I found Guy Kawaskai's post "After The Honeymoon" to be so on target that I sent it to most of the CEO's I work with at Idealab and First Round Capital. One of them wrote back "When does the honeymoon start" which is a good question. But an even more important one is "When is the Honeymoon over?"
Guy seemed to feel that the honeymoon was over after you've closed the funding round, gotten the startup off the ground, and have run into some problems. In fact, the honeymoon starts once you've closed the funding, and usually is over after the first serious board meeting post financing. I have rarely seen any company which looked as good the morning after, as it did when we closed.
It is clear to me that the second honeymoon starts once you're cash positive. Fred Adler, a noted early NY based venture capitalist, had a sign on his wall that said "Happiness is positive cash flow." If you have positive cash flow, you have time to solve problems, deal with personnel, product and other issues. If you don't, you're out raising money - whether or not you realize it. And when you're raising money, there is no honeymoon till you have enough cash for another year.
Most of the solution Guy discusses are aimed at keeping a company alive on the cash it has. They are good lessons to learn, and we try and inculcate our CEOs with them. Some, like Michael Kuperstein at Metaphor Solutions, have been through several startups and really know how to operate on a shoestring when needed, but can make effective use of capital when it's in the bank. Others, typically first time entreprenuers, fall into the trap of believing their own hype, and spend themselves, and their companies, into disaster.
When I taught at the Harvard Business School back in 1978-79, one of my colleagues, Neil Churchill, had just returned from two years running a company. I'll never forget his comment that "I've taught about cash flow for decades as an interesting accounting and intellectual issue. After six months at the company, cash flow becomes visceral. It's the most important issue."
So thanks, Guy, for pointing out some of these problems and some solutions. Positive Cash Flow is the mantra!