Great founders are planning ahead, and contemplating capital for when it will best serve the expansion of the business. We also grade the capitalization that our founders achieve. Outside investors are good, but non-dilutive capital is much better.
Startups have such a glamorous reputation. Companies like Facebook, Instagram, Youtube, Uber, and Airbnb once started as scrappy startups with huge dreams and huge obstacles.
Yet we of course know that most startups don’t end up as success stories. What does a founder or a founding team need to know to create a highly successful startup?
In this series, called “Five Things You Need To Create A Highly Successful Startup” we are talking to experienced and successful founders and business leaders who can share stories from their experience about what it takes to create a highly successful startup.
I had the pleasure of interviewing Michael Minihan, managing partner of BX3, a boutique firm that helps connect fellow small businesses with sources of funding and provides business advisory services to help extend that runway.
A serial entrepreneur, Mike has founded or co-founded several startup ventures, especially in his primary academic and longtime career background, taxation. He was a founding partner of WTP Advisors, a boutique international tax consulting firm that specialized in assisting the world’s largest companies with tax structuring and compliance issues. WTP was sold in 2014, after which time he worked at tax service firm Ryan LLC, where he stayed until his early retirement at the age of 47.
Michael’s entrepreneurial feats have been featured in Fortune’s “David vs. Goliath” segment; is frequently quoted in an array of publications, including the Wall Street Journal; and has served as a visiting professor at Fairfield University’s Dolan School of Business.
Thank you so much for joining us in this interview series! Before we dive in, our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?
Much of my career was spent in the field of international taxation. After some time at PricewaterhouseCoopers, I started a boutique international tax consultancy called WTP Advisors. My business partner and I grew that firm for about 10 years. At the end of 2014, we enjoyed a successful exit to Ryan LLC, which was a strategic buyer. They were excited about our client base, which was primarily Fortune 100, and the opportunity to expand their own international tax practice. I stayed at Ryan through the end of my transition contract, then was looking for something new to do. When the opportunity to work with entrepreneurs arose, I jumped in with both feet.
What was the “Aha Moment” that led to the idea for your current company? Can you share that story with us?
Before I left Ryan, I was trying to figure out what my next gig would be. I met a bright young man who was building a new social and entertainment platform. We got to chatting about what type of structure he should use to set up the business. At one point in the conversation, I asked him if he understood what a corporation was, and his honest answer was, “Can you walk me through how it works.” That was my “a-ha.” I knew right there that I could have a positive impact on an entire class of entrepreneurs who had great ideas, but might be lacking the experience that I had gained from running businesses for so many years.
Was there somebody in your life who inspired or helped you to start your journey with your business? Can you share a story with us?
When I started to think about leaving PwC and starting my own consultancy, I sat down with the partner to whom I reported. I didn’t quit, as much as have a conversation about where my head was and why I was thinking about walking away from the firm, including my own partnership aspirations.
His reaction was perfect; he didn’t try to convince me to stay. Rather, he offered to help me work through the decision. For six months or so, we would take an hour here and there throughout each week, and just talk: “did you think about this? What happens if that?” HIs input was so valuable to me and helped me reach the decision to leave, and be able to do so with no regrets. We remain friends to this day; and he is still my mentor, and a huge champion for my work.
I can honestly say that he had one of the most positive impacts on my own life, and taught me some really important lessons about how to manage and lead people, which I hope that I have in turn passed on to some of the people who have worked with me over the years..
What do you think makes your company stand out? Can you share a story?
I think where we shine the brightest is our ability to bring the experience of a world-class consulting and fundraising experience to early-stage companies. Historically, this type of experience was not attainable until a business had reached a fairly large scale. We recognize that our project companies will be able to go further and faster with our assistance, and so we come prepared to push hard with all of our might, leveraging every ounce of expertise within BX3 to get them to the next level.
My favorite projects are the ones that begin with a founder looking for help raising capital, but who realize from spending some time with us that capital is not the answer to their problems. The instances in which we have been able to help founders build up the business so that they raise at a higher valuation — or not raise at all — are some of the most rewarding projects; because it is there where our long-term value to the company is exponentially greater than just turning it over to our capital practice to find an investor. We started working with an ad-tech company at the end of last year that was shut down by Covid, and was looking to raise capital to restart. After working with the founders and taking a hard look at the business, we were able to devise a restart plan that did not require outside capital. The new Go-To-Market strategy completely reshapes the way that they enter a new territory and make the connections needed to drive users to the platform who become the customers of the paying advertisers.
