Dual Founders Manage Technology Startups Better

I often hear the qualms of business-smart but non-technical entrepreneurs, wondering if they really have a chance in this high-technology marketplace. I tell them that if their idea or solution is technology intensive, they clearly need technology strength on the team. Then the question becomes “How do I evaluate and attract the best technical talent?”

The simple answer is to find a business partner, not an “implementer,” who already has the technical experience you need, and is willing and able to run that side of the business. Finding that person is not a hiring challenge, since neither of you really get paid until you both succeed. Here the principles of finding any top executive apply, as I’ve covered in a previous article.

If you are an entrepreneur, like Andrew Mason, CEO of Groupon, with a degree in music and no technical business partner to be found, your job is a bit harder. Yet the smart entrepreneur can still bootstrap the technical team, using one or all of the following evaluation and hiring approaches:

1. Hire an expert consultant for initial interviews and recommendation. This is the technical equivalent of an “executive recruiter.” It definitely works, but may be beyond your budget. On the other hand, it may save you more time and dollars than you will expend recovering from a hiring mistake.

2. Start with great credentials, and focus on the culture fit. For any technical position, a great resume is necessary but not sufficient for a team fit. Your non-technical interview needs to determine if there is a chemistry match, passion, integrity, and willingness to work with others on your team.

3. Interview former employers, more than the candidate. This approach only works if you know them, are willing and able to talk face-to-face, or meet them in at a conference or another business setting. Most employers, due to fear of lawsuits, will only confirm employment data and give you positive feedback over the phone.

4. Ask early candidates how they differentiate themselves from their peers. Then use their insights in questioning other candidates. You might be surprised at how fast you get to be an “expert” on a given technology, and how easy it is to eliminate candidates who don’t have a clue. Evaluate how clearly they answer the question, as well as the answer.

5. Use questions to test analytical and problem solving ability. Pick a domain you are familiar with, and test the candidates ability to think outside the box and communicate logically. Sometimes brain teasers are a good start. Ask the candidate about things they have built on their own, and what they do to challenge themselves.

6. Use existing team to find a new manager or peer. If you already have some technical people on board, like software developers, and need a new manager, you supply the candidates based on credentials, and let them do initial interviews and make recommendations.

7. Outsource your technical requirements. If you can clearly define the specifications for your technical project, and you are willing and able to manage the efforts closely, then outsourcing it to a local or remote technical group beats hiring technical employees. It leaves you with no long-term personnel commitment, but low control of your core assets.

In general, unless you are a quick learner, these alternatives don’t solve your long-term challenge of managing and keeping up with a high-technology business. You need full control of your core technology, so I suggest you supplement your own expertise as soon as possible, to tackle the never-ending technical questions of architecture, competition, scalability, and customer support.

It is just really hard to found a technology company successfully with only one founder, technical or non-technical. Investors know this, and look for two or three-person teams who have the requisite complementary skills. If you are the non-technical one, don’t try to hire your way out of this problem. Focus on finding the right partner to double your strength rather than dilute it.

Marty Zwilling

You are the Best One to Build Your Startup Brand

As an entrepreneur, it’s never too early to start selling yourself and your idea. I hear lots of excuses from startup founders, like “I’m too busy,” concern over IP security, can’t afford an agency, and it’s too early. The result is they get no feedback, no credibility, no visibility, and no investors until months later than they expect.

I’m definitely not lobbying here for promising things you can’t deliver, or hiring a publicist before your first programmer. I’m talking about doing some real networking to test your elevator pitch, and get to know some potential investors before you ask them for money. How about talking to some real customers to see if they are as excited about your idea as you are?

You don’t need an agency and you don’t want a third party to be involved at this point. You need to do it yourself. Here is a list of ways that you can use public relations to benefit your startup, even before it is started:

• Make yourself a spokesman for your domain. Start writing a blog, speaking at local groups, and conversing at networking meetings about the need you see in the marketplace, before you pitch a solution. People will soon see you as an “expert” on solar power, as an example, so your later solar power offering will have credibility by default.

• Practice your message. Publicists always tell you to stick to the crafted message, which was probably wrong anyway. If you start early, you can improve your message with every cycle, until you have an elevator pitch for your startup that resonates with the right people.

• Even bad coverage is better than no coverage. It’s better to push the limits, or be a bit controversial, than not to be visible at all. Because of human nature, controversy gets people’s attention much more quickly than total agreement. People forget your early mistakes if they haven’t bought your product yet.

• Be unabashedly aggressive. Don’t wait for journalists to find you; they all publish their email addresses, and they’re looking for something interesting to write. Give it to them. Start forum discussions on LinkedIn and Facebook, and send out regular tweets on your direction. Comment on other people’s blogs, as well as writing your own.

• Hand out memorable business cards. When you leave your business card with another person, your memory and impact is tied to that piece of paper. Make it professional and unique, with a visual image that conveys your message, even without the words.

• Keep in touch with your audience. One networking introduction will likely not leave a lasting impression. Be sure to follow-up with key people by writing thank-you emails, asking for a personal meeting over coffee, or adding them to your monthly newsletter distribution.

At any point, hiring a professional to generate your PR may be well worth the cost, but it’s not required. Try to think like a reporter, editor, or producer, analyze their audience, and come up with “the hook.” Don’t forget your personal story as a possible hook – what you have overcome or left behind, and why you decided to become an entrepreneur.

Perhaps your product or idea addresses a social issue or event. If the hook isn’t obvious, create one by orchestrating an event, holding a contest, or donating something to charity. The earlier and more you learn about marketing, the more effective you will be later. In a startup, you are the brand. Start building it now.

Marty Zwilling

Many Confuse Sense Of Urgency With Sense Of Emergency

In business and startups, a “sense of urgency” is a good thing. Yet many entrepreneurs confuse this with a “sense of emergency,” which insidiously saps the life from their business. Urgency comes from a greater purpose focused outward, to make good things happen, while handling emergencies is a reactionary inward approach to saving ourselves from the daily crisis.

We’ve all known managers and executives that seem to thrive on emergencies, and often seem to instigate them. As a result, they are always too busy to proactively get to the urgent and strategic tasks, or provide the leadership and mentoring needed to motivate the team for the long haul.

In this era of rapid change and a competitive worldwide economy, every entrepreneur needs to instill in their team a sense of urgency, and be the role model for that mode. John P. Kotter in his book from a while back, "A Sense of Urgency," asserts that urgency is not frantic activity like handling emergencies, but a series of more proactive activities, including the following:

1. Behaving with urgency every day. Always demonstrate your own sense of urgency in meetings, interactions, memos and e-mail, and do so as visibly as possible to as many people as possible. You are the role model for everyone in your organization. If your tone or actions lack urgency, it percolates quickly to everyone, and you reap what you sow.

