1001 Serial Articles for Entrepreneurs & Startups

As of today, I will have published an article here for entrepreneurs and startups every day for the last 1001 days, since I started Startup Professionals Musings near the close of 2008. It’s been a great ride, but it’s now time to dial it back a bit, and focus on some other priorities. I still plan to publish on this blog occasionally, as well as more frequently on my blogs at Forbes, Huffington Post, and others.

In my traditional notational style, I’ve taken a nostalgic look back over the ground covered and lessons learned in the past almost three years. Here are ten key messages that I would like to leave you with:

1. I continue to gain respect for entrepreneurs. After working with literally hundreds of entrepreneurs, I’m continually impressed with their vision, commitment, and determination to succeed, despite the obstacles. For all of you who live with an entrepreneur, my congratulations and my condolences. I’m sure you know what I mean.

2. Not everyone is cut out to be an entrepreneur. Many believe that entrepreneurs are born and not made. But that is far from the truth! Studies show that anyone can be an entrepreneur, but many won’t be happy as entrepreneurs. Check yourself against this list from a while back “Ten Quotes Never Spoken By a Happy Entrepreneur.” Be happy.

3. Finding funding for startups is a tough process. Too many people still believe the urban myth that you can sketch your idea on a napkin, and people will throw money at you. Fundraising is indeed brutally tough at all stages. The simple answer is that if you need funding, do your homework and start networking early.

4. You learn more from failure than from success. It’s the learning; not success or failure, that makes the difference. Failure is a condition that all of us experience. It’s our reaction to our failures that distinguishes winners from losers. Wear your failure like a merit badge, and investors will love you.

5. Social media is a huge resource for entrepreneurs. Sadly, too many entrepreneurs still think social media is only for play, rather than work. They don’t yet realize the low-cost potential for lead generation, branding, customer loyalty, direct marketing and e-commerce. It’s been essentially my only resource, and has paid off handsomely, for example, with almost 380,000 followers on Twitter.

6. Blogging is a learning process as well as a sharing one. You may think you are an expert in your domain, but until you try to write things down in simple terms in a blog for other people, you don’t realize what you don’t know. Doing the research to clarify allows you to share effectively. I learn something new every day in blogging.

7. Gen-Y has come a long way in the last three years. My own perspective is that the recession has been good for Gen-Y (Millennials), because it has forced them to face reality, often for the first time in their life. In the last few years, even college grads with advanced degrees don’t have job opportunities waiting. But I’m happy to report that I see more and more of them eschewing entitlement to become real entrepreneurs.

8. Every entrepreneur should work first on his elevator pitch. The elevator pitch should be the first few paragraphs of your business plan, your executive summary, your investor presentation, and the first page of your web site. A different message everywhere is no message. You only have once chance for a great first impression.

9. Don’t plan to get rich from your startup. Over the years, I’ve had the privilege of working with some of the best entrepreneurs in Silicon Valley and elsewhere. On the average, the entrepreneurs I know are struggling financially. Remember, it takes about six years of hard work to become an overnight success.

10. Successful companies are all about the execution. A startup begins with a great idea, but all too often, that’s where it ends. Ideas have to be implemented, good implementation requires a plan, and a good plan and good operational decisions come from good people. That’s why investors invest in entrepreneurs, rather than ideas.

There are many more lessons available from all of you who have “been there and done that,” and share your experiences on your own blogs. If you have been reading and learning for a couple of years, it’s time for you to “pay it forward,” like I have, so others can learn from you. I’ll be waiting to learn from your insights.

Marty Zwilling

How to Get Your Startup from Point A to Point B

By Bob La Loggia, CEO StormSource Software

I enjoy the ride on a good commercial airline flight. It’s time that I can use to catch up on tasks that require focus. I throw the headphones on, listen to the best music ever created by mankind (70s music - as if I needed to spell that out), and get to work on the laptop. Nary a thought is given to the route the plane will take to get from point A to point B. Once we do our initial turn after taking off, it seems like a pretty straight shot to me.

Well, it’s anything but a straight shot. The auto-pilot is correcting constantly the entire route. It is being temporarily taken off course the whole trip. And, each time the elements take it off course, it corrects and gets back on the right path.

It’s the same with your startup business. You’ll be blown off course every day. And each time your path starts to take you in the wrong direction, you must correct and get back on course toward your goal.

There are three elements that can lead you in the wrong direction. Beware of these and don’t let any of them steer you astray:

• Great ideas. Every startup has an abundance of ideas. That’s okay. Creative and innovative thinking are signs of a healthy culture. But, so is focus. If you change direction every time you or someone in your organization comes up with a better idea, you’ll never be successful.

  Great ideas don’t make you a success. Execution and persistence make you a success. Great implementations start with a plan, and a great plan and great operational decisions come from great people. Success requires all of these.

• Interruptions. One of the top productivity killers is interruptions. Phone calls, emails, chats, meetings, and people stopping by your desk all temporarily push you off course. It has been proven that productivity is highest when there are long periods of uninterrupted work.

  Only answer your phone and return calls during a designed time, have specific times throughout the day for checking email, and encourage your staff to keep meetings to a minimum. If you absolutely need to get something done on a given day, work at the coffee shop on that day. And if you do get thrown off course, get right back in line as quickly as you can.

• Challenges. Problems, issues, obstacles, challenges – different terms, but the same result. They take your mind and your time off the important tasks you need to be doing to achieve your objectives. In a startup environment, oftentimes there is no one else to take care of the problems, so it’s up to you.

  Every company has issues. But, how you handle the issues will play an important role in whether or not you succeed. The main concepts to remember when addressing problems are 1) gather as much information as you can about the problem and clearly define it, 2) write out the possible solutions, and 3) select a solution and act swiftly and decisively. Address the problem, then get back on course.

Yes, just like an airplane flying from New York to Los Angeles, your path to success will look like an EKG line. But as much as you’ll be blown off course temporarily by great ideas, interruptions and challenges, you must always get yourself back on track. If you don’t, you might take a left turn and end up in Cuba.

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Today’s guest post is by Bob La Loggia, who is the founder and CEO of Appointment-Plus online scheduling software. He is a veteran of four startups over his 22 years in the technology arena, and admits to his share of left turns. He can be reached directly via email or through his blog.

10 Funding Quotes Every Entrepreneur Should Skip

In previous articles, I have occasionally mentioned “red flags” which every potential investor unconsciously listens for. Other writers, like Guy Kawasaki, have irreverently called some of these “entrepreneur lies,” but I prefer to think of them as innocent over-enthusiasm or over-confidence that can kill your deal.

At any rate, here is my summary of the top ten from my experience with hundreds of elevator pitches, business plans, and executive presentations:

1. “Our product is truly disruptive technology.” If your product really represents a paradigm shift, you probably haven’t figured out yet what problem it solves. At best we can count on it taking many years to catch on, just like other disruptive technologies before you. No investor wants to wait that long for his return, or fund the years of waiting.

2. “Gartner says our market will be $50 billion in 2015.” It always amazes me how an entrepreneur can define his market opportunity so broadly, then assess his competition so narrowly in the next breath. You won’t impress investors by claiming that everyone in China needs one, and nobody else has exactly the same features to compete with you.

3. “All we have to do is get 1% of the market.” This red flag is the flip side of “the market will be $50 billion.” There are two problems with this assertion. First, no investor is interested in a company that is only looking to get 1% of a market. Second, that first 1% is the toughest of any market, so you look naïve implying it's easy to get.

4. “We don’t believe there are any competitors.” This is a terrible statement because there are only two logical conclusions. A first conclusion is that there must not be a market. Or worse yet, the entrepreneur is so arrogant that he hasn’t even used Google to figure out he has competition just down the street.

5. “Microsoft is too big/slow to be a threat.” Usually the reason the big companies are no threat is that the market is too small. Competing with IBM, Microsoft, and other large companies is a very difficult task. Entrepreneurs who utter this line are kidding themselves. They may think it's bravado, but investors think it's stupidity.

6. “We have the first-mover advantage.” That’s probably the soft way of saying, we don’t have a patent or any “secret sauce” for a competitive advantage. Unfortunately, a startup with no brand name and no intellectual property is a sitting duck for the big slow company, as soon as they see you gaining a bit of traction. Sleeping giants do wake up.

7. “Our projections are conservative.” A startup's projections should never be conservative. Plus I have never seen a startup achieve even their most conservative projections. We all know that financial projections are a confidence test on how committed you are to the project, so don’t try to minimize them.

