Monday, April 27, 2015

5 Ways To Improve Startup Founder Team Productivity

bar-graph-meeting If you are like most entrepreneurs I know, there just aren’t enough hours in a day to get all your own work done, as well as run the many one-hour meetings each team member seems to demand for decisions and mentoring. I have found it to be more productive and effective to lead with the model that no meetings will take an hour, and may be done in as little as five minutes.

Of course, this requires some discipline and focus on your part, as well as the willingness to trust team members and allow them to do their jobs. For example, you must forego the traditional meeting approach, where a team member presents a slide deck with all the background and multiple solution options on an issue, and asks you for a decision.

I recommend the elevator pitch-approach instead, which you probably learned in dealing with busy investors, where the person calling the meeting is asked to summarize the purpose, value and recommended solution in the first minute or two. That leaves three minutes, or maybe a few more, for you to clarify your understanding, approve their approach or suggest additional work.

Meetings at this level should never be seen as “working sessions” for actually solving the problem, but as mentoring and direction setting for team members. I have personally used this approach in leading startups as well as large organizations, in highly technical roles as well as business development and marketing. But it only works if you observe the following principles:

  1. Never hide from your team. If you are always hard to find, too busy or unavailable behind closed doors, no leadership or mentoring relationship can work effectively. The old principle of managing by walking around will give the background, and people always having to wait makes them talk longer when they get your precious attention.

  2. Listen and adapt your style to theirs. You rarely learn anything by talking. Practice active listening and respond with a simple affirmation, step-by-step instructions or an anecdotal story, depending on the style and experience of the team member. Five-minute meetings cannot be five minutes of anyone talking.

  3. What is said in a meeting must stay in the meeting. Of course, decisions and action items must be communicated immediately, but individual disagreements, comments and recommendations must never surface around the water cooler or in later reviews. You want team members to provide input openly, honestly and without fear of retribution.

  4. Provide immediate direct and constructive feedback. Team members need your critique of their work to learn, but attacking the person is never productive. Use every opportunity to clarify your goals and set the context for follow-on discussions. If you must provide negative feedback, make every attempt to highlight the positives first.

  5. Make it clear that team members are accountable and responsible. Your most valuable team members wouldn’t want to work any other way. Encourage them to come in with solutions, not problems, and empower them to drive their recommendations to success. Everyone learns best from failures, so failure should never be a feared option.

For one-on-one coaching from the startup founder, I call this approach five-minute mentoring. The goal is not to use your time doing the job for less-experienced team members, but instead quickly identifying their barrier to progress, and providing guidance on a next step. Even if multiple cycles are required to reach the goal, you will spend less time, and they will learn infinitely more.

I fully understand that the best entrepreneurs are problem solvers by nature, so this approach requires a mindset change from solving to a specific answer, to coaching on the process, which will pay big dividends for both of you as the company grows. You can be a problem solver and build a product alone, but you can’t build a successful business alone.

Your primary responsibility as a startup founder is to provide vision, leadership and communication to all internal and external team members. Long meetings behind closed doors are draining for you and not productive for the company toward these objectives.

Start today with five-minute meetings and mentoring to get the fun and productivity back.

Marty Zwilling

*** First published on Entrepreneur.com on 4/17/2015 ***

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Monday, April 20, 2015

6 Keys To Proving A Viable Startup Business Model

valid-business-model How do you convince investors that your business model will really work, before you have a revenue stream that exceeds your expenses? Even if you are bootstrapping your business, and you are the only investor, you should be asking yourself the same question. Too many founders have learned that passion and free beta products do not imply a sustainable business.

Proof of any business model starts with a finished product or solution, sold to a new customer for full price, with high satisfaction for the value received. Of course, that has be a repeatable event, with enough revenue to sustain the business. The conundrum is that once you have really proven the business model, you no longer need the investor money you asked for to start the business.

