You Won’t Find Startup Funding From These Sources

Some aspiring entrepreneurs are so desperate for funding, or naïve, that they ignore the obvious signs of scams and rip-offs on the Internet, praying for a windfall. One would think that with all the sad stories and tools published over the past twenty years, this problem would be behind us. But people are still begging for more technology or laws, often to protect them from themselves.

As examples, I present my list of ten of the most common ways to be victimized on the Internet by ignorance or greed, based on questions and stories I get from entrepreneurs and associates. The threats are organized from high to low avoidance ease, with common sense suggestions for each case:

1. Cash transfer assistance. I continue to be amazed that some government agency reportedly still gets 100 calls per day from victims of the Nigerian unclaimed cash scam alone. People who fall for this one must be really greedy. The best answer is the age-old wisdom that if it sounds too good to be true, it’s not true. Delete the message.

2. Won the lottery. How can you win a lottery you never entered, usually in another country? A simple inquiry or response to one of these emails will get you permanently tagged as a prime scam candidate, meaning a flood of new deals. Delete these quickly.

3. Starving girl needs a friend. I always wonder how these destitute kids have computers with Internet access, and can buy the huge mailing lists they need for spamming. I recommend that you ignore these bogus requests, and spend your sympathy in local areas where you can touch and feel the problem.

4. Cheap travel. You receive an email with the offer to get amazingly low fares to some exotic destination, but you must book it today or the offer expires. It may even be free, if you sign up for a timeshare pitch at the destination. The pitch will be hell, and you can only see the beach from your hotel through binoculars. Don’t expect a refund.

5. Chain emails. This is the classic pyramid scheme where you get an email with a list of names, you are asked to send a dollar to the person at the top of the list, add your own name, and forward the updated list to a number of other people. This is just plain illegal, and you risk being charged with fraud if you participate. Don’t ever forward these.

6. Special deal on little blue pills. If you get offers for a super discount on any drug or medication over the Internet, think twice. I can’t predict what you will get, but your money will be gone, and the lift you get from the medication will be disappointing, if not downright dangerous. You’ll get a better deal at your local discount drug store.

7. Greeting card from a friend. This virus distribution technique has virtually killed the digital card industry. You receive an email from a “friend” with a digital card attached for download. Real cards don’t need attachments. They should be webpage URLs, not downloads, and definitely not “.exe” files. Delete the email and the attachment.

8. Work at home for big money. Beware of any offer that asks you to spend money before you can make money, to buy a starter kit, education, or tools. For more details, see a whole article I wrote earlier on this subject. Ignore these.

9. Phishing for private info. An example is an email from “your bank” with a scary message that info was lost or compromised, and asking you to re-enter your personal info. If the URL provided starts with “http:” instead of “https:”, don’t enter anything, or click on any links. Call the institution to report the attempted fraud, and delete the request.

10. Viruses and spyware. Every computer these days needs a current reputable security product from Symantec, McAfee, or Trend Micro. There are even free versions from AVG and Avira. If you are spammed to download any other solution, it’s most likely the problem rather than the answer. Do your research, get a copy, and install it now.

Beyond the cases mentioned here, if the message is suspicious, I recommend you visit Snopes.com, a website detailing thousands of known scams and hoaxes. With this website, and about 75 others like it, I find it hard to believe that user naïveté is the problem.

If people could get past their greed, hubris, sense of entitlement, and use common sense on the Internet, these problems would fade away due to lack of return. I’d rather see your entrepreneur resources focused on real opportunities to improve the world we live in.

Marty Zwilling

Have You Created a Citadel for Your Startup?

By Bob La Loggia, CEO StormSource Software

Business is often compared to war and waging battle with enemies. Indeed, Sun Tzu’s “The Art of War” is one of the most popular business books ever written, and it was originally written as a military strategy guide. Battle terminology has been a mainstay in the business lexicon for decades. The list of war references used in business is almost endless, from “gathering the troops” to “losing a battle but winning the war.”

One battle concept that has enduring applicability is that of creating a citadel. A citadel is a fortress in a commanding position in a city. The purpose of a citadel is to provide defense for a city. Citadels are fortified, meaning they have the firepower to fight off enemies. When a citadel is built, a city is preparing itself for a battle.

In today’s competitive business environment, where barriers to entry seem to be crumbling before our eyes, creating your citadel is more important than ever. But, erecting a citadel goes way beyond just creating barriers to entry. Developing a citadel involves the following:

• Creating a battle-ready infrastructure. Michael Gerber’s must-read book on starting a business, “The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It,” talks about working "on" the business instead of "in" the business.

  It’s a bit counterintuitive, but by focusing on creating a rock-solid infrastructure, whereby all processes are sharpened, documented and turnkey, you are developing a foundation that will allow your business to expand swiftly. You are also developing a key to business success that is rarely talked about: transforming new recruits into productive warriors quickly.

• Developing a proven, but flexible business model. Your business model is the structure that supports your strategic plan. Your business model is how you get customers, grow and make money. The paradox of a business model is not that you have to continue to tweak it until you reach perfection, but you have to continue to remain willing to adjust it constantly based on customer and market information.

  Ideally, you’ll end up with a core, proven model that you adjust along the fringes on a real-time basis. It’s the same mindset used in planning a citadel. You hone and execute your core strategy, then adjust some of the details as you gather information on the enemy, the elements, and other pertinent information.

• Building a reputation. The most effective citadels are never used. They are built as a protective measure. They say, “We are here and ready to fight. We won’t back down from any battle.”

  When citadels are constructed effectively, enemies usually move on to fight less-formidable opponents. When you build a reputation as an authority in your segment, a juggernaut that won’t let up, and a company that will defend what it has to the death, competitors will think twice about attacking.

Yes, citadels are fortresses. They are bastions of your business. Your citadel is your protection from the competition. Creating barriers to entry is important, but creating a strong infrastructure, having a proven business model, and establishing an impenetrable reputation will help ensure any would-be adversaries take their fight elsewhere.

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Today’s guest post is by Bob La Loggia, who is the founder and CEO of StormSource Software, the source of Appointment-Plus online scheduling software. He is a veteran of four startups, has over 22 years in technology, and has built several citadels. You can contact him directly through his website or email.

Every Startup Founder Needs to Create Good Risks

Most entrepreneurs think that risk is just an “occupational hazard” that can be minimized or eliminated by a smart businessman. That way of thinking is simplistic and wrong. In reality, some risks are good and should be embraced for growth and a competitive edge, while others are bad and should be avoided completely.

Traditional risk management focuses only on bad risks, and seeks to contain losses. But if you want growth and sustainability, you need to create good risks, which means intentionally taking a risk to grow your business or gain competitive advantage.

In fact, entrepreneurship is all about taking calculated risks, while minimizing non-calculated risks. Here are some simple examples of “good” calculated risks that you should be working on:

1. Deliver an innovative solution to a painful customer problem. This can be high risk if your solution doesn’t work, or your price is more painful than the problem. A bad risk is assuming that you because you like the solution, everyone will buy it, or that you can build an existing solution cheaper than anyone else.

2. Plan to replace your product with a better and cheaper one. Probably more companies fail by avoiding this strategic risk than any other. If the current product is making money, it seems like a bad risk to obsolete it. Yet, new technology can quickly blindside you, and market dynamics change, plus you need to broaden your opportunity.

3. Build a dynamic product line, rather than a single product. Every new product you add stretches your ability to deliver winning function and quality. Yet a great initial product, with no follow-on, will not keep you ahead of competitors. Take the strategic risk.

