Tuesday, February 26, 2013

How Much Traction is Enough for Investors?

tractionAlmost every early-stage startup who has approached investors for funding has heard the innocuous sounding rejection “I love your idea, but come back when you have more traction.” What does traction really mean to investors, and how much is enough? Let me try to clarify the rules, and what it takes to win at this game.

First of all, a definition. Traction is evidence that your product or service has started that “hockey- stick” adoption rate which implies a large market, a valid business model, and sustainable growth. Investors want evidence that the “dogs are eating the dog food,” and your financial projections are not just a dream.

Obviously this definition is generic, so my first recommendation is that you take the lead in defining traction metrics for your startup, and then selling your results convincingly to investors. A graph that shows a hockey-stick “up and to the right” curve with at least three data points per key indicator is a great visual assist.

One or more of the following parameters are viewed by most investors as traction indicators, but good entrepreneurs are often creative and define their own to supplement these:

  1. Start with sales to-date for a priced offering. As an investor, I would like to see one month of sales, and see how that compares to your projections. One customer is not traction, and beta tests with a thousand customers at no cost don’t count. Your graph should show that sales have “turned upward” per projections, beyond friends and family.

  2. Free and freemium products need a solid base. If your product is free, with advertising revenue from click-throughs, you need a sign-up rate and page-view rate that approaches one million page views per month. I like to see at least 10,000 active users, or a user base, page-views, or mobile downloads that double every three months.

  3. Market penetration. Percentages may be difficult at this early stage, but you need to get creative about slicing and dicing the market, sector, demographic, and sub-categories. For example, if your value-add is with first-time parents, show me a graph of how many 20-30 year-old moms have signed up each week the first month.

  4. Average transaction size and revenue per customer. Often enterprise customers, or even consumers, test a new channel by signing up for a few small transactions or trial products. If your average transaction size, number per customer, or margins have been turning up dramatically, it should mean you have gained real traction in the market.

  5. Customer acquisition cost. In an inverse fashion, real traction usually means that your cost to acquire a new customer is coming down rapidly, as your marketing kicks in, and your offering is known and accepted by the mass market. You need to position these numbers to investors as positive, based on your domain experience, before being asked.

  6. Show acceptance by major customers and key distributors. Sometimes it is not the numbers that indicate traction, but who you have signed up. Signed contracts with big name customers, like IBM, AT&T, or Wal-Mart, is a strong indication of traction. The same is true if your offering has been accepted by major distributors in your industry.

  7. Public statements from industry experts and groups. In the enterprise world, if your offering is even included as a new contender by respected industry groups, like Gartner Research, you should claim traction. In the consumer world, groups like Consumer Reports, will give you similar credibility, if positive. Start early to work these relationships.

You need to take the lead in choosing the key metrics that accurately and positively express, both quantitatively and graphically, that your startup has broken through the traction barrier. Don’t ask investors if you have traction – if you have to ask, you probably won’t like the answer.

But never forget that traction is necessary, but may not be sufficient, to lower the risk perception of investors, and assure an investment. The quality of the team, and overall financial health are equally important, as well as how your offering compares to competitors.

Overall, you should think of traction as that indicator or indicators which demonstrate that your offering has shifted from being an “idea” to being a profit-making “business.” As such, it should be just as important to you as to potential investors. Make sure you understand what it means to you, and communicate where you stand. If investors have to raise the subject first, you don’t have enough traction to win.

Marty Zwilling

*** First published on Young Entrepreneur on 02/18/2013 ***


Share/Bookmark

Monday, February 25, 2013

Entrepreneurs Need ‘Go-To’ People, and Be the Model

how-can-i-helpGo-to people get things done. As an entrepreneur, you need these people, and you need to be one, if you expect your startup to be successful. That may be easier said than done, since resumes do not tell the story, and without real nurturing, the best people won’t stay around long.

To highlight how rare this breed is, Jeffrey Gandz of the Richard Ivey School of Business relates a quote from a new CEO in a large company, "I have more than 1000 people in my head office organization, 900 can tell me something’s gone wrong, 90 can tell me what’s gone wrong, 9 can tell me why it went wrong, and one can actually fix it!"

Finding and nurturing that one is the challenge for every company and every startup. I like his summary of how go-to people are different from other people, not necessarily because they have unique skills, but because of the ways these skills are configured and integrated with other leadership characteristics:

  • Know how business works and how to work your business. They have what we might call “street smarts” as well as real intelligence. They have a special ability to help people get results, clear away road blocks, and resolve impasses that are frustrating people. Then they use those skills to build support for required actions.

  • Politically astute without being politicians. Unlike many political operatives these people are seen as dedicated to the goals of the business, rather than feathering their own nests. This leaves them with the reputation for being politically astute rather than being labeled with the stigma of being a politician.

  • Know how to use power when it’s needed but seldom use it. They recognize that people are persuaded by those that these people, in turn, can persuade. So they open themselves up to recommendations from those they are trying to persuade. They recognize that people want recognition, so they reward people who get-with-the-program with attentions for doing so.

  • Consummate negotiators but getting it done is non-negotiable. They are adept at seeing situations from others’ perspectives, separating people from principles, building bridges between positions, and bringing people to their senses. But they are laser-like in their focus on project completion, and never sacrifice deadlines for compliance.

