Monday, August 31, 2015

6 Reasons To Reconsider Your Planned Corporate Escape

Work_life_balance_rat_race The grass is always greener on the other side. It seems that everyone I know who works in a corporate environment dreams of escaping to become an entrepreneur, and every entrepreneur wishes he or she had the security of a regular paycheck.

As someone who has experience on both sides of this fence, I’m convinced that the move from employee to entrepreneur is far more risky.

Many good entrepreneurs I know have found that corporate roles are “recovery and recharge” positions between startups, since experienced entrepreneurs usually have a broad range of skills, and the flexibility and confidence to adapt. On the other hand, employees who have lived in highly structured and narrow corporate roles often don’t have a realistic view of the world outside:

  1. A lack of focus on the business side of an idea. Technical professionals, in particular, often forget that an innovative product is necessary, but not sufficient, to make a business. Their prior narrow focus in a corporate job gives little insight into the challenges of a winning business model, cash flow and marketing. Customers can be very tough bosses.

  2. Pay from a startup takes longer than you expect. Startup-marketing guru Seth Godin once said “it takes about six years of hard work to become an overnight success,” and he is an optimist. Professionals who leave corporate roles for more money are usually disappointed. Startups cost money for a long time before they pay.

  3. Startup challenges can be more painful then corporate frustrations. Professionals who are currently unfulfilled at a corporate job may not be ready for the startup roller coaster. Entrepreneurs consider vacations, training classes and administrative staff a luxury they rarely see. Make sure your passion is running to a startup, not away from corporate.

  4. A self-centered view of performance. In your corporate role, success is often measured by personal performance, independent of business growth. In a startup, a customer-centric view is required, and business success or failure overrides all personal measurements. There is no room in a startup for the egotistical Lone Ranger.

  5. Unprepared for the loneliness at the top of a startup. Running a startup is tough, since you are really on your own, with no peer support. If your personality already leans toward narcissism, being the boss can bring out the worst in you, leading to intimidation, deception and the use of coercive power. Of course, that leads to further isolation.

  6. Thinking that a startup is a job vs. a lifestyle. A corporate business role may be a short-term job, but the entrepreneur role is a lifestyle commitment. It’s not a job promotion to the next level, nor an escape from too much stress or responsibility. A lifestyle requires a passion for the journey, more than the destination.

Every employee needs to understand these challenges, since the days are gone when people commit early to a lifetime career with one company, or a lifetime of entrepreneurship. Even the average baby boomer today will have switched jobs more than 10 times, according to the U.S. Bureau of Labor Statistics, and Gen-Yers are already switching much more frequently.

If you are planning a corporate escape as your next move, it pays to think hard about a plan B, just in case this one doesn’t work out. Don’t blow up your bridges as you exit, just in case you want to return. Jumping randomly from one bad situation to another is not very smart. Maintaining good connections and good relationships in both worlds is always valuable.

Many corporate employees seem to think all jobs are a necessary evil, and are always looking to minimize the pain. Successful entrepreneurs don’t think of their roles as work, and tend to approach it with passion and excitement. Making that mental transition is the key to any escape, and it needs to happen before you make the move, not after.

Remember, we all spend most of our lives at work contributing something to others, and getting something in return. It’s up to you to make it a satisfying and productive experience, rather than a prison that you dream of escaping from. Maybe it’s time to reset your mindset before hoping that a career change will do it for you.

Marty Zwilling

*** First published on Entrepreneur.com on 8/21/2015 ***

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Sunday, August 30, 2015

4 Customer Decision Moments And How To React To Each

Elizabeth_II_at_an_office_opening Today’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 classic 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

See Russian translation, thanks to Everycloudtech.
See Vietnamese translation.

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Saturday, August 29, 2015

4 Strategies That Must Be Part of Customer Marketing

customer-marketing-strategy With the advent of social media and the pervasive move to smartphones, even customers who still prefer to purchase in brick-and-mortar stores have dramatically changed their shopping habits. Many people don’t post about their experiences, but still routinely check first to see what others are saying about the brand and the product online.

This new customer paradigm is no longer a homogeneous group driven by traditional media, but a network of unique individuals who interact with each other to develop buying criteria and expect businesses to interact with them in a visible way. If you refuse to play by their rules, they have the power to easily find alternatives, and actively pull other potential customers away.

For example, mobile now has become the formidable new communication channel, posting a year-over-year growth rate of 47 percent in 2014, according to WBR Digital Research. That means your marketing must now include shopping apps, location-based services and mobile wallets. Customers expect personalized messages, delivered to them wherever they are.

Here are four new strategies that every entrepreneur must now include in their marketing platforms to survive and thrive in this digital and highly mobile age, ranked by effort and cost on your part:

  1. Frequent new content on the web, social media and via mobile. I still see too many websites that look like they have had no updates or blogs in months or even years. Today’s customers ignore these sites in favor of ones with dynamic daily specials, promotions and positive reviews easily accessible on their mobile devices.

  2. Get beyond push messages to real customer engagement. Interaction with customers is usually started by responding dynamically to customer-service requests, but must be extended to online chats, comments and social media. Blogs must provide value to customers.

  3. Provide personalized solutions through customer interaction. Today’s customers expect to be able to quickly find what they need with powerful search capabilities on your site, or even the ability to customize your solution to fit their unique needs. One example of this is Nike’s shoe size page. The best sites engage customers more deeply and add more value.

  4. Engage customers to support shared cultural and societal causes. Motivate your customers to support you by helping them support a common social cause, such as feeding the hungry or saving the environment. See this Business News Daily article for some great examples that have benefited the customer as well as the business.