4. Implement a new business model. Software as a service (SaaS) has now pretty much replaced the old licensing model, but offering it was a strategic risk for SalesForce.com. Proactively implementing new business models, like subscriptions and “freemium” pricing, are good risks, while linearly lowering old product prices is a bad risk.

5. Partner with a competitor. Use “coopetition” for cost sharing, economies of scale, and open access to new markets. Once you have established your credibility and value, a strategic partnership may lead to other business relationships or a funding source.

6. Plan to spend money on marketing. It’s a bad risk to count only on word-of-mouth and viral social network buzz for marketing, as I see in many business plans today. These days, you have to spend money to make money. Of course there is work involved to find the right media, and balance the investment against the return.

7. Build your team from the best and brightest. Good people are expensive, and they are hard to find, which adds risk to your startup, but it’s a strategic risk. Lowering the risk by hiring the cheapest, or counting on family members, is a bad risk.

8. Count on less funding rather than more. It’s a well-known oxymoron that startups which are over-funded to reduce risk fail more often than under-funded ones. Strategically, the more you can do for less, the stronger you grow. It’s a bad risk to solve problems with money.

9. Be aggressive in your forecasts. Every investor has heard from the “conservative” founder who reduces his forecast to lower the risk. These don’t get funded, or they under-perform anyway. Forecasts should be strategic, based on the opportunity and pain level.

10. Lead rather than follow. In the old days, the leaders always caught the arrows, so following was less risky. Entrepreneurs who try to reduce risk by following winners, like building another Facebook or another Google, will find that they don’t catch arrows or customers.

The challenge with all risks is that they must be proactive, measured, and managed. If not, they automatically become bad risks. How much of your time is spent on containing the bad risks, versus initiating forward-thinking ones? If it’s over 50%, your whole startup is a bad risk.

Marty Zwilling

Google Executives are Exceptions Worth Emulating

I tell entrepreneurs that Google was an “exception” to all the investment and startup rules, but I’ve always wondered what it takes to be an exception. Since every business is built by unique individuals, I’m totally convinced that exceptional people are the key to an exceptional company.

To check out the Google founders, and because I still see so many business plans that are modeled after Google (more search engines, and more billion dollar growth models), I had to take a look at the definitive book about them, called “Inside Larry & Sergey’s Brain,” by Richard L. Brandt. It didn’t disappoint me.

This book was not sanctioned by Larry Page and Sergey Brin, so it’s not a love story. All the controversy is highlighted, but the message still seems to be that these guys were and are exceptional in their efforts to build a company. Here are some lessons from the book that all entrepreneurs should wish they could emulate:

• Independently outstanding, but complementary founders. Larry is the primary thinker about the company’s future direction, and weighs in heavily on key hiring decisions. Sergey, a mathematical wizard, is the arbiter of Google’s technological approach. Both have a deep sense of moral values and ethics, and work well together.

• Unique business tactics. Technology alone does not make a great company. Business tactics do. Google developed the most profitable form of advertising anyone had ever seen, ads selected real-time based on search terms. They focused on small advertisers looking for bargains. The model was a perfect fit for the Internet Age.

• Survived phenomenal growth. In 2003, just four years old, sales hit $1.5 billion, profit was $100 million, and it had taken over some 80 percent of the world’s search queries. Google now employs about twenty thousand people. Most founders don’t survive this kind of growth and change, but Larry and Sergey are still a well-balanced machine.

• Loved and hated at the same time. Larry and Sergey have been wickedly clever. They break the mold. They challenge old industries and make a lot of enemies. They’re ruthless businessmen. Yet through it all, they’re idealists, believers in the power of the Internet to make the world a better place.

• Surround themselves with the best people. Early on, they were able to get money from the likes of Andy Bechtolsheim and John Doerr. They convinced Eric Schmidt to take the reins with them for growth as CEO and now Executive Chairman, and had Dr. Larry Brilliant for the philanthropic arm for several years. Amazing.

• Continue to think big. According to the book, both founders continue to think big. Some of their ideas are as flighty as space travel; others are as grounded as the DNA that makes them who they are. No one proclaims to know where its leaders will take Google next, but everyone expects more great things.

Even the pros should probably pay attention here, to sharpen their game and to improve the accuracy of their assessments about people in general, as well as Google’s motivations and intentions. I think Larry and Sergey have shown a relentless focus on innovation that puts them miles ahead of competitors on all fronts.

I challenge each of you, as you reflect on your own vision and entrepreneurial plans, to take a lesson from Larry and Sergey. Do you have the intestinal fortitude to walk away rather than be “corrupted by financial interests,” or to ignore conventional wisdom and follow your own instincts? If so, then you too may be the exception that even the best and the brightest will line up to support. This world needs more exceptional people. Act like one and you too may beat the odds.

Marty Zwilling

Chronic Complainers Drain the Life From a Startup

Throughout my career in small companies and large, I’ve always been appalled by the number of people who seem to complain all of the time. These people don’t seem to realize that they are hurting themselves, as well as other people’s productivity, and the company they are working for.

I’ve always thought that I might be overly sensitive, but recently I saw an old survey done by badbossoloy.com, which claims that a majority of employees spend 10 hours or more a month complaining or listening to others complain, and nearly one third spend 20 or more hours. No startup can afford that huge cost in emotional capital, as well as productivity!

In the survey, negativity is seen as an indictment of bad managers, but I believe it is also an indictment of whiners. Ten to twenty hours a month is a lot of time to waste, not to mention the indirect time lost of the listeners, and the morale impact.

What does all this mean, and how do you correct it, or prevent it in your startup? Here are some recommendations from experts for proactive and recovery actions by all parties to minimize the problem in both employee and management ranks:

1. Executives have to be the role model. If you as the founder, or other members your executive team are chronic complainers, the disease will spread rapidly through the rest of the organization. Don’t play the blame game, give negatively charged emotional speeches, berate employees in public, or wear an angry face at the office.

2. Use the hiring process effectively. Too many startups give short shrift to the hiring process, because they are too busy, don’t want to pay market prices, or have no experience. It’s actually easy to spot whiners during the interview process, by listening to them run down previous employers and not accepting accountability. Don’t hire them.

3. Encourage regular self-assessment. Encourage your management team and employees to always check themselves before making unsolicited comments against the following criteria: “Will this comment add value to our company, our customers, the person I am talking to, or the one I am talking about? If not, don’t say it.”

4. Openly reward positive suggestions. Maybe it’s time to establish or re-activate the old-fashioned “suggestion box.” Make it work by regularly handing out real accolades, as well as real money, to people who add value or reduce costs in your business. A positive can-do attitude should also be recognized in job performance feedback.

5. Quietly deal with people who won’t change. Some whiners have been that way all their life, and don’t know how to change their stripes. With proper counseling, they need to be moved out of your business before they do more damage. How quickly and quietly you deal with these problems will be the loudest message you can send to others.

Some people will use “honesty” as the excuse for negative and insensitive comments. In fact, the most honest and productive comments are always positive recommendations on how to fix a problem, rather than the complaint that someone or something is a problem. Even if some of your co-workers are jerks, you have no moral, ethical or legal obligation to broadcast this view.

Everyone needs to understand that complaining about salary or pay, criticizing colleagues and bosses, or vendors and customers, will generally just reflect negatively on the whiner, rather than accomplish any positive results.

The truth is that optimists lead better lives, and startups with positive teams are more successful, simply because they believe that what they are doing is going to work. Negativity also is a self-fulfilling prophecy, with an outcome that can be the demise of your startup.