So what should an entrepreneur do to convince themselves, as well as potential investors, that they have a viable business model before it is totally proven? Here are some basic principles from my own experience that will improve your odds and keep you on the right track:

  1. Recognize that you are not the market. No matter how passionate you are about your solution, it doesn’t mean that if you build it, they will come. Don’t skip the market research, input from influencers, analysis of competitors, and the simple act of really listening to potential customers via social media, before quantifying your opportunity.

  2. Start selling it before you build it. Marketing is everything these days. On the average, it takes as long to build marketing momentum as it does to build the solution. If you wait to begin marketing until your product is final, you will find it very expensive to pivot to meet real world input, or the whole opportunity may have moved on without you.

  3. Plan for a real revenue model. The free model, with a loose intent to monetize later, made popular during the tech bubble, doesn’t work anymore. No matter how good your cause, it takes real money to sustain a business. Decide early where and when money will come from, set some milestones and metrics, and work to a plan, or be caught short.

  4. Word of mouth is not adequate for marketing and sales. Even though the Internet is pervasive and free, you should not assume that a website is all you need for sales and marketing. To get the visibility and distribution you need will likely require one or two levels of partner relationships and a real model for marketing, events and promotions.

  5. Customer support is more than handling exceptions. Customers expect to be delighted in all phases of the product life cycle -- understanding features, pricing alternatives, returns and problem resolution. A detailed process, with empowered employees and adequate budget, are mandatory to any viable business model.

  6. Everyone must be part of the sales process. Don’t assume that only customer-facing employees need to understand sales, and that these people can be hired and trained at the last minute. Everyone on your team must maintain the mindset that customers are the key to your business model, rather than technology or accounting.

I’m not suggesting that all these business model elements need to be perfect before you ask for funding or open doors for business. As an active angel investor, I do expect founders to be able to communicate a plan to implement all key business model elements, just as I expect them to understand and plan for all the elements of their technology and their solution.

In my experience, every great product is not a great business, and every great business model involves far more than a great product. Your challenge is to present a total business solution to the right customer set to build your credibility and momentum. Without these, your dreams and your business model may never get the fuel they need, and will burn out quickly.

Marty Zwilling

*** First published on Entrepreneur.com on 4/10/2015 ***

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Monday, April 13, 2015

Realistic Strategies For Funding Product Development

Research_and_Development Angel investors and venture capitalists are looking for startups with real products and a proven business model, ready to scale. Yet I still get too many business plans that clearly are looking for money to do research and development (R&D) on a new and unproven technology. If you need funding for these early stage activities, I have some suggestions on better strategies to follow.

The first is to be more precise in your definition and understanding of where you are, and how the money will be spent. If this is your first foray into the entrepreneurial arena, with no track record in business or technology, your best and perhaps only supporters will be that class of investors known in the trade as friends, family and fools (FFF). They believe in you above all else.

Beyond these believers, you need to match your credentials and interests with the multitude of public, academic and government organizations that proclaim to foster research and early development, to satisfy the long-term needs of the people or organizations they support. In this context, there are at least six stages often included in the scope of R&D to narrow your focus:

  1. Search for new technologies. This early stage is often called basic research, well before any specific commercially viable products might be envisioned. Here your options are limited primarily to large organizations with deep pockets, including government grants, universities and large enterprise sponsors searching for disruptive technologies.

  2. Technology pilots. This is the transition stage from basic research to applied research. Applied research is still primarily scientific study, seeking to solve practical problems, but doesn’t yet focus on a commercial product. Funding sources for this stage extend from grants to large private fund incubators, such as the IBM Watson initiative.

  3. Commercial product prototypes. Funding for commercial product prototypes is still R&D in the eyes of venture capital investors, but in business areas with large opportunities, this activity will catch the eyes of specialized angel investors. It’s still considered high risk for investment, since manufacturing and quality issues are likely.