2. Consistently communicating urgency. Urgency is a set of thoughts and feelings, as well as a compulsive determination to move and win now. Aim for the heart, not just the mind. Look for the element of every story that will compel employees into action. Make employees feel empowered, not stressed, to buy into the need for urgency.

3. Creating action that is relentlessly aimed at winning. Make sure your actions are exceptionally alert, and focused on success. Show some progress each and every day, and constantly purge low value-added activities. Be quick to reward the winning actions of everyone on the team.

4. Bringing the outside in. Be on the lookout for compelling data, people, video, websites and other important messages from outside the company. Strive to connect internal activity with external happenings and challenges. Highlight competitor wins in the marketplace, and continually challenge your own team to do better than competitors.

5. Finding the opportunity from a crisis. Always be alert to see if crises can be a friend, not just an enemy, in order to destroy complacency. Think of crises as potential opportunities, and not only dreadful problems that automatically must be delegated to the damage control specialists. But don’t assume that crises inevitably will create the sense of urgency needed to perform better.

6. Dealing with the urgency-killers. Remove or neutralize all the relentless urgency-killers, people who are skeptics or by their actions keep a group complacent or create destructive urgency. Examples are people who are always “too busy” or stretch every task delivery beyond reasonable limits.

A sense of urgency definitely includes impatience. Every successful entrepreneur I know is impatient with his own progress, and that of his team. Every member of the team should be impatient with the level of success so far. Yet they are not frantic, even in recovering from the latest emergency. They never confuse urgency with the level of effort expended.

A sense of urgency in business assumes that rapid change is required and normal. A sense of emergency is usually an effort to stop change, both good and bad. Every business should be embracing change, challenging their assumptions, and fighting inertia. Emergencies are just positive opportunities to learn.

Another challenge is to avoid a false sense of urgency. The enemy of urgency is a full appointment calendar, when everything becomes urgent. Now is the time to assess these attributes in your own startup, and in your own leadership style. Are you operating with the proper sense of urgency, or do you spend most of your time handling emergencies?

Marty Zwilling

Entrepreneurs Need to Expect and Learn From Failure

If your first startup fails, you are about average. Most entrepreneurs fail on at least one attempt. Investors agree that an entrepreneur who has never failed probably hasn’t pushed the limits. What investors look for is not that you never fail, but that you learn from the failure, maintain a positive attitude, and work with integrity on the next one.

According to Harvey Mackay in his book “Use Your Head to Get Your Foot in the Door,” how to rebound from failure or rejection is an essential skill to acquire for success. His bullets are about job hunting, but I believe the principles apply equally well to starting a business:

1. Analyze every failure, but never wallow in one. Failure is a condition that all of us experience. It’s our reaction to our failures that distinguishes winners from losers. A great entrepreneur is like a great racehorse. There’s no quit in them. Defeats are temporary. Heart and class are permanent.

2. Don’t rationalize away the hurt. Don’t kid yourself and try to cover up the hurt with “My idea is just ahead of it’s time.” Don’t let your worth be defined by others. Point your head in the right direction and get back in the game. Do rethink the path, but don’t abandon the goal.

3. Don’t walk around as if you’re wearing a scarlet letter. Whatever you do, don’t take a startup failure personally. It may indeed have nothing to do with you. We have just been through a recession, and big customers do change their mind. Self-pity has no positive applications.

4. Start worrying when they stop considering you as a contender. Thomas Edison tried over ten thousand different experiments before he finally demonstrated the first incandescent light bulb. Henry Ford’s first two companies failed, and Bill Gates' first company, Traf-O-Data, was a failure. Failure is staying down, not falling down.

5. Don’t give in on your values. Everyone sees themselves as honest, fair, and caring. Don’t sacrifice these values when the going gets tough to impress investors, creditors, partners, and clients. They will be disappointed, and likely not support you on your next opportunity, when you need them most.

The right approach is to focus on what you can learn from your startup failure. Here are some obvious things that should give you a competitive advantage the next time around:

• You gain insight into the real market. Maybe there wasn’t a market. Or now you know what customers will pay (or won’t pay), and who the competitors really are. You finally understand what usability really means, or how important customer service really is.

• You become an experienced entrepreneur. Now you know what has to be done first. You understand all the expenses that don’t get shown in a typical business plan. You understand the importance of relationships and effective communication.

• You have built a network of key people. You know the service providers who can help you, and you know the investors that work in your territory. Most investors agree, by the way, that entrepreneurs learn more from failures than from successes. Use that in a positive way the second time around.

Overall you become a better person when you have been humbled by failure. Now it’s likely you will be more understanding, supportive, sympathetic, wise, and accepting than someone who hasn’t been there yet. Be a great entrepreneur, and move from average to your best, when things are at their worst.

Marty Zwilling

Trial and Error for Business Social Media Will Fail

Most startups, and many big businesses, still don’t have a clue on how to use social media productively for marketing their business. They randomly churn for hours a day on a couple of their favorite social media platforms, with little though given to goals, objectives, or metrics; and ultimately give up and fall back to traditional marketing approaches.

The first thing that entrepreneurs need to realize is that the process and framework for making social media marketing work are different from traditional marketing, and trial and error certainly doesn’t work. Ric Dragon, an expert in online marketing, in his new book “Social Marketology,” outlined the best set of steps I have seen so far for the new world:

1. Focus on desired outcomes first. Valid social media objectives for a business should include one or more of the following: increased brand awareness, lead generation, service and support, or reputation management. Obviously, the platforms and how you use social media would be different for lead generation versus service and support.

2. Incorporate brand personality and voice. Popular culture these days expects a more humanized brand voice, and constituents are listening carefully to the tone, vision, and expertise of that voice. Think about how you can project the voice you want, and make sure it is consistently used by all team members across all platforms used.

3. Identify the smallest segments possible of your constituents. Due to the information overload felt by consumers today, marketing at the generic segment level no longer works. Social media is the only one which allows you to be hyper-granular and drill down to micro-segments, to dramatically improve engagement levels and conversion ratios.

4. Identify the communities for these micro-segments. Traditionally, community implied a physical grouping, but today a community is characterized by what they value, more than proximity. More important than finding a community, is creating one, with your blog and other social media engagement. The best communities then become your advocate.