8. “We have a proven management team.” If the entrepreneur and team were that proven, they probably would be funding others rather than asking for money. Truly proven in an investor’s eye is a team that has both failed and succeeded at least once, with success meaning 10x or more return to investors.

9. “A world-class CEO will be joining us after the funding event.” It’s easy to get your executive friends to express interest in the huge opportunity you describe, but don’t assume they will actually take the big leap down from their high-paying job to the meager salary you can offer. Rest assured the investor will ask for names, and place some calls. Hedges here by your candidates will definitely kill the deal.

10. “We have strong interest from a major customer.” The mention of unsigned contracts normally takes away more credibility than it adds. You can counter this position by bringing the interested party to the meeting for support, or at least showing a Letter of Intent (LOI). Otherwise talk about paying customers only.

I highly recommend that you screen your business plan and your executive presentation carefully for variations on any of these statements, and remove them. Your integrity and honesty are you best assets, so don’t jeopardize them with common over-statements, even if your intent is virtuous.

Marty Zwilling

Entrepreneurs Needed to Keep Web 3.0 From Fading

For some reason, I haven’t heard much about the next generation of the Internet (Web 3.0) lately, which probably means it isn’t happening as fast as everyone predicted. It’s already a couple of years behind schedule from my perspective. I suspect the real challenge is not the semantic web technology, but new attractive business models from smart entrepreneurs.

After some work, I’m still convinced that much of the Web 3.0 buzz has always been hype, but things are changing on the Internet, and bits and pieces of Web 3.0 are appearing. According to Michael Tasner, in his book “Marketing in the Moment: The Practical Guide to Using Web 3.0 Marketing to Reach Your Customers First,” here are the five key components to watch:

1. Micro-blogging. This is the ability to share your thoughts with a minimum number of characters. People are busy, with limited time, so why not get right to the point of the story, in 140 characters or fewer? Examples include Twitter, Plurk, and Jaiku.
   
   
2. Virtual reality worlds. These are places users visit to interact with others from around the world in a 3-D setting. Meetings are conducted in these spaces, and trade shows are being replaced with virtual reality shows. Examples include Second Life and Funsites.
   
   
3. Extended personalization. Web 3.0 will allow visitors to create an ever more personal experience. They are starting to expect their name to appear at the top of Web sites, personalized e-mails, and even advanced checkout options that suit their habits. Examples include SendOutCards, Google, and Amazon.
   
   
4. Mobile smart phones. There are billions of cell-phone users throughout the world, a number much larger than those who use PCs. Consumers are surfing the Web, purchasing products, and becoming instant photo journalists from their iPhone and Blackberry. As mobile takes a greater share of the market, test management tools will be necessary to maintain a consistent delivery to all devices.
   
   
5. Real time on-demand collaboration. Users can now interact in real time on documents, collaboration, including making changes. Many software-as-a-service (SaaS) applications now allow on-demand collaboration. Examples include Google Docs, Salesforce.com, Slideshare.net, and Box.net.
   

According to Tasner, who is a marketing guru, business models and marketing in the Web 3.0 environment will need the most dramatic changes to be consistent with the new culture and technology. These include:

• Adapting to mobile, the largest and fastest-growing Web 3.0 trend. Marketing messages have to be adapted and directed to the smart phones, which all have web access, e-mail, video, texting, as well as voice.

• Accommodate the resistance to sharing all information with everyone. People are more and more worried about personal privacy and identity theft. This is driving a trend towards micro-community sites and smaller, more specialized social sites. Marketers need an effective presence on these sites for credibility and trust.

• Facilitate virtual communication versus face-to-face meetings. It’s too expensive to fly across country for marketing trade shows and big sales meetings. Virtual trade shows, GoToMeeting, and WebEx are attracting new customers like crazy.

• People on the Web now include everyone. Twelve-year-olds are running million-dollar-social networks, your grandma is tweeting, and your long-lost cousin runs a popular tribe on Second Life. This trend is escalating, and will not change.

The key driving factors to Web 3.0 include mobile and residential phones with high quality video, virtual shows surpassing live events, more intelligent semantic search information, and the openness of the Web. If you are a true entrepreneur, by now your head should be spinning with the possibilities. What do you see as the throttle?

Marty Zwilling

Have You Created a Citadel for Your Startup?

By Bob La Loggia, CEO StormSource Software

Business is often compared to war and waging battle with enemies. Indeed, Sun Tzu’s “The Art of War” is one of the most popular business books ever written, and it was originally written as a military strategy guide. Battle terminology has been a mainstay in the business lexicon for decades. The list of war references used in business is almost endless, from “gathering the troops” to “losing a battle but winning the war.”

One battle concept that has enduring applicability is that of creating a citadel. A citadel is a fortress in a commanding position in a city. The purpose of a citadel is to provide defense for a city. Citadels are fortified, meaning they have the firepower to fight off enemies. When a citadel is built, a city is preparing itself for a battle.

In today’s competitive business environment, where barriers to entry seem to be crumbling before our eyes, creating your citadel is more important than ever. But, erecting a citadel goes way beyond just creating barriers to entry. Developing a citadel involves the following:

• Creating a battle-ready infrastructure. Michael Gerber’s must-read book on starting a business, “The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It,” talks about working "on" the business instead of "in" the business.

  It’s a bit counterintuitive, but by focusing on creating a rock-solid infrastructure, whereby all processes are sharpened, documented and turnkey, you are developing a foundation that will allow your business to expand swiftly. You are also developing a key to business success that is rarely talked about: transforming new recruits into productive warriors quickly.

• Developing a proven, but flexible business model. Your business model is the structure that supports your strategic plan. Your business model is how you get customers, grow and make money. The paradox of a business model is not that you have to continue to tweak it until you reach perfection, but you have to continue to remain willing to adjust it constantly based on customer and market information.

  Ideally, you’ll end up with a core, proven model that you adjust along the fringes on a real-time basis. It’s the same mindset used in planning a citadel. You hone and execute your core strategy, then adjust some of the details as you gather information on the enemy, the elements, and other pertinent information.

• Building a reputation. The most effective citadels are never used. They are built as a protective measure. They say, “We are here and ready to fight. We won’t back down from any battle.”

  When citadels are constructed effectively, enemies usually move on to fight less-formidable opponents. When you build a reputation as an authority in your segment, a juggernaut that won’t let up, and a company that will defend what it has to the death, competitors will think twice about attacking.

Yes, citadels are fortresses. They are bastions of your business. Your citadel is your protection from the competition. Creating barriers to entry is important, but creating a strong infrastructure, having a proven business model, and establishing an impenetrable reputation will help ensure any would-be adversaries take their fight elsewhere.

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Today’s guest post is by Bob La Loggia, who is the founder and CEO of StormSource Software, the source of Appointment-Plus online scheduling software. He is a veteran of four startups, has over 22 years in technology, and has built several citadels. You can contact him directly through his website or email.

Find the Best of the Best Blogs for Entrepreneurs

With as many as 100 million active blogs (web logs) in English alone on the Internet, how can you find and read the ones you need to be a leader in your business domain? I’m a speed reader, but that’s a challenge for even the best of us. Yet we know keeping up with the latest trends and techniques can make all the difference in ensuring that your business stands the test of time.

I’ll summarize below some of the strategies and tools I use to tackle this challenge. But I’m sure there are some good ones I’m missing, so I’m soliciting your input as well.

1. Business site expert blogs. Almost every traditional major business news site, like Forbes.com, Entrepreneur.com, and HBR.org have blogs which are contributed by experts in different business areas. I review these, as well as contribute entries occasionally for entrepreneurs and startups.

2. Blog aggregators. One of my favorites in this category is MyAlltop, run by a well-known name with entrepreneurs, Guy Kawasaki. This site allows you to build your own page of selected blogs and news sites from the Alltop selection of the “best of the best.” Other popular aggregators include TheHuffingtonPost and BusinessInsider.

3. Follow thought leaders on Twitter. Most great bloggers, like Mark Suster and Scott Edward Walker, are also active on Twitter. That means they send tweets to announce their latest entries, and they usually re-tweet others of value to their followers. You might even get personalized answers to business questions (try me on @StartupPro).

4. LinkedIn groups news links. There are several popular ‘groups’ you can join on LinkedIn that are focused on entrepreneurs and startups, like On Startups, Founders & CEO Club, and Startup Specialists, to name a few. They feature news links daily from popular blogs, and well as relevant discussion topics. I’m there every day.

