idaho. I had been working closely with practitioners and academics, including Malcolm Baldrige, to create a set of healthcare standards that would lead to quality improvements in the healthcare chain. And then a colleague approached me and asked me to look at a restaurant that we thought could be a good franchising opportunity. Not surprisingly, a restaurant was a difficult first start-up, but I learned a tremendous amount about bootstrapping. Imagine getting a $1.6M SBA loan, then as the business hit an unusually slow winter, running out of cash. I was terrified and went to a bankruptcy attorney before making the decision to figure it out. It put steel up my spine and I understood clearly what ‘cash is king’ is all about. After turning the business around and selling it, I now advise entrepreneurs to cut their revenue projections in half and plan accordingly. Always have a Plan B.
What is the secret of your success?
I have learned to subscribe to the J. Robert Oppenheimer quote: “We know too much for one man to know much.” One of the most important lessons I have learned is that I don’t know everything and never will, regardless of how hard I work or study. I surround myself with people who are smart, trustworthy and have good instincts – advisors who have a good head, a good heart and a good gut are invaluable. My attorney in my first startup-up once advised that I could have my ego or the money and suggested he play a larger role in negotiating a deal. On another deal, a trusted board member shared her gut feeling that a potential investor with deep pockets appeared to be untrustworthy and even dangerous. Make sure you surround yourself with advisors who are truth tellers—people who have your back and your future.
As my career has progressed, I have become more and more a trouble-shooter for ventures that were struggling because their management teams couldn’t or wouldn’t see their own shortcomings. Because they lacked this knowledge, they were unable to leverage their existing resources or find additional resources that could get them to the next stage of development.
For some people, that inability to recognize internal inadequacies is an ego issue – are you willing to give up being “king” of your own venture to be successful? A willingness to recognize areas of weakness – within yourself, your management team, your advisors – is critical to growing a business and achieving any level of success. Opinions are cheap. Get advice from those who have done it successfully.
What is a “Super-Connector”, and how did you come to be one?
A super-connector is exactly what it sounds like – a person who is able to connect many individuals from many parts of the innovation ecosystem. My contacts span from coast to coast (and internationally too) but more importantly from A to Z in experience. The quality of the chosen connection is more important than the quantity of the available connections. I not only make person-to-person connections, but I also make person-to-group connections and group-to-group connections. One of the keys to success is to be part of a group (or groups) that will provide access to what your business needs – usually capital, strategy, and team members but also support.
I became a superconnector by accident. People kept introducing me as the best networker they had ever met and asking if they could follow me around to see how I did this. For years I thought I was shy so I didn’t pay much attention to it until I was introduced to a gentleman who had grown a company to $1.7B in sales. I was introduced as someone with a platinum rolodex. I could finally see that connecting with people was a valuable asset that I could enhance. And I did. Nothing happens without people. People write the checks for funding, people share the ideas for opportunities and people buy your business.
What advice would you give to a new entrepreneur?
Three pieces of advice:
- Invest in resources to get it right the first time. Investors are not going to want to work with you if your company has “hair on the deal” – i.e. that you have made mistakes prior to funding that are going to be expensive (or impossible) to clean up. If an investor is choosing between a “hairy” deal and a clean deal, they are going to choose the clean deal. This means hiring attorneys, CPAs, and other service providers when you first start—paying them in cash or stock options– and maintaining records, staying organized, and protecting your important assets (IP, proprietary information, etc). This will not only help you avoid missteps early on in your start-up, it will also enable potential investors to breeze through their diligence process. The easier it is to do diligence, the more likely it is for them to fund you.
- Have a clear exit strategy. Investors bet on companies where they see the potential for business success that fit with their model. While some super angels, angel groups, micro-VC’s or VC’s are agnostic to industry (technology, life science or stage) and stages of startup financing (seed, angel, round A), many are not. Many investors were burned in the most recent downturn because they had invested in great (or not-so-great) companies whose exit strategies were not as robust as they had thought. Think hard about not only the investor’s exit strategy, but your own.
- Go where the money is. I recently heard the statistic that 80% of investment money for technology start-ups is coming from Silicon Valley, and that 60% of angels only invest in their geographic region. If you want to be successful, you have to go where the money is. In other words, understand the funding ecosystem. In 2011 there were 790 VC firms highly concentrated in Silicon Valley–$80B in CA, $30B in Boston, and $17B in NY. Very few startups are funded by VC’s. The National Venture Capital Association (NVCA) estimates $18B+ is invested by angels annually. It is also estimated that angels fund 30 to 40 times more startups than VC’s. There are 630,000 accredited investors in the United States. Informal investors – relatives, friends, neighbors and strangers – are estimated to loan or invest $100B+.
What resources (blogs, books, etc.) are you reading right now?
Two excellent books that are just out are “The Ultralight Startup: Launching a Business Without Clout or Capital by Jason L. Baptiste and “Venture Capitalists at Work: How VC’s Identify and Build Billion-Dollar Successes,” by Tarange Shad and Sheetal Shah.I read a lot of blogs, particularly Brad Feld at Foundry Group (http://www.feld.com/wp/), Jonathan Fields, author of Uncertainty: Turning Fear and Doubt into Fuel for Brilliance (Portfolio, September 2011) (www.jonathanfields.com), and Steve Blank, professor of management and entrepreneurship at UC-Berkeley and author, with Bob Dorf, of The Startup Owners Manual (K&S Ranch 2012)(www.steveblank.com).
This post on Start-up Stories was authored by Caitlin Vaughn.