8 Tactics To Highlight Your Startup For Early Funding

Many first-time entrepreneurs find themselves unable to bootstrap their startups, and also unable to find early funding at the venture capital level or even with angel investors. Their only recourse is that first tier of investors, fondly called Friends, Family and Fools. These are the only people likely to believe in newbies, with only minimal product evidence or business experience.

Yet surprisingly, according to statistics on the Fundable crowdfunding site, friends and family are the major funding source for entrepreneurs, investing over $60 billion in new ventures per year, almost triple the amount coming from venture capital sources. The average amount per startup has been $23,000, usually in the form of a convertible loan, rather than an equity investment.

Of course, most startups ultimately need much more than this amount to scale the business, but some prior contribution from friends and family (as well as your own sweat equity) is normally expected as a qualification before professional investors will consider entering the game. Their logic is that if your family won’t invest in you, then why should they?

This is confirmation that the right people are always more important than the right product. Here are some key ways that you can be viewed as the right people, whether seeking an investment from friends and family, fools, or even later from professional investors:

1. Ask for a specific amount to meet a specific milestone. Shy introverts may be great technologists, but they won’t be entrepreneurs until they learn to nurture relationships with friends and family, practice their elevator pitch and respectfully ask for funding. Waiting for someone to give you a gift with no specific objective is likely to be a long wait.

2. Offer a formal agreement as well as a handshake. The vehicle of choice is most often a convertible note, which is really a loan with a specified duration and interest, with an option to convert it to equity when professional investors come in later. Hire an attorney to make sure the terms are fair. This shows respect and professionalism.

3. Let people see your own investment and commitment. Friends and family are quick to differentiate between a passionate hobby and a sincere effort to change the world. Show them that you have done your homework with industry experts and potential customers, and convince them you are not asking for charity or a donation.

4. Build a prototype first on your own time and money. We all know people who are good at talking, but never seem to risk anything or find time to get started on the implementation. Every good entrepreneur needs to invest skin in the game, to show credibility and leadership to others. Investors want to be followers, not the leaders.

5. Don’t ask for more than your friends or family can afford to lose. In other words, don’t be greedy, and remember that you have to live with these people even if your startup fails. Ask for the minimum amount you need to reach a significant milestone, with some buffer for the unknown, rather than the maximum amount you can possibly foresee.

6. Communicate the plan and the risks up front. Remember that no investment is a gift, and everyone who buys in deserves to hear what you plan to do with their investment, and expects regular updates from you along the way. Be honest with naïve friends and trusting family members, since more than 70 percent of startups fail in the first five years.

7. Focus on well-connected friends with relevant business experience. A wealthy uncle may seem like an easy mark, but a less wealthy friend who has connections and experience with startups in your domain can likely help you more than any amount of money. Remember that you are looking for success, not just money to spend.

8. Tie re-payments to revenue growth in the startup. Rather than set a fixed repayment schedule, tie investment payoffs to a percentage of new product revenue, or a plan to convert the debt to equity. Use the minimum viable product concept to get revenue early, and allow market and product pivots at minimal cost.

In any case, avoid the urge to think of friends and family as a last funding resort, when they should always be your first focus, and maybe the only one you will ever need. If you succeed, there is no joy like sharing the feeling and the money with people close to you.

But make sure you do it right, per the above recommendations, or you may be the biggest fool.

Marty Zwilling

7 Strategies To Win With The Power Of ‘We-Commerce’

In the last few years I have seen a popular business model emerging which embodies a greater focus on social and environmental responsibility, and a new requirement for trust and sharing, as well as customer and community collaboration. Companies like Airbnb, Uber, Zappos, and Whole Foods are setting the example, and leading the way in profitability and purpose.

In her classic book, “We-Commerce: How to Create, Collaborate, and Succeed in the Sharing Economy,” veteran marketing strategist Billee Howard calls this movement an economy centered on the power of “we” instead of “me.” She presents a roadmap to help us navigate this new business landscape, retaining the best of the old, while innovating the path to success.

In my work with many entrepreneurs and investors, I also see and support the strong movement to this business model, which can be characterized by the following attributes she outlines:

1. Deliver value to the greater community, as well as customers and insiders. Provide real value and give-back to the global community and employees, generating trust and loyalty, which in turn brings in more customers. The result is a win-win situation, with more profits for the business, satisfied customers, and happy employees at all levels.