While most entrepreneurs I know would agree with these initiatives, and profess to understand the new customer paradigm, I still see some common pitfalls, usually brought on by too much ego and passion for their new ideas:

  • Assume that everyone loves hot new tools. Most startup founders are early adopters, so they love the latest and greatest technology. The great majority of customers, however, are wary and frustrated by new technology. The best tools, if expensive or hard to use, won’t fit the new customer paradigm you seek.
  • Assume that customers are all like you. Entrepreneurs sometimes minimize customer interaction under the mistaken notion that their personal passion will be shared by everyone in their market segment or generation. In fact, customers are all different, and want to be treated uniquely. In addition, trends change rapidly and you need to keep up.
  • Assume that more options are better. Focus is critical. More features only confuse your customers and complicate your message. Trying to do too many things as a startup usually means that all are done poorly. Start with a clear vision, and focus your measurements and communication around this goal.

Connecting and interacting with the new customer is everything today. These actions will help you drive sales, reduce costs and find better ways to compete, whether your business is online or on the ground. The old customer paradigm is rapidly going away, and so will your business, if you don’t change. In today’s business, maintaining the status quo is a losing strategy.

Marty Zwilling

*** First published on Entrepreneur.com on 8/19/2015 ***

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Wednesday, August 26, 2015

7 Principles Of Business Agility To Dodge Disaster

agility-dodge-disaster Most small businesses are trying to forget the last 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 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 principles of agility that are required for you to survive and prosper:

  1. 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.

  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. 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.

  7. 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, August 24, 2015

Smart Startups Learn How To Create And Manage Hype

StartupBus Creating a successful startup is all about marketing these days, no matter how compelling your solution. Technologists have long believed that marketing is only required when selling the next pet rock, but in this age of information overload, even the most exciting solutions will be lost from view or assumed to have no value unless they are surrounded by hype.

According to Urban Dictionary, hype is “a clever marketing strategy where a product is advertised as the thing everyone must have, to the point where people begin to feel they need to consume it.”

Even technology solutions with a large intuitive value, such as a cure for cancer, need hype for visibility, education, side-effect considerations and to avoid a scam label. What most entrepreneurs fail to appreciate is that even the most basic marketing takes time, money and creativity, and even the best still may not succeed in winning over competitive approaches or the status quo.

Marketing acceptance, especially for new technologies, actually goes through several predictable stages, called the hype cycle, as outlined by Gartner research. This cycle is actually an evolution to total acceptance of a specific solution or technology, based on the effectiveness of the marketing and hype and on the feedback of early users.

Progress through these phases is unpredictable in time, often takes many years, and can only be measured by customer surveys and market penetration analyses. Here are the five key phases:

  1. Innovation trigger. Every new startup rolling out an innovative solution is the start of a new cycle. Early hype actually should precede the final product, and consists of proof-of-concept stories, media events and industry exposure. Every entrepreneur in stealth mode who insists on waiting for their product runs the risk of being a non-starter.

  2. Peak of inflated expectations. This is the phase where the marketing hype has fully kicked in, often creating unrealistic expectations which the solution can’t yet deliver. Many startup solutions flame out at this point. According to Gartner's Hype Cycle Special Report for 2014, wearable user interfaces such as Google Glass are now in this stage.

  3. Trough of disillusionment/ Solutions and startups that stumble under inflated expectations quickly lose their allure, and enter a long period of slow growth or even a big downturn. Technologies used in these solutions are then seen as red flags by investors. Examples include mobile health monitoring, NFC (near field communication) and virtual-reality systems.

  4. Slope of enlightenment. Over time, with more marketing, and with further enhancements, customers begin to understand and accept the practical benefits of a given solution. This is the phase where strategic partnerships and new markets are key. Investors seek out startups at this point that are well positioned for rapid scaling.

  5. Plateau of productivity. This phase more specifically applies to technologies that have evolved through multiple generations and are widely accepted. Multiple startups can now spawn solutions from the technology, and position themselves for rapid customer growth and early seed-stage support from investors.

I have intentionally broadened the hype-cycle definitions from their traditional hard-technology application to include soft technologies, such as social networks and entertainment. The rules for technology startups are no longer unique -- marketing and hype are now as critical for business-to-business solutions as for business-to-consumer solutions.

There is evidence that the elapsed time of each phase is getting shorter, which just means that every entrepreneur needs to start earlier, and measure feedback more carefully, or risk failure by working on the wrong problem. As an angel investor, I often hear startups touting inflated expectations, or refusing to pivot in the face of disillusionment for their technologies.

The days are gone for those who believe that “If we build it, they will come!” Growing a business in this highly connected and information-intensive world requires a total focus on marketing and evolving customer perceptions. The best startups start early, and put as much focus on the hype as they do on the product. Where is your solution in the hype cycle?

Marty Zwilling

*** First published on Entrepreneur.com on 8/14/2015 ***

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Sunday, August 23, 2015

6 Ways A Prototype Will Enhance Your Startup Idea

startup-prototype These 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 such as MockFlow, or even Microsoft Powerpoint to lay out the key screens.

Here are six results 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:

  1. 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.

  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. 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, such as 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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Saturday, August 22, 2015

7 Ways Smart Startups Tune In To Customer Feedback

customer-feedback-listening Entrepreneurs 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:

  1. 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.

  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. 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.

  7. 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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Friday, August 21, 2015

7 Ways Founders Demonstrate They Can Run A Startup

Jack_Dorsey_-_Twitter When starting a new business, an entrepreneur has to take a “hands-on” role. Because there are so many unknowns, and things are happening so fast, this is no time to delegate or hire outside consultants to handle core functions. That fact eludes most executives from mature companies who have long depended on their staffs for real work, while their focus stays on strategy.

Thus I don’t see many startups run in absentia or by big company executives. Startup founders need to see, touch and feel all the key elements of a new business as it evolves, much like an artist renders a new painting or sculpture. Once the outline and core of a new sculpture is complete, assistants and experts can step in, even under contract, to finish the piece.

In the context of a startup, there are many “hands-on” attributes that every entrepreneur must demonstrate and enjoy if he or she hopes to succeed in building a new business. In my experience, these include the following:

  1. Be recognized for innovative actions as well as ideas. The best startup founders are ready and able to roll up their sleeves and jump into any issue and contribute, whether it's business related or technical, no matter how much expertise team members may possess. The best founders know how to pull the best out of others.

