Business Communication is Not Just Talking Loud

Effective communication is an absolute requirement for successfully starting a business, but it doesn’t come naturally to many entrepreneurs. Communication is considered a social skill, and inventors and engineers, for example, aren’t known to be social butterflies.

Founders have to communicate their ideas and products to investors, business partners, and the rest of the team. Then, hopefully, come customers, distribution channels, and going public or merging with an attractive buy-out candidate. Communication is not just talking, but also writing, body language, and “actions speak louder than words.”

John Spence, in his book “Awesomely Simple” says that the single biggest problem he has to deal with in client companies worldwide is the lack of open, honest, robust, and courageous communication. He narrows down the problem to the following aspects of communication, and I agree:

• Honesty. This element is without question the most important in building strong communication in a startup. The implementation is simple – just tell the truth all the time, every time. It’s a lot easier than trying to remember what you said the last time, and people notice quickly. Build a culture of truth, and others will follow your lead.

• Empathy. It is one thing to be honest; it is another thing to be brutally honest. Tell the truth in a frank and direct, yet respectful and empathetic, way. Shoot straight with people, but don’t shoot them between the eyes. Body language and sincerity are important here.

• Courage. You need the courage to put even the most difficult and challenging subjects on the table and lead the discussion. Don’t wait until tomorrow, hoping the problem will go away. Courageous means that team members have the nerve and confidence to question authority, rather than dutifully fall in line behind a bad direction.

• Safety. If you want people to tell the truth, you have to make it safe for them. Here is where your actions speak louder than your words, and louder than any written policies. If you obliterate someone for telling you the truth, you will never hear the truth again. If you are caught in a lie once, you will never be believed again.

• Intellectual rigor. Although people should be safe, ideas should not be. In an intellectually rigorous culture, theories are tested, and people welcome, even encourage, critical examination of ideas and information, regardless of the source. The goal is for only the strongest ideas to survive.

• Transparency. The hallmark of great leaders and organizations is that they share as much information with all of their stakeholders as often as they possibly can, in multiple contexts. Yet many leaders will tell me that they are continually amazed to hear the common complaint “why didn’t anybody tell me this was happening”.

Spence says that the best way to improve your organizational communication levels is to improve your own interpersonal communication skills. Luckily, these are skills that can be taught and learned. It takes practice and hard work, but with time, it is possible to greatly improve.

The key skills for superior interpersonal communications are effective use of body language, focused listening, expert questioning, using multiple sensory modes, providing both logical and emotional arguments, and listening for ambiguous or emotionally loaded words. But these are subjects for another day.

If you are one of those entrepreneurs who struggles with every email you write, take heed of the importance of the basic principles above, and take inspiration from the fact that you can and will improve your skills, if you are willing to work at it. But make no mistake about it, being an entrepreneur who does not communicate is not an option. Start today, and do it every day.

Marty Zwilling

Ten Ways to Optimize Your Investor Pitch Time

The average length of a funding pitch to angel investors is ten minutes. Even if you have booked an hour with a VC, you should plan to talk only for the first fifteen minutes. The biggest complaint I hear from investors is that startup founders often talk way too long, and neglect to cover the most relevant points. Or they get sidetracked by a technical glitch due to poor preparation.

If you start by pitching your extended life story, that’s the wrong point. Equally bad is an extended pitch on your new disruptive technology. Investors are more interested in your solution and your business, rather than your technology. Here are some tips on the right approach and the right points to hit:

1. Match your material to the time allotted. If you have ten minutes, that means no more than ten slides. Then match your pace to cover all the material. I’ve seen several presentations that never moved past the first slide before running out of time. An obvious effort to keep talking after the time limit won’t save your day with investors.

2. Remember you are pitching to investors, not customers. Some entrepreneurs seem to think that their product pitch is also their investor pitch. I outlined what investors expect to see in an earlier article “Ten Slides Make a Killer Investor Presentation.” These are tuned to the ten-minute limit, but are just as adequate if the investor gives you an hour.

3. Check the setup and set the stage. If the projector doesn’t work, or won’t connect to your laptop, you are the one that loses. Have at least one backup plan, such as copies of your slides to hand out and discuss, in case all else fails. The first words out of your mouth should be “Can everyone hear me, and read the screen?”

4. Research your audience before presenting. The most respected presenters are the ones who have done the research before hand to know who is in the audience, and have tailored their message to these interests. If you know only a few people in the audience, acknowledge them, and convince the others that this is not a random cold call for you.

5. Dress appropriately and professionally. It’s always better to be over-dressed than under-dressed. Business casual is the standard. Remember that most investors are from a generation where faded and torn jeans were on the wrong side of success in business.

6. Let the top person do all the talking. Tag team shows don’t work in short venues. More importantly, investors want to see and hear the top guy – typically the founder or CEO. They will be judging his aptitude, his character, and his passion. Others can be present for effect, but deferrals to team members for answers are a sign of weakness.

7. First, get their attention with your elevator pitch. Start with the problem and your solution. These are your hooks, and they better be covered in the first 30 seconds. State your value proposition, and what specifically you are offering to whom. Skip the acronyms, history of the company, and the colorful autobiography.

8. Lead with facts, but skip the details. Skip the generic marketing phrases like more user friendly, massive opportunity, and paradigm shifting. “According to Gartner, the opportunity is 100 million by 2015, with 12% compounded growth.” Investors don’t need to know the implementation details of your patent or customer support plan.

9. Don’t forget to ask for the order. How much money do you need, and what percent of your company are you willing give up for that amount? If you want investor interest, the business parameters of a deal should be presented as clearly as the product parameters.

10. Close by asking for questions and promising follow-up. Acknowledging feedback and actually listening for ways to improve will always lead to a positive impression. You should answer questions with data if you have it, but avoid defensive responses in favor of a promise to follow-up after the meeting.

Most importantly, don’t forget to practice, practice, practice. Just because you have given a thousand pitches in your life, don’t assume you can finesse this one by reading the bullet points in real time from the slides that your team put together for you. You need to be totally familiar and comfortable with your pitch to give it effectively.

Forget the theory that you can “rise to the occasion” and impress everyone with your dynamic speaking ability. If you are pitching the wrong point in the wrong way, the occasion will be more the demise than the rise of your dream.

Marty Zwilling

Five Things Every Entrepreneur Should Know About Angel Investors

If your startup is looking for an angel investor, does it makes sense to present your plan to flocks of angels, and assume that at least one will swoop down and scoop you up? In reality, hitting large numbers of angels in multiple locations with a generic pitch is one of the least productive approaches.

Here are five key things you need to know to quickly find the right angel for your startup:

1. Angels invest in people, more often than they invest in ideas. That means they need to know you, or someone they trust who does know you (warm introduction). For maximum credibility, start networking for potential investors to build relationships a few months before you start asking for money.

   They also favor entrepreneurs who are experienced in starting a company, and experienced in the business domain of the startup. Your business model may be very attractive, but if you are new to this game, you may not be fundable. In this case you need a partner who has deep domain knowledge and a track record of building businesses.

2. A complete business plan is always required. Maybe friends and family will give you money with no plan, but angel investors expect a real plan. All professional investors know that entrepreneurs who start a business without a written plan almost always fail.

   Don’t forget to clearly outline the problem you are solving, before you give the details of your solution. Clearly spell out your business model and your exit strategy, so investors will know how you will make money, and how and when they will get their return.

3. Angels like to get involved directly with the team. This means they are generally only interested in local opportunities. It won’t help your case or your workload to do an email blast and follow-up with 60,000 investors around the world. If there is no one in your area interested or experienced in your type of business, you may have to move to Silicon Valley or Boston, or wherever the right angels for your domain congregate.

