8 Common Elevator Pitch Blunders, and How to Fix Them

Every entrepreneur needs a value proposition statement for his or her startup that can hook potential investors and partners in less than a minute -- the short time you might join them in an elevator on the way to their offices. This may sound easy, but every investor I know is frustrated by wasted time listening to rambling, emotional pitches that are not to the point.

Passionate entrepreneurs tend to talk on and on about their disruptive technology, their intent to change the world and free services, but if a business can’t provide quantifiable value to real customers, the dream will likely turn into a nightmare. The better you understand what makes an effective elevator pitch, the more likely you will attract investors and customers.

Here are the most common elevator pitch missteps I see often as an angel investor and advisor to startups, with some quick advice on how to address each:

1. Insist on leading with the story of the company. You don’t have time for any story at this point. Until an investor hears about a real customer problem, and understands your solution, the background is irrelevant. There will be plenty of time for the details of your arduous journey later, but for now my advice is to postpone the story to a later meeting.

2. Rely on marketing content and emotion vs. facts. It’s good to speak with passion and conviction, but only quantified facts make a business. Skip the fuzzy terms, such as nice to have and easier to use in favor of specifics, such as costs 50 percent less or increases productivity by 100 percent. Skip the sales pitch and avoid preaching.

3. Build up for the punch line at the end. Always start with a hook to get the investor’s attention. Good hooks define a real problem, followed by a specific solution (not technology). For example, “I have patented a new LCD with double the intensity at half the cost, already proven locally, and I just need resources to scale for this market.”

4. Highlight features rather than differentiators. Investors worry about competitors more than customer features. Your second sentence should acknowledge competition, but highlight your added value. For example, “Unlike all the other LCD providers, our patented high intensity light has no blue tint or glare that looks unnatural.”

5. Focus on the solution and skip your team. Smart investors invest in people, even more than a great product. Thus your third sentence should highlight why you and your team are the right ones to support. For example, “As you may know, my team and I are uniquely qualified for this opportunity, based on our first successful startup with solar.”

6. Try to talk fast and extend the time available. Limit your elevator pitch message to about 150 to 225 words in 30 to 60 seconds. Trying to cram 500 words into that first interaction will only antagonize the receiver, and potentially lose the key impact of a highly-focused message. Always exude energy, conviction and commitment.

7. Neglect to ask for any specific next step. Obviously, you won’t close many investment deals in a minute in the elevator. Don’t forget to ask for a follow-up session to present your full pitch. Ask for an hour, but always plan on speaking for only 10 minutes to leave plenty of time for addressing questions and concerns.

8. Come unprepared with no written documents. For investors, you always need to offer an executive summary of your business plan to show this is not a dream, and provide reinforcement of the message you have just delivered. If you have no business plan or investor pitch to back it up, and the investor asks to see it, you will lose your credibility.

In reality, a good pitch is not just for elevator meetings. It should be in the introduction section of your business plan, on the first slide of your investor pitch and the beginning of your executive summary. You will find it the best way to start every networking opportunity, and a key communication vehicle that everyone on your team should know and use.

An entrepreneur’s elevator pitch embodies the value proposition that is being brought to customers, as well as investors and partners. Don’t hide it behind too many words, an urge to stay in the spotlight longer or unbridled passion. Catch the elevator up to make it a business.

Marty Zwilling

*** First published on Entrepreneur.com on 7/22/2015 ***

7 Must-Have Attributes of a Super Startup Team Member

Every entrepreneur realizes that building a great team is critical to the success of his or her startup, but many don’t realize that it takes more than multiple qualified employees to make an effective team. It’s possible, or even likely, that a set of skilled individuals can result in a dysfunctional team, where contention, jealousy, lack of communication or work habits jeopardize results.

As a mentor to entrepreneurs, I recognize that it’s easy to spot a dysfunctional team after the fact, but it’s not so easy to spot the right attributes of new team candidates, in the context of existing members. The approach I recommend is to make sure all candidates and existing members exhibit the following team-centric attributes, in addition to a unique set of skills and experiences:

1. Comfortable being challenged by associates. The attributes to look for in interviews and reference checks would include minimal ego, self-confidence and a willingness to work with others. Team members who won’t listen, immediately become defensive and react emotionally to all suggestions will quickly make your whole team dysfunctional.