  2. Communicate a clear vision, as well as a path to the destination. This means a founder needs the ability to attract the right people to a team and motivate them. Then the vision must be translated into a set of tasks to match the skills of the people who can make the vision real. The founder needs to be a mentor and advisor, as well as a leader.

  3. Capitalize on relationships inside and outside the company. Startup founders who are lone rangers or autocrats usually burn out or make big mistakes. The ability to nurture relationships, and know when and how to use them, is paramount to success. Relationships only work if they are win-win, so understanding constituent needs is key.

  4. Track and measure both long-term and short-term objectives. Translating vision into a plan, milestones and metrics is a key responsibility of every entrepreneur. All of these must be updated at least quarterly, based on feedback and results from customers, and communicated to the team on a regular basis.

  5. Able to adapt or pivot the business to respond to the market. Every startup I'm aware of has had to pivot, no matter how elegant the initial plan. Did you know that both Facebook and YouTube started out as dating sites? Founders who are close enough to the front lines are required to listen to market feedback and be savvy enough to respond.

  6. Provide constructive feedback and growth opportunities for the team. Individual team member reviews cannot be delegated or moved to the bottom of your priority list. Founders who are consistent and predictable in managing accountability across the team, including hiring and firing, consistently generate the most loyalty and results.

  7. Accept accountability for all decisions, with no excuses. The best entrepreneurs give everyone around them credit for the successes, and take full responsibility for all the failures. They learn to delegate effectively, hire people smarter than they are, and put processes in place so that the business is able to run independently of their presence.

The best startup founders actually relish their “hands-on” role in building and selling their solutions, but don’t back away from the business decisions and administrative responsibilities either. They enjoy the camaraderie of the team, but are normally tough taskmasters. They build relationships that often last a lifetime, even with competitors and investors.

Running a startup can be an intense and stressful experience, so rolling up your sleeves should be seen as a way to diffuse the pressure, build your skills and avoid the loneliness at the top. Investors and major customers are quick to spot and support the startup founder who is clearly working in and on the business and having fun at the same time. Do you fit that mold?

Marty Zwilling

*** First published on Entrepreneur.com on 8/12/2015 ***

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Monday, August 17, 2015

6 Keys To A Positive Online Presence And Reputation

online-reputation-positive Most entrepreneurs assume that a lack of an online reputation is a good thing. In reality, it’s negative, because people who can’t find you or any mention of your startup anywhere on the Internet assume you are not savvy or have something to hide. At the very least, with no positives for balance, it’s very risky, since the first negative mention of you or your company will kill your reputation.

The simple solution is for you to define your online identity early with positive content, starting with a business website with the right domain name, and an "about me" page with pictures that paint a positive image of your background, accomplishments and current mission. In addition, there are many other proactive ways to expand that positive presence, including the following:

  1. Claim your identity on social media before someone else does. You may not think it’s important to have a Facebook or Twitter account, but once you and your business get some traction, others with less scruples will be quick to grab your name and use it against you. Identity theft can be as devastating to a business as it is to a person.

  2. Actively contribute to common business and personal profile sites. Just the act of registering on these sites sets a positive reputation. Occasional engagement and visibility in forum discussions and industry activities establishes positive content to offset the random negative comment that every passionate entrepreneur is sure to generate.

  3. Add new blog content to your site on a regular basis. Blogging is an ideal way to express your positive values, show your expertise and establish yourself as an influencer. If done well, this will get you a wealth of positive comments, as well as provide real “Google juice” to push negative content out of view on any search engine results.

  4. Monitor the web for negative comments and address them directly. Any not-so-positive reviews or comments can be found with Google Alerts or a similar free tool, and should be answered quickly in a non-defensive manner, ideally pointing to other previous positive content. Don’t make the mistake of ignoring negative comments or reviews, hoping no one will notice.

  5. Actively work to remove irrelevant and unwanted content. It is always worth contacting a site owner to remove unflattering content, but you may not have much leverage. You can delete comments on your own site, or articles you have contributed. Expert sites, such as BrandYourself, have proprietary techniques to help remove bad content.

  6. Live the reputation you want to see online. These days, everything you do or say, even in a moment of weakness or in private, ends up online. It’s impossible to live one life and project another, so remember your current or future business before posting that provocative picture on Facebook. The Internet sees the good, the bad and the ugly.

If you have slipped a couple of times in the past, it can be helpful to reach out to friends and supporters to attest online to your newfound focus on the business. They can provide links to additional positive or neutral content, which will help to displace and minimize the offending content.

In case you are not yet convinced that these efforts are worthwhile, note that online reputation damage now heads the list of top 10 business risks in Aon's 2015 Global Risk Management Risk Ranking, from a survey of 1,400 risk-management professionals in 60 countries. They project an 80 percent chance that your company will lose value within five years due to this problem.

The good news is that a positive online reputation is the best lead-generation approach you don’t have to buy, if you are proactive and do it right. Don’t assume that it will happen by default. It pays to be street smart, stay out of the back alleys and be prepared for the road ahead. Your reputation follows you, and can be your salvation or the cause of your downfall.

Marty Zwilling

*** First published on Entrepreneur.com on 8/7/2015 ***

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Sunday, August 16, 2015

6 Of The Best Reasons For Declining Investor Funding

decline-investor-funding As an angel investor to startups, I’m still surprised to find entrepreneurs who expect investors to give them money, and assume no strings attached. Would you do that if it was your money? If the entrepreneur wants total control of their own venture, with no one looking over their shoulder, they should work within the limits of their own resources, a process called bootstrapping.

Angel and venture capital money always comes with ownership and management implications, starting with the obvious ones outlined in the term sheet for the deal. These normally include what percentage of the company the investor now owns, how and when tranches of money will be delivered, and even how and when you can sell your own shares (liquidation preferences).

Finally, entrepreneurs should never forget that investors really believe that they are there to help (not like “I'm from the IRS and I'm here to help”). In fact, they usually invest because they have extensive experience in your business domain, often have strong convictions on what it takes to succeed, and probably would like you to do it their way.