   A related issue is the size of the investment you need. Angel investors tend to limit the size of individual investments to $250K or less, and even in groups they rarely consider requests for more than one million dollars. If you need more, you need to focus on venture capital territory.

4. Financial projections and opportunity in the right ballpark. Investors won’t fund people who don’t push the limits, or inversely won’t recognize business realities. Here are some rules of thumb. Your fifth-year revenue projections better be between $20M-$100M. Smaller numbers mean a low return, and larger ones aren’t usually credible

   Secondly, you need a large and growing market, to offset the huge risk of funding a startup. Rules of thumb include an opportunity projection that exceeds a billion dollars, with at least double-digit growth. Smaller numbers may easily make a viable business, but won’t attract investors.

5. Business domain and your character must be squeaky clean. Certain business sectors have historical high failure rates and are routinely avoided by investors. These include food service, retail, consulting, work at home, and telemarketing. Also, don’t expect investor enthusiasm for your gambling site, porn site, gaming, or debt collection business.

   Angel investors are people too. They expect you to understand their motivation, respect their time, and show your integrity in all actions. They probably won’t respond well to high pressure sales tactics, information overload, or bribes.

If you do get rejected the first time, don’t give up, and don’t expect a simple answer on your rejection reason from most angels. They will probably tell you to come back later, after you have finished the product, signed up a few customers, or reached some other future milestone. This is called “not burning any bridges,” in case you start to show traction and they want back in the deal.

Yet if follow the recommendations above, there is definitely hope, even in these tough economic times. According to a Wall Street Journal estimate, the U.S. has at least 140,000 active angels who collectively invest some $20 billion a year in new businesses. All you need is one.

Marty Zwilling

For a Services Business, a Blog Trumps a Website

Blogging has come a long way in the past few years, from a social release for narcissists, to today’s required vehicle for promoting your consulting business and gaining valuable online exposure. Even with product businesses, it’s the ultimate way to build your brand credibility, bring in customer leads, and get feedback from your target market.

Let me be clear – a product or consulting startup today without a blog, even with a static website, risks not being competitive in cost and time to reach and hold that critical mass of online customers. If you can’t justify both a web site and a blog, skip the old-fashioned web site, and make your blog do double duty as described below.

The challenge, as with all new technologies, is to make it work effectively, and avoid wasted effort and expensive mistakes. Here are some tips I’ve gleaned from experience:

• Lead with your blog. You should start blogging about your business before you have a product, to test interest and establish your credibility. Several free blog platforms, like WordPress, are so flexible that you can configure them as a website, as well as your blog, without separate hosting.

• Add content regularly. Every business wants their web site to appear on the first page of search engine results from a relevant search (Search Engine Optimization). Blogs help because sites that update data frequently get higher SEO rankings. When you post to a blog multiple times each week, you content is constantly changing and growing.

• Anchor the blog in your domain name. If you do have a separate web domain name, like ‘www.domainname.com’, then your blog name should be the domain name suffix ‘/blog’ or ‘blog.domainname.com’. Otherwise, your blog content will be indexed separately from your web site content, resulting in a lower overall Google rank.

• Conversational style. Search the Internet for blogs in your industry and do a little research before you start. Studying other people’s blogs will help you identify what you like and don’t like, and how you want yours to look and feel. An informal writing style is generally recommended.

• Add outgoing links. For example, if you mention an article you read in XYZ magazine, make sure to include a hyperlink to the article. Your readers will appreciate the option to view the sites you reference, and having links pointing to other sites will further improve your search engine rankings.

• Create incoming links. Promote your blog by including your blog link in your e-mail signature, on your website, in social networking profiles, and by providing signed comments to other blogs on a daily basis. You should also submit your blog name to directories such as BlogCatalog and Technorati.

• Leverage blog content. It doesn’t take long to build up a sizable amount of blog content. You can repurpose your posts into articles, books and reports. Many bloggers have found publishing success and Google ads revenue from the blog to be a substantial source of revenue to bolster their mainline business.

Finally, if you don’t have the time, energy, or skills to write a blog, it may be a good investment to hire a ghost writer, or hand the job over to your marketing executive. Don’t be shy, I don’t know many CEOs today that write their own speeches and marketing materials. Focus on what you do best, and let professionals do the rest for you.

To be successful, you have to get your message out there, and make your company stand out above all the clutter. Use the social networks, like Twitter, to ‘pull’ in the business. Be a blog apprentice today, and trump your competitors tomorrow.

Marty Zwilling

Skip the MBA if Entrepreneur is Your Lifestyle

I don’t have an MBA. I used to fear that this would put me at a disadvantage in starting my own company, but now I’m convinced that it may be the other way around. In some recent surveys, as many as two-thirds of entrepreneurs felt that their entrepreneurial spirit was more ingrained than learned, so a specific education level is at least irrelevant.

For business professionals who aspire to an executive position in a large company, most people agree that an MBA is always positive. It will get you a higher starting salary, and a valuable edge in your credentials at every promotion opportunity.

What’s different about the entrepreneurial environment? Many people argue that it has to do with the requirement for entrepreneurs to use “effectual” reasoning, compared to “causal” reasoning taught by most of the major business schools.

At any rate, I had trouble thinking of famous entrepreneurs with an MBA. With a little research I found a few notable names in recent businesses, although each of these actually started with some big-company experience:

• Scott McNealy, Chairman of Sun Microsystems. He co-founded this company along with three partners in 1982. McNealy's background is surprisingly all business, after an MBA from Stanford, rather than computer science or programming, and unlike most members of the Silicon Valley community.

• Meg Whitman, President and CEO of eBay. Although not a founder, in ten years she grew the company from 30 employees and $4 million in annual revenue to more than 15,000 employees and $8 billion in annual revenue. She is a graduate of Princeton University and has an MBA from the Harvard Business School.

• John Scully, CEO of Apple, who has an MBA from the Wharton School of Business. During his ten-year tenure, Apple's sales increased from $800 million to $8 billion. Yet he was ultimately replaced a one-semester college dropout, Steve Jobs, who was the original founder.

These probably feel that their MBA was worthwhile. But I’ve found so many on the other side, here's my net on when an MBA really helps an entrepreneur:

1. If you are already an entrepreneur, more education, including an MBA, will only slow you down. Consider it a waste of time.

2. If you plan to become an entrepreneur, and already have business experience or an undergraduate business degree, skip the two-year delay and cost of the MBA.

3. If you have a technical career with no business background, and you want to start your own business, an MBA can be a blessing by giving you the basic knowledge you need to manage your business.

4. If you are still in school, and contemplating an MBA before stepping into the entrepreneurial world, go for it. An MBA will extend your education more broadly into the world of business strategy, and give you more credibility with potential investors.

What’s the difference between causal reasoning and effectual reasoning? According to Professor Saras Sarasvathy, who teaches entrepreneurship at the Darden Graduate School of Business, causal reasoning begins with a pre-determined goal and a given means, and seeks to identify the optimal way to get there. Effectual reasoning, on the other hand, begins with a given means and allows goals to emerge based on situational dynamics.

That’s all a bit academic, so for me an MBA is not gold. But I have to admit that I feel blessed when I’m invited to guest lecture at MBA classes at one of the local universities. As in all my articles, I always hope to add a dose of reality to the theory, and make some gold for entrepreneurs and executives alike. But I’m always open to learning from you as well.

Marty Zwilling

Five Problem Solutions to Motivate Your Startup

Potential startup founders are always looking for ideas to implement, when they should be looking for problems to solve. Customers pay for solutions, but there is no market for ideas. I’m often approached by people with a “million dollar idea,” but I haven’t seen anyone pay that for one yet.