Marty Zwilling

Startup Founders Need a Timely Decision Process

Every so often a promising entrepreneur seems to freeze in the oncoming headlights and gets run over by his competition. Why is it that his idea which seemed so fundable only months ago fails to dazzle investors today? The team is the same. The company's market is the same.

The only difference might be the start of another recession like the last one, resulting in a lower valuation for Internet ventures, and that makes all the difference. Herein lies a key principle of decision making - “Any decision is better than no decision.”

Even better than any decision is a good decision made quickly. What separates good decision-making from bad decision-making? H.W. Lewis, author of “Why Flip A Coin? The Art and Science of Good Decisions,” summarizes good decision making as:

• Identifying all reasonable actions.
• Listing the potential consequences of each action and the utility of each consequence.
• Evaluating the probability that each action will lead to a given consequence.
• Choosing the action quickly which has the best expected outcome or positive contribution.

These points may sound obvious, but the process is certainly contrary to the popular “shoot from the hip” approach that is practiced by some entrepreneurs. The idea here is following a process can actually force you to think. You don't have to do it perfectly to stay ahead of the game.

Beyond not thinking, another failure is not really knowing what you want to achieve through the decision. This is a problem with many product-based companies. Their goal is to create profitable products, but too often they don’t research what their customers really want, and what they are willing to pay. It's difficult to create a high-demand product by guessing.

In all cases, be sure to distinguish between ideas and opportunities. A business idea is not a business opportunity until it is evaluated objectively in the context of a specific business plan. I like focus, but if you focus too early on only one business idea without a plan, you are more likely to become attached to it, and lose your objectivity.

Some entrepreneurs seem to know instinctively that a certain product or service has great potential for success. This comes from much industry experience, and is not irrational. On the other hand many unsuccessful would-be entrepreneurs are unsuccessful precisely because they were irrational, so avoid that pitfall.

Decision-making in the face of risk is one of only a handful of unique characteristics that successful entrepreneurs possess. After all, the very nature of a true entrepreneur is one that embraces risk. Often this risk-taking is mistaken in part to be “the reason” the entrepreneur succeeds in their business.

Some decisions involve risk, at times a great deal of it, but there are a greater number of decisions that can be thought through and analyzed to determine on some basic facts, whether or not they are good or bad ideas. Smart entrepreneurs always use facts, when they have them, rather than their gut.

If you are someone who never uses your gut, and exhaustively researches a purchase prior to making it, you are most likely not cut out to be an entrepreneur. This type of decision making, careful and cautious, is certainly a great attribute to have in the corporate business world, but it’s a killer in startups.

Making no decision doesn’t work in any business. So your first test here is to see if you can decide which category of decision maker you best fit. The headlights are approaching…

Marty Zwilling

A Launch With Content Will Rocket Startup Growth

Your marketing launch is the most important element of startup success these days, to get customer attention in this world of information overload. Yet it is the one element that too many entrepreneurs focus on only as an afterthought. Everyone assumes their product or service is so great that “word-of-mouth” will carry the day for them.

Even great products need great marketing “content” to fuel the ascent of their online message. I just finished a modern-day primer on the key elements of great online content in “Launch: How to Quickly Propel Your Business Beyond the Competition,” a new book by Michael Stelzner, founder of SocialMediaExaminer.com.

Michael delivers field-tested guidance on how to create the core elements of great content for your announcement, your webinars, blog posts, Facebook contests, newsletters, Internet TV, and other initiatives. It’s all about content that will bring the masses to your business:

1. Highly relevant. To get to the core of what’s relevant to customers, you need to know them well. Use your content as a way to make a connection between your business and things that matter to them. The more frequently you can deliver content that meets the needs and desires of your customers, the more relevant you will become to them.

2. Educational. Helping customers discover new ways to solve common problems can quickly build you a loyal following. Your content must continue to deliver new ideas. In simple terms, this is where you share your knowledge, as well as the guidance from other experts, for free.

3. Easy to digest. A conversational tone should be the basis for all of your content. Highly relevant and educational content if irrelevant if you can’t make it easy for people to understand. Common approaches include the use of metaphors, tell stories, and always stay on topic.

4. Visually appealing. The eye is just as important as the mind when it comes to customers. The old saying, “A picture is worth a thousand words,” is still alive and relevant. Make sure your paragraphs are short. Use callouts and bullets to help the reader speed through your content.

5. Conversation inviting. Great content is conversation. If you want to connect with customers, put aside your writing formalities. Your language doesn’t have to be perfect. It’s pretty simple to do. Simply speak out loud. Then write it down. The message should spark a side conversation between friends, and a follow-up comment to you.

6. Lacks a sales angle. Great content shouldn’t have any obvious marketing messages or sales pitches embedded inside of it. If your content is about your specific product or service, that’s not great content; it’s marketing collateral. People won’t flock to marketing materials.

Creating these core elements is a lot easier if you can team with outside experts to help you. They have what your readers seek – important, worthwhile knowledge, and some experts already have a large following of their own. They are a shortcut that can put you far ahead of your competition.

Some experts are so instrumental that they are called “fire starters.” These are people who have so much influence that their endorsement can ignite your efforts nearly overnight. The best potential fire starters have the eyes and ears of people who closely match your ideal base. Nurture these relationships, and provide generous value to them in return.

Every marketer throws around the word “content,” but few have mastered the art and science of creating useful, thought-provoking, and viral content. Great content doesn’t happen by accident. Start early in your planning, build your own skills, or find the best expertise you can afford. There is nothing more devastating than a good business that fails to launch.

Marty Zwilling

Equity Compensation at a Startup is a Big Gamble

Wouldn’t you like to be one of the lucky people who joined Google and Microsoft when these were startups, and now be a multi-millionaire? So people ask me “How many shares should I ask for when I join a startup today?” In reality, the number of shares doesn’t mean anything – it’s your percent of the total that you need to negotiate.

For example, 200,000 shares may sound like a lot, but if the startup has issued 20 million (a common starting point), that’s just 1% of the company. By the way, you will normally only be offered “options,” which vest over a 4-year period after a 1-year “cliff.” That means you will get none of these until after you work for one year, and the total only if you stay for four years.

Plus you have to remember that these 200,000 shares could still be worth nothing in four years, depending on the “strike price” today, compared to the market price four years from now. Many employees forget that there isn’t even a market for stock, until after the company has gone public, which hasn’t happened to many companies in the last few years.

Thus, stock doesn’t “pay the mortgage” today, so to speak. Unless you have a sizable nest egg, or a working spouse with an income to support you, I would recommend that you consider any stock options as a “bonus,” rather than a key part of your compensation for joining a startup.

With all that said, here are some “rule of thumb” guidelines on what might be a reasonable offer, as extracted from an old article by Guy Kawasaki, and based on discussions I hear rattling around the investor community.

• CEO brought in to replace the founder, 5 - 10%
• CTO, CFO, VP of Marketing or Sales, 1.5 - 3%
• Chief Engineer or Architect, 1 - 1.5%
• Advisory Board Member, 1%
• Senior Engineer, .3 - .7%
• Product Manager, .2 - .3%

If you are not on this list, just worry about getting whatever your peers are getting. It never hurts to ask in a job interview what stock options are available, and don’t accept an offer which promises to “work out the equity terms later.”

Obviously, what you get will vary depending on what you bring to the company, and what the market will bear. The numbers I mentioned don’t have a level of precision that can be associated with a particular geography, or a particular business type. Offers near the high end of a range will come with a lower cash salary, maybe even 50% of the going rate.

