Over the years, I’ve noticed that I’m most productive in the mornings. I try to do things that require heavy mental lifting in the a.m. Recently I had a conversation with someone, and we randomly got on the topic of what habits work for me. To my surprise, his profession involves discussing habits with his clients. He said that a high percentage of them are the same—very productive in the a.m., and they get the most done before normal office hours.

Understanding my optimal hours and scheduling the right things at those times has been beneficial for me. Random things come up, so I have to be flexible. But when I’m able to stick to my schedule, I’m more productive. I get my high-priority work done early in the day and deal with reactive or mindless tasks the rest of the day.

Being self-aware is important for founders. It can sometimes be the difference between success and failure. Understanding your best hours and optimizing them is part of that. If you’re a founder, consider asking yourself, “When am I most productive? Am I working on the most important things then?”

This weekend I listened to an investor discuss his strategy and track record. The strategy revolves around having conviction about an investment. He gains that conviction through his own research into the company and market. He talks to customers or potential customers who experience the problem the company is solving. Once his belief in the company is sufficiently strong, he pulls the trigger with a large investment. A small number of strong-conviction bets with a large amount of capital is his strategy. It’s worked out extremely well for him—some of his investments have been wildly successful.

Today I had a conversation with a founder friend turned investor. We discussed the strategy described above and tried to answer this question: “Is there a correct approach to early-stage investing?” I know successful investors who have used a methodical style like this one and others who have totally different styles. Like other things in life, I believe investing styles are a bit like personalities. There is no right or wrong style in the abstract—the right style for an investor is the one that works for them. Everyone has different risk tolerances, horizons, etc. Imitating what has worked for someone else may not work for you. Each person must figure out the approach that’s true to them, test it, and adjust (if necessary) as they learn.

I’m looking forward to learning and refining my own investment style.

A friend does real estate projects, which I love hearing about. As we walk his sites, he tries to describe the end product. It’s hard to grasp what it will look like as I listen and look at the incomplete construction. He recently began getting renders, and he showed me one of the final version of his current project. I got it right away. The rendering brought his words to life and filled in all the gaps in two seconds. We discussed how helpful that rendering was for someone like me, and he shared an insight: it’s also been helpful for his workers and vendors. They understand what he’s aiming for now, and they make better decisions on their own that align with that vision rather than constantly ask him questions.

This past week I had a conversation with an early founder who’s building a software company. We’ve been working on his one-page strategic plan for the last few weeks. It includes his vision, mission, values, target market, three-year-goal, annual goals, quarterly goals, and quarterly projects. It’s essentially a roadmap that measures progress. It details where the founder wants to go, how he’ll get there, and what he needs to be working on this quarter and this year. The founder rolled out the plan to his team and got an interesting response from a team member: “I don’t feel like an employee anymore. I feel like an owner now, and I know exactly where we’re going and what I need to be doing.”

The founder was surprised that a simple one-page document was so illuminating. Having been a founder, I knew exactly what he meant. I also knew what he was missing. I reminded him that founders have more background knowledge about their market and where the company is heading than anyone else on the team. It’s all in the founder’s head. He’s been thinking about it nonstop. It’s clear to him. It makes sense to him. Other team members’ knowledge is full of gaps. Laying it all out in a simple way fills the gaps, making clear to everyone what’s so clear to the founder. It can be a rendering, a one-page strategic plan, or something else. If it connects the dots for other people, the outcome should be the same.

These two conversations were independent and about different industries, but the founders’ conclusions were the same. It’s important for founders to empower teams by painting a clear picture of where they’re going and how they plan to get there!

