Business RX: Advice for entrepreneurs on how to improve or launch a startup

Jan 21, 2014

Jason Shrensky is an angel in residence at the Dingman Center for Entrepreneurship at the University of Maryland's Robert H. Smith School of Business. He's here to take your questions about securing funding, building your customer base, how the entrepreneurship landscape looks in this region, and more.

I've noticed there are a lot of new co-working spaces in D.C.. How should I  evaluate the different options for my startup?

Coworking has grown quite a bit in the region. Lots of options. Frankly, I think the first consideration is to choose a place that is convenient. If it's not convenient, you won't go, and then you won't benefit from the interactions and serendipity that come from a coworking community.  Second, many coworking spots offer services and education events.  Depending on where you are with your business events in your coworking space can range from super helpful to distracting/annoying.  You'll want to figure out what's the best fit for you.  Lastly, you'll need to find a place that fits the growth stage of your business.  Almost all the new coworking spots have "open desks."  These are great if you are solo.  But some coworking spots (like the one I am involved in) also have enclosed offices that can support between 2 and 20 employees. Frankly, I think the beauty of almost all the coworking spaces  is that they run on month to month commitments - so it's hard to make a long-term mistake.  You can easily hop around until you find a place that fits your business.

What are some resources for funding an early-stage start-up in the DMV region prior to the Angel funding stage?

Prior to seeking angel funding, you'll likely find funding in two places: 1) the government and nonprofits and 2) your friends and family.  Concerning the first, government/nonprofits have funds that they are willing to place as grants to businesses that somehow help the public good.  Examples include businesses that advance science, medicine, education, or the general welfare of the public.  The great part thing about this type of funding is that it's non-dilutive.  The downside is that there is likely a long application process to secure funds.  If this first option isn't available to you, then the only other place to find funding is amongst those who love and trust you.  Hopefully, you don't need too much help to find these people. Angel investors like to see that you have gone this route for funding prior to seeing angel dollars because if those who love and trust you won't invest in you, why should they [angels]?

The Post ran a story this week saying that Washington region is beginning to find a way to compete with Silicon Valley as a home for tech talent and tech businesses. What's your take on that?  How does this region stack up as a hub for tech entrepreneurship?

D.C. is finding its way.  No question.  Are there smart startup CEOs in D.C. ?  Absolutely.  Smart tech guys? Absolutely.  Smart angel investors and VCs? Absolutely.  Are they as plentiful as in Silicon Valley?  Not, yet.  I think the big advantage to the Valley is that the companies that acquire startups are also out there.  The angels and VCs all have a good connection at Google or Yahoo, etc.  Many entrepreneurs have friends that work at these big companies. The network is so tight that it's easy to end up in a funnel that puts startups on the path to be acquired (or funded).  Unfortunately for start up CEOs and investors in the D.C. region, not being a part of that network hampers the number of exits.  That's where I think our region needs to improve.  All of us should be doing a better job of making sure our network extends to Silicon Valley.  That will even the playing field a lot.

Are there any particular policy or legislative issues on the horizon for 2014 that you think could have a major impact on entrepreneurs, either on a local or national scale?

Thank you for this question! I have no shortage of opinions on this one. Many of us are familiar with the issues that are in the tech press a lot - e.g., patent reform, net neutrality, and immigration reform. All are important.  All have been beyond frustrating because the federal government seems unable to function efficiently.  But underneath the topics that are in the news all the time are the business obstacles and inefficiencies created by local government.  I am a co-founder of a relatively new start up called UberOffices. We have locations in Arlington, Tysons, D.C., and (soon) Bethesda. What a pain it is to deal with all the local government regulation! Business franchise taxes, personal property taxes, occupancy permits, etc.  I don't mind paying the taxes.  Figuring out how to file the forms and what to pay?  Crazy.  We waste days trying to figure out how to comply.  And both my co-founder and I are attorneys. These local governments claim to want small businesses to open in their jurisdictions and have economic development departments to support this agenda, YET these same local governments make it next to impossible to efficiently comply with all of their silly rules.  If local governements want to woo small businesses, they should make it easy for entrepreneurs to do business there.  My advice for local governments: One form (that can be quickly completed online) and  one tax (that can be quickly calculated and paid online).  Stepping down from soap box . . .