  • Networks of reciprocation rather than deals. However, these exchanges of favors and reciprocity are not conditional negotiation elements, but usually based on having done someone a favor without requiring anything in return. The favor is often motivated not by future consideration but by a genuine desire to help someone else.

  • Think out of the box while acting inside the box. Go-to people are creative people who are constantly looking for better ways to get things done. Barriers are challenges, obstacles are opportunities for innovation, the words “can’t do” register as “how can we do.” They use the culture to change the culture, and use channels effectively.

  • Analytical and intuitive, aggressive and patient, confident and humble, deliberate and decisive. These sometimes paradoxical characteristics of highly effective leaders are present in abundance in go-to’s. They escalate what needs to be handled at a higher level and don’t feel that they have to resolve everything themselves.

While many resumes portray people as leaders, resumes are heavily weighted toward “initiators”, those who start things and develop new ways of doing things. Few talk about completions – driving things that they have initiated through to conclusion. You need both, and don’t confuse the two.

If you are not that natural leader, remember that becoming the go-to person in your organization is very powerful in raising positive perceptions of your value. It's all about who you know, what you know, what you do, and how you can help. Best of all, it’s fun to get things done.

Marty Zwilling


Share/Bookmark

Sunday, February 24, 2013

7 Principles That Predict What Steve Jobs Would Do

Steve_JobsSteve Jobs was one of those entrepreneurs who seemed universally either loved or hated, but not many will argue with his ability to innovate in the technology product arena over the years. He was instrumental in creating Apple, which has pioneered a dazzling array of new products, and even surpassed Microsoft, to become the world’s most valuable technology company.

Carmine Gallo, in one of his secrets books “The Innovation Secrets of Steve Jobs,” outlines Jobs “insanely different principles for breakthrough success.” I’m not convinced that Jobs’ world was that simple, but Carmine has boiled it down to seven principles, which I suggest every entrepreneur can learn from, as follows:

  1. Do what you love. Think differently about your career. Steve Jobs followed his heart his entire life and that, he said, made all the difference. Innovation cannot occur in the absence of passion and, without it, you have little hope of creating breakthrough ideas.

  2. Put a dent in the Universe. Think differently about your vision. Jobs attracted like-minded people who shared his vision and who helped turn his ideas into world-changing innovations. Passion fueled Apple’s rocket and Jobs’ vision created the destination.

  3. Kick start your brain. Think differently about how you think. Innovation does not exist without creativity, and for Steve Jobs, creativity was the act of connecting things. Jobs believed that a broad set of experiences broadened the understanding of the human experience.

  4. Sell dreams, not products. Think differently about your customers. To Jobs, people who bought Apple products were never “consumers.” They were people with dreams, hopes, and ambitions. Jobs built products to help them fulfill their dreams.

  5. Say no to 1,000 things. Think differently about design. Simplicity is the ultimate sophistication, according to Jobs. From the designs of the iPod to the iPhone, from the packaging of the Apple’s products to the functionality of the Apple Web site, innovation means eliminating the unnecessary so that the necessary may speak.

  6. Create insanely great experiences. Think differently about your brand experience. Jobs made Apple stores the gold standard in customer service. The Apple store has become the world’s best retailer by introducing simple innovations any business can adopt to make deep, lasting emotional connections with their customers.

  7. Master the message. Think differently about your story. Jobs was a great corporate storyteller, turning product launches into an art form. You can have the most innovative idea in the world, but if you cannot get people excited about it, it doesn’t matter.

Carmine suggests and I agree that these principles for breakthrough innovation will only work if you see yourself as the brand. Whether you are an entrepreneur working out of your bedroom, or a small business owner looking for ideas to improve your business, you represent the most important brand of all – yourself.

How you talk, walk, and act reflects upon the brand. Most importantly, how you think about yourself and you business will have the greatest impact on the creation of new ideas that will grow your business and improve the lives of your customers.

Thus you need to look inward first and assess your basic potential. Then imagine what you could achieve in business with the real insight and inspiration. Imagine what you could accomplish if you had Steve Jobs guiding your decisions. What would Steve Jobs do? Follow the principles above and you can do it too.

Marty Zwilling


Share/Bookmark

Saturday, February 23, 2013

7 Lessons on Managing Risk From Olympic Champions

risk-managementWillingness to take a risk is the hallmark of a serious entrepreneur. That’s why one of the first questions that potential investors ask is “How much of your own money, and friends and family, have you put into the new business?” If you won’t risk yours, you won’t get investors to risk theirs.

A while back I read the book “When Turtles Fly” by Nikki Stone, an Olympic champion, which explains this well. She provides many examples of success stories from entrepreneurs to Olympians. She proclaims that if you want to be successful, you need to be soft on the inside, have a hard shell, and willing to stick your neck out (“Turtle Effect”).

She goes on to outline seven lessons that are key to mastering the Turtle Effect, and I believe that you need to relate to every one of these before you can dare to even call yourself an entrepreneur:

  1. Find your passion. Entrepreneurs, like Olympians, tend to put a competitive spin on anything they find a passion for, and once they are snagged, they have to win. This passion, while it is your soft inside, is probably the single most important factor in achieving business success.

