Monday, May 30, 2016

Test Startup Urges As An Intrapreneur, With Caution

intrapreneur-light-bulbBelieve it or not, even large and mature companies often initiate entrepreneurial efforts inside their own companies, and they look for employees who have the right attributes to make this happen. If you want to explore the world of an entrepreneur, without jumping ship, this would be the way to do it. Entrepreneurs working inside big companies are called “intrapreneurs.”

Many companies do this to explore opportunities for growth outside their normal domain, and compete with conventional startups, to penetrate new markets and profit from the next big thing. A reason on the other end of the spectrum would be to de-consolidate non-core functions to live or die on their own merits. A third reason would be to mingle and learn from the startup culture.

Most often, corporate entrepreneurial efforts are destined to be spun-off, or disconnected from the base company, very early in their cycle, to give them all the advantages (and challenges) of a real startup. Since initial funding and staffing is usually provided by the parent company, one would assume they have a real survival advantage over other startups.

Yet, through some first-hand company experience that I won’t detail here, to protect the guilty, I am convinced that spin-offs often fail to launch or compete in the real world, for one or more of the following reasons:

  1. Employees selected to run the spin-off don’t think like entrepreneurs. All too often, corporate top performers, or ones who have scaled the ladder of time, are put in charge, regardless of whether they have a passion to run a startup, the broad range of skills, required or the required relationships with industry players and outside partners.

  2. The parent company never really relinquishes control. Like startup investors who demand board control positions, parent company executives too often exert their power, without understanding that starting a business is far different from running an established one. The result is an under-funded and under-staffed clone of the parent organization.

  3. Incentives based on internal objectives, rather than market-driven. In enterprise environments, performance objectives and bonuses are often tied to internal processes and targets, rather than product revenue, customer acquisition and market penetration. This technique, when applied to a startup, can actually inhibit progress and scalability.

  4. Salaries and support services carry corporate overhead. Legally and culturally, benefits and facilities provided to an intrapreneur under the auspices of the parent company have to be driven by the corporate burden rate. Thus the spin-off carries a heavy overhead, or faces a disconnect from the parent with no visible return path.

  5. Mission is set in stone, so required pivots are not allowed. The corporate mandate of a spin-off usually lacks the flexibility and creativity of an outside startup. Every startup I know has found the need to pivot multiple times, before finding their best fit in the market, no matter how strong their initial vision. Intrapreneurial missions are more hard-coded.

Your challenge as a corporate entrepreneur, or intrapreneur, is thus actually tougher than starting your own business on the outside. It looks more attractive, considering the guaranteed funding up front, access to pre-trained internal team members and professional analysis of the financial considerations, but the challenges listed above can override all of these.

The answer for spin-offs, I believe, is for the parent to apply tough love -- limited financial support, with no do-overs and no golden parachutes. With this approach, Sony’s intrapreneurial venture into the PlayStation game market succeeded wildly, and has since grown into an ownership of over 70 percent of the home-video-game-console market share.

On the other hand, Hewlett-Packard applied resources to all these issues a few years ago in an attempt to spin off the personal computer business, but quickly backed out as they saw losses mounting toward $1 billion a year. The low margins of the PC business just could not be overcome by resources and value unlocked by splitting the business into two more focused entities.

For aspiring entrepreneurs, there are a couple of lessons here. First, entrepreneurship (or intrapreneurship) is a mindset that team members can apply for value in corporations, as well as startups. Huge resources, even with this mindset, won’t make a startup or a spin-off successful. The magic is figuring out how to do more with less. So why are you waiting for that big investor?

Marty Zwilling

*** First published on Entrepreneur.com on 05/20/2016 ***

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Sunday, May 29, 2016

The Best Entrepreneurs Learn To Stay Ahead Of Change

change-business-anticipateAspiring entrepreneurs who rely only on traditional learning vehicles (teachers, classrooms, and risk-free practice) are doomed to failure in anticipating change today. Either they are never really ready to commit, study an opportunity until it has passed, or fail with tools and techniques from a bygone business era. The Internet and the current information wave have changed everything.

Being a successful entrepreneur these days requires a current insight to a myriad of changes, including many that haven’t yet been integrated into the traditional academic learning vehicles of textbooks and professors. The Internet is the problem, by facilitating constant change, and it’s the solution, by providing an absolutely current view of customers, trends, and best practices.

The challenge is to find the time and initiative to keep up with the information wave, and be able to curate the data into knowledge that must be learned, unlearned, or relearned. It requires an attitude of self-education, versus an assumption that someone else will provide the education. For entrepreneurs, change is the norm, so you have to relish it before you can make it happen.

This required ability is aided by some supportive personal attributes, such as confidence, initiative, problem solving, and determination, but the basic learning principles must include the following:

  1. Satisfaction will come from learning something new every day. This goes hand-in-hand with every entrepreneur’s desire to do things better, and make a real impact on the world. This is a key part of enjoying the journey, as well as the destination. It doesn’t imply any sense of superiority or weakness, but often provides motivation beyond money.

  2. Success requires challenging assumptions and status quo. With this principle, real entrepreneurs start with a conviction that new learning will reveal flaws in existing models, leading to new opportunities. The Internet is the source of data for alternative views, and social media allows direct customer interactions to test these views.

  3. Learning means understanding, far beyond memorization. Great entrepreneurs strive to understand the depth of a customer need, rather than just the ability to recite a longer list of features. Technologies are not solutions, but understanding a technology, in the context of a customer need, will result in more competitive and long-lasting solutions.

  4. The act of communicating and writing enhances learning. The process of documenting what you think you know in a business plan, for the team and for investors, solidifies your own understanding of your new business. With that learning, you are able to more effectively share and market your solution to customers and business partners.

  5. Building a new business is not rocket science. Growing a business is understanding the needs and thoughts of regular people and simple financial transactions, not some complex technology that you might assume you can never learn. With the Internet, you can see all you need explained in a dozen ways in text, videos, pictures, and podcasts.

  6. Learning is nothing more than looking outside the box. Extending your knowledge is like dealing with competitors – if you aren’t extending your comfort zone, you are losing ground. With the Internet, you can quickly test your new business concepts, with crowd funding and social media, and get quick feedback from around the world at low cost.

  7. Relationships are a test of your learning readiness. Building a new business today is all about building relationships with your customers and your team. As an entrepreneur with a new startup, you are the brand, and customers today expect a relationship. In addition, you always need relationships with advisors, investors, influencers, and peers.

  8. Proactively ask for help and anticipate the need to pivot. With the Internet, you can ask for help from normally inaccessible experts, with minimum personal exposure and cost. It’s easy to see how often others have made changes, so your own learning and associated pivots should never be an embarrassment. Avoid the arrogance trap.

No one is too old to learn new things as an entrepreneur, whether you are just out of school at twenty, or just finished your first career at sixty. If you follow the principles outlined here, and take advantage of the pervasiveness of the Internet, you too can be a part of the solution rather than a part of the problem. A failed startup is the harshest learning lesson of all, and we need to change that approach.

Marty Zwilling

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Saturday, May 28, 2016

How To Take Your Idea From A Hobby To A Business

handmade-hobby-versus-businessAs a startup investor, I often see business proposals looking for funding that really look like expensive hobbies looking for donations. I recognize that entrepreneurs tend to substitute vision and passion for formal processes, but no discipline or process in building something new is a sure way to spend money, rather than see any return and build a self-sustaining business.

I’m not suggesting that you model your startup after the complex corporate organizations you hated in your last job, but there are at least eight key functions and activities that every investor expects to find in a startup proposal with any real potential to change the world. Each of these requires some ongoing effort, so I expect at least a rudimentary process associated with each:

  1. Record of spending and business assets. I still see entrepreneurs who spend money and time for months on a new business idea without any separation of personal and business funds, and any formal accounting system for their new business. This is the first business process that every startup needs, that I wouldn’t expect to find for a hobby.

  2. Managing to specific goals, priorities, and a plan. Technologists building cool new platforms, just because they can, won’t find investor interest. Entrepreneurs need to document a process of responding to a market need, sizing opportunity, assigning a specific business model, and planning for marketing, sales, and customer satisfaction.