Equally often, I see startups who are on the road to implementing an idea, but haven’t figured out what problem it solves – the business plan waxes on eloquently for 20 pages about how great this product and technology is, but never gets around to defining the problem (investors call this the “solution looking for a problem” syndrome).

A related “red flag” in a business plan is a missing competitive analysis section, or a short paragraph that essentially says, “this product has no competition.” My reaction is, if there is no competition, then there is no market demand for your product, so why are you building it?

Luckily, many startups are smart enough to keep morphing their idea, until it finally fits a real-world problem, and they can move forward in the marketplace. Unfortunately they could have saved themselves much lost time, money, and heartache if they had just focused on identifying the problem before they built a solution.

Smart startups also don’t forget that startup ideas are solutions for someone, and companies have to make money. The way to make money is to make something people or companies need (not necessarily what they want). Here are five solutions from an old essay by Paul Graham on “Ideas for Startups” that are even more relevant in these tough economic times:

1. Automate a labor intensive process. This is the traditional realm of computers. Lotus 1-2-3 applied it to accounting spreadsheets, and Google applied it to information mining on the Internet, but Henry Ford even applied this principle to auto manufacturing. There are still millions of these opportunities for startups out there.

2. Fix something that’s broken. In business, it seems to me that the traditional banking business models are broken or at least no longer fit the purpose. On the other end of the spectrum, Internet dating sites don’t seem to work. There are thousands of them, so they must be offering something people want. Yet they work horribly, according to most people who have tried one.

3. Take a luxury and make it a commodity. People must want something if they pay a lot for it. Yet most products can be made dramatically cheaper as technologies improve. This opens the market opportunity, you sell more, and people start to use it in different ways. For example, once cell phones were so cheap that most people had one, people started using them as cameras and Internet devices.

4. Make something cheaper and easier to use. Making things cheaper means more volume and more profit. For a long time making things cheaper made them easier, but now even cheap things are too complicated. Computer applications today are cheap, but often still impossible to use.

5. Take a current solution to the next level. Solve the currently intractable problems that impact all of us. Tackle the global warming problem, predict where earthquakes will occur, find alternative energy sources, cure cancer, and unlock the keys to aging. There is no shortage of opportunity here.

Combine these with the value of a good understanding of promising new technologies, and the value of having associates with complementary skills to extend your thinking. Problem solutions are the ingredients that startups are made of. Start solving a problem today that you can use as the basis for the “idea” for your next startup.

Marty Zwilling

Startups With Real Revenue Can Get Venture Capital

I just read the Q1 2011 report from CB Insights, which shows venture capital is back. Overall, investors put $7.5 billion to work across 738 financing deals with U.S. startups. That represents a $1.5 billion jump in funding over the same quarter of 2010 with a similar number of deals, so it clearly shows a trend to larger deal sizes for fewer startups.

To me, this indicates that venture capitalists (VCs) are looking for business, but not from first-time startups. Sure, there is always some seed funding (10% of overall deal flow), but you can bet that this money goes to entrepreneurs who have been there before and won. Angels are also moving up-stage, leaving a bigger and bigger black hole for new startups. Your friends and family are really the only answer until you have a significant revenue stream.

Back to VCs, Silicon Valley venture capital firms are still the most active. In fact, most of the most active investment firms are located there, although NY now has moved solidly into second place (ahead of Boston). That doesn’t mean that you have to live in one of these places to be considered, but it helps.

It also helps to keep track of the business sectors VCs are focusing on. Greentech deals had a breakout quarter with deals and dollars up 45% and 145% respectively vs. Q4 2010. Internet and healthcare deals stayed flat and funding actually dipped. Energy deals climbed with funding increasing significantly. Every quarter seems to have a new hottest sector, but these four will be near the top for some time to come.

So what can you do to get to the head of the venture capital investment queue? Here are some key action items that will give you some priority:

• Create an investment-grade business plan. This means build a plan that hits all the hot buttons; problem/solution, executive team, competition, business model, reasonable financial projections, and what’s in it for the investor. Be ready with a killer executive summary, investor presentation, and financial model.

• Line up a winning team. You have probably heard me say this too many times, but investors look harder at the people than they do the idea (bet on the jockey rather than the horse). They want founders who have been there and done that before, in the same business domain. Both operating executives and top advisors count.

• Timing is critical. Remember you only have one chance for a good first impression. Don’t try to talk your way to a deal before you have the documentation. Practice every step, including the elevator pitch to get the first meeting. Use friends, family, and angels, if possible, to get a product, revenue, and customers first before the VC connection.

• Identify the right people in the right firms. Mass mailing your business plan to every VC in the book won’t get you any credibility or traction. Investment firms specialize by business sectors, and each partner within the firm has a specialty. If you are in “energy,” do your homework to build a list of the top players in this segment.

• Make a personal connection, directly or indirectly. If you don’t personally know anyone on this list, talk to every professional friend you have to see who they know. Get introduced via one of the social networks, or a professional organization, before you approach a VC with a business proposal.

Overall, remember what VCs are looking for big numbers, in relation to angels or other potential investors. They are looking for products (not services) that will be "must haves" for customers, not "nice to haves," and they are looking to multiply their money by five to ten times in five years.

That means the target market must be large (at least $500M), proven and growing, with revenue potential of at least $50M within five years. Initial investment targets are usually larger than $2M, sometimes up to $25M or $50M. To make this work, you will need an initial valuation of at least $5M.

Current market conditions should still convince you to be totally thorough, thoughtful and aggressive in your approach and presentations. But now is the time to get started, and remember to work friends, family, and angels before you tackle the big boys.

Marty Zwilling

Social Entrepreneurs Don’t Need Profit For Success

A term I’m hearing more and more these days is “social entrepreneur.” In the simplest of terms, these are people who seek to generate “social value”, rather than profits, and use traditional business principles to create and manage a venture to make social change.

On the surface, this sounds like entrepreneurs who want to build a non-profit organization. Yet the term seems to be more often associated with people whose work is targeted toward long-term socio-economic change. Think Margaret Sanger (birth control) or Mahatma Gandhi (non-violent), as opposed to the leaders of the Cancer Society or Goodwill Industries.

Whether the objective is to generate profits or social capital, the common element for all entrepreneurs is the recognition that there is a problem which needs solving, or there is an opportunity to improve the status quo.

The vision is always to be a change agent, to invent and popularize new approaches, and to persuade people to take a leap forward. In every case this requires a committed ultimate realist with the determination to persist in the face of daunting odds.

Another way to distinguish between the two types of entrepreneurship is by identifying what social entrepreneurship is not:

• Not a fundraising strategy for nonprofits. A social enterprise may actually be profitable, or it may be non-profitable, but the generation of funds is deemed secondary to success on the environmental or social issues in the vision. Generating funds should not be the highest priority.

• Not about profit before social impact. A social enterprise must be financially sustainable only as a means to the end, which is its social or environmental impact and rate of change. The business entrepreneur mission is profit always, social impact maybe.

• Not a new definition for the nonprofit sector. The evident and real purpose of the social enterprise must be to make the world a better place, through the operation of the business. This certainly also has potential for enhancing the vitality of the nonprofit sector, but it doesn’t move it to a higher moral plane.

• Not an investment opportunity for business investors. I still get inquiries about how to find angel investors and venture capitalist to kick-start a social enterprise. Funding such an enterprise is in the realm of philanthropists, government grants, or bootstrapping. Business investors are looking for a financial return, not a social capital return.

• Not about entrepreneurship in the government sector. So far, the largest source of services and funding for social enterprises and social entrepreneurs has been federal, state, and local governments. Yet the enterprises are not government enterprises, and the process for success makes them good business enterprises.