  2. Make sure you are focused. This is where many entrepreneurs fail. If you try to do too many things at once, you probably won’t do any of them well. All successes are best achieved from a root focal point, one step at a time, through focus on the questions and focus on the process.

  3. Get committed. No one truly understands how much they can accomplish until they develop their hard shell of commitment to a goal you really want. The commitment has to not be one day, or someday, but today. Nothing good comes without hard work. In business, that means first put it in writing with a business plan.

  4. Overcome your adversities. Adversities are the norm, not the exception. We all face them, and a few overcome them. Today it is the economy, tomorrow it could be your health. Successful people bounce back, plan for the unexpected, stop the downward spiral, and enjoy the rewards of a comeback.

  5. Believe in yourself. Confidence is not something that we are born with. It’s something we develop. Peter T. Mcintyre said, “Confidence comes not from always being right, but from not fearing to be wrong.” Focus on your own strengths. Pick a positive future goal, and visualize success. Then go for it.

  6. Take some risks. Be willing to stick your neck out. The best entrepreneurs always believe their startups will thrive despite the odds. Don’t worry if you feel some fear. Fear is a natural emotion, and fears can actually help us to be alert. Especially, you must not fear failure. People learn more from failure than from success.

  7. Use teamwork. No one in business gets to the top alone. The real genius is in recognizing where and when you need support. Finding support is the easy part. Using someone else for support may even allow you time to turn your attention toward more important issues.

Remember that there is no business without sticking your neck out, and no approach that will eliminate risk entirely, so learn to live with it and manage it. Most experts agree that entrepreneurship is more about reducing risk and managing failures, than it is about pure willingness to take risks.

So if you want to be an entrepreneur, you need to learn the secrets of successful people who know how to stick their neck out, but maintain a hard shell. Practice the seven lessons outlined above, and enjoy rather than suffer through the entrepreneurial adventure of a lifetime.

Marty Zwilling


Share/Bookmark

Thursday, February 21, 2013

6 Keys to a Satisfied Yet Successful Entrepreneur

unsatisfiedIt’s sad when the startup is “successful,” but the founder still feels totally unsatisfied. I see it happening all the time. The business is a winner, but the family or other relationships are broken by the stress. Or the entrepreneur started down this path to be their own boss and change the world, but find they are now answering to many more people, with nothing really changed.

These issues are the major focus of a recent book, “The Plan,” by John McKee and Helen Latimer. It zeroes in specifically on the difference between being “successful” and being “satisfied” in your personal and professional lives. The authors start by asserting that many people feel more or less successful, but far fewer, even the successful ones, feel satisfied.

Their conclusion is that you need a plan for your life, as well as your business, and they discuss in detail six steps to get there. If you are an entrepreneur contemplating a startup, and you want both success and satisfaction in business, I recommend you complete these steps before you start any business plan:

  1. Identify personal gaps. Find the gaps between the life you’re living and the life you dream of living. Look at the gaps that may exist in three key life areas: the personal/ family side, the career side, and the financial side. It can be difficult to be honest about some of your own character traits. People often behave in ways they don’t understand.

  2. Determine your purpose. Your purpose defines what you stand for. This is what should guide your entrepreneurial ambitions and dreams, gives you a picture of where you are going, and help you as you set the goals. Without purpose, you certainly will find yourself feeling unsatisfied even when you achieve business success.

  3. Assess your strengths and weaknesses. Most of us have a fairly good idea of our weaknesses. Few of us take the time to really understand our strengths. Review your natural talents and build on the talents you’ve developed. You will see exciting stuff – new business opportunities, new directions.

  4. Describe your dream. Many of us are clearer about what we don’t want that what we do want. Use visualization to create a very detailed picture of your dream, and write it down to see if it still makes sense. Feel what it would be like to have, be, or do what you want, to follow your purpose.

  5. Create your path. Here the solution is to create short-term milestones. Having a strong desire for something is not enough. Your desire needs to be so clear that you can see each step you need to take to reach it. Taking these steps is absolutely essential and separates those people who succeed from those who don’t.

  6. Live your best life. With the personal life plan complete, the most important step is to implement it. This is the time to have faith in yourself and begin to move towards the life you dreamed. If a business is in that plan, now is the time to start your business plan. That’s the only way to enjoy both a high level of satisfaction and success in both.

Even with all this, failures do happen. In the long run, the difference between success and failure can ultimately hinge on how you handle a failure. Don’t just repeat it in a different context, but do the work to understand it, and alter your plan. Try again – as many times as it takes. No matter how daunting. Step-by-step, day-by-day, you can get closer to your goal until you attain it.

Successful but unsatisfying professional careers are one of the primary reasons that people decide to become entrepreneurs in the first place. Thus it makes sense that before you start down the entrepreneur path, you would do some extra work to make sure you are not about to fail one more time. The last thing that this world or you needs is another successful business failure.

Marty Zwilling


Share/Bookmark

Monday, February 18, 2013

Don’t Let Early Adopters Distract Your Market Focus

camera-focusFor most new high-tech products, the first customers are always “early adopters.” The conventional wisdom is that early adopters are the ideal target for new products, to get business rolling. I see two pitfalls with any concerted focus on early adopters; first, the size of this group may not be as large as you think, and secondly, their feedback may lead you directly away from your real target market of mainstream customers.