5. Facebook for Business news links. Similar to LinkedIn, Facebook has a group for business topics, which also includes daily blog news links and discussion topics. I review news there, as well as posting my own link occasionally.

6. User generated news links. Digg, BizSugar and Hacker News sites populated by user contributed links, who want to share their favorite item. These then get voted up or down in popularity by other users, so the hottest ones bubble to the top. I quickly found that ‘most popular’ doesn’t mean most useful, so use with care.

7. Community bloggers platforms. There are now several platforms, like Bloggersbase and Brazen Careerist (for Gen-Y) where bloggers can post or repost articles, categorized by area of interest. If you are a budding blogger, these are a place to start, and even earn ranking points if voted up by other readers.

8. Bookmark favorites. Every browser has a simple way of tagging favorite URLs, so they can be accessed quickly from your own browser. Other sites, like delicious and StumbleUpon, go several steps further by allowing access to the list from any computer, anytime, and anywhere. Also you can tag them into collections, search them, and share with others.

9. Email subscription. If you like the latest blog entry from your favorite sources, like Seth Godin, to be sent to you automatically via email, it’s still available. I recommend you be very selective on this one, as many blogs will clog even the best email system.

10. Blog catalogs. Finally, if you just want to search the universe of blogs to find ones of interest, try sites like BlogCatalog and HubPages. They will help you through the maze, and promote yours at the same time.

We all need information filters these days to find the nuggets of gold in a sea of sand. But I do recommend that you spend some time each day catching up on the real world around you. Otherwise, you are just keeping your head in the sand, and you won’t see the changes you need to survive.

Marty Zwilling

Are Poker Playing Entrepreneurs More Successful?

By Bob La Loggia, CEO StormSource Software

Are startup founders who play poker statistically more likely to succeed in business? Beats me. But I do know that there are many lessons that founders can learn from poker players. As we all know, poker used to be relegated to smoky casinos and the back rooms of seedy lounges. But, in recent years, poker has become a game for the masses. Kids who once idolized athletes now idolize the “e-athletes” they see playing poker on TV.

Now, I’m not going to ask you to start wearing dark glasses and try to stare down the office supply salesman as he tries to convince you to buy your pens and Post-it Notes from his company. But, I am going to ask you to think about a key aspect of poker playing that is very applicable to businesses.

You can easily spot a novice poker player because they have a tendency to always think their opponent has a better hand than they do. If someone raises the bet, the novice folds their hand. “I’m sure they have a pair of aces. I can’t beat them with my pair of kings,” they think.

Conversely, you can always spot a confident pro. When they get raised, they take a moment to think. They analyze the situation, take a good look at the person who raised, and then decide what to do. Oftentimes, they’ll re-raise, but other times, they’ll match the bet. They know that their opponent doesn’t necessarily have a better hand, even if they act like they do.

In business, you will always have competitors. And you may have a tendency to think they have it all figured out – that they have the better hand. When they announce that new feature or high-profile partnership, don’t panic or get demoralized. Instead, stop and assess the situation carefully.

Chances are, you are holding a pretty good hand, too. Maybe it’s better than theirs, maybe it’s not. In poker, as in business, it’s not the best hand that wins; it’s the one who plays their hand best that wins.

Business history has proven time and time again that it’s not necessarily the best product that wins in the marketplace, and having a superstar founding team, VC partner, or advisory board doesn’t guarantee success.

Was VHS a better technology than Betamax (for you youngsters, VHS and Betamax roamed the Earth about the same time as the dinosaurs)? Why isn’t TiVo’s vastly superior DVR in a dominant position? Does Domino’s sell one million pizzas a day because it has the best pizza? And, did Facebook provide that much more of a rich user experience than MySpace?

So, now you have your excuse for spending your Tuesday nights at the casino. Tell your significant other that it’s all in the name of sharpening your business skills. And, if you must wear the dark glasses and hoody at work, please do it when you are alone.

The office supply salesman may be intimidated by your staredown, but, more likely, he will think you’ve lost your marbles. Dark glasses or not, always remember, it’s not what’s in your hand that’s most important; it’s how you play it.

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Today’s guest post is by Bob La Loggia, who is the founder and CEO of StormSource Software, the source of Appointment-Plus online scheduling software. He is a veteran of four startups, has over 22 years in technology, and has seen a lot of poker games. You can contact him directly through his website or email.

America’s Entrepreneurial Innovation Needs Help

The innovation engine that powered the U.S. economy over the last century seems to be slowing down and dying, threatening not only local opportunities, but the economies all over the world. The $30 billion trade surplus in advanced technology products that America enjoyed just one decade ago has now become a $56 billion deficit.

More and more people, like Henry R. Nothhaft, in his new book “Great Again: Revitalizing America's Entrepreneurial Leadership” are already calling these last ten years the “Lost Decade.” Nothhaft has put together a challenging but small list of things we have to do to revitalize our innovation leadership, and I’m supportive:

1. Liberate entrepreneurs from regulatory shackles. Startups in the U.S. face the highest combined federal and state tax rates in the world. At 39%, it’s more than 50% higher than the European Union countries average of 25.5%. Rates around the world are still going down, while U.S. rates have remained fixed for the last ten years.

   In addition, due to Sarbanes-Oxley and other regulations, accounting costs have gone up an estimated four times for all businesses, and 2008-2009 represented the worst IPO market in forty years. We need a regulatory regime that nurtures startups, rather than penalizing them like giant corporations.

2. Fix the patent office to keep up with the backlog. Since 1992, Congress has diverted nearly $1 billion in applicant-paid fees already earned by the USPTO to other uses (like the 2010 census), leaving the patent office unable to deal with the threefold increase in patent applications over the last 20 years.

   As of January 2011, there are a staggering 1.2 million applications awaiting approval, and more than half have never had an initial review, which really hurts startups. The average total fees for obtaining a patent are now way up to $38,000. In most cases, no patent means no financing, no new products, no new jobs, and no new industries for tomorrow.

3. Offer meaningful incentives to bring back high-tech manufacturing. In the last ten years alone, more than one-third of America’s largest factories have shut down. That’s 42,400 factories, including 15 semiconductor plants, and 12 million lost jobs. We now produce only 14% of the world’s supply of semiconductors, and even less of other things.

   Both China and Taiwan now provide a 5 year, zero-tax holiday, for semiconductor manufacturers, followed by 5 years at rates as low as 5%. Germany, Ireland, Israel, and most other non-Asian nations also provide major tax incentives, and huge R&D tax credits. We need to make a strong manufacturing base a national priority.

4. Ease immigration rules to turn brain drain to a brain gain. Studies show that foreign immigrants who enter on H-1B visas make a greater innovation and scientific contribution to the nation, by patenting at double the rate of native-born Americans, and publishing more highly-cited engineering articles.

   In fact, between 1995 and 2005, these same immigrants founded over 50 percent of the venture-backed technology companies in Silicon Valley, and are some of the key venture capitalists there as well. The evidence is that immigrants don’t take jobs, they create them by the millions.

5. More programs to support basic science and research. Over the past decade, there has been an exodus of scientific and technical expertise from the DoD (Dept of Defense) and academic community, with basic research dropping from a high of 26% in the 1960’s budget to only 12% of their budget today.

Government should learn from private industry and invest research funds just like a venture capitalist invests startup capital. It should invest in people and teams first of all, and let startup entrepreneurs take the fruits of that research and build from it a better tomorrow.

It’s time for us to get back to the basics of fostering innovation. I agree with Nothhaft that the answer is neither the “big government” of the radical left nor the “no government” of the radical right – it’s the “smart government” of the common-sense middle. Startups can be our silver bullet to kick-start our economy and innovation, so let’s give them some help, and be great again.

Marty Zwilling

Your Startup Technology is Like a Banana

By Bob La Loggia, CEO StormSource

Technology is like a banana. Yes, you heard me right, a banana. Just like technology, a banana has very distinct phases. Understanding these phases and taking action on them could be the difference between your company being king of the jungle or being caged in a zoo scraping flattened Junior Mints off the ground for sustenance.

Eating a green banana

You know the drill. You head to the grocery store, snake up and down the aisles pretending that you are the one in control of your choices and not the marketers. When you finally hit the produce section, it’s a welcomed reprieve from the cardboard, plastic, and aluminum. When you get to the bananas, you say, “Hmm, these look a little green. No biggie. They’ll be ripe within a day.” So, you grab a bunch and off you go.

