Sunday, June 30, 2013

5 Rules of Relevance Every Startup Needs to Adopt

John-MackeySome investors seem to focus wholly on the strengths of the management team, or a sustainable competitive advantage, and in reality these are the core attributes for every funding equation. While these may be necessary for funding, they may not be sufficient to make your startup the great success embodied in your vision.

In the last couple of years, perhaps in reaction to some business atrocities leading to the recent Recession, I am seeing a renewed focus on other less tangible attributes which can set your startup apart. Examples include the Conscious Capitalism® movement, led by John Mackey of Whole Foods, The B Team, led by serial entrepreneur Sir Richard Branson, and the Benefit Corporation (B Corp) form of business now available in 14 states.

I have always struggled to communicate the multiple other relevant priorities, and the other intangibles required for a great execution. I found many of these in “Great From The Start: How Conscious Corporations Attract Success ,” by John B. Montgomery, which does a great job of laying out specifics.

It also starts with a good summary of the intangibles, summarized as the five rules of relevancy, by Mark Zawacki:

  1. A startup needs to be relevant and stay relevant. Relevancy for an early-stage company is the discovery and understanding of the real addressable market for a product or service. This is not the total opportunity out there, and not the total target market, but the subset of customers who have and will spend the money you need to cure their pain.

  2. A startup needs to find a voice relevant to its ecosystem. These days, you have to foster a community of support for your business. That means educating targeted supporters is key, even before you start to sell. Selling too early triggers customer defenses and drives them away. Everyone hates being sold to; we all prefer to buy.

  3. A startup must gain balanced traction. This is not just sales traction, but a proper balance between resources, product, and customers. It means building a viable and desirable product before selling, assembling the right team with funding, and recruiting and educating enthusiastic customers who will be your best advocates.

  4. A startup must form partnerships and alliances within its ecosystem. Today’s ultracompetitive global environment demands that you make alliances early. Startups often pay lip service to strategic partnerships, but they schedule these efforts far down the road. The right partnership strategy can make a company relevant.

  5. A startup must maintain a relevant laser focus. Too many early-stage companies are so desperate for customers that they operate in a frantic and random sales mode. They sell into multiple verticals, or pursue multiple revenue streams, such that they can’t develop a repeatable, scalable sales process, and don’t do anything well.

Of course, relevancy doesn’t work if you don’t have a winning business model. In the traditional business environment, this means the priority is an adequate return for your stakeholders, but today it also means your company should provide a material positive impact on society and the environment.

Great companies recognize that there are now multiple interdependent stakeholders, including customers, business partners, and social groups, who need to be part of your equation since they can drive or limit your success, in addition to management and stockholders.

In other words, your startup needs to be a “conscious” entity, constantly aware of the complex eco-system around it, and the factors driving change and evolution. This requires conscious leaders who are passionately committed to personal and professional growth, as well as the greater good of society. These leaders then cultivate the consciousness of their team members.

In reality, your people are the consciousness and relevance of your startup, and your customers judge your startup as they would judge a person. No relevant company can afford to focus on short-term wins over the long-term effects of its behavior on other stakeholders. How much time and how many measures has your startup applied regularly to the relevance issues above?

Marty Zwilling


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Friday, June 28, 2013

10 Reasons for a Startup to Skip Outside Investors

ewing-marion-kauffman-at-deskI’ve always wondered who started the urban myth that the best way to start a company is to come up with a great idea, and then find some professional investors to give you a pot of money to build a company. In my experience, that’s actually the worst way to start, for reasons I will outline here, and also the least common way, according to a recent survey of new startups.

Based on the latest Startup Environment Index from the Kauffman Foundation and LegalZoom, personal money, or bootstrapping, continued to be the primary startup funding in 2012. Eighty percent of new entrepreneurs used this approach, with only six percent using investor funding. The remaining entrepreneurs borrowed from family and friends, or acquired a loan.

So before you become obsessed with scoring investors to fund your idea and minimize your risk, consider the following:

  1. Finding investors takes work, time, and money you can ill afford. Entrepreneurs who plan to complete a business plan the first month, find an investor the second, and roll out a product the third month are just kidding themselves. Count on several months of effort and costly assistance to court investors, with less than a 10% success rate.

  2. Anyone who gives you money is likely to be a tough boss. If you chose the entrepreneur lifestyle to be your own boss, don’t accept money from anyone. Every person who gives you money will want to have “input,” if not formal approval on every move. Be prepared to live with communication, negotiation, and milestones every day.

  3. Don’t give up a chunk of your company and control before you start. Even a small investor in the early days will take a large equity percentage, due to that pesky valuation challenge. At least wait until later, when you ready to scale, and have some “leverage” based on a proven business model, some real customers, and real revenue.

  4. You will squeeze harder on your own dollars than investor dollars. It’s just human nature that we remember the pain of earning our own dollars, versus those “donated” by someone else. Focusing on the burn rate and prioritizing every possible expense will keep overhead down, help you stay lean, and achieve a higher profit earlier.

  5. Sometimes survival requires staying under the radar. People who give you money like to talk about their great investment, and competitors see you coming. Sometimes creative efforts need more time before launch, or your efforts to run the company need tuning. Investors like to replace Founders who don’t seem to be moving fast enough.

  6. Managing investors is a distraction from your core business. Fundraising and investor governance are never-ending tasks, which will take real focus away from building the right product and finding real customers. Having more money to spend, but spending it on the wrong things, certainly doesn’t pave the road to success.

  7. Entrepreneurs need to start small and pivot quickly. Start with a minimum viable product (MVP), as well as a minimum viable team. Investors like a well-rounded team, working in a highly parallel fashion. That takes more money and time to set up, and more people to re-train and re-educate when forced to redirect your strategy.

  8. The best partners are ones who share costs and risks. With no investors, you will work harder to find vendors who will absorb costs and associated risks for a potentially bigger return later. Since they now have real skin in the game, they will also work harder to show quality and value, which is a win-win-win for you, them, and your customers.

  9. You will be happier and under less pressure. You should choose to be an entrepreneur to be able to do what you love. Yet we all apply pressure to ourselves to do these things to our own satisfaction. Investor money brings so many additional pressures, that personal happiness and satisfaction can be completely jeopardized.

  10. Show you are committed to your startup, not just involved. When you put your own financing on the line, your partners, your team, and eventually your customers will know that you are committed to solving their problem. That increases their motivation and conviction, which are the keys to their success as well as yours.

Of course, some of you will say, I don’t have a dollar and my big idea can’t wait. Unfortunately, outside investors are not an answer to this problem. To investors, having no money indicates that you may not have the discipline to manage their money, and manage a tough business process as well.

In these cases, I would suggest you work in another similar startup for a while, to learn the business, save your pennies, and test your startup concept on the side. A startup idea executed hastily and poorly will be killed more completely than any timing delay. Are you sure the money you seek is really your key to changing the world?

Marty Zwilling


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Thursday, June 27, 2013

Many Entrepreneurs Over-Think or Under-Think Issues

bill-gates-thinkingStartups and entrepreneurs are drowning in the information overload, where the volume of data created is like a new Library of Congress every 15 minutes. That creates a huge gap between data and meaning, and makes quick decisions and action ever more difficult. We all need to take a little more time to think.

On the other end of the spectrum, some people “over-think” things to the point of inaction. Acting without thinking, and thinking without action, are both deadly to a startup. The challenge is to find the right balance, and to make the thinking deep and reflective thinking.

In his book, “Consider: Harnessing the Power of Reflective Thinking In Your Organization,” Daniel Patrick Forrester talks about how some successful entrepreneurs, like Bill Gates, former CEO of Microsoft, force some think time in their schedule by abandoning the office for a cabin in the woods every few months for some reflective thinking. Others simply reserve an hour every morning for private thinking, despite a densely packed schedule.