2. Enjoy a healthy level of conflict. The most productive teams regularly engage in some healthy friction and heated debates between team members, but are able to avoid the emotion and drama that negates the value of these efforts. That’s the way smart teams make real change happen. Remove team members who initiate unhealthy conflict.

3. Commit to the team despite individual qualms. Commitment means a willingness to negotiate and support a team decision, despite personal qualms and some risk. People who are perfectionists are not usually good team players. Test new candidates for their reactions to hypothetical and actual past situations.

4. Willing to take team accountability as personal. Accepting accountability means not making excuses for the team, and avoiding the fallback to highlighting personal performance. It also means coaching and challenging peers on the team on behavior leading to dysfunction, even when it means risking a friendship.

5. Support the team view in external discussions. You need team members who will support team efforts and progress, despite customer challenges or questioning from executives. Non-team players are quick to jump ship, and defer support to a popular counter view, thus undermining the effectiveness of the whole team.

6. Focus on team results vs. individual performance. Team members that exhibit more concern for individual status and results are doomed to failure. A critical role of the founder is to effectively communicate the collective goals, characterize progress in the context of the team and integrate individual performance results.

7. Accept team relationships as personal as well as business. Effective teams get to know each other on a personal basis, and find opportunities to meet for lunch or an outside event as a team. If you find a team member who truly dislikes other members, or doesn’t trust them as individuals, the whole team dynamic will be compromised.

In my experience, a few entrepreneurs seem to actively discourage any real team synergy, perhaps due to a lack of confidence in their own abilities, too much ego or a desire to retain autocratic control over each decision. This is a self-defeating strategy, since cohesive teams will normally outperform any set of star individual performers.

Thus the ability to build effective teams is one of the key differentiators of a great entrepreneur that outside investors look for, and the validation of having effective teams in place is high on the list of due diligence items before investor funding is committed.

If you find you have a dysfunctional team at your startup, fixing it should be a top priority. If you are just now hiring, be sure to keep the team-centric attributes on the same plane with other qualifications. On either end of this spectrum, teamwork or lack of it can make or break your startup, independent of the strength of your business concept.

Marty Zwilling

*** First published on Entrepreneur.com on 7/17/2015 ***

8 Ways That Blogging Will Kickstart Your Startup

As the number of sites on the Internet floats around one billion, the challenge with every new startup is to be found and stand out. More important, if someone does find your site, the content better be enticing enough for them to come back. Blogging is one of the best ways to do this and build a brand, even before you have a product or service.

In this age of relationships, you, the entrepreneur, are a very important element of your new brand, and it’s never too early to start marketing the value of your expertise, insights and ideas. A great solution is necessary, but not sufficient, to build a great startup. Thus I recommend that every entrepreneur start blogging in parallel with solution development for the following benefits:

1. Get customer idea feedback before you commit resources. Every entrepreneur should count on at least a couple of adjustments or pivots before they get it right. The challenge is to spend minimal time and money learning. After a few blogs about your concept, the comments better match your passion, or it’s time to rethink your idea.

2. Blogging will improve your site search engine ranking. New and relevant content on a regular basis is a major driver in search engine optimization, as well as the inbound and outbound links that blog comments generate. If you post on industry sites, or get syndicated to popular sites, your scores and visibility will go up even more.

3. Develop an efficient and effective writing style. A good blog is a short and tightly-written message, which is key to every business communication. I see too many investor pitches, and even executive summaries that ramble on for many pages without a clear message. Practice makes perfect, and feedback will tell you quickly if you are on target.

4. Let that ideal co-founder find you. Blogs are a great way for potential business partners to find each other, and build a social media relationship before getting into the hard negotiations of who gets how much. Your reach with a blog is much broader than traditional business networking channels and industry conferences.

5. Demonstrate thought leadership to potential employees. In small companies and startups, people seek out leaders they want to work for, in lieu of a big company with more job security. From your perspective, you want team members who are taking the initiative to stay current by seeking out new ideas and leaders from blogs on the Internet.

