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Key Financial Modeling Lessons for Entrepreneurs

     
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When it comes to establishing a startup, there's a lot to learn. And who better to learn from than the people that have experience with hundreds of startups that both succeeded and failed - the investors themselves. The following are a few lessons from two of the most prominent investors around that you should be sure to take note from, Mark Andreesen and Ben Horowitz:

Marc Andreesen

Today, Andreesen is co-founder of AH Capital Management, and one of the world's most successful technology investors. But, Adreesen's experience reaches much further than his successful investment record. Prior to his current role he saw tremendous success in the software industry. Holding executive positions with companies like Opsware, America Online, Netsacpe, Facebook, and many others. Here are a few words of wisdom that any technology entrepreneur would be wise to listen to.

 

“On the inside, when you’re running one of these things, it always feels like you’re on the verge of failure; it always feels like it’s so close to slipping away. And people are quitting and competitors are attacking and the press is writing all these nasty articles about you, and you’re kind of on the ragged edge all the time…“

 

Key Takeaway: An important thing to keep in mind as an entrepreneur is that nothing is going to come easy. Even if you manage to secure investments from angel investors or a venture capital firm, that's only the first hurdle. Making effective use of that investment is going to be a struggle - you need to be strong-willed and hardworking to succeed because your back is going to be up against the wall for a long time to come.

 

"If you're a new startup and spending $50 million a quarter, maybe switch to regular water instead of coconut water. We call it the 'edifice complex.' As soon as a company builds their fancy new headquarters they immediately fall off a cliff and collapse. It's peak ego building, something that doesn't work."

Key Takeaway: Just because you've managed to raise a large sum of money doesn't mean that you can throw it around fast and loose. A high valuation isn't a sign of success, it's a sign of opportunity - so don't throw it away.

 

"The common theory is that you want to be first to market, but actually you want to be last to market and close the door [on that industry] so no one can come after you." 

Key Takeaway: Just because you think you have the most unique or innovative business idea doesn't mean that it will result in the best possible product or service. It's the startup that perfects the idea and executes the best business plan that succeeds - and that is the startup that is last to the market - for the simple reason that no one will be able to better their concept.

 

Ben Horowitz

Horowitz, the other half of AH Capital Management, aka Andreesen Horowitz, is equally respected among technology investors and entrepreneurs alike as one of the best of the best, and his extensive experience in industry without a doubt has helped him achieve greatness in is current role. Here are a few key soundbites that are worth reading.

 

"There are no shortcuts to knowledge, especially knowledge gained from personal experience. Following conventional wisdom and relying on shortcuts can be worse than knowing nothing at all."

Key Takeaway: There's only a certain amount that you can learn from reading books and lessons like these - you can't expect to know everything you need to know without actually experiencing the process yourself.

 

"All the mental energy you use to elaborate your misery would be far better used trying to find the one seemingly impossible way out of your current mess. Spend zero time on what you could have done, and devote all of your time on what you might do. Because in the end, nobody cares; just run your company."

Key Takeaway: Things are going to go wrong, especially if you've chosen to be an entrepreneur. It's the nature of the business. However, the difference between an entrepreneur that is successful and one that isn't is the ability to accept failure, learn from it and focus on finding a solution. Nobody cares about your startup except you, so dwelling on your mistakes is pointless.

 

“Often any decision, even the wrong decision, is better than no decision.”

Key Takeaway: When you're forced to make a hard decision, you're going to need to be confident and decisive - even if you make the wrong choice. Making the wrong decision comes with the job, it provides experience that you will use to make better decisions in the future. If you're afraid of making a decision because you're afraid of being wrong, then you may be in the wrong line of work.

 

“Sometimes an organization doesn’t need a solution; it just needs clarity.” 

Key Takeaway: People can sometimes be too focused on the potential outcome of a solution to a problem, when really, if you look back at the origin of the problem, the solution may end up presenting itself. In other words, slow down and take a look at the whole picture when dealing with any issues that come up before making decisions.

 

Keep these quotes by two of the most prominent investors in mind as they can provide valuable lessons as you go about funding your startup.

 

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