Wednesday, July 30, 2014

Smart Entrepreneurs Don’t Need Disruptive Technology

electricity-innovationIt may not be as sexy, but starting a new business that builds on an existing technology or business model is usually less risky than introducing that ultimate new disruptive technology. There are many levels of innovation that go beyond copying someone else’s idea, but stop short of pushing the bleeding edge.

Many of the major business successes started this way. McDonald's didn’t really invent the fast-food model -- it simply improved on the cookie-cutter White Castle process. Before Wal-Mart made the low-cost high-volume business model famous, there was Ben Franklin and Two Guys, which touted it way back following World War II.

The advantage of imitation, with innovation, is that it gives you a solid base for building experience. There is always time later for your next startup, using that disruptive technology of your dreams. Or you may decide that your dream was not really the great idea that you thought it was.

Don’t be intimidated by the negative image that imitation currently has in the startup world. Certainly, I’m not recommending just one more Facebook, with a couple of features from Twitter, since social media has an unlimited potential for innovation. Risk level has always been directly correlated to the number of unknowns, so eliminating even one variable will improve your odds:

  1. Eliminate one aspect of research and development. According to a recent Harvard Research study, first-time inventors spend at least a third more on their initial technology than later innovators. In addition, we all know that patent disclosure rules often facilitate legal reverse engineering, and innovation at this point is now much cheaper.

  2. Capitalize on the lessons from early adopters and competitors. Smart startups save cost and time by capitalizing on the pivots of others before them. Market research can thus be based on real customers and a previously tested market. Studying and learning from the mistakes of others is the best way to reduce your own risks.

  3. Attract investors who fear pioneers catching arrows. Banks have always been more likely to support the franchise model of cloning an existing business, while they avoid, like the plague, a new and untested technology. Most equity investors tend to avoid truly disruptive technology startups, since they take longer and more money to scale.

  4. Imitation with continuous innovation predictably drives progress. The auto industry and others have used this model for generations, so business processes and metrics for innovation are well documented. Disruptive technologies are random and their success is unpredictable. Good imitators, such as McDonald's, often bypass the original innovator.

  5. There is always a related market or new country. The world is now a small place, but startups usually don’t have the resources to saturate all the related markets at once. Imitation with innovation is a great way to jump ahead of the curve. Especially if that new market is your home country, you will have the advantage.

Don’t be fooled by thinking this approach is easier than rolling out a disruptive technology. In many ways, more effort and attention is required to make sure you know what works and what doesn’t in a given domain. Timing is critical, as well as a focus on marketing and customer satisfaction. Competitors can move quickly, and there is no huge technology gap to protect you.

If this approach appeals to you, I recommend that you start by looking for successful businesses and focus on innovations you could offer to make the businesses even more successful. Innovations are often as simple as better delivery, more customization or better distribution. Who knows, your imitation with innovation may turn out to be the bigger than the disruptive technology of your dreams.

Martin Zwilling

*** First published on Entrepreneur.com on 7/21/2014 ***


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Monday, July 28, 2014

Practice Entrepreneur Integrity As Seen By Others

integrityAs an entrepreneur, your personal integrity is critical for getting and keeping the support of investors and team members, and your company’s integrity is critical for getting and keeping customers and vendors. But in a practical sense, what does that really mean?

Most definitions of integrity include something like “the quality of being honest and morally upright.” Yet, I’ve found through experience that both honesty and morality are relative terms, depending on the reference point of both the speaker and the receiver. In business, the only view that counts is that of the receiver.

For example, it may not be easy to see when you are being blinded by money in closing a deal, but it’s easy for everyone else to see it. Here are five specific recommendations that will help team members, investors, vendors, and customers to see a high level of entrepreneurial integrity in you at all times:

  1. Meet your commitments. As an entrepreneur, when you are late with a committed business plan or meeting with an investor, you lose integrity. As a company, if your customer feels you did not meet your product quality commitment, your company loses integrity. Your view or reason doesn’t matter.

  2. Honest to a fault. This term is usually used to mean honest as seen by other people. Some think honesty is only related to what is said, but not telling the whole truth is dishonest, even in court. If you can’t deliver a service because of your company’s mistake, integrity suggests that you include the real reason in your apology.

  3. Strong and consistent moral code. The target here is to meet the receiver’s moral code expectation. If your product or process is marginal or worse, you will lose that customer. If you are trying to find an investor for your new gambling site, you probably will be disappointed.

  4. Treat everyone with respect. No one likes to be dis-respected (from their perspective). Respect is difficult to define in the abstract, but quick to be recognized by the receiver. Be courteous and considerate to all on cultural differences, positions, races, ages, or any other types of distinctions.

  5. Build and maintain trust. Trust is a reliance relationship built on character, strength, and ability. It usually takes several good acts to build, and one bad act to lose. To build company trust, you need to personalize your company. People do business with people. Even internationally-known brands are judged daily by the quality of their people.

Integrity must start at the helm, and then it can percolate down through the deepest layers and become the heart and soul of the company’s culture. If the entrepreneur who runs the company does not have integrity, a startup usually falters.

Only people who don’t have integrity think it’s hard to detect. Lack of integrity is one of the easiest qualities to detect in people and companies you meet. It only takes a few actions or choices to set, but it will take many actions to reset if you go wrong. In business, it’s one of the most sought after qualities by customers and vendors.

In order to succeed as an entrepreneur, you need to have a good idea and the leadership to make it happen, and you need to demonstrate integrity at all times. In the words of President Eisenhower, "The supreme quality for leadership is unquestionable integrity. Without it, no real success is possible, no matter whether it is on a section gang, a football field, in an army, or in an office". Or as Alan K. Simpson said, “If you have integrity, nothing else matters. If you don't have integrity, nothing else matters.”

Marty Zwilling


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Sunday, July 27, 2014

Entrepreneurs Today Don’t Need A Big Budget To Start

entrepreneur-lifestyleIt wasn’t so many years ago that starting a new e-commerce business on the Internet was a complex custom development project, usually costing a million dollars or more. Now you can do it for free, or a few hundred dollars, with one of the many web building tools available, like Shopify or Weebly Store. A programmer can build a new smartphone app for a few thousand dollars.

With the appearance of do-it-yourself services on the Internet, entrepreneur curriculums at every university, and a wealth of new books on the subject, the need for expensive consultants and business advisors has also been mitigated. Almost anyone can start a company today on a shoestring budget, following these cost-cutting recommendations:

  1. Establish a solid legal structure for your business. Setting up the business as an LLC or C-corporation can now be done online with low registration fees and minimal risk. The same is true for filing patents, registering trademarks, and filing copyrights. Required legal fees now average $5K or less, compared with $20K or more as a minimum.

  2. Work out of your home, and keep your own books. You can now skip the mandatory office space rental, with secretary and bookkeeping staff, or outsourcing. With a little help from a friend, you can handle expenses, revenue, and payroll, with QuickBooks or a similar package. These steps alone can reduce your monthly burn rate by at least $10K.

  3. Use the cloud and subscriptions for computing technology. Gone are the days of required $50K computer servers onsite, with big software license fees up-front. Servers needed expensive IT consultants for setup and maintenance, and required excessive power and cooling. With Google, you get all the storage you need in the cloud for free.

  4. Social media facilitates marketing and sales. For startups, social media and color printers have essentially replaced the need for external public relations and marketing services. You can optimize your website and spread your marketing messages across the world through the Internet. Savings here can easily reach another $10K per month.

  5. Minimize investment in prototypes and tooling. With do-it-yourself makerspaces such as TechShop, you can avoid expensive prototyping iterations. You can now get tooling and products built very quickly either in the US or in China, with delayed payment options. The need to build a new million-dollar factory for each new product is gone.