In any case, your startup is now part of some investor’s portfolio, so you need to treat the situation like reporting to a new boss, and not like a new freedom. That means listening to investor expectations, communicating regularly and effectively, and assuming that all your efforts will now be monitored in the following ways:

  1. You now must have a Board of Directors. As an early-stage startup, you may have some hand-picked mentors as an Advisory Board, but now you need a formal Board with approval rights on all your strategic decisions and pivots. Investors will expect at least one seat on the board, and expect a board report from you each month on key items.

  2. Progress milestones become management objectives. Every funding term sheet is followed by a set of milestone commitments, which should not be considered optional suggestions. Funding can be pulled, and future distributions withheld, if objectives are not met. Your very role as CEO is at risk if the Board is not satisfied with your progress.

  3. Your time is no longer your own. Many investors will feel the need to visit your office, or just call you to chat, for a personal update on how things are going. They see you as working for them, as opposed to them working for you, so these calls, visits, and questions are not something you can delegate, or postpone repeatedly.

  4. Communication to investors must be regular and proactive. A quick way to lose support of investors is to wait for prodding from them before providing communication updates, or answers to changes in status or direction. On the other hand, calling them on every minor issue, or asking them to make decisions for you is equally bad.

  5. You can’t keep bad news secret. Most entrepreneurs try to keep team morale high by limiting and editing the flow of information downward, so they try to do the same thing upward to their investors. Unfortunately, this practice can get them fired quickly, due to the legalities of the shareholders rights agreement on what must be shared and when.

  6. Cash flow tracking is even more important with someone else’s money. Since they now have money in the bank, entrepreneurs sometimes start delegating spending decisions, or they decide that it’s time to make that trip to Paris that they couldn’t justify before. You must be even more strict with investor cash than with your own.

If you haven’t done this before the investor deal was signed, now is the time to talk to each of your peers who may have received money from the same investors. These peers can tell you what works and what doesn’t work with a given investor. Also, these peers are now your competition in a portfolio ranking, so you need to know to stay ahead of them in the pack.

If your startup is one of the high fliers in the portfolio, be aware that investors may ask you to take even bigger steps into the unknown, hoping you can be the next Google. Certainly you don’t have full control, but don’t get talked into taking unnecessary risks just to make the investor’s portfolio a leader among their peers.

In reality, when you take someone else’s money, your job as an entrepreneur gets even tougher and riskier than before. I’ve seen many startups that might well have succeeded, if only they had not attracted all the money they wanted. In the startup world, hardship and struggles are often your best teachers. If you do take investor money, do it with your eyes open. It can disappear quickly, leaving you with just some heavy strings.

Marty Zwilling

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Saturday, August 15, 2015

8 Startup Situations Challenge Founder People Skills

leadership-excellence Most 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 classic 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 some 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, August 14, 2015

8 Ways To Prepare Your Startup For Obstacles Ahead

obstacles-ahead Too many entrepreneurs tackle starting a business as a random walk into a business minefield, and they count on their street smarts, thick skin and pure determination to get them to their destinations alive. That does work once in a while, usually with some serious collateral damage, but a less painful approach is to prepare and plan for each step along the way.

One preparation example is the value of building a business plan before you start. A popular startup myth claims you don’t need one, since investors never read them. The reality is that if you are only doing a business plan for investors, you are already in trouble. You need the business plan for yourself, to force you to draw a detailed roadmap through the obstacles ahead, and be able to measure your progress along the way.

In my perspective as an advisor and mentor to many entrepreneurs, there are a set of basic strategies that can be applied to every startup to dramatically improve the odds of success, no matter what the business domain. These include the following:

  1. Take inventory of your resources before you start. Funding is only one of the critical resources you need to start a business. Maybe more important, you need domain knowledge, relationships and lots of potential customers. Some entrepreneurs run with passion into the minefield, only to find it’s harder to recover than to plan ahead.

  2. Define success as it relates to this startup. For some entrepreneurs, the end goal is a social one, such as saving the environment or feeding the hungry. For others, it’s all about making money. The path to each of these destinations is quite different. If you and your team don’t know where you are going, the obstacles will loom large and endless.

  3. Prepare a startup vignette to highlight value. Every startup needs a simple elevator pitch, quantifying the value of its journey, that can be communicated in less than a minute to new team members, potential investors and customers. As an investor, I’ve heard people talk for many minutes, and I still had no idea where they were going or why.

  4. Calculate and manage your financials. Even non-profits require money to operate, so every startup needs a business model with plans to bring in income. Manage expenses and measure success by profitability, as well as social value delivered. Pace yourself to avoid financial dead ends that can kill your startup.

  5. Scaling the business requires repeatable processes. Plan ahead to add more structure, people and financial resources to convert initial success into long-term growth. This means delegating tasks and not micro-managing, as well as more time spent working on the business, rather than in the business.

  6. Define metrics to keep on track for the journey. Common financial metrics include burn rate, gross margin, revenue growth and net profit. You also need a sales pipeline, customer acquisition costs and marketing costs as a percent of revenue. These measurements should be driven by your values and your company culture.

  7. Continually motivate and reward your team. Team loyalty and positive motivation is a powerful force for overcoming unforeseen obstacles. Reward systems should focus on progress and results, rather than time worked or entitlement. Celebrate every small milestone and success to keep the momentum growing.

  8. Maintain your own strength and drive. You won’t survive the journey if you try to run the business 24 hours a day. Be sure to schedule time away from work for physical and mental rejuvenation, including for hobbies and family. Mentors, advisors and business peer support groups are also key to a better perspective on the road ahead.

The best entrepreneurs I know use these strategies to prepare themselves before the assault and to prevent being surprised by the obstacles they will likely encounter. Prepared entrepreneurs are ready and able to dodge and pivot quickly, and not burn themselves out before they reach the finish line. The alternative is to endure a hard road and a painful beating along the way that I wouldn’t wish on anyone.