Any offers of equity compensation before the first round of institutional capital should be considered purely speculative. You should also assume that your percentage will go down through dilution as the company raises additional rounds, and offer sizes will go down as the company grows.

Your compensation is the total package, stock plus salary. At best, you should view stock as “deferred compensation” or a “bonus,” which has no value today, and a risk for the future that is much higher than mutual funds, or a conventional balanced public stock portfolio. Yet it has been a source of great wealth to a tiny percentage of people.

Couple all this with the fact that working at a startup is much tougher than working at bigger companies – despite all the hype you see about startups which provide free food, pool tables, and totally flexible hours. Generally, less structure means more stress, and fewer people means higher expectations, longer hours, and a job that may be gone tomorrow.

The bottom line is that you shouldn’t even think about joining a startup, stock or no stock, unless you believe in it and are ready for the adventure of your life. It will always be a learning experience, but it may be a bumpy ride to nowhere. How many gamblers do you know that have won big?

Marty Zwilling

Angel Investors Won’t Swoop Down on Your Startup

Fundraising is brutal. Actually, according to Paul Graham, “Raising money is the second hardest part of starting a startup. The hardest part is making something people want.” More startups may fail for that reason, but a close second is the difficulty of raising money.

A while back, I outlined “Most Startups Get No Professional Investor Cash” for startups, listing angel investors as alternative #6. I still get a lot of questions on these mysterious and often invisible investors, so here is another attempt to bring them out of the ether.

By definition, an angel investor is not an “institutional investor.” Venture capitalists (VCs) are paid to invest other people’s money, and measured on the rate of return they get. Angels are typically high net worth individuals who are investing their own money, for a wide range of motives.

So “good” angels are ones with motives that are consistent with what you bring to the table. This means they usually invest in people who have the right “chemistry”, and areas of business they already know. They tend to work locally, so they can “touch and feel” their investments.

Angel investors also tend to limit the size of individual investments to $250K or less. If you need more, you need VCs or a flock of angels. So how do you find those good angels?

1. Use personal networking. The best angels you will find are the ones who know you personally, or know a member of your team or advisory board. If a potential investor gets to know you BEFORE you are asking for money, your credibility and investment probability will be improved by an order of magnitude.

2. Entice angels to play along. Of course, angels are really mortals. They want to make a difference. Asking an angel to work with your company in an advisory role is a great way to establish a relationship that may lead to a cash investment. If you impress the angel, it will likely make her at least an archangel (advocate) when it comes to funding.

3. Court local angel groups. Since angel investors most often focus only in their own geographic area, it’s most effective to court the local group, or even make a guest appearance with an archangel. If you can earn an archangel's confidence, he or she will invite you to pitch the group, and you'll have an edge in the voting.

4. Mine national databases. If you are still alone, submit your application to the leading online website national databases of angel investors, AngelSoft (USA) and National Angel Capital Association (Canada). These sites have arrangements with hundreds of local groups and individual investors that you might otherwise have missed.

5. Remember angels beget angels. That means that once you get the first one, he or she becomes your best advocate for finding more. Investment angels don’t like to travel alone, so they will bring in others if they can (it’s called share the risk).

6. Don’t forget passive angels. These are angel investors who are private, meaning they don’t go to meetings, but will invest if someone they trust brings them an attractive opportunity. Find the right investment advisor, or member of your advisory board, and the “match-making” will happen.

Remember that angels have a culture all their own, and it pays to understand how to deal positively with them after you find one. There are some good books out there to help, like “Attracting Capital from Angels”, by Brian Hill and Dee Power, and “The Art of The Start”, by Guy Kawasaki.

Even if you follow this recipe, you are likely to find that fundraising is a brutal challenge. But if it results in a good angel or two watching over your startup, you will definitely be one step closer to heaven.

Marty Zwilling

Entrepreneurs Who Fear Chaos Risk An Early Demise

Every startup founder I know talks about the chaos of their business, which they usually attribute to that burst of growth that is required to get to positive cash flow. They envision a stable environment after that point, and may have convinced themselves that they will be safer and happier with a livable income, maintaining a loyal but flat customer base.

Sadly, this false perception often leads to the death of their business, or at least the end of their tenure as CEO. I second the message that chaos never subsides, from a couple of successful entrepreneurs, Clate Mask and Scott Martineau, in their book “Conquer the Chaos.” Your only choice is to live with it, and find a way to conquer it.

Some small business owners hope to reduce stress by keeping their business static, and believe that they can rely on referrals and repeat business to keep a consistent customer set. Even with this, there are important reasons why not innovating, or going into maintenance mode, will lead to your demise:

• Competitors swoop in and take your space. There are always people around with deeper pockets that can find synergy between your space and theirs. Once they see you have developed credible traction, they can grab your space with less cost (meaning lower price) than you had to put into developing it. Don’t count on your IP to save you.

• Employees stop innovating. Employees are human, and a static known environment is more comfortable than a dynamic one. Innovation requires venturing into the unknown, causing more dreaded chaos. The easiest way to reduce chaos is to buffer all your activities (slow down), define safer generic processes, which spiral down productivity.

• Your products quickly become outdated. Change is the only constant in a successful business. Technology keeps improving at a rapid rate, so you fall behind in technology, driving costs up, and you become non-competitive.

• Your income drops. With decreased employee productivity and outdated technology, your costs go up, and income drops. Even great entrepreneurs are amazed at how fast this can lead to a non-recoverable situation.

The only real solution is to conquer the chaos, while continually expanding your reach into the available market, and into the improvements in technology. Conquering chaos requires two key strategies:

1. Mindset strategy. Your mindset is your emotional capital, bolstered by disciplined optimism and entrepreneurial independence. These give you the capacity to grow your business without getting consumed by it. You need to find ways to replenish these on a regular basis, and find your balance of pain versus rewards to keep your company vital.

2. System strategies. These are the processes and tools you implement to grow your business and keep it running smoothly and profitably. Key ones include centralization, automation, and follow-up. Again, balance is the key, with some measurements along the way to keep you on track.

Even after you bring chaos under control, you face an ongoing challenge to avoid back-sliding. Once your systems are in place, you have to give yourself the time you are saving. Make sure your own ambition doesn’t send you back into chaos. Don’t fall for the belief that your business will fail without you. Relax, let go, and enjoy the freedom you have earned.

Only now can you become the liberated entrepreneur that you set out to be in the first place. Your business will grow, you will make more money, have more time, more control, more purpose, and less chaos. Do you have what it takes to achieve the real entrepreneur lifestyle?

Marty Zwilling

Tested Startup Capabilities That Lead to Success

Every startup wants to be a predictable success, yet so few ever achieve this enviable position. In reality, getting there is not a random walk, and requires an understanding of the stages that every business must navigate and the organizational characteristics necessary at each stage.

Les McKeown, in his recent book “Predictable Success” outlines these stages and characteristics for any business. He points out, for example, that every business should anticipate the early struggle stage, a possible fun stage, and probably a turbulent whitewater phase, before they can hope for the predictable success stage.

This stage is defined as a point where you can set and consistently achieve your goals and objectives with a consistent, predictable degree of success. Unlike previous stages, where you may not know how or why you have survived, you now know why you are successful, and can use that information to sustain growth in the long term.

His studies show that companies at this stage show five key characteristics, which I believe every startup should strive to achieve from the very beginning:

1. Decision making. The ability to readily make and consistently implement decisions. You need a sense of flow – decisions are made without the decision-making process placing a burden on the organization, or the leader. Decision making is delegated and decentralized, freeing management to concentrate on what they can do best, rather than micromanaging others.