2. Develop a personal-engagement extraordinary service mentality. The days of mass production and commodity pricing as an asset are gone. The new customer generation wants to provide input, and wants to be treated as one-of-a-kind in their solution, delivery, and service. Being good in business now looks like an art, with creativity and innovation.

3. Customers and team members must be inspired, rather than pushed. Companies that offer value beyond their product or service, for social and environmental good, are seen as leading the way forward to a shared future abundance. This results in a new loyalty inside the organization, as well as outside, building momentum and profit.

4. Grow bigger by thinking smaller in the beginning. Start with a niche that you want to be known for, and knock it out of the ballpark by being the best. Narrowing your focus actually broadens your appeal and allows you to charge a premium because you are “the expert.” This give you the credibility to expand to other niches and grow the market.

5. Make innovation, creativity, and artistry your core competency. This requires team members who’ve been taught to think like innovators, and a reward system that fosters creativity. It requires actively listening to customers, and a culture of change. Most of all, it requires leadership and communication from the top on purpose and shared goals.

6. Tell your purpose story for engagement and improved recollection. Stories have been an essential driver of change and engagement throughout human history. Good stories make us think and make us feel. They stick in our minds and help us remember ideas and concepts in a way that numbers and text on a slide with a bar graph won’t.

7. Bridge the physical and digital worlds for your customers. Make sure all relevant customer interaction data, regardless of channel or source, is immediately available at every step of the customer’s journey. Empower all team members and customers, both in-store and online, with the right information they need in order facilitate a buy decision.

On top of the current pandemic, the business world has been forever altered by the growth of the world-wide Internet and global telecommunications. The customer and business universes are now globally and totally connected. This means that all customers see social needs and the environment as part of their own world, and expect these to be part of every business focus.

Thus, as the new sharing economy challengers continue to evolve their new business models, the traditional incumbents are being forced to change, or forced out of the marketplace. It’s time to take a reading on where you are in this spectrum. Is your company innovating a path to success, or riding an old wave into a cliff?

Marty Zwilling

5 Keys To A Team That Balances Results With Learning

No matter how hard you work as a business leader or entrepreneur, you can’t sustain consistent results without an equally hardworking team, each with a learning mindset. In fact, in my experience as an executive and a mentor to entrepreneurs, sustainable results require a balance between hard work and learning, for you and your team members. Therein lies the challenge.

Most business leaders I know have found this balance for themselves, but many find it an order of magnitude harder to achieve and sustain this balance within individual teams and throughout the organization. I believe this difficulty stems from the historical use of results-only metrics in measuring performance and rankings, without including learning measures and achievements.

I see these issues addressed well in a new book, “The Performance Paradox: Turning the Power of Mindset into Action,” by Eduardo Briceño. Eduardo is a global pioneer in cultivating growth mindset cultures, and he provides case studies and specific guidance on how individuals, teams, and organizations can overcome this learning and hard work challenge.

Here is my interpretation of his top five foundation requirements to building great learning teams, with my own insights added:

1. Establish team trust, relationships, and purpose. The best way to establish trust is by being open, asking questions, listening to the answers, and giving candid feedback. Get to know your team members personally to deepen your relationships. Communicate a purpose that gives people a good feeling for helping others and doing good for the world.

   For example, Blake Mycoskie, founder of Toms shoes, garnered trust from his team by effectively communicating a higher purpose of helping the needy by donating a pair of shoes for every pair sold. He found that the returns were far greater than the cost.

2. Empower team members to initiate change. Make sure your team members feel that you are always willing to listen to new ideas, and never penalize or reprimand them for thinking outside the lines. Encourage change and highlight the learning that always comes from failures. Celebrate small successes often with informal positive feedback.

   Amazon and Jeff Bezos credit much of their growth and success to supporting of unsolicited business “experiments” from anywhere in the organization. Bezos highlights the learning garnered from failures as well as successes from these experiments.

3. Communicate challenges and objectives transparently. A team shielded from the realities of business cannot help you make decisions. To cultivate a learning culture, you need to expect some discomfort on both sides. Over time, you will get used to sharing and team members will respond in a constructive way, and even overcome conflicts.