6. Start building your customer community early. Don’t promise what you can’t deliver, but marketing is all about building excitement and suspense. It is never too early to start collecting leads and building a brand. You may even find alternate revenue streams, including speaking engagements and consulting, to bridge the gap to product rollout.

7. It's the first step to full use of social media marketing. Every blog entry needs promotion through social media, so you will learn how to use Twitter, Facebook, LinkedIn and other sites. From there it’s a short step to podcasting, YouTube videos and Instagram. Customers these days expect to find your information where they are, not where you are.

8. Establish visibility and attract funding sources. Be assured that the best investors are actively scanning blogs for new entrepreneurs and new ideas. It’s far more satisfying and fruitful to be approached by potential investors, rather than cold-calling a list of people who never heard of you. Investors invest in people as much as the idea.

All of this is possible on every entrepreneur’s budget, since the major blogging platforms, including Tumblr, WordPress and Blogger (Google) are free. Each can be linked directly into your site domain name for maximum SEO impact. In fact, WordPress can also provide a simple base website through static pages, thus even eliminating standard site hosting fees.

Never forget that blogging is most effective for “pull marketing,” and should never be used push your product. If you provide value to your audience, they will be pulled to you and your website for related solutions. That’s a win-win situation for you and your customers, and puts you head and shoulders above the crowd. Start today.

Marty Zwilling

*** First published on Entrepreneur.com on 7/15/2015 ***

Checklist To Find The Startup Partner Of Your Dreams

As an advisor to startups, I often get asked what to look for in an ideal co-founder or business partner. My first response is that it’s much like finding that ideal spouse, where chemistry, common interests and complementary communication skills are key. After some reflection, I now realize these attributes are necessary but not sufficient to be an ideal business partner.

Other attributes of a great business partner, such as real experience and near opposite ends of the age spectrum, may actually be counter to ones you look for in a spouse. A great example was when Eric Schmidt, with years of experience at Sun Microsystems and Novell, joined forces with Sergey Brin and Larry Page at Google. This was a win-win in business, but not a marriage.

In either case, it pays to find someone that you trust and enjoy being with for hours at a time, even through hard times. Otherwise, the relationship will be doomed to conflict, stress and unhappiness. Believe me, life is too short to have that happen in business, or in a marriage. I recommend that you look for these additional traits to make a business partnership work:

1. Recognizes the need for relationships. Building a business is not for loners or autocrats, no matter how smart that person may be. Many of the entrepreneurs I meet prefer to focus on the technology, so they desperately need a people-oriented partner for balance. Together they can attract investors, employees and even customers.

2. Able to help, rather than be a helper. This means every entrepreneur needs partners who are smarter than they are in complementary domains. For example, a technologist needs a strong finance person or a strong sales person who is willing and able to make decisions. You need to believe that you can learn from them, not manage them.

3. Shared vision, values and culture. If your vision is to change the world, don’t sign on with a partner whose primary drive is to get rich. This also applies to how you both see quality, service, work ethic and employee relationships. Too many entrepreneurs later see their partners as working against them.

4. Credibility, visibility and connections you need. Most startups need investors, vendors, distributors and industry support at different stages to achieve aggressive customer growth and penetration objectives. These are partner values that can far exceed any budget you might allocate, or all the hard work you might contribute.

5. Similar dedication and work habits. More than one startup team has been broken due to differences in work style -- for example, if one person works on the business 20 hours a day, while the other has a nine-to-five mentality. It’s very difficult to maintain a productive relationship when one person prefers texting, and the other only communicates face to face.

6. High integrity and commitment. Most business people form a quick impression of the level of integrity of people close to them, and become very uncomfortable trusting their future with those who are perceived to be on a different plane. In the same fashion, they expect a level of commitment that’s at least equal to their own.

7. Business ethics and moral values. In the last few years, the ethics and moral compass of a business have become more and more important to success or failure. In a world of instant communication, everyone knows if employees are not treated with respect, or if business practices are negatively affecting the ecology or economy.