Marty Zwilling

*** First published on Entrepreneur.com on 8/5/2015 ***

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Monday, August 10, 2015

Why You Must Really Know Yourself Before A Startup

know-yourself If you're an aspiring entrepreneur, you need to take a hard look at yourself before leaving that regular paycheck. Don't assume you will be happier and make more money starting the business of your dreams.

The good and the bad news is that as an entrepreneur, you won’t have a manager charged with directing your efforts or peers helping you implement, and your new team will be quick to tell you only what you want to hear. Thus the burden is on you to capitalize on your strengths, find co-founders and team members to fill the gaps and find mentors and advisors you trust.

Very few people are superhuman, with all the skills, creativity, business acumen, knowledge and personality to succeed alone at any business they tackle. For the rest of us, taking a realistic view of our individual limitations, and acting with them in mind, is the only way to succeed, for the following reasons:

  1. Starting the right business requires knowing yourself. If you know your strengths and what you enjoy, you are more likely to tackle a business problem that is best suited to your skills and interests and is less sensitive to your shortcomings. Too many people fail working on someone else’s problem. You won’t be happy in the wrong business.

  2. Attracting the right team requires knowing what you don’t know. You need to surround yourself with the best people to complement your strengths and fill your gaps, so together you will be able to see the real opportunity, set the right objectives and execute to success. Many entrepreneurs fail because they seek out the wrong team.

  3. Building a business requires confidence in yourself. As an entrepreneur, you will have no place and no one to hide behind. Knowledge of yourself is the key to confidence, and confidence builds leadership. Building a new business requires good leadership to develop the market, attract customers, motivate the team and conquer the unknowns.

  4. Being authentic and genuine gets the best from others. To be effective as a leader and respected by your team, they must see that you like who you are. Customers and outside business partners also respond to this vibe and give you the respect and trust you need to keep going. It’s painful and ineffective to continually be someone you are not.

  5. Make better business decisions by playing to your strengths. Capitalize on your strengths, and accept input from advisors and the team on decisions outside your range. Everyone will see you as a better listener and a stronger leader who is not autocratic, and knows how to tackle the many unknowns of a new business.

  6. Know when to say "no" without guilt. Knowing your limits, and not taking on tasks that you can’t deliver on or are not priorities, is the only way to survive in a modern business world that demands your attention 24 hours a day. Entrepreneurs who know themselves are not afraid to delegate, and never use the “too busy” excuse.

  7. You won’t improve if you don’t know what needs fixing. Every entrepreneur and every business needs continuous improvement. Understanding yourself will help you set the right priorities for self-improvement, including working on your health, balancing family life, changing bad habits and joining business peer groups.

If these observations make no sense to you, it may not yet be the time for you to start down the path of an entrepreneurial lifestyle. Many people are happier to stick with the familiar, even if not totally satisfied and happy, rather than deal with the stress and likely failures of starting their own businesses.

Marty Zwilling

*** First published on Entrepreneur.com on 7/31/2015 ***

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Sunday, August 9, 2015

8 Battle Strategies Every Business Startup Needs

Strategy_Concept Winning customers as an entrepreneur in a startup has many parallels to a young army trying to penetrate some formidable new and unfamiliar territory. You need a strategy as well as a goal, and you need to pick your battles well. Even in this age of purpose before profits, a business won’t survive by pretending there are no competitors out there to worry about.

I had certainly heard of the 2500-year-old, but still current, masterwork on military strategy by Sun Tzu, “The Art of War,” but never thought very relevant to business startups. But Becky Sheetz-Runkle, in her book a while back for small businesses, “The Art of War for Small Business,” gave me a whole new perspective.

In the context of offering some inspiring examples of small business success, she includes some timeless business lessons that I believe every startup entrepreneur should take to heart and follow in practice. As examples, I offer my interpretation of some of the key lessons here:

  1. Scout the territory first and pick your battles. A smart general going into battle always does the research first on the lay of the land, including critical high points that have the most value, before charging into the fray. Too many startups rush into battle early, assuming any progress will somehow give them the competitive advantage.

  2. Prepare thoroughly and strike fast. Lining up your resources is critical, but so is time to market. Some entrepreneurs get bogged down in planning and never get to the point of action, often called analysis paralysis (i.e. ready-aim-aim-aim-aim-aim...). A good general makes sure his troops are trained and prepared, and are not hesitant to act.

  3. Capitalize on strengths and shore up weak points. A winning military leader always knows the weaknesses of his troops, as well as the strengths. Entrepreneurs likewise must be able to recognize and leverage the competencies of the current team, while providing the backup and direction to minimize weaknesses in selecting target markets.

  4. Attack competitor weaknesses and be alert for opportunities. Every competitor, like every army, has weak points, and every territory has ready opportunities. Entrepreneurs must seek these out, pivot as required, and lead the team into battle. Small wins and some penetration builds momentum and bolsters morale for that major assault.

  5. Limit your focus to key objectives on a single front. No startup or army can manage more than 3 to 5 goals and priorities without becoming unfocused and ineffective. Pick the key challenges and attack them will all your resources, rather than stay spread so thin that every initiative is jeopardized. “Spray and pray” is not a winning strategy in any war.

  6. Capture territory the opposition does not yet own. In war, the smart general looks for territory that is undefended. Success there is assured, but the value of that position may also be low. In business, it’s always smart to look for new opportunities, or markets with few competitors, but beware of “solutions looking for a problem,” and lack of customers.

  7. Negotiate and leverage win-win alliances. Even in ancient times, creative diplomacy was a better solution than fighting to the death. Entrepreneurs need to learn that your toughest competitor may be your best strategic partner, leading to a win-win situation. This approach is called coopetition, and is too often overlooked as a key strategy.

  8. To win you have to take risks, but don’t be reckless. There is no safe position in business, or in war. In both cases, charging into battle with your eyes closed, is simply reckless, and will lead to destruction. Winning in either arena requires the skill and willingness to take smart risks, with trained resources, due diligence, and determination.

