“Why are you worried about selling your company?” I asked Fred. “You’re just getting started, and you’re worried about selling (your company)? That doesn’t feel good to me.”
I had just met Fred, and I was trying to decide whether I was going to work with him. And, an entrepreneur who volunteers they are focused on selling their company in a couple of years is not an entrepreneur I’m interested in working with.
Sign number one: You’re not thinking big if you’re thinking of a sale from the get go.
You know the old saying that building a startup is a marathon, not a sprint. Well, you’re a sprinter, and you’re going to burn out well before the marathon is over.
So, best of luck to you, but I’m not interested in working with you.
More importantly than that, you likely don’t have the stomach for the challenges you have ahead.
The thought process of a quick sale is the wrong mindset. It’s likely to take you seven to ten years before you have a successful liquidation event. There are going to be lots of moments where everything hangs in the balance.
If you can’t learn how to take a punch, then you don’t stand a chance as a startup CEO. And believe me, you’re going to get punched again and again.
Sign number two: You’re too stingy with your equity.
Years ago, the CEO of a startup approached me to work with him. He had no investors, and he was looking to hire a VP of Engineering.
He found a good candidate for the position, and he only wanted to give him 1% equity vesting over four years. I told him the candidate wasn't going to take the risk of joining at this early stage for such a small percentage ownership.
The CEO's answer was, "Why not? We're going to be worth $1B in a couple of years."
Yeah, great. You believe you’re thinking big with your unicorn goal of world dominance, but you’re actually thinking small. If you can’t build a great team, then you can’t win.
That’s what’s going to happen when you hoard the equity. There’s a market for each position you have, and if you offer a great candidate a below market equity offer, you’re not going to hire the candidate.
Sign number three: You’re afraid to raise money because you’ll lose control of your company.
I saw this play out with my first set of co-founders, “Jim” and “John.” They were so paranoid about being screwed over by investors they quit before our funding could close.
Then, they started up their own company and started raising money. Yet again, they walked away from a term sheet from a very good investor. Instead, they tried to bootstrap their company to success.
Their company never grew to any significant level. After a couple years, they gave up. That's what happens when you think small.
Sign number four: You’re afraid to delegate to your team.
To scale your startup, you’re going to need a great team around you. And, you’re going to need to delegate to your great team.
You can build a startup to, maybe, $10 million or so with just you being the sole brains of the company. However, try scaling your company to $100 million and beyond, then you’re going to need a great team around you.
But, if you’re too afraid to delegate responsibility to your team, then you’re thinking small. Worse, your company will likely not scale.
Sign number five: You’re afraid to sell.
Show me a CEO that’s afraid to sell, and I’ll show a CEO that’s doomed to be small time forever.
I’ve worked with a lot of engineers that have never sold before and were petrified, the optimum word being “were”, of selling. The successful CEOs, despite their fear, just go out sell.
They may be awkward, and they may not know what they’re doing, yet they will be the most successful sales person the company has for the life of the company.
The CEOs that farm out sales to someone else stay small time. At best, their company meanders along. Most likely, their company completely fails.
So, there you have it. My top five signs that you’re thinking small. You’re in great shape if you’re not doing any of these.