A VC in Vacationland

English: John Lasseter, Chief Creative Officer of Pixar and Academy Award winning director of, Toy Story, reviews the 550 films on the National Film Registry with These Amazing Shadows co-producer, Barbara Grandvoinet. (Photo credit: Wikipedia)

Charlie Rose recently did an interview with John Lasseter, a founder of Pixar (and summarized in the New York Times). The interview focused on Pixar's in-house theory: be as wrong as fast as you can. Lasseter said, that mistakes are an inevitable part of the creative process, so get right down to it and start making them.

Brilliant thinking, and it struck me that startups should follow the same advice. But the problem is: HOW DO YOU KNOW WHAT MISTAKES TO MAKE FAST? Here are a few thoughts on the process of making startup mistakes.

1. Figure out who your customers will be–in every startup I have been involved with this has been the key question to determine up front. Who has the pain points? Are they willing to pay (on an ongoing basis) to solve those problems? What will keep them coming back for more? Easy questions to ask, but tough ones to answer. But you better figure it out…and fast. At Placester, we originally thought that our customers would be landlords and that we would help them rent, manage and sell their properties. But when we applied the "show me the money" rule, we realized that real estate agents had the biggest need for an on-line presence and also controlled significant advertising money. We may get around to the property owners later, but the agents had the biggest incentive to make a rental or sale happen, because they were only paid on commission.

2. Be selective in team building–not only will these people make or break your startup, you have to live with them 12 hours or more a day. Compatibility is critical and shared passion a key. In one case, a co-founder moved back from his beloved Europe to the US to help run a startup. That shows real passion and dedication. In another case, a co-founder ended up with significant ownership, but other career ideas. We were lucky to have an amicable "return of founder equity" in that case.

3. Only have committed investors–I have seen too many startups take dumb money, either from investors with little knowledge of the space, or investors without access to sufficient funds to carry the company through the development process. It's easy to grab any money coming your way when you desperately need it, but if those investors cannot help you either be successful (via mentoring and industry networks) or gain entrance to the venture capital world, the burden of driving the company forward will fall totally on your shoulders. Cold calling VC's is no fun and its very difficult to get anyone to listen to you without an introduction. So if Uncle Frank is an early investor, that's fine as long as you quickly get a cadre of experienced investors as well to carry you forward.

Finally, celebrate mistakes. Stand up in front of the team and say " I just wasted a couple of days looking at the wrong marketing/HR/etc. strategy!" Your team will learn from your candor and be willing to do the same when they screw up.  It also saves someone trying to "win at the crap tables by betting their house after they lost all their money"–or sticking to a solution path that is not working.