2. Goal setting. The ability to readily set and consistently achieve goals, and really being in control. It has to happen seamlessly, as part of the day-to-day operation of the business, not as the resource-sucking, do-it-at-the-last-minute event that it is in so many organizations. Goals are hit more than missed, and people are willing to take timely, corrective action.

3. Alignment. Structure, process and people are in harmony. Otherwise, a lot of time and energy is expended by people because they have to manipulate the organization’s processes and/or structure in order to get things done. There is just the right amount of process and structure to efficiently get the job done.

4. Accountability. Employees become self-accountable, in addition to being externally accountable to others. When empowered to make decisions of genuine import about their own jobs and responsibilities, and given the resources and freedom required, each employee personally buys in to the overall success.

5. Ownership. Employees take personal responsibility for their actions and outcomes. This results is everyone pulling together, rather than by the manager group constantly “pushing.” There is a deep sense of co-dependency, where managers are dependent on their teams for delivering, and employees are dependent on managers for guidance.

As challenging as it may seem to achieve these characteristics in your business, the bigger challenge is to retain them for the long haul. Many businesses slowly slide into a treadmill stage, where they become over-systematized, or on toward the big rut where creativity disappears (“the way we have always done thing”), on into the death rattle, where the market moves faster than the company.

As a startup, you need to walk before you can run. That means starting early to practice and implement the techniques that will lead to predictable success. Remember that the lynchpin of the entire framework comes down to your own personal ownership and self-accountability. There is no room here for excuses or half-way efforts.

Marty Zwilling

Foster the Factors that Make Startup Work Fun

Startup work environments are always chaos, but they can still be great environments to work in, or they can be terrible. Whether yours is terrible or great, that same tone flows out to your customers, and regulates your productivity inside. You as the founder are the starting point and definer, so you need to get it right.

What does it take to create a positive workplace culture? I did some research on this, and compared it with my own experience. I’ve concluded and the experts agree that it’s all about understanding people, and overtly optimizing the factors that drive them at work.

Ed Muzio, in his recent book “Make Work Great: Supercharge the Team, Reinvent the Culture, and Gain Influence One Person at a Time,” summarized the key influencers as follows:

• We are driven by peers. According to many studies and observations, group pressure entices us to rethink our own opinions, and can even change our actual perceptions. That’s a good thing if your business peers are positive about what is happening, and it can cause a spiral into the ground if goals, priorities, and issues are not understood.

• We are driven by authority. Stanley Milgram, a famous researcher in the 1960s, concluded that “Ordinary people, simply doing their jobs, and without any particular hostility on their part, can become agents in a terrible destructive process.” It’s up to you, as the authority figure, to define the standards and communicate roles correctly.

• We are driven by expectations. Around most people at work is a core group of six to eight people (your “role set”) who send you expectations about what you should or should not be doing, along with implied rewards or punishments. Our satisfaction is strongly driven by this role set. Find compatible and complementary people for your role sets.

• We underestimate the impact of the situation. The pressure of a situation actually can override the prior three forces. Thus you always must be very sensitive to the context, since unfair blame based on situational factors will negate all your positive influences. Don’t make the mistake of assuming people act from personal choice alone.

You as an individual team member, and you as the authority figure, must make a conscious choice to drive the culture around you, rather than be driven by it. Psychologists have noted that going passively along ‘on automatic’ if often our worst enemy. It doesn’t get the job done, and it’s not even satisfying.

The most effective way for you to drive the culture is to understand yourself and to be explicit on the following items to your role set and others:

• Your personal goals and purpose
• Your intended impact (‘So what’)
• Your incentives and motivation
• Your progress as it happens
• The resources you need
• Your capability (share your knowledge)

By default, the at-work culture is just “how we do things around here,” based on problems faced “back then.” The problems you face today are different, and the solutions from back then were likely not the best. That means there is always a premium on culture teachers, compared to culture followers.

So don’t ask yourself how you can influence the culture, by rather how you already are influencing it. Are you a beneficiary of precedent or a slave to it? Choose to choose to make your work environment great.

Marty Zwilling

Nine Steps to Effective Business Problem Solving

Creating a startup, or managing any business, is all about problem solving. Some people are good at it and some are not – independent of their IQ or their academic credentials (there may even be an inverse relationship here). Yet I’m convinced that problem solving is a learnable trait, rather than just a birthright.

Entrepreneurs who are great problem solvers within any business are the best prepared to solve their customers’ needs effectively as well. In fact, every business is about solutions to customer problems – no problems, no business. Problems are an everyday part of every business and personal environment.

Thus it behooves all of us work on mastering the discipline of problem solving. Here is a formula from Brian Tracy, in his book “The Power of Self-Discipline” that I believe will help entrepreneurs move up a notch in this category:

1. Take the time to define the problem clearly. Many executives like to jump into solution mode immediately, even before they understand the issue. In some cases, a small problem can become a big one with inappropriate actions. In all cases, real clarity will expedite the path ahead.

2. Pursue alternate paths on “facts of life” and opportunities. Remember, there are some things that you can do nothing about. They’re not problems; they are merely facts of life. Often, what appears to be a problem is actually an opportunity in disguise.

3. Challenge the definition from all angles. Beware of any problem for which there is only one definition. The more ways you can define a problem, the more likely it is that you will find the best solution. For example, “sales are too low” may mean strong competitors, ineffective advertising, or a poor sales process.

4. Iteratively question the cause of the problem. This is all about finding the root cause, rather than treating a symptom. If you don’t get to the root, the problem will likely recur, perhaps with different symptoms. Don’t waste time re-solving the same problem.

5. Identify multiple possible solutions. The more possible solutions you develop, the more likely you will come up with the right one. The quality of the solution seems to be in direct proportion to the quantity of solutions considered in problem solving.

6. Prioritize potential solutions. An acceptable solution, doable now, is usually superior to an excellent solution with higher complexity, longer timeframe, and higher cost. There is a rule that says that every large problem was once a small problem that could have been solved easily at that time.

7. Make a decision. Select a solution, any solution, and then decide on a course of action. The longer you put off deciding on what to do, the higher the cost, and the larger the impact. Your objective should be to deal with 80% of all problems immediately. At the very least, set a specific deadline for making a decision and stick to it.

8. Assign responsibility. Who exactly is going to carry out the solution or the different elements of the solution? Otherwise nothing will happen, and you have no recourse but to implement all solutions yourself.

9. Set a measure for the solution. Otherwise you will have no way of knowing when and whether the problem was solved. Problem solutions in a complex system often have unintended side effects which can be worse than the original problem.

People who are good at problem solving are some of the most valuable and respected people in every area. In fact, success if often defined as “the ability to solve problems.” In many cultures, this is called “street smarts,” and it’s valued even more than “book smarts.” The best entrepreneurs have both.

Marty Zwilling

The Best Online Reputation Defense is Good Offense

These days, your online Internet reputation is your reputation. Of course, having no reputation is usually better than a bad one, but don’t wait for someone else to establish a good one for you. It’s time for every business and business person to proactively create a positive presence, before someone else puts you in a defensive mode that is hard to win.

The first step in the process is to claim your online identity. This is simple in concept, but requires real effort and can be time consuming, and even expensive, if someone gets there before you and tries to sell you the rights to your preferred business or personal domain name. See my previous article on “When to Pay a Premium for Your Company Domain Name ”

Michael Fertik and David Thompson bring this issue and many others together in their book “Wild West 2.0.” After you claim your identity with placeholder domain names, accounts in social networks, and common blogging platforms, your next challenge is to create enough positive content as a “Google wall” to keep negative info out of the top Google search results.