What are the issues and questions that these successful leaders reflect on within their own organizations, and related to their own behavior? Here are some key areas for reflective thinking, from my perspective, based on the research from Mr. Forrester:

  • Think before you assert control. While none of us can stop the flow of data and the creation of content that swirls around us, we can control how we structure the moments that arise and our responses. As leaders, the control we assert in problem solving sets a tone that will be followed by the whole organization.

  • Give full attention very selectively. Now we work in a state of giving our “continuous partial attention” to issues before us. While not all matters require deep thought, we find the ones that do are afforded equal footing with ones that don’t. We must come to a conclusion about the consequences of giving only partial attention to top initiatives.

  • Carefully select communication methods. If email or text messaging is the default way you interact, then you have already declared where it sits in your hierarchy. While technology allows for speed and immediacy, it doesn’t usually convey the texture and empathy of face-to-face interaction that is key to many important issues.

  • Recognize the limited value of disconnected short dialogues. In many ways, problem solving has devolved into a series of dialogues that take place across digital transmissions with occasional face-to-face interactions. Failure to think deeply about forward-looking events and big ideas will come at a cost.

  • Book time to compose your thoughts. With the tethering to technology that happens to us throughout the course of a day, it is clear that we treat time with our thoughts as a low-level priority. Even if you can’t book a week away to thin, it isn’t hard to book a meeting with yourself, when you are off-limits to everything but your thoughts.

  • Reflect carefully before delivering messages. When people demand immediacy from you, do you consider how the people on the other end will receive it, before you dash off a message? Sometimes multiple crafting and editing iterations are required as you think about the ramifications. Is an electronic message even the right answer?

Think-time and reflection don’t just happen when we are alone. Startups will inevitably engage in discourse and dialogue through meetings. You need to insure effective discourse in meetings (“thinking out loud”) by making sure there are no negative consequences to dissent and debate. Otherwise meetings will be perceived as a waste of time by the people who count.

While technology and the Internet allow you to act and react more quickly than ever before, you need more than ever to consider decisions reflectively before making them. In addition to solving problems the right way, make sure you are solving the right problems.

Marty Zwilling


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Wednesday, June 26, 2013

Entrepreneurs Court New Super-Angel Investors

David-S-RoseIt is no secret that the world of venture capital (VCs) was turned upside down by the recent Recession, and many other changes in the marketplace. I see now emerging a new wave of investors, popularly known as “super-Angels,” micro-VCs, or “super-seed” investors. Every early-stage startup should explore this new funding alternative.

Examples of some leaders in this space include Mike Maples in Silicon Valley and David S. Rose in NYC, who each make up to ten investments a year of up to $250,000. Business Week ran a more thorough analysis of this movement a while back, which I have updated below. I would conclude that the genesis of this trend comes from several forces, including the following:

  1. Less investment capital available. Venture capital dispensed quarterly to startups actually declined again in the first quarter of 2013 to $6.3 billion, the lowest quarterly total in more than two years. Due to the struggling economy as well, traditional individual Angel investors haven’t been able to fill the gap.

  2. New “up-and-comer” VCs focus on early-stage companies. VCs are finding that they don’t need the “large” funds of $100M to $500M to support a portfolio, if they focus on early-stage startups. It’s higher risk, but higher return, to pick the big winners early, before Angels have set unreasonable valuations and restrictive terms.

  3. Technology costs are plummeting, meaning you can do more with less. Twenty years ago, it cost $5 million to really launch a high-tech startup, when the same thing can be done today for $500 thousand. So, in effect, VCs need to come in at what was formerly the Angel stage to grab the gems and hold them.

  4. Many old-line VC firms have grown too big and unwieldy. More are realizing that they have forgotten how to build innovative companies, so they are going back to their roots, when firms were smaller and more nimble. They can plant more seeds, and place less dependency on the big win.

  5. Being “lifecycle investment partners” has a downside. As venture funds grew bigger during the dotcom bubble, and sized themselves to invest in every round of selected startups, they found it was very hard to stop investing in the underperforming companies. That model doesn’t seem to work any more.

  6. Great companies are made, not born. Conventional wisdom is changing from startups being born a winner (execution doesn’t matter), to being made a winner (more chances and more help early on). This means smaller amounts given to more entrepreneurs who get a chance to prove that they can build great businesses.

Of course there a couple of potential down sides to this movement:

  • As more startups are funded, without the big VCs on the other end, more companies will be looking for growth dollars and may languish trying to differentiate themselves in a crowded, but slow spending, consumer marketplace.
  • More sources of funding for early-stage startups may drive up valuations on these deals, which will lower the returns for the Angels and super-Angels willing to do these deals. That could cause this bubble to burst and hurt everyone.

I applaud the direction of investors who want to re-invigorate venture capital by taking it back to the real entrepreneur who needs help getting his venture off the ground. Too many founders today face the conundrum that they need capital to get started, and even Angels defer until after you have your product built, business model proven, and a real revenue stream.

Startups with connections or warm introductions to super-Angels should count themselves lucky. These Angels typically don’t demand board seats, and are not as heavy-handed as VCs. Check them out, and find others, so maybe you too can be super-blessed by a super-Angel.

Marty Zwilling


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Sunday, June 23, 2013

6 Reasons Why Focus is Job One for Every Startup

search-engineIt’s great to dream big, but your startup needs a laser focus in the beginning to get market and investor attention. Google did it with search engines, Apple did it with a personal computer, and even Wal-Mart did it through low prices. A business plan I saw a while back to combine all the good features of several popular social networks on one site does not do it.

Trying to do everything at once probably means that none of the items will be done well. Plus it’s almost impossible to craft a message that will make your offering stand out in the minds of customers. I can’t think of a company that launched to superstardom with a broad focus. Can you?

Here are the common sense reasons why a laser focus is more likely to lead to startup business success:

  1. Time to market is critical. It takes too much time to build processes and products to capitalize on a broad strategy. Meantime, small competitors will appear and seize your business opportunities and steal your targeted customers.

  2. Keep infrastructure costs low. Every business needs some basic equipment and infrastructure, and ongoing development costs. Attempting to roll out the big dream internationally all at once costs lots of money. Getting more money is hard, but not as hard as building the big infrastructure and getting it right the first time.

  3. Need to be nimble. Every successful startup I know has had to “dodge and weave” or pivot quickly as they learn what their customers really want, and what really works in product design and marketing. Bloated products and the grand unifying “theory of everything” won’t allow you to adapt quickly to market changes and mistakes made.

  4. Innovate to market leadership. Success requires market leadership in your product area, and it’s easy to see that pushing more products and services dilutes your focus and attention. Market leadership isn’t a one-time thing, it means continuous innovation, or you will be left behind.

  5. Maintaining quality is key. The more you try to do in parallel, the harder it is to maintain quality. Remember the old maxim that “you only get one chance to make a great first impression.” Customers are fickle, and good quality and good customer service is hard, even with a focused product.

  6. Personal bandwidth is limited. When things become too messy and complex, and even you are not sure of priorities, people get disillusioned, tired, lose motivation, and tend to give up easily. A laser focus is easier to communicate, easier to manage, and more likely to get done quickly and well.

As with everything, there are two sides to every coin. When applied appropriately, focus will result in rewards exceeding your expectations. Conversely, focusing on the wrong things will result in a downward business spiral. Focus on exploiting strengths and achieving success rather than resolving weaknesses and avoiding problems. Don’t get burned by focusing on the wrong thing.

