Monday, November 30, 2015

These 8 Disciplines Define A Fundable Entrepreneur

Palm with a plant growng from pile of coinsAspiring entrepreneurs often ask me what to do first when starting a business. Let me assure you, there is no absolute right or wrong, but there is real value in doing things in a sequence that minimizes the risks, optimizes your efforts and generates the best “first impression” on potential investors. Just don’t try to sell your business to investors before it is well established.

A popular approach these days seems to be for founders to regale investors early with a pitch touting the newest “million-dollar idea.” In fact, ideas are a commodity and by themselves won’t generate any funding interest, outside the context of a leader who can execute. Instead, entrepreneurs need to focus first on execution disciplines and timing. Here are my recommendations for establishing the right sequence:

  1. Nail down a specific problem and solution before incorporating. You shouldn’t try to create a business that hasn’t yet been defined. The name and the type have to fit, or expensive rework will be required later. The date of incorporation is the official start date for your business, so progress from this point will be scrutinized by investors. On the other end of the spectrum, a solution without a company will be seen as a hobby.

  2. Start with the simplest legal entity, to minimize liability and taxes. In the United States, this is a limited liability corporation, or LLC. A C-corporation is more complex and expensive, and is recommended only if you expect to pitch to professional investors who demand preferred stock, or to more than 100 potential shareholders. Don’t put your family assets at risk by assuming that a sole proprietorship or partnership will cover your business needs.

  3. Build your time line and momentum quickly after your business' start. Your credibility as an entrepreneur is at stake. Even new entrepreneurs should be able to move from an idea to a legal entity within a couple of months, finalize their business plan in the new few months after that and have a prototype solution built within six more months. Efforts that take years, or have many starts and stops, will not generate investor confidence.

  4. Find a partner and core team early to supplement your expertise. Very few individuals have the skills and energy to build a startup alone. If your strength is technology, find a co-founder who has a comparable strength in business, finance or marketing. A strong team has more credibility with investors than does a great idea by itself.

  5. Register some intellectual property to provide a barrier to entry. A large portion of your competitive advantage and your potential value to investors is the size of your intellectual property portfolio. Entrepreneurs who have no patents, trade secrets or trademarks are usually deemed non-fundable and non-competitive.

  6. Demonstrate a concentrated focus on customers early on. Investors look for entrepreneurs who are customer-centric, rather than technology-centric. Even before you build a product, you should be interacting with potential customers in person, and through social media. Accumulate customer advocates, testimonials and “letters of intent.”

  7. Ship a minimum viable product quickly, test the market and iterate. Startups that operate in stealth mode until their solution is perfect usually acquire customers and investors very slowly. You should assume that your first offering will likely need tuning, so nurture a culture and process for improvement and iteration from the very beginning.

  8. Prepare for investor attention once you are ready to scale the business. Seeking investors before you have a business plan, or a product or even a few customers, is premature unless you have built previous successful businesses. Fundable entrepreneurs have a proven business model and are ready to scale up the business.

Of course, your milestones and timing may vary due to personal constraints or technology requirements. The key is to communicate variances clearly while highlighting momentum. Do things in the right sequence, and show the results that you have achieved. For investors, it’s all about confidence in the entrepreneur. Confidence lost early can never be regained.

Marty Zwilling

*** First published on Entrepreneur.com on 11/20/2015 ***

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Sunday, November 29, 2015

4 Ways Entrepreneurs Can Create More Innovations

be-more-innovativeIn today’s fast moving world of business startups, learning trumps knowing every time. What established businesses know through experience keeps them from looking for the new and innovative ways to do what they do better, cheaper, and faster. I’m convinced that’s why most mature companies are slowing down or buying their innovation through acquisition, rather than building it.

In her recent book, “Rookie Smarts,” Liz Wiseman, one of the top thought leaders in business, amplifies this point as it relates to hiring and cultivating the curious, flexible, youthful mindset in keeping a mature company young and competitive, as well as keeping experienced employees more productive.

She outlines four distinct ways that business people doing something for the first time, whether they be entrepreneurs, or people in a new role in a larger company, tend to think differently than experienced veterans. With my focus on startups, I can translate very easily how her points lead to more innovation even in the entrepreneurial environment:

  1. Maintain an unencumbered mind. True entrepreneurs, like backpackers, are ready to explore new terrain, more open to new possibilities, and don’t get stuck in yesterday’s practices. They tend to ask the fundamental questions, see new patterns, and notice the mistakes of others. They are not afraid to act boldly, and tend to recover quickly.

  2. Seek out experts and return with ideas and resources. Startup founders need to be more like hunter-gatherers, seeking out experts and trying new ideas to address their challenges. They are not entrenched in their domain, and don’t look for data that confirms what they already know. They don’t hesitate to disseminate the knowledge to their team.

  3. Take small calculated steps, moving fast and seeking feedback. Experienced business professionals tend to take big steps, move at a comfortable pace, and are not on the lookout for changing conditions. Entrepreneurs have to be like firewalkers, take a risk, move quickly one step at a time, searching for milestones on the way to success.

  4. Improvise and work tirelessly while pushing boundaries. Great entrepreneurs, like pioneers, work hard, keep things simple, and focus on core needs. They don’t have a comfort zone or protocol to fall back on. They assume that new tools and structures will have to be built along the way. Progress on the learning curve is their satisfaction.

But even as an entrepreneur, you can fall back too quickly on prior experience, or settle into habits that are too comfortable. Here are some things we all need to do change perspectives and learn to learn all over again from time to time:

  • Transport yourself in time and place to your first professional role. Remember how you felt then, what you did, and how you approached work. Use this insight to reset your own thinking, and to provide great leadership guidance to other members of your team.
  • Multiply your expertise with additional experts. Avoid the temptation to jump in first, and consult other experts to bring new insights into the challenge at hand. Don’t give up until you have found new patterns to an area you thought you knew.
  • Reverse the learning role with new team members. By asking a junior colleague to mentor you, you will more likely hear new approaches or technologies and get new insights on your customer base or business challenges.
  • Expand your professional network to new groups. Actively look for people with views contrary to your own. As you change the stream of information and consider alternative views, your thinking will expand.
  • Take a step back and remap your terrain. Try to visualize your domain the way a newcomer would see it, without the filters you have already built in your mind. Map out the current players, rules of the game, cultural changes, and constituent alignments.
  • Swap jobs with a colleague for a day. Use the exchange to gain new business and customer insights, and to formulate the naïve questions that a newcomer might ask. The swap will be an exciting learning experience for both of you.

True entrepreneurs thrive on the experience of learning, maybe more than the experience of success. That’s why the best entrepreneurs I know can hardly wait for a chance to exit their current startup as it stabilizes, and start again down a less familiar but new learning path. Once you stop learning, you stop having fun, and you stop succeeding.

Marty Zwilling

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Saturday, November 28, 2015

9 Business Leader Bad Habits That Sabotage Results

leaders-bad-habitsAfter working with dozens of entrepreneurs, I’m still amazed that some seem to be able to do the job easily and effectively, always in control, while others always seem to be struggling, out-of-control, and fighting the latest crisis. I am more and more convinced that it is the right business behavior that leads to success, rather than some exceptional intelligence or training.

In that context, entrepreneurs should carefully review the points made by Denny F. Strigl, former CEO of Verizon Wireless, in his classic book, aptly named “Managers, Can You Hear Me Now?” He outlines the behavioral habits he has seen in managers who are successful, versus the bad habits of ones who struggle. These habits apply even more directly to entrepreneur and startup leadership:

  1. Failure to build trust and integrity. Poor leaders often fail to build trust initially, or they erode trust during daily interactions and operations. Without trust, there can be little cooperation between team members. This results in little risk taking, diminished confidence among employees, and a loss of communication throughout the company.

  2. Focus on things that don’t really matter. Entrepreneurs who struggle spend too much time focused on things that don’t really matter. If it doesn’t fit into one of the Four Fundamentals: growing revenue, getting new customers, keeping the customers they already have, or eliminating costs, they should rethink what they are doing.