The term “early adopters” relates to the people who are eager to try almost any new technology products, and originates from Everett M. Rogers' Diffusion of Innovations book. Early adopters are usually no more than 10%-15% of the ultimate market potential, and marketing to them may be necessary, but not sufficient in marketing to the mainstream. Witness the market struggle for 3DTV acceptance over the past couple of years.

The good news is these people will readily provide candid feedback to help you refine future product releases, and push towards new features, increased control, and interoperability. The bad news is that they hardly ever push towards simplicity and increased usability needed by the masses.

The result can easily be the classic death spiral, driven by a small but vocal portion of your market, for more and more features, when you can least afford it in time or money. Equally bad, implementation of input from a few early adopters can actually prevent your products from being adopted by the majority, as follows:

  • Minimizing value of usability features. Features you designed for average users, like wizards for configuration, and simple buttons to eliminate complex processes, will get no feedback, or removal recommendations. Early adopters like to see tricky and elegant details, rather than general usability.
  • Increased control and flexibility. Product suggestions by early adopters often ask for increased user control over details of the technology. However, each increase in control that you hand over to the users also increases user interface complexity, and the opportunity for pitfalls for the average user.
  • Emphasis on engineering robustness. Early adopters love the technology, sometimes to a fault. Technical issues, like execution speed, file size, and memory usage are typical examples that always need further optimization. At some point it becomes compulsive engineering, rather than engineering to increase value for the average user.
  • Higher product price. They want new features automating complicated but obscure tasks. These features will likely be used by only a tiny fraction of the entire user base, but increase complexity for everyone. Early adopters are normally less price sensitive, so may mislead you in finalizing your pricing model.

The dilemma that we all face is that the most valuable customers might be the least vocal (silent majority). The users who scream the loudest are usually a minority segment. The challenge of every business is to proactively seek out a cross section of core users and ask them for feedback, rather than responding to random noise.

I’m certainly not suggesting that you ignore early adopters. Simply recognize them as a specific and important small market segment, and treat them with respect. Early adopters have money, and if they like your product, they’re generally very vocal about it and provide invaluable word-of-mouth press. You need their evangelism and passion to get enough momentum to start attracting mainstream consumers.

So don’t be lulled into complacency by early adopters as your first customers. Temper your feedback assessments, product changes, and marketing strategy to the mainstream market. Ten percent of your projected market won’t make either you or your investors very happy.

Marty Zwilling


Share/Bookmark

Thursday, February 14, 2013

7 Steps to Achieving Entrepreneurial Lifetime Goals

Brian-Tracy-speaksSuccessful entrepreneurs are usually hard-driving, and highly focused on some specific goals, like being the dominant player in a given domain, or the low-priced provider of their product. Yet other entrepreneurs will talk for hours about all their ideas, and how they intend to change the world, but I don’t hear any specific goals or milestones.

Many people are very hesitant to set specific goals, due to lack of self-confidence or whatever. The result is that they don’t ever get anywhere, because they never really knew where they wanted to go. If you find yourself in this category, try the following simple steps highlighted by Brian Tracy in “No Excuses: The Power of Self-Discipline”:

  1. Decide exactly what you want. If you want to increase your income, decide on a specific amount of money, rather than just “make more money.” Without precise goals, you can’t measure progress, and you miss the real satisfaction of knowing when to declare success.

  2. Write it down. A goal that is not written down is like cigarette smoke; it drifts away and disappears. It is vague and insubstantial. It has no force, effect, or power. It’s too easy to forget or push aside when outside forces arise that you hadn’t anticipated – and they will. On the other hand, most people don’t hesitate to write down excuses.

  3. Set a deadline with specific milestones. Pick a reasonable time period and write down the date when you want to achieve it. If it is a big enough goal, set intermediate milestones for measurement reference points. The rule is “There are no unrealistic goals; there are only unrealistic deadlines.” Don’t be afraid to change the deadline – for cause.

  4. Make a list of things you need to do to achieve your goal. The biggest goal can be accomplished if you break it down into enough small steps. Make a list of obstacles and difficulties, knowledge and skills required, necessary people, and everything you will have to do to meet the goal. Add to these lists as you learn more.

  5. Organize your list by both sequence and priority. A list organized by sequence requires that you decide what you need to do in what order. A list organized by priority enables you to determine what is more important. Then develop a business plan which embodies all of the above.

  6. Take action on your plan immediately. Don’t delay. Move quickly. Procrastination is the thief of time, and it shortens your life. Winners in life take the first step now. They are willing to overcome their normal fear of failure and disappointment, and take a small step, and then other one, until they reach the goal.

  7. Do something every day that moves you in the direction of your major goal. This is the key step that will guarantee your success. Do something every day that moves you at least one step closer to the goal. In this fashion, you develop momentum, which further motivates, inspires, and energizes you. Soon it becomes automatic and easier.

You can’t control the future, and that’s not the purpose of goal setting. It’s also a recipe for failure to assume that the path to your goal will require suffering and sacrifice. In fact, the whole objective of all steps above is to allow you to avoid stress and suffering, and be more fully motivated by your progress.