Remember that most people can confidently and competently accomplish one thing at a time, and most customers are only looking for one thing at a time. After you saturate the market with your focused offering, then you will have the time and resources to broaden your offering.

Don’t give up your grand vision, since no investor wants to buy a “one trick pony.” But also don’t try to be the “one-stop shop” for all on day one.

Marty Zwilling


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Friday, June 21, 2013

8 Keys to Award Winning Startup Customer Service

award-winning-customer-serviceMost leaders agree that poor customer service is a business killer today, in terms of lost customers, reduced profits, and low morale. Yet the average perception of customer experience continues to decline. Young entrepreneurs and startups, in particular, often remain naively unfocused, despite their passion, of what it takes to provide the high-quality service expected.

It’s a tough job, and inexperienced entrepreneurs just don’t know where to start, and how to do it. Chip Bell and Ron Zemke, who are experts in this area, provide some of the best specific insights I’ve seen, in their book “Managing Knock Your Socks Off Service.” Their eight initiatives should be required reading for every entrepreneur:

  1. Find and retain quality people. You have to start with hiring only people who are willing and able to make serious customer service happen. Make sure you know and communicate well exactly what you mean by high-quality service. Train them fully, give them authority, make them accountable, and tie their pay to customer satisfaction.

  2. Know your customers intimately. This means personally listening, understanding, and responding to your customers’ evolving needs and shifting expectations. Then make sure that everyone on the team does the same, and are motivated to improve the match with your startup. Seek out complaining and lost customers for the most important input.

  3. Build a service vision that everyone sees as clearly as you. This means articulating and living the customer service mindset for the team, in front of customers and in the board room. It must be understandable, written down, and verifiable, with regular measurements and metrics to make it real, benchmarked against the competition.

  4. Make your service deliver process “happy.” A well-designed service delivery process will make you easy to do business with. The process must be employee friendly, as well as customer friendly, and have feedback mechanisms to correct poor results. If service employees are not happy, the process isn’t working yet.

  5. Train and coach continuously. Companies with great service routinely spend 3% to 5% of salaries training team members – experienced as well as new. Leaders have found that keeping everyone on top of changes in technology, competition, and customer demands is critical to success. Service people need this as required team support.

  6. Involve, empower, and inspire. Involve team members in the fix to customer problems, as well as fixing the faulty process causing the problems. Empower them to look beyond simple rules for solutions, not out of habit, routine, or fear. Inspiration is the process of creating excitement, enthusiasm, and commitment, by your passion and actions.

  7. Recognize, reward, incent, and celebrate. By human nature, he team that works for and with you want to do a good job. The best incentive is to give them something good back in return. This should start with constructive feedback on how well they are doing, and what they can do to improve. Don’t forget recognition for accomplishment and efforts.

  8. Set the tone and lead the way. Like it or not, you are the personal role model for all the people in your startup. How they see you deal with and talk about peers, partners, team members, and customers tells them what the real rules of conduct are for customer service. You can’t con or manipulate people into doing quality work.

Customer service is not just handling exceptions, something that you can think about later, once the business is up and running. It’s a core process that must be up and effective when you deliver your first product or service. If you still doubt the consequences, consider the following facts from research by American Express and RightNow Technologies:

  • 95% of consumers said they “take action” after one bad customer experience
  • 91% consider customer service important when selecting a company for business
  • 85% of consumers said they would be willing to pay more for superior service
  • 82% claimed to have stopped doing business with a company due to poor customer experience.

In the past, competitive advantage was all about economies of scale, advertising power, and service versus price. With instant low price search, ordering via smart phones, and unfiltered online reviews via Yelp and Foursquare, the advantage today has shifted to companies who can make every experience positive. Prepare for it, and don’t jeopardize your future on the first day.

Marty Zwilling

*** First published on Young Entrepreneur on 06/13/2013 ***


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Thursday, June 20, 2013

Million Dollar Ideas Don’t Make Successful Startups

million-dollar-ideaWhen entrepreneurs come to me with that “million dollar idea,” I have to tell them that an idea alone is really worth nothing. It’s all about the execution, and investors invest in the people who can execute, or even better, have a history of successful execution. Execution is making things happen, and for startups it usually means making change happen, which is even more difficult.

For most people, execution is one of those things that seems obvious after the fact when done correctly, but is hard to specify for those trying to learn to do it better. I found a book on this subject, “The 4 Disciplines of Execution,” by Chris McChesney, Sean Covey, and Jim Huling, which seems to talk well to startups as well as the corporate world it was written for.

These authors argue effectively that the hard part of executing most strategies is changing human behavior – first the people on your team, then partners, vendors, and most importantly, customers. No startup founder or leader can just order these changes to happen, because it isn’t that easy to get other people to change their ways. Changing yourself is tough enough.

Here are four key disciplines that I believe the best entrepreneurs follow to expedite the change and forward progress implicit in the successful execution of a million dollar idea:

  1. Focus always on one or two top priority goals. We all live with the stark reality that the more we try to do, the less well we do on any of the elements. Thus focus is a natural principle. Narrow you and your team’s focus to one or two wildly important goals, and don’t let these get lost in the whirlwind of daily urgent tasks and communications.

  2. Identify and act on leading measures first. Some actions have more impact than others when reaching for a goal. Hold the lagging measures for later (results available after the fact), and focus on lead measures first (predictive of achieving a goal). For example, more customer leads are predictive of more sales revenue later.

  3. Define a compelling scoreboard. People on your team play differently when someone is keeping score, and even better when they are keeping score, and even better when they have defined how their score is measured. This is the discipline of engagement. If the scoreboard isn’t clear, play will be abandoned in the whirlwind of other activities.

  4. Create a frequent forum for accountability. Unless we feel accountability, and see accountability on a regular cadence, it also disintegrates in the daily whirlwind. It’s even better if team members create their own commitments, which become promises to the team, rather than simply job performance. People want to make a contribution and win.

These four disciplines must be implemented as a process, not as an event. That means your team needs to see them as a normal and continuous focus, not a one-time push which fades in the rush of other daily priorities. The team needs to see the process practiced by the startup founder, as well as preached regularly.

Startup founders also need to realize that building and managing a company is quite different from learning to search for and solidify an idea that can grow into a company. Every entrepreneur has to navigate that personal change from thinking to doing to managing.

It’s not only the change from thinking to managing, but also the change and learning from constant iterations. Major changes, called pivots, are terrifying to a team that has put months of constant focus into executing what they thought was a great idea. If you don’t have an execution process, you have chaos.

Overall, every entrepreneur should be concerned if they don’t regularly feel stretched beyond their comfort zone, meaning mastering the art of execution if you are mainly creative, or developing creativity if you are mainly process driven. Don’t forget that the fun and challenge is in the learning, so enjoy the ride. The entrepreneur lifestyle is not meant to be comfortable.

Marty Zwilling


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Wednesday, June 19, 2013

6 Key Marketing Do’s and Don’ts For Your Startup

dos-and-dontsMarketing is everything these days. You can have the best technology, but if customers don’t know you exist, or they don’t know how your technology solves a real problem for them, your startup will fail. Yet I see many entrepreneurs that focus on the basics of marketing too little and too late.

They skimp on the design of their website, procrastinate on the rollout to make sure the product is perfect, and get so excited about technology features that they forget about creating value for customers. In fact, this article was driven by a startup press release I just saw today, highlighting a startup’s “geo-fencing technology” as a new basis for discount coupons. How many customers will have any idea what this means to them?