In fact, I now believe that all of Sun Tzu’s teachings are still relevant to entrepreneurs, who more than ever face fierce competition for customers, market share, and talent. Their very survival depends on strategy, positioning, planning, and leadership, just like it did for armies a thousand years ago.

With these lessons in hand, entrepreneurs today in startup companies can and do outsmart, outmaneuver, and overwhelm larger adversaries to capture market share, satisfy unmet needs, and emerge victorious in their chosen markets. That’s the challenge and the fun of being an entrepreneur. Believe me, it’s a lot more satisfying than the alternative.

Marty Zwilling

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Saturday, August 8, 2015

5 Strategies To Make Your Solution Really Memorable

Apple_logo_Think_Different Every entrepreneur believes that their product or service is memorable, and that every customer will quickly see the advantage over competitors. Yet true product differentiation in the eye of the customer is rarely achieved. According to a classic survey by Bain & Company, 80% of businesses believe they have differentiated offerings, but only 8% of customers agree.

To highlight the impact of being perceived as differentiated, other experts project that businesses with truly differentiated offerings have an 80% chance of long-term success, whereas companies with ‘me-too’ customer perceptions have only a 20% chance. Differentiation is a key requirement for a successful startup rollout, and must be sustainable to keep ahead of new competition.

Since I’m a fan of real-world feedback, I was intrigued by the insights on differentiation in a recent book, “Roadside MBA: Back Road Lessons for Entrepreneurs, Executives, and Small Business Owners,” by Michael Mazzeo, Paul Oyer, and Scott Schaefer. As well as having great academic credentials, these guys recently traversed the USA getting lessons from real small businesses.

Here are a few of their conclusions relative to product differentiation, supplemented by my own recommendations from experience and other experts:

  • Work on perceptions, as well as reality. It doesn’t do you any good to be different, if your customers can’t perceive the difference, or you don’t tell anyone about it. The days are gone for the “if we build it, they will come” mentality. Marketing and target customer relationships are always required, no matter how obvious the differentiation is to you.

    Of course, working on perception can backfire if the differentiation reality isn’t there. Remember the old saying, “You can put lipstick on a pig, but it’s still going to be a pig.” Like a damaged reputation, a discredited differentiation is extremely difficult to turn positive.

  • Quantify the difference for your customers. Use numbers to make your offering the clear alternative. Fuzzy marketing terms like easier to use, lower cost, and higher quality are not effective differentiators, since they have been overused to the point of having no meaning.

    Real data and customer testimonials say it best, such as get it done in half the time, or half the cost, or comes with a 5-year warranty. In my experience, numbers less than 20% are not enough, since small numbers are not likely to overcome the inertia and learning curve required of most customers.

  • Focus on customers you really care about, and who care about you. Trying to be all things to all people never works. Identify your target customer segment before you finalize your differentiation. For example, customers with high disposable income will likely respond better to unique features, rather than a lower cost.

    One business visited on the road had successfully implemented a product-differentiation strategy to appeal to the 20% of their clients who were the most profitable, and discourage the 80% who were more costly. They noted that customers’ loyalty grew with their real preference for the unique product features offered.

  • Customize to differentiate, but do it efficiently. The new generation of customers expect to get what they want, when they want it, customized to their taste. So customization is an important differentiation strategy, but be sure to strike a balance between the revenue potential of the effort, versus the costs required to execute.

    We have moved from the era of mass customization to collaborative customization. Today, differentiated companies enable customers to determine the precise product offering that best serves that customer's needs. For example, MakeYourOwnJeans encourages customers to tailor-make jeans dynamically per their specifications.

  • Define a unique selling proposition (USP), and keep it simple. Complex or highly technical selling propositions are not good differentiators, since they will likely not grab people’ attention or be remembered by most customers. A good example is Dominos Pizza “We’ll deliver in 30 minutes or less, or it’s free!”

Successful product differentiation requires a conscious and continuous effort, including listening on the right social media channels, being consistently helpful to your customers, and continuous innovation. But the results can put you in that coveted 8% that customers remember for real fun and profit. Isn’t that why you signed on to the entrepreneur lifestyle in the first place?

Marty Zwilling

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Friday, August 7, 2015

8 Ways An Investor Pitch Differs From A Product Pitch

goon meet When pitching to investors, entrepreneurs always seem to start with a customer pitch, then add a slide or two about the business. In reality, they need a separate pitch about the business, carrying over only a slide or two about the solution. Remember, investors are buying into the business, not the product. Investors are business experts, while the entrepreneur is more likely the product expert.

In every case, the relevant pitch needs to start by highlighting a real customer problem, then outlining a new solution, with all the features and disruptive technology. One of the most common red flags I hear from my fellow investors, and even customers, is that they hear yet another “solution looking for a problem.” These don’t get funded, nor bought by customers.

Beyond that common starting point, the why and how of the business are more important to investors than the what. Attracting business investors is as tough as attracting customers, but it’s a different challenge. Investors have business motives, so using customer motivations to attract investors won’t work. Here are the motivation elements that investors expect to hear:

  1. Size and growth potential of the market opportunity. Your customers don’t care if you are targeting a billion-dollar market and growing at double-digit rates, but investors will skip small or shrinking opportunities. Large and growing markets imply a high startup growth potential, with high odds of scaling and success.

  2. How the solution and business model work to fund the business. Every customer understands that your solution has to generate more revenue than cost, but you should not put that data in a customer pitch. Investors will impatiently expect a winning business model, customer segment definitions and volume projections.

  3. Competitor positioning and sustainable competitive advantage. How you intend to beat specific competitors (business model, intellectual property) is a key investor decision criteria. Your solution may be a technological marvel, but if it is vulnerable to competitors, potential investors will likely walk away. “First to market” is not sustainable by a startup.

  4. Startup team strengths and domain experience. Customers may be attracted to your marketing message, but investors look harder at the startup team, seeking superior expertise in the key areas of growing a business, product domain, financial, marketing and sales. In my experience, the team's credentials are more important than the product.