  6. Use freelance and work-at-home to reduce payroll. As an old rule-of-thumb, startups realized that employees cost double the salaries paid, to cover office costs, health-care benefits, and workers compensation. Today, productivity is way up, you can do most anything yourself, and you can outsource to contractors with more skill and less cost.

Of course, not all new businesses can benefit from all these recommendations, so think carefully about what you can do, and what you can’t. For example, if you have no technical background, you probably can’t create or sell an enterprise software product for a low price, even today. Maybe you should start with an online e-commerce site, based on your favorite hobby expertise.

My point is that one or more entrepreneurial opportunities are now within the financial reach of almost everyone. You don’t need to count on the old myth that all you need is a new idea on the back of a napkin, and investors will throw money at you. It never happened in any time frame I can remember, and it definitely won’t happen today.

If you can’t afford today to start the business of your dreams, even with all the suggestions here, the growing number of startups is still a positive for you, since you might be able to join another entrepreneur as a co-founder, or simply work for another startup to build up your skills, experience, customer savvy, and resources.

But don’t wait too long if you want to stay ahead of the curve. I see a historic shift taking place toward the entrepreneurial lifestyle, and away from the corporate job cubicle environment. People are using the new cost equations brought about by the Internet and social media to do what they love, and love what they do. Isn’t it time that you joined the movement?

Martin Zwilling


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Saturday, July 26, 2014

Hungry Entrepreneurs Always Seem To Find Capital

creative-funding-alternativesEvery startup needs access to capital, whether for funding product development, for initial rollout efforts, acquiring inventory, or paying that first employee. Most entrepreneurs think first of bank loans as the primary source of money, only to find out that banks are really the least likely benefactors for startups. Thus “creative” really means maximizing non-bank financing.

While sizing up the alternatives, I couldn’t help but pick up a recent book by Karlene Sinclair-Robinson with the creative title of “Spank the Bank: The Guide to Alternative Business Financing.” She plumbs the range of possibilities she has gained through personal experience as an entrepreneur, and as the “queen of business financing” in the financial industry.

The alternatives are many, but they are not easy. The most successful entrepreneurs are the ones who think creatively, not only about their offering, but also about how to acquire cash, and never say never. They have to sell themselves, more than their product, to close on every alternative source of funding. Here are ten top sources from Karlene, and my own experience:

  1. Personal financing. You may not think this is very creative, but I’m amazed at the number of “wannabe” entrepreneurs who haven’t thought about saving any money before they start, or wouldn’t think of using their own savings to start a business. No investor I know will put money into a deal if they see that you have no “skin in the game.”

  2. Personal credit lines. You qualify for a secured personal credit line based on your personal credit efforts. Credit cards can usually be acquired with even less history. We all know startups that have been built on one or both of these. The advantage is that you retain total ownership and control, as long as you make minimum payments.

  3. Family and friends. These are people who should believe in you, without waiting to see if your idea works, or waiting until you have real customers, revenue, and hard assets. These commitments should always be positioned in writing as promissory notes, or so-called bridge-loans, which convert to equity at a rate determined by later investors.

  4. Peer-to-peer lending. This is a process whereby a group of people comes together to lend money to each other. It’s been around many years, in examples like small business groups or ethnic groups supporting similar efforts. In the startup context, look for a successful entrepreneur peer willing to fund similar new ideas.

  5. Crowdfunding. Here you use the power of the Internet to find a crowd of like-minded people, with small amounts each, to back your efforts. This approach is now spreading beyond non-profits, pre-sales, and memento rewards, to soon include the ability to make small equity investments via the JOBS Act passed a couple of years ago.

  6. Micro-loans. There are many private companies and non-profits that offer small loans, up to $35,000, to promote entrepreneurship, to individuals who would not normally quality for bank financing. Examples include Patriot Express loans, and Small Office/Home Office (SOHO) loans.

  7. Vendor financing. If you need tangible products for inventory, many manufacturers and distributors can be convinced to defer your payment until the goods are sold by you. This really means an extension of the normal 30-day payment terms to a period of months or longer, depending on your credit worthiness and extra fees.

  8. Purchase order financing. The most common scaling problem faced by startups is the inability to accept a large new order, since they don’t have the cash to build and deliver the product. PO financing companies will often advance the required funds directly to the supplier, allowing the transaction to complete and profit to flow to the startup.

  9. Factoring accounts receivables. This is similar in concept to PO financing, but applies the advance to unpaid amounts not yet due or collected from customers. In high volume startups starting to scale up, this will provide cash on your sales immediately, rather than waiting for 30 to 60 days or longer for payment.

  10. IRA financing. Investment Retirement Account funds and 401(k)s are arguably the single most accessible alternative funding source available today for startups. You can’t use your own self-directed funds for your startup, but many others are willing and able to loan you money from theirs, for the right terms, if they believe in you and your cause.

Note that we haven’t yet mentioned the more conventional and less creative finance approaches of Angel and venture capital investors. For new entrepreneurs, these sources usually have very little interest in early-stage or seed financing, preferring the lesser risk of a proven business model, with real revenue and customers, ready to scale. Yet creative thinking wins here also.

Karlene’s book provides details on the how and why of all these forms of alternative financing for startups, and many more. Managing cash flow is just one of the many ways that entrepreneurs have to think creatively to innovate, beat the competition, and survive. If you figure out how to spank the bank, you can surely spank your competitors. The payback there is even better.

Marty Zwilling


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Thursday, July 24, 2014

Agility Is The Key To Survival In Good Times And Bad

business-agility-petMost small businesses are trying to forget the recent recession, and get back to “business as usual.” They don’t realize that business as usual is gone forever. With social media and smart phone conversations, real product information spreads at astounding speeds. Entrepreneurs that are not listening, not engaging, and not changing will be left behind even in the best of times.

Business agility is defined as the ability to adapt rapidly and cost efficiently. It is required today for new innovation strategies, analyzing markets for new opportunities, and organizational changes. Today’s customers are much more proactive in going online for the latest information, rather than simply reacting to the “push” messages that businesses traditionally use to drive commerce.

According to a recent survey conducted by Dimensional Research for Zendesk, 90 percent of respondents asserted that positive online reviews influenced buying decisions, and 86 percent admitted buying decisions were influenced by negative online reviews. Yet there is evidence that as many as half of the small businesses out there still don’t even have a website or go online.

If you as an entrepreneur are not “listening” to your online reviews, and not moving quickly to make changes, you are losing ground. Moving forward, you should expect the market volatility to increase, driven not only by customers, but by new technology, changing government regulations, and a surge in new competitors.

For a business, volatile markets are a source of great opportunities, as well as great risks. Every entrepreneur must be alert enough to spot the change early, and agile enough to adapt quickly. Here are some key elements of agility that are required for you to survive and prosper:

  • Stamp out organizational inflexibility. Bureaucracy can appear quickly in startups as well as large companies. The real problem is inflexible people. Every organization must constantly review its hiring practices, training, and leadership to make sure the focus is on people who are motivated, open-minded, and empowered.

  • Continually watch for new opportunities. Don’t wait for your competitors to uncover new markets that you wish you had jumped into early. An agile business doesn’t wait for their current product line to fail, before planning some enhancements. The days of the “cash cow” are gone. Make sure you have a process in place to find your next big thing.

  • Rotate team members into new roles. If a key person in your organization has never changed roles, that person is likely limiting their personal growth, as well as the growth of your business. Maybe it’s time to find the real strength of your team by giving top performers additional new responsibilities, and rotating the lower performers out.

  • Define a continuous innovation culture. Innovation doesn’t happen without active leadership, a mindset of commitment from the team, and a defined process. Discipline is required to continually track results, return on investment, and customer satisfaction. Let your continuous innovation become your sustainable competitive advantage.

  • Foster a performance culture, and avoid analysis paralysis. A strategy of speedy execution is required. If you organization routinely thinks in terms of months or years to make any change, it’s falling behind and probably already obsolete. Don’t wait for expensive outside consultants to tell you it’s time to change, or make it happen.