On the marketing side of the equation, there are so many “marketing gurus” and “marketing resources” out there, the real challenge for most of us is to sort out the basic do’s and the don’ts that apply to startups. I found some help from marketing coach David Newman’s new book “Do It! Marketing,” which provides some pragmatic marketing advice for all small businesses as follows:

  1. Don’t tell customers how great you are. Parroting a generic message that you have great service, great value, and a great selection says you have nothing unique. You need to clearly convey what makes your startup the only choice for your customers. Give yourself the “So-what?” test and check for a compelling value-based answer.

  2. Don’t fall into the marketing-speak trap. Don’t fall for the temptation to make big claims, empty promises, and mind-boggling jargon. Learn to speak a new customer-specific dialect based on current research and homework. Go directly to the source – your real live customers, and get their priorities, issues, pressures, and challenges.

  3. Don’t waste your time networking with strangers. Start networking smarter and smaller. Invite key people for coffee or lunch one-on-one, and get to know them and their business. Aim first and foremost to make them a friend, and the connections to others will come naturally. Working the circuit of big groups of strangers is minimally productive.

  4. Don’t waste your time following up. If you are focused exclusively on prospects who are actively seeking to solve the problem you are positioned to solve, you won’t need five or seven attempts to get their attention. Craft a no-follow-up sales letter, after you have positioned yourself as the right expert, with powerful testimonials. They will call you back.

  5. Don’t dumb it down for social media. Many entrepreneurs fear giving away their very best insights, strategies, or tools via social media – it might diminish the demand and the profit. In fact, when customers perceive real value in what you give away, they begin to imagine how much more they might get as a real customer.

  6. Don’t put all your faith in passion. Passion is necessary, but not sufficient to grow your startup. Be passionate about what you do, but develop a really strong plan, and a strong plan B too. The more you think ahead of failure, and think beyond failure, the better your chances for success are.

Instead of asking themselves “How and when will this generate sales?” entrepreneurs need to focus more on who they are marketing to and why. Then give them a compelling, specific, and relevant reason to buy from you.

One of the best approaches is to sell the same way that you buy. You look for value in a specific solution, or at least a conversation about your own problem, headache, heartache, or challenge. You don’t buy based on cold calls, spam e-mail, or phone calls that interrupt your dinner. Give your own customers the same consideration. Good marketing is not rocket science.

Thus marketing is the first thing you need to think about and act on in growing your business, as well as the last thing. The only actions that create results are those that make you stand out above the crowd, attract, engage, and win more customers than your competition. Have you reviewed your startup marketing actions recently for the right do’s and don’ts?

Marty Zwilling

 


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Tuesday, June 18, 2013

Entrepreneurs Must Be Survivors in Their Own Mind

survivor_logoPeople with a victim mentality should never be entrepreneurs. We all know the role of starting and running a business is unpredictable, and has a high risk of failure. For people with a victim mentality, this fear of failure alone will almost certainly make it a self-fulfilling prophecy.

I’m sure you all know someone who is the perennial victim. The problem is that most of these people aren’t likely to accept your assessment, so it’s hard to help them. They don’t see themselves as others see them, and many simply refuse to accept the reality of the world in general.

According to an article by Karl Perera, called “Victim Mentality - You Don't Have to Suffer!” there are many indications of a victim mentality in a person’s thought process. Here are some key ones he mentioned, applied to the entrepreneurial environment:

  • “When things don’t work, I secretly believe I’m the cause.” Victims act as though each business setback is a catastrophe and create stress for themselves. These people feel more importance and ego when relating problems rather than successes.

    A survivor believes that bad things are an anomaly to be brushed off, or just another challenge to overcome. In fact, they look forward to the challenges, and get their most satisfaction from declaring success.

  • “When I talk to myself, I never have a positive discussion.” Second-guessing every decision affects mood, behavior, and happiness, and is likely to cause or intensify a victim mentality. If you are negative, you cannot see reality, leading to more bad decisions, confirming you are indeed a victim.

    Survivors continually relive their positives, and see themselves as miracle workers. They live in the present or the future, and rarely dwell on mistakes of the past. They have faith in themselves, and life as a whole.

  • “When others put me down, I‘m wounded to the soul.” Negative comments from others are devastating to a victim. Offensive behavior towards you actually says more about the other person. But if you have a negative mentality you will just take what they say or do at face value, and believe that you deserve to be the victim.

    The survivor always stands up and fights negative comments, and usually turns the blame back on the deliverer. He is quick to counter with all his positives. He builds boundaries around negative or toxic people, and avoids them at all costs.

  • “I believe in fate, even though it’s unfair.” If you succumb to fate, then you think you are responsible for all the bad things that happen to your business. The victim feels that he or she has been treated unfairly but is trapped. There seems to be no way out.

    Survivors believe that they can make things happen, rather than let things happen to them. They accept random turns in their life as new opportunities, rather than unfair punishment.

  • “Everyone is punished for a reason.” Religious beliefs can have a positive or negative affect on your life. If you believe in a Supreme Being who is responsible for everything, it’s easy to believe that your pain and misery is punishment for something you did wrong.

Survivors obviously take it the other way. They enjoy a personal relationship with the Supreme Being of their understanding, and feel a gratitude for everything positive in their life. They may ask their Supreme Being for help, but rely on themselves for results.

This victim mentality is not a good thing under any circumstances, but it’s particularly lethal when applied to an entrepreneur. If you would like to be an entrepreneur, remember that you don't have to be a victim. Take a hard look in the mirror. Truly the only one who makes you feel like one is the same person who can make you a survivor - you!

Marty Zwilling


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Monday, June 17, 2013

Investors Seek Out Entrepreneurs With Resilience

Dean-Kamen-SegwayIf you haven’t had a failure, you aren’t pushing the limits. If you are really an entrepreneur, you are a risk taker and less cautious by nature, so failures should be expected. Wear you startup failure as a badge of courage. Don’t go after failure, but embrace it when it does happen and grow from it.

People who are afraid of failing should not become entrepreneurs. They can't overcome the psychological fears of making a mistake, and are afraid of losing money. They are better off keeping their day job. Successful entrepreneurs, on the other hand, tap into the positive power of failure. Here are three examples:

  • Steve Jobs was fired by Apple Computers in 1985, the company he helped to create. He went on to acquire Pixar, made it a success, and then came back to reinvent Apple as a very successful consumer products business.
  • Dean Kamen, the creator of the Segway Human Transporter, several successful biomedical device businesses, and holder of 440 patents, jokes that his biggest failure is “that I have too many to talk about.”
  • Thomas Edison invented the electric light bulb, central power generation, and the phonograph, but failed in his effort to extract low-grade iron ore from sand. He brushed this off, and went on to many successful media and transportation businesses later in life.

According to investors I know, young entrepreneurs who have failed at least once are more likely to get funding from them, compared to entrepreneurs with a perfect track record. Investors know that founders often learn more from a failure than they do from a success, so don’t be so quick to delete a failure from your bio. Serial failures, on the other hand, send a different message.

A failure can be a milestone on the road to success, if you celebrate that failure for what the mistakes taught you – and use the experience to move to the next idea. Here are three points of learning that many famous failures emphasize:

  1. Accept responsibility, don't spread the blame. It’s easy to blame partners, investors, customers, and the economy. If you blame someone else, you'll never learn from your mistakes. Remember, you volunteered to be the entrepreneur, so you are not the victim.

  2. Capitalize on the good relationships you found. In every bad deal, there are always some good people. Many entrepreneurs have taken on one of these as a new partner, and gone on to make millions of dollars. The good investors will fund you again, and the good customers will gladly take your next offering.

  3. Study and profit from your mistakes. Mistakes are priceless lessons, so you should learn from them, rather than run from them. Making mistakes and becoming smarter is the job of an entrepreneur, while not making mistakes is the job of an employee.