  4. Product verification and clinical trials. These days, almost every new product is not deemed scalable until it has been certified as meeting a multitude of quality and agency standards, including the Environmental Protection Agency (EPA), Food & Drug Administration (FDA) and Underwriters Lab (UL). Specialized VCs start to jump in at this stage.

  5. Business commercialization. Product development at this stage is the process of scaling up for manufacturing and marketing rollout. The technology is now embodied in a solution that can be replicated to reliably solve a real customer problem. Your fundability with investors now depends primarily on the execution capability of your team.

  6. Expanding the product line. Even for mature startups, there is always a need for further product development and research to compete and diversify the business, and investors understand this. But to prevent confusion with basic R&D, these costs should never be called out the major category in your use of funds statement to investors.

While all forms of technology research and development will always be required, entrepreneurs need to understand that the funding for these efforts comes from many different sources, depending on the stage. Business equity investors are buying a portion of your business, so they are looking to fund a specific business with a specific offering, not a generic technology.

Don’t waste your time and energy talking to angels and VCs about technology funding when you could be focused more productively on grants, private funds and future business partners. Business investors and customers want to hear about solutions, and tend to back away from technology, until it is proven.

Fortunately, in many attractive business domains, including mobile software, Internet apps and ecommerce, the cost of product development is at an all-time low. Developers are using powerful technology tools to build mobile apps and websites for a few thousand, rather than millions of dollars. Thus the best entrepreneur strategy for funding is to build solutions, not technology.

Marty Zwilling

*** First published on Entrepreneur.com on 4/3/2015 ***

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Wednesday, April 8, 2015

8 Questions Before You Join Or Invest In A Startup

question-mark-startup Every startup founder loves to prompt for questions from investors and potential key team members about their vision, and the huge opportunity that can be had with their disruptive technology. Yet if you are on the other side of the table, there are some other key questions that you need to ask, which will tell you more about the real success prospects for this business.

Enthusiastic startup founders may try to deflect or minimize these questions in true media-training style, so you need to be patient, calm, and persistent to get the whole story. From my perspective as an investor, I recommend that every founder needs to know the answers to these questions, be open and honest in answering them thoughtfully, and without making excuses:

  1. What is the current runway and burn rate? These terms quantify how fast money is being spent, and how long the business can survive before another round of investments is required. Early stage burn rates over $50K per month, or a runway of less than six months may indicate an inefficient or desperate startup. Think twice before you jump in.

  2. How complex is the capitalization table? The allocation of shares among the founders, and the number and size of outside investments, will tells volumes about the health, stability, and management of the business. Most founders like to talk about their many months or years of sweat-equity, but cash invested is a stronger commitment.

  3. When did this effort really start, including pivots? If the company has been around for more than a couple of years, and still has no product or revenue flow, there better be a good explanation. One more key employee or one more investor will probably not turn the situation around. History gaps and founder turnover may indicate a long road ahead.

  4. Does everyone on the team have a clear role and mutual respect? You won’t get this answer directly from the founder, so ask to talk to other key team members to make sure everyone is carrying their weight, and communicates effectively. Some conflict and differing perspective is healthy, but too many titles or close relatives should be suspect.

  5. Any outside advisors or board members available for discussion? Every startup should have at least a couple of outside advisors who are not major investors or family members, anxious to talk to new investors and key new hires. These should be people with complementary skills to the founders as well as industry expertise or connections.

  6. Is there a real customer willing to give a testimonial? Don’t be sidetracked by potential customers in the middle of a free trial, or friends of the founder. If it’s too early for customers, make sure you understand exactly when the product ships, how detailed is the rollout and promotion plan, and how many times these plans have changed.

  7. Are any lawsuits and challenges to intellectual property pending? Before you invest your life savings, or bet your career on this startup, you need to know how much of a barrier to entry the brand and patents are projected to be. If you have questions or concerns, now is the time to seek legal advice, not after the fact.