  • Practice small change experiments often. The “big bang” theory of change, where innovations only come through huge and expensive new projects, with big rollouts, is a thing of the past. New innovations should be seen as experiments, which are inexpensive, measurable, quick to fail, and without retribution if they don’t work.

  • It all starts with agile leadership. If you are the entrepreneur, or the top executive, you set the model and the tone of your business. You can’t have an agile business without effective communication, an empowered team, and a constant influx of new ideas. Managing an agile business means managing change, not solidifying a status quo.

Business agility is simply to ability and intent to make small changes, on a daily basis, to penetrate new markets, add new revenue streams, reduce costs, and prune out products that are no longer carrying their weight. All you need to win with customers is to be slightly more visible and have a few more evangelists in the marketplace.

It’s time to take a hard look at your own business. Is it pulling ahead, or falling behind? Standing still in not an option.

Martin Zwilling


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Monday, July 21, 2014

9 Ways To Inspire Your Startup Team To New Heights

contagious-leadership-habitsStartups provide business leadership with new products, services, and new revenue models, but leadership startups can only be built by entrepreneurs who are leaders themselves, and incent leadership in the team around them. Leadership which incents other people to be leaders is called “contagious leadership.”

John Hersey, in his book “Creating Contagious Leadership,” describes nine required skills or habits for inspiring a contagious leadership culture within a startup, as well as within other types of businesses, or even life in general. He and I believe that leaders have to make the overt decision to acquire these skills, and don’t have to be born or trained into them:

  1. Spotlight leadership acts of others. This is the habit of focusing attention, directly or indirectly, on leadership efforts and accomplishments of another team member or group. For managers and non-contagious leaders (contained leaders), the spotlight seems to always be on themselves.

  2. Cultivate positive character qualities. Contagious leaders have a habit of highlighting effective choices about “how” things were accomplished, and not just “what” was accomplished. It’s not just about the numbers, but how character played a role, and who made the right decisions along the way.

  3. Provide in-depth recognition. Don’t just articulate specific actions that deserve praise. Contagious leaders tell Harry why and how he did a good job, whereas managers and contained leaders just say “Good job, Harry.”

  4. Emphasize strengths, leading to greatness. Conventional managers focus on people’s shortcomings and point them out as often as possible. Contagious leaders nurture the habit of recognizing others strengths, and help them extrapolate these to greatness.

  5. Communicate often and effectively. The habit of constantly exchanging information, thoughts and feelings openly and honestly builds morale, enhances productivity, and fosters contagious leadership. Too many managers “tell ‘em only what they need to know and not a moment before they need to know it.”

  6. Provide an unobstructed vision. Contagious leaders foster the habit of focusing actions on a clear and sensory-rich picture of the desired result. Managers tend to have only a vague picture of where the company is going, so they are unable to share a coherent vision with others.

  7. Really touch people’s lives. Nurture the habit of truly knowing your most valuable asset – people. Managers avoid any real, deep involvement. Most don’t know if the people reporting to them are married or single, or anything about them. Contagious leaders know their people personally and do things for them, not because it’s good for business, but because they truly care.

  8. Passionately support your people. Managers are always controlled, rather than being fully committed and willing to take a risk. Contagious leaders are quick to support their team, and always stick up for them, even in the face of adversity.

  9. Mentor a permission mentality. Contagious leaders mentor their team to always assume they have permission to do things their way. They try to extend the concept of contagious leadership, rather than constrain it. Managers want a staff of imitators and followers. They want people to do what they want, and to do it their way.

In summary, leaders are not the same as managers. Managers focus on the process, while leaders focus on the people. Leaders influence people to make things happen, rather than tell people to make things happen. Contagious leaders create a culture that inspires everyone to be fully engaged in the startup. The result is that your whole startup will be the leader.

Marty Zwilling


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Sunday, July 20, 2014

When Are Business People Entitled To Be Entitled?

startup-funding-entitlementWhere did this sense of entitlement in our business culture come from? I’ve written about this before, but I was reminded again a while back at a conference for startups when an entrepreneur started berating investors for not funding early-stage startups. It sounded to investors like me that they felt a funding entitlement for their startup idea. Of course, I’m sure entrepreneurs sense that many investors feel entitled to deals with no risk. It’s bad news either way.

As a society, we seem to think we've evolved to the point where we can fashion a large portion of existence according to how we wish it to be. We notice what we like and what we dislike, so we work to make society match our dreams. Somehow, these dreams and wishes have morphed in many people’s mind to an entitlement.

In later-stage businesses, entitlement is evident when employees treat customers with indifference, or feel they are entitled to their job by merely “showing up for work.” Here are some examples of people rationalizing their entitlements, especially when the fantasy serves to owe them money or power:

  • “I put in more hours than most of the people here, so I expect a bonus.” A bonus should be all about results, not time worked. We all know people who seem to be always present and always working, but don’t produce results. People with entitlement expect bonuses because it is bonus time, not because recipients earned them.
  • "We deserve our high pay since it was the other division that failed." We heard this from many of the Wall Street groups that survived a few years ago only with government bail-outs. A company succeeds only if all the teams succeed. That’s the way capitalism works. Being really good at what you do doesn’t matter if your firm is broke.
  • "The pay seems to be the same whether I work hard, or hardly work.” No business can afford to reward mediocrity or less. Watch for the signs of entitlement and let it be known that the behaviors associated with entitlement will not be tolerated. Executives need to show up be the model, communicate the model, and enforce the model.
  • "I did my job, so don’t expect me to jump when customers complain." Employees don’t see a connection between how the experience a customer receives today influences their feelings about buying from the company in the future. Make sure they understand the sense of urgency to address customer satisfaction and market needs.
  • “I give my all to this company, so I deserve healthcare coverage.” Health care is a need, like water or food, and not a right. And like water or food, it isn’t free. Every company needs to promote equity among all employee levels, and relate benefit levels to profit levels. But demanding benefits that sink the company is not the answer.
  • "Someday this business will be mine anyway." How many family businesses have met their demise because of this entitlement view? When heirs grow up believing that no matter how they act, the business will be theirs to run, they often end up with no business to run. Furthermore, once that seed is planted, it's very difficult to stop it.

Entitlement beliefs that are left unchecked lead to selfish, even more entitled expectations. Most psychologists believe that entitlement comes from a deep inner belief that the world is not fair. In some age group, this feeling can be rationalized as perhaps derived from an early life where parents gave them everything, and they now expect the world of business to do the same.

We’ve got to remind everyone, employees, entrepreneurs, and investors, that true success and leadership is built on a foundation of personal responsibility and self-discipline. Companies which feel entitled about their position in the marketplace will lose, and entitled employees will kill a company.

Few things frustrate me more than dealing with people who feel they are entitled. Everyone shares the challenge of changing our business culture of entitlement into a culture of merit. I do believe everyone is entitled to pursue success. No one is entitled to be entitled.

Marty Zwilling


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Saturday, July 19, 2014

Smart Entrepreneurs Know Customer Buying Moments

customer-buying-momentsToday’s customers are much more in control of their buying decision, as they have more choices and more information than ever before. Almost instantly, via the Internet or on their smartphone in the store, they can find the lowest price alternative or their favorite features, without waiting for push marketing or listening to your best sales person.

This can be an advantage to startups who don’t have the resources and brand awareness of mature businesses, if they understand and position themselves to win in the decisive moments of the new customer buying process. These decisive moments, and how to respond, are outlined in Robert H. Bloom’s recent book, “The New Experts: Win Today's Newly Empowered Customers.”

Bloom is a widely known expert on managing business growth, and he starts by summarizing the three key weapons of current customers, which include an instant summary of choices, prices, and features. His research indicates that they don’t have any old-fashioned customer loyalty, and they want precisely what appeals to them at the moment, preferably customized just for them.