• Social entrepreneurship is not socialism. The socialist doctrine dictates compulsory taxpayer contributions to finance social initiatives, while the social entrepreneur uses the standard business model and innovative approaches to attract customers, fund activities, and accomplish social change.

The common element in both types of entrepreneurship is that an entrepreneur rather than an administrator is required. This is someone who is willing and able to create a new enterprise, based on an innovative idea, and is willing to assume total accountability for the inherent risks and outcome.

So, if you are an entrepreneur at heart, but you are driven by a higher cause than making a profit, social entrepreneurship may be for you. It is an emerging field with diverse and shifting interpretations, but most agree it’s really about making the world a better place. There is certainly plenty of opportunity in that space.

Marty Zwilling

How to Market Your Startup to People Not Like You

Face reality. As an entrepreneur, you should assume none of your customers is like you, yet I find that most entrepreneurs assume just the opposite. Customers don’t have your technical base, the passion, and interest in your solution. In fact, even if they did, they couldn’t find you in the clutter. An underrated portion of every startup effort must be about communication and marketing.

By habit, people market to customers like themselves, because they know what they like and need. The challenge is attracting customers not like you, since that isn’t so intuitive. Kelly McDonald, who runs a top ad agency, takes on this challenge in “How to Market to People Not Like You.” Her focus is on companies facing change, which of course includes every startup. Here are my key recommendations from her book:

1. Get out of your marketing “comfort zone.” Go beyond the “spray and pray” approach to marketing (spray your message out there as widely as possible and pray it sticks). A better approach today is “narrowcasting” – learning as much as possible about your target audience, and communicating to them frequently, richly, and relevantly.

2. Get to know the customer you’re not getting, but should be. Don’t guess, or let your own biases be your guide. Go online and read everything you can about the group you want to target. Attend events, meetings, and gatherings of your potential customer observe and talk to attendees. Don’t forget to ask them what they want and need.

3. Tweak your product or service offerings. This process alone communicates validation that you are actively reaching out. It says “I see you, I value you, and I want you.” People will pay a premium for what want, so you need to accurately tune and relate your offering to their values, needs, and wants.

4. Make sales and customer service friendly. Little things make a big difference, so you need to tune your operational readiness and support to these new customer segments. Maybe your shopping bags need handles, or your employee attire needs adjusting. Don’t forget showing respect for other cultures, values, languages, and priorities.

5. Develop marketing messages based on their values. Make sure your message has relevance to your new customer target, and is authentic and sincere. Make sure it fits in with their life and lifestyle. As you move to new support new languages, don’t just translate, but “transcreate” (express the same meaning and nuances).

6. Use technology to reach your prospects. Everyone must have a web site that is complete, inviting, and easy to use. Create and maintain your own database of targeted prospects, and don’t rely on generic email lists for marketing. Use social media, search engine optimization, blogging, and mobile media. These will beat word-of-mouth any day.

7. Proactively deal with naysayers. As you expand your market, act to minimize negative feedback or backlash from core customers by explaining what you are doing, your motivation, and why it is good for all. Team members need to understand these things as well, and need to understand exactly what you expect of them.

An obvious place to look for customers not like you is in the generational segments outside your experience. You personally can’t be in all five of the core segments – Matures, Baby Boomers, Gen X (thirties), Gen Y (twenties), Gen Z (tween). Each has different interests, spending habits, and priorities. Focus on the most important one first, and broaden carefully.

Then there are women versus men, immigrants, and the unique cultures of 195 different countries in the world, with many more races, religions and political views. Obviously, most of your total potential market is not like you. It’s never too early to start going after it. Your long-term business success depends on it.

Marty Zwilling

Technology Attacks the Venerable Business Card

In a second, with Google, I can find a phone number that was assigned to you ten years ago, but it takes me an hour to find your phone number on that business card you gave me last week. That’s just wrong. We need instant access to the most important of all resources, current contact info.

Too many of us have piles of business cards scattered around the office and home, as well as additional contacts on your cell phone, PDA, Outlook, LinkedIn, and Facebook. The result is we can’t find that key name and phone number quickly when we really need them.

The solution is simple to define. What we all need is a digital tool that can extract data from business cards, as well as sync it with your cell phone, your email, and the social networks you use. It needs to have great search and display capabilities as well as spreadsheet-like sorting so you can look at the information in various ways. Finally, we want it cheap (of course).

My old rolodex for 100 business cards doesn’t do the job any more. So I’ve been scouting around for something better, looking at the pluses and minuses. There are a wealth of alternatives, but no universal solutions:

• Bump. Here’s the latest technology. A new smart phone app that allows users to simply tap their smart phones together, and with the right setup, they will exchange contact info. This is great and it’s free! Of course, you both need to have compatible smart phones with the software already downloaded.

• CardScan Personal. Here is the old standby low-end hardware-based solution, a simple business card scanner for $150, with software to synchronize the data with Outlook, Windows mobile devices and smartphones. That doesn’t address social networks and other lists you may have. The scan hardware here is required for all software solutions.

• Sage ACT! If you prefer the software and data be all on your own computer for security and privacy, ACT! has been the standard for businesses and individuals for over 20 years (base $200). The cost goes up if you want to synchronize with Outlook and your PDA, but most of the features you might be looking for are available.

• Salesforce.com. In business, contact information management is a key part of customer relationship management (CRM). Salesforce.com is the most popular online service offering, meaning no software to install, and accessible from any computer. For individual entrepreneurs, it’s a high-end alternative (entry $5+/month), and it’s definitely a candidate for your business sales force. Basic sync functions are available.

• Shareware. I found dozens of software packages available on the Internet for free download, or a nominal price. Several of these have good reviews, including PIMEX, Diasho, Enhilex, and Advanced Contact Manager. Yet my experience is that shareware software is usually worth what you pay for it.

• Commercial software. There are hundreds of other alternatives and add-ons out there, like Quickbooks Customer Manager, Personal Information Manager, Beyond Contacts, and Goldmine. They range in price from $150 to over $4000, but check each for the features important to you.

Social networks have added additional layer of complexity to this challenge. LinkedIn supports the export of connection contact information to Outlook and Gmail, with no special software required. Facebook, however, does not provide this interface, and has specifically prohibited applications from being offered to solve the problem. They consider such data proprietary.

Even email is a problem. You need to capture contact details beyond the email address from email contents, including signature blocks. I did find a package named Copy2Contact, which can save you lots of cutting and pasting. Now if everyone included contact information in every email, I wouldn’t need to bump into you periodically to stay current.

Marty Zwilling

Four Common Startup Issues Which Threaten Survival

The best survival guides tell you how to be proactive and avoid the probabilities of ending up in a worst case scenario. Of course you need to learn how to recognize a bad situation before it bites you, and you need to know all the secret ways to wiggle your way out, before you succumb.

The challenges stem from the simple fact that every entrepreneur is starting something new, where things are predictably unpredictable. There are unknowns at every turn, leading product development, attracting customers, managing cash, and dealing with human resources and office politics.

Several whole books have been written on this subject, such as “The Worst-Case Scenario Business Survival Guide” by David Borgenicht and Mark Joyner, so you should consider this article a simple introduction. Here is their and my perspective on the most common problems that will threaten your survival:

1. People are the problem and the solution. Probably 80% of the startups I know have found human resource issues to be the most treacherous. Trusted partners quit, personal friends become enemies, and staff management becomes a huge burden. Some say that if we could only run a company without people, the entrepreneur’s job would be easy.

   The proactive solution is to hire sparingly, and spend the time and effort needed to hire existing experts in all cases. Don’t hire your friends and family, don’t assume they can learn on the job, and don’t assume that cheap is best. The best will save your sanity, avoid most potholes, and pull you out of disasters you never anticipated.