As you adopt a goal-setting mindset, you will find yourself setting different kinds of goals. These are lifetime goals, not just a collection of near-term objectives. It’s these really big objectives, that seem unachievable even to you right now, that will inspire you the most, and motivate you to real success and happiness.

Marty Zwilling


Share/Bookmark

Tuesday, February 12, 2013

Women Bring Their Own Style to the Startup World

Ginni-RomettyDo you think men make better entrepreneurs than women, and why? I did some research on this subject a while back, and I found some interesting perspectives. Everyone seems to agree that women think differently than men, and run their businesses differently, but there is a lot less agreement on which styles are better or worse.

First of all, it is evident that there are far fewer women entrepreneurs today than men. According to a recent article in the Huffington Post, last year marked a new high for female CEOs in Fortune 500 companies, but the percentage big companies run by women is still less than 4%. In startups and small companies, the numbers are much better, but still estimated to be below 25%.

Yet, according to a study by the Center for Women’s Business Research, the number of female-run firms is growing twice as fast as all the rest, so women are catching up. The latest big-company addition was Ginni Rometty, who was promoted into both top titles at IBM in 2012.

Back to how entrepreneurial styles differ between the sexes, here are some observations I found from various sources on styles, not necessarily better or worse:

  1. Leadership style. There are clear differences between males and females in their management and leadership styles, probably reflecting their genetics. Distinguishing traits of male leaders are autonomy, independence, and competition, while those of women are relations, interdependence, and cooperation. Both have their advantages.

  2. Operational style. For operational purposes, men move quicker, are more analytical, more focused and concentrate more on the short term and on rules. In contrast, women generally gather more data, consider their context, think more long-term, and rely also on their intuitive and sympathizing characteristics. No comments on which is better.

  3. Organizational style. Status and rank are important for men, whereas women are more comfortable working in a flat hierarchy. The structure of preferred by males resembles a hierarchy or pyramid, where authority stems from one’s position within the hierarchy, and emphasis is more upon goals and objectives than on the process.

  4. Business relationship style. For men, business relationships are more competitive, and power is enhanced through control of information, which may be hoarded rather than shared. Women have larger social networks, for advice and resources, and relationships with other business women are more nurturing than competitive.

  5. Emotional style. The biggest surprise for me was the finding that men seek larger "emotional" networks - the complex of associations that provide warmth, praise, and encouragement. Also men tend to show more emotion in business than women do, as a form of domination and intimidation.

  6. Investment style. Most of the venture capitalists and angel investors I know are male. Women seem to network for the sake of relationships, and they will invest in support of these relationships, but have less interest in business opportunity investments. Men network for the sake of utility.

  7. Motivational style. According to the National Center for Women & Information Technology, women’s self-image seldom includes entrepreneurship. Women are more likely to be motivated to pursue an startup career to balance family and career, while men are more likely to be motivated by wealth accumulation and career advancement.

We know, of course, that in the real world, it all comes down to the individual, not how many X chromosomes that he or she has. As I contemplate the differences in style listed above, it seems that in fact they are complementary – yin and yang – like masculine and feminine, rather than right or wrong. Societal trends actually seem to be favoring the women these days.

The implication is that entrepreneurs of either sex would do well to find a business partner on the other side, capitalizing on the other dimension, rather than engage in a battle of the sexes. Wars are no fun for either side.

Marty Zwilling


Share/Bookmark

Monday, February 11, 2013

10 Sage Quotes From $100M Entrepreneur Winners

Robert-JordanEntrepreneurs are a notoriously stubborn (some say confident) group of people, so I see many of them making the same mistakes that predecessors have made. Thus I’m convinced that it’s useful for all of you to step back from time to time, and listen to some sage advice from people who have been there and enjoyed success.

Recently, as I was perusing a book by Robert Jordan, titled “How They Did It: Billion Dollar Insights” I saw some wisdom and inspiration that made sense. All the quotes come from entrepreneurs who have built and sold at least one $100 million company. Of course, you can always argue that each was just in the right place at the right time, or was lucky, or had a rich uncle to get them started, but it would be smarter to listen to the messages:

  1. You need enough capital and a little more. “Everything isn’t going to go well in the first couple of years, and you need to get to cash flow positive. You don’t want to be going back for a second round when everything isn’t going well” (J William DeVille, Health Personnel Options).

  2. You need to see the glass half full, rather than half empty. “You have to have the perspective and the personality that, when these bumps, mountains or doglegs happen, you don’t focus on everything that’s wrong. You continue to be optimistic and to move forward to solve the problems” (Bonnie Baskin, ViroMed Laboratories, AppTec).

  3. Surround yourself with great folks, and it gets a lot easier. “You’re very hesitant to fire your first employees, but a lot of times the company outgrows their abilities or takes on a different direction. I tell everyone that the only constant around here is change” (David Becker, Virtual Financial Services).

  4. You can be a leader without being the best at everything. “Like in basketball – you don’t need to be the best outside shooter or the big guy. You can play a role. Working with others, giving people credit. Give and take. Knowing how to make hard decisions” (Jeff Aronin, Ovation Pharmaceuticals).