  3. Solution development and delivery. Products and services for a business need to be attuned to customer requirements, cost and quality tradeoffs, with milestones for pricing and completion. Typically some production and delivery is outsourced, requiring formal contracts and documentation. Hobbies are developed ad-hoc, driven by personal needs.

  4. Preparation and management of funding. Even if you are not requesting outside funding, I would expect a clear process for sourcing and managing the investment you plan to apply. External investors expect a documented business plan, with clear targets on funding needed, use of funds, revenue projections, return potential, and exit strategy.

  5. Team building status and plan. Solo entrepreneurs, with a team of helpers, will be assumed to be a hobby rather than a business. I recommend every startup plan for at least two or three decision level team members, and at least a couple of highly-qualified external advisors. Show that you have a process to hire, fire, and train others as required.

  6. Formalize the use of tools and information technology. Productivity and repeatability is the hallmark of a good business, whereas a hobby usually assumes everything is custom built and personal. I look for business startups to already have their website up and running, administrative tools purchased, and basic procedures automated.

  7. Customer receivables collection and vendor payments. These are critical processes for any business, so they need to be implemented even before investor requests are sized or solicited. For progress and success assessment, each of these needs some metrics defined, a training plan, and responsibility assignments within your team.

  8. Marketing, sales, support, and service operations. I’m assuming that most of you will see these as intuitively obvious elements of a business, but not needed for a hobby. Yet I continue to get funding requests that never mention any specific plans or costs to be associated with these elements. No mention usually means no plan and not competitive.

For all of these, your objective should always be a minimum viable process to start, with the expectation that each will be enhanced and pivoted as you learn from customers and competition that works and what doesn’t. The key is to be proactive, rather than assuming that you can react to each crisis as it happens. Customers today are easy to lose, and expensive to replace.

It’s a myth in the startup world that not having processes makes you more competitive. In my experience, no defined process means unable to respond in a timely fashion, unpredictable quality, and high operating costs. None of these are attractive to investors, and jeopardize the success of even the best initial idea. A hobby may take your idea to a product, but a startup has to take the idea to a business.

Marty Zwilling

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Friday, May 27, 2016

7 Team Attributes That Can Make Any Idea Come Alive

Playing_mafia_gameThere is an old saying in the startup investor community, “Smart investors invest in the team, not the idea.” As an angel investor, I’ve learned to believe in this approach, since I have seen great ideas go astray, due to poor execution and I have seen apparently marginal ideas make millions, managed by a savvy entrepreneur. Giving the wrong people money doesn’t help at the idea level.

Who would have forecast that entrepreneur Gary Ross Dahl would make millions by starting a “pet rock” business way back in 1975? Some business successes can be attributed to luck, timing, or available funding, but in this case most agree that Gary was simply a marketing genius and he created his own market through creative advertising, emotional appeal and exclusivity.

That may be an extreme case, but I’ve found that even with the proposals that include compelling paradigm shifts in technology, a hard look at the entrepreneur is often the most significant due-diligence that an investor can undertake. Beyond basic business and technical credentials, here are some of the key startup team attributes that every investor is looking for:

  1. Team shows an appreciation and plan for marketing. The days are gone when an inventor can get credibility by saying “if we build it, they will come.” Similarly, mentioning viral marketing without specifics won’t assure fundability. Everyone on the founding team needs marketing awareness, and a marketing plan with content.

  2. Leader pitches the plan, not the product. Investors look for entrepreneurs who talk about building a sustainable business, rather than highlighting the breakthrough elegance of the technology or the need for social change. Even social entrepreneurs need milestones, quantifiable results, and revenue to sustain their value.

  3. Focus on customer needs. Some founders are so passionate about their solution that they forget to lead with an explanation of the customer value equation. Investors assume that entrepreneurs are experts on their solution, but they want to see the same depth on customer and market dynamics.

  4. Startup presents a plan to expand and lead the market. Every investor I know has seen multiple plans to add more features to Facebook, or add yet another dating site. I’m looking for teams who are exploiting a new market niche, or adding real innovation to an existing domain. Investors like to see new intellectual property as a barrier to entry.

  5. Plan includes a business model with good margins. Counting on sustaining the business through more free users and growth in eyeballs for advertisers is a naïve and risky approach and it implies investors with very deep pockets. Investors expect to hear annual revenues, average margins, customer acquisition costs and sales pipelines.

  6. Founding team has business and domain experience. An entrepreneur needs a depth of business experience on the team, as well as technical expertise. This should include financial, marketing, sales, and operations, all with a record of working together in setting milestones, managing results, and focusing on the market opportunity.

  7. Business objective is clear and laser focused. If the entrepreneur is pitching a plan that sounds like this is a solution for everyone, it’s likely that resource constraints will not allow any customer segment to be served well. The best startups are highly focused in the initial rollout, but can present an evolving strategy for broadening the market later.

It’s always likely that one or more of the team members are young or inexperienced, but every entrepreneur can attract a strong and balanced team, with the proper networking and the willingness to share equity early. Building the team later, with money from investors, is a losing strategy, since team members paid cash are less committed and investors want the team first.

Thus I would assert that build a great solution is only half the task faced by every entrepreneur. The other half is building a great team and plan for making a great business out of the solution. With both of these, you can make any idea come alive. Otherwise you will likely feel like you are working hard with one arm tied behind your back. You need both for maximum impact.

Marty Zwilling

*** First published on Entrepreneur.com on 05/18/2016 ***

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Wednesday, May 25, 2016

Find Your Sweet Spot To Excel As An Entrepreneur

the-purpose-effect-etsyFinding your sweet spot as an entrepreneur needs to start with a meaningful personal purpose that is also a business opportunity. Some people are so passionate about a cause that they forget to consider the lack of business potential, while others are so enamored with profit that they jeopardize their ethics. Both ends of this spectrum fail to bring long-term satisfaction or success.

Many entrepreneurs are finding their “secret sauce” these days by combining a strong purpose with a good business opportunity. For example, the handmade-item platform Etsy sponsors free entrepreneurship courses for underemployed and unemployed people, including assistance in setting up a store on Etsy, thus adding more artists and artisan sellers to their platform.

Patagonia, a successful outdoor products company, combines building safe high-quality products with philanthropic efforts to help the environment. In the name of this cause, the company donates time, services, and at least one percent of their sales to hundreds of grassroots environmental groups around the world. Purpose must not be perceived as just a gimmick.

So the question is how do you find a personal purpose and a business purpose that are in sync, to be the driver of business success, as well as your own happiness? I just finished a new book, “The Purpose Effect,” by renowned author Dan Pontefract, that provides a good framework and background or doing just that. I recommend his tips for creating and maintaining that sweet spot:

  1. Define a personal declaration of purpose. Deciphering one’s personal purpose should be priority one. Keys to this must include how you want to operate your life, and how you incorporate your strengths, interests, and core attributes. Write it down, make it specific, expressive, yet succinct and jargon-free. Then take ownership and make it happen.

  2. Don’t stop believing, learning, and developing. If one stops growing and experiencing, personal purpose will be inhibited. We all change as we mature, and we all need to keep changing. To find new work you love, it helps to do job shadowing or short term rotation. Outside of work, it’s important to join a club, do volunteer work, and help at local events.

  3. Establish a team-defined declaration of purpose. By constructing with the team a purpose-first strategic direction with a role-based mindset, a business will have far greater buy-in from its team to achieve its mission and objectives. When every team member sees purpose in their role, the benefits begin to accrue quickly for all.

  4. Set specific targets for serving all stakeholders. The challenge of every business is to create a win-win relationship between business owners, partners, team members, customers, and the community at large. By setting specific targets, you can apply measurements to chart progress and be able to celebrate successes along the way.

  5. Delight and deliver value to your customers. Without customers, there is no business. Thus even purpose-driven entrepreneurs need to maintain a “customer-first” perspective. When the customer is put first, the team will rally around that focus. When the customers are delighted, they become your best advocates of your purpose and your business.