5. Identify the influencers of these communities. Social media brings all the aspects of important influencers these days, including peer pressure, authority, credibility, and in some cases, celebrities. Because feedback from social media operates in real time, you don’t have to wait months for results. You spend the months influencing the influencers.

6. Create an action plan with metrics. Good action plans include a listening plan, channel plan, SEO plan, and a content creation plan, with activities and metrics. Social media activities span the gamut from curation to gifting, building relationships and groups, blogging, service actions, to lead conversion. Pick the ones that fit your desired outcome.

7. Iteratively execute and measure results. Measuring is all about return-on-investment (ROI). This can be customer acquisition cost, revenue growth, profit, or whatever other parameters are key to your success. Iterate and expect to pivot, based on results, because you can’t get it all right the first time. This is not trial and error.

In fact, marketing in the social media is fundamentally different from conventional marketing. The depth in which connections can be made with the “audience” or “customers” is far greater than it possibly can be with any other medium. The very nature of influence at this level mans that values and vision must be in tune.

Of course, with social media marketing, trial and error is not the only way to fail. You can fail by not being there at all (see the United Breaks Guitars story), or making the big mistake (see Red Cross Rogue Tweet).

More positively, social media also brings many more ways to succeed. See the examples of Dell Makes $3M from Twitter (customer retention), Australia’s Tourism via Facebook (large rewards), and Blendtec You-Tube “Will it Blend” (brand building). It’s time for you to learn the best practices of using social media in your company, and putting them to work before your competition puts you out of work.

Marty Zwilling

Six Street Smart Startup Survival Secrets

Every entrepreneur wants to know how they can improve their odds on the road to success, and why some entrepreneurs seem to be able to squeeze success out of even a marginal business case. Most experts agree that is has lot to do with your level of passion, determination, and innovation, modulated by a strong focus on reality, common sense, and street smarts.

John Bradberry, in his book “6 Secrets To Startup Success” explores many of these attributes, especially passion, and defines some useful principles to help enthusiastic entrepreneurs squeeze the most out of their passion, while not being trapped by it. Every existing and budding entrepreneur should internalize these reality principles:

1. Ready yourself as a founder. Too often, passionate entrepreneurs leap head first into a venture before thinking it through. To improve your readiness to succeed as a startup founder, take an honest look at yourself as a founder before leaping. Reality-check your goals, then focus on ways to leverage your skills, assets, resources, and relationships.

2. Attach to the market, not your idea. Passion is an inner phenomenon, but all healthy businesses are rooted outside the founder, in the marketplace. To turn your passion into profits, emphasize the market, and always think about your business relative to the customers you serve. Know your markets and execute on your market opportunity by placing a priority on your customer’s experience and perception of value.

3. Ensure that your passion adds up. Passionate entrepreneurs tend to develop rose-colored plans, over-estimating early sales and underestimating costs. To convert your passion into tangible business value, write a business plan that makes financial sense for the needs and future goals of your startup, and have it checked by an expert.

4. Execute with focused flexibility. No amount of startup planning can accurately predict the unexpected twists and turns imposed by reality. To succeed, a new venture needs both iteration and agility. Establish an ongoing process for translating ideas into actions and results, followed by evaluation.

5. Cultivate integrity of communication. Passionate commitment to an idea can breed reality distortion. That is, aspiring entrepreneurs often see only what they want to see and rely on “feeling good” about their venture as their only measure of success. Commit to building the skills essential for high-integrity communication: curiosity, humility, candor, and scrutiny.

6. Build stamina and staying power. Contributing factors aside, most startups fail because they run out of money or time. To lengthen and strengthen your venture’s runway, aim to launch close to the customer and raise more money than you’ll think you need. Focus on building personal staying power, maximize learning, and improvements.

These principles will help keep you from falling into the passion trap. Bradberry defines this trap as a self-reinforcing spiral of beliefs, choices, and actions that lead to critical miscalculations and missteps which result in rigidly adhering to a failing strategy until it’s too late to recover. Entrepreneurs who fall into this trap usually don’t even see it coming.

According to Small Business Association figures, about six million Americans a year make the bold leap onto the startup path, with many more worldwide, and many have no corporate safety net to fall back on. Unfortunately, less than half of these new ventures survive beyond a few years. Too many of these have fallen into the passion trap.

Of course, passion is what real entrepreneurs live for, and they sometimes assume it can take them anywhere they want to go. But those who continually temper their passion with reality principles, and adjust their course, are much more likely to see success in getting there. Like the line from a country song, “if you don’t where you’re going, you might end up somewhere else.”

Marty Zwilling

Good Entrepreneur Ethics Increase Business Value

Did you ever wonder how a new entrepreneur knows how to “do the right thing” for his business? Most experts believe that the essence of doing the right thing is ethics. Translating that into business value, a study by Wirthlin Worldwide concluded that 80% of customers still base a good portion of their buy decision on their perception of that firm’s ethics.

Ethics are generally defined as a set of societal standards that encompass the norms of the community. These norms are not genetic, and they have to be learned. At the base of these are moral values, but in my view most of the rest are gleaned from experience, parents, and formal education.

In the real world, the latest updates come from good business books, like the one by David M. Shedd, “Build a Better B2B Business.” This one focuses on the generic attributes, as well as specific processes, which add up to the ethically right thing for most businesses.

The generics include integrity and honesty, as well as the above mentioned moral values. The specifics for business include providing leadership in building the business, but also in contributing to the greater good:

1. Communicate your values and business goals. Do the right thing for the business starts with defining core values. Then create business goals to tackle the few critical issues and opportunities for the business. To be effective, communication has to be two-way and continuous, to keep the “right thing” as “top of mind” for all team members.

2. Align the organization to your values and goals. Ensure everyone is in alignment to live the values and focus on and execute the goals. Make the tough decisions to ensure the success and profitability of the business, and make the tough personnel decisions to put the right people in the right positions, giving them the training they need.

3. Manage priorities for the short-term as well as the long-term. Just as people must manage their personal and work responsibilities, so, too, must companies balance their priorities. Prioritize on the constraint in the business – that which is important, not on what is most urgent.

4. Endeavor to beat, not meet, industry standards. Doing the right thing is not just “getting by,” or squeezing within the letter of the law. It means knowing and living by the spirit of the law, as well as not waiting for new laws and regulations to fix problems. The same is true of employee standards, and social responsibilities.

5. Create winning teamwork. Leading people to do the right thing as a team is one of the most challenging things to teach and coach. Making a team work well requires constant communication, demonstrating accountability, ensuring motivation, recognition, and continual learning.