   Another advantage of open communication and transparency is your ability to attract and retain the right kind of talent to your organization. Most HR departments say that hiring and retaining the right team members for every role is one of their biggest challenges.

4. Create a culture of team psychological safety. Fear of being judged as incompetent or insecure is a common and major hindrance to the effectiveness of teams. People need to feel able to talk about mistakes, as well as successes. Your challenge is to define norms of behavior and expectations for contributions, in both positive and negative situations.

   As an example, Google spent years studying how to make their teams more effective, and concluded that their single focus on team member psychological safety was the prime contributor to their success. You can start by showing empathy for each individual.

5. Encourage people to solicit feedback frequently. When all your people are waiting for feedback, it means they assume all feedback will be critical or negative. You want the team to seek feedback as positive and powerful learning opportunities. Make it frequent and broad, both inside and outside the internal team, to reinforce a sense of confidence.

   As a leader, you are the role model for seeking feedback, by asking your teams regularly for feedback on your own performance. Make it a point to really listen to their input, not be defensive, watch body language, and follow up by making the changes suggested.

You will quickly find that learning teams are more collaborative and productive in normal times, and especially in those challenges where change and innovation is required. Avoid letting them fall into the performance-only trap by shifting their focus from simply doing to learning while doing. Help them improve their skills and discover new career options while doing higher-quality work.

Marty Zwilling

*** First published on Inc.com on 09/08/2023 ***

8 Tactics To Make Service Your Competitive Advantage

Most leaders agree that poor customer service is a business killer today, in terms of lost customers, reduced profits, and low morale. Yet the average perception of customer experience has not improved. Young entrepreneurs and startups, in particular, often remain naively unfocused, despite their passion, of what it takes to provide the high-quality service expected.

It’s a tough job, and inexperienced entrepreneurs just don’t know where to start, and how to do it. Chip Bell and Ron Zemke, who are experts in this area, provide some of the best specific insights I’ve seen, in the classic book “Managing Knock Your Socks Off Service.” Their eight initiatives should be required reading for every entrepreneur:

1. Find and retain quality people. You have to start with hiring only people who are willing and able to make serious customer service happen. Make sure you know and communicate well exactly what you mean by high-quality service. Train them fully, give them authority, make them accountable, and tie their pay to customer satisfaction.

2. Know your customers intimately. This means personally listening, understanding, and responding to your customers’ evolving needs and shifting expectations. Then make sure that everyone on the team does the same, and are motivated to improve the match with your startup. Seek out complaining and lost customers for the most important input.

3. Build a service vision that everyone sees as clearly as you. This means articulating and living the customer service mindset for the team, in front of customers and in the board room. It must be understandable, written down, and verifiable, with regular measurements and metrics to make it real, benchmarked against the competition.

4. Make your service deliver process “happy.” A well-designed service delivery process will make you easy to do business with. The process must be employee friendly, as well as customer friendly, and have feedback mechanisms to correct poor results. If service employees are not happy, the process isn’t working yet.

5. Train and coach continuously. Companies with great service routinely spend 3% to 5% of salaries training team members – experienced as well as new. Leaders have found that keeping everyone on top of changes in technology, competition, and customer demands is critical to success. Service people need this as required team support.

6. Involve, empower, and inspire. Involve team members in the fix to customer problems, as well as fixing the faulty process causing the problems. Empower them to look beyond simple rules for solutions, not out of habit, routine, or fear. Inspiration is the process of creating excitement, enthusiasm, and commitment, by your passion and actions.

7. Recognize, reward, incent, and celebrate. By human nature, the team that works for and with you wants to do a good job. The best incentive is to give them something good back in return. This should start with constructive feedback on how well they are doing, and what they can do to improve. Don’t forget recognition for accomplishment and efforts.

8. Set the tone and lead the way. Like it or not, you are the personal role model for all the people in your startup. How they see you deal with and talk about peers, partners, team members, and customers tells them what the real rules of conduct are for customer service. You can’t con or manipulate people into doing quality work.

Customer service is not just handling exceptions, something that you can think about later, once the business is up and running. It’s a core process that must be up and effective when you deliver your first product or service. If you still doubt the consequences, consider the following facts from research by MTD Training Group:

· More than 50% -- Scrapped a planned purchase because of bad service

· 60% – Consider switching businesses after 2-3 instances of poor service

· 69% – Spent more money on purchases from satisfied businesses

· 90% – Tell others about their service experiences.