  6. Create an engaging and ethical workplace. Prioritizing an ethical culture is a critical step to gaining the respect of customers, team members, and the community in the pursuit of becoming a purpose-based organization. Factors which increase engagement include more manager face-time, flexible work rules, and better recognition opportunities.

In the long run, both purpose and business are all about people. Neither of these can be static, and still stay vital. Both should be thought of as in perpetual motion, so finding your sweet spot is not a one-time event. You and your business are on a journey, by way of new experiences, insights, and knowledge, requiring constant attention, or the sweet spot will be lost.

That should convince you that finding and maintaining your sweet spot in business will not be easy. It takes hard work and requires hard choices be made, which can be painful. In the difficult early stages of any business, it can also seem like you are leaving some things for others that should be in your pocket. But you will soon find that the joys of giving far outweigh the taking.

Marty Zwilling

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Monday, May 23, 2016

6 Principles For Overcoming Entrepreneurial Adversity

entrepreneurial-adversityEvery entrepreneur knows what it’s like to face adversity. It comes with the territory, and includes cash-flow challenges, fickle customers, belligerent investors and unpredictable economic downturns. The best entrepreneurs tackle these one at a time without losing their stride or their passion and many secretly get their highest satisfaction from overcoming an impossible problem.

For example, you probably didn’t know that the world’s richest entrepreneur, Bill Gates, found that his first venture, Traf-O-Data, failed to make money because he couldn’t solve the technical problems quickly enough and selling to municipalities was a nightmare. Instead of making excuses, he credited his later success with Microsoft to the lessons he learned with Traf-O-Data.

Also, most people don’t realize that Richard Branson has dyslexia, which made him a poor student, so he faced adversity well before his first startup effort. Yet he was able to use his dynamic and powerful personality to drive him to success. Today, Branson is known for over 400 companies, many very technologically advanced and he is the fourth richest person in the United Kingdom.

I’ve always been intrigued by the fact that adversity energizes some people, almost to the super-human level, while others are driven to despair. I suspect it starts with a strong survivor instinct, rather than reverting to a victim mentality. Beyond this, I have extracted from my own work with entrepreneurs a set of principles that I recommend for every founder in the face of adversity:

  1. Maintain a positive attitude, learning from failure. Thomas Edison called every failure an experiment (now it would be a pivot). He made no excuses for 10,000 light filament failures. Challenged by his contemporaries, Edison soberly responded: “I have just found 10,000 ways that won’t work.” He then succeeded.

  2. Build relationships with others, communicate. An isolated position is hard to defend in the face of adversity. Successful entrepreneurs are not afraid to reach out and ask for help from peers and advisors. They communicate their goals, fears, and challenges, without excuses and actively listen to feedback and guidance.

  3. Surround yourself with smarter people. The best entrepreneurs get past the need to control every aspect of their business, and make every decision. They actively solicit people who are strong, have more expertise in a specific area and trust them to make decisions there. Adversity will melt away.

  4. Prioritize your health and activities balance. In the natural world of survival, unhealthy and unbalanced people most easily succumb to adversity. Smart entrepreneurs always find time for rest, outside physical activities or even meditation. Working 20 hours a day, seven days a week does not solve all problems.

  5. Accept adversity as a norm rather than an exception. Some adversity in inevitable in every business, so it must be treated as any other unknown, rather than a crisis or the end of the world. Many entrepreneurs thrive in adversity and get satisfaction from the solving challenges, compared to the relative boredom of business-as-usual.

  6. Practice resilience by refocusing on your strengths. Researchers have concluded that human beings are born with an innate self-righting ability or resilience, which can be helped or hindered. Obsessing about problems and weaknesses hinders resilience, while identifying and building on individual strengths increases resilience and leads to success.

One of the biggest myths that aspiring entrepreneurs tend to believe is that they can be successful doing only fun things. In reality, experienced leaders and entrepreneurs will tell you that it’s how you anticipate and handle the inevitable tough challenges that determines long-term happiness. If you try to avoid any risk and competition, you won’t be happy with the outcome.

I don’t recommend the entrepreneur lifestyle to those who can’t deal with risk and adversity. If you are ready to give it a shot, or are already committed, I do recommend the principles outlined here for solidifying your natural strengths. We can all benefit from the experiences of others. The best entrepreneurs don’t succeed by dodging challenges, but because of how they handle them.

Marty Zwilling

*** First published on Entrepreneur.com on 05/13/2016 ***

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Sunday, May 22, 2016

8 Ways To Prevent Burnout While Running A Startup

burnout-businessNew entrepreneurs routinely jump into a startup with a full charge of passion and energy, but often find themselves drained of both after a few months by the workload and challenges. As a result, burnout and loss of passion are consistently listed among the top causes of startup failure, according to many studies. The challenge is find ways to continually recharge along the way.

Of course, this same challenge extends well beyond the entrepreneur, into all walks of life and work. I just reviewed a recent book, “Are You Fully Charged?” by human relations expert and bestselling author, Tom Rath, which explains well the three keys to energizing all your life pursuits. These keys are meaning, interactions, and energy.

Based on my experience working with early-stage startups, I agree with Guy Kawasaki, that those entrepreneurs who set out to make meaning in the world (a positive change) create the companies that will most likely be successful. I have extrapolated Rath’s eight insights on making meaning as key focus principles that every new entrepreneur should take to heart:

  1. Create meaning with small wins. Celebrate small wins by asking yourself what can you do today to make a difference? Real meaning is made up of many small differences, such as a design breakthrough, new business model, a truly satisfied customer, or an excited team member. Take a moment to enjoy each of these and get recharged.

  2. Pursue life and meaning, as well as a solution. Finding meaning is driven from within, through new learning and overcoming challenges. Every startup has a wealth of these opportunities. Successful entrepreneurs often admit that they enjoyed the journey more than the destination. Meaning does not happen to you – you create it. Don’t wait.

  3. Make your startup a purpose, not just a business. Strive to see the work you do to build a business as the way to make a difference in the world. Make sure your team understands your shared mission, meaning, and purpose. Making meaning is making your life, and the lives of others, stronger as a product of your efforts.

  4. Find a higher calling than cash. Happiness does not scale up with income. Studies show that doubling your income might increase happiness by 10 percent. In addition, focusing first on money will kill meaning. The more you focus your efforts on others, the easier it is to do great work without being dependent on money, power, or fame.

  5. Ask what the world needs. You create meaning when your strengths and interests meet the needs of the world. One of the rightful critiques of all the “follow your passion” advice is that it presumes you are the center of universe. A better way is to explore the most pressing needs in your social circles, organization, and the worldwide community.

  6. Don’t fall into the dreams of others. If you walk only in the path of others, your own image disappears. Be sure you create your own shadow, spending some time each day engaging in activities that energize and recharge you. Also plan to spend more time around specific people who energize your work and less around those who don’t.

  7. Take the initiative to shape the future. If you want to make meaning in the world, your ability to do so will be almost directly proportional to the amount of time you spend initiating instead of responding. Being busy is often the antithesis of working on what matters most. Usually you have to focus on less to do more.

  8. Work in bursts, paired with time to recharge. This can mean focus for 45 minutes, followed by a break for 15 minutes. Short breaks allow you to refresh yourself and work with purpose. Try to remind yourself daily why you do what you do, and if you don’t like what you hear, it’s time to change to something that has more meaning for you.

In an author survey of 10,000 people, only 20 percent admitted to spending much time doing meaningful work yesterday. Only 11 percent reported having a great deal of energy at work. Clearly, most entrepreneurs are operating well below their capacity, and could be more effective in building their business or making new meaning in the world. If you are one of these, then it’s time for you to change before you burnout and disappoint everyone, including yourself.

Marty Zwilling

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Saturday, May 21, 2016

7 Entrepreneur Attributes You Need To Lead The Market

ETalk2008-Sir_Richard_BransonThere are a few entrepreneurs who seem to always be ahead of the rest, and are able to sense where the market is going tomorrow. Investors reverently call this the ability to “see around the next technology corner,” and fight for a place in line to put their money down. Everyone wants to support the entrepreneur with the courage to make bold decisions, and can make it happen.