New startups actually have a flexibility advantage over more mature businesses in anticipating and reacting to the four key decisive moments that Bloom outlines and I have observed in the new customer buying process:

  1. Survive the now-or-never moment. You only get one chance to make a great first impression. If you can’t get a positive customer perception at this first moment, you will likely never get another chance – with so many other alternatives. The key to winning in that moment is to think like a buyer, not the seller. Build a relationship and trust quickly.

  2. Win the make-or-break moment. You win here by getting the customer immediately engaged, and keeping him there, by knowing their interests and expectations better than any competitor or alternative. Avoid the extended period of evaluation and negotiation during which the customer will likely move to other transaction alternatives.

  3. Sustain the keep-or-lose moment. The buying process is just the beginning of the customer experience, and it has to remain a good one throughout the time that your customer actually uses your product or service. Great startups manage to continually improve the relationship through outstanding follow-on support and service.

  4. Capitalize on the multiplier moment. Of course you want your customer to come back, but the best ones also become your evangelists in bringing their friends to you, and broadcasting their positive experiences to the world through social media. This is a key moment where your customer acquisition costs go way down, and your profits go way up.

This new world is all about empowered customers. As an entrepreneur and startup, you should love this environment and cater to it. Many existing businesses see it as a big problem, and can’t adapt easily. That’s your chance to step in and compete at every moment of the customer buying process, usage experience, and follow-on events.

As you bring on employees to facilitate your growth, they have to embrace the new reality. Empowered customers required empowered employees, and your internal business processes have to be aligned with the same principles and the same smartphone and Internet technologies. Make sure you adopt the right hiring practices and training to keep your team responsive.

Then you have to trust the team to think and act proactively on behalf of your vision and mission. Of course, both you and they will make mistakes, which are the best learning experiences. Continuous innovation and change are the keys to staying current, reducing complexity, and delivering the winning customer experience to keep you ahead of the competition.

What most companies don’t realize is that businesses don’t drive customer trends anymore, customers drive business trends. Consumers are well aware of the latest technologies, and their expectations are usually ahead of even the most forward-thinking startups. It’s up to you to understand and capitalize on the decisive moments of empowered customers, or you will become a “has-been” before you even start.

Marty Zwilling


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Friday, July 18, 2014

How Much Should You Get For Your Invention Idea?

technology-inventionEvery inventor seems to think their invention is worth a million dollars, but I haven’t seen anyone pay that much for one yet. In fact, I often have to tell aspiring entrepreneurs that their inventions have zero value, at least not until they are put in the context of a business plan, with qualified people committed to executing the plan. Early-stage ideas fall in the same category.

Don’t get me wrong. I have the greatest respect for inventors and idea people who think outside the box to envision and create solutions never before seen. But I have also learned from experience that there is often quite a distance between a great invention and a great business. A business is about making money, while inventions are more about spending money.

According to a Harvard Business Review article, many people in history, famous for their inventions, such as Thomas Edison, were entrepreneurs who only later were remembered as inventors of the products they commercialized. In fact, entrepreneurs will always tell you that the invention was the easy part, and building an innovative business was the real challenge.

Of course, it helps to have innovative technologies before you start building a business. In other words, inventions are necessary but not sufficient to create real value for investors and customers. So what do investors look for in qualifying you for that million dollars you need to take your invention from your garage to the market? Here are some reality checks you should apply:

  1. It takes a business team to build a business. If you have been working alone, perfecting your idea, with no new business track record, your best strategy is to license the technology to a company or team with real business experience. You may get that million dollars someday in future royalty payments, but don’t expect anything today.

  2. Commercialization requires infrastructure. Many great technology solutions, such as hydrogen engines for cars, look great on paper, but are extremely difficult to make into a business. The value is tied to infrastructure outside your control, such as a pervasive network of fuel stations, trained service facilities and new government regulations.

  3. You need a viable business model and customers. Investors expect proof that your invention can be manufactured in volume and can justify a sales price at least double the cost to a large customer set that has money to spend. I see too many technology solutions to world hunger, where constituencies don’t have money to sustain a business.

  4. Take a hard look at the alternatives. Just because your technology is “cool” doesn’t mean that it solves a painful problem that customers are willing to pay for. People like to complain about global warming and the plastics pollution problem, but they may not be ready to buy alternative energy at twice the price, or change bad habits for global gain.

  5. Lock in your sustainable advantage. Technology limited to a single product is seldom enough for a business. A long-term advantage usually also requires intellectual property, such as a patent, trade secret or trademark. Investors look for technologies that can spawn a family of products, rolled out over time, for continuous innovation.

  6. Experts and market research agree you are first. Just because you haven’t heard of anything like your invention doesn’t mean you are ahead of the pack. Even a patent search won’t uncover work in progress that may be well ahead of you in the business cycle. Test your idea with experts, scientific journals and trade publications.

  7. Truly disruptive technologies carry an extra burden. Investors realize that big changes in technology usually take a long time, several false starts, and more money than expected to commercialize. They, and most customers, really are quicker to adopt evolutionary rather than revolutionary products. Early adopters are not a big market.

Ultimately, you need to remember that customers buy solutions to problems from business people they trust -- they don’t buy technology from inventors. If you really want your invention to change the world, maybe it’s time to give it to a proven entrepreneur and split the ownership of a new company. The million dollars will come in due time.

Marty Zwilling

*** First published on Entrepreneur.com on 7/11/2014 ***


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Wednesday, July 16, 2014

Kickstart Your Startup Credibility With A Prototype

Alan_Kay_prototype_DynabookThese days, everyone wants to be an entrepreneur, pitching their latest and greatest new idea, and looking for someone to give them money. Angel investors, like me, have long figured out that asking to see the prototype is a quick way to separate the ‘wannabes’ from serious players. Talk is cheap, but entrepreneurs who show you a working model of their idea know how to execute.

In reality, it doesn’t take a huge investment of money and time to build a prototype today. If it is hardware, look for one of the ‘makerspaces’ such as TechShop, with all the tools you need to make almost anything yourself. Software products and apps can be quickly wireframed with free tools like MockFlow, or even Microsoft Powerpoint to lay out the key screens.

Here are the key objectives that you can achieve by building a prototype, which are really the reasons that investors and partners will give you a whole new level of credibility as they evaluate your startup for potential funding:

  • Something you can touch and feel helps validate opportunity. When you wave your arms and describe your future product, everyone sees what they want to see, and it looks great. With a realistic prototype, you can get more accurate feedback from customers on their real need and what they might pay, before you invest millions on the final product.

  • Quantify the implementation challenges. Many ideas I hear sound great, but I have no idea if they can be implemented. Building a prototype at least allows both of us to ask the right questions. Visions and theory are notoriously hard to implement. A prototype has to be real enough to be convincing, without looking like science fiction.

  • Give yourself time to pivot without dire consequences. It doesn’t matter how certain you are of your solution, it’s probably not quite right. Every entrepreneur has to deal with the realities of constant change in today’s market, and it’s much easier to pivot the pre-production prototype than to dispose of unsellable inventory.

  • Show investors that you are committed, and past the idea stage. Without a prototype, most professional investors won’t take you seriously. In reality, the process of designing, building, and validating a prototype does dramatically reduce the risk, and allows everyone to hone in on the real costs of going into production.

  • Reduce the time to production and rollout. For both software and hardware technology, multiple iterations are usually required to achieve production quality and performance. Time is money, and may be your primary competitive advantage. Don’t spend your whole development budget, before finding that you need another iteration.

  • Support early negotiation with vendors and distribution channels. A three-dimensional prototype is always better than just a documented specification when negotiating contracts for manufacturing, support, and marketing. As a startup, you need all the leverage you can get.