  5. Execution is everything. “Even if you start a business with the wrong idea or too many competitors, you can out-execute all the other ideas in the right market. What I mean by execution is the ability to do what you’re setting out to do and then being able to zig when the market zags” (Dick Costolo, FeedBurner).

  6. You learn more from bad times than from good. “You learn more from complaints than from compliments. I always discount compliments I get from customers because I think a lot of times they’re just being nice. The complaints – those are real” (Jim Dolan, The Dolan Company).

  7. At some point, you need to let go of control. “Many founders think they need to be in control even when the company has evolved beyond them. You need to know your limitations and, if necessary, find people who are more adept at running the company and taking it to the next level” (Tony Faras, MGI Pharma).

  8. You are who you hire. “If the person who hired you is smart and nice, the people that person hires will be smart and nice. If the person who does the hiring is smart and a jerk, you’re going to end up with a log of smart jerks” (Ron Galowich, First Health).

  9. A business needs momentum. “You try to think ahead and be sure that whatever surprises come up, you are prepared to move ahead aggressively and positively. The last thing an entrepreneur wants when starting a business is to lose momentum” (Bill Bantz, Pathogenesis).

  10. Ship early and iterate. “Get some kind of product out early so that you start getting feedback from customers. Don’t put all your eggs in one basket because you’re doomed if that launch fails. With feedback you can hone your products” (Roland Green, NimbleGen)

Robert interviewed a total of 45 successful entrepreneurs responsible for $41 billion in value, so this is just a sample of the insights he found. I certainly don’t advocate that you take all the advice you hear from these leaders, but it always pays to listen for a nugget that fits your case. Underneath every nugget, there’s likely more buried treasure hiding. Go for the gold in your company!

Marty Zwilling


Share/Bookmark

Wednesday, February 6, 2013

Not All Entrepreneurs are Cut From the Same Cloth

entrepreneur-dnaAnyone who works with entrepreneurs will tell you that all are different. Some are really inventors, who view the challenges of building a business as a necessary evil. Others are really marketers out to make money fast, and believe that they can entice customers to any offering. Some just want to change the world and make it a better place. But none have any lock on success.

I’ve always wondered if there was some way that I could quickly deduce a new entrepreneur’s “sweet spot,” and optimize my mentoring to those strengths and weaknesses, maybe similar to the Myers-Briggs type indicator for business professionals. I just saw an interesting step in that direction via a new book “Entrepreneurial DNA,” by Joe Abraham, with his assessment web site.

His framework seems to be picking up some traction, and is already in use informally by several entrepreneurship platforms, including StartupAmerica, and CoFoundersLab. His methodology measures an entrepreneur’s fit or DNA in each of four quadrants – Builder, Opportunist, Specialist, and Innovator (BOSI), defined at a high level as follows:

  1. Builder. The Builder loves building a business from the ground up. These are the ultimate chess players in the game of business, always looking to be two or three moves ahead of the competition. They are often described as driven, focused, cold, ruthless, and calculating. Many might say Donald Trump epitomizes this category.

  2. Opportunist. The Opportunist is the speculative part of the entrepreneur in all of us. It’s that part of our being that wants to be in the right place at the right time, leveraging timing to make as much money as possible. If you ever felt enticed to jump into a quick money deal, like a real-estate quick-flip, or an IPO, that was your Opportunist side showing.

  3. Specialist. The Specialist entrepreneur will enter one industry and stick with it for 15 to 30 years. They build strong expertise, but often struggle to stand out in a crowded marketplace of competitors. Picture the graphic designer, the IT expert, or the independent accountant or attorney. We all know many good ones here.

  4. Innovator. You will usually find the Innovator entrepreneur in the “lab” of the business working on their invention, recipe, concept, system, or product that can be built into one or many businesses. The challenge with an Innovator is to focus as hard on the business realities as the product possibilities. Too many Innovators are like Dean Kamen, still struggling with the Segway Human Transporter, while holding 440 other device patents.

Of course, discovering your entrepreneur type is only the beginning. After that, it’s all about capitalizing on your strengths, shoring up your weaknesses, and building a personal plan that doesn’t work against you. The drivers for your strategic plan come from at least four directions:

  • World of experts (books, consultants, webinars). You go all over the country, the world, and the Web searching for “best practices” in marketing, finance, planning, and funding. Ultimately, most get the best help from business advisors and mentors.
  • Internal forces (your startup team). Every human being internal to your business and investors bring a certain culture. Some are very positive. Others are more conservative or even negative. Sometimes you inherit the culture from family and predecessors.
  • External forces (competitors and customers). All too often, entrepreneurs set their strategy around what competitors are doing. Or they get strong feedback from early adopters and outspoken customers who may not be representative of the real potential.
  • Prospects (potential opportunity). In the pressure of early revenue, it’s easy to be bent toward what’s in front of you today, rather than follow your strength and your vision. Serving prospects that don’t fit your entrepreneur type, like moving away from your specialty, can be a disastrous strategy.

Overall, I see real value in using this methodology in conjunction with incubators, business accelerators, and mentoring. I’m not yet convinced that anyone has a fully automated system that will nail your entrepreneurial DNA, and make you succeed, despite the unpredictable business and personal realities.

