Do you want to pitch your business to investors? If so, this may not be a book you can afford to skip. The authors show you how.
In the TV series “Star Trek: The Next Generation” and its sequel series “Deep Space Nine,” the commerce-centric aliens known as Ferengi had a directive called The Rule of Acquisition. Well, entrepreneurs are not aliens, but start up complexity, especially when it comes to financing a start-up and managing its complexity, can feel alien enough to warrant a few rules.
While there are a lot of books on startup rules, the best one is a straight talking resource called Straight Talk for Startups; 100 Insider Rules for Beating the Odds from Mastering the Fundamentals to Selecting Investors, Fundraising, Managing Boards, and Achieving Liquidity. Written by Randy Komisar and Jantoon Reigersman, the book is a condensed series of concepts belonging in every small business library.
Komisar and Reigersman have years of entrepreneurial and investment experience between them. Komisar has written several books on entrepreneurship, as well as being a frequent lecturer on the subject, while Reigersman serves as Chief Financial Officer of Leaf Group, a publicly traded consumer internet company. I feel these men have crafted a splendid primer every entrepreneur must read to make their pitches better.
What Is Straight Talk for Startups About?
Komisar and Reigersman share 100 time-tested ideas for building a start up from a financial and operational standpoint. This book is aimed at startup entrepreneurs who don’t have time for a deep dive into financial questions. Instead they need fast info to help when pitching to investors.
The rules are organized into four parts: Mastering the Fundamentals, Selecting the Right Investors, The Ideal Fundraise, Building and Maintaining Boards, and Achieving Liquidity.
What I Liked about Straight Talk for Startups
I like how imaginative the authors were in creating this set of rules. The book’s format allows entrepreneurs to highlight really terrific reminders applicable when finishing financial tasks or operating within teams. Instead of suggesting a business plan, Rule 17 recommends developing an aspirational plan and execution plan. Another rule suggests hiring a game-raising assistant rather than “a full-time seat filler.” Phrasing like this helps you rethink how your business is positioned.
Other rules deal with issues like liquidation and investment. Here’s a rule about how to pick the right type of capital investor for your business.
“Domain investors — These venture capitalists usually have business experience in a particular industry…They can bring a wealth of industry experience and connections to your venture. The downside is that they may be prisoners of their own experience and resistant to your new, industry-disrupting ideas.”
The rules flow well from one to the other, making comprehension of ideas easier. Rule 41, “Strategic Investors Pose Unique Challenges,” complements Rule 42, which covers raising capital in stages. Here’s a bit more on Rule 41 as an example:
“Corporations flush with cash and short on innovation are frequent investors in startups…But taking money from a strategic investor is tricky. First the stage of your investment is important. If your venture is pre-product or pre-sales, your strategy is still very fluid…They might invest in you as an enterprise software company only to find that, by the next financing, you are now a consumer hardware company. As you can imagine, those changes will cause them to reconsider their continued support.”
Another gem is Rule 16, “Use Your Financials To Tell Your Story.” I really liked the phrasing about viewpoints here:
“Ventures do not run out of cash overnight….The best practice for early-stage venturers is to focus on cash burn from both an operational point of view — where the money is going — and a variance point of view: how your cash spending is different from what you planned or anticipated.”
The rules are timely, including a nod to the Jobs Act and a mention of 409A price when working with third parties to issue stock. In fact, Rule 85 — which references investment alternatives — is a must-see.
What Could Have Been Done Differently?
The book could have called out specific examples marketing missteps, but doesn’t really spend too much time on this issue. However, the book’s opening section, Mastering The Fundamentals, does look at the authenticity of a standup’s branding. For example, the book challenges startup entrepreneurs to ask whether their businesses are ones other investors want to work with? If so, why? The rules Komisar and Reigersman lay out address branding as eloquently as they do cash flow.
I prefer the book’s financial focus however, because it helps entrepreneurs look at the payoff when deciding on which marketing choices to deploy.
What Complements Straight Talk for Startups?
A good compliment to this book is one of my favorites, Venture Capital Investing. Other books for funding a business we reviewed include The Crowdfunding Revolution, which focuses more on VC-backed resources, Locavesting, which examines community resources, and Cash from the Crowd, which looks a crowdfunding. Take a look at all of them to determine what approach makes sense for your business.
Why Read Straight Talk for Startups?
This is a must-read for entrepreneurs planning to expand a business or those dreaming of a future IPO. It can provide much needed advice without lengthy discussions. Straight Talk for Startups is not as in-depth as a book specifically about finance, but it does get you ready to pitch your business to investors — making the book an excellent resource.