Five Things I Wish Someone Told Me When I First Launched My Business or Startup

Over almost 20 years in venture capital, Carter has helped launch dozens of startups, participated in almost $2 billion of investment rounds, invested alongside over 200 different venture funds, and currently spearheads Penn Medicine's Co-Investment Program at the University of Pennsylvania, which makes investments in faculty spinouts focused on cell therapy, gene therapy, mRNA, lipid nanoparticles, and connected health companies.  Prior to his venture capital career, he was on the other side of the table as an entrepreneur, having started two software companies.

Can you tell us a story about what brought you to this specific career path?       

As I was about to graduate from the University of Pennsylvania in 1999 and was interviewing for jobs, I was introduced to an individual who had an idea for a new software company and needed people to help.  It was the perfect time to be an entrepreneur and help start a company because I was just beginning my career, did not have any kids, and had no real commitments, and it offered me a real opportunity to have an impact within a growing high-tech company just prior to the dot-com bubble bursting when investment dollars were widely available. 

In 2002, I met some software developers who had an idea for a new kind of database technology that would improve processing speeds by almost 10x for the telecommunications and financial services industries.  Together, the three of us founded Quazant Technology, raised money from investors, and began building the company.  After a number of years building the software and experiencing some exciting customer engagements, we ended up winding the company down as we weren’t able to generate enough market traction. It was a long, slow death and one where we fought hard to return capital to investors—which is a great story and cautionary tale unto itself. 

As we were winding Quazant down, one of our investors called me because they needed to add to their deal team since they had just raised a new fund focused on enterprise software companies.  Moving from the entrepreneur side of the table to the investor side of the table was an exciting idea for me, so I made the move and joined Cross Atlantic Capital Partners in 2006.  For the next 13 years, we invested capital in enterprise software and tech companies, during which time I moved from associate to principal to managing director.  In 2019, I joined a brand new investment vehicle that Penn Medicine at the University of Pennsylvania set up to fund spinouts that emerge from faculty research.  Being someone who fought his own disease and ultimately had brain surgery to address it, I love the fact that my work could someday have a material impact on people's lives.

Can you tell us a story about the hard times that you faced when you first started your journey?

I think every entrepreneur will agree that having enough cash on hand is an eternal and existential struggle, and this struggle led to one of the more difficult times I personally faced as an entrepreneur.  Here’s an example: during my second start-up, we didn’t have enough money to pay everyone.  One co-founder was willing to take only 50 percent of his salary, but another co-founder mandated that he be paid his entire salary.  Since there was not enough money to make those salary payments and pay myself, I could not pay myself anything and could not reimburse myself for the expenses that I incurred on behalf of the company.  So, after my savings were exhausted, I began delivering pizza for Pizza Hut at night.  It sure didn’t allow me to live an extravagant life, but at least it paid the rent.  I use that as a cautionary tale to entrepreneurs because it reinforces the importance of making sure that one’s personal financial “ducks are in a row” to weather the tough times if you’re going to launch a company full time.

Where did you get the drive to continue even though things were so hard?

Ultimately, I felt responsible for the money that the investors put in.  That was their hard-earned money, and I felt that it was my duty to generate a return for them.  In this case, that involved doing everything I could to extend our runway.

How are things going today? How did grit and resilience lead to your eventual success?

At one point in Quazant’s life, resilience and adaptation were the name of the game.  When our product was taking longer to get to market, we needed to generate revenue.  So we began some custom software development engagements.  These proved to be interesting engagements, but they also allowed the company to continue operating and developing its primary product. Ultimately, the value of making and keeping relationships is what ultimately led me to where I am now.  For instance, it was one of Quazant’s investors who called me as we were winding the company down and ultimately offered me a job.  That led me to the venture capital side of the table and, ultimately, to my current role.

Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?

When I was looking for office space for my first company, I took a look at a number of locations.  When I found one that I thought would work, I brought my colleagues to take a look, and we all agreed that it would be good.  However, I later learned that our real estate agent perfectly timed the visits so that we would not be there when a small school located below had lunch hour or let out for the day because, when those things happened, there were a ton of people smoking and making loud noise.  So, when we visited to consider the space, it was quiet and smoke-free.  However, once we moved in and started working there, we came to find out that this was going to be a daily occurrence.  It also meant that we had to carefully time our clients’ and investors’ visits as well.

This ultimately taught me a lesson that I have used for so many situations since—and, of course, I do not just mean situations revolving around looking for office space—which is to consider any decision from many different angles and delve down into the goals of the various people involved because they are not always aligned with your own.

What do you think makes your company stand out? Can you share a story?

I think my second company, Quazant, stands out because it actually was not a success.  However, I learned the most from it, and it serves as the basis for much of my advice when we make an investment in a company or when I serve on a company board.  We were able to return most of the investors’ money, and I still feel terrible that we were not able to generate a return for them.  I recently ran across a letter that one of the investors sent me after we wound the company down, and, in the letter, he made it quite clear that he had a lot of resentment over losing some of that investment.  I share that same sentiment because I lost a lot of money as well.  We worked really hard and pursued every avenue to return much of the investors’ money.  While we didn’t return all of it, we were able to return much of it.  So, I can stand up in front of anyone and justify our decisions, knowing that we went far beyond the call of duty and that things could have turned out a lot worse. 

Which tips would you recommend to your colleagues in your industry to help them thrive and not “burn out”?

Surround yourself with people who are equally committed and share the same vision as you because they will be there to help shoulder the burden when you’re overwhelmed.  Similarly, surround yourself with people who are connectors, because those are the types of people who will help you when you need to target potential customers, investor leads, business partners, or add to the team.  This will save a lot of time and energy and, as a result, cause less burnout. 