Failure is not usually a single event, but a collection of mistakes and circumstances that add up to test the patience of the founder. Failure combined with a strong sense of business ethics can motivate and produce innovation, while failure due to a lack of ethics can lead to desperation. Certain types of failures, like failures of integrity and ethics, are harder to recover from.

Failure, even multiple failures, can be the first stage of a very successful journey. Success usually comes to those willing to keep coming back. Resilience and agility are really the only sustainable edge in business. So when you experience your first failure, just give up your ego, let it go, and get back to work smarter on your next success.

Marty Zwilling


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Saturday, June 15, 2013

Savvy Entrepreneurs Look for More Than Funding

MAC6-incubatorSome entrepreneurs start polling venture capitalists for that multi-million dollar investment before they even have a business plan. That’s like trying to sell part of something to a stranger for big money when you haven’t fully defined it yet. It won’t work, it costs time and money, and hurts your credibility when you need them later.

Every entrepreneur needs help and support along the way, from developing the initial idea, to selling off the successful business (exit strategy). The challenge is finding and using qualified affordable support organizations for each stage. Don’t waste your resources on the wrong ones.

It’s helpful to think of startups as proceeding through several stages, which I have defined before from a funding perspective. Let’s take a look here some similar stages from a support perspective:

  • Idea stage. The first step toward a business with any idea is to write it down, and build a business plan around it. If you need help at this stage, look for a local university teaching online courses on entrepreneurship, or how to build a business plan. The alternative is to work with an innovation institute to evaluate your technology, or hire a consultant. If you need money now, is has to come from friends and family.

  • Early or embryonic stage. The most common support organization at this level is called a startup incubator or accelerator, and these exist in most countries, usually sponsored by a university, local government organization, or even local individuals. Usually these will not give you money, but will provide very inexpensive space to work and office services.

    Their real value is your access to senior advisors with experience, and other startups in the same stage. Sometimes these will ask for 5%-15% of your equity for their support services. They are not trying to make money, but simply to recoup their costs over time.

    Separately at this stage, you may look for small funding amounts from Angel investors, called seed investments. Funding of $25,000-$250,000 may be available from Angels, who are private individuals spending their own money. The incubator organization can help you find them, or show you how to apply for a government grant.

  • Funding or rollout stage. This is the time for you to step out on your own, find office space, and open your business. Once you have some traction, you can approach venture capital organizations, with funding amounts of $1-10 million for the real rollout, often referred to as the “A-round,” or first institutional funding.

    Support organizations at this stage are usually professional financial advisors, or investment banks, which have nurtured relationships with institutional investors. These usually charge you a fixed fee up front, and then perhaps a small percentage of the raise.

  • Growth and exit stage. Companies at this stage must have a large market, good traction, and be focused on scaling infrastructure and market adoption. This normally means more then 30 employees, and more then $1 million in revenue. Support organizations are investment banks, similar to the preceding stage.

As startups pass through each stage, they need to use support resources wisely to minimize costs, wasted time, and maintain credibility to support movement to the next stage. Typically, they must also change and tune their executive team, to keep up with the increasing demands of a growing company on process discipline and sustainable success.

Obviously, if you bootstrap your business, you can avoid all the investment implications, but you still need a business plan and professional support. Otherwise, not paying attention to the expectations associated with each stage will likely jeopardize your business success. Do it right and enjoy real progress in each step of the journey.

Marty Zwilling


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Thursday, June 13, 2013

Beware the Long-Term Pitfalls of Entrepreneurship

Pitfalls-of-EntrepreneurshipMost entrepreneurs expect to face the “normal” challenges of starting a business, which include finding the right opportunity, building and executing a winning plan, and financing their venture. But many forget the pitfalls associated with traditional business jobs which can apply even to the smartest and most dedicated people running their own business.

Often these facets of entrepreneurship don’t rear their ugly head until well down the road. Yet before you start, you should think about what the impact might be on your psyche, and how to neutralize these challenges in your own plan. I’ll summarize key ones here, from the positives and negatives in “Build a Business, Not a Job” by David Finkel and Stephanie Harkness:

  • Long-term daily job grind. Sometimes entrepreneurs are so set on creating a successful business, they forget to create one that they love to work on every day. After a time, they find that they have merely created a job for themselves, with the same rote responsibilities and stress that they experienced in a prior corporate world. Daily attendance is mandatory in order for the business to succeed and be profitable, and the so-called freedom is hard to find. Vacations and time-off don’t happen for years.

  • No formal training courses. Larger enterprises are always sending their “high fliers” to leadership refreshers, new technology updates, and training on employee performance management. Entrepreneurs find themselves all alone in the trenches, without the time, money, or incentives to do these things. The result is a sinking feeling after some time that you are no longer vital and competitive in your own domain.
  • Personal wealth management. Entrepreneurs find that the business skills needed to grow their business are not the same as the personal wealth skills needed to manage a healthy personal wealth plan for their family and their retirement. Their business is their entire portfolio. They are at the mercy of innumerable catastrophes, making this a huge risk.

    For these individuals, a lack of financial fluency often leads to poor decisions after they no longer have their businesses. They wake up one day without their business, and with nothing to show for the years spent building it.

  • How society perceives you. As a young entrepreneur, everyone looks up to you for running your own business. But later you find that you may be perceived by many as a person without job security, unlike your classmates or ex-colleagues, who are sought after or being placed in well-known large company or multinational positions.

    Even worse, you find that your business domain has developed a negative stigma through no fault of your own, as has happened to investment banks, mortgage brokers, and many nightlife businesses. It’s no fun to hide your business role rather than proudly proclaim it.

  • Business must be more than the money. Years into a successful business, owners often wake up one day facing a painful question: Is this all there is? To truly be successful your business must be about more than the money.

Good entrepreneurs find a great personal adventure, like Richard Branson, or great philanthropy, like Bill Gates. Guy Kawasaki says the best reason to start an organization is to make meaning – to create a product or service that makes the world a better place.

Every business startup has to have a viable idea, but it also needs a strong sense of realism on the possible pitfalls. Starting a company as an entrepreneur should be viewed as the beginning of a lifetime career, not a work project that you expect to be over in a few months. As such you should consider the long-term challenges as well as the short-term ones.

Life is too short to end up with pain and regret after a “successful” career.

Marty Zwilling


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Wednesday, June 12, 2013

A Business Requires Collaboration But Not Consensus

CollabAny entrepreneur with a vision can postulate a new business, but it takes a collaboration of many people to make it a success. Today the complexity of forces required for success include multi-disciplinary skills, competencies, and experiences in which the whole is greater than the sum of the parts. Entrepreneurs who embrace the “lone wolf” approach usually live to regret it.

A while back I read “The Collaboration Imperative,” by Ron Ricci and Carl Wiese, which makes the case very well for why collaboration matters in every business, as well as startups. Every entrepreneur should heed the following lessons on collaboration derived from the authors work on the culture, process and technology of collaboration in hundreds of companies:

  1. Consensus is the enemy of collaboration. Collaboration leaves everyone with a feeling of “win-win,” while consensus is “win-lose” or even “lose-lose.” Collaboration opens more possibilities, while consensus narrows them to a compromise.

  2. Collaboration has to start at the top. Company culture is not set by words, but by the actions of the founder. That means treating everyone with respect, and providing regular constructive feedback. Trust is required for every successful collaboration.

  3. The biggest barriers to collaboration are not technical. They are cultural and organizational in nature. Startup executives need to first build a culture and processes with communication and shared goals, rather than internal competition and bureaucracy.

  4. Collaboration cannot be deployed – it must be embraced. Executives and managers must be willing participants, modeling collaborative behavior and embracing the technology tools, not just taskmasters. All team members must be committed.