They say that all humans are basically the same, regardless of ethnicity, gender, or religion. What happens next is a ritual that transcends all of mankind – a self-indulgent lie that occurs millions of times every day in all corners of the Earth: You talk yourself into trying to eat an unripe, green banana. You struggle to peel it, but you succeed. As you take that first bite, you realize something is wrong. Something is terribly wrong. You were expecting a fine wine and you got vinegar. You try to stay composed, but you can’t control yourself. You burst into a fit of fury and curse the heavens. The anguish is unbearable. You wish you were never even conceived.

Eating a green banana is like introducing a technology for which people aren’t ready. It looks good and seems pretty cool. But, when you try it, it’s a disappointment. Either the customer isn’t ready or the technology isn’t ready or the market isn’t ready. Remember when the first tablet computers were introduced? They failed. They were a green banana.

Rotten bananas

To see a brown, slimy, unwanted banana is a horrible experience. Just days ago, it was spritely, firm and full of potential. Now, it’s a pitiful has-been of a fruit. It’s hard to even look at. It’s starting to leak a little and stink. It’s that same uncomfortable feeling you get when you visit an old-folks home.

When your technology is out of date, prospects and customers get the same feeling. They may not write you off, but it’s definitely a struggle for them to take your technology seriously. And, it gets harder when they get marketed to by new, shiny competitors. It’s like putting a new, firm bunch of bananas on the counter next to a couple nasty, rotting ones.

Just right

When you peel back the perfect banana, time seems to stand still. The world is beautiful, easy, and calm. You chomp down and confirm this wonderful feeling.

When your technology is not too young and not too old, when it’s in the prime of its life, it’s a magical thing. It just works and your customers get it. We come across web sites and applications like this all time. You know them when you see them. They feel right. But, you also know when it when you see technology that is old or technology that is not yet ripe. They don’t feel right.

In your business, make it a priority to have the right technology, even if it’s just your web site. Don’t make it too “out there” and make sure it doesn’t look too old. Your prospects and customers will tolerate green or brown bananas for a while, but eventually they’ll move on to the next tree where the fruit is ripe. Don’t let this happen to your business.

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Bob La Loggia is the founder and CEO of StormSource Software, maker of Appointment-Plus online scheduling software. He is a veteran of four startups, has over 22 years in technology, and has seen a lot of bananas. You can contact him directly through his website or email.

10 Reasons Why Capital Shouldn't Make Or Break Your Startup

By John Williams

Fast Company magazine recently reported that PayPal founder Paul Thiel is giving away $100,000 to twenty-four young men and women to finance startup businesses. The caveat is that these young entrepreneurs have to drop out of college to do it.

This move is indicative of the possibility that the traditional ways of going about making a living through a college education, an entry-level position at a firm, and steady promotion through the ranks is a dead model. Instead of following a proscribed course which may lead nowhere, entrepreneurial leaders such a Thiel are sparking a change in the way we think about success.

Thiel is providing his mentees with capital to make their startups a reality. For most of us, though, the idea of investors or even securing financing may as well go the way of the corporate ladder. For those of us without angel investors, there are still plenty of reasons to move ahead with new ventures, and we are not alone:

1. It's all you. When you don't accept capital from someone else, you aren't beholden to anyone else's input. You get to call the shots. You get to keep and reinvest every bit of what you make. You get the personal satisfaction of making something out of almost nothing. People love the fact that Microsoft was started in a garage. Dick's Sporting Goods was started with $300. Become a compelling story yourself.

2. Having no money can help you plan. With a bank account full of someone else's money, it's hard not to feel flush with cash and have a false sense of security. An inflated sense of financial well-being can result in sloppy budgeting and accounting as you write checks here and there without pause. But when your only capital is your hard-earned seed money, every penny that goes out will be scrutinized painfully. Your mortgage and grocery bill depend on it.

3. You can keep overhead low. You may want office space outside of your home, but you may not need it to start. Print advertising is expensive, but social media is free. Fancy websites are expensive, but blogs and Facebook pages are free. New desks and computers are expensive, but second-hand stores and Craigslist are great sources for used equipment and supplies. A box of business cards and a card table in your spare bedroom may be all you need. The rest can come later. Or not. Frugal business practices can be rewarding.

4. A lean image is appreciated. Who hasn't dreamed of a big fancy desk, over-the-top corporate parties, and glossy ads in national magazines? But in the current business climate conspicuous displays of wealth are frowned upon and summon images of Enron, oil companies, and big banks. The shoestring budget and image are in style. Take advantage.

5. Starting small gives you flexibility. Starting small and nimble allows you to adjust and be flexible as you gain experience instead of being tied to a large concept by heavy investment in upfront costs. If you spend $50K on a website selling party supplies but you soon realize it's the sales of catering supplies you offer that have taken off, you will want to have a site that promotes your newfound focus. But if you've spent all your money on the website for party supplies, you may not have the funds to have the site redone.

6. Businesses can be built on sweat equity. Startup businesses requiring the least amount of capital are those that require little more than your time and hard work. A landscaping service can be started with only a used lawnmower and effort. A freelance writer needs only a computer and her time. If you will be making a product to sell, be sure the cost of materials is minimal and beyond that it costs only your labor. Making cakes, making baby clothes, or making birdhouses, for example. As your services gain demand, your time becomes more valuable and you can charge more.

7. Moonlighting can pay the bills. Some people say if you are serious about starting a business you must go all-in from the beginning, but for some that simply isn't a reality. You can pay your bills with another job so that profits from your startup can be invested back into your business. The only trick here is that you have to be willing to work around the clock between your day job and your startup.

8. You will (MUST) love what you are doing. Don't equate "startup entrepreneur" with "future millionaire" or visions of a buy-out by a big-time corporation. Making something from nothing doesn't happen overnight. The struggles that come with reaching your business goals will be a lot easier to live through if you love what you are doing and are committed to your idea.

9. People can help you if you help them. A local fishing guide might make friends with folks at the bed and breakfast, each referring clients to each other. You can network to give and get referrals for other businesses. Ask satisfied customers to spread the word on yelp, tripadvisor, Angieslist, etc., and to tell their friends.

10. Customer service is free. Out-do the big-shots and other competitors when it comes to customer service. Being polite and doing diligent work costs you nothing. It's amazing how rare it is for professionals to return phone calls and emails promptly, show up on time, or finish a project for the price quoted. Do this and you will separate yourself from the crowd.

According to the nonprofit Kauffman Index of Entrepreneurial Activity, the 2010 startup rate is the highest in fifteen years, a great deal of which are sole proprietorships by necessity. But a sole proprietor startup is not a bad thing, and it does not require the investment capital that may be keeping you from moving forward with your business idea. If lack of capital is holding you back from initiating your startup, think again to convince yourself that this excuse won't fly.

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Today’s guest post is by John Williams, president and founder of Logo Garden, a resource website for anyone starting or running a small business. John is a veteran of over two decades in the advertising industry. He has published extensively on branding, and often shares his thoughts on the Logogarden.com blog.

Startups Needed For Cloud Computing Gray Areas

Cloud computing is still all the rage in the business world these days. Yet I find that most business people don’t understand and fully trust it, and I defy even the technologists to define it in ten words or less for business people. Many say it’s just marketing hype applied to old principles that have been around for a long time.

A typical definition (from Wikipedia) is that “cloud computing, is Internet-based computing, whereby shared resources, software and information are provided to computers and other devices on-demand, like a public utility.” That’s about 25 words which I’m certain doesn’t paint a very precise picture to the entrepreneurs I know.

Putting aside the acronyms and technical jargon, I think I can distill the essence of the cloud computing vision to the following five key points:

1. Buy service from a central utility, rather than buy assets. Now you can pay for a metered service delivering compute power, data, and storage, based on your business demand, through the Internet. No need to buy and manage these as assets. This is a great cost leveling advantage to businesses, which used to be called time sharing.
   
   
2. Maintenance and support are provider responsibilities. Small companies no longer need an IT staff, with the inherent costs and management responsibilities. That allows them to focus on their core competencies, reduce overall costs, and be more agile in responding to market changes.
   
   
3. Access to new services and data is instantly global. Employees don’t need to come to an office to do their job, and customers don’t need special software installed access a new application. International standards and localizations are assumed from the beginning, rather than added much later.
   
   
4. Availability is 24/7, just like your electric utility. No more down time on weekends, or during the nightly backups. Especially when looking at software for field service workers or other mobile teams, it's important to consider services with constant availability. The Internet is a huge power grid that services computing needs (cloud computing) of businesses and consumers, just like the electricity grid services power needs (cloud power).
   
