June 10, 2015 Jordhy Ledesma

The Startup War Chest

war chest is a metaphor for any collection of tools or money intended to be used in a challenging or dangerous situation. Historically, it referred to the chest located in the homes or barracks of soldiers, in which the soldier kept arms and armor. In the modern era, it more often refers to a collection of funds (or less occasionally special tools or equipment) intended to allow a person or organization to get through a situation that requires much more readiness or money than usual. – From Wikipedia

Many entrepreneurs go to war alone, broke, naked, and with a  big open heart! They go on quoting Rocky, The Field of Dreams and Forrest Gump. It’s time for a rude awakening, because you’re in a different movie. And, if you must pick movies I would probably say that entrepreneurship is similar to The Terminator or something along those lines. When people say entrepreneurship is hard, they don’t mean Harvard hard; they mean it’s Vietnam hard. Let me say it once or at least a couple of times: Entrepreneurship is war. Entrepreneurship is war.

Entrepreneurship is war anyway you look at it. It’s a war against yourself, against established players, even against customers who don’t want to migrate to your technology. You might use money to win this war, you might use intelligence, secrets, persuasion  but, in every case one thing is certain: you need a war chest.
Your war chest should be filled by intellectual property, connections, industry insights, key people and strategic money (that comes from the right sources of financing) in order to have a fighting chance in crowded markets. However a war chest gives you many more intangible gains that include but are not limited to:
– Greater seduction points for potential employees
– Advantages that can help you carve a profitable strategic focus in your industry
– Mess avoidance tools
– Market domination tools (think distribution or big coffers)
– Greater appeal for partnerships
– Leverage against big players, and so on

Deception via Innovation

It’s very important to have a big set of tools in your war chest to mislead your key competitors. The more plays you have under your belt the more misleading you can be.  A high number of plays also signals the capability of innovation and a strong execution ethic. Being deceptive is not about lying but about executing in a way that leaves the revelation of your final purposes to the very end.

Types of War Chests

Money is not the only type of war chest. While is good to have more money than your need, what’s crucial is having the right kind of money: does your investor expect an exit in 1, 5 or 10 years? Are you left with material equity for your best/early employees? Are the terms reasonable? Is the reputation/track record of your investors a good one? And so on. Aside from money you must research I.P. war chests, human capital, social and legal war chests.

Take your time and build up your war chests (all of them!). Make a habit of preparation before execution. And then, keep building it as your startup/high growth business keeps moving forward. By the way, building a war chest is the paramount responsibility of CEOs, and usually it’s also the foundation of your corporate strategy.


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