NOTE: For this book review, I intentionally and excessively quoted the authors throughout the post. I do this for two reasons: (1) I prefer to have the authors’ words speak for themselves rather than me interpreting, generalizing, or inadvertently misinterpreting their intent, and (2) It helps you, the readers, see the quality of the authors’ work/writing.
In Straight Talk for Startups, venture capitalist Randy Komisar and finance executive Jantoon Reigersman shared the “secrets” they’ve gathered “from decades of being on both sides of the table—originally as entrepreneurs looking for advice and more recently as mentors” (p. xix). As they caution, “You must be fluent in all issues facing entrepreneurs if you hope to win” (p. xx).
From the publisher’s website for the book: Komisar and Reigersman walk budding entrepreneurs through 100 essential rules—from pitching your idea to selecting investors to managing your board to deciding how and when to achieve liquidity. Culled from their own decades of experience, as well as the experiences of their many successful colleagues and friends, the rules are organized under broad topics, from “Mastering the Fundamentals” and “Selecting the Right Investors,” to “The Ideal Fundraise,” “Building and Managing Effective Boards,” and “Achieving Liquidity.”
“From the outside, starting a company looks easy. Just wake up with an idea, tell your friends, and convince one or two people to partner up; take your pick of top-tier venture capital investors, build a product, get swarmed by offers, and sell to the highest bidder. But we know it isn’t really like that” (Komisar & Reigersman, 2018, p. 269-270).
The Review: It’s actually the last sentence describing the book (for those “curious about what makes high-potential ventures tick”) that got my attention and piqued my interest. You see, I do not run, work for or have any plans for creating a startup. The closest I’ve ever come to a startup is watching entrepreneurs on TV’s Shark Tank, a reality TV show about entrepreneurship in America; the “Sharks” – tough, self-made, multi-millionaire and billionaire tycoons – invest in the best businesses and products that America has to offer.
I’m writing this review from the perspective of someone who’s simply curious about how startups work.
Investopedia.com (2018) has succint and clear definitions for entrepreneur and startup.
Here’s the verbatim definition of startup from Investopedia.com: A startup is a company that is in the first stage of its operations. These companies are often initially bankrolled by their entrepreneurial founders as they attempt to capitalize on developing a product or service for which they believe there is a demand. Due to limited revenue or high costs, most of these small-scale operations are not sustainable in the long term without additional funding from venture capitalists.
Because Straight Talk for Startups is written as a list, it doesn’t “flow” like when reading a standard/usual business book. And since it uses a list (100 insider rules), it’s only fitting that I select a handful (one or two from each of the five parts that the book is divided into), and quote and talk about them below.
Part 1: Mastering the Fundamentals
Rule #5 (p. 13): Most failures result from poor execution, not unsuccessful innovation.
“Timimg is critical. If you are right about the market but wrong about the timing, you will fail just the same” (Komisar & Reigersman, 2018, p. 13).
Komisar and Reigersman said that Steve Jobs’ underappreciated strength was his “unnancy ability to never ship a product before its time” (p. 14). They talked about how Jobs killed off the Newton project (which had been struggling for years), but kept the talented people working in the area and redirected them to target digital music, eventually leading to the iPod.
“It was a decade later that Apple introduced the iPhone, a quantum leap from the Newton. The technology and batteries were finally cost-effective, the market had been primed to carry [Apple’s] entertainment in their pocket, and, by adding a cellular radio and a clever touch interface, Jobs finally had what he needed to deliver on the promise of a connected online communicator” (Komisar & Reigersman, 2018, p. 14).
Rule #18 (p. 45): Know your financial numbers and their interdependencies by heart. You might think that these rules are generic advice, but you would be wrong. Rule #18 offers a prime example of the detail-oriented wisdom shared. The authors offered a quick primer on how the financial numbers (e.g., income statement, cash flow statement, balance sheet, working capital schedule, debt & cash schedule) work together.