How have you used your success to bring goodness to the world?
The great economic shutdown of 2020 was devastating for many early-stage businesses. We went to market with five different initiatives during 2020 to help our fellow entrepreneurs, with things like free marketing services and press releases for COVID rebound stories, free tax preparation services, and free PPP application and forgiveness reviews. All the same, much of our day-in, day-out is about bringing goodness to the world. The selection process for the projects we take is competitive; we turn down many, many more projects that we accept. We are focused on projects that we think will have a positive social impact, and will work well with our existing client base, in terms of overlap, strategic partnerships, etc. We are looking well beyond founders who just espouse a good business proposition.
You are a successful business leader. Which three character traits do you think were most instrumental to your success? Can you please share a story or example for each?
Two of my most favorite business quotes, (and I’m probably paraphrasing here), are first, “Our primary responsibility is to take care of our people, because if we take care of our people, they will take care of our customers;” and second, It doesn’t make sense to hire smart people and tell them what to do, as the whole point of hiring smart people is for them to tell you what to do. With these people-focused mantras in mind, I think the three character traits that best served me towards being successful are:
- Empathy. I see empathy as an important trait because of all the other things that it requires. For example, you can’t be empathic without good listening skills. Empathy is what helps enable us to be in the shoes of someone else. This enables us to plan effectively and be creative for that client. If we dig deep and truly understand what they want to accomplish — but also, critically, the “why” of their intentions — we can really provide them the best possible service to help them get there. On the employee side, being empathic translates to giving people space and freedom to do their jobs. It also means allowing people to manage their schedules for themselves, and providing a workplace that encourages creativity. Yes, we have deadlines and yes, we are required to meet them. The “how” of how we meet them largely falls on the individuals who are responsible for that particular project. No one likes to be micromanaged; we specifically hire individuals who do not require it.
- Integrity. One of my favorite stories is from when Ryan was acquiring our tax business in 2014. When the diligence process started, we got a lot of “feedback” from their team about our engagement process with our clients. They had never worked on an acquisition of our scale with clients like ours who were largely Fortune 500, but who operated with so many handshake deals in place. What they came to understand was that those clients often wanted to work with us precisely because we were willing to work on the basis of a handshake. That level of trust came from building years-long relationships that made people very comfortable because they came to know that we operated with integrity. Our word was bankable; if we promised something, we delivered it. Our competitors, largely Big Four accounting firms, had a client onboarding process that took weeks. Ours, on the other hand, was simultaneous. Once we agreed on the terms of a project, we shook hands and got to work. In the next phase of the deal, Ryan required us to obtain client consents to transfer ongoing engagements from our firm to Ryan. These consents also served to memorialize the terms of many of the “handshakes.” A process that Ryan expected would take at least a month was complete within days. I attribute that largely to the integrity of our firm, as well as the incredible relationships we had built with our clients.
- Optimism. An organic optimism, even enthusiasm, about work really goes a long way towards getting everyone excited about going to work every day. It really is infectious. Our company is generally a “good news” business anyway, in that we are dealing with early-stage companies with founders with plans to change the world. One of our projects is Narbis, a wellness device that helps users train their brains to focus — in other words, a non-pharmaceutical aid for people with attention and concentration issues. We have worked with the founder through all types of adversity over the past year, including the effects of that pesky pandemic in their launch year — but we all meet multiple times each week, and it is so rare to see anyone ever down. We know what we are doing here is amazing and we know we are going to have a positive impact on so many people’s lives.
Often leaders are asked to share the best advice they received. But let’s reverse the question. Can you share a story about advice you’ve received that you now wish you never followed?
Off the top of my head, I don’t think I’ve been in this situation. That could very well be time healing the wounds, however.. I guess my experience has been that even the bad advice has value, as it should always create a lesson to be learned. Even if the lesson is that the person giving that advice may not be such a good advisor, I think there is always something to take away.
Can you tell us a story about the hard times that you faced when you first started your journey?