  8. How much and when can I reasonably expect a payback? Since nine out of ten startups fail completely, serious investors look for a 10X return on their investment within five years. Look for examples of similar companies and revenue multiples achieved from acquirers. Calculate employee stock option values and vesting times, as well as salary.

These questions are the key ones in every due diligence effort, always done by accredited investors, but almost never done by key employees and new partners. Ironically, startup investors are normally in less personal jeopardy than early startup employees. Smart investors know that many startup investments will fail, while employees always plan on million dollar payouts.

In any case, in addition to the grand vision and the chance to change the world, I recommend that it’s worth your while to calmly and assertively get some good answers to some hard questions from a passionate startup founder before you sign your life away.

Marty Zwilling

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Monday, April 6, 2015

10 Steps To Finding The Right Startup Co-Founder

Jerry_Yang_and_David_Filo A common challenge faced by every entrepreneur is that they don’t have the bandwidth, interest or skills to do everything that is required to build their startup. Of course, they can outsource part of the work or hire employees, but that approach means more time and money to manage the work, which they don’t have. The right answer is to find a co-founder with complementary skills.

Two heads are always better than one in a startup. Both need to share the passion, long-term opportunity and risk, rather than just getting paid to do a job, win or lose. Investors worry about a single entrepreneur getting overloaded, disabled or led astray, with no balancing and supporting partner. The challenge is how to find that elusive perfect-fit partner.

Don’t expect someone else to find the partner for you, since it’s really very much like finding a life partner. Your version of the right chemistry, similar values and passion for your solution probably won’t match mine. Yet from my own years of experience in the startup community, here are 10 common steps that have worked for other entrepreneurs:

  1. Write a "job description" for that ideal partner. Your best friend, spouse or a family member is the least likely candidate, so don’t start there. Take a hard look at your own business strengths and weaknesses, and write down what partner skills and experiences would best complement yours. Seek input from seasoned investors and peers.

  2. Network to find co-founders just as you network to find investors. In fact, many of the same venues, such as industry conferences, entrepreneur forums and local business organizations are useful for both. Online, it pays to join entrepreneur groups on LinkedIn and Facebook, and interact with people who meet your criteria on Twitter.

  3. Join online "matchmaking" sites for business partners. Co-founders are business partners for startups, so don’t be afraid to join and explore sites such as StartupWeekend, StartupAgents and CoFoundersLab. Also start a discussion on the wealth of business blogs frequented by entrepreneurs, where you can make your interests known.

  4. Attend local university entrepreneur activities. University professors and student leaders always know a host of top entrepreneurs, alums or staff members who are just waiting to find the perfect match for their own interests, skills and entrepreneurial ideas to change the world. Support local activities and you support yourself.

  5. Look for a partner from a different background. In today’s global economy, your ideal partner may be half way around the world, from a different geography and business culture. Every startup infrastructure is flush with smart people from all cultures, many of whom may be ready and able to bring new energy and creativity to your startup.

  6. Follow up with associates from prior job assignments. If you were impressed with someone’s drive and capabilities in a prior work role, now is the time to connect again to check their interest and availability, or recommendations they may offer. Use caution to avoid employer conflicts of interest and non-compete clauses.

  7. Relocate to a more likely geography. Finding a high-tech co-founder in the middle of Kansas may be a long search. There’s a reason that Silicon Valley and Boston are hubs for high-tech startups. These areas may have not just your co-founder, but also the robust ecosystem your startup needs for investors, programmers and customers.

  8. Explore candidate common interests outside of work. Co-founder chemistry and interest matches are best explored outside the office. Find some common hobbies or sports to get acquainted before giving away half your company. Business partnerships are long-term relationships, so take your time getting acquainted before closing the deal.

  9. Jointly define major milestones and key metrics for the startup. This process is the ultimate test of a true shared vision and working style. Building a startup is hard and unpredictable work, and people get busy, so now is the time to jointly commit. If you can’t work as a team now and easily agree, it probably won’t happen at all in the future.