Komisar and Reigersman (2018) said that as an entrepreneur, you need “to be able to drill down into the components of each element [in the financial numbers] so you understand, for instance, why revenues have increased rapidly (more customers) but your operating margins have shrunk (discounts to accelerate sales, customers not as profitable as expected, etc.)” (p. 49).
Part 2: Selecting the Right Investors
Rule #31 (p. 80): Avoid venture capital unless you absolutely need it.
“Remember: venture capital comes at a price, in the form of a meaningful percentage of your company. . . So you have to be prepared to part with a significant portion of your company to even attract a good venture capitalist” (Komisar & Reigersman, 2018, p. 80).
“Venture capitalists will impose certain controls on what you can and cannot do without their approval, such as sell the company or issue new shares” (Komisar & Reigersman, 2018, p. 81).
Part 3: The Ideal Fundraise
Rule #42 (p. 110): Raise capital in stages as you remove risk.
Raise money in stages because “if you raise more money than you need in an attempt to remove the leap-of-faith risks too early, you will pay a big price. Given everything that you still have to prove and accomplish, on a risk-adjusted basis, your valuation will be too low to provide you and your team with a compelling upside after you absorb all the dilution a ‘one-and-done’ round would entail. Simply stated, you are too risky at the start to raise all the capital you need at an attractive price” (Komisar & Reigersman, 2018, p. 110).
Part 4: Building & Managing Effective Boards
Rule #65 (p. 175): Your board should be operational rather than administrative.
“You want businesspeople, not bureaucrats. You want a board of strategic thinkers with strong operating backgrounds, who are willing to work hard to make your venture a success. . . They need to be informed, available, knowledgeable, and engaged” (Komisar & Reigersman, 2018, p. 175).
Part 5: Achieving Liquidity
Rule #87 (p. 231): Investors’ and management’s interests in liquidity often conflict.
“Investors may argue against the sale of a venture below a certain price—even when it would provide a resctable outcome for all. They [the investors] expect a larger multiple and return on their investment and are willing to roll the dice to get more” (Komisar & Reigersman, 2018, p. 231).
At the end of the book, in the Epilogue, Komisar and Reigersman shared their “Cardinal Rule” which is “Always Ask Why?”
“Know why this venture is important to you. Why it should be important to others. And, given the low probability of success for any venture, why it is nevertheless worth failing at. Of course you don’t want to fail; success is always preferable to failure. But if you fail, will you feel you wasted your time, or that you fought the good fight?” (Komisar & Reigersman, 2018, p. 271-272).
I love this part:
“You don’t just dream up a company; you sweat the details and manage operations. You watch every nickel and are strategic about whom you raise it from. You lead through good times and bad. You assemble trusted advisers, coaches, and boards to keep you on track. You don’t dream it; you work it—hard” (Komisar & Reigersman, 2018, p. 270).
Summary: Reading about what it takes to start and run a company, in particular the know-how and experience needed to get the job done, and gleaning from the sage advice distilled in the 100 rules, was an extraordinarily informative experience. Based on the wisdom shared by Komisar and Reigersman, anyone—not only entrepreneurs—can benefit from the tips and guidance in the rules from Straight Talk for Startups. Even if you’re not an entrepreneur or know anything about startups, if you’re just curious about what makes a startup venture work, then I think you’ll find Straight Talk for Startups to be a fascinating read.
Written By: Steve Nguyen, Ph.D.
Organizational & Leadership Development Leader
References
Investopedia.com. (2018). Entrepreneur. https://www.investopedia.com/terms/e/entrepreneur.asp
Investopedia.com. (2018). Startup. https://www.investopedia.com/terms/s/startup.asp
Komisar, R., & Reigersman, J. (2018). Straight Talk for Startups. New York, NY: HarperCollins Publishers.
Disclosure: I received Straight Talk for Startups as a complimentary gift, but my book review was written as though I had purchased it.