6. Look at yourself from your customer’s perspective. The right thing is for every business leader to value every customer and realize the importance of each in building the business. Your appreciation of your customers and focus on delivering value to them is a pre-requisite to customer satisfaction, growth, and success.

7. Balance work and life. We are all in business to be successful, but we are all people too. Another way to send a strong message about doing the right thing is to step up to the thorny “quality of life” issues, including balancing one’s work and personal life, work at home, and providing the right health, social, and spiritual needs.

Since ethical behavior is the base, the traits to foster this must always be sought out and nurtured. These traits include day-to-day work consciousness, enhanced discipline to foster a combined business and ethical acumen, and empathy for a high level of engagement. This insures that everyone is joined together, feeling a common imperative to do the right thing and make the right decisions.

So don’t assume that “doing the right thing” comes naturally, and doesn’t require any effort. Yet the evidence indicates that a startup which consistently does the right thing has a competitive edge, and a higher success rate. Are you ready and willing to take the high road for the ethics of your team and your company?

Marty Zwilling

Entrepreneurs Must Be Adept at Rapid Realignment

Every entrepreneur’s first priority should be the alignment of interests across the range of constituents required for success – partners, investors, customers, vendors, and employees. The best are ones quickest and most willing to do the realignment on a continuous basis these days, as the market changes, customer interests change, and you learn from experience.

Alignment means everyone has complementary objectives, and everyone is executing on their objectives. These things change so fast these days that the primary role of the entrepreneur as CEO is to be the Master of Realignment. The details of this role are outlined in a new book “Rapid Realignment,” by the experts in this space, George Labovitz and Victor Rosansky.

The basic alignment framework of strategy, customers, people, and processes hasn’t changed, but the pace of technological, competitive, and social change has increased at an amazing rate. Most entrepreneurs recognize the need to pivot on a regular basis, but many forget that pivoting usually requires a realignment effort to get all the players back in sync.

At the highest level, startups must remember what Jim Barksdale of FedEx famously said, “The main thing is to keep the Main Thing the main thing.” That means keeping all the players and all the organizations centered on what matters amid the crosscurrents of change. There are several key principles to follow along these lines:

1. Move slow, fast, faster. The experts advise taking your time initially to listen, learn, and gather data. Then it’s time to speed up with a set of ambitious initiatives, and finally going all out to engage all the constituents in enduring change. False starts or obvious mis-steps will derail even the best pivots.

2. Revisit your startup vision and values. Make sure the inspiration that launched your vision isn’t lost in the course of a pivot or market change. Of course, you may need to realign that vision to your team, your investors, and all the other players. Without that realignment, many may be left with confusion.

3. Realign all elements of the plan. All too often I talk to startups which still don’t have a social media plan even though most of their customers now use social media as a key part of their buying decision. If you have had to pivot from the consumer market to enterprise customers, that requires new pricing models and new sales channels.

4. Communicate, communicate, communicate. If you want effective team collaboration, you have to communicate effectively. When I was an executive, a common complaint was “Why didn’t someone tell me about the change?” A rule of thumb is that you need to put out an important message four times, in different ways, before everyone hears it.

5. Change out team members as required. Entrepreneurs need to understand that realigning a team often means replacing members who are unable to change. It certainly is likely that you will have to get new strategic partners, and market to a new segment of customers. These changes may cost more than product changes.

6. Update delivery systems and processes. Re-evaluate processes as they are today and set metrics to better represent the new sales, operational, and service needs. Then you have to face the reality that it’s time for new systems, software, or vendor contracts. Building a culture of continuous improvement is great for facilitating realignment.

7. Pay particular attention to investor alignment. For inexperienced entrepreneurs, pivots and realignments often lead to some of the biggest disagreements and tension with investors, whether they be family, Angels, or VCs. These can easily result in CEO/Founder replacement or funding freezes if not handled openly and above-board.

Quite simply, rapid realignment is required for long-term survival in today’s startup world. Entrepreneurs need to realize that they can’t accomplish the alignment alone – they need to get engagement from all the members of the team, and the extended team. Make sure it hasn’t been pushed too far down on your priority list.

Marty Zwilling

A Startup Advisory Board Dream Team is Priceless

Every startup faces a myriad of challenges that are well beyond the scope of any founder, so you need a few guiding lights to illuminate the road ahead. These should be carefully selected, with a proven track record, willing and available to help, and be completely trustworthy. Make sure they are willing to check their egos at the door.

Let’s talk specifics. I recommend that every early-stage startup find three Advisory Board members. These should all be people who bring credibility and value to your company just by their very association with your company name. They should have deep backgrounds and experience in a relevant domain to your startup, and executive experience in running a company.

For example, if your startup is building a high-tech software product, a dream team of advisors would be a former CEO or high-level exec in another software company, a former software marketing executive, and a former financial executive. I use the term “former” here to imply that they may now be slowing down or retired – this being a good thing in that they may actually have the time and inclination to help you (but we all know some very busy people who still find time to help).

Even still, you should expect to offer compensation. Based on my experience, it is reasonable to offer 1% ownership in your company to each advisor, plus expenses, and a small annual stipend of maybe $1000. For this, you should expect participation in monthly strategy and review meetings, and unlimited access via phone or email for questions, mentoring, and advice. Even more importantly, you should expect these members of your team to be your advocates to angel or VC investors, or even be part of your friends and family financing round.

With such meager compensation and high expectations, you might ask, what would motivate such highly qualified professionals to agree to work with you? Here a few potential benefits that you should highlight to your best candidates:

• Opportunity for crash course in new technologies and new business initiatives
• Sharing of their experience with next generation of entrepreneurs
• Meet new contacts that might help them in their own business
• Potential to meet new partners, customers, and friends
• Personal satisfaction of contributing to a successful business
• Increase in prestige or broadening of resume

It’s reasonable to do your recruiting informally, but a professional touch is to put together a formal agreement to seal the deal. Besides laying out the benefits, your advisory board invitation letter also might include:

• Your business plan executive summary
• The Advisory Board's objectives and focus
• Minimum and maximum time commitment and involvement level

The Advisory Board is quite different from a board of directors, which is required of some private companies in many states. It is more of a mentorship role, and its members have no fiduciary responsibility to the company or its stakeholders. Once your company is past the startup stage, you do need a board of directors. What better candidates than your Advisory Board?

To bring real money and credibility to your company, and help you avoid costly mistakes in development and strategy, a first-class Advisory Board is a small investment. Don't be afraid to ask people outside of your realm to serve. The more experienced and blunt your board members are, the better. The worst thing that can happen is that they reject you, which costs nothing here. Later on during funding or execution, rejection can cost you your company.

