Choose Your Weapons Wisely

Thursday evening Bob and I attended a networking event in Waltham hosted by TCN, at Foley Hoag’s Emerging Enterprise Center. As usual, it was well worth our time. We met some great folks who are doing some cool new things in a variety of innovative industries. We also got a chance to catch up with some folks we haven’t seen in a while. After all this I started to reflect on how instrumental some of our service provider choices have been for CitySquares. Choosing the right vendors is critical for a startup and I firmly believe that it can make the difference between being a startup and a relevant startup.

Find the right law firm. When we started out in 2005 I actually made it a point, and a time consuming process, to go out and interview law firms. Being that we’d be interfacing with consumers as well as small businesses, hopefully in high volume, I knew we’d need good representation and especially if we were going to raise funding. First, I wanted a firm that could provide a full suite of services to us. Having worked with boutique, or home based lawyers, I knew what they could provide and I knew very well what they couldn’t provide. At my previous company a home based attorney was OK, but not for CitySquares. Secondly, I wanted a firm that had extensive experience with high tech startups and Internet startups. That was very important to me. Lastly, I needed a firm that could provide a deferment. So I set out on a two month project to find the right firm for CitySquares. I literally conducted interviews. I had lawyers from small firms and large firms coming to our old office to meet with me and sell me. Most of them were pretty darn good. They were about as good a salesperson as I am, and that concerned me a lot of times. Other times I’d go to firms and they’d show off their view of Boston, or impress me with meetings with senior partners in the firm. At times I was flattered, because, who were we? We were nobody yet, and we didn’t have two nickels to offer. But I think they were all selling me just as much as I was selling them.

One evening I went to an entrepreneurial event at Foley Hoag called “Negotiating Term Sheets.” The attorney from Foley Hoag who lead the event seemed like a nice enough guy, and he put up with me during the event. I was a little outspoken at times about some of the terms and even about raising money at all. He tolerated this. After the event I asked for his card, told him that we were looking for a firm to help us with various corporate matters, funding, and then building the business etc. Long story short, Foley Hoag is now our law firm.

Now, I have to say that despite the fact that, yes, we’re talking about lawyers here, there is no substitute for a good lawyer. What I like about our firm and about our guy, is that a) he’s not your typical lawyer, he’s a pretty regular guy – salt of the earth, b) they treat us extremely fairly in any number of ways, and c) they have this EEC thing I mentioned in the first paragraph – the Emerging Enterprise Center. I can’t say I’ve attended all that much there, but when I have it’s been well worth it. It’s all about value-add right? I hate that expression, but it’s so true.

Find the right bank. Also along these same lines is picking the right bank. When we were on the hunt for financing we knew we’d need a good bank. And some might say that Citi or Bank of America can do just as good a job as any, or that the community bank around the corner can. And ya know, that may be true but it’ll be a long time until I find out because we chose Silicon Valley Bank based on numerous recommendations by numerous trusted folks, from our advisers, our CFO, to our attorneys and prospective investors. If it’s good enough for them, it’s good enough for me. I don’t quite know what I’m really looking for in a bank anyway, aside from lower fees, good rates, and a strong relationship. What you get with SVB is the later, strong relationships that hinge on the very fact that you are a funded startup company and that they understand your needs unlike any other bank. They also have relationships with your investors, as well as countless others, and that makes for some very good treatment. They know that if they treat you well, that they’re also treating your investors well, and in doing so, building relationships. Silicon Valley Bank was able to get us started on some basic banking services very fast, but also with some nice value-added services, like an unsecured credit card with a very reasonable rate and limit. Despite their name and that they’re headquartered in California’s Silicon Valley they are here in Boston. They have an office in Newton, not a branch, but they are able to handle deposits there, which they also offer via a free courier service. At SVB’s Newton office is where you can find one or two of Boston’s more well known angel investor groups meeting once a month. Those relationships can start with SVB. I bumped into our rep from SVB at the Foley event Thursday, and he was full of good information about a great many things going on in the Boston startup arena. Again, this is a key relationship that you just can’t find with your standard, every day bank.