  3. Shirk accountability and role model. Founders need to realize their behavior is in a “fishbowl” and thereby highly visible for the team to see and imitate. What the founder says and does in stressful situations sends a signal to imitate that behavior, even when they are not under stress. Poor performers thrive in an unaccountable work climate.

  4. Fail to consistently reinforce what’s important. Managers often stress a particular message or a program for a couple of weeks, and then assume everyone gets it. When they change their message too often, team members become confused about what’s important. People perform best when what they hear is consistent and frequent.

  5. Over-rely on consensus decisions. Some founders go too far to become consensus builders. This takes too much time in our super-competitive environment, and the result of a total buy-in is usually a watered-down version of the original decision or action they intended. Informed decision-making is not the same as consensus decision-making.

  6. High priority on being popular. The first priority of a founder is to deliver results, rather than building friendships. Happy team members don’t necessarily bring you stellar results, although stellar results almost always bring you a happy team. Good managers don’t worry about shaking up the status quo, and realize that change is never initially popular.

  7. Get caught up in their self-importance. Many founders fail because they get caught up in the “aura” of their position, and seek recognition and glamour for themselves. They love to give speeches to groups and in places that don’t really matter. These people seldom see what is causing their own demise in their attention to “all-about-me.”

  8. Put their heads in the sand. Many founders struggle because they only want to hear good news. Team members quickly learn to report positives, while hiding problems. As a result, productivity suffers, employee morale decreases, and targeted results are missed. Encourage open, honest, direct, and specific communication always.

  9. Fix problems, not causes. Don’t fix a problem without addressing the reason the problem occurred. The most common excuses given include lack of time to immediately address the cause, lack of resources to address the cause, or problem is outside of their control. Good managers always find the means to fix the cause.

In order to stop struggling and start delivering, entrepreneurs need to close the gap between what they know and what they do. Avoid the bad behaviors outlined here. Do the good things, day in and day out, until your behavior becomes habit for both you and your team. This can out-perform pure intelligence and lead to real success and positive results from everyone on the team.

Marty Zwilling

*** Published on IvyExec.com on 11/27/2015 ***

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Friday, November 27, 2015

6 Reasons Startups Should Skip the Big-Bang Launch

big-bang-launchBig-bang hard launches make sense for large enterprises like Apple or Microsoft, who are building on existing revenue streams and have the resources for lavish events, Superbowl ads and large inventory buildups. But for startups with limited resources and experience, I always recommend a soft launch or toe-in-the-water approach in a local market -- and scale up later.

In fact, for startups, it usually makes sense to announce your solution on social media and blogs even before you have built the first one. Think of it as an inexpensive way to do some real market research -- which big companies can’t do, for fear of getting an antitrust violation for announcing vaporware to impede the market. Smart startups are already doing it on crowdfunding platforms.

Then it’s time to evaluate response and feedback, make the necessary plan pivots, and try it again. Iterating this process, until you see some real traction, is far less risky and expensive than the big-bang rollout. Let me summarize the advantages of this to your startup:

  1. Immediate real customer feedback. Startups which insist on operating in stealth mode in fear of competitor response miss the more important customer response. In addition, with today’s fast moving market, the whole environment can change in the year or more you are hiding out to get the solution and your total infrastructure built.

  2. Small real revenue today is better than large later projections. All investors want to see real evidence that the dogs will eat the dogfood before they give any credibility to your hockey-stick projection curves. Funding to support a rollout is much harder to procure than funding to support a scale up, after an initial hint of success.

  3. Maximum agility for required pivots. It’s amazing to most entrepreneurs how fast their little startup can become a battleship, hard to turn in a storm. Executing multiple iterations while very small is critical for anyone with a limited budget and runway. Startups need the agility to test various business models and positioning messages.

  4. Partners and distribution channels will take you seriously. In many business arenas, brand-name partners and distribution are a prerequisite to scaling the business. A validated early customer following will get their attention, and allow you to negotiate the support you need in time for the real business surge.

  5. Build your audience and the product at the same time. With social media and inexpensive website tools, you can build momentum in the marketplace without the need to spend money on a big-bang rollout. With these tools, it’s easier to measure impact and progress and make required changes than trying to measure big-bang results.

  6. Time to train and prepare staff to deal with customers. A soft launch is less stressful to the team and lets them more gradually re-acclimate from a development environment to a delivery environment. It takes time to learn how to do customer service, interviews and demonstrations. A few missteps can totally destroy your big-bank launch.

But an iterative rollout or soft launch should never be used as an excuse for poor planning or an untested solution. Especially with a minimum viable product (MVP), every feature included must be high-quality, documented well and properly marketed. Free give-away products and beta tests are not the same as rollouts -- you get no validation of the business model.

In any launch, it’s important to have the right training and controls in place to prevent a visible marketing or delivery disaster. Customers have long memories, and they can spread the word very fast with social media, so negative reviews can easily be non-recoverable. It is much smarter to make a few people very happy than to leave many people or even a few unimpressed.

Most of the superstar companies we know like Facebook and Google have never had a big-bang rollout. They started slowly, in limited areas such as one university or city, and then expanded slowly, based on customer demand and resources available. Even big brands like McDonald's and Walmart entered the scene one store at a time.

Yet some entrepreneurs find it hard to resist the urge to get their product or service into the hands of a large number of people at one time. They are so certain that customers are poised and waiting that they forget the costs of a hard launch -- and the risks of a highly visible failure. It’s one of the few times in a startup when it actually pays to be less aggressive. Proceed with caution.

Marty Zwilling

*** First published on Entrepreneur.com on 11/18/2015 ***

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Wednesday, November 25, 2015

8 Myths That Can Inhibit Innovation In Your Business

george-barbeeStarting an entrepreneurial business, or maintaining the competitiveness of a mature business, requires innovation. Yet everyone I know seems to have a different perspective on what constitutes real innovation, and why is seems to happen so rarely. Another challenge is to debunk some of the common myths that seem prevent many from even assuming they can innovate.

As a starting point, I like the Wikipedia simple definition of innovation as “the application of better solutions to meet new requirements or market needs.” I also enjoyed a new book, “63 Innovation Nuggets for Aspiring Innovators,” by George E. L. Barbee, based on his 45-year career and work as an innovation guru with several Fortune 100 companies and the Darden School of Business.

Some of the most common innovation myths that Barbee mentions or I have encountered in my work with entrepreneurs around the world include the following:

  1. True innovation can only come from R&D and geniuses. In reality, the best business process innovations usually come from regular employees on the front line of your business, just trying to do a better job and better serve customers. Many product innovations come from quality improvement focuses, like the Japanese Kaizen initiative.

  2. Innovation must be driven top down by visionary leaders. Some innovations are clearly implementations of visionary ideas, but anyone at the operational level can think outside the box, individually or as a team, to suggest and implement innovations. Many innovations, including Post-It notes and superglue, were even invented by accident.

  3. Real innovation only happens in entrepreneurial organizations. Startups may be quicker to adopt innovations, but there are clearly some large problems than can only be solved by companies with large resources. Other innovations, such as the ones from Kaizen initiatives, can only come from established organizations and processes.

  4. Innovation is random, and can’t be orchestrated. Current research indicates that innovation is a discipline, it can be maximized, measured, and managed through formal processes. Peter F. Drucker outlined the key elements of this discipline, including methodically analyzing seven areas of opportunity, in a classic article on the subject.

  5. Individuals who are innovators are born, not bred. Research published by Harvard in a book, “The Innovator’s DNA,” concludes that innovation is about 30 percent individual genes and 70 percent learnable and driven by motivation. The focus must be on five discovery skills of associating, questioning, observing, networking, and experimenting.

  6. Solution innovations need to be perfected before going to market. These days, with markets and technology changing so rapidly, it’s impossible to verify an innovation before taking it to market. Thus I recommend the minimum viable product (MVP) approach with iteration, to test innovations until the product or service really meets today’s customers.

  7. “Thinkers cramp” and “organization cramp” limit innovation. Innovation and creativity are two different things. Creativity is more about ideas, while innovation is all about implementation. The “writer’s cramp” type of block on ideas need not apply to the implementation of measurable and specific improvements and innovations in business.