   
5. Easy integration of customized applications. People have traditionally bought their own computers simply to provide a common platform where all their applications could talk to each other, even though customized, and share data. The cloud provides these transformations with security and integrity.
   

Make no mistake about it, these are the dreams, not the reality today. Even the pundits agree that cloud computing is still for “early adopters,” meaning it’s not all there yet. Many people can quote cloud computing successes, like businesses using Amazon Web Services for huge scaling, or failures, like the Google App Service major outage a while back.


Other gray areas include how to do secure credit card transactions in the cloud, tax considerations for international operations, multiple virtual machines in one cloud, and properly addressing differing geographic regional requirements in a single cloud. Then there is the connection problem of sharing data with standard applications not in the cloud.

When a vendor starts talking about his paradigm shift to a dynamically scalable and virtualized solution in the cloud, with SaaS (software as a service), PaaS (platform as a service), MSP (managed service provider), or web services in the cloud, tell him to skip ahead to the chart which shows you how well he does on the five points above, and the five gray areas outlined.

Even though “the cloud” is a familiar cliché for the Internet, cloud computing is still very much an opportunity for startups, with lots of room for innovation and better solutions. Now is the time to jump on board, but a cloud usually means you should expect a few storms ahead before you see the sunshine.

Marty Zwilling

David S. Rose – Father of Angel Investing in New York

I recently had the privilege of interviewing David S. Rose, who has been described as "the Father of Angel Investing in New York" by Crain's New York Business, and a "world conquering entrepreneur" by BusinessWeek. He chairs New York Angels, one of the most active angel investment groups in the country, which has invested over $60 million into nearly 70 companies.

Marty: Welcome to Startup Professionals interviews. It sounds like you could be a full-time Angel investor, but I know you have other activities as well. Tell us a bit about these.

David: I’m also a serial entrepreneur who has founded half a dozen companies, including Angelsoft, which provides the underlying Internet infrastructure for most of the world’s organized angel investing ecosystem. I also spend close to half my time teaching, and in addition to serving on the entrepreneurship advisory boards at Columbia, Yale and NYU, I am Chair of the Finance, Entrepreneurship and Economics program at Singularity University in Silicon Valley.

Marty: Were your own first investment ventures a positive and learning experience?

David: Absolutely. Because one rushes in all flush with the enthusiasm of giant exits, and soon begins to realize just how challenging it is to actually get to a positive exit! My first angel investment in the 90’s was into a video hardware company run by a good friend with great connections to the industry.

After that evaporated, I didn’t invest again until just after the dotcom crash (when my long-suffering spouse grounded me from any further entrepreneurial ventures :-)). The second company in which I invested, back in 2001, was a novel concept from the serial entrepreneur who invented social networking.

It had a great idea, great team, and great angels…but was ahead of its time. The third company is still alive. Its indefatigable founder, however, has since raised an additional $25 million from other angels, never made a penny of profit, and the value of my original six-figure investment is now about zero.

My fourth investment, and the first one I led, was into a mobile applications company, which was also ahead of its time and never truly understood its market. It, too, went down the tubes. The fifth one was a high-buzz, high-tech play with lots of big-name angels, and we eventually brought in a rock star CEO and a major VC followed us in with many millions. But that one fell victim to rapidly developing technologies, the recession, and the collapse of the consumer electronics market, and is unlikely to return a significant profit.

But while they certainly weren’t positive exits, the optimistic side of me continues to believe that they were all positive learning experiences, and I’ve tried to never repeat the same mistake twice. Luckily for me (and regardless of what anyone else says, there is a lot of luck involved in angel investing), I have since had significant positive exits to companies like Kodak, CBS and Facebook, and the current value of my portfolio is approaching the 30% IRR that rational angels target.

But my experiences are probably living proof of what the academics have been pointing out over the past few years: angel investing can be very lucrative, but it is a challenging path. It requires a mindset that can accept an enormous risk of failure, an ability to stick to at least a ten-year plan, and a willingness to continue executing on your plan despite losses early in the J-curve. According to most studies, getting into angel investing without being prepared to make a total of between 20 and 80 investments is a good way to lose ALL your invested capital.

Marty: How has the business world changed since you first started?

David: The exponential development of technology has begun to cause deep and fundamental changes to the world of early stage finance. It used to be that without millions in funding you couldn’t easily start a high growth company, and that funding could only come from venture capital firms that were hard to find.

My first Internet venture in the early 1990s took about $20 million in venture capital to get to our product launch. My second, six years later, took only $2 million in VC funding. When I started investing, my first angel deal took $200,000 to get to Internet product launch, and one of New York Angels’ recent investments only took $20,000. That’s a three order of magnitude difference!

Combine this with half a dozen books by investors like Bill Payne, Jeff Bussgang and Dermot Berkery explaining everything in painstaking detail, and there is enormously more information to help entrepreneurs achieve their funding goals. This is quite literally the best time in history for an entrepreneur to take a shot at creating a new venture.

Today, with facilitators like Angelsoft connecting over 35,000 accredited investors and bringing best practice tools to over 600 groups, with national and international organizations such as the Angel Capital Association, and with myriad VCs, angels and experts such as yourself blogging exhaustively about the field, this is also the best time in history for people with available assets to get into angel investing.

Marty: What is a key personal attribute you see in successful entrepreneurs?

David: Without question, the single most important attribute of a successful entrepreneur is integrity. And that’s not some philosophical or theoretical malarkey; it’s hard-nosed fact. When we invest in a startup, we’re NOT investing in cash flow or assets. Instead, we’re investing 100% in the person, because that’s all we’ve got.

So if we get even the slightest whiff of anything that doesn’t feel right, we’ll just move on. That means your entire life must be an open book, 100% of the reference checks we do on you (including ones we find on our own) must come back positive, and we need to see that you’ve treated former investors, employees, partners and customers with impeccable fairness.

Marty: Any advice you would like to give to someone contemplating a startup?

David: Being an entrepreneur is tough. Really, really tough. The entrepreneurial life is one of challenge, work, dedication, perseverance, exhilaration, agony, accomplishment, failure, sacrifice, control, powerlessness…but ultimately, extraordinary satisfaction.

It will be without question the hardest thing you will do in your life, and it is absolutely critical that you find personal joy and fulfillment in the process of entrepreneurship, in which case the economic success of your venture will be simply the icing on the cake.

Marty: David, it’s obvious that you personify that advice, and your path has not been an easy one. Thank you very much for your insights and your continuing role-model leadership for all of us, and best of luck in all your ventures! For more, you can contact David directly via his personal website.

Marty Zwilling

Don’t Pay Bribes to Get International Expansion

By Ernst Gemassmer

Expanding into International is both necessary and positive for every company, including startups, but it has some unique challenges, as I have found out personally, like expected “under the table” payments in dealing with other cultures and bureaucracy. Some companies look at this as a “cost of doing business,” but it can easily cost you your reputation and your business.

In a recent update by Thomson-Reuters, the U.S. Justice Department and SEC reported imposing over $1.5 billion in penalties on companies in 2010. In a very recent international bribery case, Alcatel-Lucent decided to pay $137 million to settle charges that it paid millions of dollars in bribes to foreign officials to win and maintain contracts in Costa Rica, Hondurus, Taiwan and Malaysia. The days of a “slap on the wrist” for offenders are gone.

The U.S. crackdown started way back in the late 1970’s with the advent of the “Lockheed Bribery Scandals,” in which the company was accused of paying bribes to foreign governments in order to secure aircraft and equipment orders. The resulted in the U.S. “Foreign Corrupt Practices Act,” which made it illegal for U.S. corporations to make any payments to foreign officials.

Last year, this same type of legislation was adopted by thirty other nations and countries who are member of the Organization of Economic Cooperation and Development (“OECD”), with its much-awaited Good Practice Guidance for anti-bribery compliance programs.

Now all companies, more than ever, need to implement internal controls and directives to meet the current legislation before they go International. As an example, one major public company, for whom I worked at the time, issued the following internal directives:

• All foreign subsidiaries are no longer permitted to engage ‘expeditors’ to obtain permits, licenses and other permissions from government entities.

• All distributors are obliged to sign documents stating that they would not use any of their commissions for payments to foreign officials.

For our subsidiary, in one of the key countries of South America, these internal regulations dramatically complicated the task of obtaining various permissions from local authorities. For example, obtaining periodic renewals of business licenses became a very tedious and time-consuming process for the local subsidiaries. These efforts proved to be a major distraction from our main objective, namely sales and service of our high tech products.