Marty Zwilling

10 Keys to Making an Entrepreneur Website Credible

Smart people only visit and buy from credible and memorable websites. In the past, if your startup had a website presence, the company was credible by definition. In today’s world, a website is necessary but not sufficient for credibility. Dreamers and gamblers have found out that if the website isn’t validated as credible, it’s probably a scam, and everyone loses.

Yet most startups I know experience the same shock of disappointment when they first open up their website to offer their “million dollar idea” product, and nobody comes. What validates credibility and makes your site memorable in the minds of consumers, and how much does it cost?

1. Put yourself on the site. People buy from people. Until the company name is a famous brand, you are the brand. No name, picture, address, or business history only convinces customers that you are hiding, located in an un-trustable country, or don’t have a clue. They will exit quickly.

2. Show evidence of your expertise. Publish a regular blog, contribute to relevant social networks, and write a “white paper” on your technology. People respect people with relevant experience, so highlight your accomplishments, and the credentials you have.

3. Highlight personal presence and testimonials. Third parties are always more credible sources than you are. Highlight interviews and reviews from recognized industry sources, and news sources. Include links to your profiles on LinkedIn, Facebook, and Twitter.

4. Create a positive online image. Show your visitors some evidence of community involvement and charity efforts. Offer something that is really free – with no strings attached to cause them to lose their trust. Set up an award, and show winners.

5. Link to recognized brands. If you can have an affiliate relationship with any recognized brand names, or any connection to publicly recognized experts, highlight these and provide links to their websites.

6. Advertising presence. The presence of a few related advertisements can actually improve your site credibility, since most credible sites have them. Of course, too many or obnoxious advertisements are especially harmful to a site’s credibility.

7. Join relevant business associations. Most will give you a membership graphic for your website, and an association link to give your business extra credibility. Don’t forget the local Chamber of Commerce and Better Business Bureau.

8. Provide a privacy and security statement. Display a logo like McAfee Secure or Privacy Label, in addition to specific policy statements on these subjects, to persuade your visitors and prospects to trust you.

9. Offer support assistance and guarantee. Publish the terms of your support, return, and replacement policies. Be consistent is their application, and provide contact information for both phone and email access. Follow-up for customer satisfaction.

10. Professional user-friendly site design. Studies have shown that consumers gauge credibility in large part based on the appeal of the overall visual design, including layout, typography, font size, color schemes, no broken links, and correct language usage. Don’t forget basic Search Engine Optimization (SEO) so search engines improve your ranking.

These are all minimal-cost survival marketing efforts. Beyond these, you will likely need to budget time and dollars (up to $50,000 is not unusual) for real marketing efforts to enhance your visibility and credibility, which include branding, promotions, give-aways, and free services.

In summary, a startup with no website, or a website with no credibility will kill your business. Use the tips outlined above during the first three months to get in the game, and count on much more time and money if you intend to stand out. Make your website not only credible, but incredible!

Marty Zwilling

A Business Plan is for You First, Then for Investors

Too many entrepreneurs still believe the urban myth that you can sketch your idea on a napkin, and investors will throw money at you. Every investor I know is frustrated with the poor quality of the business plans they get. This is sad, since “how to write a business plan” is a frequent topic found in every business journal, and a common title in the business section of every book store.

What is the definition of a good business plan? In simple terms, it is a document which describes all the what, when, where, and how of your business for you, your cohorts, and potential investors. Forcing yourself to write down a plan is actually the only way to make sure you actually understand it yourself. Would you try to build a new house without a plan?

Make sure your plan answers every relevant question that you could possibly imagine from your business partners, spouse, and potential investors. That means skip the jargon and include explanations and examples. A plan that generates more questions than it answers is not a good plan.

Finally, hone the result into a professional document. Remember that you only get one chance to make a great first impression. Make sure it has a cover page, table of contents, headings, page numbers, and is organized logically.

Notice that I didn’t say anywhere that a good business plan has to be at least 20 pages, or have ten sections, or must start with an executive summary. These are good things, but I’ve seen great business plans that are ten pages, or have totally non-standard formats.

But, if you ask, ten sections is a nice round number, and would include the following:

• Executive summary
• Problem and solution
• Company description
• Market opportunity
• Business model
• Competition analysis
• Marketing and sales strategy
• Management team
• Financial projections
• Exit strategy

You can get free downloads of sample business plans from the Internet, and there are thousands of customized samples for sale highlighting every business area. I’ll even send you a free sample of my own business plan via email, if you drop me a note. You really need a business plan for you own efforts, even if external funding is not a requirement.

So what if you know that you simply aren’t a good writer, or don’t have the time or patience to write? No problem. That’s why they invented ghost writers, and came up with the concept that you can pay someone else to do it for you. A few thousand dollars is a small price to pay for a successful business, or for that $1M investment you expect the plan to entice.

The tougher case is where you really don’t understand the business you are about to enter, so you don’t know what to write. This is a recipe for failure that most investors and professionals can quickly see, so no investment will be forthcoming, and your startup will likely wither and die.

My advice here is to swallow your pride, and find a partner or give it away to someone who has the “domain knowledge” and the business experience to get you going. Your idea may be right, but dead right is not very satisfying to anyone.

Keep in mind that thoroughness and clarity of the plan are factors that will play key roles in successfully financing, starting, and operating your business. A great business plan is one that your team can learn from, attracts investors, and will guarantee your species a future. With no plan, I hope you have unlimited personal funds or at least a rich uncle!

Marty Zwilling

Entrepreneurs Who Can See Around the Corner

The ultimate compliment that any entrepreneur can get is that they can “see around corners.” This is a statement that they are willing and able (and successful) at projecting market and technology turns, not just straight-line innovations. They have the courage to make bold decisions, often contrary to conventional market research.

Steve Jobs of Apple has been maybe the most visible example of this phenomenon, but others often mentioned include Richard Branson (Virgin Group), Joe Costello (Cadence Design), and Howard Schultz (Starbucks). Most of you could suggest one more, but not many.

Seeing around the corner does not mean closing your eyes and jumping into the unknown. We can all point to the casualties from that approach. Great entrepreneurs seem to all exhibit a common set of attributes which go well beyond the basic skills required to be an entrepreneur:

1. “Larger than life” personality and presence. Richard Branson’s adventurer escapades are legendary, and Steve Jobs made new product presentations an experience, as well as a sales pitch and an education. Joe Costello was known to dress up as Frankenstein and the Riddler for company functions, and wasn’t afraid to laugh at himself.