2. Missed or no target expectations. Setting the wrong or no expectations is another of the most consistent problems I see with every startups. Missed milestones de-motivate the team, unrealistic financial projections will put you in crisis with investors, and you find you need to double every product development timeframe when talking to sales and marketing.

   Add an advisory board or experienced mentor to reality-check your financial projections, timeframes, and milestones before you publish them. But not defining or publishing expectations is not the solution; that leads to quick disasters as everyone sets different ones, based on their own experience, or lack of it. “Stretch” goals in early-stage are not advised.

3. Too slow or too fast to change. Ironically, startups that are all about change often are slow to see the need, or slow to implement. Yes, it’s your vision, and it’s good to be relentless, but don’t be blind and stubborn. The other side of this coin can be equally disastrous; the change of direction based on every customer or investor comment.

   Maintain your focus, but assume that changes in your plan will be required. Make it clear that you intend to re-forecast your plan every three months, and communicate changes proudly to your team, rather than apologetically. Build a learning organization that shares your vision and drive.

4. Strategically timid and haphazard marketing. To get competitive leadership, you can’t be an industry follower. Too many startups simply follow the standard distribution channels, use standard pricing, and count on their one extra feature to give them the market. Marketing is done in fits and starts.

   Instead, you need to undertake an aggressive campaign in the new media, with creative selling messages and promotions. Don’t wait until you are in crisis mode to think about doing something new. Look for ways to offer additional value, rather than slash prices.

Overall, there are no silver bullets, and the entrepreneurs who recover from the most worst case scenarios are the ones with the most drive, determination, and positive mindset. Experience helps, so every worst case you survive makes you stronger for the next one. If you really believe that failure is not an option, you can make success happen, despite the odds.

Marty Zwilling

Entrepreneurs Must Minimize Friction For Feedback

Entrepreneurship is not a job for the Lone Ranger. Every startup requires building and maintaining effective relationships with people, including partners, team members, customers, and investors. That means giving and asking for feedback, and learning from it, especially negative feedback.

“Friction” is feedback mixed with emotion, making it all the more difficult to sort out the value. There should be no immediate assumption that one side is right, and the other is wrong. It may be an indication that one party isn’t giving the feedback well, or the other isn’t taking it well, or both. Both of these modes are wrong, and non-productive.

Unfortunately, many entrepreneurs I talk to confess that they put off giving feedback because they are uncomfortable. Others tell me they can’t deal with friction or negative feedback, so they don’t listen. If feedback is so important, why is it often ignored? Let’s look at what causes friction, and how to prevent it, resulting in productive feedback:

• Make your feedback “information”, not a judgment or evaluation. Words such as “good” or “bad” telegraph evaluation, on the quality of work or rightness of behavior. Label words, such as “careless” or “disloyal”, signal judgment about a person’s character. Most people don’t like judgments, so they respond with friction, rather than listening.

• Descriptions in neutral language lead to recognition. People tend to keep listening and consider changing when they recognize themselves in non-confrontational descriptions of an actual event. When they can’t relate to the data, you will have friction or tune out. Stick to what you know and what you observed.

• Secondhand feedback poisons the process. Too many entrepreneurs create friction by highlighting comments from other people. This stems from two problems. First, this he-said-she-said doesn’t include concrete examples and clarifications. Secondly, people become defensive when feedback is not first-hand.

• Pick an appropriate time and place for feedback. Getting feedback in front of your peers, or when you are rushing to meet a deadline, is embarrassing and prone to friction. If you are trying to give feedback with privacy, and the person never has time to listen, that’s a different problem.

• Feedback given at work should be only about work. Don’t mix observations about commitment and loyalty on work issues with observations about private relationship actions seen at a party or elsewhere. Again, stick to the facts you know, your personal observations, and avoid absolutes such as “always” and “never.”

• Minimize the perceived power difference to facilitate listening. Feedback to top executives is more readily received from outside experts and mentors, rather than less experienced team members. Inversely, feedback to newer employees should be given by their direct manager, or even peers, rather than a top executive.

Not all feedback should be about things that need improvement. Everyone needs positive reinforcement on items and actions done well, and it opens their mind to any feedback without friction. In fact, most psychologists agree that people advance more rapidly by positive reinforcement, rather than negative reinforcement.

We never see ourselves as other people see us. We see friction, and we react to friction, based on our standards, what we consider important, what we value, and what makes us uncomfortable. Understanding that, and understanding the triggers to friction outlined above, you as an entrepreneur need be able to deal with friction as the most important feedback of all.

Marty Zwilling

Look For These Five Qualities of a Great Solution

Every entrepreneur wishes that he could predict whether his idea could be the “next big thing,” before he spent his life savings and years of energy on it. Investors, on the other hand, typically don’t even look very hard at the product or service, but prefer to evaluate first the entrepreneur, and secondly the business plan.

I define these products and services as “solutions” (customers buy solutions to a problem), but Guy Kawasaki more generically calls them causes, meaning any new idea, company, or service. Yet we can all agree that the quality of the solution or cause is very important, and there are attributes that reduce the business risk and make it more likely a success in the marketplace.

Many people have tried to outline and refine these important attributes, including Kawasaki again in his latest book “Enchantment: The Art of Changing Hearts, Minds, and Actions.” He and I recommend that product ideas be assessed against the following five key qualities:

1. Depth. A deep product or service has a robust set of features. It means you’ve anticipated what your customers will need as they move up the power curve, For example, Google is a one-stop source for your online needs, ranging from simple search to managing your e-mail, to analyzing your Web site. The selection is incredibly deep.

2. Intelligence. An intelligent solution solves people’s problems in smart ways. Smart solutions are the ones that look simple in retrospect, don’t require a genius with an instruction manual to use them, and the benefits are easily quantified. In the computer world, the advent of the mouse for interface control and selection was such a product.

3. Completeness. A complete solution provides a great experience that includes service, support, and a string of enhancements. For example, the Lexus experience is more than the steel, leather, glass, and rubber. After-sales support, comfort, accessories, and brand image are as much a part of owning a Lexus as the car itself.

4. Empowering ability. An empowering solution enables you to do old things better and to do new things you couldn’t do at all. It increases your confidence and your ability to control your life. This feeling of empowerment is the essence of why young people love their smart phones and often consider their phone an extension of themselves.

5. Elegance. An elegant solution is not opulent, but embodies creativity and polish, and enhances the user experience. An elegant solution works with people. An inelegant solution fights people. It looks right. It feels right. It works right. And it doesn’t make more work for you. This may be hard to define, but you know it when you see it.

In summary, the best product or service is a full-featured one (deep) that shows you understand customer needs (intelligent), comes with support (complete), makes customers better (empowering), and is easy to use (elegant). As you create your solutions, ask yourself if they are deep, intelligent, complete, empowering and elegant.

Of course, great startup solutions need great teams to implement them. Back to my comment at the beginning that investors evaluate the people before the idea, see my article a while back for details on why “Investors Fund People First, Plan Second, Idea Last.” The combination of these factors is why a new entrepreneur with his first idea usually has a tough road ahead.

As Guy says, “in a perfect world, you are so enchanting that your cause doesn’t matter, and your cause is so enchanting that you don’t matter.” In the real world, don’t count on either of these cases. You can best help yourself by doing the homework listening to customers and quantifying the pain points before you define a great solution. Then build a team, build a plan, build a great company, and have fun.

Marty Zwilling

Six Key Factors in the Right Outsourcing Decision

Since my background includes software development, I often get the question about when to build a solution in-house, versus outsourcing it to a local company, near-shore service, or off-shore organization in China, India, or Eastern Europe. In the USA, “near-shore” is a euphemism for connected countries, like Mexico and Canada.