Distributors willingly signed the required documents, since they were threatened by corporate with cancellation if they did not comply. However, in reality the U.S. corporation had no opportunity to audit distributor books and therefore could not determine whether a distributor adhered to the letter and the spirit of the document.

After a number of complaints and extensive lobbying from industry, the ‘Foreign Corrupt Practices Act’ was amended. The new regulations now permitted so-called ‘facilitating payments to petty bureaucrats’. In practice that meant that we could once again focus on running our sales and service activities.

Dealing with the bureaucrats for permits and licenses was once again outsourced to expeditors specialized in these areas. Generally the cost for each such transaction was nominal, i.e. less than $200. These costs were small, especially when compared with the predictable outcome, which could be achieved in a timely manner.

In my personal opinion, little progress in simplifying bureaucracies can be expected any time soon, in any country. However, it is absolutely essential to adhere to local laws, rules and regulations. Failure to do so in a timely manner could result in the suspension of a business license, negative articles in the local press, slowing down imports, restricting the outflow of profits or even jail sentences.

Thus, I highly recommend that you take local regulations in each country seriously, and avoid the temptation to resort to bribery. If necessary, you may need to hire a local consultant to help you and your company in navigating complex, and in many instances illogical, rules and practices. The other alternatives are not worth the risk to your reputation and your business.

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Today’s article is presented by one of the founders of our Startup Professionals team, Ernst H. Gemassmer. He resides on the West Coast, and has long helped entrepreneurs there, as well as providing turn-around assistance as interim CEO, and International coaching. You can contact him directly at ernst@startupprofessionals.com.

Many Websites Look Like Zombies to Google Search

A while back I emphasized how important is to have a company website these days (Publish Your Website Or Customers Won’t Find You). I should have added that a website not optimized for search engines is lost in the heap of a billion dead websites. Unless someone searches for your company by name, it won’t show up in the first few pages of any search results.

Search engines are programmed to rank websites based on their popularity and relevancy. These are subjective elements, but there are specifics that even a computer program can evaluate to set your ranking, and thus determine whether your site is alive and a good match to a specific search request. Yet recent research indicates that almost half of small business websites are still missing these basics, and thus are essentially dead to the search world.

The solution is keeping your site alive and vital, and following basic search engine optimization (SEO) suggestions. Here are some high-value elements you need, if you hope to see your company on any page of results for relevant user queries:

• Relevant and constantly updated content. Web sites that haven’t been updated in the last couple of years can’t possibly be alive. These days, the best way to provide fresh content is to attach your blog to the website, and add new entries at least a couple of times a month.

• Create inbound and outbound links. Contact related web sites that are well known, to request reciprocal links. Another way to get inbound links is review other site blogs, and leave your comments with your link. Register your business in relevant directories, and sign up in all local directories. Make sure you have no dead links on your own site.

• Web page title tags. You need to name every page of your web site, and these names must contain your important search keywords. Check every page of your web site to make sure a title is predominantly displayed as the first line of a search result. Missing and meaningless tags will cause your site to be ignored by users, even if found.

• Web site keyword tags and description. These are elements, normally added by your website designer, which contain one or two sentences that briefly explain to the search engine what each web page is about. These same tags and keywords should be used liberally in each page text to give that page a higher ranking.

• Image attributes and sub-folder names. Search engines process every word on your web site, even optional internal names assigned to images (alt tag) and folders. Thus even internal names of website elements must be properly named (eliminate computer generated text) to amplify your search position.

• Reduce page load time. Eliminate flashy ads that delay entry to your site. Search engine spiders (also known as bots) take into consideration the page’s size in kilobytes. Web pages that take a long time to load will discourage search engines and human viewers alike. The usual culprit is a picture or graphic that is larger than 20 kilobytes.

Completion of these tasks is not the full SEO job, but will keep your company out of the Internet dead zone. You can contract an SEO specialist at this level for a couple of thousand dollars, or you can do the work in-house, if someone on your team has some basic tools and web maintenance skills. SEO does not have to be a major expense.

Another alternative is to buy your way out of the zone with Search Engine Marketing (SEM). If you give Google enough money, their search engine will put you up as a preferred provider for any search keyword you buy. That may be a quick fix, but will definitely be more costly in the long run.

But the cost of doing nothing is even greater. Websites that look like the walking dead to Google search, work like no website, which means that your business will suffer. Work on a good website is never done, but there is no time like the present to wake up and get started.

Marty Zwilling

Many Startups Stumble on International Cultures

By Ernst Gemassmer

Most of us have travelled abroad and experienced the challenges and frustrations of getting what we want without being laughed at or insulting our hosts. Similar issues prevail when doing business in other countries, cultures and languages. Even if you think your business is all local, multi-ethnic sensitivities are more relevant than you may think, including the US.

Although the Internet gives you pervasive reach, it hasn’t reduced the world to one locale for your business. The international opportunity is large, as I related in an earlier article, but there are some major challenges as well. Here are a few examples from my personal experience:

1. You need to translate/localize your products. I was once asked by a top executive of a major software company why we were not selling more products in Finland. I informed him that we needed to translate the software into Finnish at a cost of $50,000.

   He did not seem to understand that Finland was not part of Scandinavia and that English is not too well understood by most people there (with the exception of the Swedish-speaking minority in Finland). He could not be persuaded to commit the funds required for localization. Thus, we did not translate the product and sales remained at an insignificant level.

   Translation not only increases sales, but in many countries it is required by law.

2. Local laws prevail. Some years ago Brazil had a major balance of payments deficit. Therefore Brazil made it difficult to import products from abroad. Corporations were encouraged to export from Brazil to generate foreign currency and they were allowed to keep a portion of the foreign currency. Companies became creative by selling and trading foreign exchange licenses.

   Our own subsidiary, of a major technology company, started to repair and service competitive products in order to maintain our own technical staff and service capabilities. Thus, when the government creates restrictions, think out of the box.

   Managing foreign exchange reserves is every bit as challenging as managing a family budget. Brazil is now a powerful country, but similar examples still prevail in many developing nations.

3. Respect local customs and practices. A successful sales person wanted to become more familiar with the international market and requested a transfer to the Latin American sales group, based in the US. I counseled the department manager against hiring since she would be subject to personal challenges in selling to our partners in Latin countries. Eventually I relented and she joined the group.

   Unfortunately my prediction turned out to be true, she felt harassed by one or more of our business partners and left the group shortly thereafter. Even though we had agreed to provide her an equal opportunity to pursue her goals, we could not protect her from the different perspective on comments and advances in Latin America. Thus, hiring decisions should be made carefully, after fully understanding local practices.

   Although most Latin American countries have significantly improved working environments for women, few companies would yet dare send a women employee to work in Saudi Arabia.

4. HR rules are local. I had organized European operations into regions and the country manager for Italy reported to the central European manager based in Germany. This organizational structure worked well until the two senior managers got into a shouting match and the Italian manager indicated that he was resigning.

   His manager accepted his resignation and documented the case in the personnel files. Shortly after leaving the company we were notified that the Italian ex-employee was suing us for creating an unacceptable working environment, which led to his resignation. We retained legal council in Milan and were advised that we would loose if the case went to trial. After some painful negotiations we settled the case out of court for a twelve-months severance payment.

   When hiring staff internationally, always be well informed about local laws and prevailing practices. Not following this advice can be very costly. Although labor laws are increasingly unified in the European Common Market, major differences are still encountered in many countries. Proceed with caution.

5. Watch your product naming. Product naming is always a major effort and mistakes can result in costly failures. You may recall the Chevy Nova, a compact car from GM. Pundits in Latino countries quickly picked up on the name, ‘no va’ means ‘does not go’ in Spanish.

   Thorough name searches as well as professional advice in this area is highly advised. Cultural and religious implications must be very carefully considered.

Thus, I would recommend that you proceed with extreme caution and sensitivity. Great care must be taken in dealing with different religions, customs, dress codes, foods and alcohol issues. This can be frustrating, but the business world is getting smaller, and cultural issues can make or break your business. Have you properly factored international into your product or service?

Today’s article is presented by one of the founders of our Startup Professionals team, Ernst H. Gemassmer. He resides in Silicon Valley, California, and has long helped entrepreneurs there, as well as providing turn-around assistance as interim CEO and business coach for several companies. You can contact him directly at ernst@startupprofessionals.com.

Google Yourself to See How Other People See You

The measure of an entrepreneur used to be the number of real friends claimed, but times have changed. Now the measure is how many hits one has on a Google name search, factored by some formula, like the sum of all positive messages minus 100 for every negative message. If you don’t define yourself effectively, the Internet will do it for you in ways you never imagined.