8. No perceived negatives or red flags to overcome. As a startup, your key team members' image is your brand. Thus partnership decisions are much more critical then employee hiring decisions. Even if all initial interactions look positive, don’t forget the due diligence process, especially follow-up discussions with previous partners.

If you can find and attract a business partner or two that satisfy all these criteria, your company may likely be the next Google, no matter what the business idea is behind it. That’s how important the right people are to a new startup.

Marty Zwilling

*** First published on Entrepreneur.com on 7/08/2015 ***

8 Keys To Providing Consulting Services To Startups

I may be old fashioned, but the term consultant still conjures up an image of a self-proclaimed expert who can make great presentations, generate recommendations and leave you to do the hard work of implementation. This may work for big companies who have specialized staffs, but it doesn’t work for startups and small businesses who are already understaffed and overloaded.

Startups need outside experts who can do the work, as well as provide training on what needs to be done. That’s called leading by example, and it is actually appreciated by businesses of every size. In my view, it’s time to eliminate the term consultant, as well as focus on activities and approaches that appeal more to the growing volume of small businesses today:

1. Join the movement to contract roles. Businesses stopped hiring for lifetime commitments some time ago, as markets change so rapidly and companies need to tune their workforce for changing economic conditions. It’s time to move from traditional consulting to a freelance execution role as a hands-on interim professional or executive.

2. Change your title to professional or specialist. Simply defining yourself as a specialist or professional minimizes the stigma of a consultant role (think marketing specialist or staffing professional). Specialists and professionals are already seen as experts who do the work, rather than just make recommendations for others.

3. Adopt a project-based revenue model. Agreements based on projects to be completed, rather than an hourly rate, put the focus on quantifiable business outputs vs. time spent. For example, a marketing project would be the number of leads generated or ad impressions, instead of recommendations for improving the process.

4. Be willing to work at all organization levels. Leadership by example works at all levels of a company. It is not limited to the realm of the top executive or board of directors, who could bring in consultants for studies and analysis. Specialists today can justify their cost based on more direct return on investment calculations at all operational levels.

5. Treat a startup as a customer, not a client. A client relationship suggests that the consultant is in charge, whereas the customer designation recognizes the more modern model of the customer in control. It also highlights all aspects of required customer service, satisfaction, loyalty and referrals to peers.

6. Be responsive to every customer communication. Many consultants today are hard to contact between scheduled meetings, due to their formal communication processes. It’s time to adopt your customer’s favorite mode of communication, whether that be texting, phone calls or social media, and not limit responses to office hours.

7. Adapt a style to meet the new business work models. If your customer dress code or decisions process is informal, you should adapt yours to fit in, rather than continue to act and look like an outsider. If the startup team is distributed around the world, your challenge is to meet their process requirements, rather than expect them to meet yours.

8. Deliver results rather than recommendations. PowerPoint presentations are not business results. If your customer needs service and support procedures, then your deliverables should include customized creation, implementation and training, rather than simply recommendations on what to include.

Google and social media have transformed the business world. There are expert blogs and curation sites, like this one, covering every aspect of business and leadership. With a few Internet searches, anyone can find all the recommendations and advice that even the best consultants have at their disposal today. All that is missing are the skills and experience to execute.

The number of startups is at least an order of magnitude larger than big companies. The startup world today doesn’t need consultants, but they do need specialists and professionals with experience and expertise who can do the job, and provide coaching while producing results, at a predictable cost.

Wouldn’t you like to increase your opportunity by an order of magnitude?

Marty Zwilling

*** First published on Entrepreneur.com on 7/10/2015 ***

7 Top Business Disciplines That Win On The Street

As a mentor and advisor to entrepreneurs, I find it’s easy to recognize “street smarts” when I see them, but it’s hard to explain the specifics to someone on the other end of the spectrum, even if they are willing to learn. Some people argue that street smarts are only a natural born skill, but I disagree. I believe they are disciplines that can be taught and learned.

In the urban world, being street smart means instinctively knowing how to keep yourself safe from scams and bad guys. It means you know your way around, how to handle yourself in tough situations, and how to “read” people’s intent. In reality, the startup world contains those same very risky streets, but in the business context.