There is no simple answer to that question for all cases, but there certainly are some key considerations which will help you select the optimal solution for your case. In fact, the considerations are not unique to software development – they apply almost as well to any product or service you have:

1. Control of core competency. Don’t outsource your core competency. If your software is your solution and “secret sauce,” don’t entrust it to outsiders of any kind. It’s like giving up control of your company. If the software is ancillary to your mission, proceed through the rest of these considerations.

2. Intellectual property content. Some country cultures have little appreciation for software as intellectual property. For example, 90% of the software used in China and Vietnam today is pirated. Near-shore and local outsourcing alternatives are manageable with contracts and non-disclosure agreements. Protect your intellectual property.

3. Technology level. If you expect your solution to incorporate the absolute latest in software technologies, scalable to millions of users, with multi-system failover and recovery, don’t count on out-sourcing. On the other hand, if it is maintenance and testing on non-core software, use the lowest cost solution.

4. Cost factors. Companies in Asia and Eastern Europe can still provide direct cost reductions of up to 75%. In these calculations, be sure to include indirect costs of remote work, such as more project management, more travel, and less efficient communication. The net may be less cost reduction than you thought.

5. Product or services. Once product software is written, it doesn’t take much effort to deliver it to customers. Software services, on the other hand, involve the creation of software customized for a specific situation, with a relatively low level of leverage and reuse. Outsourcing for services needs to be carefully managed, and almost never works.

6. Creative or operational. Creative products, like chip design programs, architectural rendering, or consumer games are not easily outsourced. Operational products, like process automation or reservation systems, may be large but mundane, and more easily outsourced. In all outsourcing cases, a detailed specification is required.

The typical software startup these days is a one or two person operation, founder and co-founder, who do the work themselves on the first product with no salary. With today’s tools, they can do the work of a six or eight-person team 10 years ago, so software outsourcing is not appropriate.

On the other hand, if your startup is not software oriented, but you need some work done (not central to your product and core competency), it is usually better to outsource, either locally or remotely, than to hire employees, manage them, pay benefits, and maybe have to lay them off later.

If you do decide to outsource, build the relationship first, and manage the project carefully. Watch for evidence of inadequate staff and training, high turnover, poor or inadequate process, and lack of vendor project management. On your side, the killers are poor specifications, no acceptance criteria, and scope creep.

Overall, I believe that the demise of software entrepreneurs has been greatly exaggerated. Whether you are outsourcing software development, manufacturing, or accounting, the considerations are the same. Outsourcing is a tool, not the problem or the solution.

Marty Zwilling

Many Websites Look Like Zombies to Google Search

A while back I emphasized how important is to have a company website these days (Publish Your Website Or Customers Won’t Find You). I should have added that a website not optimized for search engines is lost in the heap of a billion dead websites. Unless someone searches for your company by name, it won’t show up in the first few pages of any search results.

Search engines are programmed to rank websites based on their popularity and relevancy. These are subjective elements, but there are specifics that even a computer program can evaluate to set your ranking, and thus determine whether your site is alive and a good match to a specific search request. Yet recent research indicates that almost half of small business websites are still missing these basics, and thus are essentially dead to the search world.

The solution is keeping your site alive and vital, and following basic search engine optimization (SEO) suggestions. Here are some high-value elements you need, if you hope to see your company on any page of results for relevant user queries:

• Relevant and constantly updated content. Web sites that haven’t been updated in the last couple of years can’t possibly be alive. These days, the best way to provide fresh content is to attach your blog to the website, and add new entries at least a couple of times a month.

• Create inbound and outbound links. Contact related web sites that are well known, to request reciprocal links. Another way to get inbound links is review other site blogs, and leave your comments with your link. Register your business in relevant directories, and sign up in all local directories. Make sure you have no dead links on your own site.

• Web page title tags. You need to name every page of your web site, and these names must contain your important search keywords. Check every page of your web site to make sure a title is predominantly displayed as the first line of a search result. Missing and meaningless tags will cause your site to be ignored by users, even if found.

• Web site keyword tags and description. These are elements, normally added by your website designer, which contain one or two sentences that briefly explain to the search engine what each web page is about. These same tags and keywords should be used liberally in each page text to give that page a higher ranking.

• Image attributes and sub-folder names. Search engines process every word on your web site, even optional internal names assigned to images (alt tag) and folders. Thus even internal names of website elements must be properly named (eliminate computer generated text) to amplify your search position.

• Reduce page load time. Eliminate flashy ads that delay entry to your site. Search engine spiders (also known as bots) take into consideration the page’s size in kilobytes. Web pages that take a long time to load will discourage search engines and human viewers alike. The usual culprit is a picture or graphic that is larger than 20 kilobytes.

Completion of these tasks is not the full SEO job, but will keep your company out of the Internet dead zone. You can contract an SEO specialist at this level for a couple of thousand dollars, or you can do the work in-house, if someone on your team has some basic tools and web maintenance skills. SEO does not have to be a major expense.

Another alternative is to buy your way out of the zone with Search Engine Marketing (SEM). If you give Google enough money, their search engine will put you up as a preferred provider for any search keyword you buy. That may be a quick fix, but will definitely be more costly in the long run.

But the cost of doing nothing is even greater. Websites that look like the walking dead to Google search, work like no website, which means that your business will suffer. Work on a good website is never done, but there is no time like the present to wake up and get started.

Marty Zwilling

Some Startups Forget to Validate a Business Model

Many entrepreneurs work hard on the proof of concept (technical), but skip any proof of the business model (revenue flow). In other words, once they are convinced that the product works, they assume their price, sales channel, and marketing will bring in the customers. These days, the technical side may be the easy part.

Proving the business model requires a different approach than proving the technical concept. For example, one CEO I know gave away his software product to the first ten customers. Customer personnel seemed to like it, and it worked, so he was totally devastated when he couldn’t sell one for a “reasonable” price in the first two months of hard work.

So how do you go about proving the business model? It starts with a customer problem or need, and includes proving the technical concept, but starts earlier and goes much further, per the following key steps:

1. Quantify problem cost-of-pain first. Before you design your new solution idea, gather evidence and estimates of how much money a customer is willing to spend (if any) to solve the problem. Factor in your margin, and you will have an upper bound on your solution cost. You won’t succeed with a product that is too expensive for the market.

2. Prove the technical concept. If the product doesn’t satisfy the need, or it doesn’t work, no business model can work. Start by testing the requirements on real customers, and providing “beta” versions to get real feedback. Iterate and improve the fit until your test customers are delighted, not just tolerant.

3. Use focus groups. Gather some representative customer contacts, and give them your best sales pitch, including price, channel, and support. Then listen carefully to the feedback. Don’t be discouraged if you don’t get it right the first time. Changes at this stage cost almost nothing.

4. Talk to domain experts. Here is where your Advisory Board can help you in finding real people with deep experience in your product domain, and gather some unbiased feedback. Listen to potential angel investors, who have domain expertise, and aren’t afraid to ask the hard questions on pricing and channels.

5. Limited rollout. If you have a physical product, try it in a couple of stores first. If you are on the Internet, try one city. This is tricky, since you have to do realistic marketing to see realistic results, but don’t roll out the big viral campaign yet. Look at product costs, margins, commissions, and other expenses to make sure you still have a bottom line.

6. Get a reference customer. You should descend on that big best customer candidate with everything you have. Don’t give the product away, but make sure he has every bit of service you can provide. He better be so pleased that he is willing to provide a testimonial for your real marketing campaign.

7. Sample trade show or user group. If you use the big “Coming Soon!” sign correctly, people will stop by your booth for a look. Make sure they are real customers, and that they get the whole story (not just a technical demo), including price and channel. Otherwise their feedback has no value in proving your business model.