Many of our early consulting projects were in the blockchain and crypto space. Like many new technologies, early adopters included criminals and the sub-ethical. As a result — and having not really previously dealt with people who were lacking in this area — we encountered a number of projects that consumed lots of resources by clients who did not seem to think twice about disappearing when the bills came due.
That process made us stronger and has resulted in a vetting process that I think is second to none. Every project that we take now is an A+. We only work with founders who share the same level of commitment and integrity that we do. The companies we are building together are quite literally changing the world for the better.
Where did you get the drive to continue even though things were so hard? What strategies or techniques did you use to help overcome those challenges?
Once our pipeline was filled with top-notch projects, it became almost impossible for us to waver in our mission. I read PitchBook and Crunchbase digests every day to see who is getting funding and for what. I often shake my head, knowing that we are curating things that are light years ahead of the companies that I read about. So what this boils down to is really about believing in what you are doing and continuing to push forward, even if the first answer — or first 10, or first 20 answers — is “no.”
The journey of an entrepreneur is never easy, and is filled with challenges, failures, setbacks, as well as joys, thrills and celebrations. Can you share a few ideas or stories from your experience about how to successfully ride the emotional highs & lows of being a founder”?
I try to remember that when things feel bad, they are probably not actually as bad as they feel. And every failure creates an opportunity. So, I try to let the failures sink in a little, clear my head, think about what opportunity was created, and how can I go about capitalizing on that opportunity. When we win, we definitely celebrate. I do think, however, it’s always important to be at your desk on time the next day, no matter how awesome the celebration the night before. There is a certain amount of discipline that goes a long way towards ensuring there will be a “next” celebration.
Let’s imagine that a young founder comes to you and asks your advice about whether venture capital or bootstrapping is best for them? What would you advise them? Can you kindly share a few things a founder should look at to determine if fundraising or bootstrapping is the right choice?
In my opinion, every founder has to bootstrap, whether they have the benefit of outside capital or not. Bootstrapping should never be optional and should always come before venture capital. That’s not to say that outside capital isn’t important. For a business really to scale, it becomes necessary. One of the keys to a successful capital raise though is to tackle it when the money isn’t immediately needed. The process is infinitely easier for firms that are adequately capitalized and are raising to help realize a long-term vision.
Ok super. Here is the main question of our interview. Many startups are not successful, and some are very successful. From your experience or perspective, what are the main factors that distinguish successful startups from unsuccessful ones? What are your “Five Things You Need To Create A Highly Successful Startup”? If you can, please share a story or an example for each.
One of the best things about my role at BX3 is the opportunity to work with truly brilliant founders. The amount of knowledge that I can absorb from day-to-day interactions with this group is of course rewarding; but it also helps me shape my approach to running BX3 and working with the next group of founders who join our client roster.
One of our key projects is an Ohio-based incubator called Converge Ventures. The founders are exceptional and we work well together because of a shared approach to building successful businesses. When we sat down to memorialize that approach, we broke it down into four key components: 1. Customer; 2. Product; 3. Capitalization; 4. Team. Component no. 5, Luck, really covers a mix of intangibles that feed success. Here are some thoughts on each:
- Customers. Many entrepreneurs start with a good idea and assume that if you build it, they — i.e., the customers — will come. Based on the sheer number of businesses that fail, we know that can’t be true. Instead, I think it’s important to start from the perspective of the customer — the person who wants you to build it — and then you have a much better chance that they will come. Better yet, if the customer becomes part of the development process, the chances increase exponentially that they will stay in the mix as paying customers when the product gets to the commercial market.
- Product. If the customer need has been identified, the next question is, can you build it, and can you do so with an eye towards economic feasibility. If you are going to fail, you want to fail as quickly and cheaply as possible. The best founders strike me as the ones who have mastered this product development phase, including figuring out the inflection points for MVP, beta, commercialized product, and so forth. The teachers of the masterclass in product development have figured out where to access already developed, and underutilized IP, such as in a university setting, and can expand on that IP to create a commercially viable product.