Elon Musk seems to be highest on this list these days, with his record-setting order rate on the new Tesla Model 3 all-electric car, and well as groundbreaking progress on SpaceX and SolarCity. Steve Jobs of Apple and Richard Branson of Virgin Group are other popular examples. Most investors probably have one or two more favorites, but their list is always short.

So what does one have to do to get on the list? No one expects an entrepreneur to be “always right,” and definitely no one is looking for aspiring entrepreneurs who are willing to make random jumps into the unknown, based primarily on passionate dreams or a revelation from a life-changing event. They do expect to see all the key attributes of an entrepreneur, and a few more:

  1. Dominating presence without the arrogance. These entrepreneurs are outspoken and opinionated, but not afraid to put their money where their mouth is. Steve Jobs never denied his failures, but didn’t hesitate to risk it all on a next turn of technology from computers to consumer products. His new product presentations were legendary.

  2. Exhibit almost superhuman energy and focus. According to many, Elon Musk has worked for 100 hours a week for more than 15 years, with incredible productivity. Richard Branson’s adventurer escapades are legendary, while at the same time founding over 400 companies. Steve Job’s focus on incredible design has set new standards for all.

  3. Good at business, but driven by making the world a better place. Too many founders that are driven by good social causes forget that they have to make money to deliver on their vision for the long-term. Maintaining that balance between doing good and doing business is a key to success that investors and customers watch carefully.

  4. Build relationships with the best of the best in their domain. Lone scientists may uncover some great technology, but a team is required to build a solution and a market. That team has to cover the range from top designers, savvy financial managers, to good marketing and sales leaders. Leaders make a team greater than the sum of the parts.

  5. Pushes beyond the limits of known function and design. Only a few entrepreneurs have the intelligence and perseverance to not only envision, but actually build, solutions that defy conventional design and performance limitations. They have to ability and patience, as well, to communicate and awaken customers to a need never felt before.

  6. Enjoy continuous learning from “stretch” experiments. These entrepreneurs are self-learners, having long ago foregone the conventional learning vehicles of schools, consultants, and incremental improvements. They challenge themselves and their hand-picked team to “impossible” tasks, like reusable rockets, or a computer in a wristwatch.

  7. Always on the offense in strategy rather than the defense. For most entrepreneurs, playing defense is the default, since it doesn’t require being proactive and it’s hard to consider killing a cash cow. Steve Jobs couldn’t wait to push out the Macintosh personal computer, even though the Apple IIe was still doing well in the market.

The entrepreneurs who work at “seeing around the corner” are the ones who work 80 hours a week or more, just to avoid the predictable 40 hour per week regimen. They don’t worry about getting it right the first time, or every time, because they relish the heightened learning they get from failure. They get their satisfaction from the journey, as well as the destination.

As a mentor and advisor to aspiring entrepreneurs, my advice is to hone your development of these extended attributes by first working in a challenging startup environment under the tutelage of a more experienced entrepreneur that you respect and trust. It helps to know the difference between a corner and a brick wall before you charge ahead.

Marty Zwilling

*** First published on Entrepreneur.com on 05/11/2016 ***

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Friday, May 20, 2016

Professional Investors Qualms About Crowdfunding

kickstarter-crowdfundingWith the advent and growth of crowdfunding over the past few years, many entrepreneurs have predicted the demise of those demanding angel investment groups and venture capital organizations. In fact, the latest figures show that crowdfunding has already grown to over $30 billion in 2015, exceeding the amounts contributed by either angel groups or VCs alone.

Early crowdfunding successes have been undeniable. In 2015, the new Kickstarter Pebble smartwatch raised $20.3 million, smashing the old Kickstarter record of $13.3 million held by the Coolest Cooler. This is the cooler that features an ice-blender, Bluetooth speakers and a USB charger. Over on IndieGoGo, Flow Hive raced past their goal of $70,000 to raise $12.2 million.

But don’t be misled – these are just the cream of the crop. According to statistics, between 69 and 89 percent of projects, depending on the platform, do not meet their monetary goal and have to return anything they do collect. That’s not as high as the failure rate with professional investors, but it should convince entrepreneurs that crowdfunding has been no panacea for funding.

Granted, all the experience so far has been without the most anticipated feature of the JOBS Act – Equity Crowdfunding (Title III), effective a few days ago with 685 pages of rules. At least ten online portals are already gearing up to help regular people buy startup equity, without abiding by accredited investor rules. Anticipation is high, but it’s obviously too early to see any results.

Have you ever wondered what professional startup investors think about all this? As an accredited angel investor, I claim to be one of those professionals, and I’ve talked to many more. I’ve also perused much of the published material on equity crowdfunding, including a comprehensive new book, “The Crowdfunding Handbook,” by former Wall Street lawyer, Cliff Ennico. I would summarize the views and qualms from professional investors as the following:

  1. Crowdfunding platform costs could trickle down to angel groups. The new audit, due diligence, and liability requirements from the JOBS Act, now levied on equity crowdfunding portals, could dramatically increase the costs and restrictions on angel groups. These groups are now largely run by volunteers at no cost to entrepreneurs.

  2. Lack of checks and balances on startup valuations. A startup that is listed on a crowdfunding platform gets no formal pushback or negotiation on its declared valuation. Unreasonably high early valuations hurt the entrepreneurs, as well as professional investors, later when a second round becomes a down round or can’t be negotiated.

  3. Investors cannot verify accountability or governance. In equity crowdfunding, no investor is representing their own interest. Board seats can’t be negotiated, and even informal mentoring in decision and governance processes is unlikely. This means less capability to ensure that invested funds are spent wisely or as planned. Risk is increased.

  4. Later funding rounds can’t deal with a thousand shareholders. Very few successful startups need only one funding round, and venture firm offerings, as well as the IPO process, will go up in cost, complexity, and risk, as the number of current investors goes up. Even if the additional rounds are also crowdfunded, the same considerations apply.

  5. The impact of “dumb money” versus “smart money.” By definition, investors from the crowd have less experience and differing motivations from professional investors. This can hurt the company, and jeopardize all investors. Most public company executives today decry the short-term focus of conventional shareholders on profits versus strategy.

At the same time, we all recognize that that there is never enough money to satisfy the needs of entrepreneurs, so more sources are always welcome. Smart angels and venture funds have already begun to integrate equity crowdfunding as a step in their investment strategy. Increasingly I’m seeing startups in talks with bigger investors after a successful crowdfunding campaign, as fund managers scout platforms for interesting ideas and teams.

Crowdfunding is here, with the major types focusing on pre-orders, rewards, goodwill, and now equity. If you are an entrepreneur, I recommend you find the right platform, a good handbook, and go for it. Your options for funding just increased, or at least you have a new way to get some real market feedback on the demand for your solution.

As a professional investor, I recommend continuing to capitalize on business experience and financial acumen. It shouldn’t be that hard to stay ahead of the crowd.

Marty Zwilling

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Wednesday, May 18, 2016

7 Business Expansion Drivers Every Startup Can Use

business-growth-multiplierThe military has long recognized that machine guns are force multipliers for rifles, but businesses have been slow to capitalize on this concept. Sometimes all the planning in the world isn’t enough for business survival, when things change as fast as they do today. Every business, especially startups, needs all guns blazing quickly on every opportunity or insight into the market.

This point was highlighted well in a recent book, “Disrupting Digital Business,” by R “Ray” Wang, CEO and Principal Analyst of Silicon Valley-based Constellation Research. I recommend that every entrepreneur and small business investigate and implement as many as possible of his seven new business force multipliers that I will paraphrase here:

  1. Information sharing through social media networks. The speed, interactivity, and sharing we can do today through the social media networks of Twitter, Facebook, and many others is a major force multiplier. Communications that traditionally could only be broadcast to all can now be done on a customized person-to-person level, interactively.

  2. Soliciting user-generated online feedback and reviews. User generated content that is immediately available to other users is another positive force multiplier. Of course, it can also be a negative force multiplier, if you are not paying attention as an entrepreneur, or choose to challenge your customer’s view of reality.

