A VC in Vacationland

I have had a few life or death moments in the past, none quite a scary as being with my entire family–kids, grandkids, brothers and sisters, and about 150 other people, many of them friends,off the New England coast last weekend in a small ferry headed for a vacation on an island in a bad storm.  I really thought we were all going to die, as the ferry encountered fifteen foot swells, was experiencing thirty degree rolls, and green ocean water was crashing over the windows.  The very stupid captain finally turned around after a passenger was almost swept overboard and ended up badly breaking his leg.

It got me thinking about a lot of things, like being glad our wills are up to date (they are, and if, god forbid, my entire family dies on a ferry or private jet, our money goes to charity), but also about life or death experiences at startups.  I see the phenomena frequently–the frantic call from the CEO whose company is about to go under, the inventor who has run out his or her credit cards and home equity loans.  They are facing the life or death experience for their dreams and it is hard to say no and let a dream die.  Sometimes I manage to get the intellectual property or a part of the company sold to another entrepreneur.  Often the people do not go with the products.  I continue to hear from these people for a few months, with new ideas or seeking help getting a job. Then they melt into the past.

I should have acted sooner with that stupid ferry captain to prevent my latest life or death experience.  I have extensive blue water sailing experience off the Northern Atlantic coast as well as in the Caribbean.  I knew the trip was a mistake as soon as we left the harbor.  I should have demanded a return as soon as we hit the big swells, instead of waiting 45 minutes to finally go up to the pilot house and tell him to return to get medical help for the passenger and to avoid a disaster at sea.

Entrepreneurs also need to act sooner to avoid life or death experiences.  In my post of last week, I’m Having an Out-of-Money Experience, I detailed a number of ways in which entrepreneurs could avoid running out of cash.  I also learned a few more during my recent life or death experience.

There are also a number of additional things entrepreneurs need to do to avoid life or death experiences:

• Act Quickly: Perhaps your staff and advisor’s really do not know what they are doing.  You are the leader and you must do what you think is right. Not later, now. 
• Deny Your Emotions: Do not assume anything. Everyone and everything around you may be telling you that all your people know what they are doing.  These signals may be wrong. Very wrong. Go with your gut feelings.  If is does not feel right, it probably is not.
• Focus on the Present: Many may be telling you to not worry, or in the case of the captain, saying that we were only ten minutes from our destination.  Well, the seas were getting increasingly worse and the guy with the broken leg was turning gray. There are very limited medical services on the island, except for a small clinic, and the Coast Guard could not have choppered in under the storm conditions. Do what you think is right now.  A start up cannot focus on the longer term until the short term is stable.
• Have a Succession Plan: Most entrepreneurs do not have the legal structures in place if something happens to them.  A good friend of mine was a lawyer who didn’t think he needed to partner with anyone.  When he died unexpectedly, so did his practice.  His widow could not sell the business and ended up spending years in financial extremis.  Key man insurance is also important so that if one of the founders dies, then the others do not have to sell the business to play off the heirs.  Finally, file a written plan with your attorney about how the business will be handled if you should depart this world.