By their count, Catalina Daniels and Jim Sherman (both MBA 1991) listened to approximately 300 startup pitches in 2016, the first year the HBS classmates worked side by side as angel investors in New York. “You meet a lot of very smart people, with what sound like good ideas,” says Daniels, “but even if you meet them for only 15 minutes, which is a typical angel pitch, you can see them make mistakes on the spot.”

They were the type of missteps only experienced entrepreneurs would recognize as potentially fatal weaknesses: a lack of clarity around the problem the company is trying to solve, confusion in how the founders relate their story, or an overreliance on fundraising. “We started to see some patterns,” Sherman notes.

That year, the pair jointly invested in three companies, about one percent of those they had considered—that’s about the typical success rate for new companies that seek funding. The experience made Daniels and Sherman consider how they could improve the chances of future entrepreneurs at every stage of the process. The answer: Smart Startups: What Every Entrepreneur Needs to Know, their new book with advice from HBS founders, including Daniels and Sherman themselves. “Our purpose is to improve the odds for any startup,” explains Sherman.

The pair came to entrepreneurship via different paths. Sherman spent his first years after graduation from HBS working in media corporations, yet he had always envisioned himself at the helm of a startup. In 1997, he was tapped to launch Martha Stewart Living’s first online business; in the process, he discovered the need for an internet strategy firm focused on media and publishing. Sherman set off on his own as founder and CEO of WestEnd New Media in 1998 and then launched two more companies, including ShermansTravel Media.

Photos by Simon Simard

Photos by Simon Simard

Daniels, on the other hand, had never considered herself a born entrepreneur. She worked at McKinsey & Company before attending HBS and returned to the firm after graduation, building a 17-year career in consulting. She thought her next step would be a move to the corporate world, until she was presented with the opportunity to invest in and lead Sweetwell, a company developing low-calorie sugar replacement. Since leaving the company in 2011, she’s worked in the entrepreneurship space as a venture partner at ERA, a New York–based accelerator, and as an investor and board member.

In their exploration of how entrepreneurs might best avoid common pitfalls and instead plot paths to success, Daniels and Sherman asked the founders they interviewed the same question: What did you wish you had known?

For Justin Joffe (MBA 2009), one surprise came early in his entrepreneurial journey. There is no lightbulb moment, Joffe explains in retrospect. “I don’t believe a coconut falls out of the tree, hits you on the head and you have an aha,” he told the authors. He evaluated 30 ideas before landing on the one that became to his first startup, a mobile dental practice called Henry the Dentist.

Jenny Fleiss, who launched Rent the Runway with cofounder Jenn Hyman (both MBA 2009) realizes now that they would have allocated their initial resources differently if they had recognized their true competitive advantage sooner. In the early days of the e-commerce site, the pair focused on building relationships with designers; ultimately, however, it was mastering the logistical challenges of renting clothing that set them apart. “It’s been where we’ve invested a ton of time and energy,” Fleiss told the authors. The company even developed one of the largest dry-cleaning operations in the world.

Other responses to the coauthors’ open-ended question included the importance of governance, a lesson Daniels learned at Sweetwell. They also learned it is never too early to plan for an exit, a process Sherman experienced when he sold a material stake in ShermansTravel Media in 2007 (and recently reacquired).

Daniels and Sherman wanted their readers to sense an immediacy, as if they were “having a cup of coffee with these founders,” Sherman says. A would-be entrepreneur would learn from their experiences and avoid similar surprises. But you can’t avoid every pitfall as an entrepreneur, Daniels cautions. “You’re not going to be able to anticipate everything,” she says. “It’s going to be difficult to do everything right, and it’s not all going to be perfect and the way you thought it would be.” That’s an important lesson, too.

Post a Comment