But I see a real opportunity here for every entrepreneur to optimize his impact, and his personal satisfaction, with a minimum of effort. I challenge each of you to take a hard look at what makes you tick. Is your strategic plan (if you have one) a wishful dream or a perfect match for your DNA?

Marty Zwilling

*** First published on Young Entrepreneur on 01/28/2013 ***


Share/Bookmark

Tuesday, February 5, 2013

How to Maximize Results in the Art of Persuasion

Howard-GardnerBeing a good entrepreneur means being able to effectively convince an investor that you have a great idea, persuade partners that your approach is right, and convince potential customers that the solution is right for them. If all your ideas are intuitively obvious to everyone, you probably aren’t thinking outside the box, or don’t really have the next big thing.

The process and tactics involved in winning over others with your views have has been studied extensively by Howard Gardner, a Harvard developmental psychologist, in “Changing Minds: The Art and Science of Changing Our Own and Other People’s Minds.” It turns out that the same principles apply to changing your own mind (learning new things), as well as others.

There is no single “silver bullet” here. Leaders seeking support for their ideas shouldn’t rely on a single method of persuasion. I agree with an old Harvard Management Update, which suggests you need to tailor your approach to the audience, as well as use as many of the following pragmatic approaches as possible:

  • Try often and in many ways. Many people mistakenly assume that their message is so powerful and so convincing that a single delivery should do it. Plan to deliver your message artfully several times (not all in one meeting), in different formats, including written, verbal, graphics, scenarios, and demonstrations.
  • Lead from a familiar problem. Start with a familiar problem, presented in neutral terms, that your audience can relate to. Then apply your new idea, technology, or solution, to show the added value in concrete terms. Avoid abstract or academic discussions that often sound like an effort to show you are smarter than the audience.
  • Leverage the power of contrast. Contrasting scenarios can also prove powerfully convincing, one with your message implemented, and one without. If you can challenge or involve the receiver in creating this contrast, it will help them move from old beliefs to your new ones.
  • Tune to receiver expertise and intelligence. Your approach to right-brain (visual and intuitive) people should be different than left-brain (logical and analytical). That usually means listening first, consulting with others, and taking time to establish a relationship with an investor before you hit him with your startup idea.
  • Get help from friends and experts. None of us is equally comfortable with, or skilled at all the possible approaches. Don’t hesitate to get help from a colleague on a creative demo if you are analytical, or a good writer if you need a strong business plan.

Theoretically, all these tactics can be related to Gardner’s seven levers of persuasion:

  1. Rational reasoning: Logically outline the pros and cons of a decision.
  2. Research: Present data and relevant cases to support the argument.
  3. Resonance: Use your likeability and emotional appeal to win support for your view.
  4. Representational re-description: Make your point in many different ways.
  5. Resources and rewards: Use rewards or punishment as incentives.
  6. Real-world events: Use events from society at large to make your point.
  7. Resistances: Understand the factors that cause people to reject your view.

As a practical implementation, I find that the most persuasive leaders start their conversations by asking questions. They get to know what is important to that person, what moves them, and what level of resistance the receiver has to the new idea. The higher the level of resistance, the more time and more of these techniques will be required.

If you are an entrepreneur, or any business professional, you need to change people’s minds, including your own, on a regular basis. I’m convinced that the tactics listed here can improve your success rate, and your overall effectiveness in your job. Feel free to try to change my mind.

Marty Zwilling


Share/Bookmark

Sunday, February 3, 2013

8 Key Actions for Entrepreneurs Needing Early Money

money-handsMost entrepreneurs have learned that it’s almost always quicker and easier to get cash from someone you know, rather than Angel investors or professional investors (VCs). In fact, most investors “require” that you already have some investment from friends and family before they will even step up to the plate.

You see, investors invest in people, before they invest in ideas or products. Since they don’t know you (yet), their first integrity check on you as a person is whether your friends and family believe in you strongly enough to give you seed money for your new idea. If they won’t do it, they why would I as stranger invest in you?

Friends and family will likely not expect the same level of sophistication on the business model and financials as a professional investor, but they do expect to see certain things. Here is a summary of some key items to think about as an entrepreneur before approaching friends, family, or even fools:

  1. Don’t be afraid to ask, carefully. If you set around quietly waiting for someone you know to offer you money to fund a startup, you will probably have a long wait. On the other hand, if you open every conversation with “I need money,” you won’t have any friends or any money. Practice your “elevator pitch,” and end it by asking for the order.

  2. Be upbeat and respectful. Nothing kills everyone’s optimism and desire to help quicker than a negative or arrogant attitude. If they are going to put cash into your company, chances are that they will expect to spend a fair amount of time together, either helping you or certainly discussing progress. Nobody likes a downer.

  3. Be passionate about the idea. Friends and family will quickly detect your level of sincerity and thought behind the idea. You need to convince them that you have been working on this vision for a long time, and have done the “due diligence” on all the potential knockoffs. Daydreams and “the idea of the moment” won’t get much respect.

  4. Demonstrate progress and your own “skin in the game.” Saying that you need money to start is not nearly as convincing as saying that you have built a prototype on your own dime, but need more to roll it out. We all know people who can talk a good game, but never get around to building anything.