If you are not comfortable or skilled enough to build a prototype yourself, it’s time to find and engage a co-Founder who has the interest and background to at least manage the work. You should never outsource the management of your core technology. At worst, maybe you can find a trusted friend to guide you, or a nearby university with expert professors and the proper tools.

Of course, there are many commercial resources available on the Internet, including the Thomas Registry, which is an online database of 650,000 specialty manufacturers, distributors, and prototype developers, across every state and country. There are also a wealth of invention support sites, like InventorSpot and IntellectualVentures.

Unfortunately, working with any of these outside services is hard to manage, risky in results, and some have developed a reputation for taking advantage of unsuspecting entrepreneurs. The amount of money you spend on their services is never an indication of potential success. There is no magic formula for success while inventing. Proceed with your wits about you.

Overall, building a prototype is still a great way to bring your idea to life, for yourself, your team, investors, and future customers. Your target cost expectation should be one-tenth of the total commercialization cost, with the assumption that it will be throw-away. Even still, I can’t think of a better way to validate your solution early, and get credibility with the people who count.

Marty Zwilling


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Monday, July 14, 2014

10 Entrepreneur Alternatives To Investor Funding

Gold_bullionThe “valley of death” is a common term in the startup world, referring to the difficulty of covering the negative cash flow in the early stages of a startup, before their new product or service is bringing in revenue from real customers. I often get asked about the real alternatives to bridge this valley, and there are some good ones I will outline here.

According to a Gompers and Lerner study, the challenge is very real, with a majority of new ventures that don't attract investors failing within the first three years. The problem is that professional investors (Angels and Venture Capital) want a proven business model before they invest, ready to scale, rather than the more risky research and development efforts.

My first advice for new entrepreneurs is to pick a domain that doesn’t have the sky-high up-front development costs, like online web sites and smart phone apps. Leave the world of new computer chips and new drugs to the big companies, and people with deep pockets. For the rest of us, the following suggestions will help you survive the valley of death:

  1. Accumulate some resources before you start. It always reduces risk to plan your business first. That includes estimating the money required to get to the revenue stage, and saving money to cover costs before you jump off the cliff. Self-funding or bootstrapping is still the most common and safest approach for startups

  2. Keep your day job until revenue starts to flow. A common alternative is to work on your startup on nights and weekends, surviving the valley of death via another job, or the support of a working spouse. Of course, we all realize that this approach will take longer, and could jeopardize both roles if not managed effectively. Set expectations accordingly.

  3. Solicit funds from friends and family. After bootstrapping, friends and family are the most common funding sources for early-stage startups. As a rule of thumb, it is a required step anyway, since outside investors will not normally consider providing any funding until they see “skin in the game” from inside.

  4. Use crowd funding. The hottest new way of funding startups is to use online sites, like Kickstarter, to request donations, pre-order, get a reward, or even give equity (coming soon). If your offering is exciting enough, you may get millions in small amounts from other people on the Internet to help you fly high over the valley of death.

  5. Apply for contests and business grants. This source is a major focus these days, due to government initiatives to incent research and development on alternative energy and other technologies. The positives are that you give up no equity, and these apply to the early startup stages, but they do take time and much effort to win.

  6. Get a loan or line-of-credit. This is only a viable alternative if you have personal assets or a home you are willing to commit as collateral to back the loan or credit card. In general, banks won’t give you a loan until the business is cash-flow positive, no matter what the future potential. Nevertheless, it’s an option that doesn’t cost you equity.

  7. Join a startup incubator. A startup incubator is a company, university, or other organization which provides resources for equity to nurture young companies, helping them to survive and grow during the startup period when they are most vulnerable. These resources often include a cash investment, as well as office space, and consulting.

  8. Barter your services for their services. Bartering technically means exchanging goods or services as a substitute for money. An example would be getting free office space by agreeing to be the property manager for the owner. Exchanging your services for services is possible with legal counsel, accountants, engineers, and even sales people.

  9. Joint venture with distributor or beneficiary. A related or strategically interested company may see the value of your product as complementary to theirs, and be willing to advance funding very early, which can be repaid when you develop your revenue stream later. Consider licensing your product or intellectual property, and “white labeling.”

  10. Commit to a major customer. Find a customer who would benefit greatly from getting your product first, and be willing to advance you the cost of development, based on their experience with you in the past. The advantage to the customer is that he will have enough control to make sure it meets his requirements, and will get dedicated support.

The good news is that the cost for new startups is at an all-time low. In the early days (20 years ago), most new e-commerce sites cost a million dollars to set up. Now the price is closer to $100, if you are willing to do the work yourself. Software apps that once required a 10-person team can now be done with the Lean Development methodology by two people in a couple of months.

The bad news is that the valley’s depth before real revenue, considering the high costs of marketing, manufacturing, and sales, can still add up to $500K, on up to $1 million or more, before you will be attractive to Angel investors or venture capital.

In reality, the financing valley of death tests the commitment, determination, and problem solving ability of every entrepreneur. It’s the time when you create tremendous value out of nothing. It’s what separates the true entrepreneurs from the wannabes. Yet, in many ways, this starting period is the most satisfying time you will ever have as an entrepreneur. Are you ready to start?

Marty Zwilling


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Sunday, July 13, 2014

Think Hard Before Jumping From Corporate To Startup

jumping-off-a-cliffI talk to many people who have spent years struggling up the corporate ladder who dream of jumping ship and becoming an entrepreneur. I hasten to tell them that every job move is fraught with risk, but the move from employee to entrepreneur is on the high end of the risk curve. It’s a big jump, especially in today’s economy, so do your homework first on this one.

According to an article in the Harvard Business Review a while back, “Five Ways to Bungle a Job Change,” there are at least five common missteps that professionals make when moving to a new job. I will assert that each of these has a comparable relevance for those of you contemplating leaving a company employee role to create or join an entrepreneurial startup as follows:

  1. Not reality checking your dream. In moving to a new company, the questions to ask are expectations, financial stability, cultural fit, and role responsibilities. All of these apply directly to starting your own company. Test your “dream” startup plans on some experienced entrepreneurs to get a reality check before you leave your current job.

  2. Leaving for money. Remember, the grass always look greener on the other side of the fence. More money in the short term is unlikely as an entrepreneur. In fact, most startup founders pay themselves no salary for the first year or two, and investor money is hard to find. I tell new entrepreneurs not to quit their “day job” until they have real revenue.

  3. Going “from” rather than “to”. If you are desperate to get out, you may just be lurching into entrepreneurship, only to find it more stressful and unsatisfying. People who feel competent but unsatisfied or bored in their current job make better entrepreneurs than people who feel overworked, under-appreciated, and over-stressed.

  4. Over-estimating yourself. Search consultants say that many job seekers have an unrealistic view of their skills, their prospects, and their culpability. If you have had problems with several companies, you may be part of the problem. That part will be amplified in any startup, since you are now the company, so the blame stops with you.

  5. Thinking short term. Moving from an employee to an entrepreneur is a lifestyle change, as well as a career change. Don’t make the misstep of assuming it is a short-term move to riches, or an escape from a problem. Starting a business is hard work, requires a lot of learning, and only pays off in the long term.

These missteps are obviously inter-dependent. When people overvalue themselves, they are prone to stress from job performance feedback and dissatisfaction with compensation. This leads them to jump, without real consideration of the fit and opportunity, into the entrepreneurial world, where they could be even more unhappy.

Every employee needs to evaluate these challenges, since the average baby boomer will have switched jobs 10 times, according to the U.S. Bureau of Labor Statistics. The days are gone, when we commit early in life to a lifetime career with one company, or a lifetime of entrepreneurship. The business landscape is changing rapidly these days, so we need to be willing to change as well.

A good question to ask before finalizing a change is “What if I’m wrong?” Be ready to cut your losses and move on. Jumping repeatedly to another bad situation is not the answer. In every case, take a hard look at your real strengths and weaknesses. Be willing to listen to an advisor or mentor on how others perceive you, and be willing to correct for those weaknesses.