An aspiring founder asked what I did financially to prepare for entrepreneurship and what I recommend. I started my company over a decade ago. I wasn’t far removed from college, and the world was a different place in general (inflation is real). Here are a few things I thought about that others may find helpful:

• Reduce fixed expenses – Your personal cash flow (i.e., salary) will likely decrease during your early years as a start-up founder. Reducing your fixed expenses (recurring fixed monthly payments) will give you more flexibility. You want to be able to focus on the company. But you don’t want to reduce them to the point where life is miserable, either.
• Reduce debt – Eliminating or reducing unnecessary debt is easier said than done. But if you’re fortunate enough to be in a position to do it, it will help diminish financial stress and lower debt repayments or remove them from your fix expenses altogether.
• Increase savings – Start-ups are hard and unpredictable. It’s not unheard-of for founders to take small salaries, go without a salary, or inject personal capital into the company when times are tough. Savings are a financial cushion that helps you weather the early years. If you can, increase your savings before you start your company.
• Get buy-in from loved ones – If others are affected by your entrepreneurial decision (e.g., family or a significant other), being on the same page is important. Discuss how entrepreneurship will affect the household (including finances). It’s important for everyone to have an idea of what the journey will look like and buy in.
• Consider a Roth IRA – If you’re eligible, consider opening a Roth IRA (you can fund it later). This is a great retirement vehicle in the traditional sense and also an interesting tool that founders can strategically use to invest or hold alternative investments (e.g., private company shares).
• Eat in – We eat three meals a day. Eating out is expensive, so eating in can improve your personal cash flow quite a bit.

These are just a few things that aspiring founders can consider doing before they start their company. Everyone’s situation is different, so some of these won’t be feasible for everyone. Still, they’re good things to be aware of and think about. Building a business is hard. Minimizing stress in other areas in your life can help a lot.

Had a great conversation with a founder who’s taking a hybrid approach to capitalizing his company. He raised a small amount of initial capital and used it to build the early version of his product. He’s been acquiring customers and fine-tuning the product based on feedback, in search of a product–market fit. Instead of raising more capital, he has his customers sign one-year agreements and pay for the entire year up front. The company is cash-flow positive and can stay afloat without raising again as long as it continues to acquire customers. The founder is thinking about raising a large round to accelerate growth once the business achieves product–market fit.

This founder’s capitalization strategy is interesting, and it’s working well for him. He raised capital to get off the ground but began bootstrapping the company after the investor capital was spent and the product launched. Customer revenue is the cheapest and best source of funding for a company. The challenge is getting enough of it to fund investments in future growth, which this founder is doing with annual up-front customer payments.

I like this founder’s approach, and I’m looking forward to watching his journey. I’m sure he and his team will find more creative ways to build a big business!

Today I had independent conversations with two founders about founder equity versus investor equity. Founders usually set up only one company, so they often need to rely on other people’s advice. A few things I shared with these two founders:

• Common shares – Common shares are usually issued to founding team members who actively work in the business—ideally full-time if the business can pay salaries. It’s a good practice (and a requirement of many investors) that common shares issued to founders be on a vesting schedule.
• Preferred shares – Preferred shares are usually issued to an individual or organization that injects capital into the company but doesn’t actively work in the business. Preferred shares have a stronger claim to company assets than common shares do. Preferred shares issued to investors are usually not on a vesting schedule.
• Cap table – A cap table details who owns what amount and what type of shares, how much capital investors put into the company, and other details regarding capitalization of the company. Many founders do this in a spreadsheet because it seems easy enough, but small mistakes can be extremely costly down the road. Using—as early as possible—software like Carta or LTSE Equity (formerly known as Captable.io) is highly recommended.

Every company and investment has its own nuances and circumstances, so the info above isn’t set in stone. It’s just a high-level starting place for founders. Company equity and cap tables are important and something founders should pay close attention to. It’s worth spending the time to do research or ask others if you don’t understand something related to these topics.

I’m a big fan of software helping small businesses run more efficiently, and I’ve shared my thoughts on how workflow management can help achieve this. I’m always curious to learn more about how software aligns with this thesis. I’ve talked with founders who have deep knowledge in an industry and are building what they call an “operating system” for smaller players in that industry. The idea is that these industries are manual and inefficient. The “operating system” will handle most aspects of the business in a way that takes into consideration nuances of that industry, thus freeing up time the small business can use to focus on other things.