  8. It’s impossible to innovate in a staid complacent culture. Innovations come from people, not culture. When people change, due to new leadership, new motivation, or business changes, innovations occur, which can lead to culture change, rather than the other way around. Complacent cultures cause business failures for reasons well beyond lack of innovation.

You probably know more of these myths, but the message here is that initial innovation is critical to every startup, and continuous innovation is critical to the survival of every business. The market and your competitors never stand still, so every moment your business stands still, it is losing ground. Don’t let a few outdated and unproven innovation myths stop your business from achieving the impact and lasting legacy of your long-term vision.

Marty Zwilling

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Monday, November 23, 2015

7 Criteria For Selecting an Entrepreneur-Confidant

business-mentor-selectionMost entrepreneurs are too stubborn to seek a mentor for guidance: They have so much confidence in themselves and their ideas that they don’t see the need to ask anyone for advice. The best entrepreneurs, however, actually claim multiple mentors: Mark Zuckerberg relied on Steve Jobs at Apple and Washington Post chief executive Donald Graham, almost 40 years his senior.

Mentoring does not happen by accident, or require large stipends. Both parties have to be proactive in making the relationship work, and the communication and learning have to go both ways. The best mentors are confidants who have already "been there and done that," yet are looking forward to learning from someone whom they respect, and who often is from another generation or industry.

  1. Select mentors to fill your strength gaps. If your strength is technology, perhaps you need a business mentor. Friends, family and subordinates are not good candidates. It’s plausible to have more than one, but not likely that you have the bandwidth for more than two. Mentors tell you what you need to hear, while friends tell you what you want to hear.

  2. Look for street smarts rather than book smarts. Anyone with knowledge can help you, but real-world experience is usually the best teacher. Age is irrelevant, but, normally, experienced retired executives have more time and interest in helping new, aspiring entrepreneurs. Busy top current executives may be interested but not available.

  3. Take your time to build a personal relationship. Good chemistry is a key to a productive mentor-mentee relationship. Initial mentor exchanges should be face-to-face, rather than by email, texting or phone only. Full communication is critical, including body language and context, to build the trust and credibility required for maximum value.

  4. Look for someone with a legacy of business success. A renowned college professor or a brilliant psychologist may seem like a good prospective mentor, but these people can’t offer you the pragmatic advice and guidance you will need as an entrepreneur. Think about what you personally want to achieve in business, and look for someone who has already achieved it.

  5. Find a mentor who is willing to learn as well as advise. The healthiest and most sustainable mentor-mentee relationships are ones where each party adds value to the other’s life. Both people need to be genuinely interested in the other, and willing to share elements of their private lives as well as their business strategies.

  6. Look for someone who has personal characteristics you admire. If you are shy and introverted, for example, seek out someone who is an extrovert. Good mentoring is not limited to words and advice. Style and body language can be just as motivating and instructive. Observing habits that instill trust and credibility is a learning opportunity.

  7. Develop and share your vision of what success means to you. Choose a mentor who can relate to your own, personal vision. Some entrepreneurs want to be financially independent and others want to change the world, while others see "success" as a balanced family life. The best mentor must understand that equation, and align his or her advice with your objectives.

In any case, don’t expect a mentor to make your decisions for you, or relieve you of the task of doing the proper research into issues and opportunities. Obviously, too, he or she should never be used as an excuse for a failure you've had; your mentor should never be the target of an emotional barrage because you've had a bad day. If you don’t take responsibility for your own actions, no mentor can or will help you.

The best way to choose and treat a mentor is to look ahead and put yourself into that role. Given the business success you expect to come from your experience as a mentee and businessperson, you yourself will likely be asked to be a mentor somewhere down the road.

So embrace your search for the right mentor. And, once you do select this confidant, choose someone who can prepare you to "pay it forward," just as he or she is paying it forward to you. That way, we all get a payback.

Marty Zwilling

*** First published on Entrepreneur.com on 11/13/2015 ***

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Sunday, November 22, 2015

7 Principles Define A New Win-Win Model Of Business

win-win-modelAs an entrepreneur, it’s never too early to set the culture you need for a thriving business, as well as thriving employees, customers, partners, and vendors. In fact, in my experience, cultures are very hard to change, so if you don’t get it right the first time, the road ahead will forever be difficult. “The Art of War” culture as an analogy for business just doesn’t work anymore.

I’m seeing more and more business success stories like the one in a recent book “Uncontainable: How Passion, Commitment, and Conscious Capitalism Built a Business Where Everyone Thrives” by Kip Tindell. He is the CEO and Founder of the very successful Container Store, while still making Fortune magazine’s 100 Best Companies to Work For list for fifteen consecutive years.

He offers a set of seven principles and values for his ultimate win-win philosophy and harmonic balance among all stakeholders, as a roadmap for any company to develop a profitable, sustainable, and fun way of doing business. I recommend that every aspiring entrepreneur and serious business professional take each one of these to heart from day-one of their startup:

  1. Talent is the whole ball game. When you surround yourself with hugely talented, passionate, dedicated, and genuinely kind people, you will succeed in whatever you do. Tindell’s mantra is that one great person is equal to three good people. Start with only the very best people, demand excellence, and train them to stay ahead of the pack.

  2. Craft mutually beneficial relationships. This requires spending the extra time needed to really get to know your employees, vendors, and customers, and letting them get to know you. Know the issues they face, and search for ways to help them, make them happier, more productive, and more profitable. The result is more win-win than win-lose.

  3. Reframe selling as an activity that improves customer’s lives. If you get to know your customers well enough, you can provide solutions that make selling and service the same thing. It’s a win-win deal that keeps customers coming back, helps your company, and incents customers to bring in their friends through word-of-mouth and social media.

  4. Great communication is the best leadership. How can people trust their leaders if they’re not being fully informed about what’s at stake? The objective is to communicate everything to every person. It starts with daily ongoing communication between team members, and extends to the top with executive updates and informal listening sessions.

  5. Simultaneously deliver the best selection, service, and price. Stick with what you know and do it better than anyone else. Keep is simple, and think solution rather than item-based, for the proper perspective. The best relationships with vendors give you price and selection leverage, and the best service relationships bring customers back.

  6. Team members must act intuitively, based on training and motivation. Intuition is nothing more than the outcome of previous training and experience. More training on your solutions and customer needs means better intuition and anticipation of how to help customers. Happy and motivated employees won’t be afraid to use their intuition.

  7. Build and maintain an air of excitement in your company. Faithfully following the first six principles will build that sense of excitement where everyone wants to be there and feels the sense of energy, customers and employees alike. You can’t force that feeling of warmth and caring, it has to be authentic and come from the hearts of talented people.

The great management guru Peter Drucker once said, “Culture eats strategy for breakfast.” Today company culture is more important than ever in driving strategy and value, not the other way around. A great culture in an entire business infrastructure of executives, employees, vendors, and customers working together to achieve a common goal of everyone thriving.

No leader can “create culture,” but they must create the environment where the desired culture can emerge and flourish. Leaders do this by driving values, values drive behavior, behavior drives culture, and culture drives performance. High performance makes new leaders. This is the self-reinforcing circle of excellence every business needs to succeed. Are you driving the right values in your business?

Marty Zwilling

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Saturday, November 21, 2015

7 Key Maxims of a Mindset Focused on Growth

growth-mindsetBased on my experience advising entrepreneurs, I’m convinced that success is often more a mindset than a specific set of skills or intelligence. The mindset I’m looking for is one that sees challenges as exciting rather than threatening, setbacks as learning opportunities and that effort and perseverance will overcome any obstacle. Most experts call this a growth mindset.

Of course, that mindset has to translate into a set of specific actions that other people recognize as going above and beyond the fixed mindset. A fixed mindset is when entrepreneurs believe their abilities and market are fixed, and the challenge is to make the best of the hand already dealt. Here are key maxims that I believe indicate a growth mindset rather than a fixed mindset:

  1. A need to learn from customers, rather than educate them. Technologists, in particular, are prone to building solutions looking for a problem. Successful entrepreneurs start with a customer problem, and develop a solution, rather than the other way around. They build a startup culture of working for customers rather than pushing a product.