In the past, competitive advantage was all about economies of scale, advertising power, and service versus price. With instant low price search, ordering via smart phones, and unfiltered online reviews via Yelp and Foursquare, the advantage today has shifted to companies who can make every experience positive. Prepare for it, and don’t jeopardize your future on the first day.

Marty Zwilling

8 Perspectives On Innovation That You Should Discount

Starting 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 to 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 the classic 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 many years ago 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

8 Business Realities Every Entrepreneur Needs To Know

How 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 the world, 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 the classic book, “Almost: 12 Electric Months Chasing A Silicon Valley Dream,” from 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

9 Keys To Overcoming The Fear Of Change In Business

One of the biggest challenges in any business, large or small, is overcoming the natural human preference for status quo, or fear of change. It means that most team members and executives alike have a natural tendency to prefer killing innovations rather than implementing them. Even customers, while they all want the next big thing, want it to happen with minimal new learning.

These fears and how every business can counter innovation assassination are explored in a classic book, “Robert's Rules of Innovation II: The Art of Implementation,” by Robert F. Brands, who brings decades of experience implementing innovation as the founder of InnovationCoach®. His goal is to teach us how to drive a culture of continuous innovation into every work environment.

Brands book is based on the implementation of nine principles of innovation originally developed by Google way back in 2008 by Marissa Mayer. I believe these principles, paraphrased here, should be adopted by every entrepreneur struggling to accomplish innovation in a startup in any market:

1. Innovation can come from anywhere in the organization. Entrepreneurs should look for ideas from anyone, inside the organization or outside, top down or bottoms up, but the implementation responsibility is all yours. Startup leadership and survival is all about execution. That culture has to come from the top down, by your actions and messages.

2. Focus on customer needs rather than profits. When innovations are implemented that have clear value and acceptance by customers, business success will follow. That’s the win-win equation we are all looking for. It also propagates back inside your company, via happier and more motivated employees, and far outside as societal advancements.

3. Target factor of ten improvements, not 10 percent. Some experts have long felt it is easier to make something 10 times better than it is to make it 10 percent better. It’s called radical innovation versus incremental improvement. It forces one to step from existing assumptions and tools, and lean instead on creativity and thinking outside the box.

4. Let new technical insights drive innovative products. For Google, this has led to self-driving cars, based on work with Google maps and artificial intelligence. Every startup technical team has unique insights, which should become new innovations. All too often, these insights are ignored by the company, and developers leave to become competitors.

5. Ship and iterate, don’t expect instant perfection. Too many innovations get caught in analysis paralysis, and die an expensive death. No technical analysis has the power of real-time user and market feedback. Perfection is impossible in today’s rapidly changing market, and iterations are part of educating the market as well as your team.

6. Spend twenty percent of work time on innovation. Everyone in a company should be encouraged to spend fully one-fifth of their time pursuing ideas for positive change, even if it is outside the core job or core mission of the company. This approach works best if you start with a focus on hiring change agents, and incentive programs for innovation.

7. Set your default to sharing rather than proprietary. Information sharing and open source facilitates collaboration on a huge scale, and can bring in as many innovations as are sent out. It also increases market acceptance of innovations, by allowing concurrent work on integration, standardization, and support structures outside your company.

8. Tolerate no negativity attached to failure. Stigmas and penalties for failing are among the largest gates to innovation. Like Thomas Edison famously said, failure is simply learning what doesn’t work. Failing well to Google means failing fast and failing cheap, all very positive attributes in today’s rapidly changing and highly competitive world.

9. Instill a mission and purpose that matters. People think harder if they really believe their innovations will impact millions of people in a positive way. Work can be more than a job when it stands for something people care about, and involves giving more than taking. Entrepreneurs are seeing huge premiums these days for giving back generously.

The current pandemic brings new challenges which need to be addressed. There is no more time for excuses, no reasons to postpone, ignore, or otherwise assassinate innovation in your organization. Whether you manage an entrepreneurial startup or a multinational conglomerate, the pressures are unprecedented. Are you now unleashing your team’s full execution abilities?

Marty Zwilling