This also goes for which investors to choose, because not all investors are the same.  I tell people all the time that not all investor dollars are the same because some investors bring more to the table.  All things being equal, you want the investor who is going to roll up their sleeves and get involved.  For instance, some investors have a stable of leadership candidates, and others have access to a tremendous amount of intellectual property that, when paired with your own, may help you leapfrog competition or achieve a value inflection point sooner. Other investors simply invest their cash, sit back, and watch.

None of us are able to achieve success without some help along the way. Is there a particular person to whom you are grateful who helped get you to where you are? Can you share a story?

I have to say that I am most grateful to my father for helping me through my professional journey.  He had his own entrepreneurial and subsequent venture capital journey, and, as such, he was able to offer me great advice along the way.  Over the years, when telling my father about scenarios I’ve encountered, I have found myself quoting him— even when telling him stories. It just goes to show that good advice stays with you.

How have you used your success to bring goodness to the world?

I think that my current role is the one where I have been most able to help do that.  Before this role, I was focused on software and helping technology companies grow.  However, I’m now in a role where I can help some of the world’s most accomplished and forward-thinking researchers bring potential life-saving and life-improving solutions for patients to the world through their biotech spinouts.  I help them get new companies off the ground, help them raise money, and try to be as much of a team member to the new companies as possible so that, hopefully, these solutions may one day make it to patients and save or improve lives. 

What are your "5 things I wish someone told me when I first launched my business" and why? Please share a story or example for each.

1 . Be realistic with projections.  It’s simply laughable when an inexperienced entrepreneur thinks they can wow investors with projections of going from zero to $100 million in revenue in 3 years.  The “hockey stick” revenue projections may have existed back in the .com days, but it’s just not realistic these days.  I’ve been a part of a lot of pitches and unrealistic revenue projections are an easy way to lose a prospective investor.  Ultimately, realistic revenue projections and cost estimates that are based on data is the way to have credibility with investors. 

2 . Incorporate succession planning into your hiring process.  One company with which I was working went out to raise money and the CEO was 71, another Partner was 81, the other Partners were over 65, and then there was me, who was about 42 at the time.  So, the investors with whom we were meeting kept telling us that they were investing with a 5 to 10-year horizon, and our leadership was just too old.  So, succession planning – and ensuring that your team has a diverse age range – is important.

3 . Protect yourself from fraud – even from those you think you can trust.  One of the most brazen instances I encountered at one point in my career was a joint venture with another company. One would think that the interests of the parties would be aligned in a joint venture.  However, our joint venture partner was the running point when negotiating a client contract and our partner changed the name in the client contract at the last minute from the joint venture’s name into their own company name.  As a result, the entire contract – and all the related revenue – flowed to their company, instead of the joint venture.  Needless to say, this became a lawsuit and just shows that it’s critical that you protect yourself at every step along the way – even from those you think are your allies.

4 . Go into it knowing that you’ll always be fundraising – even when you’re not actively raising money.  Every person and investor is a potential investor for this round or the next.  So, even if an investor says ‘no’ to this round, maintain that relationship, give them updates about your growth along the way, so that there’s a warm relationship and a basis on which to pitch them when it’s time for the next round.

5. Raise money before it’s too late.  This is something that I’ve encountered as both an entrepreneur and as an investor.  When you start to get low on cash, it’s already too late to raise money for several reasons.  One of these reasons is that you have to budget at least6 - 12 months to raise a full round.  So, if you have less than that in runway, then it’s too late.  Another reason is that if you start getting low on cash, then investors will use that to their advantage and can provide pretty onerous terms that benefit them—to you and your earlier investors’ detriment.  At every portfolio company board meeting, I delve into a portfolio company’s runway, use of cash, and projections so that we have a line of sight into when we need to start an official fundraising effort.

Can you share a few ideas or stories from your experience about how to successfully ride the emotional highs and lows of being a founder”?

There is no doubt that there are highs and lows, and these can influence professional and family relationships.  So, like many things, it’s important to have the buy-in of the members of your family before venturing into the world of being an entrepreneur.  These are the folks from whom you are going to need support—emotional and sometimes financial.

It’s also important to ensure that you have enough financial footing to undertake the effort, and remember that the revenue never comes flowing in the way one often thinks it will.  My example of delivering pizzas at night to make rent is an example of not having a solid enough financial footing to weather the lows of being a company founder.

As it relates to the highs and lows that are inevitably felt within the company, the best way to handle that is to ensure that the employees and leadership team feel like they are part of the effort.  Stocks and options are a way to do that, but that’s not the entire equation.  The team needs to feel like the company and its mission are their own.  So, rejoice together during the good times, and then come together in a transparent way  as a team and come up with the best path forward to address the tough times.  That way, you have buy-in and support.

You are a person of great influence. If you could start a movement  that would bring the most good to the most people, what would that be? You never know what your idea can trigger.

Your goal should always be to always do the right thing.  When presented with a situation or decision, I often ask myself: If I had to stand up in front of someone else or see my decisions on the front page of the New York Times, can I justify making the decision I’m about to make?  If I cannot justify my decision in those two settings, then it’s back to the drawing board to find the right decision.

How can our readers further follow your work online?

I think the best way is through my LinkedIn profile.  I’ve been trying to be more active in posting exciting advances from the companies we’ve helped launch, as well as personal developments, like my journey through epilepsy and brain surgery, which has given me a real purpose in what I do and an appreciation for forming biotech companies that are dedicated to improving the lives of people battling real-life diseases.