- Capitalization. Great founders always keep an eye on the balance sheets of today and tomorrow, knowing that running out of cash can be fatal; and that it is easier to raise money when you don’t need it. Those are fundamentals in the way that we operate and advise our clients. Great founders are planning ahead, and contemplating capital for when it will best serve the expansion of the business. We also grade the capitalization that our founders achieve. Outside investors are good, but non-dilutive capital is much better. The master founders have a keen eye for finding and obtaining funding through alternative sources like grants, which provide critical operational funds without fracturing the cap table.
- Team. We work with lots of great technicians who know nothing about running the business. It is so critical that founders surround themselves with the right people who are helping to move the dream forward. One of our founders, who happened to be a brilliant scientist with a great product, came to us at a point in the company’s lifecycle where he was completely missing the rest of his C-suite. Fundraising in the capital markets was not a realistic possibility until we had the opportunity to backstop some of the key C-suite functions that had been neglected, including cleaning up legal documents and corporate formalities, creating accounting processes and systems and bringing them current, and building a real marketing campaign that credentialed him to the outside world as an expert in the field.
- Luck. Sometimes you just need things to swing in your direction. Grubhub was around long before the pandemic, but when the pandemic dust settles, Grubhub will be a huge winner largely due to luck. Yes, I have heard the saying “you make your own luck.” No, I don’t fully believe that. Just as history will show Grubhub as a pandemic winner, there will be thousands and thousands of pandemic losers — founders who built incredible businesses — whose timing was just off. The expression “make your own luck” is something I interpret as a euphemism for hard work and diligence. Founders need to have the discipline to work very hard. Working hard and creating more buzz leads to more opportunities, but closing them and turning them into something scalable does ultimately require a little bit of luck.
What are the most common mistakes you have seen CEOs & founders make when they start a business? What can be done to avoid those errors?
Lots of thoughts about this popped out in the last question, but I think some of the worst fundamentals come from building something in a vacuum. We also see lots of mistakes around capitalization like underestimating burn rate or development costs. We also have seen many cases of founders who are able to raise capital doing so too soon, and ultimately diluting themselves unnecessarily. One of the more disturbing trends that I see is around the attitude for business fundamentals. We see mainstream business headlines regularly tout high valuations for companies that are nowhere near reaching profitability. That feels like an alternate reality and creates a false sense of a founder’s obligation to drive profitability. You have lots of users? That’s great. But how does it translate to profitability and ultimately, to cash in the bank? Realistic paths to profitability are a required ingredient for any client that we take on.
Startup founders often work extremely long hours and it’s easy to burn the candle at both ends. What would you recommend to founders about how to best take care of their physical and mental wellness when starting a company? I think of building a business as a long journey rather than a short trip. No matter how much you like what you are doing, if you are sprinting all the time, you will burn out. I believe that you do your business a disservice as a founder if you don’t regularly lift your head up to see what is happening in the world around you. For me personally, I am a long-time practitioner of Transcendental Meditation. I’ve found that it helps me disconnect for at least a little time every day while resting my mind, which helps me focus better and be more creative when I am on. But I think this disconnect process looks a little different for everyone, and can take many forms, including exercise, reading, or watching TV.
You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂
I am a big believer in the power of empowerment. A big focus of my spare time thus revolves around programming and supporting entrepreneurs who may not have access to the resources that they need to be successful. Empowering them to create is what brings people along, creates jobs, creates wealth, and creates the products and services that improve our society. I also believe that people are wired to want to pay that forward. I received amazing mentorship so that is a huge focus of mine, ensuring that I help others where I can. I like the idea of movements that help entrepreneurs move to the next level. At the personal level, this could be something as simple as offering a couple of hours to be a mentor or supporting a Kickstarter or crowdfunding campaign.
We are blessed that some very prominent names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US with whom you would love to have a private breakfast or lunch, and why? He or she might just see this if we tag them.
I don’t care if it is cliche, but I am a huge fan of Shark Tank, and although I’d love to meet any of the sharks, I’m going to cite Mark Cuban here. The reason I chose Mark Cuban first is because of his forward thinking around blockchain and digital payment technology. But with regards to Shark Tank in general, I think the show has done an amazing job of educating an entire generation of entrepreneurs who now have a new attitude about preparedness and really truly understanding the fundamentals of their own businesses before speaking to potential investors.
How can our readers further follow your work online? Can you please fill this in with our social media, etc.?
This was very inspiring. Thank you so much for the time you spent with this. We wish you continued success and good health!