A young emergency medical technician saw a problem in the field in which he worked. He carried enormously large patients up and down stairs. If you consistently do this time and time again, shift after shift, this results in a fatiguing injury to one’s back. The next thing you know…SNAP. Herniated Disk—most likely a career ending injury.
So as this young medical technician watched his partners go to light duty or end their fire-fighting and emergency medical careers, he came up with a solution. This solution consisted of a track device that mounted to the bottom of an ambulance cot. This, in effect, assisted medics so that they would no longer need to carry patients down flights of stairs.
He did all of the prototyping in an out-of-company atmosphere. Once he had a working prototype that he felt was worthy to show to his co-workers, he felt confident enough to ask for help getting this back-saving tool to market.
He had a business plan that was very well executed (This was 1998. Business Model Generation did not exist. He was young, but old school) and was ready for discussions.
His intellectual property (IP) attorney gave him five names of potential angel investors. Three of these names he could not use the IP attorneys name with, two he could. First call, he got shut down completely, second call there was no answer, third call he was verbally vomiting at 100 mph. This third angel investor asked a couple of roundabout questions, and then got straight to the point. “Do you have IP?”
“Yes” the young EMT answered.
“Who is your IP attorney?”
Angel investor says, “I know who gave you my name.”
Then the angel stated, “If he believes in you, so do I. Let’s schedule a meeting.”
Little did this EMT know what was coming. The angel investor wasn’t really interested in the investment so much as getting to know the young inventor. After an hour’s discussion, the angel said: “Here is my offer. I am proposing a percentage portion of your company in exchange; I will give you a mentoring board of directors. It will consist of four people. An operational excellence leader, financial leader, executive officer leader, and someone that is well versed in raising capital if we should need it.”
“Yes, we.” stated the angel investor. “I would like to be your partner”
“What about the cash investment?” said the young medic.
The angels first line of advice: “I think that you are far enough down the path that you can get a purchase order if what you say is true.”
At the end of the day he was correct. PO in hand two months later, 50% of this order was pre-paid in cash. This was the start this company needed.
There are five years of moments much like this. A very young leader learned from a very experienced team. This team took this medic through:
•Five fundraising events that involved close to 30 investors.
•Type of fundraising that took place: convertible debentures, common stock, series B, and series A preferred rounds.
•Full-scale prototyping and production management. Down to the nitty gritty. Supply chain management, cost reductions, pricing strategy, negotiating with suppliers on terms etc…
•Superior financial knowledge. This is a keen understanding of how to leverage an income statement, balance sheet and cash-flow statement.
•Monthly financial metrics and goals, quarterly board meetings, and annual shareholders meetings.
•Product marketing and marketing communications mentoring
•An acquisition to a Fortune 100 company (SYK)
•Post-merger activities. (Every acquisition is different, but these bottom two were close to starting the company over again from the ground up.)
The point to showing this high-level bulleted list is to share with you that a young entrepreneur needs a team IF your plan is to raise capital and set it up for an exit strategy. Having amazing mentors pulls your mind out of the daily grind. What really hits home is the majority of these endeavors are happening outside of the day-to-day activities.
The pressures on a young startup entrepreneur both inside and outside of the company are enormous, especially if you include the company’s performance evolution. If the company is under-performing and you have a supportive board, this can make all the difference. Carrying this on your own and preserving the company culture is hard to do with a supportive board—doing it alone would be very difficult if not impossible in my opinion.
If the company is over-performing, this can cause the same challenges. Growing a team, preserving culture, watching costs, and staying in the high margin zone are essential. Having a mentoring group that applies accountability pressure during these times is also vital.
I’m sure you may have guessed this by now, but this was a little snippet of my personal story. People can talk about master’s degrees all they want, but nothing replaces real world learning. Without this mentoring team, the company could not be a success.
Without the internal team at our place of business, we could have not been a success. It takes an entrepreneur to balance this equation well and make sure that both teams are working together.
This takes time to learn. It is an acquired taste. Sometimes it’s bitter and you want to spit it out. The other times it is soooo sweet!
The biggest challenge sometimes is not the success of your product but getting your team to take steps at the same time and be on the same page. I felt my team was unbelievable (both internally and externally) at understanding how this goes together.
Good luck to you, and I hope that you can create the perfect balance!