Positive content, such as information and pictures on your accomplishments, achievements, and friends, paints you in a good light. Neutral content, including your membership in business associations, and company affiliations, can at best balance false negative information, or at least make the negatives harder to find.

Here are some of the easiest methods we both recommend for creating positive and neutral content:

• Blogging. There are several major free blogging platforms you can use to claim your identity, including WordPress, Blogger, and LiveJournal. If you add new content periodically, it is likely to become a secure and important part of your online resume, and it will come out at the top of any Google searches on your identity.

• Twittering. An even easier way of getting your positive messages to the top of Google rankings is “micro-blogging” through Twitter. This is especially useful in providing links to other positive and neutral content.

• Profile sites. There are several free and paid services, such as LinkedIn and Visible.me, that allow users to create a short personal profile and to link to other relevant sites. Simply engaging in forum discussions and exchanging comments establishes positive content.

• Other user-created content sites. Sites like Flickr, Webshots, and YouTube allow users to create and share photos and videos, and create short profiles. You can use these sites to your advantage by uploading relevant and positive content and prominently including your name in the subject or description.

• Professional directories. Many professions offer free online directories of members or similar sites for professional networking. These sites are often highly ranked in search engine results because they are heavily linked. If there is a directory relevant to your business or profession, use it.

If you have already been a victim of online reputation damage (accidentally or maliciously), proactively reach out to friends and co-workers to explain the problem. They can assist you by linking to positive and neutral content about you, thus displacing or minimizing the negative content.

For your startup, one study found that reputation damage is a bigger risk to most companies than natural disaster or even terrorism. Remember that during the startup phase where your company is not yet a brand, you are the company, so your reputation and that of your company are tightly linked.

The Internet has been a powerful and disruptive technology. The good news is that you can use it to advantage. But you can’t ignore it, and pretend there is no danger. Just like in prior generations with the Wild West, people who put up a good offense to protect themselves were the ones who survived and prospered. Take heed, and take action.

Marty Zwilling

Find the Best of the Best Blogs for Entrepreneurs

With as many as 100 million active blogs (web logs) in English alone on the Internet, how can you find and read the ones you need to be a leader in your business domain? I’m a speed reader, but that’s a challenge for even the best of us. Yet we know keeping up with the latest trends and techniques can make all the difference in ensuring that your business stands the test of time.

I’ll summarize below some of the strategies and tools I use to tackle this challenge. But I’m sure there are some good ones I’m missing, so I’m soliciting your input as well.

1. Business site expert blogs. Almost every traditional major business news site, like Forbes.com, Entrepreneur.com, and HBR.org have blogs which are contributed by experts in different business areas. I review these, as well as contribute entries occasionally for entrepreneurs and startups.

2. Blog aggregators. One of my favorites in this category is MyAlltop, run by a well-known name with entrepreneurs, Guy Kawasaki. This site allows you to build your own page of selected blogs and news sites from the Alltop selection of the “best of the best.” Other popular aggregators include TheHuffingtonPost and BusinessInsider.

3. Follow thought leaders on Twitter. Most great bloggers, like Mark Suster and Scott Edward Walker, are also active on Twitter. That means they send tweets to announce their latest entries, and they usually re-tweet others of value to their followers. You might even get personalized answers to business questions (try me on @StartupPro).

4. LinkedIn groups news links. There are several popular ‘groups’ you can join on LinkedIn that are focused on entrepreneurs and startups, like On Startups, Founders & CEO Club, and Startup Specialists, to name a few. They feature news links daily from popular blogs, and well as relevant discussion topics. I’m there every day.

5. Facebook for Business news links. Similar to LinkedIn, Facebook has a group for business topics, which also includes daily blog news links and discussion topics. I review news there, as well as posting my own link occasionally.

6. User generated news links. Digg, BizSugar and Hacker News sites populated by user contributed links, who want to share their favorite item. These then get voted up or down in popularity by other users, so the hottest ones bubble to the top. I quickly found that ‘most popular’ doesn’t mean most useful, so use with care.

7. Community bloggers platforms. There are now several platforms, like Bloggersbase and Brazen Careerist (for Gen-Y) where bloggers can post or repost articles, categorized by area of interest. If you are a budding blogger, these are a place to start, and even earn ranking points if voted up by other readers.

8. Bookmark favorites. Every browser has a simple way of tagging favorite URLs, so they can be accessed quickly from your own browser. Other sites, like delicious and StumbleUpon, go several steps further by allowing access to the list from any computer, anytime, and anywhere. Also you can tag them into collections, search them, and share with others.

9. Email subscription. If you like the latest blog entry from your favorite sources, like Seth Godin, to be sent to you automatically via email, it’s still available. I recommend you be very selective on this one, as many blogs will clog even the best email system.

10. Blog catalogs. Finally, if you just want to search the universe of blogs to find ones of interest, try sites like BlogCatalog and HubPages. They will help you through the maze, and promote yours at the same time.

We all need information filters these days to find the nuggets of gold in a sea of sand. But I do recommend that you spend some time each day catching up on the real world around you. Otherwise, you are just keeping your head in the sand, and you won’t see the changes you need to survive.

Marty Zwilling

Entrepreneurs Need to Be Leaders, Not Pushers

True leaders realize that, by definition, the word "leader" places one at the front and not the rear. Yet many, many executives try to lead through fear and intimidation. This isn’t really leading at all. It’s pushing. Those of you with time in the military probably understand this concept well.

In startups, leading from the front means that you are not afraid to get your hands dirty, pitching in to get the job done. If you are the type of leader that likes to sit back and delegate, you shouldn’t have left your nice job at American International Group (AIG), unless you had no choice, of course.

Delegation is a great skill to have, but you have to lead effectively to earn the right to use it. Intimidating or berating other team members from a position of power doesn’t work in lieu of leadership. If one of your executives hasn’t learned that, you need to get rid of them. Otherwise they will kill you in the end, one way or another.

In every startup, people are expected to wear multiple hats, each and every day. An effective leader that wears many hats easily creates loyalty. This is a quality that cannot be bought or bullied. Loyalty must be earned, and startup executives who earn it generally do the following:

• Communicate and demonstrate a clear sense of purpose
• Provide great coaching, mentoring, and tutoring
• Recognize, praise, and reward achievement
• Ensure credit is given where credit is due
• Consistently dependable and knowledgeable
• Always accessible
• Treat people fairly
• Listen well
• Have patience and humility
• Helpful and quick to expedite important matters
• Demonstrates loyalty by standing up for his team, defending them to other executives, and when necessary, to customers

Funny thing about loyal team members - they respond very well to being led from the front. Your team’s level of motivation and attention to detail is always going to have a fairly direct correlation to your ability to keep things moving forward, despite the cyclone spinning around you.

People will make mistakes, so accept it now - certain tasks, even critical ones, can get lost in the noise. The 100% solution is never attainable - so forget about. Strive for 90% and try to get that part right. The rest will come in time.

Communicate effectively and constantly with your team. No news is not good news in times of crisis. Tell the truth even when it hurts. Don’t be caught stuck to your chair while the storm is swirling around you. You must stay on top of everything and everyone. And guess what, you will miss things, too. Get over it.

Unfortunately, a crisis often drives leaders to retreat behind closed doors instead of advancing to the source of the problem. They withdraw to their desk, get inundated with data, overwhelmed by numbers and lose the connection with their people. Witness the recent management problems in the financial and insurance industries.