All this assumes you have done the right job first in assessing competition, establishing the sales and marketing channels, and optimizing costs. I see business plans with a great analysis of competitor’s product features, but competitor’s business models rarely get mentioned.

Over the last few years, the right business model has become the key to converting a good idea into a winning startup. Your business model can be your competitive edge, or it can be your soft underbelly. Prove it out, before you dive in with the sharks.

Marty Zwilling

If You Need Angel Investors, Avoid These Startups

We are talking about angel investors here, meaning people who invest their own money in early-stage startups for a share of the equity. These people are highly focused on investment areas they know, which have a large opportunity for growth, revenue projection of $20M or more in five years, and a high return that can be realized via an exit within five years.

Generally, the same criteria applies to venture capital investors, although they invest other people’s money, at a later stage, in larger amounts. Both are excited by innovative new products and services, and neither is normally interested in deals in the following domains:

• Consulting services. This type of business is usually based on the expert skill and reputation of an individual or small group. Such a business shouldn’t need a large investment to get started (no product to develop), and it probably won’t scale quickly (limited supply of experts). Accordingly, investors will decline.

• Restaurants and retail. Local and family businesses, such as cafes and retail shops, are also not investments that angels tend to consider, unless you are proposing a new national franchise. Otherwise these will not scale, and cannot show a growth and return rate to excite professional investors.

• Gambling and porn sites. Most professional investors value their integrity and image so much that they would never consider investing in a business that might be offensive to many, or raise legality questions in the minds of business associates and future clients. This is definitely the space for bootstrapping and personal networking.

• Real estate. Angel groups almost never supply financing for real estate purchases, or personal loans. Even in today’s market, there is capital available from financial institutions at a lower cost for these purposes. It doesn’t make financial sense to give up equity ownership on an asset purchase, with built-in collateral.

• Non-profit businesses. I think investments in non-profits are called “contributions.” In fact, many angels investors are also philanthropists, but the process of finding them and working with them in this context is totally different from the angel investment process. It’s hard to promise a high financial return from a non-profit.

Be wary of brokers who claim they can find angels in these domains, for an up-front fee and a percentage of the investment. In general, you shouldn’t be paying a fee to have someone evaluate your investment opportunity, or “guarantee” to find you investors. I recommend going only with legitimate angel groups, accessible through national websites like www.angelsoft.net, or locally publicized organizations.

Even if you are in the right domain, you should remember that angels invest in people, even more than ideas or specific business ideas. They put high premium on entrepreneurs who are experienced in building a business, and experienced in the domain of their current proposal. First-time founders will find that most angels turn into mirages.

Entrepreneurs in an unfamiliar domain better find a partner who has been there before they apply for funding. Early-stage these days means early customer revenue received, and early product in the market. If you have no product, no customers, and no revenue, talk to friends and family for that initial funding.

So if your domain is among the ones outlined above, you probably won’t find any angels lurking. That doesn’t mean you should give up your dream. It just means you have to take a harder look at the other alternatives listed in my earlier article on the “Most Startups Get No Professional Investor Cash” for startups. A real entrepreneur loves a little challenge, to be the shining light in the crowd.

Marty Zwilling

Five Ways a Business Mentor is More Than a Friend

Friends tell you what you want to hear. Mentors tell you what you need to hear. When the message is the same from both, you don’t need the mentor anymore. In that sense, you should think of a mentor more like your advisor who has done all he can. You always need the friend.

Also don’t confuse a business mentor with a business coach. A mentor’s aim is to teach you what to do and how, in specific situations, unlike a coach who helps you develop your generic skills for deciding what to do and how. The mentor helps the entrepreneur fill an experience gap, and a coach helps fill a skill gap. Both may be required.

Before you are ready for a mentor, you must know yourself. Have you assessed your strengths and weaknesses? What are your goals? Where are you heading? Unless you know these things, no one can help you. Also you need to be prepared to take advice and criticism, if it is honest, helpful, and given in a friendly way.

Once you are ready, what are some of the attributes of a good mentor that you should look for? You need someone who:

1. Applies pragmatics to your ideas. Most entrepreneurs have lots of ideas. Some can be put into practice easily, but others will be off-the-wall and need refinement to implement. A good mentor will have some knowledge and some perspective on almost every business subject, which compounds their effectiveness.

2. Challenges your accountability. Entrepreneurs tend to be driven by the crisis of the moment. As such, it is easy to neglect the real priorities of growing the business. Sharing of your goals with your mentor means that if you don't complete them, you have a credible voice to remind you and help get you back on the right track.

3. Able to extrapolate the business. A successful business never stands still. You need a constant stream of ideas for scaling and expanding, with a realistic understanding of the costs and resources required. Then there is the exit strategy, which needs planning, connections, and forethought.

4. Has the contacts you need. When you need contacts for investors, equipment, and legal or accounting advice, your mentor has the contacts and knows where to find the information. More importantly, the mentor tells you what you need to do to build and maintain your own list of contacts.

5. Gives the outside view looking in. A mentor knows what to look for, and sees what your customers see. It’s natural to become so immersed in your business that you forget to step back and look in from the outside. Like living next to the railroad tracks; after a while you don't hear the trains.

How do you find a person who meets these criteria? Sometimes a mentor just appears naturally, but do your networking among friends and colleagues. Look for a person who could be a good role model, someone who has the skills and personality that match your chemistry.

This person could be a professional who does this for a living, or a role model in a related business who is willing to help you. An ideal candidate is someone from the Boomer generation, who is semi-retired, but still active in local organizations or the investment community.

I don’t mean to imply that an entrepreneur needs a mentor more than a friend, just that friends are not normally positioned for double-duty as mentors. You need at least one of each, and the ability to tell the difference.

Marty Zwilling

Some Startup Opportunities Are Losers Today

People are always asking me for an inside tip on Internet sites that will be “the next big thing.” Those are hard, since someone has to invent something innovative, but I do have some views on other ideas whose time has come and gone.

In some cases, these are concepts that have already been done too many times, and the space is crowded. In others, the concept has been tried too many times, or no one has yet succeeded in making any money. Or both. Here are my favorites:

• Social and business networking sites. Just for starters, Wikipedia now lists about 200 sites by name (once over 300), which they claim is just some of the more notable social networking sites. I still get about one business “idea” per week for a new networking site, which will combine the “best of all the sites” into a new one. If you must do one of these, skip the “me too” and focus on a niche, if you can find an unoccupied one.

• Online dating sites. Feedback from my old diatribe on this subject tells me that there are over 8,000 existing ones world-wide, including two or three new ones per day. Most of these will fail, or never turn a profit. I hope you have a better idea than Women Behind Bars, or Herpes-Date.com. But then, this is an emotional need every single seems willing to spend money on (not to mention the 40% more who are already married).

• Search engines. You can find several lists of the “Top 100 Alternative Search Engine” on the Internet, and there used to be a web site dedicated to tracking these. Remember the three “big gorillas” in this space, Google, Microsoft, and Yahoo. There may be room here for something really innovative, but just a better user interface, people prioritized results, or one millisecond faster will probably not do it. If you have more money than the incumbents, try it, but don’t look for investors.

• Micro payments, micro loans, micro investments. Micro “everything” has had lots of entrants over the years, but all are gone, or not making any money. Paying for your ice cream on your cell phone through Twitter is more trouble than cash, and getting a $10,000 loan accumulated from 50,000 people is hard to manage. The latest is “crowdsourcing” your startup with thousands of tiny investments. It won’t happen tomorrow.

• Portals and single sign-on sites. A portal is a “home page” which you can partition to be the entry to a dozen others, with a single login to minimize the “yellow stickies” on your computer. The trouble is there are thousands of portal sites, like My AOL and My Yahoo, so you need a portal for the portals. Single sign-on is a technical dream that requires world-wide standards be set before it can be implemented.