  2. Develop market insights and a growth vision far beyond today. This is commonly called understanding the big picture, or the ability to see around corners. It is a mindset that customer needs are constantly changing, and the entrepreneur’s job is to anticipate and contribute to that change, rather than just react to it. Market change is opportunity.

  3. Don’t try to solve all the world’s problems in one solution. The most successful customer solutions are sold as simple and focused, such as in Apple’s iPhone 5 TV ad, rather than a complex solution to a host of problems. A mindset of simplicity is what it takes to overcome a customer’s natural fear of change and new technology.

  4. Foster leadership and accountability at all levels of the company. A company culture of initiative and collaboration breeds new strategies, processes and innovations that are driven by customer input, rather than by autocratic management from the top down. An entrepreneur mindset of integrity and honesty is required to make this happen.

  5. Partnering with customers, rather than acting as a supplier. Founders with a growth mindset engage their customers and vendors in a win-win partnership. This increases customer loyalty, facilitates problem-solving and allows you to anticipate what customers need even before they know they need it.

  6. Replace “push” marketing with value-added “pull” marketing. The basic objective of the pull-marketing mindset is to proactively demonstrate value and expertise, so that when potential customers are ready to purchase, your company relationship is “top of mind.” Traditional push marketing is losing effectiveness due to information overload.

  7. Manage by metrics rather than by crisis and emotion. A success mindset starts with setting “stretch” objectives for yourself and your team, based on market needs, with the confidence that everyone grows from looking ahead and pushing the limits. Progress must be measured to allow for corrections and the opportunity to celebrate success.

Other indications of an entrepreneur with a growth mindset include a priority on coaching and employee growth, a willingness to accept negative feedback as an opportunity to learn and greater use of outside relationships to stay tuned into market and technology changes. They contribute time to outside causes, and see their company as part of the greater ecosystem.

All of these maxims expand an entrepreneur's image and the impact of his or her company on the marketplace, which in turn accelerates success. There is no room in business today for entrepreneurs who are worried about how smart they are, how they’ll look or what a mistake will mean. It’s time to step up the game by adopting a growth mindset. Anyone can.

Marty Zwilling

*** First published on Entrepreneur.com on 11/11/2015 ***

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Friday, November 20, 2015

8 Signs That Your Startup Success May Be In Jeopardy

Hap-KloppHow many entrepreneurs do you know that “almost” made it big? Startups are very risky, and most fail. Yet entrepreneurship is one of the fastest growing trends in business today. Surveys show that entrepreneurs are among the happiest people in business, despite the challenges. Yet it would pay real dividends to know at the start what separates the “also-rans” from the winners.

As an advisor to many entrepreneurs and startups, I’m always looking for early signs that usually lead to an “almost” success, but I have found them hard to pin down. Maybe that’s the reason I was intrigued by a new book, “Almost: 12 Electric Months Chasing A Silicon Valley Dream,” by Hap Klopp and Brian Tarcy. It’s a true story of “almost” at Ardica Technologies in Silicon Valley.

Even startups with a cast of gifted geniuses and seasoned entrepreneurs can easily fall victim to these malaises. Here are the key lessons from this story and my experience that I believe every entrepreneur should take to heart:

  1. Invention without commercialization is not a business. Your technology may be amazing and the opportunity huge, but these alone don’t ensure a business success. It still requires solution delivery, a team working together, and customers with money to spend. Make sure you are building what customers want, rather than what you can build.

  2. Running short on money often leads to bad decisions. Vendors and most people on your team need to keep getting paid, or their loyalty quickly shifts to retribution. Crisis survival decisions can easily be counter-strategic and lead to product and people credibility gaps. Soliciting timely and adequate funding is more critical than development.

  3. Multiple cultures cannot co-exist in a single company. Culture is simply “the way we do things around here,” and it trumps strategy every time. Everyone on the team must share the same purpose, values, and goals. Culture clash can be some people driven by technology and others by customers. The founder sets the culture by words and actions.

  4. Startup leaders must exhibit trust and transparency. Successful entrepreneurs must create and maintain an environment of team trust to build loyalty and commitment. They need to focus on people behaviors, rather than personalities, to engender trust. Then they “say what they mean and mean what they say” all the time every time to prove it.

  5. Team conflict that turns into friction will slow you down. The best startup teams don’t shy away from healthy debates between team members or founders. That’s the way smart people with innovative insights make real change happen. But heated debates can generate so much emotion and friction that the entire team becomes dysfunctional.

  6. No amount of passion will save a solution that is not ready. If you solution doesn’t work, or exhibits quality problems in the marketplace, no amount of determination or expertise will save you. For high technology solutions, almost working is failing. Founders need to be realists, to understand when to pivot and when to fall back in recovery mode.

  7. Get rich quick is not a viable startup strategy. Entrepreneurs driven primarily by money are usually disappointed, which can cause them to give up too early or set poor goals. Seth Godin once said that overnight success in startups takes about six years, and Seth is an optimist. Make sure you enjoy the journey as well as the destination.

  8. Failing to plan is planning to fail. Like the old refrain, if you don’t know where you’re going, you will probably end up somewhere else. If you don’t formally communicate a plan, everyone will follow their own default, killing the teamwork and productivity you need to survive. No startup is so simple that everyone knows what is in your head.

These are all crucial business lessons that are best learned by reading, not repeating. If you see the symptoms in your own startup, there still may be time for recovery, or it may be time to jump ship before disaster strikes. If it’s too late for you, then at least take consolation in the fact that failure in a startup is not a career-ending disgrace, and should be worn as a badge of honor.

Marty Zwilling

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Wednesday, November 18, 2015

6 Key Principles Drive Startup Change Leaders Today

DisruptivetechnologyOne of the business ironies that many entrepreneurs have learned the hard way in the past is that ideas which are truly disruptive carry the highest risk of failure, take the longest to gain traction, and thus are the least likely to get external funding. So some entrepreneurs stick with incremental solutions, avoiding more transformational or adaptive solutions implying disruptive change.

In the past, only a few entrepreneurs, like Steve Jobs and Bill Gates, maintained the passion, patience, and determination to accomplish disruptive change in the marketplace. Today with the growing number of disruptive technologies available, like cloud computing, wireless sensors, Big Data, and mobile devices, an incremental solutions mindset is no longer enough to win.

John Sculley, in his classic book “Moonshot!: Game-Changing Strategies to Build Billion-Dollar Businesses” argues that every entrepreneur now needs to think and act like one of those elite entrepreneurs who could go the extra mile and cause disruptive change. He coins the term “adaptive innovator” for the required mindset to characterize the required focus.

I strongly support the key principles he outlines as required to drive the mindset to make business leaders successful in this new world, both in established companies as well as startups. I have summarized or paraphrased the points here, to add my own focus and experience with new entrepreneurs and startups:

  1. Be forever curious and an optimist. Adaptive innovator entrepreneurs are inspired by what’s possible, but focus on what’s probable. Great entrepreneurs aren’t just dreamers, they are doers. They wake up each day re-energized and optimistic, curious about the world around them, but always committed to getting real things done.

  2. Unpack your best ideas. Unpacking an idea is about taking deep dives into it; twisting and turning it to see the concept in different ways. The deeper your dive into an idea, the more creative will be your insights. Ideas without context are just a commodity. Context comes from experience. Trying and failing is an experience building-block to get context.

  3. Learn more every day in layers. Let every new bit of learning spark your curiosity to build a new layer of knowledge, which will then drive another layer of learning. Thinking visually can help. Listen for insights from others, and follow-up on every reference to spark new learning. It’s the reverse of peeling layers off an onion.

  4. Never give up in finding a better way. Steve Jobs was never satisfied, and kept pushing himself and everyone around him. He kept raising the bar. At Apple, when a product actually shipped, against unimaginable timelines, even the most talented and skeptical on the team were amazed at and empowered by what they had accomplished.