2. Strive for breathtaking design, as well as function. Great entrepreneurs remember that great design motivates and excites customers, often even more than function. Design is not just about making things look pretty. It gives a product structure and style, and makes it memorable and unique.

3. Practice learning as an action sport. Entrepreneurs who depend on the ‘traditional’ learning process (schools, formal classes, practice problems, and risk-free iterations) are doomed in breaking the paradigm. The best entrepreneurs attack learning like a sport, savoring the challenge, and practicing it every day.

4. Possess extraordinary passion and energy. Visible passion is a quality that helps successful entrepreneurs choose their direction, attract clients, investors, and success. They also remember that energy is a resource that must be renewed, so they treat themselves well both physically and emotionally.

5. Believe there is no such thing as a crazy idea. For real entrepreneurs, crazy is a compliment, and the new market may be just around the corner. Besides, many of the most commonly used items today, like disposable razor blades, were deemed crazy ideas before their inventors made a fortune.

6. More to business than dollars and cents. Entrepreneurs who see around corners usually start with the “big” vision of making the world a better place. Guy Kawasaki talks about making your product a “cause,” rather than just focusing on how much money you can make, and considering social entrepreneurship for maximum impact.

7. Not afraid to kill the cash cow. Holding back on promising new businesses to maintain old ones is the bane of many entrepreneurs. Unfortunately, playing defense is easier than playing offense. Steve Jobs didn’t hesitate to kill the iPod in favor of the iPhone and iPad, which moved the market to a whole new level and kept competitors at bay.

8. Build a great team and nurture them. The best entrepreneurs know that investors invest in people, not ideas. Customers buy from people, not companies. With a team of the best people, the sum is greater than the parts, so your chances of surviving the walk around the corner are optimized. Surround yourself with people smarter than you.

But all these attributes don’t mean that anyone should expect to get it right every time, or certainly not the first time. All the entrepreneurs mentioned here have had their share of failures and false starts. The key is learning from a failure, and having it increase your motivation and focus, rather than de-motivate.

My advice to the entrepreneur looking to earn the ultimate compliment is to first sharpen your view by tackling a more modest straight-line objective, and bouncing your bigger visions off people who have been there and done that (peers, investors, and competitors). Use those reflections for a sneak peek around the corner before you leap.

Marty Zwilling

Entrepreneurs Need Market Data to Back Their Vision

Most startup founders know exactly what they want to design and sell, and they are personally convinced that everyone will buy one. Yet they often fail to realize that their view is likely biased, and will be instantly discounted by potential investors. Business plans with no “industry expert” data on your target opportunity size and growth are routinely rejected.

Your business plan must have an “Opportunity” section, where industry market size and growth projections are included. Within this section, investors look for footnotes referencing external sources, or quotes from notable domain experts. Absence of these raises a big red flag.

Yet most startup teams have no idea where to start, and what kinds of data to look for, in building this key section of their business plan. Is it possible to get this information with minimal cost? Let me offer a few suggestions which should allow you to do the work yourself:

1. Use Internet search engines. The Internet today is like the Library of Congress at your fingertips. Search on any product name for census data, online research reports, trade association publications, and online newspapers with relevant statistics. Look for growth and opportunity tables than can be copied and footnoted in your plan.

2. Visit your local university library. On or off the Internet, there are dozens of reputable market research reports available for purchase. To give you a look first, and often get the data you need, visit a university library where many of these are stocked for free access.

3. Check local economic development offices. Almost every county and municipality has an economic development office which features market research on popular market segments in your area. Also, this is a good place to ask for pointers to other sources.

4. Visit the local bookstore. Browsing in the business section of your local bookstore is a great way to do market research, while enjoying a cup of coffee. Information here is more current than your local library, and you might even buy a book for later research.

5. Purchase online reports for a fee. After exhausting all the free sources, go back to the Internet and order for a fee any additional report or association journal that you need. Credible sites include Gartner Group, Market Research Reports, and Frost & Sullivan.

6. Informal focus groups. In conjunction with some outside expert data, it is acceptable to add your own research, like setting up a small focus group and documenting results. Variations include online bulletin boards, telephone surveys, and direct-mail surveys.

There are two types of research you'll want to collect. The big-picture market opportunity data is called secondary. It consists of previously collected data like demographic information, industry trends and census information. Next, you need data as specific as possible to your product and your market. This is called primary research, and may include information that you generate yourself.

The information you discover will help you build a profile of your market and the industry. For instance, if you're developing a product for vehicle owners, you'd want to find out the number of vehicle owners broken down by gender, age, and geography. Then how much this market spends on vehicles, spending growth or shrinkage in the past 10 years, and industry projections.

Having no data to back up your opportunity and financial forecast is the kiss of death for any startup funding request. We all know that you can use statistics to prove any point you want, so just quoting data doesn’t mean your plan is sound. Certainly, paying more for the data doesn’t make it any more sound either, so check the low budget alternatives first.

Marty Zwilling

‘The Tyranny of the OR’ For Social Media Marketing

An all-too-common question I get from startups and small businesses is “Which is the right social media platform for my business?” Is it Facebook, Twitter, LinkedIn, or one of the other 200 active platforms vying for attention these days? The right answer is that not all of these are worth your attention, but it’s probably more than one.

The “Tyranny of the OR” is a concept from the business best-seller “Built to Last,” by James C. Collins (Stanford Business School). Too many executives believe that things must be either A or B, and can’t be both. The reality is that most businesses need to embrace the “Genius of the AND,” meaning they should use and monitor more than one of the available platforms, based on objectives.

If you are in the realm of the 47% of small businesses who still ignore social media, you need to read the new book by Dave Carroll, “United Breaks Guitars.” It highlights the story of how United Airlines in 2008 paid no attention to social media as Dave’s story of his crushed guitar and poor customer service went viral around the world. United Airlines is still recovering from that debacle.

Thus your objectives for social media should at least include monitoring your online reputation on the three top platforms, and hopefully taking the minimum actions to turn any negatives into positives for the rest of us. Of course, the right approach is to be proactive along one or more of the following lines:

1. Reputation management. You can’t ignore the fact that Facebook alone now has over 900 million users who may be talking about you, and there are a dozen other platforms per Wikipedia that have over 100 million users. You need to protect and grow your brand, so the first step is to know what’s going on, and the best defense is a good offense.