It’s not only the financial industry that is in crisis today. Our whole health care system and many business areas are in the same boat. Now is the opportunity for real leadership. Leadership is about being visible and setting the right example out front on the firing line. There is a saying in the military that generals who lead troops from the safety of the rear, should have to take it in the rear. That’s not a comfortable position for anyone.

Marty Zwilling

How an Entrepreneur Can ‘Get Lucky’ in a Startup

If you have had some success in a business, I’m sure you bristle just like I do when someone says “You were just lucky…” I’m a strong believer that we all make our own luck, which means that the harder we work, the luckier we get. In reality, “hard work” is just a catch-all term for a list of principles that good entrepreneurs follow, allowing them to work smarter and improve their odds of success.

A short list of these “hard work” principles, published recently by Anthony Tjan in the Harvard Business Review summarizes them as heart, smarts, and guts. I agree with these, and most people recognize them when they see them in others, but the terms are still a bit abstract for learning purposes.

Therefore, other experts, like professors Alex Rovira and Fernando Trias de Bes, authors of the book, “Good Luck: Create the Conditions for Success in Life & Business,” have identified five more definitive principles that seemingly lucky and successful entrepreneurs have in common:

1. Accept responsibility for your actions. Business owners who feel that they have had good luck also feel responsible for their own actions. When things go wrong or the outcome of any given situation is other than intended, they never point the finger of blame at external factors or other individuals. Instead, they look to themselves and ask, "What have I done for this to occur?" Then they act accordingly to solve the problem.

2. Learning from mistakes. Creators of good luck don't see a mistake as a failure. Instead, a mistake is an opportunity for learning. Thomas Edison is the classic example. The very first light bulb was invented by Sir Joseph Wilson Swan, who demonstrated the theoretical concept but gave up trying to develop a practical application after only three attempts. By contrast, Edison made his own good luck and designed a working light bulb after over 1,000 failures.

3. Perseverance on all goals. Creators of good luck don't give up or postpone. When a problem or situation arises, they act immediately to either solve it without delay, delegate, or forget about it. This enables their energy to be fully focused on their work and avoid conscious or unconscious distractions, which only generate inefficiency.

4. Confidence in yourself and others. The most powerful principle is often the most overlooked. Confidence in yourself is essential, and those who create their own good luck have high degrees of assertiveness and self-esteem. Closely linked to assertiveness and self-esteem is trust in others and respect for them, seeing other people as major sources of opportunity.

5. Cooperation with others in your network. Synergy is key. Trust in others leads to a solid network of work colleagues and friends, which, in turn, provides more resources to carry out projects than if they were managed alone. Think cooperation rather than competitiveness. At the most basic level, any project or undertaking takes place in the context of the broader group, and everyone should have the chance to emerge a winner.

With these attributes and the right attitude, I believe that most of "business luck" can be meaningfully influenced. That lucky attitude, according to Tjan, is a combination of three traits – humility, intellectual curiosity, and optimism.

Therefore, the basic equation of developing the right lucky attitude is quite simple. It starts with having the humility to be self-aware of your own limitations, followed by the intellectual curiosity to ask the right questions and actively listen to input, and concluding with the belief and optimism that something better is always possible.

Any entrepreneur can have this mindset if they just believe that luck is not random. They need to realize that they alone are the creators of the conditions that foster the achievement of specific, visualized goals. Then, having seen it work, they will know how to repeat the success. Overall, that really is “hard work.” Are you doing the right hard work to get lucky in your business?

Marty Zwilling

New Technology Adoption is Getting More Painful

Even though I love technology, I always cringe when an entrepreneur starts his pitch by touting his new technology. He has forgotten that new technologies are perceived by most customers as causing more pain than the problems they hope to eliminate. I chastise these startups to highlight the solution created by the technology, rather than highlight the technology itself.

I usually get pushback about the success of all the great technology companies, like Intel and Apple. Let me be clear – technology and market-driven need not be mutually exclusive! The best companies find a way to drive the market with a solution based on their technology, rather than push their new technology as the solution for the marketplace.

Yet we all know that many customers delay their adoption of the latest software platform, and fancy new hardware, for a year or two until all the “kinks” are worked out of them. In reality, new technology alone is often assigned a negative value, as startups push out alpha and beta products earlier and earlier in the competitive rush.

Of course, there are always a few early adopters who love change and need to have the latest technology, but early adopters don’t make the market. Here are a few thoughts on a process that will keep you on the right track for the majority of your real customers:

• Get real customer input. Is your product tempered with actual market and customer feedback? Everyone's personal perspectives and interests are different, so the key is starting from market problems, and going from there to technology - not vice versa.

• Quantify the pain points. What are the major points of pain experienced by the intended users of your product or service? Users with no pain who say “nice to have” will not likely pay money or endure change for your product.

• Keep it simple and easy to use. Are the user problems being solved in the simplest possible way, with the fewest possible features? Or have many features been thrown in, just because the technology can deliver them?

The easiest way to start this process is by starting from the market drivers and working forwards, not backwards. Don’t make the mistake of looking at market needs or requests as an afterthought to verify what's already been planned.

Companies that are market-driven are externally focused: they identify opportunities and then capitalize on them. Technology-driven companies are internally focused: they identify what is possible with the technology and then look for customers who might like the results.

Market-driven also means knowing the overall dynamics and forces in the marketplace and understanding how those forces might impact the business – marketing and sales driven. A technology-driven business is driven by engineers. A great company finds a balance between these two forces, but makes the business side the driver.

In fact, technology is neither intrinsically good nor intrinsically bad. We all know that very few customers will buy technology, simply for the sake of technology. Technology tools and platforms are hard to sell, because the people who love and understand them are not usually the decision makers, or the budget owners.

But how do you manage “disruptive” technologies, where people don't even know they have a need? Many entrepreneurs are convinced that they have the greatest invention ever, and others will believe when they see it. Investors know better, since dramatic changes in technology historically take a long time and lots of money go gain a foothold – with a few rare exceptions.

If you are looking for external investors, my advice is to take a hard look at your business plan and investor presentation. If they highlight your technology first, you will likely be tagged as a solution looking for a problem. Start by quantifying a customer problem, and show how you are using technology innovatively to solve this problem. That’s market-driven technology providing solutions, and every investor and customer will want a piece of that action.

Marty Zwilling

Every Startup Needs a Reality Check Now and Then

Most of the time, I’m all about providing encouragement and inspiration to entrepreneurs. They need it and they deserve it, because entrepreneurs are the lifeblood of our economy. But every so often, I try to give them a reality check, just to keep their feet on the ground and their nose to the grindstone.

Many years ago, I enjoyed one of Guy Kawasaki’s first books, “Reality Check: The Irreverent Guide to Outsmarting, Outmanaging, and Outmarketing Your Competition.” In his classical humorous and cynical style, he could reset your dreaming in a moment. Here is a sampling of ten themes from the book that I think are just as relevant today as they were then:

1. The reality of starting. It’s not going to get better – it already is. Startup folks are like medieval monasteries: always convinced that paradise is just ahead or that things only recently got worse.

2. The reality of raising money. The closest real-world analogy to raising money is speed dating. That’s right: In five minutes, people decide if they are interested in you, just as in bars and nightclubs. This isn’t right, and it isn’t fair, but it is reality.

3. The reality of planning and executing. If you think raising money was the hard part, you’re in for a surprise. Raising money is easy and fun. The real work begins when you have to deliver the results you promised.

4. The reality of innovating. Many people think that innovation is easy: You sit around with your buddies and magical ideas pop into your head. Or your customers tell you what they need. Dream on. Innovation is a hard, messy process with no shortcuts.