  3. Crowdsourcing for funding and ideas. Crowdsourcing allows entrepreneurs to bypass the experts and professional investors, to get quick validation and help for efforts that meet the needs of today’s audience. New ways are being developed every day to reward and influence people who participate in crowdsourcing, for a very low cost.

  4. Flash mob activities created for immediate impact. These can be utilized as force multipliers by creating “pop-up” stores or events at a moment’s notice in the middle of an opportunity to get interest, attention, and sales. Apple did it with a pop-up store in Austin to sell the new iPad to 20,000 technologists near the South-by-Southwest music festival.

  5. Nurture dedicated customer advocates and fans. Consider advocates to be a step up from customer engagement. Advocates talk about you and become influencers to the many who are undecided. These dedicated fans and partners believe so much in your brand, your cause, and your product, that they do all the force multiplying work for free.

  6. Improve situation awareness for real-time decisions. This means that your network has connectivity to the right people and groups to hear the right information at the right time and place to make speedy and informed decisions. It’s a force multiplier by allowing your business to react and jump into something important before everyone else does.

  7. Do predictive hot-spotting to anticipate near-term changes. Effective prediction of the future is the ultimate force multiplier. It’s already in use by law enforcement to predict security hotspots, health-care to predict needs, but most businesses are far behind in the use of analytics and big data. It’s time to exploit your network for trends and direction.

If you want to grow your startup, and you are only reaching one customer at a time, one market or one partnership at a time, you’re not going to grow fast enough to be competitive, especially against the larger players that have a full infrastructure in the marketplace. These force multipliers allow you to scale up rapidly, and reach opportunities you could not support any other way.

But force multipliers used without focus are not enough to make a company great. Top entrepreneurs still have to decide what activities and tools are the most important for their domain and their environment. We all have limited resources and time, and need the right force multipliers to leverage every single element of both.

Of course, the concept of force multiplication goes far beyond your startup networks. Simple force multipliers, like product cost reductions and powerful new software tools, have been around for a long time. Every team member needs to constantly seek forces that can multiply their impact and productivity. What new force multipliers are you using in your startup today?

Marty Zwilling

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Monday, May 16, 2016

9 Leadership Initiatives To Ramp Up Team Engagement

zappos-office-tourMost new entrepreneurs have great ideas, and many are highly skilled in building their solutions. Unfortunately, far fewer have the focus and experience of building and maintaining a highly engaged team. They don’t realize that strong team engagement leads to even stronger customer engagement, which can more than double your startup revenue and growth, according to experts.

Team engagement has to extend well beyond your internal team of employees and executives, to the extended team of partners, vendors, and investors. The principles of engagement are the same across all these domains, even though the required actions may be different. I’ll focus here on key recommended actions for the internal team:

  1. Be the role model for engagement from the top. Startup founders and leaders need to get out of their office, and demonstrate engagement with the team every day. Engagement doesn’t come from written policies or one-way speeches. It comes from two-way interaction with individual employees, and clear indications of active listening.

  2. Link your business to a higher purpose than profits. Team members with a compelling sense of social or environmental purpose feel an extraordinary engagement. For example, TOMS Shoes matches every pair of shoes purchased with a new pair of shoes for a child in need, driving engagement for employees and customers.

  3. Empower employees with authority and tools to succeed. Full autonomy to go above and beyond in sales and customer-service roles will increase team engagement as well as customer satisfaction. Highly satisfied customers become your best advocates, bringing in new customers, repeat business, and ramping up revenue and profits.

  4. Link rewards and performance to engagement levels. High engagement is more related to high performance than high satisfaction. Satisfied employees too often include under-performers. Measure engagement levels and results, rather than satisfaction levels, within team members and customers, to assess and pay for performance.

  5. Focus on a culture of motivation rather than punishment. Eliminate the fear of failure by offering incentives to learn, and rewards for thinking outside the box. For example, Zappos brings in thought leaders from personal development, education, community, philanthropy and other realms to share their ideas for motivation and engagement.

  6. Respect individual team member needs and attributes. Let team members be themselves, with a relaxed dress code and individual consideration for start times, time off, and office décor. They will respond with greater empathy for unique customer requirements and team member expectations. The result will be higher engagement.

  7. Hire and train for engagement levels, as well as skills. Resumes tend to reflect skills, rather than engagement capabilities, so good interview techniques by leaders and peers are absolutely required. Training for engagement and promoting those who excel, are additional ways to foster the right behaviors. The ability to engage is a winning skill.

  8. Facilitate and use customer, peer engagement feedback. Feedback on engagement should come from multiple sources, including social media reviews, peer reviews, and executive interviews. Make it evident from your words and actions that you are listening and positive feedback will be rewarded. Make sure they know your values.

  9. Authentic relationships lead to authentic engagement. Entrepreneurs and team members who genuinely care for each other relish their engagement with others. Be transparent and authentic in your communications. Model high standards of integrity, respect and walk the talk if you expect to engage employees through trust.

The goal of these initiatives is to ramp up engagement in yourself and your team to be a multiplier of the quality of your solution and your marketing, to achieve new levels of market penetration and profitability. It’s a big lever in your ongoing battle for success, and it’s one that you need to pull earlier rather than later. Are you there yet?

Marty Zwilling

*** First published on Entrepreneur.com on 05/06/2016 ***

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Sunday, May 15, 2016

7 Areas Where Ideas Are Necessary, But Not Sufficient

business-idea-necessary-sufficientIn my experience with entrepreneurs, there seems to a wealth of self-proclaimed “idea people” who aspire to start businesses, but only a few who are willing and able to dig in and get the job done. All the great ideas in the world won’t make a business, if the ideas never get implemented. Only rare great entrepreneurs, like Bill Gates and Elon Musk, have proven to be both.

I worked with Bill Gates in the early days of Microsoft and the IBM PC, while I was with IBM. Bill was relentless in his focus on getting the software PC DOS project delivered, while continually challenging us with new business models. Elon Musk is known for his focus on implementation, often working 80-100 hours a week, while still able to offer an endless supply of innovative ideas.

If you or your team sees you as an idea person, your first task as an entrepreneur should be to find a co-founder who can deliver. Finding a co-founder is rarely a bad thing, since two heads are always better than one in meeting all the startup challenges. Let me be a bit more specific on how follow-up trumps ideas for success in the key challenges of a startup, or any small business:

  1. Networking with investors, partners, and customers. Meeting people and talking about your ideas won’t get you very far. First you have to listen carefully to what the other party is looking for, and then you have to follow-up to meet their connections, do personal dinner invitations for relationship building, and demonstrate traction.

  2. Tailor investor proposals and term-sheets. Professional investors expect far more than an idea pitch – they are looking for a documented opportunity analysis and realistic financial projections. They watch for formal follow-up to questions, demonstration of real product, and revenue results. Passionate reiteration of the idea won’t close funding.

  3. Detailed product specifications and prototypes. With great idea people, an initial product is rarely fully defined, as features are added and subtracted to meet the audience of the day. Milestones are not met because there is no implementation discipline. Products from idea entrepreneurs often try to be everything to everyone.

  4. Productivity and time management challenges. Idea entrepreneurs are largely driven by the “crisis of the moment” or the next event on their schedule. They are too busy to follow-up on a major partner opportunity, customer inquiry, or a critical internal process that simply isn’t working. Communication to the team suffers, and productivity is low.

  5. Managing marketing metrics and the sales pipeline. Effective marketing requires converting ideas to real content, creating programs to educate channels, and managing metrics to see what works and what needs to change. Follow-up is required for every sales lead, a pipeline built, and a sales process documented, with training for new reps.

  6. Customer acquisition, retention, and support. Ideas don’t generate customer loyalty – they want to see specifics for their case. Most experts agree that acquisition of a new customer costs six times retaining existing customers. Lack of follow-up after a sale can cost you more customers than poor service or poor quality.

  7. Maintaining professional relationships. No business associate will be impressed with ideas for long, if they experience unpredictable follow-up delays in email, phone calls, or delivery commitments. Disciplined execution is as critical to communication and relationships as it is to the bottom line of your business.