Thus I was happy to see some help in a classic book by John A. Kuhn and Mark K. Mullins, “Street Smart Disciplines of Successful People” that put some meat on the bones of what it means to be street smart in business. I like their outline of seven key disciplines, all of which can be learned and practiced, that may actually be required for business success:

1. Work smart. This means using discipline to get smart before you start working. Find out everything you can about the business domain you are targeting. In addition, maintain a change-oriented and future-focused mentality, with an actionable execution plan. When someone tells you they are working hard, it’s usually an excuse for not working smart.

2. Skip the chatter. If you are trying to gain commitment or persuade someone, practice the discipline of thinking beyond conversational chatter. The four steps of a successful presentation always include preparation, practice, delivery, and asking for the order. Make these part of every interaction with partners, customers, and team members.

3. Deal with people. People do business with your people, not your startup. Finely tuned people skills make you more likeable, warm, friendly, open, and effective. Put yourself in their heads to see things from their perspective. Have patience, and listen actively before speaking. Street smart entrepreneurs practice this discipline until it is not work.

4. Watch your money. It’s not unusual for creative entrepreneurs to find finances difficult to understand, intimidating, or just a numbing bore. If you feel that way, find a partner who loves that critical side of the business. In reality, the discipline to manage cash does not require a financial genius. It just requires a discipline of relentless focus.

5. Get more business. This discipline is the art of making a constant of new business opportunities, new customers, and new revenue flowing into your startup. Develop an aggressive prospecting mentality, stay close to current and past customers, get referrals, and optimize Internet marketing. If you startup isn’t evolving and growing, you are failing

6. Manage yourself. Entrepreneurs will always be wearing many hats in their business and personal life. Even the more important activities can sometimes be excuses to avoid the underlying challenge of working toward your life-changing goals. Learn and practice time management disciplines. Banish procrastination. Be decisive. Have fun.

7. Everybody sells. It may not be in their job descriptions, but everyone in a startup should be selling. The very first moment that you have contact with an investor, or a customer has contact with your team, an impression and a perception is created. That perception is your reality, and you only get one chance to make it a good one.

Overall, street smarts also requires that you can put all these things together for problem solving, and to dodge and weave effectively through the risky business streets. It means balancing your idealistic vision of how things could be, against the realities of the business world. Confidence and a positive attitude are also required to be a street smart and successful entrepreneur.

But attitude and problem solving are not sufficient, without the basic disciplines outlined above. No one is born with all these disciplines. These represent the knowledge and experience of many successful business people. Study them carefully and practice them religiously. The alternative is a long and painful learning curve, which neither you nor your investors can afford.

Marty Zwilling

How To Make Money Like Facebook With Online Ads

One of the most popular and least successful models I see in new business plans for startups is the so-called Facebook model, providing free services to users while collecting revenue from ads to offset costs and grow the business. To make this work, you need heavy traffic on your site -- probably at least a million page views per month -- which most sites never achieve in their lifetimes.

That’s an especially tough challenge in your first year or two of operation, even if you use every technique known to get traffic flowing. While you are doing all this work, of course, you need deep pockets to fund all your efforts, content and growing website hosting fees. When Facebook did it a few years ago, the company used more than $100 million in venture capital funding before it became profitable.

It helps to understand how online advertising really works. When I first took a look at it, I was overwhelmed by all the terminology and acronyms, so I spent some time sorting it out and simplifying it for aspiring entrepreneurs and the rest of us:

1. A site owner gets paid when a visitor clicks on an ad. This model, called pay per click (PPC), is the one most commonly offered to entrepreneurs. For the advertiser, this is the cost-per-click (CPC) model. The goal is for your visitor to be redirected to the site or product being advertised. The average click-through rate hovers around 5 percent, with a payment of a few cents for each, so don’t expect to get rich quick on this one.

2. Get paid every time an ad is displayed on your site. With this model, advertisers pay for the number of times an ad is shown regardless of whether it is clicked on. Technically, this is called pay per view (PPV), pay per impression (PPI) or pay per mille (PPM), which is a thousand impressions. Advertisers see this as cost per impression (CPI) or cost per mille (CPM). Advertisers pay even less for this one, since they don’t like to pay when your visitor ignores their ads.