2. Build your brand and expert visibility. Engaging in social media and blogging on a regular basis is a low-cost way to achieve visibility, and become the “go-to” person for that topic and the voice that people trust in your industry. That’s how you brand yourself as an expert in your niche and make your company the one that others seek out and turn to. Customers today trust those they know and those they see others trusting.

3. Increase customer leads and conversion. With 98% of the population now using social media, at least 30% look at business profiles on Facebook, Twitter and LinkedIn before buying any product or service. Of those, approximate 70% said they wouldn’t deal with a new company if it didn’t have a social media presence. You need to be there.

4. Maximize customer retention. It’s a well-known axiom of business that efforts to retain existing customers have tremendous payback, compared to the costs of attracting new customers. Courting them with ongoing updates and special offers through their social networks is a natural way to keep their loyalty.

5. Proactive customer service. Without social media, companies must rely on incoming calls and letters to address customer problems and concerns with products and services. Why not ask them for feedback before there is a problem, and watch what they are telling their friends, both good and bad?

6. Keep up with the competition. Last year, Emarketer estimated that Facebook’s revenue from advertising was $3.8 billion and that could be $5.2 billion in 2012. Almost 40% of small businesses that sell on Facebook say it is their sole sales channel. Ignoring what your competition does is sure to limit your business longevity.

So what are the best social media platforms for small business, according to these industry leaders? It never hurts to look at where the big boys are. According to some recent data from Inc. 500 companies, the top three are Facebook (74%), LinkedIn (73%), and Twitter (64%). I recommend that these are the point of entry for every business.

For the new platforms and all the rest, that’s where tracking and testing comes in. Set some objectives, pick a likely platform, set some measurements, and do a 30-day trial. If you don’t get results, it might be a mismatch for your target market. If you see progress, double down and add even more content or focus to continue the positive momentum.

So there is no one magic social media platform for any business, just like there has never been just one marketing channel for any business. The best marketing programs today for small businesses are the “genius of the AND,” including traditional print and video advertising, complemented by proactive efforts in a selection of the new social media domains. Don’t put all your eggs in one basket.

Marty Zwilling

Some Entrepreneurs Never Learn to Manage Growth

Entrepreneurs often have formidable technical expertise, key to developing a new product or service, but a great naïveté in management skills. They run into difficulty when their business reaches the $1-2 million annual sales range, or their employee count exceeds 5-10. It’s here that entrepreneurs must shift their thinking from tactical and operational, to strategic and managerial.

I’m convinced that management is a learnable skill. It can come from experience, or from training in a prior company, and it can even be self-taught from the Internet by smart entrepreneurs, just like they learned the skill of establishing a company, negotiating a contract, or filing a patent.

There are also many books on this subject, including one from the master on management, Brian Tracy, “Full Engagement!: Inspire, Motivate, and Bring Out the Best in Your People.” In it, he outlines a long list of key management principles for success. I’ve extracted here some key ones relevant to startups entering the growth stage:

1. Communication clarity is essential. Management is “getting results through others,” not doing it yourself with the assistance of others. That means your chief responsibility is to communicate clearly about what you need done, and who has the responsibility to do it. Your growing team doesn’t automatically know what you are thinking.

2. Planning has priority over doing. Planning is one of key learning areas, in moving from an entrepreneur to a manager. Your ability to plan, to think through what needs to be done, in advance, on paper, is a critical skill that largely determines your entire future. Your job moves to determining what is to be done, instead of how it is to be done.

3. Organize your work before you begin. Most startups begin first, and think about organization later. Organizing means bringing together the necessary resources, and assembling the right people, then assigning work to specific people to be accomplished at specific times to specific standards of performance.

4. Delegate effectively and often. Delegation doesn’t work when you are creating your startup. ‘Not delegating’ doesn’t work when you are growing it later. Remember that delegation is not abdication. It’s still your company, so you have to follow-up, step in for disaster recovery, and keep the interplay between tasks and organizations working.

5. Staff properly at every level. This is not the same as finding a partner with complementary skills to start your business. It means not only hiring, but training and measuring performance. It means mentoring less experienced team members, and quickly replacing incompetent staff members. These are all skills you can learn.

6. Focus on high productivity. For growth and success, you need to continually look for ways to increase output, while lowering costs. That’s a big step from one product for one customer. The three R’s for attaining higher productivity are reorganization, reengineering, and restructuring. No entrepreneur is born with these skills.

7. Set the standard with visible actions. You can only lead by example, and set equally high standards for the people around you. You learn and gain credibility by committing to excellence, and asking customers and team members for feedback and ideas.

8. Concentrate on the important tasks. All successful managers never forget to concentrate on their most important task and stay with it until it is done. As a startup grows, it’s easy to try to do too many things at once, while doing nothing particularly well.

9. Identify constraints and their source. Between you and any goal is a constraint setting the speed at which you achieve that goal. The best managers are the most creative in overcoming constraints. Constraints follow the 80/20 rule – eighty percent are from inside, and 20 percent are from the outside. You need to tell the difference.

10. Concentrate on continuous improvement. No company that is static can grow or survive. Continuous improvement requires strategic planning to set new objectives and work toward them. Every growth company needs to innovate continually, maybe spending 20 percent of your revenues on research and development.

Some entrepreneurs, on seeing all this, will decide they have no interest in being a manager. They should voluntarily bow out early, to start another business. Others will get pushed out, with some pain, by investors who see the need for a new team to lead the growth stage. Even more painfully, too many others won’t bother to change their style, resulting in everyone being unhappy, and a business that stagnates, or even fails.

Things that great entrepreneurs have in common with great managers are that both are results-oriented and action-oriented. They have a sense of urgency, and move quickly. Thus it should be easy to apply those attributes to the learning required for the next stage of your company. Just start now, and do it!

Marty Zwilling

New Early Stage Financing Options for Entrepreneurs

If you are new to the entrepreneurial world of startups, you are likely confused by the terminology of seed-stage, lean startups, micro-VCs, and Super Angels. Don’t be embarrassed, since even professional investors are often confused these days by the new terms, as well as old terms used with new meanings. In any case, it’s time to look again at the options you really have.

A while back I heard a talk by Dave McClure, a long-time angel investor, who also proclaims to be one of the “new breed” of venture capitalists in Silicon Valley, as CEO of 500Startups, which is either a micro-VC seed fund, or a startup incubator, or both. He is going gangbusters, and is now targeting a $50M second round of funding. The good news is that he is all about helping early-stage startups. The hard part for entrepreneurs is figuring out what it takes to play.