  5. Good ideas come from anywhere, so the more voices the better. These are critical in arriving at a clear idea of what is important, exploring what is possible based on constraints, and coordinating effective actions to produce successful outcomes.

  6. Collaboration enhances personal communication skills. As team members interact and play to their strengths, they learn to be authentic and genuine, which increases their effectiveness as well as their skills. They reach agreement faster and communicate more.

  7. You get out of collaboration what you put in. According to a global study of business conducted by Frost & Sullivan, the return on a collaboration investment progressively improves as better tools are deployed and a collaborative culture takes shape.

  8. Collaboration success means changing both roles and rewards. This means creating processes that allow more perspectives, but make it clear who has decision-making rights. It’s essential to provide incentives to change ingrained behavior.

  9. More interaction opens opportunities to create more value. Within any given startup environment (market, industry structure, competitors, product/service mix, etc.) opportunities exist that are often missed unless everyone is listening and communicating.

  10. The average return on collaboration is four times the initial investment. From the study referenced, measured gains ranged from three to six times. This ROI comes from cost avoidance, cost reductions, business optimization, and faster business decisions.

In today’s highly competitive and unpredictable environment, it’s not enough to do one thing better than your competitors. You need to change your organization so that it can rapidly recognize and adapt to new opportunities and new threats.

Collaboration is the new imperative. It may be the only way to accelerate innovation, improve agility, increase adaptability and cut costs all at once. But building a collaborative culture is not an easy transformation for the traditional fiercely independent entrepreneur. How long has it been since you have taken a hard look at your own startup?

Marty Zwilling


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Tuesday, June 11, 2013

Your Health and Balance are Key to Startup Health

Improve-Employee-HealthA couple of years ago, I saw firsthand what can happen to a founder, and the business, when the founder practices unhealthy habits such as working 20 hours a day. A typical “Type A” personality, with boundless energy and enthusiasm, she aggravated some previous health limitations until she was bedridden, and the business floundered.

Many entrepreneurs are too focused on their dream to take notice of health warning signs, which leads them to ignore business health signs as well. If you can’t remember the last time you had a relaxing evening with the spouse, or read a book, you may be overworking and that could negatively affect your health in the long run.. If your business won’t run for a day without you, then the business isn’t healthy either.

There is no single formula for how to stay healthy while starting and running an exciting but demanding new business, but here are a few suggestions, depending on your lifestyle:

  • Stay fit and rested. You will have more energy and think more effectively if you are in shape and rested. In addition, you’re a role model for partners and employees. Real job performance is more a function of productivity than hours worked anyway.
  • Find a stress reliever. For some people, it’s quiet meditation, and for others it’s a vigorous workout at the gym. Find something you really enjoy that doesn’t have anything to do with your business. These will help you unleash the creative side.
  • Work and family balance. Family-work balance is an issue that involves financial values, gender roles, career paths, time management and many other factors. Entrepreneurs can be so focused that they ignore the family, resulting in an unhealthy situation for everyone.
  • Regular medical checkups. No one is immune to the random attacks of a disease, and something recognized sooner rather than later can often be treated with minimal lasting effect. Undiagnosed and untreated problems, resulting from ignored or unknown symptoms, are a health disaster well worth avoiding.

At the same time, don’t forget that there are things you must do to maintain the health of your business, and send the right message to your employees on priorities:

  • Reward employee health. Lead by example, of course, and encourage employees regularly to pursue a healthy lifestyle. You might even give special recognition for sticking to a wellness program, or sponsor a healthy team outing or other activities.
  • Quarterly business reviews. On a regular basis, at least once a quarter, you need to take a hard look at all your key metrics. Maybe it’s time to tackle a new geography, or figure out how to exit some clients who are “high maintenance.”
  • Quality improvements. Continuous improvement is the key to quality production. Make sure your processes are working. A constant increase in the quality of products and services, including more innovation and creativity, all lead to a healthier business.
  • Improve customer service. Make sure all employees are empowered to provide the same customer service they would want for themselves and their own business. Measure how well you are doing with surveys and personal contacts.

Healthy companies need healthy employees and healthy processes. Workplace health promotion is not, as some might think, a charitable gesture towards employees but an investment in the company. It can be a life or death issue with you personally, as well as your company. Don’t wait, like my friend, until you’re already overworked.

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.


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Monday, June 10, 2013

How Many Key Leadership Principles Do You Practice?

mark-zuckerberg-sergey-brinCreating and building a business is not a one-man show. It requires a team effort, or at least the ability to build trust and confidence among key players, and effectively communicate with partners, team members, investors, vendors, and customers. These actions are the hallmark of an effective leader.

Behind the actions are a set of principles and characteristics that entrepreneurial leaders, like Mark Zuckerberg and Sergey Brin, seem to have in common. Look for these and nurture them in your own context to improve the odds of success for your own startup:

  1. Clarity of vision and expectations. You must be able and willing to communicate to everyone your vision, goals, and objectives. Just as importantly, you have to be absolutely clear about who you are, what you stand for, and what you expect from everyone around you. People won’t follow you if they are in the dark or confused.

  2. Willingness to make decisions. It is often said that making any decision is better than making no decision. Even better than “any decision” is a good decision made quickly. Business decisions always involve risk, at times a great deal of it. Smart entrepreneurs always balance the risk with facts, when they have them, rather than their gut.

  3. Experience and knowledge in your business area. Effective leaders set a personal standard of competence for every person and function in the startup. It must be clear that you have the knowledge, insight, and skill to make your new company better than your very best competitor.

  4. Commitment and conviction for the venture. This commitment must be passionate enough to motivate and inspire people to do their best work, and put their heart into the effort. Behind the passion must be a business model that makes sense in today’s world, and a determination to keep going despite setbacks.

  5. Open to new ideas and creativity. In business, this means spending time and resources on new ideas, as well as encouraging people to find faster, better, cheaper, and easier ways to produce results, beat competition, and improve customer service. Be a role model and guide others to excel.

  6. Courage to acknowledge and attack constraints. An effective leader is willing and able to allocate resources to remove obstacles to the success of the startup, as well as removing constraints on individuals on the team. It is believing that where there is the will, there will be a way.

  7. Reward continuous learning. You have to encourage everyone to learn and grow as a normal and natural part of business. That means no punishment for failures, and positive opportunities for training and advancement. Personally, it means upgrading your own skills, listening, and reading about new developments and approaches.

  8. Self-discipline for consistency and reliability. An effective leader is totally predictable, calm, positive, and confident, even under pressure. People like to follow someone when they don’t have to “walk on eggshells” to avoid angry outbursts, or assume daily changes in direction.

  9. Accept responsibility for all actions. Everyone and every company makes mistakes. Good entrepreneurs don’t want to be seen as perfect, and they have to be seen as willing to accept the fact that “the buck stops here.” No excuses, or putting the blame on the economy, competitors, or team members.

The good news is that all of these principles of leadership are learnable. The bad news is that it’s not easy. Don’t assume that success as an entrepreneur is only about great presentations, killing competitors, or having insanely great ideas. It’s really more about leadership, understanding the needs of your prospective clients, and communicating your solutions with clarity.

Marty Zwilling


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Friday, June 7, 2013

How to Say ‘No’ With a Smile and Save Your Startup

say-no-with-a-smileEntrepreneurs have to know when and how to say ‘no,’ and be good at delivering the message. All startup leaders are besieged with requests for their time, attention, talent, money, or influence, and sometimes even good requests won’t fit into the time and energy you have available.

Startups require focus, so you need to say ‘no’ to some things, in order to do the important things well. This is really the principle of displacement, which dictates that everything you do rules out other things that you don’t do. It’s impossible to do everything.