  5. Prepare incessantly and daily. The best athletes are naturally gifted, but even they train constantly and invest hours of practice every day. It’s no different for the best adaptive entrepreneurs. The most formidable tools of the adaptive innovator are smart personal productivity aids to help realize your dream. Learn to use these tools effectively.

  6. Put the customer at the center of your business concept. As you consider a really transformative business concept, leverage your domain expertise and create a customer experience never realized before in that industry. Couple this with automation and technology to offer a disruptive solution. The customer, not the technology, is in control.

Sculley correlates many of these principles to the lessons he learned and insights from his failures at Apple, as well as his entrepreneurial successes before, during, and after Apple. We both agree that the marketplace and pace of technology have changed since the days that Jobs and Wozniak started Apple, so the entrepreneurial and investor mindset has to change as well.

If you are a new entrepreneur, you can still choose to “play it safe” with incremental innovation to improve your initial funding chances, but getting funding won’t be very satisfying if you can’t compete, and lose it all. It’s time to adopt the adaptive innovator entrepreneur mindset principles listed above, capitalize on the game-changing new technologies, and go for the gold.

Marty Zwilling

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Monday, November 16, 2015

8 Initiatives That Can Supercharge Your Startup

plan-bHow many times have you heard or suspected that a certain entrepreneur was just lucky? Without fully discounting that random good things sometimes happen, I’m a firm believer that great entrepreneurs make their own luck. The smart ones get some extra support early on critical decisions, and work a bit harder on issues that are common startup killers.

As a member of the advisory board for several startups and a mentor to other entrepreneurs, I’ve accumulated my own list of strategies and recommendations on where “going the extra mile” can save you from disaster or supercharge your startup for maximum growth under any circumstances. Here are a few:

  1. Surround yourself with help rather than helpers. Helpers do what you tell them, but you need help from people smarter than you and can do what you need in areas outside your expertise. Helpers may be cheaper and quicker to find, but they cost you dearly in managing, coaching and error recovery. Team strength trumps team size every time.

  2. Manage outgoing cash flow personally. In the heat of a thousand daily crises, it’s too easy for an entrepreneur to delegate expense management. The objective is not to delay payments, but to avoid the expense or capital payment altogether, by working in house, bartering for services or just doing without.

  3. Cushion your investment requirements. Do your homework to realistically size development, marketing and staffing requirements, and then increase the number by 50 percent. Subtract the amount you are able to contribute to find the amount you will need from investors. Don’t wait for the first cash-flow crisis to start talking to investors.

  4. Assume your initial strategy will be wrong. That means you need to maintain a mindset of constantly adapting to the realities you see. Those entrepreneurs who build a plan then put their head down and charge will find themselves with flat growth and no resources or energy to recover. Smart entrepreneurs always have a plan B.

  5. Be stingy with your energy and time. Don’t be afraid to say “no” with a smile on your face. Saying yes to everyone will kill you. Keep some reserves for a focus on the urgent priorities of strategy, attracting customers and beating competitors, rather than the crisis of the moment. Learn how to delegate, seek outside help and balance your life.

  6. Choose advisors as carefully as your executives. A good business advisor who is an expert in your domain and has built a startup like yours is often more valuable than any C-level executive. Resist the temptation to be defensive, and don’t assume you are somehow smarter than the competition. Actively listen to mentor and customer feedback.

  7. Register intellectual property early. If you can’t find anything innovative in your user interface, process or algorithms, you need to think again and add something for a competitive barrier to entry and increased valuation. Any intellectual property will help, including trademarks, copyrights and domain names. No proprietary content is death.

  8. Start marketing before you have a product to sell. With today’s social media and crowdfunding platforms, you can effectively test the waters before you build. If you see no traction, it may be time to pivot before you spend time and money on something that is not going to work. Great marketing is often more important than a great product.

No matter how great your idea, remember that building a successful business is all about speed. Make decisions, get things done and move forward. In most cases, any decision is better than no decision. Any startup that is not moving forward faster than competitors and the market is idling.

Above all, don’t count on luck to make your startup successful. There is no substitute for non-emotional realistic goals, productive relationships, good planning and hard work. Super-focused entrepreneurs build supercharged startups, which turn into successful businesses. How solid is your plan to get lucky?

Marty Zwilling

*** First published on Entrepreneur.com on 11/06/2015 ***

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Sunday, November 15, 2015

5 Personality Types That Thrive In New Businesses

Steve_Ward_CEO_of_Master_MatchmakersAs a startup advisor, I see many aspiring entrepreneurs whose primary motivation seems to be to work part time, or get rich quick, or avoid anyone else telling them what to do. Let me assure you, from personal experience, and from helping many successful as well as struggling entrepreneurs, that starting a business is hard work, and doesn’t come with any of the benefits mentioned.

Yet, for those with more realistic expectations and the right motivation, the entrepreneur lifestyle can be the dream life you envisioned. According to a study by the Wharton School of Business, in a survey of 11,000 MBA graduates over many years, those running their own businesses ranked themselves happier than all other professions, regardless of how much money they made.

So what are the right motivations, and how do you candidly assess your own? Indeed, there are many self-assessment tools available online, but I was more impressed with the insights provided in a recent book “What Motivates Me: Put Your Passions to Work,” by Adrian Gostick and Chester Elton. These guys are workplace culture experts, and claim to have input from 850,000 people.

The authors offer portraits of some key individual personality types, such as achiever and thinker, and tie the relevant motivators for business success and happiness to these types. I have amplified these here from my own experiences to focus on the entrepreneurial subset of businesses:

  1. You love doing your own thing and being in control of your destiny. As an achiever, you thrive on tight deadlines, ambitious goals, and leadership challenges. Even in chaotic startup environments, you normally finish required tasks on time and to high standards. Team members see you as high-energy, determined, and action-oriented.

  2. You are driven by a cause or purpose to change the world. As a builder of new things and people development, you are not afraid to speak out on significant issues and world challenges. You cultivate loyal friendships, people growth, and thrive in strong team environments. You see success as making a difference in the world around you.

  3. You are tuned into others’ emotions and want to help people. As a caregiver, you understand the problems of others, and are determined to provide solutions which will make their life better. You love to have fun at work, and believe that balancing work and family is critical. People see you as great for demanding customers and team bonding.

  4. You are driven to compete and win in the marketplace. Being reward-driven, you are driven to win money, customers, applause, and the admiration of others. This determined nature can help you accomplish great things in new organizations. You are seen as a doer, but one who needs recognition and incentives to produce your best work.

  5. You simply know there is a better way or solution to the problem. As a thinker, you love to learn, use your imagination, and enjoy the feel of adrenaline rush now and then. You get frustrated with bureaucracy, and won’t accept that things have always been done a certain way. Team members see you as the lifeblood of innovation in the organization.

In a critical extension to this thinking, the authors and I would outline another dimension to these personality types and motivators, by defining five motivation grade levels that also impact entrepreneurial motives, actions, and satisfaction:

  • Level A. Primary motivation is to make a difference in the world, with a secondary motivation of earning a living. These people define their roles in terms of their customers’ or employees’ or coworkers’ needs, not their own.
  • Level B. Primary motivator becomes making consistent return for stockholders. These are still good people with an intent to provide great products and services, but making a difference takes a back seat. This often happens when a Level A company goes public.
  • Level C. At this level, it’s not just money but the love of money that becomes the primary motivator. Entrepreneurs at this level will seek the minimum cost and quality to be more competitive. Advertising, pricing and support practices may show questionable integrity.
  • Level D. At this level, greed takes over as the primary motivator. Unethical acts are tolerated, and customers may be treated unfairly or harmed. We all know a corporate giant or two at this level who went out of business in the financial crisis a few years back.
  • Level F. At the lowest level are those involved in Internet scams, Ponzi schemes, or organized crime. Entrepreneurs motivated to work at this level harm not only themselves, their employees, and customers, but also society in general.

In the long-term, entrepreneurs in Level A are the happiest, successful, and most productive. Certainly we see some Level C and Level D entrepreneurs who appear to be prospering, but appearances can be deceiving and fleeting. Make sure your motivation to be an entrepreneur is more than a dream, and will stand the test of time for you and all the people around you.