That’s the reason every good parent should be coaching their child from birth to avoid posting all the naughty things on social networks that can come back to haunt them later. To illustrate the point, here is a true story posted by Seth Godin a while back:

“A friend advertised on Craigslist for a housekeeper.

Three interesting resumes came to the top. She googled each person's name.

The first search turned up a MySpace page. There was a picture of the applicant, drinking beer from a funnel. Under hobbies, the first entry was, "binge drinking."

The second search turned up a personal blog (a good one, actually). The most recent entry said something like, "I am applying for some menial jobs that are below me, and I'm annoyed by it. I'll certainly quit the minute I sell a few paintings."

And the third? There were only six matches, and the sixth was from the local police department, indicating that the applicant had been arrested for shoplifting two years earlier.

Three for three.

Google never forgets."

It doesn’t take much imagination to extend this example into your own business world, with potential customers and business associates checking you out. Can you imagine how many positives and how many years it will take to offset the impact of three negative posts entered by the entrepreneur herself in some spirited moments?

In reality, it’s not just the Internet that captures everything we do – just look around you at the cameras in public buildings, banks, and everyone’s cell phone. Remember the news with the videos of the latest celebrity exploits, or the cell phone photos that are snapped of every public and private activity and printed in magazines.

There’s still a bit of the “wild west” left in the Internet, especially as it relates to social networking sites, so keep your wits about you as you explore and act. Don’t be tempted into thinking that can safely relieve your tensions or aggressions in the anonymous massive numbers on Twitter, Facebook, or LinkedIn.

In case you think the number of friends is a meaningful measure, remember that social networking has also totally destroyed the meaning of the word “friend.” Teenagers have hundreds of friends on Facebook by the time they are sixteen, most of whom they have never met face-to-face, and other people collect thousands on LinkedIn. Many of the top Facebook users boast proudly of their “whale” status (5,000 friends or more).

I’m not here to argue whether it is right or not. Just recognize that it is what it is. So do your business networking and social networking with your eyes wide open. In fact, if you live your business and personal lives that way, you might actually hope that someone is looking over your shoulder, and catches you in a glowing moment. Be known for your strength. Then you can be happy that Google never forgets.

Marty Zwilling

Pivot Now is Less Painful Than Turnaround Later

By Ernst H. Gemassmer

Startups struggling for survival are not uncommon, due to economic changes, management problems, or product issues. If these challenges can’t be resolved by the existing team with “course corrections” or “pivots,” an investor will often bring in an experienced CEO to tackle the turnaround before or after bankruptcy.

This is a hard and painful process for everyone, but it’s usually better than the alternative of liquidating or losing the assets and antagonizing many customers. The issues are often similar, so I’ll relate a real case from my own experience to illustrate the process and the results.

In this case, a private equity firm engaged me to assist in the purchase of a German software supplier. Upon successful completion of the acquisition I was asked to initiate a major turnaround or business restructuring, since the current course had led to bankruptcy.

Here is a summary of the processes required, timeframes, and the results:

• Restructure management teams. This effort required two weeks of interviews with senior and middle managers to identify the team required to take the company forward. The challenge was to locate current staff with enough product/customer knowledge but with enough drive and desire and willingness to make the required changes.

  It was essential to move with deliberation and speed. Procrastination could only cause unnecessary additional anxiety. Clearly required was ‘leadership from the front’.

• Determine key customer satisfaction levels and requirements. The company had succeeded in selling its products to the leading German and international automotive companies and their suppliers. Customers interviewed were generally satisfied with the software products as well as customer service. However, they were confused by the company organization structure.

• Optimize staffing requirements. The first order of business, which soon became apparent, was a significant reduction in staffing. During its rapid growth the company had followed an unusual growth path by establishing a separate company with its own infrastructure and staffs in each German geographic region. Fully staffed entities were also established in a number of countries in both Western and Eastern Europe.

  In addition the company had started to sell its basic software to other industries as well. All this led to a staff level exceeding 700 employees, contributed to lack of control and eventual bankruptcy. The organization both within Germany and other countries was quickly streamlined, in line with customer feedback.

• Negotiate changes with the company union. The company had a worker’s council similar to a labor union in structure. German law dictated the need for a worker’s council based on the number of employees. Numerous meetings were held with individual members of the council as well as the entire council. Eventually several key members of the council understood the challenges facing the company and worked hard to convince their colleagues to agree to staff reductions. This task took about two months and required a lot of patience, soft pressure and persuasion.

Patience on part of the new management team ultimately led to a successful restructuring. When I returned to the US after many months, the company had been restructured, had come out of bankruptcy, and did not lose a single important customer.

The message for startups is to do course corrections or pivots often along the way, and you won’t have to endure a bankruptcy and turnaround to get back on track. An even better course is to seek and heed the advice of experienced advisors during the critical early phase of charting direction and growth of your startup.

Today’s article is presented by one of the founders of our Startup Professionals team, Ernst H. Gemassmer. He has long helped entrepreneurs in Silicon Valley, as well as providing turnaround assistance as interim CEO for several companies in Europe. You can contact him directly at ernst@startupprofessionals.com.

Women In Business Catch Up After The ‘Mancession’

It looks like women have caught up with men in numbers in the workplace. For the first time in history, women in the USA now outnumber men in the workforce, and there are now more women in supervisory positions than there are males. The question is whether they will handle the downside of working any better than men.

According to an article by Ella L. J. Edmondson Bell, PhD, titled The 21st Century Workplace -- Are Women the New Men?, the economic downturn has hit men harder. They held nearly 80 percent of jobs that have been lost during what is now being called the "mancession." Will women now inherit the stress, pressure, exhaustion, burn out and heart attacks commonly associated with male leaders in business?

Some predict that this new female-dominated workplace will mean a softening of the corporate culture, with more benevolent leaders. Others foresee just the opposite. Ella says many women don't want to be seen as "soft" -- and others simply aren't. No one would call Carly Fiorina, the head of Hewlett Packard from 1999 to 2005, a wilting lily. According to her memoir, Tough Choices, she was sometimes referred to as Chainsaw Carly.

All this is especially relevant on the entrepreneurial side, since statistics show that women are starting businesses at more than twice the rate of their male counterparts. Some would argue that the growing success rate of women entrepreneurs shows that they are resourceful, and better able to succeed, despite the odds.

While I’m sure we will continue to see progress on the female side, I predict that they will struggle with the same major challenges faced today by men. These include:

1. Funding your dream. Raising money is hard, whether you are counting on friends, investors, or banks. I rarely see women at angel investment groups, either asking for money, or offering to fund new ventures. Men seem more focused on this one.

2. Need for increased confidence and mindset skills. Many women and men are paralyzed by perfection, plagued by pessimism, and the need to satisfy others, rather than themselves. We need more women leaders.

3. Motivation to succeed. Every entrepreneur needs to love what they do, and believe so strongly in their product or service that they can weather the tough times. On this one, it’s easy to spot the ones with passion, from either gender.

4. Manage time and priorities. Women, often more than men, try to do too much. It’s hard to balance the continual demands of the business, personal relationships, and home life. Every entrepreneur needs to prioritize the important tasks ahead of urgent tasks.

5. Never stop learning. After you start your business, the learning really begins. True entrepreneurs look at failures as their best learning experiences. Networking, and using your network is the next most important element of learning.

I don’t see any challenges which are so gender specific that they can’t be overcome by any entrepreneur. Yet I don’t think women should be convinced that the battle for equality is almost over. There is still the question of why there are so few women in high places, and why the average income for women in business is about 68% of men’s income.

What I am hoping is that women will not just be the new men, and suffer from the same maladies and limitations. I’ll be looking for women to create the “new business culture” that every worker wants – better role definitions, more effective and productive leadership, and better work-life balance. That would make women entrepreneurs the new women, rather than the new men!

Marty Zwilling

Startups Need International, Without the Pitfalls

By Ernst Gemassmer

Fortune 500 companies such as IBM, Proctor and Gamble and others derive more than half of their revenues from international activities. We have heard that there are significant tax advantages in doing business offshore. All this sounds very enticing and many budding entrepreneurs can’t wait to fly to Paris or Shanghai to tap into the international markets. However, the startup CEO must evaluate a number of potential pitfalls, before jumping on the international bandwagon.