The most important element is to understand for yourself what elements of a job role are the most satisfying to you, and what constitutes a healthy work-life balance for you. You spend most of your adult life at work. Life is too short to let career missteps make it unhappy.

Marty Zwilling


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Saturday, July 12, 2014

How Great Entrepreneurs Really Listen To Customers

feedbackEntrepreneurs and business executives seem to be even more focused on their technology than the rest of us, and less inclined to listen to the voice of the customer, even if they remember to ask. Real two-way conversations with real customers, including the all-important body language, are unheard-of these days. Being connected to the Internet many hours a day is not enough.

In fact, being connected on the Internet has taken on a whole new meaning to me, since I noticed a study commissioned a while back by PC Tools, which found that more than a quarter of people using the Internet have no problem with staying online during sex. Others admit to surfing the web even during religious services. I doubt if any of these are really listening to their customers.

If you are looking for a way to get a competitive edge, now is the time to start building a relationship with your customers, which includes active listening. In a business context, here are some old-fashioned guidelines for effective listening, for you and the members of your staff who have been distracted by all the things you can now do online:

  • Forget selling while asking for customer feedback. It’s easy to focus first on selling, and to treat all customer input as objections to be overcome. It’s harder, but necessary, to resist the response urge and actively listen to customers, while logging their input for later analysis. Customers will sense the relationship being built, and both of you win.

  • Observe customer body language, as well as words. Whether it’s while listening or talking, multiple studies show that as much as 50 to 65 percent of the communication is nonverbal. This means meeting personally with real customers, in an environment friendly to them. Email surveys and voice response units are not effective listening.

  • Eliminate pride and ego from the equation. If your customer senses your ego is talking, they know you won’t be able to listen. Pride is good, but can easily be heard as selling. You can’t listen if the customer isn’t talking, so make sure more than half of the conversation is input rather than output.

  • Always ask open-ended questions. Questions that start with “why” invite a defensive response, and usually don’t lead to a productive dialog. You are not looking for one-word responses. More effective questions usually start with “what,” and focus on that person as a customer, rather than you, your product, or your service.

  • Pause thoughtfully rather than reply immediately. People sense that you are not listening, when you respond too quickly. Even with the best of intentions, responding on the spur of the moment often results is something we wish we had not said, or said differently. Always listen carefully for nuances, and think before you speak.

  • Respond to general comments with focused questions. Forget the script, and think on your feet to go where the discussion leads. This requirement for effective listening is why customer satisfaction online and phone surveys may identify big problems, but don’t really address customer needs for future of your business.

  • Make social network contacts into two-way conversations. Social network streams that are all output, or all input, are not effective. You need to post non-defensive responses to all inputs on a timely basis, to show you are accessible and listening. Requests for input that are thinly disguised sales pitches won’t work.

Customers want and expect two-way personal relationships with their providers, and they know that the technology now allows for this. “Push” marketing messages are perceived as clutter, and are often simply ignored. Business relationships build loyalty, in the same way that personal and peer-to-peer ones do.

My final message is that you need to be listening online and offline to what customers are saying about your competitors. Listening more effectively to current customers will maintain their loyalty, and listening more effectively to the customers of your competitors will bring you the new ones you need to grow. Talking too much can cost you both.

Marty Zwilling


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Wednesday, July 9, 2014

How To Test The Startup Lifestyle Before You Commit

Startup_WeekendIf you think you are the perfect fit for the entrepreneur lifestyle, but you’re not yet sure if you’re ready to start your own, then I recommend that you take a job with an existing startup first to validate the culture realities against your dream. Without risking all your life savings, you may find that corporate desk you have as an alternative is a lot more satisfying.

Running or working for a startup is more of a lifestyle than a career choice. Be prepared for chaos, long hours, and small paychecks in the short-term. Founders stock, and stock options, will be worth nothing for the first several years, if not forever. The fun is the long-term potential of changing the world, and maybe even hitting it big financially.

So here is a rational hedge strategy I recommend, and see playing out every day in Silicon Valley and other startup hubs. If you have a spouse and kids, one of you needs to keep a solid job at a dependable large company like Intel, Apple, or HP. That one will provide the stable base income, medical and dental benefits for all, and the schedule flexibility to administer your kids’ activities.

The partner most obsessed with the startup lifestyle tests the water by going to work in an early-stage startup, similar to one they might hope to start someday. Here are some thoughts on how you can find that perfect test environment, and some recommendations along the way:

  1. Look for startup job openings. Check Craigslist first, since most new ventures don’t have the money for executive search firms and the major job listing sites. If the startup has its own website, that is the next place to look. As with any job search, always play to your strengths, and stick to business domains and roles you already know.

  2. Hang out where entrepreneurs meet. There are many organizations which cater to entrepreneurs, including The Indus Entrepreneurs (TiE) and local startup incubators. Get to know the people there, and ask them for pointers to new ventures that are still in the formative stage. Your best job leads will come from other entrepreneurs.

  3. Explore investor websites and conferences. Most Angel groups and VCs advertise the startups they have recently funded, with pointers to startup websites, sometimes including open positions. Investor conferences are also a good place to keep up with what is going on, get to know some potential investors for you, and find what is hot.

  4. Search online startup platforms and crowdfunding sites. There are a wealth of sources today for startups, including Gust, VentureLoop, AngelList, and KickStarter. Typically you can browse them by region or technology to find founders. Use LinkedIn to check for a fit, and craft personal resume emails and letters to make your case.

  5. Kick your networking up a notch. Every geographic area has entrepreneur networking activities, like startup weekends and tech meetups. There are many networking groups on FaceBook, LinkedIn, and others social media sites, which can help you increase your odds of finding a match early.

Once you find a startup that seems like a good fit, it’s still important to do some of your own due diligence. Every startup has a unique culture, driven by the founders, so talk to as many people in the organization as you can. Unfortunately, some startup teams are almost as dysfunctional as some families, and you need to avoid these.

As much as possible, make sure you understand the risk and the challenges ahead. Build yourself a list of specific questions, like the following, and get the answers, both informally and formally as you interview and make the rounds:

  • Do you feel strongly about the product or service?
  • How much money has been invested so far?
  • What is the startup cash burn rate per month?
  • Are more investment rounds required (runway)?
  • Who gets stock options, and how many?
  • When is cash-flow-positive anticipated?

Now it’s time to make a decision about working for a startup. Believe me, this one is a lot easier and less risky than the decision to start your own. But if you believe that you can drive the next big thing, and you are not afraid chaos and constant pivots, a startup is the place to work. It’s the best way to test your appetite for the lifestyle, and the best way to prepare for starting your own venture.

Marty Zwilling


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Tuesday, July 8, 2014

Build Your Brand By Embracing Your Personality

My_little_ponySponsored by VISA Business

Starting a business is usually the result of a personal dream or need. Investors tell me that they invest in people more than the idea. Customers buy from people, not from a company, at least at early startup stages. That’s why it’s important to build a personal brand, in parallel and before your business brand. This will kick-start your business, and improve your odds of success.

So what does it mean to “brand yourself”? Branding yourself means making yourself visible, and communicating via all avenues your personal value and what your stand for, with total clarity and consistency. It’s especially important to highlight your uniqueness in some easy to remember way, so people will think of you and what you do, in case they need your product or service.