  10. Negotiate and document roles early, including who is the boss. No matter how equal you all are, there is only room for one at the top to make the final decision on hard issues. Especially when everything feels good today, don’t be hesitant to ask the hard questions of each other. There can be only one chief executive officer.

For the success of your startup, finding the right co-founder is one of the most important things that a new entrepreneur needs to do. There are so many challenges in a startup that no founder should try to go it alone. When you find someone that works, I’m betting you will be together on your next startup, and the one after that. Great teams persevere, and success breeds success.

Marty Zwilling

*** First published on Entrepreneur.com on 3/27/2015 ***

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Saturday, April 4, 2015

5 Tips For Startups To Win With Social Media

win-with-social-media Social media is so pervasive in today’s world that every entrepreneur believes instinctively that they know how to use it for their startup. Many soon find that what you do in a personal context doesn’t necessarily translate to your business, and measuring business value is quite different from measuring personal satisfaction. When it comes to social media for your business, expect a high learning curve, but rest assured it’s not rocket science.

Social media is now one of the key marketing tools, but not the only one, so the challenge is to manage the resource tradeoffs effectively by constantly assessing payback versus cost. Startups should begin by selecting just a few of the vast array of social media offerings out there, and customize based on results.

I agree with my friend Lon Safko, and his classic book “The Social Media Bible,” which asserts your team can be successful at social without the cost of an expensive expert or agency, by following these five basic steps:

  1. Start with the dominant players. Top social networks are Facebook (1.2 billion users). LinkedIn (300 million), Twitter (288 million) and Pinterest (70 million). Concentrate your efforts on two to three platforms to start. Get to know the five W’s of these – who, what, where, when, and why. Ask yourself where are the influencers in your market, the majority of your target customers, and what type of interaction will be most productive to your business?

  2. Assess your target customer demographics. Identify your target customer and create customer profiles. If you already have a strong customer base, create a brief survey to help you determine what social media sites they’re using and how to reach them in a targeted way. Add a blog to give yourself a voice, show your expertise, but skip the sales pitch.

  3. Create an integrated conventional marketing and social media strategy. Social media does not stand alone; it must be integrated into a balanced marketing strategy. Your plan should include a well-designed web site, events, press releases, and search engine marketing (SEM). SEM is the most common form of online marketing, which increases your website visibility on search engine results pages through optimization and advertising.

  4. Prepare your staff to deliver on social media requirements. Social media is not free – it takes time and skills that you won’t have by default. Ad hoc coverage by team members in their spare time is a recipe for failure. You need executive buy-in, committed budgets, and education for the whole team on objectives and activities.

  5. Don’t forget the metrics and analytics. You can’t manage what you don’t measure. Determine the proper measurement tools and set up the measurement process. Only then can you determine your ROI. Manage your expectations, and analyze every marketing channel. Scour the Internet for data from similar businesses, existing media, and match it with your own customer profiles. Then set your goals for penetration, frequency, and results.

With social media, a key element of success is focus on the message. Never “sell” or push out your message like conventional advertising. The trick is to listen first, add something of value to the conversation, and pull the customers to you because they trust you and want more. According to Lon, the keywords to remember are to be “sincere, authentic, and transparent.”

Startups are in an ideal position to capitalize on the fundamental shift in power to the customer, who now has real control over your brand message. Companies have to communicate, rather than just pontificate. Customers see what their peers are saying in blogs and product reviews, and how you respond to these, and this impacts their buy decision more than any advertisement.

Above all, don’t forget to observe your competition and their social media activity. Learning from their mistakes and building on their best practices can save you time and money.

Finally, remember that it takes time to establish and optimize your social media presence. Use the five steps listed above to start slowly, leverage your time effectively, stay one step ahead of your competitors, and enjoy the success that social media can bring to your startup.

Marty Zwilling

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