For most of us, having to say ‘no’ somehow feels like a rejection, so we hate to do it. Instead, too many entrepreneurs just say ‘yes,’ and regret it afterward. So here are some tips that I have accumulated over the years that can help you say the right thing the right way:

  • Give yourself time to think. Before responding with an enthusiastic ‘yes’ that you never meant, or a cryptic ‘no’ that will ruin a relationship, ask for time to mull it over. It’s acceptable business practice to say that you need to check your calendar first, or pass the request by other principles before deciding. Commit a date for the final decision.

  • Explicitly evaluate the pros and cons. First, make sure you understand the full implications of a simple yes or no response. Every ‘no’ answer reduces the likelihood of another opportunity along the same lines, while every ‘yes’ answer increases your workload and the probability of burnout on your long list of critical items.

  • Listen to your gut. Sometimes we say ‘yes’ because we love the excitement of a new idea, when our instinct is telling us that it implies many complex issues that we are not prepared to deal with right now. It’s a fact that our brain often stores relevant information that we might not be able to vocalize right now. Trust your judgment.

  • Negotiate a return consideration. Often people asking for favors don’t realize or consider the cost, so you shouldn’t hesitate to ask for a reciprocal favor. It may make that person re-think their need for your help, or you may actually get more than you give.

  • Make the ‘no’ a function of your constraints. Emphasize that the rejection has more to do with your priorities, budget limitations, and workload, rather than any inherent flaw in their request. In this context, encourage a return discussion as some specific point in the future, or with some specific variation.

  • Lead with positives when saying no. Mute the sting of rejection by rewarding the person for being aggressive and creative, while not directly accepting the contract or proposal. It may even be appropriate to give some reward, such as access to an alternative opportunity, or recognition in front of peers, to encourage the source.

  • Pick the right time and place. Pick the least stressful time of the day, or a private place where you can talk sincerely, and give full attention to any questions or discussion. Watch your body language and tone to eliminate the guilt and fear that often make the ‘no’ response harder on the sender than the receiver.

  • Be logical, calm, and concise. Choose your words wisely to avoid confrontation and a defensive or emotional reaction, but make sure the answer is clear and understood. No one wins when you say ‘no’ so softly or ambiguously that the other party reads it as a ‘yes’ or even a ‘maybe.’ Skip the detailed explanations.

People have learned the art of asking, so you need to learn the art of saying ‘no.’ Rid yourself of the fallacy that you must say ‘yes’ to be viewed as a leader. If the request presents a moral dilemma to you, your code of ethics should allow you to refuse, rather than lie to the other party, or agree to something you can’t deliver. Just say ‘no,’ and smile as you say it.

Marty Zwilling


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Thursday, June 6, 2013

How to Lock and Load the Right CEO for Your Startup

cofounders-lab-foundersIf you are a young startup founder, how do you find that CEO or other executive for your “dream team” to close on funding or complement your skills to kick start your company? It makes logical sense to scour the job boards, engage an executive recruiter, or scan the networking sites like LinkedIn for a good array of candidates, and then interview the ones with the best resumes.

But in fact, that’s just the beginning. To complement local face-to-face networking, you can always use one of the many online matchmaking sites that have sprung up in the last few years, like CoFoundersLab and Founder2be (think eHarmony™ for entrepreneurs, or Match.com meets LinkedIn).

There you can connect with thousands of potential executives and partners, or find a planned meetup in a city near you. Also, trusted advisors and experienced investors should be polled for good candidates. Sure, some executives are found from resumes, and relationships can be built online, but trust and executive chemistry are hard to deduce from a resume or quick meeting.

From the candidate perspective, the ideal executive is much more likely to sign up for your job if he knows and trusts you, versus just meeting you online or through the interview process. In all cases, never lose focus on finding someone who can meet the following top objectives, adapted from some old advice by Jeff Richards to startup CEOs:

  • Build the team. The CEO must focus on key management team hires and assume a few mistakes which need to get fixed. A great hire can make a company, but a single bad one can break it. As one company Chairman says, "The common elements I see in first time CEO's: a) they don't hire fast enough, b) they don't fire fast enough, and c) they don't manage their board and investors well."
  • Provide effective leadership. Remember that leadership is both upward, as well as downward to direct reports and employees. A good CEO provides leadership to the Board of Directors, company investors, and stockholders. There are several books written on this subject. A good place to start is "The Effective Executive - The Definitive Guide to Getting the Right Things Done", by Peter Drucker. In it, he says "Management is doing things right; leadership is doing the right things."
  • Create and sell a financial model. Even with a good CFO, your CEO is the top fund raiser. It's important that the CEO define alternatives and have a very clear view on how he will use the proceeds, including the option of not raising any outside capital at all. The CEO is the check and balance on the constant parallel pushes for more development, more marketing, and more growth.
  • Craft an operational plan and make it work. Most founders are product guys. They need an operational CEO who knows the market and the marketing game. He must nail down a sales process that fits the domain and economy. This includes the tactical as well as the strategic. The CEO needs to know how to qualify and close deals, as well as who to sell to, why do they buy, pricing, and what your strengths are against the competition.
  • Communicate company values and culture. Make certain you as the founder and the CEO are on the same page on mission, company values, exit strategy, and workplace model. Disconnects on how employees are treated or decisions will be made can be disastrous, especially with family-owned or closely held ventures.

Executive recruiters are the old-fashioned fallback, if networking doesn’t work out, but find one who has long-term relationships with many experienced candidates and business executives. I have found that most startups and small businesses can’t really afford to go this route (the average fee for a CEO is in the $40,000 ballpark).

So get out there and network today, online and offline, so you can be one of the lucky ones who has been nurturing a relationship with some candidates and executive recruiters before the real need arises. Your investors will love you, your company will prosper, and the new executive will be a hero. Everybody wins.

Marty Zwilling


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Tuesday, June 4, 2013

10 Rules for Survival in the Startup Lifestyle

bill-murphy-jrAs we recover from some tough economic times, more and more people seem to be turning to entrepreneurship as an alternative to traditional employment. I applaud this trend, but caution all of you thinking this direction to approach entrepreneurship with your eyes wide open. It is not for everyone, as the entrepreneur’s path is fraught with challenges.

Many experts have tried to clearly lay out the criteria for survival in a way that allows you to judge your own situation and your own temperament, and make a rational decision before starting down this path. One of the best summaries I have seen is in a book by Bill Murphy, Jr., titled “The Intelligent Entrepreneur,” outlining the ten rules of successful entrepreneurship, as follows:

  1. Make the commitment. Entrepreneurship can be learned. But you have to be committed to the process of building your own thing and the act of creating something, rather than just coming up with an idea. It will likely take several ideas, with the learning process of failing on a couple, before you can call yourself a successful entrepreneur.

  2. Find a problem, then solve it. Rather than finding a new idea first, try finding a problem first. Problem solvers make successful entrepreneurs. Idea people are dreamers, who often don’t enjoy the hard work of a solution in a specific timeframe to make money.

  3. Think big. Thing new. Think again. In other words, make sure your solution will scale up. Professional investors will tell you they look for business plans that can credibly project revenues of at least $20M within five years, or they won’t justify an investment.

  4. You can't do it alone. Have a support team of people you know and trust. An idea person and a problem solver make a great team. Successful entrepreneurs have to work well with people, whether they be partners, investors, employees, suppliers, or customers.

  5. You must do it alone. But the dichotomy is that there are things that you have to do alone. “The buck stops here.” You have to be decisive, accept responsibility, and provide the vision. Vision is not a group-think activity. Sometimes decisions have to be made quickly, and with very little hard data, so you need the confidence in your gut.

