Innovation and entrepreneurship are very much a part of the American culture. In many respects this may be the best time in history to start a new business. In many industries barriers to entry have never been lower. Globalization has reduced the costs of production and opened new markets. The new media has provided inexpensive ways to reach new customers.
Start-ups have access to incubators, accelerators and many other support systems that did not exist a generation ago. There are more books, classes, conferences, coaches and success stories to emulate than ever before. Unfortunately many offer conflicting and sometimes foolish advice.
Start-ups also have access to far more capital than ever before. There is more money in venture capital and angel investor funds. There are government programs like the SBA which will guarantee loans and other programs that provide grants for new ventures.
This convergence of knowledge and capital is important because both are needed for any business to succeed. A good business without capital is likely to go nowhere. What I find amazing is the need to explain this to a great many people who want to be entrepreneurs.
I frequently speak with two or three entrepreneurs a week. I meet many through Founders Dating. Founders Dating is a website where entrepreneurs can ask each other questions that are relevant to the start-up experience.
Conceptually, Founders Dating is an excellent idea. Entrepreneurs frequently face similar problems and unfamiliar situations. There are many seasoned executives who are willing to offer them advice. However, some of the questions and many of the answers highlight substantial problems.
Some of the questions reveal that some of the entrepreneurs do not have a clue about the real world. Many of the answers are shallow and reflect a “gut response” to complicated issues.
On more than one occasion, someone has asked for the best book to read to help make them a successful businessperson or to teach them how to successfully market their product. There seems to be an attitude, especially among the younger entrepreneurs, that they can learn all they need to learn without a business school education or any practical experience.
As it should be, many of the entrepreneurs are younger millennials and many of the advisors are older baby-boomers, like me. I am surprised how many times that the advice offered by these older executives is “pooh-poohed”. There is an obvious attitude that baby-boomers do not understand technology or the “new” financial markets. Nothing could be more foolish.
Baby-boomers after all created both Apple and Microsoft, were the first users of their products and invested in their IPOs. Similarly, when Genentech did its IPO in the mid-1980s baby-boomers did not have much difficulty understanding “genetically engineered pharmaceuticals” even though they were a cutting edge concept at the time.
At the same time the idea that the financial markets have fundamentally changed is just wrong. If you are looking for funding for your start-up you are probably not going to ask millennials for money because they do not seem to have a lot of it. Baby-boomers, on the other hand, poured billions into tech stocks in the 1990s and still do.
There are actually a few angel investors on Founders Dating who are happy to tell entrepreneurs what they are looking for in a start-up and how they think a start-up should structure its pitch to investors. You would think that the entrepreneurs who are looking for funds would value the advice of people with money to invest, but it is not apparent that they do.
Again, there are people who have read one or two books on the subject who claim to know better. They are telling the entrepreneurs what they want to hear, not what they need to know.
Many inquirers seek specific advice about legal or tax issues. I always advise them to seek their own legal counsel. General answers to general legal questions rarely apply in all cases. In many cases questioners are referred to forms or templates which may or may not get the job done.
In one case, a questioner asked about the tax ramifications of using independent contractors as opposed to employees. It was not a foolish question but it elicited a foolish and dangerous response.
I am not a tax specialist but I do know that the IRS has a specific guideline for determining who is an employee and who is an independent contractor. The guideline contains a list of about 20 things the IRS considers and will apply should you get audited. I told the questioner to consult his accountant and follow the IRS guideline.
Almost immediately, another person chimed in to tell me that I was an idiot to follow the IRS guidelines or to recommend that anyone should. That person had apparently done so, hired a slew of independent contractors and the IRS penalized him anyway.
My first thought, of course, was that he had not followed the guideline correctly or that there was more to the story than he was telling. Whatever the truth, he was adamant in his advice to the questioner that following the IRS guideline was useless. He was so adamant and made such a compelling argument that I called a tax attorney I know to ask if the IRS had changed its mind or if my advice to follow the guideline was misplaced. He assured me that any competent tax professional would have given the advice that I did. But how would the person who asked the question know that?
I look at Founders Dating as way of doing pro-bono work. When I am speaking with an entrepreneur I give the same advice for free that I would give to a large established company that was paying my normal hourly rate.
One of the hazards of the information age is that there is so much bad information out there. Founders Dating is a good idea, but it needs some mechanism to filter the good information from the bad or the recipients of the information will get nothing of value.