Marty Zwilling

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Saturday, November 14, 2015

7 Indicators Of Business Traction You Should Celebrate

growth-tractionEvery entrepreneur is quick to tell friends and potential investors about his or her vision of changing the world, about all the customers who have expressed an interest, and about all the other investors who are lining up to get a piece of the action. As an angel investor, I really prefer to hear evidence of credible traction today, not how great things could be in the future.

As a serious entrepreneur, you have more invested than any outsider, so you should be looking for the same evidence and not believing your own hype. Yet I hear the same story so often that I wonder if entrepreneurs really understand what they should be celebrating, and how to measure their progress against these expectations:

  1. How many real customers do you have today? Beta customers, free signups, customers expressing interest and your family and friends don’t count. You should be counting only those people who fit your target customer demographic and paid full price for the product or service, without any prior connection to you or the business.

  2. Is your customer-acquisition rate accelerating? Especially for free or freemium products, the rate of new signups is critical. Disregard that initial surge that might have come from early adopters or a huge initial marketing effort. If the ongoing acquisition rate is slow, and not trending upward, it may be time for a pivot or a reality check for your targets.

  3. Are you penetrating or skimming your target segment? Some entrepreneurs are convinced that they have real traction when in fact they are only getting new customers from expansion to new geographies, segments or products. This is not a viable long-term strategy. Penetration levels in pilots below 1 percent may not indicate traction.

  4. Is revenue per customer or transaction size increasing? Real traction is usually indicated if the average transaction size or rate per customer is increasing, and customer lifetime value (CLV) in increasing. This indicates real customer loyalty, rather than a predominance of test buys or high customer turnover. Margins should be increasing.

  5. Is customer acquisition cost going down? As customer acceptance and awareness goes up, the cost and time to acquire new customers (CAC) will come down. The formula is a simple one: dividing the total costs associated with acquisition by total new customers, within a specific time period. Increasing costs means you are losing traction.

  6. What is your acceptance by major consumer outlets? Featured visibility or signed contracts with name brand players and distributors, such as Home Depot or Amazon, almost always indicate traction. Each of these should be celebrated, but can also test your scalability due to high inventory requirements, slow payables and harsh terms.

  7. Are you reviewed positively by online media and industry analysts? It’s never too early to build relationships with industry analysts, influential blogs and the media. In this arena, it’s possible to show real traction even before you ship a product through heightened anticipation and pre-orders.

In the final evaluation, traction is the key driver for your business valuation, and is needed to attract investors, partners or a public stock offering. Your challenge as an entrepreneur is to generate traction and at the same time choose the right metrics to quantify and sell that traction to your team and to outsiders. For all practical purposes, if you can’t or don’t measure it, it doesn’t exist.

Many entrepreneurs feel they need to spend more money to increase traction. In fact, the right solution in the right market will get traction at minimal cost, so that should be your target. Traction “purchased” by a huge marketing spend may indicate a business that is not sustainable in the long term. Smart investors and acquisition candidates heavily discount these efforts.

While the traction term may be overused by investors, it is a key concept that every entrepreneur should understand for assessing their own valuation and the level of uptake by customers that they are seeing on their business. Once a business is beyond the idea stage, it’s time to spend less time on vision, and more time on traction. What traction have you celebrated lately?

Marty Zwilling

*** First published on Entrepreneur.com on 11/04/2015 ***

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Friday, November 13, 2015

8 Ways To Enhance Your Work Performance With Focus

Nikon_135mm_focusEvery entrepreneur and most professionals wish there were more hours in a day to get their work done. These days, with all the new technology, including smartphones and social media, many are convinced that multi-tasking is the answer. Yet there is more and more evidence that jumping tasks on every alert for a new email, text, or phone call actually decreases overall productivity.

According to a new book, “One Second Ahead,” by noted authority on training the mind, Rasmus Hougaard, there are some basic rules that can really help you manage your focus and awareness in all work activities. Practicing these will ensure greater productivity, less stress, more job satisfaction, and an improved overall sense of well-being.

The top two rules, which he calls mindfulness, include a singular focus for at least a few minutes on your current task, and limiting your distractions very strictly during this period. Don’t ever try to do two significant cognitive tasks at the same time, switching on a millisecond basis, or your attention will become fragmented and both will suffer.

Hougaard outlines eight mental strategies or habits that every entrepreneur needs to cultivate, to keep your mind clearer and calmer, and increase your overall productivity. I concur, based on my own extended career in business and mentoring entrepreneurs. Examples of companies already coaching their teams on these mental strategies include Google, Starbucks, AOL, and more:

  1. Mentally be fully present and engaged in the current task. Presence is foundational for focus and mindfulness. It means always paying full attention to the people, objects, and ideas around you. Practice by making a conscious decision to intentionally be more present with a team member, with a client, at a meeting, or at home.

  2. Deliver rational responses rather than impulsive reactions. This requires patience, or the ability to endure some discomfort and stay calm in the face of challenging situations. Patience is more concerned with larger goals, rather than temporary quick-fix solutions. Practice by stopping and taking a few breaths to calm down, before reacting.

  3. Choose to always give honest and constructive feedback. Show kindness. Do unto others as you would have them do unto you. Practice by incorporating kindness in every interaction with people, by showing attention, respect, understanding, and acceptance. You will improve everyone’s productivity, and make yourself happier as well.

  4. Approach every situation with a beginner’s mind. Without a beginner’s mind, what you have seen and done in the past, called habitual perception, can be problematic. It means you may not actually see today’s reality. Practice by overtly rejecting any habitual perceptions, and challenging yourself to be more curious in your day-to-day activities.

  5. Refrain from extended fighting with problems you can’t solve. Acceptance is the realization that every problem can’t be solved, and frustration or anger won’t resolve the issue. It will just make you less effective and less happy. Practice by choosing to move on, without carrying an inner battle, when you have exhausted all reasonable efforts.

  6. Balance your focus between instant gratification and discomfort work. Consciously identify the tasks that come easy to you, such as email and texting, versus tougher tasks, maybe including customer complaints or confronting coworkers. Practicing awareness of balance will lead to a change in your level of quick distraction and long-term avoidance.

  7. Proactively seek moments of joy throughout your day. Most of us are “always on,” always connected, and always running, all day. The key to cultivating joy is to anticipate at least some activities you enjoy daily. Many people find joy in just sitting still for a few minutes in quiet contemplation. Others find an occasion to smile or laugh every day.

  8. Consciously let go of heavy thoughts and distractions. Letting go is a simple but powerful mental strategy to clear your mind and refocus on the task at hand. Let go of a problem stuck in your head, or frequent distractions, such as a new email or text message. Practice by periodically relaxing and breathing to refocus your thoughts.

Without these mindfulness initiatives, most people will find their ability to focus at work declining. We all face the same information overload, increased pressure to move fast, and highly distracted work reality. Our attention is continuously under siege, leading to fewer results. Have you noticed an impact on your productivity, health, and happiness? Now may be the time to increase your focus.

Marty Zwilling

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Wednesday, November 11, 2015

How To Take Money From Friends And Still Be Friends

Heart-of-money-friendsIn their passion to succeed, too many entrepreneurs treat friends and family investments as “low-hanging” fruit, only to find out later, after a stumble, that the pain of lost relationships is greater than the loss of their beloved startup. Other entrepreneurs never start their adventure, because they can’t face the prospect of even approaching friends and family for an investment kick-start.

The only way an entrepreneur can really dodge this issue is to totally fund the startup with personal funds (bootstrapping). Then you don’t have to worry about the fact that most angel investors and venture capitalists won’t take a bet on you if none of your friends and family have given you a vote of confidence with money.

This is a sensitive and critical area for new entrepreneurs, and it’s important to get it right the first time. Brian S. Cohen and John Kador, in their classic book “What Every Angel Investor Wants You to Know,” includes these best points of practical advice I’ve seen recently on this subject:

  1. Manage expectations before the fact. Even if you passionately believe that your idea is a winner, it’s smart to remind friends of the historical facts with startups. More than 50% fail in the first two years, and even the “overnight successes” take six years on the average. In the interim, there is no market for the shares, and no dividends or interest.