Somewhere below this list is another tier of questionable potential startups, including more calendar sites, blog aggregators, Craigslists, photo sharing sites, music sharing sites, or more instant messaging sites. Web 2.0 has made it cheap and easy to launch a site, but that doesn’t mean it’s easy to succeed.

In my view, the single biggest reason for startup failures on the Internet is a lack of real innovation. Changing the user interface, and adding a couple of features doesn’t compensate for not being there first (“me too”). The second biggest reason is lack of focus. Combining the features of several successful products will not assure success (“something for everyone”).

For some ideas, the wave has simply passed. Rather than trying to hang on, be the first to start a new one. The rewards are worth it, and it’s a lot more fun. What’s your idea?

Marty Zwilling

Follow Seven Rules for a Creative Startup Culture

Within the startup realm, there is a big difference between having an innovative product versus an innovative business. Some startups have a new technology, but stick to a tried-and-true business model. Others take an existing product, and give it new life with a creative business model. The most competitive startups do both, all the time and every time.

In today’s competitive world, with its accelerating rate of change, no competitive advantage lasts long. According to Josh Linkner, in his new book “Disciplined Dreaming,” we have entered the Age of Creativity, in which each incremental gain is zeroed out as global competitors quickly copy and adapt. The only sustainable competitive advantage is creativity.

He makes the case, and I agree, that creativity in a company, large or small, doesn’t just happen – it requires a culture. If you want to build and maintain a creative culture in your organization, you need to make sure your operation is guided by these seven critical rules:

1. Fuel passion. Every great invention, every medical breakthrough, every advance of humankind began with passion: a passion for change and for making a difference. With a team full of passion, you can accomplish just about anything. To promote passion, you need to develop a sense of purpose, promote collaboration, and have fun.

2. Celebrate ideas. Many businesses give lip service to their celebration of innovation, but punish, rather than reward, risk-taking and creativity. In a creative culture, rewards come in many forms: money, yes, but great businesses also celebrate creativity through praise (both public and private), career opportunities, and perks.

3. Foster autonomy. People and teams that can call their own shots are better able to produce valuable creative output, since requiring approval at every step kills the creative process. Granting of autonomy first requires extending trust. The key is to provide a clear message of what you are looking for, and then get out of the way.

4. Encourage courage. Netflix, which is known for its creative culture, tells employees to “Say what you think, even if it is controversial. Make tough decisions without excessive agonizing. Take smart risks. Question actions inconsistent with our values.” Encourage team members to take creative risks without fear.

5. Fail forward. Rather than characterizing something that doesn’t work immediately as a “failure,” position it as an experiment. These experiments can be called “failing forward,” because each one leads you one step closer to the perfect solution. The key is to fail quickly. Flush out ideas and let go of the ones that fail.

6. Think small. When you want to foster big ideas, it’s important to have a strong sense of urgency, be nimble, and not afraid to embrace change. It’s easier to accomplish this in a small team, in a small local environment, before you try to extend it a much larger infrastructure. You will see results sooner, and be more able to overcome opposition.

7. Maximize diversity. A diversity of thought and perspective fuels creativity and builds creative cultures. To connect with customers, for example, you need to understand the world from their perspective, not yours – this is one area where a diverse culture can make a huge difference.

Fostering creativity doesn’t mean that you don’t need a business plan, or must forgo all discipline in running your business. A successful business is still all about execution, so you still need clear milestones, checkpoints, and metrics to keep you on track.

Creativity is the ultimate competitive advantage. Not just one innovation, but a culture that assures that you are never standing still on the technology or the business model. Make it the priority we are all looking for. No investor wants to bet on a “one-trick pony.”

Marty Zwilling

Many Startups Stumble on International Cultures

By Ernst Gemassmer

Most of us have travelled abroad and experienced the challenges and frustrations of getting what we want without being laughed at or insulting our hosts. Similar issues prevail when doing business in other countries, cultures and languages. Even if you think your business is all local, multi-ethnic sensitivities are more relevant than you may think, including the US.

Although the Internet gives you pervasive reach, it hasn’t reduced the world to one locale for your business. The international opportunity is large, as I related in an earlier article, but there are some major challenges as well. Here are a few examples from my personal experience:

1. You need to translate/localize your products. I was once asked by a top executive of a major software company why we were not selling more products in Finland. I informed him that we needed to translate the software into Finnish at a cost of $50,000.

   He did not seem to understand that Finland was not part of Scandinavia and that English is not too well understood by most people there (with the exception of the Swedish-speaking minority in Finland). He could not be persuaded to commit the funds required for localization. Thus, we did not translate the product and sales remained at an insignificant level.

   Translation not only increases sales, but in many countries it is required by law.

2. Local laws prevail. Some years ago Brazil had a major balance of payments deficit. Therefore Brazil made it difficult to import products from abroad. Corporations were encouraged to export from Brazil to generate foreign currency and they were allowed to keep a portion of the foreign currency. Companies became creative by selling and trading foreign exchange licenses.

   Our own subsidiary, of a major technology company, started to repair and service competitive products in order to maintain our own technical staff and service capabilities. Thus, when the government creates restrictions, think out of the box.

   Managing foreign exchange reserves is every bit as challenging as managing a family budget. Brazil is now a powerful country, but similar examples still prevail in many developing nations.

3. Respect local customs and practices. A successful sales person wanted to become more familiar with the international market and requested a transfer to the Latin American sales group, based in the US. I counseled the department manager against hiring since she would be subject to personal challenges in selling to our partners in Latin countries. Eventually I relented and she joined the group.

   Unfortunately my prediction turned out to be true, she felt harassed by one or more of our business partners and left the group shortly thereafter. Even though we had agreed to provide her an equal opportunity to pursue her goals, we could not protect her from the different perspective on comments and advances in Latin America. Thus, hiring decisions should be made carefully, after fully understanding local practices.

   Although most Latin American countries have significantly improved working environments for women, few companies would yet dare send a women employee to work in Saudi Arabia.

4. HR rules are local. I had organized European operations into regions and the country manager for Italy reported to the central European manager based in Germany. This organizational structure worked well until the two senior managers got into a shouting match and the Italian manager indicated that he was resigning.

   His manager accepted his resignation and documented the case in the personnel files. Shortly after leaving the company we were notified that the Italian ex-employee was suing us for creating an unacceptable working environment, which led to his resignation. We retained legal council in Milan and were advised that we would loose if the case went to trial. After some painful negotiations we settled the case out of court for a twelve-months severance payment.

   When hiring staff internationally, always be well informed about local laws and prevailing practices. Not following this advice can be very costly. Although labor laws are increasingly unified in the European Common Market, major differences are still encountered in many countries. Proceed with caution.

5. Watch your product naming. Product naming is always a major effort and mistakes can result in costly failures. You may recall the Chevy Nova, a compact car from GM. Pundits in Latino countries quickly picked up on the name, ‘no va’ means ‘does not go’ in Spanish.

   Thorough name searches as well as professional advice in this area is highly advised. Cultural and religious implications must be very carefully considered.

Thus, I would recommend that you proceed with extreme caution and sensitivity. Great care must be taken in dealing with different religions, customs, dress codes, foods and alcohol issues. This can be frustrating, but the business world is getting smaller, and cultural issues can make or break your business. Have you properly factored international into your product or service?

Today’s article is presented by one of the founders of our Startup Professionals team, Ernst H. Gemassmer. He resides in Silicon Valley, California, and has long helped entrepreneurs there, as well as providing turn-around assistance as interim CEO and business coach for several companies. You can contact him directly at ernst@startupprofessionals.com.