Next, do the same to brand your company. Branding guru Catherine Kaputa, in “Breakthrough Branding,” confirms that branding is all about building a recognizable identity, and associating it with benefits and positive consequences. She outlines some positioning strategies that I recommend, with the following key drivers of brand growth:

  • Brand boldly – for your business and you. A common way to position your personal and business brand is to boldly “own” an attitude on a key attribute. Every product or service has specific attributes that are important to key customers, like integrity and trust, or customer focus. Craft a simple message to make that your identity.
  • Dominate the category (even if you have to create a new one). Small brands that break through to grow big find a “small” idea that fills a gaping hole – a need in the marketplace that wasn’t met before – and they keep filling that need better than anyone. If you dominate the market, competitor copycats will only amplify your positioning.
  • Figure out how to grow and scale the business. Businesses that scale have leverage and more rapid brand growth. Technology businesses can be very scalable because you can develop a core set of assets, such as software systems, and then you can monetize them at low additional cost. Build your business model on systems, not on people.
  • Enchant your customers. At the end of the day, you’re only as good as your customers who love and appreciate you. That’s why having a special customer relationship model that’s hard to copy can propel your business growth. According to Guy Kawasaki, enchanted customers elevate your brand, like advocating a good cause.
  • Put “growth agent” in everyone’s job description. Growth means change, and that doesn’t come naturally to most people. Keep everyone focused on one key objective and three measurable key results, so “business as usual” is not an option. Find people smarter than you in each aspect of the business, and hand if off as you scale.
  • Strike the right balance between innovation and staying true to the brand. Ignore innovation and your competitors will quickly pass you by. Too much innovation will confuse your customers, and drain your resources. To stay true to the brand, use open innovation, and see the power of involving customers in the process of innovating.
  • Take advantage of good luck and bad. Sometimes a sprinkling of good luck after bad, along with pluck, can propel your business idea into a breakthrough brand. The early startup period (“valley of death”) is your most vulnerable time but also your most opportunistic, because it is the time when you can create tremendous brand value.

As much as we might like entrepreneurship and branding to be a science, because it would be simpler that way, it is not. Being a brand entrepreneur, both for you personally as well as your business, requires learning, and is an ever-changing art without easy formulas.

An entrepreneur these days can’t afford to hide behind an impersonal website or hole up in the corner office. Social media such as Facebook, Twitter, and blogs connect your customers to one another, and you, twenty-four hours a day, seven days a week. If you don’t take charge of your brand, someone else will – and they are not likely to brand you in the way you want to be branded. It’s a lot more fun to be someone you always wanted to be!

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, July 7, 2014

Where Is Your Technology In The Gartner Hype Cycle?

Hype-Cycle-GeneralThe Hype Cycle was a concept put forward by Gartner, Inc. back in 1995 meant to apply to technology product evolution and acceptance. As I was reading about it a while back, it occurred to me that the concept relates directly to how investors see startup opportunities and potential success as well, at least those with technology in their offerings.

For those of you unfamiliar with the concept, the Gartner Hype Cycle characterizes the over-enthusiasm or "hype" and subsequent disappointment that typically occurs with the introduction of new technologies. Hype curves then show how and when technologies move beyond the hype, offer practical benefits and become widely accepted. A hype cycle in Gartner's interpretation always comprises five phases:

  1. Technology trigger. The first phase of a hype cycle is the technology trigger or breakthrough, product launch or other event that generates significant press and interest. This is the “truly disruptive technology” that startups often claim.

  2. Peak of inflated expectations. In the next phase, a frenzy of publicity typically generates over-enthusiasm and unrealistic expectations. There may be some successful applications and startups using the technology, but there are typically more failures.

  3. Trough of disillusionment. Technologies and related startups enter the trough of disillusionment because they fail to meet expectations and quickly become unfashionable. Consequently, the press usually abandons the topic.

  4. Slope of enlightenment. Although the press may have stopped covering the technology, some businesses continue through the slope of enlightenment and experiment to understand the benefits and practical application of the technology.

  5. Plateau of productivity. A technology reaches the plateau of productivity as the benefits of it become widely demonstrated and accepted. The technology becomes increasingly stable and evolves in second and third generations. Startups can now truly define a problem, and position their solution for rapid growth. Investors love this stage.

Late last year, Gartner released their Gartner's Hype Cycle Special Report for 2013, detailing some of the biggest trends in technology up to that time. This report evaluates the maturity of over 2,000 technologies and trends in 102 areas. New this year are brain-computer interfaces, autonomous vehicles, biochips, and quantum computing. It’s definitely worth a look.

According to this latest report, technologies at the overhyped stage include "big data", consumer 3D printing, gamification, and wearable user interfaces. The trough of disillusionment includes mobile health monitoring, NFC and cloud computing. Gesture controls, biometric authentication systems, speech recognition and predictive analytics are now in the plateau of productivity.

There have been numerous criticisms of the hype cycle, one of which is that it is not a cycle, and that all technologies don’t really have the same outcome. Another criticism is that the shape of the line has not altered or accelerated in ten years, even though all the evidence suggests that the half-life of new technologies is getting shorter, and the number of competing technologies is increasing.

So, of course you have the option of ignoring hype cycle predictions, and pushing forward with your latest technology startup. Just don’t be surprised if you get investor pushback while early in the cycle, and be prepared with counter arguments. Great startups know the hype, then set out to beat it.

Marty Zwilling


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Sunday, July 6, 2014

How To Enhance Innate Business Leadership Abilities

3D_Team_Leadership_Arrow_ConceptEntrepreneurship is all about leading – leading customers to a new product or service, leading a startup team to peak performance, and leading a new business to the market opportunity, while providing maximum return to stakeholders. Most entrepreneurs feel they have innate leadership talents, but struggle with how to nurture these abilities and measure their effectiveness.

Since I believe that a large part of leadership is personal confidence and initiative, I was drawn to a recent leadership book by Robert S. Murray, “It’s Already Inside.” His focus and belief is that anyone can nurture their innate leadership abilities, to achieve business and life success. The key is learning from the life lessons of others, something you never get in classrooms.

He hits many of the key lessons that I have learned from my own experience, and feedback from great leaders, in both large businesses as well as startups. These include the following:

  1. Practicing authentic leadership versus fake leadership. Authenticity requires honesty, self awareness, and a selfless perspective. Authentic entrepreneurs lead through the power of personal influence, rather than coercion. Fakers rely on position, authority, and manipulation – leading to short-term gain and long-term loss.

  2. It all starts with a vision, but you have to execute. Vision provides direction so your startup won’t just flail about. As you communicate your vision to stakeholders, you will strengthen your own belief and get buy-in from them. But above all, leadership is defined by action. You have to execute to succeed, so trust yourself and start moving forward.

  3. The importance of critical thinking. Critical thinking is the ability to think clearly, rationally, reflectively, and independently. Critical thinking is not just accumulating information, and should not be confused with being critical of other people. Entrepreneurs need to practice critical thinking to be leaders, rather than following conventional wisdom.

  4. Leadership comes with building and nurturing the right team. Entrepreneurs not only have to pick the right team members, but have to continually communicate the vision, tasks required, and provide mentoring and feedback to each member. Don’t focus on the product, and assume the team will come along by osmosis.

  5. Pretend to be a customer or client of the business you lead. Successful entrepreneurs practice stepping back to look at their business the way customers see it for the first time. It obviously helps to ask new customers what they see. Then it takes humility to swallow your pride and your biases, and make improvements regularly.

  6. Coaching and mentoring are key to the leadership role. A good leader will make sure that each person is getting exactly what they need for their role and their maturity. Depending on the individual, the entrepreneur may look like a dictator, a high school coach, a mentor, or a country club host. People ignored see no leadership.

  7. The importance of listening well. More entrepreneurs need to practice leadership by walking around (LBWA), and truly listening to the people on their frontline, as well as listening to customers, partners, investors, and vendors. It’s hard to listen while you are talking, and many people seem adept at listening without really hearing anything.

  8. Time for solutions versus problems. It’s easy to become so overwhelmed by the day-to-day problems of running a business that you have no time to work on solutions or strategy that will give you greater leverage and long-term success. Ask each member of your team to be the CEO of his own problems, and you will take time for the solutions.