1. International requires patience. Relationships have to be built one-by-one in each country. Business contacts enjoy playing tour guide, having a meal together and getting to know you. So, do take time to get to know your partner and their country and its customs. Under no circumstances should you put your partner under pressure to sign a contract before your departure date. The partner should feel that you have all the time in the world to build and cement the relationship.

2. International requires capital. International travel is lengthy, exhausting and expensive. Local legal as well as accounting counsel is required in most countries. Hiring local staff requires establishment of a legal entity, which can be both expensive and time consuming. The hiring/firing process is lengthy, expensive and complex. Termination of a wrongly hired person can be a very expensive process.

3. The rules of the game are different in each country. These differences include: language, safety, currency, packaging requirements and numerous other considerations. Also, be aware of details pertaining to imports, such as duties and related paperwork, you may even be required to obtain import permits. If a country has currency problems, i.e. a shortage of foreign currency, you may succeed in obtaining an import license, but not the required foreign exchange cover. So, choose your target countries carefully.

4. Entering Europe is not a single effort. The classic mistake is to place an office in London and think that you have entered the EU (European Common Market). Although communication between the US headquarters and the London office may be good, proximity to local markets on the European continent are generally not achieved from London. Local presence in key markets is highly recommended, either through business partners of subsidiary/joint venture operations.

5. Manufacturing offshore could impact intellectual property. This comment applies especially to manufacturing in China. Even a trusted manufacturer generally employs numerous subcontractors and this can easily lead to unauthorized copying as well as loss of intellectual property rights, despite patent protection. However, the financial benefit may exceed the risk of losing partial patent protection.

6. Products must be adapted to local conditions and regulations. Documentation and software have to be translated into each local language. If you purchase a consumer electronic product in Europe, instructions come in numerous languages and tiny print. Electrical and safety requirements have to be met. Remember that even electrical plugs are different in most countries.

7. Carefully choose the head of international operations. Managing international operations includes several different functions, ranging from sales to a thorough understanding of finance, technology and legal. In addition the international manager must be a good communicator and diplomat both internally and externally.

The above points might discourage a new company from venturing into the international marketplace. However, my intent is to make the entrepreneur recognize and evaluate the challenges and the opportunities, before embarking into the global world.

As an emerging company, you will probably participate in one or more US trade shows. Frequently ‘international scouts’ will seek you out and promise to develop certain market places in exchange for exclusive business relationships. Do not, under any circumstances enter into exclusive relationships, as they can be difficult and expensive to sever later on. However, it is advisable to promise a potential partner a ‘head start’ in exchange for a volume commitment.

Good luck with your entry into the exciting, challenging as well as rewarding international marketplace.

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Today’s article is presented by one of the founders of our Startup Professionals team, Ernst H. Gemassmer. He has long helped entrepreneurs in Silicon Valley, as well as providing turnaround assistance as interim CEO for several companies in Europe. You can contact him directly at ernst@startupprofessionals.com.

Social Networks Don’t Automate Personal Contacts

By Ernst H. Gemassmer

We all intuitively believe in maintaining personal and business contacts, but most of us don’t do well in this area. It takes real time and hard work to maintain contacts. Social networking can help, but a large list of online friends and followers is no substitute for a smaller list of personal and ongoing business relationships.

As background, I attended several educational institutions both in the US and abroad. My professional life started with a BS in Chemistry, an MA in International Relations and a Master of Business Administration. This provided me with a good education and numerous important contacts around the world.

Over the years I also lived in different parts of the US and abroad, meeting all the usual challenges of raising kids, changing jobs, buying and selling houses and trying to stay fit. I was totally focused on family and jobs. This was often challenging since a significant amount of my time was spent on business trips around the world, participating actively in the emerging global economy.

Changing jobs as I moved up the corporate ladder generally involved a move to a new location with all the associated tasks and challenges. Old colleagues, neighbors and friends were soon forgotten and I made almost no effort to stay in touch. The new environment kept me so busy that I had a good excuse for not keeping up with them. The higher I climbed in a corporate hierarchy the less time I had, or claimed to have, for thinking about the past, or keeping in touch.

For expediency I started to use various consultants to investigate and address current issues and provide me with information to make critical business decisions. It was simpler and more expedient to use third parties, rather than relying on my personal contacts. Using so called experts and well known consulting firms provided a degree of legitimacy, which would have been harder to achieve with less well known personal contacts.

Eventually I retired and had an opportunity to think about how I treated my personal, academic and professional contacts. Now that I had spare time I started to re-engage with educational institutions, professional organizations, neighbors and old friends. However, I found out quickly that special groups had formed over the years, and I was not involved in their formation, development or growth. Thus, it became a real challenge to re-engage with them and took a lot more effort than I had anticipated.

Many of my younger friends use various social networks on a daily basis and think that they will thereby avoid this problem. Obviously they disseminate a lot of information through these networks. However, these ‘updates’ are in small snippets or photos and lack detailed information. They are also somewhat impersonal since they are directed at such a wide and relatively public audience.

In my personal opinion such networks are useful tools, but do not replace dedicated personal contacts. If I had to do it over again, I would dedicate a certain amount of time, all the time, to keeping up with the development and evolution of all of my contacts. Don’t let the technology fool you into thinking you can take shortcuts. Believe me, the personal touch still pays big dividends!

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Today’s article is presented by one of the founders of our Startup Professionals team, Ernst H. Gemassmer. He resides on the West Coast, and has long helped entrepreneurs there, as well as providing turn-around assistance as interim CEO, and International coaching. You can contact him directly at ernst@startupprofessionals.com.

Entrepreneurs Need to Find the Best ‘Curators’

Every entrepreneur is flooded with information from all directions, but despite their best efforts to absorb it, they likely miss the information really needed to start a business. These days, we all have to rely on a few trusted sources to digest and filter information, net out the relevant messages, and steer us with links to accurate details.

These trusted sources are a new breed of professionals who may soon carry the new title of “information curator,” evolved from the “museum curator” role, where a domain expert filters and communicates the important elements of a past civilization or technology. The evolution and the real value of curator are outlined in a great new book “Curation Nation,” by Steven Rosenbaum.

In the past century, curators for business information were specialized news magazines like Forbes and Inc., and books for entrepreneurs like “Think and Grow Rich.” But with the speed of the Internet, these have become as old-fashioned as museum curators.

Modern digital curators for early-stage entrepreneurs are the expert bloggers who put “content into context.” They write and tweet every day, with the single guiding credibility and personality that the new social culture demands. Here are a few that I aspire to:

1. Venture Hacks, by Babak Nivi and Naval Ravikant. These are both experienced entrepreneurs and angel investors. VentureHacks also created AngelList, a mailing list of prominent business angels that facilitates entrepreneur fundraising.

2. Both Sides of the Table, by Mark Suster. Mark is a serial entrepreneur who is now active in the venture capital community for early-stage startups. He definitely has experience on both sides of the ‘entrepreneur versus investor’ table.

3. Lessons Learned, by Eric Ries. He brings a strong technology base to the table, as a former CTO, and creator of the Lean Startup methodology. He is the co-author of several books including “The Black Art of Java Game Programming.”

4. OnStartups, by Dharmesh Shah. Dharmesh is the founder and CTO of HubSpot, as well as a blogger and speaker on the topic of startups and Internet marketing. He also co-authored the book "Inbound Marketing" about the power of social media and blogs.

Then there are the aggregator curators that bring together the best of the best from a wide variety of sources, without the single guiding light to make sure they are consistent and integrated. These are great for understanding the big picture, spotting trends, and product reviews.

1. TechCrunch, founder Michael Arrington. This popular site has an outstanding group of writers and contributors for profiling startups, reviewing new Internet products, and breaking tech news.

2. Business Insider, Silicon Alley Insider, founder Henry Blodget. The Business Insider aggregates, reports, and analyzes the top entrepreneur and startup stories and blogs daily from across the web, and delivers them in a very readable format.

3. Forbes.com, Entrepreneurs, executive editor Brett Nelson. An invitation-only group of writers and bloggers comment daily on current events, trends, and all aspects of the entrepreneur role in the entrepreneur section and expert blogs.

4. Huffington Post, Small Biz Blog, co-founder Arianna Huffington. Contrary to popular opinion, HuffPo is not just a place for political commentary. For many people, it also serves as a one-stop news source about small businesses and entrepreneurs.

If you are overwhelmed by the daily flood of content, and have realized that Google and the other search engines can’t achieve the filtering and required value judgments, then you need to look for an effective information curator like the ones outlined above. You may even decide that the more exciting opportunity is to be a curator yourself in our new curation nation.

Marty Zwilling