Find the right accountant and CFO. There simply is no substitute for the right people handling your books and financial strategies. I’ve been using the same bookkeeper for about 8 years now, and I trust him with my personal finances as well as my business’ finances. He’s handled my taxes, my wife’s taxes, and my businesses’ taxes. This long lasting relationship will continue for a long long time. Why would I ever consider changing? He has never let me down, he’s been with me through the tough times and the good times, and he works very well with our financial strategist, our CFO. If the three of us couldn’t work well together, I’d be in a lot of trouble. I met our CFO a little less than a year ago, he was referred by one of our advisers. He’s got a ton of experience in the Boston startup community, specifically with technology and Internet ventures. Let me repeat that… He’s got a ton of experience in the Boston startup community, specifically with technology and Internet ventures. The more I work with him, the more I appreciate his experience and wisdom and the more I realize how critical a good CFO is. Keep in mind that we don’t employ him on a full time basis, he’s a consulting CFO. Financial strategy, projections, etc., is one area that I’m not savvy in, so having a CFO who can work with me to layout the financial plan, who can work with the board of directors, who can work with my bookkeeper, and office manager, and who understands the scene is just absolutely mission critical. We made a mistake a couple years ago, working with a “CFO” who wasn’t up to par. Well, that’s a mistake I won’t make ever again.

Obviously there are other key relationships that need to be built and cultivated in a startup, but also over the longer term for an entrepreneur. I’ve talked about the importance of good advisers previously, and how hard it is to find them, but I’ve neglected to talk about these service providers. Having good service providers, and top-tier service providers like those I’ve mentioned, brings a certain amount of credibility and respect to the business just as much as having the right management team or the right investors. These folks need to believe in you just like a good investor or employee would. That is the basis of the relationship – trust, and believing in the entrepreneur(s) and in the plan. With that trust comes a relationship, and with that relationship comes top-tier services, credibility, and it puts you in a leading class in the entrepreneurial community. Lastly, I believe that if I do a good job with CitySquares, and if I decide to build another business afterwards, that I’ll be able to count on these folks to go for another ride with me – at their own risk of course!

The Importance of Good Advisers

Being that CitySquares is my second business I understand how important it is to have advisors – good advisors – and good advisors are hard to come by.

In my first business, which I started with a technician’s mindset (See E-Myth), I brought on some “advisors” and paid the price – in more ways than one. I brought in people who I thought I could learn from, who I thought I could grow my business with and in return provide them with some real interest in the company’s growth. What I ended up with was whiteboard sessions that went nowhere too often, overly complicated product ideas, and more messes to clean up. After giving it a good solid shot for a year I had to end it. It was painful, very painful, and cost a lot of money and time. It was a good decision and I learned some extremely valuable lessons from that experience.

When Bob and I started CitySquares not a day later did we decide to build an advisory board made up of people we could a) trust and b) who didn’t immediately want something from us in return. Those two qualities ruled out a whole bunch of people over the course of a few months. We quite literally interviewed people! I remember some of them read about us in the paper when we were just starting out, and they were very eager to “work with us.” Well, what that really meant was they wanted to do any number/combination of these things:

  1. draw pretty pictures on a whiteboard and show off how smart they are
  2. convince themselves of how valuable that MBA is
  3. carve a notch into their belt – like its another credential
  4. get-in with any board members/investors for their own selfish reasons

And in return they wanted equity, a seat on our board of directors, introductions to investors, even cold hard cash.

When it was all said and done what we ended up with was a small advisory board made up of a few people who came to us in very unexpected ways, and who …

  1. totally bought into our vision
  2. totally bought into our business model
  3. totally bought into our mission for locally owned business and real world community

These advisers wanted nothing in return for their time and for their brainpower – and I’m not exaggerating. I’d press the issue with them over coffee, lunch, whatever, and I’d insist that we put something in writing – and they’d insist “what’s the rush, Ben?” and “there will be plenty of time for that, Ben.” and “let’s just get Citysquares to [milestone] first.”

These folks are my most trusted advisers today. I have the utmost respect for them in so many ways and they continue to provide immense value to me and to the company, from referring us to others/others to us, to attending various meetings, to taking calls from me at various hours and in some instances working with some of my staff on things. The value is immeasurable. And yeah, now they’re all under formal agreements with the company and I sleep better at night because of it.

The point here is …

  1. Finding good advisers is extremely hard
  2. Bad advisers can be costly – even devastating
  3. they likely end up coming to you in unexpected ways
  4. they don’t want anything in return (within reason of course – I do suggest picking up the tab on lunches, coffees, beers, whatever, and going to meet them where it’s convenient for them – always)
  5. when you got one, you’ll know it
  6. when the time is right, be sure you know it!
  7. offer them your best deal
  8. Thank them often – you’ll need them when times are good and when times aren’t good.