I agree with these founders. Some industries need software to handle their unique needs. But there are limitations to this that founders building operating systems for small business should consider. For example, accounting. QuickBooks has been creating accounting software for small businesses for a long time. The chances aren’t great that your operating system will be better at accounting than QuickBooks. Integrating with this established leader is likely a better strategy. And there are other examples.

Figuring out the most painful and inefficient problems small businesses face and solving them with an operating system is a good strategy (to begin with). That will create value, which should lead to customers. The less painful areas can be handled with integrations. Sure, everything won’t be in one system, but it’s a lot better than a completely manual process.

Operating systems for small and medium businesses don’t have to reinvent the wheel. They just need to solve the most painful problems well!

I’ve shared my views on how the current labor shortage is a challenge for companies that can’t meet customer demand. Since then, I’ve been asking more questions about hiring. I continue to hear from startup founders how hard it is to find good candidates, especially technical talent. Recruiting for a startup has always been hard, so this isn’t a total surprise. But I am surprised to continually hear leaders of seasoned companies describe challenges hiring skilled workers. I decided to reach out to friends who are skilled workers in high demand and get their perspective. I got some good insights.

I consistently heard that people are reevaluating their current employers. They’re looking at the actions their employers have taken throughout the pandemic. And they’re listening closely to their plans. For example, how companies address returning to the office is important to some people. If they like what their employers have done and the plans they’re hearing, they intend to stay. If not, they will be or are already looking.

How people select their next opportunity is another common theme. Many have reevaluated their personal lives and priorities. They want a work culture that respects their priorities. They’re spending more time with people they care about and want to work for organizations that don’t require them to sacrifice their life outside work.  

Purpose is also starting to matter more to some people I spoke with. Recent US and world history has been eventful, and they’ve had time to think. Outside of profits, I heard that people want to work for companies that are making a positive impact on something besides their leaders’ bank accounts.

These conversations were relatively few; the sample size was small, so my observations are not in any way scientific. But the feedback was still revelatory. I think how companies recruit and retain talent is changing before our very eyes. I predict that the companies that recognize this and adjust will be more successful in attracting and keeping talented team members.

Yesterday I watched an MLS game and noticed something interesting. The game was overshadowed by an unfortunate dynamic on the home team. The star player and the coach weren’t seeing eye to eye, so the player sat out the game. His team lost. There’s no guarantee the home team would’ve won if their star had been on the field, but naturally the fans, including me, wondered.

As in most relationships in life, teams go through their ups and downs. There will be wins and losses. Good days and bad. It’s normal—part of the journey. The teams that achieve greatness find a way to ride it out when things go wrong and stay united in their goal. They continue to operate as a team.

Building a big company requires a team. Founders should be mindful that keeping their team united and motivated to move toward the goal is one of their main responsibilities as the leader. Compromise will be required. People will have to put their egos aside at some point. At the end of the day, it’ll be worth it if the team wins together!

A lot of merger and acquisition activity has occurred during this last year. It’s often involved life-changing liquidity events for founders and team members. These events frequently come with conditions. If a fund invests a material amount of capital, they may well create a board of directors and usually want at least one board seat. The board members are the CEO’s bosses. Some boards are great and support founders; others don’t. The ones that don’t support are a challenge to deal with. If the company is acquired by a larger company, the team (including the CEO) usually become employees of the larger company. Finding the right role for each team member is a process, and no one is guaranteed to get the role they want.

I’ve chatted with a few founders in these situations, and they’ve shared that life post-transaction can be difficult. I spent time thinking about why these founders struggled after events that changed their lives for the better. Then it hit me. Founders have key characteristics in common. One has to do with the locus of control—the degree to which people believe that they, as opposed to external forces (beyond their influence), have control over the outcomes of events in their lives.

Founders like to be in the driver’s seat. This desire is what allowed them to become a founder in the first place. When it’s taken away or severely limited, it can feel unnatural for founders and emotionally diminish what should feel like a milestone win.

A strong internal locus of control is something that’s core to founders, and they should think hard about situations that could curtail it. What can they do to maintain it?