3. Your visitor must take action on ad before payment. With this variation, no payment comes to you until your visitor get redirected to the ad site and performs a desired action there, such as filling out a registration form. This is called pay per action (PPA) or pay per lead (PPL). The advertiser sees it as cost per acquisition (CPA) or pay per performance (PPP). This model arose a few years ago to mitigate the risks of click fraud.

4. Share of revenue from ad action initiated by your visitors. This is a variation of the preceding model, called performance-based compensation. It has the best potential to maximize your income, but the results are totally unpredictable. Advertisers see it as a method of shifting the risk on untested ads or products to you, so do your homework.

5. Fixed compensation rate for a specified time period. This approach is the most predictable way to anticipate revenue from advertisers. You simply negotiate a fixed price per day for displaying the ad on your site, which advertisers see as cost per day (CPD), independent of the ad’s visibility or your visitor response. But rest assured that the advertiser will be measuring results, so a long-term revenue stream is not so predictable.

It’s also important to know that advertising delivery technology has come a long way in the past few years. The ads you see from day to day may change as your site content changes, and every visitor may see a different ad based on their profile and interests. Now ad space is often auctioned to the highest bidder in the few milliseconds while your page is being built.

But all this doesn’t change the reality that it’s hard to make any money on ads in the early days of a new startup. Even Facebook required nearly five years and 300 million users before it became cash-flow positive from advertising. With the competition today for ads on popular sites such as Twitter, the probability of new sites building a big revenue stream from ads is even lower.

So if you want to make money like Facebook from ads, your first step is to grow a very large visitor base, funded by a revenue stream other than advertising, or investors with a strong ongoing commitment to your success. In other words, it’s time to think of advertising revenue as a benefit of your success, not the source of it.

Marty Zwilling

*** First published on Entrepreneur.com on 7/1/2015 ***

8 Business Name Mistakes That Investors Hate to See

Every new baby gets a name before it is introduced to the world, and yet some entrepreneurs continue to send me business plans with TBD (to be determined) in place of a business name on the front page. They don’t realize that the name they choose, or lack of it, sets an initial perception of the business that may override all of its value. Your business name will have the same impact on potential customers.

Just as with names of people, there isn’t any ultimate right or wrong, and every name has unique implications in different cultures, economies and markets. Names can imply strength, value, connection or friendliness, or they can set opposite tones. As you search for that perfect name, it pays to avoid the key mistakes that we investors and business naming experts hate to see:

1. Trivial names and acronyms are not sticky. Your spouse’s initials may be meaningful and memorable to you as a company name, but won’t get you very far in business. In this world of information overload, you need a name that will remain memorable and meaningful for years to come, even after trends change and your startup has pivoted.

2. Tricky spellings send customers to competitors. Today, everyone expects to find you online, and competitors quickly learn to route all misspellings of your business name to their sites. Use conventional spelling, or phonetically consistent spellings, rather than the cute variation that implies a double ententre and amuses all your friends.

3. Nonsense phrases and non-words are tough to brand. These may be easy to trademark, but there are few plans strong enough, or companies with enough money, to make Google and Xerox recognized brands. Most startups don’t have the resources, and should be more humble in starting with a name that customers will recognize.

4. Every extra syllable or special character makes it harder. Two syllables seems to be the optimum for a business name, especially if it can be easily turned into a verb, such as Facebook or Twitter. Hyphens, special characters or mixed case in the name only invites the misspellings and memory problems mentioned earlier.

5. Beware of international and cultural implications. Even if you have not thought of going international, remember that every website on the Internet is visible around the world. Do your research to be sure you will not be embarrassed by a name that has negative or obscene implications in another culture or language.

6. Don’t limit future expansion possibilities. Business names that have specific geography references or product implications will come back to haunt you as the market changes or new growth opportunities emerge. Changing the name later and rebranding is a very expensive proposition, and takes a long time.

7. Your desired name is not available on the Internet and/or social media. These days, before you adopt a company name, you need to make sure you can secure the domain name for your website, the trademark is not taken and the name is available on all the social media sites that your customers might frequent. Confusion will cost you customers.