  5. Specific elements of your marketing and sales plans. Of course, these should never be in a customer pitch, but investors expect an overall strategy with specific budgets, milestones and metrics. Partnerships, distribution channels and pricing models should be included. “If we build it they will come” is not a marketing and sales strategy.

  6. Projected revenues and expenses over the strategic period. Typically, investors want to see five-year financial projections to check your commitment and understanding of the business's potential. This allows them to calculate burn rates, break-even points and forecast the company valuation over time.

  7. Immediate investment requirements and use of funds. No investor pitch should end without asking for a specific amount of money, providing some details on how that money will be used and what equity in the company you are offering in return. Investors are also interested in future investment requirements, time frames and long-term strategy.

  8. Potential investor return calculation and exit strategy. Startup investments are extremely risky, primarily because the stock has no value until a future liquidity event, such as an acquisition or public offering. The entrepreneur needs to show a strategy for such an event, and a projected value and return to the investor.

Putting together a good investor pitch is hard work. It requires the same level of understanding of your business that you probably have already put into developing your product or service, over a period of months. A great product can’t exist without a business, just like a great business can’t exist without a product. A great entrepreneur has both, with the ability to tell the difference.

Marty Zwilling

*** First published on Entrepreneur.com on 7/29/2015 ***

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Wednesday, August 5, 2015

5 Leadership Initiatives Define Great Entrepreneurs

509307017DH00049_TechCrunch Most aspiring entrepreneurs are convinced that the strength of their initial idea somehow defines them as a leader, as well as the success potential of their derivative business. In my experience, it’s a lot more complicated than that. It takes leadership ability, as well as a good idea, to make a successful entrepreneur, and great leaders evolve from key leadership decisions along the way.

Fortunately, basic leadership and entrepreneurial skills can be acquired from experience and training. If you don’t have the entrepreneur leadership attribute or interest, but want to be an “idea person” or inventor, then I recommend that you find a partner with the requisite skills to implement and run the business from your idea.

Yet we all know that there is a big gap between good entrepreneurs and a great business leaders. Great leaders seem to make the right pivotal decisions at every critical point along the way. I’ve never been able to clearly define those key points, and what separates the good from the great at these points.

So I was happy to see Julia Tang Peters, in her recent book “Pivot Points,” tackle this issue. She concludes from her work with many modern business leaders, including CEOs Bud Frankel (Frankel & Company) and Glen Tullman (7wire Ventures), that there are five pivotal decisions that propel certain entrepreneurs to be gifted leaders:

  1. The launching decision. At some point an idea captures your imagination and creating a business becomes more than just about income. You define goals that rivet your attention, galvanizing you to turn dreams into reality. The launching point establishes the platform on which every potential entrepreneur becomes an actualized entrepreneur.

  2. The turning point decision. This is the confluence of your willful decision to do more, and the pressing need to take action. It unleashes an extraordinary verve to take the idea or business to the next level. It tests your capabilities and capacity in various ways, stretching them far beyond your comfort zone and requiring total commitment.

  3. The tipping point decision. Here you are catapulted into leading and working on the business, as distinctly different from the work of mastering your subject and working in the business. At this point you will have built a team whom you trust with substantive responsibilities, freeing you to hone the art of leading, inside and outside the business.

  4. The recommitment decision. Now is the time when you as the leader look at where you are and where you want to go, knowing the need to renew the commitment or leave. For many this happens during disruptive change, like being acquired or being the acquirer. For others, it’s a personal decision to balance family life, or do something different.

  5. The letting go decision.  The ultimate test of leadership is letting go at a time of strength so that others can carry on the work. It may be a hold’em or fold’em business situation, or simply time to plan for succession. This decision point is the most emotionally challenging, since letting go is pivotal in defining the terms of the entrepreneur’s legacy.

I’m certain that an understanding of these points will equip you with the knowledge you need to take the right path on decisions when it matters most. The world is full of high-achievers and high expectations, but without the proper framework for turning entrepreneurial determination into real leadership accomplishment, you risk going nowhere.

I agree with Peters that entrepreneurial leadership is not all about people traits or characteristics, but often about the choices they make at key decision points along the way. Of course, skills in decision-making are not enough alone to make a great entrepreneurial leader. Here are some of the other characteristics I look for:

  • Willing to listen, and will address skeptical views.
  • Always an evangelist and a good communicator.
  • Willing to question assumptions and adapt.
  • Proactively sets metrics and track goals.
  • Ties rewards to performance results.
  • Aggressively takes smart risks.

So a great idea is necessary but not sufficient to make you a great entrepreneur and a great leader. Work on the right characteristics, and think hard about those five key pivotal decisions that can make or break your satisfaction and your legacy. It’s more fun when you are the entrepreneur leader you want to be.

Marty Zwilling

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Monday, August 3, 2015

7 Strategies To Reduce The Cost Of Finding Investors

cost-of-investors1 Most new entrepreneurs assume that great investors will find their startups based on the compelling solution the founders have created. It does happen once in a while, but usually only for entrepreneurs who have already spent money promoting their efforts, and a large amount of precious time connecting with their peers and the investment community.

Others spend money on mailing lists and investor contacts and “cold calling” a few thousand people, hoping to find someone willing to take a risk on an unknown company. As an angel investor, I believe this approach is a waste of time, since no honest investor is likely to seriously consider a request for money from a stranger. There are just too many scams.

Thus it behooves every entrepreneur to optimize their investment strategies early, based on time and dollar costs, as well as odds of success. In all cases, due diligence is recommended on every potential investor and angel group before spending money you don’t have, looking for money you need. Here are some key recommendations to get you started:

  1. Plan for adequate time to find an investment. Don’t wait until your startup is out of money before looking for an investor. Potential investors can sense a desperate entrepreneur, and see it as an indication of poor planning, more than an opportunity for a great bargain. Count on the investment process to take three to four months.

  2. Use initial feedback wisely to improve your case. Investors are buying your business, not your product. The right investor will have specific feedback on pricing models, distribution and market positioning to improve scalability. Listen and ask for that feedback, rather than debating it. Update your materials and message after every pitch.