For business professionals, I would suggest that if you don’t do follow-up well, you should never aspire to be a manager or an executive. That’s what they have to do most of the time, so you won’t enjoy the job, and probably won’t be seen as doing it well. Most executives will tell you that their idea time is while sleeping, or while working out in the gym.

Of course, every small business needs to be built around a great idea, and every entrepreneur needs to find innovative new ideas regularly to stay ahead of the crowd. But the bulk of the real work and time to make a startup or small business successful is in the execution and follow-up.

In my view, idea people will be more at home and more appreciated in the design, marketing, or planning department of a larger and more mature organization, with an implementation team behind them. Successful entrepreneurs need to enjoy the journey, perhaps more than the destination.

Marty Zwilling

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Saturday, May 14, 2016

8 Reasons to Find Joy in Your Job

joy-at-workI’ve never understood why so many business employees still think it’s fashionable to display a negative attitude about their work and never seem to find a job they enjoy. They don’t realize that they are their own worst career enemies, since promotions and new opportunities always are offered first to people who proclaim to be productive winners, rather than sound like losers.

Top companies today, including Google and Zappos, have found that a work culture that includes some fun, populated by happy and positive people, leads to more productivity and success for the business as well as the people. In my years of business experience as an employee, a startup investor, and an executive, I have seen a host of reasons for these results, including:

  1. People work more productively on things they love to do. When you are having fun and are fully engaged on your favorite project, the time just flies by, and more gets done. Happier workers have been shown in studies to increase their pace (productivity) without sacrificing quality. That in turn increases their self-confidence and motivation to do more.

  2. Happy people maintain a positive “can-do” attitude. Negative attitudes are often a self-fulfilling prophecy, meaning that if you don’t think you can do something, you will usually fail. With a positive attitude, every new challenge, and there are many in business, becomes an invigorating opportunity, rather than an annoying distraction.

  3. Relaxation tends to improve creativity. Constant stress, tension, and unhappiness causes people to withdraw and reject new customer ideas or solutions. They find it hard to think outside the box, be creative, or be open-minded to peers and executives. That’s why companies like Twitter offer free yoga classes and free meals to employees.

  4. Supportive group collaborations produce better results. In teams, people that enjoy and respect each other feed off other’s energy and brainstorm more innovative answers. An unhappy member becomes a “downer,” and brings everyone down, or at least slows them all down. Productive group decision-making requires confident team members.

  5. Positive team members are not afraid to make mistakes. They know the joy of learning from failed fun experiments far outweighs the risk of being seen as failures. In the unknowns of a new business, there are no right ways or wrong ways, just new ways that need to be tested to satisfy customer needs and stay ahead of competitors.

  6. Leaders like to be surrounded by fun, productive people. If what you enjoy in business is new challenges and more opportunity, you need to be seen by leaders as one of them. If you display a negative attitude and unhappiness, you are less likely to get the trust and attention of people in a position to make a difference for you.

  7. Happy people are not afraid to ask for and give support. Smart people surround themselves with people they respect and trust, and don’t try to solve every problem alone. They swallow their pride, ask for help when things get tough, and actively listen and respond to recommendations. They also get satisfaction from mentoring others.

  8. Demonstrate your leadership, or be happy as a follower. Accept and capitalize on your own strengths and weaknesses. Not everyone needs to be a leader. Everyone appreciates a productive worker who does the hard work, makes no excuses, and gets satisfaction from positive customer and executive feedback. Enjoy your strengths.

In this new age of the entrepreneur, if you can’t find a job you enjoy in an existing business, it may be time to start your own business. According to a classic study by the Wharton School of Business a while back, those running their own businesses ranked themselves happier than all other professions, regardless of how much money they made, or how many times they failed.

If you are one of those people who still insist on seeing business and fun as incompatible, I urge you to take another look. Fun is all about satisfaction, doing new things, stretching your mind, and productive relationships with others. If you can’t find that in your own business, or one of the many exciting businesses out there today, then I say you haven’t looked hard enough. Enjoy.

Marty Zwilling

*** First published on Entrepreneur.com on 05/04/2016 ***

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Friday, May 13, 2016

6 Places To Find The Right Investor For Your Startup

funding-a-startupOne of the biggest myths I have found in the entrepreneur community is that every startup needs one or more outside investors for credibility and success, and perhaps is even entitled to at least one. They don’t realize that according to statistics from Startup.co, almost 60 percent are funded with personal savings and credit, and another 25 percent get their money from friends and family.

That leaves only about five percent that actually get their funding from investors, through crowdfunding, banks, angels, and venture capitalists. Of course, if you want to be in that number, or you want that number to go up, you have to know how to locate potential investors who fit your profile, requirements, and expectations.

I saw a good summary of the most effective ways to source prospective investors in a new book, “The Art of Startup Fundraising,” by Alejandro Cremades, who has been there and done that, both as an entrepreneur and an investor. The first step is to set your criteria, including a match for your sector type and stage, and then proactively seek out and contact the best candidates:

  1. Review profiles on professional social media sites. Searching LinkedIn, for example, is a must for contemporary entrepreneurs. It clearly identifies potential investors who meet your profile, and provides contact information. But don’t wait for them to contact you. Draw up a list of the best prospects, and put together your best story for follow-up.

  2. Identify customer executives who need your solution. Many savvy entrepreneurs are able to convince high-potential customers that investing early in a high-value solution, perhaps through an advance on royalties, is in their best interest. Customers benefit from early solution access, priority input on requirements, and personalized customer service.

  3. Reach out to your biggest fans for investor leads. Strong believers in your solution can be your best salesforce to find investors, and some of them may be open to investing as well. Any one of them might find an interested rich uncle, or give you a warm introduction to that professional investor that you have been trying to attract.

  4. Ask your business advisors for warm introductions. There is a good chance that business advisors and mentors also have access to investment capital, or know someone who does. In my experience, an introduction to an investor from a mutual friend or business associate will double or triple your odds of closing a deal.

  5. Talk to thought leaders at relevant industry events. Getting to know leaders at these events will get you visibility and credibility, as well as valuable feedback on your strategy and solution. Industry leaders are a prime source of leads to companies and individuals that may invest. In addition, it’s always better to be friends before you are a competitor.

  6. Review current crowdsourcing sites for a good fit. By using a service such as Onevest, you can also place your startup in the right shop window and let investors come to you. Crowdsourcing is rapidly becoming the key source for finding investors outside the mainstream. It works best for solutions that have social value and mass appeal.

While exploring all these alternatives, don’t forget that the right investor in a majority of cases may be you, through bootstrapping and personal credit. The advantages are many, including avoiding all the cost, pain, and distractions of finding and managing external investors, allowing you to retain full control and all your hard-earned equity for yourself.

The right investor also changes as you move through the different startup stages. Friends and family are key at the idea and early development stages, when you have minimal business valuation. Angel investors typically provide early-stage rollout funding, while venture capital firms won’t be interested until you have real traction and revenue during scaling.

Looking in the right place for the wrong investor won’t help you. But operating in stealth mode, or waiting for that perfect investor to find you, or feeling entitled, is even less effective. The most successful entrepreneurs know where to look and when to look for funding, and the rules are always changing. Maybe it’s time to rethink your startup funding strategy.

Marty Zwilling

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Wednesday, May 11, 2016

5 Principles That Drive The New Market For Sharing

uber-mumbaiThe pervasive ability and need to communicate constantly and globally through the Internet and smartphones is incenting everyone to get more out of their own assets and time, and capitalize on the idle resources of others. This new sharing economy is rapidly becoming the new business of sharing, with major winners already including Airbnb (rooms), Uber (rides), and Chegg (books).

If you are an aspiring entrepreneur, or an existing business, and haven’t yet sized any of these opportunities, you may be already late to the game. Until I read a recent book “The Business of Sharing,” by Alex Stephany, who founded JustPark (current valuation estimated at £20M), I too had no idea of the scope of opportunities, and the 200 or more players already out there.