8. Skip the new wave of domain name suffixes. Even though the standard .com or country suffix can now be replaced by virtually any word, including .bank, .sport, or .coke, I don’t recommend it yet for startups. While these may sound attractive in defining your company name, they still don’t have full recognition by most customer segments. At best, they should be reserved as alternates, with website redirects to forestall competitors.

In all cases, I recommend that you spend some time building a short list of three to five names that satisfy your objectives, but avoid the shortcomings above, and try them out on potential customers, peers and advisors. Feedback from friends and family is the least valuable, since they have the same biases that you do.

If you choose a name, and realize based on early results that it was not the right one, it’s smart to change the name immediately, rather than hope to overcome the limitations with more marketing. Changing your branding is always hard, but it’s one of the most common pivots that startups make. It will cost you some money and time now, but not changing your name will likely cost you your business later.

Marty Zwilling

*** First published on Entrepreneur.com on 6/26/2015 ***

6 Reasons Smart Entrepreneurs Think Twice Before IPO

The visibility of Google, Facebook and a few others continues to propagate the myth that the ultimate objective of every entrepreneur should be to take their startups public via an initial public offering at the earliest opportunity. Everyone thinks this is the route to become the next billionaire like Mark Zuckerberg.

In reality, this option is a nightmare that can bump you out of the driver seat, dilute your equity and create a business entity you can’t control. For financial reasons alone, an IPO is a statistically rare phenomenon, happening just 275 times in 2014, out of almost 500,000 startups. Many of these may still fail spectacularly, such as Webvan and Pets.com.

As an advisor and mentor to startups, I try to make sure entrepreneurs understand both the pros and cons of an IPO as an exit strategy. Facebook, for example, ended up raising almost $16 billion through its IPO. It’s hard to imagine any other investor mechanism that could have raised that much money. On the other hand, Zuckerberg signed up for a lifetime of challenges:

1. Large personal and corporate liability exposures. As a public company executive, your management style, and even your personal life, is subject to extensive scrutiny by stock analysts and stockholders. Violations of integrity and accepted business practices is malfeasance and can result in corporate and personal fines, and even prison terms.

2. Extensive government reporting and compliance rules. To prevent another Enron scandal, public companies and their officers are measured against strict and growing government rules for reporting and compliance, popularly known as Sarbanes-Oxley, or SOX. Private companies are largely exempt from these reporting requirements.

3. Doubling or more of overhead expenses. These new reporting and compliance rules require expensive new processes, systems and consultants. When including lawyers and a chief compliance officer, many experts argue that the costs can quadruple those of a private company. That extra money raised better kick-start your opportunity.

4. All strategy and operational moves become public. Every public company has to answer to thousands of public stockholders now, rather than just a few private investors. This is a huge communication requirement, as well as a tremendous disadvantage in flexibility and dealing with competitors. The public is not an easy master to satisfy.

5. Public expectation of growth every quarter. The pressures to maintain a profitable and steep growth curve, vs. reinvesting returns in new markets, are very frustrating to entrepreneurs who get their satisfaction from the flexibility of a startup in addressing new opportunities. Even perceived weaknesses can dramatically impact company valuations.

6. Control moves to external directors and the public. Private companies typically have an internal board of friendly owners, unlikely to be pressured by the media to consider an unfriendly tender offer from another major player in the market. Even with private equity and private acquisition transactions, control stays internal to the principals.

Of course, there are cases where a new technology or medical startup needs that huge financial infusion to build the infrastructure needed for real growth, so the rewards are worth the risks and costs. In the long run, building a global company with the relatively unlimited public resources is still only possible by starting with an initial public offering and giving up your startup.

For every entrepreneur, I recommend first a personal assessment of your goals and strengths. If you enjoy the challenges of a startup and being in charge of your own destiny, you probably won’t survive the move to a public company, and you certainly won’t enjoy it, even if it makes you and all your friends rich. Greed is not an easy master to satisfy either.

Marty Zwilling

*** First published on Entrepreneur.com on 6/24/2015 ***