  2. Make sure the money is discretionary. If friends and family are still willing to take the risk because they believe in you and love you, you need to be convinced that they can afford to lose it all without major impact, and their emotion won’t generate unreasonable expectations over time. If you are not sure on this matter, then don’t take their money.

  3. Be professional about it. Treat the transaction as you would expect to be treated by an Angel investor or VC. That means writing down and signing the terms of the agreement, after making sure everyone understands them. Insist on paying market rates for commercial loans, since the IRS can instigate some nasty consequences on “gifts.”

  4. Tie payments to your product or service revenue. Try to avoid obligations with fixed repayment schedules. With “cash flow” obligations, investors receive a percentage of your operating cash flow (if any) until they have been repaid in full, or have achieved a specified percentage return on their investment.

  5. Loans are a safer option than equity. Offering debt is better than offering direct equity, especially in early stages when you have no valuation for setting equity percentages. Many use a convertible loan note that may be converted into equity upon the closing of the first formal Angel or VC round of financing, with a more realistic valuation.

  6. Pay the money back, with thanks, as quickly as you can. This money is real, so don’t assume it doesn’t have to be repaid. Some founders are too focused on quick repayment, and they compromise strategic decisions. That’s why it is better to use institutional investors and loans when you are able, with realistic time frame expectations.

Don’t forget a couple of additional potential negative realities. For entrepreneurs, friends and family money usually represents the smallest increment of funding, yet requires the most time to manage. Everyone wants to keep up and even have a say in your activities, and that can be a lot of conversations to manage.

A second harsh reality for entrepreneurs is the realization of how little power you have to protect the position of these early investors. New money from professional investors sees lesser value in old money, so the equity of early investors is “crammed down” and often lost in the scale-up surge. Later investors all think you have given away too much of the company too soon.

These realities are part of the reason that this first tier of very early investors are often referred to as “friends, family, and fools.” Most experienced entrepreneurs and investors can recount a horror story of families and friendships torn apart by money lost on someone else’s dream. In these cases both the entrepreneur and the friends are the fools. Don’t be one or create one.

Marty Zwilling

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Monday, November 9, 2015

The Top 4 Wrong Reasons to Seek Investors

pinching-penniesA popular myth these days is that successful entrepreneurs must attract investors to get their businesses going, when the reality has been that more than 80 percent of new businesses are started and grown with no outside investment at all. In fact, there is plenty of evidence that too much money can undermine a startup more quickly than squeezing pennies.

The cost of entry to entrepreneurship is lower than ever, due to smartphone apps and powerful free tools to create websites and ecommerce offerings. Yet many entrepreneurs rely on expensive outside services and outside money, rather than do the networking for a co-founder or two who have the right skills to work for equity. Bootstrapping not only reduces cash needs, but increases commitment.

Many of the best entrepreneurs I see find themselves besieged by investors, and have actively turned them away, at least until they reach a point of valuation and scaling where they don’t have to give away a lion’s share of ownership and control. Here is a summary of the top four wrong reasons I see for looking for investors:

  1. A desire to start with an impressive infrastructure. Some entrepreneurs think a new brand is all about having plush offices for displays and visitors and an upscale address. They forget that the product or service makes the brand, not the environment. With most solutions, infrastructure cost is overhead you don’t need.

  2. You don’t want to risk your own money on development. The first question from most investors is the size of your own investment. If you won’t risk your own money, they question your commitment to the project. If you claim to have no financial resources or savings, investors might suspect your strategic planning ability or financial acumen.

  3. The need to hire staff immediately. Creative and determined entrepreneurs always find ways to get people to work for equity, barter services or share later revenue rather than pay cash up front. Salaried staff will never have the commitment of co-founders that depend on the success of the startup.

  4. A desire to roll out on a massive scale. Most startups need to pivot at least once, so you need a limited rollout territory with a minimum viable product to keep the costs of corrections in line. Hitting a broad market initially with multiple fully-featured products and a huge marketing campaign is a recipe for disaster that bootstrapped startups never try.

Indeed, there is a time and place in every new venture where even a bootstrapping entrepreneur should consider bringing on investors. These would include the following:

  • You have a proven business model. Once you have a complete offering, with real revenue from real customers, it’s time to ramp up the business. You need extra cash for inventory, marketing and a real operations team, and investors can calculate the return and risk. Organic growth at this stage may be non-competitive.
  • The solution requires expensive equipment or processes. If your medical solution requires long clinical trials or your product requires injection molding or special fabrication equipment, it’s time to look for an investor. Even here, an alternative solution is to partner with a related vendor or potential big customer for equity or royalty advances.
  • You need investors' domain knowledge and management expertise. Famous investors bring value just for their credibility and name recognition in the marketplace. If one of the top venture-capital firms invests in your startup, your potential for success will be boosted by the association. Medical expert investors can be worth more than the money they invest.

Another good reason for skipping investors is to shorten the whole startup cycle. Most entrepreneurs don’t realize that finding an investor can add months to the process and require huge amounts of your time during the critical development and go-to-market period of your startup. In this rapidly changing marketplace, your opportunity can quickly evaporate or be grabbed by competitors.

Thus finding investors early is most often the hard way to get your startup off the ground quickly. Bootstrapping continues to be the preferred approach, giving you maximum ownership, control and agility. Isn’t that why you chose the entrepreneur lifestyle in the first place?

Marty Zwilling

*** First published on Entrepreneur.com on 10/30/2015 ***

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Sunday, November 8, 2015

10 Ways To Make A BAD First Impression On Investors

goon meetMany new entrepreneurs are so excited by their latest idea that they can’t resist contacting every investor they know, assuming the investor will be equally excited and want to contribute immediately. Others will work hard on a business plan, and then mail it indiscriminately to every potential investor they can find on the Internet. Both of these approaches are a waste of your time and theirs.

The best professional investors receive dozens of proposals a day, so they are conditioned to look for quantitative data, rather than passion, for credibility and potential. They also look for entrepreneurs they know from past experience and warm introductions, or for evidence that you have previously built a successful startup, and sold your last one for maybe $800 million.

If you are not in that rare category of known and proven entrepreneurs, you should avoid the following list of my top ten turnoffs that I have personally experienced as an angel investor. These will put your proposal in the circular file, and even future good opportunities from you may go to the bottom of my list:

  1. “Give me a call to hear about an opportunity that can’t fail.” Teasing or spamming an investor is not the way to his pocketbook. Also suggesting that they check out your website or video and tell you what they think will not likely peak their curiosity. Every pitch should start with a concise statement of the problem and your innovative solution.

  2. “Attached is a copy of my full business plan for your review.” Too much detail at first contact is just as much of a turnoff as no information. The first page of the business plan better be an executive summary which gives the investor a taste of the financials, as well as opportunity, competition, and key executives.

  3. “I don’t have a business plan, but the technology is disruptive.” Investors are buying part of the business, not the product or service. They only want a quick overview of the product, not detailed features and patent secrets. If you haven’t yet finalized the business model, cost projections, and customer segments, you aren’t ready for investors.

  4. “Excuse the typos and cleanup that I’ve been too busy to finalize.” Don’t send investors documents and notes that would be rejected by any high-school teacher. These will quickly convince investors that you will be equally unprofessional in your attention to detail in running the business. Investors invest in the jockey, more than the horse.

  5. “I’ve used a few well-known acronyms and abbreviations for brevity.” Technical jargon may be natural for you, but investors read this as arrogance or laziness on your part, if not an intentional effort to intimidate the reader and obfuscate facts. Every acronym should at least be spelled out and defined at its first appearance in any content.

  6. “I think you will find the business plan answers all your questions.” Business plans the size of a small book are a big turnoff to investors, and will only serve to make your business seem more complex and more risky. A tightly-worded plan of approximately 20 pages is effective in painting the overall picture, including all the key financial elements.

  7. “An additional level of detail is included in the various appendices.” It’s always impressive to have stand-alone supporting documents for product specifications, sales plan details, and backup financial reports. But including all of these in the base plan to make it look more impressive will probably backfire.