  3. Don’t be discouraged if your first try is not a success. Finding the right investor is a bit like finding a spouse. Look for someone with the right chemistry and complementary insights. It’s unlikely to be the first investor you encounter, no matter how beautiful your story. In my experience, finding the right investor will take several months and rejections.

  4. Practice with advisors and friendly investors before tackling the big guns. As they say, you only get one chance to make a great first impression, so don’t pitch to a key angel group or venture capital team for practice. Investors are not interested in “mulligans” at this stage, since they don’t expect to provide money for restarts later.

  5. Don’t be a total unknown to every investor in a meeting. Through peers, social media or connections, make every effort to meet one or more of the investors before the actual pitch. Entrepreneurs who are not known by at least one investor are presumed to have not done their homework.

  6. Weigh the cost of every pitch against the potential return. You can’t pitch to every investor or group, so consider the odds, travel expenses and fees of every opportunity. Don’t be afraid to ask an investor group leader for its track record, sweet spot and connections to startups funded. Follow up to learn expected terms and process time.

  7. Temper your approach based on the stage of your startup.  If your startup has a proven revenue model, real customers and is ready to scale, approach the best investors even if it costs you more money. For new entrepreneurs looking for seed-stage help, concentrate on investors who know you or organizations with a vested interest.

In addition to the indirect costs, entrepreneurs are often surprised to learn that they may be asked to pay a direct fee to investor groups to cover research and meeting expenses, just for the slot to present their case. This practice has caused a rousing debate among both entrepreneurs and investors, with some calling it a scam, and others defending it as filter for serious businesses.

According to the Angel Capital Association (ACA), only about a third of its member groups charge any fee, and in all cases less than $500. Other well-positioned groups outside the ACA, such as Keiretsu Forum in Silicon Valley, charge up to $1,500. Registered investment brokers, who assist in business plan and presentation preparation, as well as sourcing investors, may expect a $10,000 retainer per month, as well as 5 percent of investor money raised.

Thus it always costs money to raise money, so plan ahead. I would recommend a budget of at least $10,000 to prepare documents for pitching, legal fees for term sheets and contracts, travel expenses and assistance fees.

Don’t believe the myth that finding outside investors is easy, an entitlement or even necessary. Even today, more than 90 percent of new businesses are bootstrapped. For determined entrepreneurs, there is always a way to earn the money and retain control, rather than face the biggest costs of finding investors: giving away part of your business.

Marty Zwilling

*** First published on Entrepreneur.com on 7/24/2015 ***

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Sunday, August 2, 2015

6 Startup Strategies That Turn Off Most Investors

exchange-of-ideas Don’t bash the competition. Every investor knows how vulnerable a new startup is to competitors, so investors always ask about your sustainable competitive advantage in the marketplace. How an entrepreneur answers this question speaks volumes about their knowledge of business realities, customers, confidence, and their ability to handle investor funding.

There is no perfect answer to the competitive advantage question, but investors are looking for how your offering will keep ahead of competition, not just at this moment, but throughout the life of their three to five-year investment. They are also seeking to find out how you handle one of the many tough questions that a new founder will get in today’s market.

A strong answer should be something like “Our product introduces a new lower-cost technology, which we have patented and trademarked, that makes us very attractive today, and will provide a wealth of additional products as we move forward.” That says you are competitive today, have a real barrier to entry, and the potential to remain ahead of the competition for a long time.

Based on my own experience as an angel investor, and feedback I get from many other investors, here are a collection of answers that we often hear instead, from the least credible to at least reasonable:

  1. Insist you have no competitors. Leading with this answer will likely terminate any further investment opportunity with this investor. He or she will assume your comment means there is no market for your product or service, or you haven’t looked. Neither speaks well for you or your startup. Even if you hedge by saying no direct competitors, we all know that existing cars are still big competition to your new flying automobile.

  2. Claim the first mover advantage. This is one of the most frequent responses I hear, and is rarely convincing. The problem is that startups have limited resources to keep them ahead of big companies. If your early traction highlights an opportunity they have missed, they can mobilize their huge resources and run over you. First mover advantages are only sustainable by large companies, or founders with deep pockets.

  3. Proclaim your solution as a paradigm shift. If you insist that your technology is so new and unique that it will disrupt your competitors and the whole market, investors will fear that neither they nor you can afford the time and marketing required to weather the change. They will likely decline on the basis that historically, pioneers get all the arrows.

  4. Highlight your world-class team as the secret sauce. Insisting that your team is better than any other, giving you a sustainable competitive advantage for the long term, will likely come across as naivetĂ© or arrogance. Investors know that no startup has a lock on the best people and processes, and investors don’t deal with unrealistic founders.

  5. Declare that you will offer the product or service free. Free is a dirty word to investors, since they need a return on their investment. Perhaps you intend to collect money from advertisers, but this requires a large investment to get the audience you need before monetization can work. Facebook spent over $150 million before revenue.

  6. Intellectual property as barrier to entry. I like patents, trademarks, and trade secrets, so this answer is a better sustainable competitive advantage than the other five answers. Now all you have to do is defend your position, and we all know that patents can break a startup in court battles, and will have alternative implementations if the price is right.

Thus, there is no perfect answer to this question, so the best entrepreneurs see it as an opportunity to highlight their own advantages, rather than put down a competitor. Being negative is never the answer. For example, it’s tempting to say that your worst competitor has poor quality products, requiring costly maintenance, but it’s much better to say that you provide a five-year free warranty that no competitor can match.

After highlighting your best competitive features and your intellectual property barriers to entry, I encourage you to put on your humble face, and proclaim your determination to never stop improving your products and processes to out-distance competitors. You want investors to believe that you are a realist, but have the confidence and determination to win.

Investors know that winning in today’s highly competitive environment is more a mindset than a product feature. Competitor bashing is not a skill that you need to hone. I look for entrepreneurs that can sell themselves and their offering to discerning customers. Money from customers and investors is the same color.

Martin Zwilling

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