Here is just a sampling of the latest terminology and lingo that I gleaned from Dave, and from some additional research on the Internet, that I think every entrepreneur should know, who may be looking for funding now, or down the road:

• Micro-VCs. These are emerging group of professional investors (venture capitalists, ala VCs), who are investing from a fund of other people’s money, with a particular focus on seed-stage startup opportunities. Seed-stage means promising companies that don’t yet have a revenue stream, and may not yet have a proof of concept.

• Super Angels.These are angel counterparts to VCs, who traditionally only invested their own money, but now have begun raising funds from outside investors, to do more than a few deals per year. Like most angels and micro-VCs, however, they still start with relatively small sums of money, often investing only $10,000 to $50,000 in the first increment.

• Series-seed round. Since the economic downturn started, neither angels nor VCs have given much attention to startups without a product and a revenue stream. That was left to the realm of friends and family. In the last year, there has been a resurgence of interest, some say a bubble, by both angels and VCs, in a pre-Series A kicker to identify promising startups with seed funding, before major equity has been given away.

• Early-stage startup.Every startup is early-stage to someone. For a startup founder, this stage is when the “big idea” has become a passion for him, but he hasn’t written anything down yet. For angel investors, early-stage means there is a good business plan and maybe a prototype, but no customer revenue. For VCs, early-stage means customer revenue is less than $10M. Thus the more precise term these days for early startups is “seed stage.”

• Business accelerator. This term is replacing “startup incubator,” which is a facility provided by an individual, university, or local community for any new startups to congregate for almost no cost, with the hope of learning from each other. The business accelerator model is YCombinator and TechStars, who select only the best applicants, have a demanding process, provide experienced coaching/mentoring, some seed funding, with a required exit in about six months. Incremental investment may follow.

• Lean startup. This is a concept coined (and trademarked) by Eric Ries a few years ago, primarily for software and web applications. Lean startups operate on minimal money, an open source environment, and assume multiple iterations, with customer feedback, to get it right. A popular phrase heard in this environment is “rinse and repeat.” Today, if you do well in this mode, you will get funded if and when you need it.

• Crowd funding.The recently passed JOBS bill now allows even non-accredited investors to contribute small amounts to new startups through “crowd-sourcing” sites, like Kickstarter and Crowdtilt. While the exact rules are still being set, suggested limits for a given startup will likely be a maximum of $1M, with each investor limited to an amount equal to the lesser of $10K or 10% of their annual income.

Overall, the biggest issue for early-stage startups still is funding – how much should you expect, who provides it, and how much of your future company should you give up to get it? The trend for investors, including micro-VCs and Super Angels, is to place “lots of little bets,” ($10K to $50K) with milestones applied, which can then lead to incremental and larger funding checks.

Pundits call this the “spray and pray” approach to funding. Even though significant deal vetting and filtering is performed by the investor teams running these seed programs, in effect, they spray little bits of capital onto as many good ideas as possible, help them along, and pray some eventually strike it big.

Despite these pundits, I sense a fundamental change in the early-stage financing eco-system. With the Internet and other powerful but inexpensive business tools, the cost of development and rollout of new startups is lower than ever before, so the “big bang” theory of funding no longer makes sense. This should be a wake-up call for traditional entrepreneurs and investors alike.

Marty Zwilling

5 Opportunity Areas To Motivate Any Entrepreneur

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 today’s recovering economic environment:

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

Don’t Allow Your Startup To Be a ‘One-Trick Pony’

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 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

Startup Viral Marketing Costs Real Money These Days

Every time I challenge a business plan with little or no budget for marketing, I get the answer that they will be using “viral” marketing, which costs nothing. The founder explains that the product is so “buzz-worthy” that usage will spread rapidly through word-of-mouth only, meaning people loving it and recommending it to their friends.

First of all, Seth Godin pointed out a few years ago that viral marketing does not equal word-of-mouth. His view is that word-of-mouth is an unsolicited consumer action, positive or negative, which usually fades quickly, like a good or bad restaurant review.

Viral marketing is a deliberate marketing action, designed to grow attention at a compound rate, without further stimulus, by word-of-mouth. It usually implies an opportunity to win big, like a lottery, or experience something sensational, like an incredible video or free product.

At any rate, “buzz-worthy” and “viral” are marketing illusions that cost big money to create. In a business plan these are called marketing campaigns, which continue to rise in cost. Here are three elements of most viral marketing campaigns:

• Hire brand evangelists. Think of a brand evangelist team online as people blogging about your product, or posting links to it in every forum. Brand evangelists offline talk up your product lines at cocktail parties or recommend your services to friends while watching their kids' soccer game.

• Develop viral content. Someone has to design and create those entertaining or informative messages that are designed to be passed along in an exponential fashion, often electronically or by e-mail. It’s harder than it looks to exploit people’s propensity to share humorous, enjoyable or useful information - jokes, special offers, and games.

• Seed viral activity. People are more demanding and have more choices than ever before. This means spending more money on search marketing (SEM) to make it look like the buzz is working. It also means making the content appear omnipresent on the Web and in the marketplace, including dedicated video sites and blogs. In addition, special offers and competition prizes may be required.

As a result of the rising popularity of viral campaigns, the cost of developing one has increased significantly, and the increased ‘viral clutter’ has made it more difficult to stand out from the crowd. However, despite this, viral marketing can indeed be more cost effective than traditional marketing when done well.

Seeding is the most expensive aspect of a viral marketing campaign, with some video sites charging in excess of $10,000 to be featured on their home page for one week. Only a few years ago a humorous video or unique toy could be seeded into a couple of relevant online communities, and it would be hugely popular. However, the cost of entry has gone up as the concept of viral marketing has become pervasive.

In general a well-executed viral marketing campaign can cost anywhere from $100K to many millions. There is a reason that sites like Priceline.com Europe and Facebook, which everyone believes were made popular by viral marketing, have spent at least $50 million each becoming a household name.

Some startups not only ignore this and don’t budget for it, but they actually plan on the free viral marketing to generate enough revenue from click-through advertising to fund operations and future growth. That’s a double death wish.

We have all heard of a few cases where viral marketing resulted in a message “spread through the Internet like a cold in a kindergarten,” but counting on this can just as quickly lead to the death of your startup. Unless you have very deep pockets, plan for some very significant marketing costs to kick-start your dream.

Marty Zwilling

Make Sure Your Startup Domain is Investor Friendly

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 Gust, 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 “The 10 Best Sources of Cash to Start Your Business” for startups. A real entrepreneur loves a little challenge, to be the shining light in the crowd.

Marty Zwilling