  8. “I really can’t find any worthy competitors in this space.” Avoid degrading or demeaning your competitors, unless you can quote third-party data. Investors read this approach as naïve, even bordering on unethical. Talking about competitors should be your opportunity to make positive statements about the advantages of your own product.

  9. “Let me show you a demo rather than a business plan.” Demos never go according to plan, and ones that work go on far too long. Remember that investors can’t see the business from a demo or prototype, and they won’t appreciate all the love and work you have put into building the product. The best demos to investors are 30 seconds or less.

  10. “Look how many social media ‘likes’ my site has generated.” We all know how to get friends and peers to pump up our story online, but investors want to see feedback from paying customers. Real contracts, testimonials, and even statements of intent are much more effective, if not real revenue and growth statistics.

As a new entrepreneur approaching an investor, you only get one chance for a great first impression. Passion is necessary but not sufficient to get their attention. My advice is to pick your opportunities carefully, prepare thoroughly, and focus more on the financial side of your story. It’s a lot easier to turn off an investor than it will be to get them turned back on later.

Marty Zwilling

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Saturday, November 7, 2015

4 Communication Hacks to Entice Customers

increased-pace-communicationEntrepreneurship is more about building a business than inventing a product. It’s more about the quality of the execution, rather than the quality of the idea. Most importantly, it’s more about being a proactive leader who connects to customers and the team deeply, rather than a bright light that struggles to be seen amidst the glare of a million other bright lights.

Achim Nowak, noted business coach and author, in his classic book “Infectious: How to Connect Deeply and Unleash the Energetic Leader Within,” talks about how technology today allows entrepreneurs to communicate at a furious pace. They exchange more emails, texts, and tweets every day. Yet many know less and less about how to really connect, and get people to commit to their business or product.

I’ve seen this all too often in my own work with startups. More noise always means more hours a day working, but it doesn’t necessarily mean more business or more productive connections. Nowak talks convincingly about how successful entrepreneurs connect deeply with others at the highest of four levels, with less effort and more results:

  1. Level one: Talk at the social level. Talk is the first of four levels of communication. It is the surface of many business experiences, and some people never get beyond this level of relationship. They don’t engage with a measure of skill and ease at this level, which inhibits any resonation at a deeper level. You need to move past this level quickly.

  2. Level two: Connect through personal power. Entrepreneurs have personal knowledge and strengths that can get them past the social level in connection. These should include professional position, existing relationships, specific expertise, professional appearance, and passion for your cause or business. Use them effectively.

  3. Level three: Shape the intent of the connection. Great connectors don’t just fall into conversations; they carefully shape them with conscious intent and tone. Action verbs are key to creating powerful intents, and they unleash forward-moving velocity. Don’t waste your precious time, or theirs, on long boring conversations at lower levels.

  4. Level four: Energy conquers all. Energy and passion is the realm where all resonating connections truly unfold. If an entrepreneur doesn’t have it, or doesn’t show it, he or she will never be able to build deep connections and commitments from customers, partners, or team members. Everyone recognizes the visible and verbal queues of energy.

Entrepreneurs who understand how to connect with people on all four levels are able to shape conversations with effortless grace and create infectious connections that are the key to business success in this age of relationships.

For many business people, the hardest part of establishing relationships effectively is dumping old habits, and learning to ignore some old myths and common beliefs. Here are a few of the things you probably need to unlearn, according to Achim, for better business as well as social connections:

  • You need to find common ground fast. Common ground is, in many ways, a wonderful thing, but is irrelevant when it is forced. Take your time to discover common ground, and relish the many things that you do not have in common.
  • Avoid charged topics. In today’s media-saturated world, being comfortable discussing current and controversial topics is critical. In business, having the confidence to disagree, explore points of conflict, and learn new points of view builds real relationships.
  • Don’t show the cracks. In reality, not taking any risks in showing the personal cracks guarantees that you will be viewed as a business robot that nobody really wants to work with. The power of a vulnerable moment is a powerful connection.
  • Don’t get stuck with a loser. Some business people are so busy looking for the right connection, afraid of losers, that they are never really in any relationship. It is far more powerful to really connect with a few key people than to skim the surface with many.
  • I will, I will, I will be perfect. The notion of perfection negates the wonders of all that is not perfect, such as the beauty of an awkward moment, the thrill of the unrehearsed encounter, and the delicious learning of solving a business problem.

Today, more than ever, people buy based on connections, and commit based on relationships, no matter how great the technology is behind your product. In addition, we are all human, and we need good relationships to be healthy and happy. Maybe it’s time to take a hard look at your people connections, and use these tips to kick your results up a notch.

Marty Zwilling

*** Published on IvyExec.com on 11/05/2015 ***

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Friday, November 6, 2015

8 Reasons Young at Heart Entrepreneurs Lead the Way

yount-at-heart-entrepreneurSurviving as an entrepreneur requires unbridled passion, enthusiasm and a certain naiveté in the face of many unknowns. Young people are more accustomed to facing a new world each day, so they don’t worry about it, and usually actually relish the new adventure. Once the rest of us reach a certain age, we know too many things that can go wrong, so we avoid the path entirely.

Of course, entrepreneurs of any age can be young at heart and equally fearless, and still able to use their greater experience as an advantage. These are the people that every smart investor seeks, but rarely find. Thus every investor also looks hard at the young entrepreneurs who are striving to achieve things that no one else thought possible, and exhibit the following characteristics:

  1. Ability to rebound quickly. This resilience to recover quickly from a setback, pivot and charge ahead again is invaluable for an entrepreneur. The startup path is strewn with aspiring entrepreneurs who give up at the first tough challenge, are quick to make excuses or burn themselves out in stubborn desperation on a broken objective.

  2. See the best parts of life are still ahead. Young people who look forward with anticipation rather than dread make the best entrepreneurs. They see the potential for changing the world as a great experience and are determined to enjoy the journey as well as the destination. They have no legacies to protect or past accomplishments to live up to.

  3. Can give total focus to the business. Entrepreneurship is best started before the financial burdens of family and keeping up with peer success weigh heavily. Young entrepreneurs don’t miss the responsibilities of success, as they have never been there. There are fewer distractions from prior commitments and relationships.

  4. Have boundless optimism and energy. Young entrepreneurs are convinced that every day they are creating a business that will improve the future of our country, communities and families. They are confident that their power to focus 24 hours a day will overcome technological and political barriers, and surpass the old guard of existing competitors.

  5. Willing to think differently. As people age, they tend to get stuck in traditional modes of operation and thinking. It’s becomes harder to think creatively. To build a successful new startup, with new challenges and new competitors every day, it’s important to be the model for your team of how to think outside the box.

  6. Live and work unconventionally. Invention and creativity cannot be scheduled. The realities of new product development may require living on ramen noodles and sleeping on a cot in the back room for a week. Young entrepreneurs are not yet ingrained with the corporate habits of long meetings, regular work hours and free weekends.

  7. Enjoy multi-cultural relationships. In this age of the Internet, the world is a smaller place, so young people have grown up aware of the diversity around them. They have learned from and interacted with multiple cultures online through social media and at school. Diversity is a key to innovation and maximizing new business opportunities.

  8. Satisfaction is not connected to money. Young idealism associates happiness with a lifestyle, rather than a reward. The entrepreneur lifestyle has the lure of future money, but more immediate satisfaction in the daily learning, new relationships and stature in an exciting community of peers. Satisfaction is making your own decisions and mistakes.

None of these are a total substitute for street smarts and book smarts. Investors look for aspiring entrepreneurs, young or young at heart, who can sell themselves well, have good negotiating skills, are problem-solvers and have a broad educational background. Don’t forget to highlight the experience you have accumulated in all of life’s domains.

If you are an aspiring entrepreneur with the perspectives outlined above, the future is bright. It’s time to enjoy your advantage and step out confidently to change the world. The rest of us are waiting expectantly to see what you can do. Don’t disappoint us.

Marty Zwilling

*** First published on Entrepreneur.com on 10/28/2015 ***

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