  9. Know when to overreact or under-react. Real leaders stay in control of their emotions, and use reactions to highlight a point. For example, startup leaders should probably overreact to values violations, and under-react to the next crisis. Always reflect before you react. You don’t learn that in the classroom.

World-class entrepreneurship will never be learned totally in the classroom. It takes hard work, lots of practice, and lots of mistakes. It takes focus to become both a student and a teacher of leadership. You will soon be amazed by how things start to fall into place, despite what you don’t know. That’s the innate leadership coming out. Enjoy it.

Marty Zwilling


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Saturday, July 5, 2014

Entrepreneur Leadership Today Demands A Human Focus

Susan-Steinbrecher-Joel-BennettMost entrepreneurs assume that success is dependent on their product expertise, coupled with some knowledge of how to run a business. In fact, I have found from personal experience and mentoring that both of these are necessary, but not sufficient, for building a business. Successful entrepreneurs today must practice human-centered leadership to compete and win.

There are many leadership styles out there that may have worked well in the past, including authoritarian and paternalistic. But in this new age of relationships, these often work against your business. There is more and more evidence that a more human-centered or heart-centered leadership yields the best results with your team and with customers in the long run.

As top business consultants and leading proponents of this leadership style, Susan Steinbrecher and Joel Bennett, in their latest book “Heart-Centered Leadership: Lead Well, Live Well,” do a good job on the details of why and how this approach leads to greater satisfaction and well-being for the team, and by extension, to the bottom line profit and impact of the business.

Here are a few examples from their book and my experience of the many indicators, challenges that entrepreneurs will probably recognize, which highlight the value and need for increased focus on the human element:

  1. Collaborative team sessions seem to drag on. Entrepreneurs often complain about the amount of time wasted in meetings, because one of the team members just wants to be heard, or feels that what he or she has said is not valued. Great leaders learn to listen actively to conversations, so people don’t hold up progress just to be understood.

  2. Disruptive office politics start to show. Startups with weak directives, poor communication, and ineffective cultures are breeding grounds for negative interpersonal dynamics. Office politics are really about self-interest and self-esteem. Heart-centered leaders create engaged teams that are too highly motivated to waste time on politics.

  3. Investments and acquisitions fail. Failure is often not due to fiscal irresponsibility or lack of due diligence. Business-to-business relationships usually fail because the leadership team underestimates the impact and the importance of recognizing the human element. Effective entrepreneur leaders focus on getting people needs satisfied early.

  4. Team conflicts become personal fights. A conflict and a fight are not the same thing. The best entrepreneurs understand their people and embrace constructive conflict for steering through the maze of innovation and change common to every startup. Toxic relationships are emotional, often personal, disagreements which are counter-productive.

  5. Demand for coaching, counseling, and discipline training is high. The most-used workplace training programs are really about matters of the heart. Managers need training in coaching, counseling, and discipline because they resist or have difficulty communicating with team members. Punishment at work is not a motivator to change.

  6. Difficulties retaining key employees. Top team members rarely quit the company. More often than not they quit their boss. All too often, quitting is a response to a perceived lack of leadership or appreciation by key executives. Human-centered leaders connect with each team member at a personal level to assure ongoing commitment.

  7. Evidence of crossing the line ethically. If entrepreneurs show only an exclusive focus on the bottom line, team members may convince themselves that they have to bend the rules to be successful, which can easily lead to lying, cheating, and stealing. Leaders need to focus on a human-centered culture in their actions, as well as every message.

  8. Customer relationships culture is slipping. Your startup can’t sell and compete on the strength of your customer relationships, if the business culture in your startup is not human-centered. That startup culture has to come from the beginning and from the top, meaning heart-centered leadership from the entrepreneur.

There is an increasing body of evidence that teams and leaders focused on the human element not only live well, but are winning in their profit-making objectives as well. Examples of exemplary companies practicing this model include Starbucks Coffee and the Whole Foods. Both of these are human-centered businesses that boast high growth, high loyalty, and low employee turnover.

How evident in your leadership style is your commitment to personal understanding, open-mindedness, authenticity, trust and integrity? If you haven’t tried it, or you aren’t getting the feedback from your team than you want, maybe it’s time to take a hard look in the mirror. It’s never too late to learn.

Marty Zwilling


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Friday, July 4, 2014

How To Get The Right Investor To Fund Your Startup

Ron_Conway_InvestorTime is too precious to waste trying to close a deal with the wrong investors at the wrong time. Luckily, not all investors are looking for the same thing, so it pays to know what type of investors are most interested in what your startup brings to the table.

The key is understanding how potential investors see you, and especially how they view the maturity stage of your startup. For example, if you have a proven product, real revenue, a big potential market, and are ready to scale up the business, every investor will be interested. On the other hand, if you are a new entrepreneur, still in the idea stage, professional investors will only tell you to come back later when you have traction (customers and revenue).

Thus your startup maturity and growth stage is the primary key to success with potential funding sources. Different types of investors tend to specialize in capitalizing on businesses at different stages. Venture capital firms look for the most mature companies they can find, Angel investors typically deal a tier lower, while friends and family are most likely to help you get started.

It never hurts to start networking personally with all levels of investors early, but sending out teasers and business plans to every name you can find on the Internet is a waste of your time and theirs. It will be much more productive to categorize your startup in one of the following five stages, and limit your investor focus accordingly:

  1. “I have a great idea and I need money to turn it into a business.” For investors, this is the idea stage, where you may have a great idea, but no plan, product, or customers, and probably no success record in this business domain. No professional investor will be interested at this point, so count only on yourself, friends, family, and fools for money.

  2. “My invention and prototype works, but I need funding to continue.” Investors call this the seed stage, where money is required to build a market and a real product. Government grants and industry partners are you best bet here, but Angel investors might give you $250,000 to $1 million, if you have the right business case and credentials.

  3. “The final product works great, and all the early users love it.” You are now entering the rollout stage, with money required for marketing, hiring a full-time team, and a production process. At this point, most Angel investors and a few early-stage VCs will be happy to talk, assuming you have the business model validated, and a large opportunity.

  4. “It’s time to scale up and I need money to keep up with demand.” Congratulations! Every investor wants to be part of your growth stage, after your first $1 million in revenue. They call first investments at this stage the “A-round,” and often follow with a B-round through G-round. Growth stage investments from VCs are usually $5 million and up.

  5. “The ride has been fun, but I need my money out to start the next big thing.” This is the exit stage for the entrepreneur, and for all earlier investors. The new investors you need at this stage are investment bankers, private equity, or competitors, to buy you out via merger or acquisition (M&A), or to go public with an Initial Public Offering (IPO).

Obviously, maturity and growth are a continuum, so the rules are never absolute. My message is that your startup will attract a different class of investors, as it passes through each stage, just as it has to supplement and tune the team, process, and product to keep up with the needs of a growing company and customer base. Tune your investor pitch and funding expectations accordingly.

Another good indicator of your real stage is the valuation you can set for your company at any given moment, to determine what portion of your equity an investor will expect of his money. Prior to the growth stage, your company valuation is limited to goodwill based on intellectual property and team experience, since you have no revenue. Future opportunity size doesn’t count in the early stages.

Contrary to popular opinion, all investor money is not the same. Friends and family believe in you, and only want to see you achieve success. Angel investors probably will know your business, and want to me mentors along the way. VCs normally come with the highest expectations of board seats, controlling votes, and milestones to meet.

Don’t sign up for one, expecting the other. If you want to avoid all these stage and investment considerations, you can always bootstrap the business (fund it yourself, and grow organically). Otherwise, be sensitive to first impression you leave on every investor, and the efficiency of your time spent on funding. You will enjoy the lifestyle a lot more when you find the right investor.

Marty Zwilling

*** First published on Entrepreneur.com on 6/27/2014 ***


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