  5. Ask for the minimum rather than the maximum. We would all love to have a million dollars of funding to “do it right” and build the company of our dreams. But your chances are minimal of finding someone who will give you that much to start. Set some milestones for three or four months out, and show what you can do, then ask for more.

  6. Communicate the risks, and write down the agreement. Be honest with naïve family members and friends about the inherent risks of a startup – at least 70% fail in the first five years. Don’t take money from family or friends who can’t afford to lose it. Think hard about the consequences of a possible startup failure and the loss of their funding.

  7. Show some incremental value along the way. Look for ways to get some traction with a minimal product, while you are still developing the main event. In high technology, this is called “release early and iterate,” which allows you to make corrections as you go, as well as adjust for the market changes. It also shows progress to early backers.

  8. Network to build investor relationships before you ask for money. Having a real project, rather than just an idea, is a strong positive when networking for Angels or VCs. Now you really have something to discuss, and real credibility as an entrepreneur. Build the friendship first, ask for advice on a real project, then maybe money later.

Overall, don’t think of friends and family funding only as a last resort. There are massive advantages, like sharing profits with friends and family, as well as the strategic credibility than can be gained from funding from someone you know, rather than from a professional investor.

I hope all of these points seem like common sense to you, and you wouldn’t think of handling it any other way. Yet, I’m continually amazed at how often I am approached as a professional investor by strangers asking for a million dollars to fund an idea, without hitting even one of the above points.

We can all recount horror stories of families and friendships torn apart by money lost on someone else’s speculative dream. In these cases both the entrepreneur and the funding partner are the fools. Don’t be one.

Marty Zwilling


Share/Bookmark

Friday, February 1, 2013

Seize the Power of Diversity in Your Startup

diversityMany entrepreneurs think that diversity on their team just makes their job harder, since startups are all about making fast decisions, and executing efficiently. Often they assume that this is only a big-company issue, having more to do with the legalities of equal opportunity, hiring minorities, and moral imperatives. In reality, diversity in a startup can be your big competitive advantage.

In a recent Deloitte Review of “Diversity as an Engine of Innovation” executives were asked about the connection between diversity and company performance, and 90 percent agreed it was critical. In a different survey of over 500 European respondents, 83% felt that diversity initiatives had a positive impact on their business. Quantification studies still show more mixed results.

While more quantification efforts are always a good thing, I believe the evidence is conclusive that there is business value for startups in using diverse teams, including different genders, age, race, and ethnic cultures. These varied personal perspectives and life experiences will allow a startup to benefit in many ways, including the following:

  1. Diverse teams make better decisions. When homogenous teams make decisions, their similar ideological preferences and backgrounds tend to compound any weaknesses. Diversity brings new perspectives and range to the group dynamics, which will likely improve the accuracy of the outcome.

  2. Groupthink with diversity enhances learning. By groupthink, I mean cooperation in which every member of the group holds the vision, mission and values of the group above self-interest. Teams that are homogeneous are less likely to challenge their own assumptions, less likely to listen to feedback and, therefore, less likely to learn.

  3. A diverse team brings a broader perspective. This means your plans will be more creative, and your solutions to problems can occur faster. Your startup, for example, will more likely see and understand sooner the needs and wants of a larger and more diverse customer base.

  4. Diversity will likely strengthen team culture. As your startup grows, you need to attract and retain a broader group of talented individuals, who share a common set of values and commitment to action. Diversity highlights the value of different perspectives on the team, and fosters innovation and creativity.

  5. Diverse teams will have more diverse networks. You as the entrepreneur will thus have access to a broader pool of potential investors, customers, vendors, and expertise. Greater, diverse networks can solve greater, complex problems, and compete more effectively in a rapidly changing marketplace.

Tristan Walker, VP of Business Development at Foursquare and Silicon Valley diversity advocate, recently pointed out that, "By the year 2040, racial minorities will account for the majority of the United States population." If entrepreneurs really want to keep up with the needs of this evolving population, they need to capitalize on the diversity that comes with it.

Starbucks, led by Howard Schultz, is an example of a startup that has long actively supported a focus on diversity, and credit these efforts with their success in a very competitive industry. Diversity and inclusion continue to be a central part of Starbucks’s strategy to, in the words of the company’s vice president, global diversity, May E. Snowden, “embrace diversity as an essential component in the way we do business.”

To me, it’s clear that the startups that make decisions based on individual and team merit, rather than title, politics, or culture execute faster and learn faster than their competitors. In today’s highly competitive environment, that can be decisive.

So, whether you are making early strategic hires, or growing your advisory board, look for people who are smarter than you, and not just like you. It will help both you and your business to grow faster and live longer.

Marty Zwilling

Disclosure: This blog entry sponsored by Visa Business and I received compensation for my time from Visa for sharing my views in this post, but the views expressed here are solely mine, not Visa's. Visit http://facebook.com/visasmallbiz to take a look at the reinvented Facebook Page: Well Sourced by Visa Business.

The Page serves as a space where small business owners can access educational resources, read success stories from other business owners, engage with peers, and find tips to help businesses run more efficiently.

Every month, the Page will introduce a new theme that will focus on a topic important to a small business owner's success. For additional tips and advice, and information about Visa's small business solutions, follow @VisaSmallBiz and visit http://visa.com/business.


Share/Bookmark