5. The reality of marketing. Everybody wants to do the fun stuff: shuck and jive with the beautiful people, and create fun marketing campaigns. More accurately, marketing is the process of convincing people that they need your product. That’s not so easy or fun.

6. The reality of communicating. Entrepreneurship is an outward-focused activity. It requires that you communicate with others in all the modern modes. Every one is a skill you need to master. All it takes is reading this book and practicing for twenty years.

7. The reality of competing. If you don’t compete with anybody for very long, it may mean that you’re trying to serve a market that doesn’t exist. The question of defensibility is one of the toughest for an entrepreneur to answer. A good answer is not to stop moving.

8. The reality of hiring and firing. These are black arts for most people. Few people are trained for either, and most depend on their gut. They believe they won’t make hiring mistakes, so will never have to fire anyone. Wrong; and mistakes hurt people and you.

9. The reality of working. In the beginning, startups are like a clean sheet of paper: nothing but opportunity and upside with a chance to make meaning and change the world. Then the reality of work sets in. Building a success is hard – damn hard, actually.

10. The reality of doing good. At the end of one’s life, you are measured not by how much money you made, but by how much you’ve made the world a better place. Successful entrepreneurs often switch to non-profits and social entrepreneurship for real impact.

Of course, there is much more, but I think you get the idea. I also hope these themes don’t send a totally negative message, because the book is funny as well as thought provoking. I do believe we all need reality checks to face our challenges head-on, so that we can deal with them and survive, rather than just float along in the clouds until our dreams evaporate.

Marty Zwilling

Don’t Allow an Hour for a Five-Minute Discussion

I’ve always wondered why every executive meeting has to be one hour in length, or longer. That’s probably a tenth of your day spent on one issue. It better be a critical one, because you have a hundred others waiting. I believe you can be much more productive, as well as a more effective leader, if you approach most meetings as mentoring opportunities, and limit them to five minutes.

In a traditional meeting, another person presents you with multiple options, and you make the decision. With the five-minute mentoring approach, the mentee asks for your support in their decision, or asks for your insight on the considerations for them making a future decision. Which approach do you think is more fulfilling for them, and best for your company in the long run?

The time limit has more to do with setting an expectation that the meeting is not for solving the problem, but coaching on the parameters and the approach. If you are a problem solver by nature, this requires you to change your mindset from giving the “answer,” to helping someone else understand the process, and come to an even better solution.

I have used this approach with high-tech roles, like software design, as well as business development roles. It works, but in all cases, to be a successful mentor, there are some key things you have to do:

• Be available always. If you are “too busy” most of the time, or locked behind closed doors, no mentoring relationship can work. It has to be evident to the mentee that this relationship is important to you, and you will make short periods of time available on a moment’s notice as required. If you often make people wait, they will take extra time, which will make more people wait longer and later.

• Adapt to each individual learning style. Start by open listening. Some people learn best from anecdotal stories, and others need concrete pointers and step-by-step instructions. Respect each mentee’s desire to grow and honor their individual style. Remember that five-minute listening is not the same as five-minute mentoring.

• Respect discussion confidentiality. Mentor discussions must remain confidential, so both parties can talk freely to each other without being quoted around the water cooler later. The mentee must not be afraid to show false starts or a naïve perspective.

• Provide honest and constructive feedback. Personal attacks and emotional comments are not appropriate, but people need real feedback to learn. Set the context by clarifying your goals and expectations on a regular basis. Critique the work and not the person.

• Hold the mentee responsible and accountable. Encourage the mentee to generate their own solutions, and make it clear that they must accept full responsibility for their personal choices. Good people won’t want it to work any other way. Most people learn best from making mistakes, so you have to let them fail sometimes.

I’m definitely not proposing the “traditional” style of mentoring, where the goal was a one-way transfer of a broad range of knowledge or information. Here the mentor was the authoritarian source, and directed all other aspects of the mentoring relationship. The mentee was a passive recipient and often had little say or control in the relationship.

Today’s learner-centered mentoring is a dynamic and two-way relationship that involves critical reflection and full participation in short period increments by both partners. The mentor assumes a role of a facilitator. The mentee becomes a proactive and equal partner, helping direct the relationship and set its goals.

The primary responsibility of a startup founder is to provide vision and leadership. Use five-minute mentoring as one tool and stick to it with unwavering zeal. There's nothing worse than getting off course and entering areas that lead you away from the primary track. Your greatest contribution is maintaining focus and guiding the team. Give it a try. You’ll get your time back and real respect.

Marty Zwilling

Don’t Let Personal Biases Sabotage Your Startup

I’m sure we have all seen entrepreneurs with high levels of passion and confidence touting an idea that seems to make very little sense to us. Of course, we never see ourselves in this mode, yet we need to recognize that all humans see reality differently through a built-in set of “cognitive biases,” based on their own unique background of experiences, training, and mental state.

These biases are good, in that they allow us to quickly filter and make decisions in the constant barrage of information we face each day, but bad because they often lead to errors in reasoning and emotional choices. The worst case is called the “passion trap,” where a pattern of beliefs, choices, and behaviors feel good and become self-reinforcing, but lead to disaster.

John Bradberry, in a recent book called “6 Secrets to Startup Success” identifies five key biases that sabotage many passionate entrepreneurs in their startup decision making. I challenge any entrepreneur to honestly tell me that they have never fallen victim to any of these while making startup decisions:

1. Confirmation bias. This refers to the human tendency to select and interpret available information in a way that confirms pre-existing hopes and beliefs. The antidote is to look for dissenting views that seem to form a pattern of concern. Then what you perceive as isolated exceptions, might indeed appear as a clear majority.

2. Representativeness (belief in the law of small numbers). Many entrepreneurs tend to settle on conclusions they like, based on only a small number of observations or a few pieces of data. The new founder who hears positive reviews from three out of four friends may assume that 75 percent of the general population will react similarly.

3. Overconfidence or illusion of control. Overconfidence leads founders to treat their assumptions as facts and see less uncertainty and risk than actually exists. The illusion of control causes startup founders to overrate their abilities and skills in controlling future events and outcomes. Both result is “rose-colored” plans, rather than realistic ones.

4. Anchoring. This refers to our mind’s tendency to give excessive weight to the first information we receive about a topic or the first idea we think of. It encourages founders to cling to an original idea or, if pressed, to consider only slight deviations from the idea instead of more radical alternatives. The ability to pivot sharply and timely is at risk here.

5. Escalation of commitment (“sunk cost” fallacy). Startup founders often refuse to abandon a losing strategy in an attempt to preserve whatever value has been created up to that point. They feel that they have put so much money, time, and energy into an idea or plan, that it must be the idea. Investing more into a bad idea doesn’t make it good.

Optimism, for example, is a typical entrepreneurial trait that improves performance, but only up to a point. In fact, moderately optimistic people have been shown to outperform extreme optimists on a wide range of task and assignments. There are a number of similar entrepreneurial characteristics that are recognized as good, but can be amplified to unhealthy levels, resulting in passion traps, or so-called “Icarus qualities.”

Every entrepreneur needs to be on the lookout for early warning signs of biases and passion traps that signal that you are in danger of undercutting your odds of startup success. Obvious ones are founders who are thinking or saying, “This is a sure thing,” or executives losing patience with advisors who point out risks or shortcomings in your plan.

In my experience, a great startup is more about great execution, rather than a great idea. It’s about converting your passion into economic value. To counter-balance the biases in your passion, the best approach is to look beyond your own mind and actively listen to your customers, your advisors and your team. When was the last time you really listened?

Marty Zwilling