The business tenants of the sharing economy, with alternative names including collaborative consumption, peer-to-peer economy, or “we-conomy,” always imply these five basic principles and assumptions:

  1. Sharing economy platforms create reciprocal economic value. Usually these are revenue-generating e-commerce sites, or have the potential to be revenue-generating. Even if the goods and services are changing hands as gifts, or the revenue motive exists only to make services sustainable, the economic value is evident.

  2. There is value in the “idling capacity” of all assets. Idling capacity is a notion that was first systematically studied and measured in the context of industrial processes. The sharing economy applies the same ruthless logic of how best fully utilize our clothes, bicycles, driveways, computers, pets, and free time.

  3. For utilization to increase, assets need to be made accessible. These days, accessible starts with being visibly listed online, in lieu of the now old-fashioned rental sites and swap-meets. It can mean selling through peer-to-peer e-commerce (eBay), renting (HomeAway), gifting (yerdle), or even swapping (Swapz).

  4. Assets need to move in a community of engaged users. Community means more than supply and demand. Often these communities are built around special interest groups, where the members interact through social media, help each other, and trust each other, and the relationships go well beyond the transactions.

  5. Access to assets in a community leads to a reduced need to own. One consequence of the new sharing business model is that goods become services. The Zipcar sharing service is said to take 17 other cars off the road, as opposed to Hertz car rental, which only adds more vehicles into every community.

Where and when is all this leading? I believe that we have only seen the beginning. Certainly change happens more slowly in areas encumbered by political systems, long-standing cultures, and large dominant brands. Although the sharing economy isn’t really new, here are a few of the arenas that Stephany and I believe are still ripe for disruption:

  • Education. With US student debt at over one trillion dollars, startups like Skillshare and Udemy provide top-class vocational training for the price of a Harvard hoodie.
  • Insurance. An example is Berlin-based startup Friendsurance connecting people to create a private insurance pool for payout on household and consumer electronic claims.
  • Healthcare. Cohealo is now allowing hospitals to share medical equipment. Fertility can be helped by less restrictive ways for people to share their sperm and eggs.
  • Restaurants. In Cuba today, there are over 1,000 restaurants in people’s homes, known as paladares. Chefs are beginning to offer peer-to-peer dining platforms or cooperatives.
  • Financing. With crowdfunding, entrepreneurs and artists no longer need to wait for family money or venture capital. In the US, we are still waiting for equity crowdfunding, but the rewards, donation, pre-order, and debt-funding models are already working.

Yes, the sharing economy is changing the rules of business, and opening a wealth of opportunity for innovative entrepreneurs around the world. Those that recognize it early still have time to ride the wave, and those that don’t will lose out on a lucrative way of doing business. It’s time to start caring about sharing.

Marty Zwilling

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Monday, May 9, 2016

7 Good Entrepreneurial Habits That Turn Bad

friendster-philippinesGood entrepreneurs are all about managing change, but too many forget that they have to change themselves as their dream evolves from a startup to a scalable business. Most begin by doing the product development, marketing and sales alone, but struggle making the transition to hiring and coaching others, defining repeatable processes and focusing on future strategy.

For example, there once was a social network called Friendster, often credited with starting the social networking boom way back in 2002. Many pundits feel entrepreneur Jonathan Abrams failed to get the professional management and resources he needed to scale, including turning down an offer from Google for $30 million and was run over by Facebook, a later competitor.

The challenge is to move from doing the work to managing the work and leading others. It doesn’t matter how dedicated and capable you are, there are only so many hours in a day, and as your business scales, you need to count on others for help. Certain habits, including key ones below, served you well in the early days, but can easily lead to your demise as the business grows:

  1. Continuing to act as a control freak. When the plan is all in your head, and elements are undefined, it’s important to monitor every step of the progress, in order to make quick corrections. When the business starts to scale, you need documented processes and people with the right skills and training who can do the right work without you.

  2. Trust your gut, and ignore naysayers. Now you have real customers who can quickly turn off hundreds of potential customers if you ignore their feedback. Now it’s time to make decisions from analytics, customer reviews, and financial results, rather than letting your passion and perseverance convince you that customers will soon see it your way.

  3. Nurture loyalty and trust only with a core group. As your business grows, so must your circle of relationships. Your trusted circle must now be expanded to include new partners, customer advocates, and peer business executives. You can’t demand total loyalty from all, so you have to learn to accept criticism without being defensive.

  4. Happy to work and live on your own terms. Many entrepreneurs gave grown to prefer the relative quiet and isolation of their garage, and their ability to set their own schedule. As an executive, the business will demand your attention on a 24-hour basis and you must interact with employees and customers every day to keep the momentum going.

  5. Love to solve tactical problems and let strategy evolve. Investors and alliances are looking for partners who have a strategic focus, and can find the right consultants to solve their tactical issues. Strategic thinking reduces tactical problems as the business grows, so great entrepreneurs learn to change early from tactical to strategic thinking.

  6. Take pride in your ability to get things done yourself. That ability to tackle any challenge personally, and get it done, serves early entrepreneurs well. As the business grows, you must learn to hire and train employees, and utilize outsourcing in non-core areas to keep up with the volume and detailed expertise required. It’s a big change.

  7. Limit your scaling efforts to organic growth. When you build a great solution or product, all you can think about is shipping more volume of your product to a larger audience. That’s necessary but not sufficient to scale most businesses. You need to nurture non-organic growth partnerships and acquisitions to maximize your valuation.

Some founders don’t want to change, or simply don’t enjoy the executive role. The smart ones in this category know when it’s time to bring in an outside more experienced CEO, or step aside voluntarily when investors start demanding new management disciplines and metrics. Others won’t adapt and won’t step aside and cause major or terminal damage to their business.

Thus my recommendation to every entrepreneur is to first take a hard look at their own strengths and weaknesses, as well as what they enjoy doing. Try to capitalize on your strengths, rather than trying to fix all your weaknesses. Maybe that means swallowing your pride and stepping aside as your business grows, or bringing in a new partner with the commensurate skills. This life is too short to go to work every day unhappy and struggling. Not every entrepreneur needs to scale.

Marty Zwilling

*** First published on Entrepreneur.com on 04/29/2016 ***

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Sunday, May 8, 2016

Why Startup Product Plans Make Poor Business Plans

loose-leaf-binderMost technical entrepreneurs I know demand the discipline of a product specification or plan, and then assume that their great product will drive a great business. Serious investors, on the other hand, look for a professional business plan or summary first, and hardly ever look at the product plan. Is it any wonder why so few entrepreneurs ever find the professional investors they seek?

Just for clarification, I characterize a product plan as a formal description of your product or service, with a quick business description at the end for effect. A business plan is a careful layout of the business you are building, with a quick product overview in the intro to set the stage. In reality, you need both, to clarify for yourself and team that you have a viable business solution.

A product plan has tremendous value inward facing, telling your product people what to build, while the business plan has maximum value outward facing, explaining to the rest of the world how your new company will survive and prosper. A product plan is never a substitute for a business plan.

Because the product plan is aimed internally, it can assume the reader has the relevant technology and jargon background. Here are the major elements of the best product plans:

  1. Market requirements section. This first section of every product plan defines the market, sizes the opportunity, and discusses individual needs and requirements that will be provided by your product and service. These requirements must be based on market analysis, expert input, and existing customer feedback.

  2. Technology, architecture, and feature descriptions. This section of the product plan details every element of the product or service that is your solution. It allows all members of your team, including marketing, support, and sales, to size and build the business plan processes they need to find customers, deliver, and maintain grow the business.

  3. Development schedule and checkpoints. A product plan must include the timeline and milestones involved in product research and development. Each of these activities should have associated costs and resource requirements. Related activities must be defined, including performance expectations, quality certification, and proof of concept.

  4. Quality testing and approval processes. Product certification or product qualification requirements and processes are a key part of every product plan. This section of the plan would include the definition of specific test processes, how results will be measured, and who has responsibility for execution and approval.

