“We work 100 hour weeks to not work 40 hour weeks,” says Nihal Mehta, a serial entrepreneur and venture capitalist. Mehta has created five start-ups and now uses the lessons from two failed companies to be a more effective investor. However, at one point in his career, Mehta found himself with $400,000 in debt. The lessons he learned through his many failures before finding success are very common in entrepreneurship.
His first startup, Philly Tonight an online city guide website for the Philadelphia, Pennsylvania, was a very doctom 1.0 company. The office was a typical well-funded startup with high ceilings, nerf basketball hoops, and a ton of energy. What they had in focus for growth, they lacked in concern for revenue. They racked up $400,000 in debt and no way to raise additional money.
The one thing that would have changed everything was if we focused on profitability [instead of growth] the business would have survived.
After learning the painful liquidity lesson. Mehta changed his outlook on business development. This resulted in his next startup being a success.
The difference in mentality was we started it as a cash flow positive business. We grew it and never hired ahead of revenue.
One cause of failure was poor cash flow management. Good thing for our clients, a cash flow analysis comes with every business plan! It can tell in which month/quarter you will be cash-strapped, what your break-even point is, even down to how much you can budget for rent. It can also tell you how much to ask, in either debt/equity and what interest rates and payment duration will work for you.
Nihal has since found Eniac Ventures, a a seed-stage Venture capital firm with offices in San Francisco, California and New York City.
See his insightful interview at: http://cnb.cx/1MyP7Kj.
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