  6. Manage risk. Without risk, there can be no innovation. Not every idea can, or will, be a winner. Fear of failure will kill innovation, but reckless disregard for risk will kill a business. The successful entrepreneur is able to find the balance between these two extremes.

  7. Learn to lead. In a startup, the entrepreneur leader has to do two things. First, drive the business creation process, and secondly, inspire all the others. The others include the rest of the team, investors, and customers. That means hands-on leadership and effective communication.

  8. Learn to sell. Don’t believe the old myth that “if we build it, they will come.” Selling is a learned skill, and takes effort, just like building a product. Everyone in your startup, especially the entrepreneur, needs to understand sales, and needs to be a salesman.

  9. Persist, persevere, prevail. Experts say the prime cause of failure in business is quitting too soon. The successful entrepreneur never gives up, and uses creativity to overcome all obstacles, including personal, financial, and technical ones.

  10. Time, not money, is the key resource. Entrepreneurship is a lifestyle, not a job. Be prepared to play the game for life. There are no quick fixes, or quick get-rich solutions. Learn to manage and balance your time; it’s the one thing that belongs to you alone. Great entrepreneurs have a life outside of work, and find time to give back.

Reporter Bill Murphy compiled his book based on three real-life success stories of Harvard graduates, all of whom proved the points by their failures as well as successes. There is no magic here, but I believe these rules can shorten the learning curve and increase the success rate for every budding entrepreneur. They can also help you be happy and have some fun.

Marty Zwilling


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Monday, June 3, 2013

How to be Perceived as an Entrepreneur Role Model

jeff-bezos-with-kindleIn the beginning all businesses are just people playing out an idea. It’s never the other way around – there is no idea so big that it doesn’t need people to make it succeed. Investors know this, hence the saying “Bet on the jockey (founder), not the horse (idea).” A great jockey is a great role model.

Like it or not, everyone looks to the entrepreneur as the jockey role model in a new business. Typically this energizes new startup founders, but some struggle trying to live up to their own, as well as everyone else’s expectations. In reality, nobody really expects anyone to be superhuman, but it can feel like that.

We certainly wouldn't expect superhuman behavior from the people looking to us for guidance, nor would we want them to expect flawless behavior from themselves. If not flawless behavior, what characteristics and actions do they look for? Here are some frequently mentioned ones:

  • Demonstrate confidence and leadership. A good role model is someone who is always positive, calm, and confident in themselves. You don't want someone who is down or tries to bring you down. Everyone likes a person who is happy with how far they have come, but continues to strive for bigger and better objectives.

  • Don’t be afraid to be unique. Whatever you choose to do with your life, be proud of the person you've become, even if that means accepting some ridicule. You want role models who won't pretend to be someone they are not, and won't be fake just to suit other people.

  • Communicate and interact with everyone. Good communication means listening as well as talking. People are energized by leaders who explain why and where they are going. Great role models know they have to have a consistent message, and repeat it over and over again until everyone understands.

  • Show respect and concern for others. You may be driven, successful, and smart but whether you choose to show respect or not speaks volumes about how other people see you. Everyone notices if you are taking people for granted, not showing gratitude, or stepping on others to get ahead.

  • Be knowledgeable and well rounded. Great role models aren't just "teachers." They are constant learners, challenge themselves to get out of their comfort zones, and surround themselves with smarter people. When team members see that their role model can be many things, they will learn to stretch themselves in order to be successful.

  • Have humility and willingness to admit mistakes. Nobody's perfect. When you make a bad choice, let those who are watching and learning from you know that you made a mistake and how you plan to correct it. By apologizing, admitting your mistake, and accepting accountability, you will be demonstrating an often overlooked part of being a role model.

  • Do good things outside the job. People who do the work, yet find time for good causes outside of work, such as raising money for charity, saving lives, and helping people in need get extra credit. Commitment to a good cause implies a strong commitment to the business.

True role models, like Jeff Bezos of Amazon.com and Michael Dell before him, are those who possess the qualities that we would like to have, and those who have changed the way we live. They help us to advocate for ourselves and take a leadership position on the issues that we believe in.

We often don't recognize true role models until we have noticed our own personal growth and progress. That really implies that it takes one to know one. Thus, if you are asking the question, that may mean you are well along the road to being that role model already. Don’t stop now.

Marty Zwilling


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Sunday, June 2, 2013

5 Ways to Make Your Startup a Choice Investment

Bob-RicePeople with money to invest have choices. How do you as an entrepreneur with a new idea get to be one of those choices? Initially, you may be able to rely on friends and family to put you on the top of their list, but eventually you will probably need real professional investors (Angels and VCs). You won’t win with them without understanding their alternatives, as well as their mindset.

I like the work just published by Bob Rice in “The Alternative Answer,” which does a great job of summarizing the investment universe, starting with the “conventional” stocks, bonds, and real estate, but moving on through more esoteric alternatives, including hedge funds, private equity, real assets, managed futures, and finally venture funding.

Venture investing is often mentioned as the most sexy form of wealth creation, but it’s also recognized as one of riskiest. Sure, it has great up-side potential, per early investors who made millions or billions in Facebook, LinkedIn, and PayPal, but it also sports a total failure rate of nearly 50%. Most Angels I know get their payback from helping others, not from making money.

Within the venture community, the first rule to remember is that opportunities abound these days, due to the increasing pace of technology evolution, and the scope and creativity of the global community. That means there are far more entrepreneurs looking for money than there are investors, and entrepreneur entitlement is not a realistic expectation.

Since Angel investors put money into 60 times as many companies as venture capital funds, according to Wikipedia, early-stage startups need to focus first on the key thresholds that drive these investment decisions. The same hold true for venture capital investors. Here are the top five, as outlined by Rice in his book, which match my own experience:

  1. Management team. The single most important ingredient of success is not the idea, but having a team in place that has impeccable integrity, can iterate the product quickly, pivot the business model as necessary, and keep costs down in the process. Angel investors look for prior domain and startup experience. They bet on the jockey, not the horse.

  2. Funding risk. Will the startup be able to get to self-sustaining mode before it runs out of cash? This requires a visible focus on the company’s revenue model, the costs to get there, and cash on hand. Angels expect at least a working prototype and a hint of market acceptance (traction) before investing. Before that, rely on friends, family, and fools.

  3. Scalability. Is your concept worthy of a company, a product, or a feature? The target market better be a big one, like over a billion dollars, with a double-digit growth rate, large enough to absorb multiple entrants. That’s because it’s a sure bet that someone else is working on the same idea – if not, it’s probably a bad idea.

  4. Defensibility. Angels want to fund a startup whose implementation can’t be knocked of by just anyone. But patents and other intellectual property only go so far. Additional protection is always the speed of the initial implementation, and the ability to iterate quickly. That goes back to the strength of the management team as the #1 threshold.

  5. Exit strategy. What’s most realistic these days is an exit via sale to an existing major company for which you solve a meaningful problem. That means merger and acquisition (M&A), not initial public offering (IPO). Shooting for that sort of exit over a three to five year period is usually the best strategy. No exit strategy means no return to investors.

The hype is high right now for equity crowd funding as an alternative to Angels and VCs. Rice and I are not so sure. When legal, it may be an alternative if you only need a small amount (less than $100,000), and don’t ever plan to come back for more. No VC or Angel investors I know are interested in a bunch of angry, crammed-down small investors as co-shareholders.

Most investors like the idea of adding venture investments to “diversity their portfolio,” and create great up-side potential. They don’t like the fact that your track record and traction are unknown, there are no analysts to rate competitors, and getting money out may be a challenge. Maybe it’s time to shorten your product pitch and talk more to investors about the things they really want to know.

Marty Zwilling


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