Now let’s talk about the basic components of a business plan. Since this document is outward facing, it is important to keep the terminology and tone consistent with that of your customer set, investors, and business partners. It does need to include a high-level summary of the components in the product plan, with key additional sections as follows:

  1. Definition of customer problem, followed by your solution. The customer pain point must be defined before the solution is presented, so it doesn’t look like you have a solution looking for a problem. Use concrete terms to quantify the value of solution, like twice as fast or half the cost, rather than fuzzy terms, like cheaper and easier to use.

  2. Opportunity segmentation and competitive environment. The market for your solution should be quantified in non-technical terms, with data sourced from professionals in the industry, rather than your own opinion. List key competitors and alternatives, highlighting your sustainable competitive advantages, such as patents and trademarks.

  3. Provide details on the business model. Every business, including non-profits, needs a business model to survive. Providing your product or service free to customers may sound attractive in marketing materials, but you need revenue sources to survive. Free is a dirty word to investors, since it’s hard to get a financial return from free.

  4. Executives, marketing & sales, financial projections, and funding. These are additional critical sections of a business plan to define who is running the business, business strategy activities, and financial expectations. There are many good books and Internet articles describing each of these sections, so I won’t cover the details here.

In principle, there is very little overlap between these two plans, so it never makes sense for an entrepreneur to build one without the other. Yet I’m still often approached by aspiring entrepreneurs who have neither. If you are still in the idea stage, meaning you have nothing but a passionate verbal description of an idea, approaching investors is a waste of time and a recipe for failure.

Savvy entrepreneurs always remember that they are the key investor in their company, so they measure themselves against the same standards as professional investors. That means they invest first in a set of plans.

Marty Zwilling

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Saturday, May 7, 2016

8 Accountability Steps Lead To A Great Entrepreneur

accountability-ladderMost business managers preach that the key to success is holding employees accountable for actions, but I have found that successful entrepreneurs are all about holding themselves accountable. They skip the blame and complain game, and make things happen despite major obstacles. As a startup investor, I view any evidence of a victim mentality as the kiss of death.

In reality, the picture is a bit larger than this, as outlined in a recent book “Leading with GRIT,” by Laurie Sudbrink, a well-known business leadership coach and speaker. She defines GRIT® as Generosity, Respect, Integrity, and Truth, with accountability being a major component of integrity. With all these elements, people can move from accountability to total leadership.

To explain accountability, she and I are strong proponents of the Accountability Ladder, which has been included in every Management 101 class for many years. Unfortunately, most entrepreneurs never get the opportunity to take this class, and many corporate managers seem to have forgotten, so I’ll summarize from my experience in business the eight basic rungs:

  1. No accountability, person totally unaware of failures. These are business people, whether they be employees, managers, or entrepreneurs, who don’t have a clue about what is required or the devastation they leave behind. Usually these people think they are doing a great job, and are totally oblivious to their unhappy customers or cash drain.

  2. Use blame and complain in lieu of accepting accountability. Some business people always play the victim, finding someone or some natural force as the cause for all their failures. An example of this would be finger pointing at unfair managers, blaming economic downturns, and irrational customer expectations for missed commitments.

  3. People deliver excuses rather than results. It’s easy for an entrepreneur or an employee to convince themselves that they would have been successful if they had more time, received more funding, or had the proper training to do the job. Usually the real culprit is procrastination, lack of focus, or low productivity and lack of metrics.

  4. Wait and hope for a miracle. Entrepreneurs with the mantra “if we build it, they will come,” and executives who don’t communicate their expectations, fall into this category. Employees can’t be accountable if they don’t know what is expected of them. Entrepreneurs won’t be successful if they have a passion, but no plan and no target.

  5. Accountability starts by acknowledging reality. Business people at this level recognize the magnitude of the workload and the specific tasks required for success. Smart entrepreneurs know they must deliver a quality product, develop a winning business model, and attract real customers. All that’s left is to commit and deliver.

  6. The next step is to accept ownership and responsibility. Moving forward into the business realities requires courage, commitment, and determination to succeed. If the motivation is not strong enough, it’s easy for people to fall back down the ladder and cover their lack of ownership with excuses, blame, and complaints.

  7. Apply known solutions to predictable tasks and challenges. Most good employees and executives perform at this level of accountability. They admit to owning the situation, and pride themselves on their professional abilities. Yet, when the totally unexpected happens, they may be quick unload the problem up the line, or fall off the ladder.

  8. Accept total accountability and make it happen. These are the cherished entrepreneurs who succeed despite tough odds, and the employees who come up with new approaches to delight your customers, achieve breakthrough goals, and develop innovative new products for markets you never imagined.

From my perspective, accountability should be the guiding principle for entrepreneurs who seek to change the world, as well as for employees who want to stand out above the rest. Before you start assessing accountability in others, it usually pays to take a hard look at yourself in the mirror. Are you accountable to be accountable?

Marty Zwilling

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Friday, May 6, 2016

How Winning Startups Tackle Tough Growth Constraints

Meeting_in_Air_Force_One_conference_roomThere is nothing wrong with growing your business by selling more of your solution to more people in more cities, states, and countries. That’s called organic growth, and everybody does it. But in my experience as a startup advisor, too many entrepreneurs get stuck there, and always find excuses for not really exploring mergers, acquisitions, partnerships, and alliance alternatives.

Excuses for not thinking outside the box usually include limited personal bandwidth, not enough cash, and fear of the unknown. All of these are real, but the best entrepreneurs find these no more daunting than the challenges they face every day, and find time to work on the business, as well as working in the business. Here are the key steps I recommend to keep you growing:

  1. Identify the single biggest current constraint on growth. For example, at any given moment in your business, you may be limited by development, marketing, or sales. The organic solution is to hire more people, spend more money, and ramp up your focus. But finding money and hiring more people always takes longer than expected -- slow growth.

  2. Evaluate outsourcing as a quick solution to break the constraint. These days, there are many companies around the world, with the skills and equipment you need, ready to assist with development resources, marketing programs, or call centers immediately. Of course, they all prefer cash, but some may work for future revenue or startup equity.

  3. Investigate strategic alliance alternatives. An example of a good strategic alliance was Barnes & Noble bringing Starbucks into their book stores. It was a win-win deal, with new customers and better service for both. Startups can use alliances just as well to get to new customer segments, block competitors, or gain credibility from the logo of others.

  4. Acquire or merge with another company. Acquiring another startup with a strong development team may be far faster and cheaper than building your own, and can be an equity exchange rather than cash. Mergers and acquisitions can also be win-win, if you have customers they need for a product complimentary to yours. Think outside the box.

  5. Negotiate a “co-opetition” deal with a competitor. Win-win deals with competitors are always possible, for example, to reduce costs of a common component, to penetrate new markets, set industry standards, or share a sales channel. Just keep your customer’s best interest as your first priority, and resist the urge to kill every competitor.

Smart entrepreneurs make these five steps an iterative process and a way of life, attacking one growth constraint after another. Of course, it’s important to maintain a balance of organic growth versus the more creative approaches. Total reliance on partners and acquisitions may de-motivate internal teams, or increase your vulnerability to conflicts of interest or partner control.

The smart approach is to nurture a pipeline of growth alternatives and relationships, similar to your customer acquisition pipeline. This requires that you maintain at least a minimum business development focus and skill set inside your own organization to keep these options on the table. Business development must maintain that balance between internal and external growth options.

I always recommend organic growth options first for things that represent your core competency, since it does allow you to better protect intellectual property, and retain and motivate key team members. Organic growth also has the advantage of driving your product and process innovation, which is important for differentiation and long-term competitive advantage.

The advantages of non-organic growth, in addition to speed and potential cost savings, include the development of new management skills and access to market segments which will ultimately be required for survival as a mature multi-billion dollar company, or an attractive public company looking to satisfy stockholders with an extended record of high growth.

If you want your business to be seen as a premium startup by professional investors, able to command unicorn valuation multipliers, you need to double your revenue or more every year. That’s not likely to happen from organic growth alone, so it’s time to get familiar with the growth steps outlined here. How many of these alternatives are already part of your growth plan?

Marty Zwilling

*** First published on Entrepreneur.com on 04/27/2016 ***

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