I’ve started a few companies in my life – 7, actually. The first when I was only 23 – and the mistake I made then was NOT involving an attorney except on the most fundamental level. It took several years of litigation to finally settle things from that company – even though it sold for a nice profit about two years later.
I’ve also made the mistake of bringing in too many ex-employees (actually, they were ALL ex-employees). We spent more time arguing about who was allowed to boss who around than we did developing product. We never did develop a product, actually (at least not before I left the company).
My next company will start with everyone clearly understanding their roles – and buying into them, and realizing that yes, even if we are still equal owners, someone has got to be boss. Eventually decisions need to be made. And I won’t be that boss – I’ll bring in one – preferably nobody else knows.
I’ve also started a company where I spent a significant amount of time with someone before I found out they weren’t really interested in what I was trying to do – they were a friend, and were just being nice, and trying not to tell me “no”. This goes back to the above about clearly setting expectations.
I spent a lot of money once on a “promise of investment” that never came – this sounds like an easy one to avoid, but when you are excited about an idea, it’s amazingly easy to imagine everyone else is just as interested, and to assume that they are on board, even if they haven’t invested a dime yet.
The most important thing I have learned is that people don’t like telling you your idea doesn’t interest them, doesn’t make sense, or is just plain stupid. It’s generally easier for them to “string you along”. While you are being “strung” you are wasting cycles.
This is especially true of VC’s. For some reason they hate to say no. Instead they say things like, “this is really interesting, but it’s probably too early in development for us to get involved. Contact us again in a couple of months”. That might mean exactly what it says. My experience is that it means, “I don’t want to hurt your feelings, but we aren’t interested”. The problem with the way you hear it though is that you go spend another couple months working on this thing, and then try to get back with the VC. By then you no longer exist to them. They’ve not only forgotten you, but they blocked your caller-id. It would be MUCH nicer if they were just truthful – my experience is that they think they are being nice by not telling you what they really think.
The same is true of friends, and family. That’s why it is critical to find a dis-interested third party that is some kind of expert in the field you are working in – and that you get their opinion – even if you have to pay for it.
Enough for now – there’ll be plenty more mistakes for Part 2, I bet!