Jason-- I've been working on a startup off and on for a few years now. I'm ready to take the next step in developing the business and need a partner. What are some ways I can meet people and network with those who may want to join my team? Does Uber Offices offer networking events? Also, what are some key traits I should be searching for? -- Dan

Hi Dan. Great question. Yes, UberOffices has networking events. That's one good way to possibly meet a co-founder,  although I've seen it work less often from a one-off event. At UberOffices, I've seen members join up to create a business after they were sitting next to each other at their desks working on their own projects and got to talking over a few weeks or months.  There is also a business called CoFoundersLab, which is a local company that specializes in this problem of finding a co-founder.  Frankly, I think finding a good co-founder is as hard as finding a spouse (or life partner).  You'll probably spend more time communicating with this person every day than you will your spouse.  You'll go through tons of stress with this person (probably the same amount as with your spouse :-)).  Business is super hard, and a co-founder can make that better or worse.  I think there are 3 must-haves in a co-founder: 1) Trust, 2) Equal work ethic (otherwise jealousy seeps in), and 3) Different but complementary skill sets (e.g., sales person and technical person).  It takes a long time to find someone with all three characteristics.  Take your time.  Don't leave it to chance. If you do, you will regret it.  Lastly, I don't think a co-founder is a must have. Sometimes you can just hire around the issue.  Many times this is a better plan in my opinion and leads to less stress.

One question we hear most often from readers in this space is that they have a hobby they enjoy, and want to figure out whether it has legs as a business.  What questions do you recommend exploring and asking to figure the answer to that question?

I don't think there is a worthwhile business unless there is a burning problem that needs to be solved or a real gap in the market. The problem with many hobbies is that they are enjoyable for the hobbiest to work on and there are no time constraints for completion of the hobbiest's task.  A business is typically successful where a task can be completed efficiently at scale.  So if the hobbiest can practice the hobby efficiently at scale and the demand for the product/service exists at scale, then the hobby probably has legs as a business.  But rarely do I think of hobby and "efficient at scale" in the same sentence.

This doesn't mean that a hobby can't become a profession. If you tinker with computer programming as a hobby, for sure there are ways to make money with this skill. There are many employers that value the skill. But the skill itself is not a business.  The business comes when you can solve a problem or produce a particular good efficiently at scale.

Another theme we hear often in the chat is that people are eager to be an entrepreneur and be their own boss, but they don't know where to start.  What's your advice to folks in that mindset?

I think the question is a bad one.  Although it's hard to tell from the popular press today, there is no glory in being an entrepreneur. It's just hard and painful.  There is glory in providing value.  Successful entrepreneurs discover a problem or inefficiency (usually at their workplace), they become experts on the problem (likely because they see it everyday at their workplace), they figure out how they would solve the problem, and then they can't sleep at night unless they can spend every moment working on solving the problem.  These people create value by solving the problem. They are entrepreneurs because being an entrepreneur is the path most efficient for solving the problem / creating the value.  They are not entrepreneurs first.  They are value creators first.  Value creators become successful in business.  People who think entrepreneurship is cool do not.

I see you are a co-founder in 2 startups. How do you go about splitting up equity share when starting the company? Is there a formal agreement? Did you and your co-founders have any disagreements to overcome with regard to equity share before moving forward with the business idea?

First, having two startups is like having two wives - it seems like a good idea . . .  I actually regret having two startups simultaneously.  Because I split my time, I find that I don't do either job to the best of my ability.  I didn't plan for it to happen, but the way the timing worked I ended up in two businesses at once.  And I love both.

You must have a formal agreement if splitting equity when starting a company. I strongly recommend that such agreement include a vesting schedule in the event that the co-founders' primary contribution to the company will be sweat (time spent working).  There have been many articles written about this, so I won't reiterate the points made in them.  But if you are looking for problems in the future, start a business with a co-founder without a formal agreement with equity vesting structure.

Disagreements about equity splits prior to starting the business are natural, healthy, and in my opinion, essential. You and your co-founder are typically nice to each other during the pre-company stage. The first real friction will come when discussing the equity split.  And that's the moment you really find out who your co-founder is.  How does s/he handle conflict, stress, etc.?  This is a great time to find this out.  The best thing that could happen is that this process gets really conflicted, you agree on a resolution, and then you move forward like nothing ever happened.  Anything less?  I'd recommend a different co-founder.

Thank you to everyone for your thoughtful questions.  I had a lot of fun.

In This Chat
Jason Shrensky
Jason Shrensky is a local entrepreneur and angel investor who joined the Dingman Center team as an Angel in Residence in 2011. In addition to actively investing in early-stage companies, he splits his time between two startups that he recently co-founded: ÜberOffices and ComplexInterests. ÜberOffices provides co-working office space in the DC Metro area predominantly for early-stage technology and media companies. At ComplexInterests, Jason is working on developing a unique enterprise software package targeted at accounting, law, and financial services firms.
Recent Chats
  • Next: