Set Your Online Reputation Before Someone Else Does

These days, your online Internet reputation is your reputation. Of course, having no reputation is usually better than a bad one, but don’t wait for someone else to establish a good one for you. It’s time for every business and business person to proactively create a positive presence, before someone else puts you in a defensive mode that is hard to win.

The first step in the process is to claim your online identity. This is simple in concept, but requires real effort and can be time consuming, and even expensive, if someone gets there before you and tries to sell you the rights to your preferred business or personal domain name. See my Forbes article on “Get A Domain Name Without Bankrupting Your Startup ”

Michael Fertik and David Thompson outline this issue and others in their book “Wild West 2.0.” After you claim your identity with placeholder domain names, accounts in social networks, and common blogging platforms, your next challenge is to create enough positive content as a “Google wall” to keep negative info out of the top Google search results.

Positive content, such as information and pictures on your accomplishments, achievements, and friends, paints you in a good light. Neutral content, including your membership in business associations, and company affiliations, can at best balance false negative information, or at least make the negatives harder to find.

Here are some of the easiest methods Fertik and I recommend for creating positive and neutral content:

• Blogging. There are several major free blogging platforms you can use to claim your identity, including WordPress, Google Blogger, and LiveJournal. If you add new content periodically, it is likely to become a secure and important part of your online resume, and it will come out at the top of any Google searches on your identity.

• Twittering. An even easier way of getting your positive messages to the top of Google rankings is “micro-blogging” through Twitter. This is especially useful in providing links to other positive and neutral content.

• Profile sites. There are several free and paid services, such as LinkedIn and Naymz, that allow you to manage your professional profile and measure your social reputation. Simply engaging in forum discussions and exchanging comments establishes positive content.

• Other user-created content sites. Sites like Pinterest, Instagram, and YouTube allow users to create and share photos and videos, and create short profiles. You can use these sites to your advantage by uploading relevant and positive content and prominently including your name in the subject or description.

• Professional directories. Many professions offer free online directories of members or similar sites for professional networking. These sites are often highly ranked in search engine results because they are heavily linked. If there is a directory relevant to your business or profession, use it.

If you have already been a victim of online reputation damage (accidentally or maliciously), proactively reach out to friends and co-workers to explain the problem. They can assist you by linking to positive and neutral content about you, thus displacing or minimizing the negative content.

In fact, damage to reputation and brand has moved up to #4 from #6 in the Top 10 risks identified in Aon's 2013 Global Risk Management Risk Ranking, moving ahead of business interruption and failure to innovate to meet customer needs in 2011. Survey results also suggest there is now an 80 percent chance of a company losing at least 20 percent of its value in any given five-year period due to reputational issues.

The Internet has been a powerful and disruptive technology. The good news is that you can use it to advantage. But you can’t ignore it, and pretend there is no danger. Just like in prior generations with the Wild West, people who put up a good offense to protect themselves were the ones who survived and prospered. Take heed, and take action.

Marty Zwilling

Founder’s Stock Is Gold, If You Know The Rules

In reality, so-called “Founder’s” shares are simply common stock, issued at the time of startup incorporation, for a very low price, and normally allocated to the multiple initial players commensurate with their investment or role. But that’s only the beginning of the story.

These shares are allocated and committed, but not really issued and owned (vested) until later. Typically, vesting in startups occurs monthly over 4 years, starting with the first 25% of such shares vesting only after the employee has remained with the company for at least 12 months (one year “cliff”). Vesting always stops when an employee leaves the company.

Even though the class is common stock, Founders can negotiate special vesting and other terms as part of their stock restriction agreement upon venture investment. Here are some typical special terms and considerations for Founder’s stock:

• Negligible real value. Since Founder’s shares are usually issued at the time the company is incorporated, they essentially have no real value. As the company builds value, shares allocated later for employees or partners will have an appropriate price.

• Vesting with no cliff. Most Founder vesting is not subject to the one year cliff because partners should already know and trust each other. Thus, most Founders will start vesting their shares from the date they actually started providing services to the company.

• Right of repurchase in favor of the company. This clause gives the Founder the first right of refusal to buy shares back from a partner who decides to leave early, or otherwise makes a troublemaker out of themselves. This right usually "lifts" over time, meaning that as time goes on, fewer shares are subject to this repurchase agreement.

• Accelerated vesting conditions. They might also have special terms in the case of termination or demotion that accelerate vesting. These have less to do with the type of stock and more to do with who the person is and how strategic they are to the organization.

• Stock dilution control. While most employees would see their vesting rest when the “Series A” round closes, a Founder might retain some percent of their shares. Everyone wants to minimize dilution of shares, so this special clause is common.

Unfortunately, Founders often make the mistake of waiting until they have received a strong indication of interest from an investor before they decide that it is time to incorporate. Forming a company so close in time to raising capital can create a significant tax issue.

For example, if Founders issue themselves stock for one cent per share when they form the company, and then within a short period of time outside investors jump in at $1 or more per share, it might appear in an IRS audit that the Founders issued themselves stock at significantly below the fair market value per share.

The difference in value between what the Founders paid and the fair market value of that stock based on actual sale to outside investors will be characterized as compensation income resulting in what could be significant tax liability to the Founders.

The way to avoid this risk by filing an “83(b) election” with the IRS within 30 days of the purchase of your Founder’s shares and paying your tax early on those shares. Failing to file the 83(b) election is common mistake of Founders that you should avoid.

There should be no tax concern for a Founder investing more of his own money any time in the process. All the tax concerns relate to "outside" investors coming in shortly after incorporation. Valuation has very little meaning until an outsider invests.

So my advice is to incorporate and allocate Founder’s stock as soon as you are starting real work on the company, but at least six months before you anticipate any outside investors. But don't incorporate too early, as investors will measure your growth and progress since the incorporation date. Several years of apparent inactivity since incorporation will make it look like there is a problem with you or with the company.

Of course I have to add my caveat that I’m not a lawyer, and these comments do not constitute a legal opinion. See a qualified business attorney if you anticipate multiple investors or a complex company structure. Don’t let a positive investor decision take the joy out of your future.

Marty Zwilling

How To Size Your Marketing Budget For Funding

It’s not uncommon for me to see a startup business plan “mission” to be the “premier brand” for their product, yet their marketing budget in the financials is trivial. This combination will almost certainly get your plan tossed by potential investors, who understand all too well the need and cost for marketing in today’s environment.

When questioned, founders usually mention word-of-mouth, viral marketing, and a top quality product. These founders need a reality check on what recognized brand names have spent to reach that threshold, and how long it is likely to take. Viral marketing costs real money these days, which usually means adding at least an extra zero to budget estimates.

Recognized brands like Facebook and Priceline.com each required over $50 million and several years to get to be premier brands. We know that existing big brands like Apple and Nike spend millions per year just to maintain their brand recognition. In fact, the average spent by Inc 500 companies for sales and marketing expense continues to hover around 10% of overall revenues.

My first recommendation then is to confine your “premier brand” comments to the long-term vision section of your business plan. Concentrate elsewhere on the near-term marketing activities (which are also expensive) for this round of funding. By the way, if the marketing section is missing or un-budgeted, you will also likely be “branded” as unfundable.

So what are some credible marketing and promotion steps you should consider for your startup? There are many more, but these should get you started:

1. Create a professional website and blog. With these, your business presence can look big and credible even when you are small. There are multiple low-cost website tools available, like Adobe Dreamweaver, which allow you to do your own work and save thousands of dollars, but a budget of $10,000 is a good starting point. A blog is critical, and essentially free (your cost is creating content).

2. Get exposure for your expertise. Use social media and Search Engine Marketing (SEM) to start. Create meaningful content and engage others online (free downloads, white papers, webinars, regular blogging). Put out regular press releases for search purposes and general visibility. Pitch your story to newspaper journalists, radio, and television news reporters who cover your local area or industry.

3. Do something unique to get customer attention. Promotions and free give-aways are all the rage these days. This step requires thought because you need to identify what can set you apart from your competitors and how to retain customers. Promotions that appeal to the wrong customers won’t help you.

4. Generate leads for your product. Gather leads online from your social media initiatives, mine your contacts, attend trade shows, and use lead-generation services. Here is an area where you need to be creative, and not just spend big money. For example, exhibiting at trade shows is very expensive, and usually not very productive. Figure out what is valuable to your audience.

5. Establish partners and referrals. Customers who enjoy doing business with you are more than happy to spread the word. Create referral marketing opportunities within your business community that maximize the potential for customer referrals. Find partners and channels which are complementary, and not directly competitive.

Good marketing often is the only thing that separates the successful startup from the not-so-successful startup. There is no doubt that marketing overall has become even more critical for startups over the past several years.

Despite the fact that social networking and other online processes are essentially free, good marketing still costs money. If your early-year budgets for marketing aren’t 10% of projected sales or more, plus an early kicker for setup, you are probably underestimating reality, and jeopardizing your credibility with investors.

Marty Zwilling

One Of These Days, You May Not Be An Entrepreneur

If I had a dollar for every time someone has said to me, “One of these days, I’m going to start my own company,” I’d be rich. If this day ever comes for all these people, we will be overrun by startups. Yet I don’t lose any sleep over either of these possibilities.

Most people procrastinate from time to time, but I suspect that the challenge here is somewhat deeper than that. So I did my own informal survey of business books, to gather the key reasons why most people never start the journey. If you recognize yourself in any of these categories, you may be more of a “wanna be” than a real entrepreneur:

1. You are a dreamer, not a do-er. Most people in this category actually prefer to think of themselves as “idea people,” rather than implementers. In my view, the dreaming part and the idea are the easy parts, and the hard part is building a workable plan and making it successful. A strong vision is required, but that’s different from the dream.

2. Unable to learn the new skills. This starts happening to people immediately after school, who think that academia is where skills are acquired. Actually, schools are only for learning how to learn. Specific expertise is self-learned from experience, not books. The ability to learn doesn’t decline with age, unless confidence and interest declines.

3. Unhealthy fear of failure. A wise man I once knew said “He who is never afraid, he’s a fool.” Successful people overcome their rational fears, and move on to get the job done. Others are debilitated by their fear, and never start. Expecting some failure, and learning to deal with it, is one of the most effective ways to learn. Investors know that all too well.

4. Hidden fear of success. Believe it or not, many people fear success, and stop short if they see it approaching. There is, in fact, plenty of evidence that it takes a strong person to manage their life after success – note the many failures after success in winning the lottery, or after topping the charts in their chosen profession.

5. You are a perfectionist, not a pragmatist. A new product or service will never be perfect in a rapidly changing world, so why start? At the other extreme, I know inventors that have been working on the same idea for thirty years, and have nothing to show for it. A proven path to success in business is to get something out, and iteratively improve it.

6. Not focused, or easily distracted. Successful entrepreneurs have a strong vision, and don’t let anyone or anything lead them astray. In business, this means you have to keep your priorities straight, and separate the important from the urgent. Learn to commit, focus, organize your work, and delegate when appropriate.

7. Always finding excuses. The first principle of entrepreneurship is that “the buck stops here” – you have to accept ultimate responsibility for whatever happens, good or bad, Excuses are artificial barriers for not starting something, or ways of convincing yourself that someone or something else is responsible for your failures. Neither is productive.

8. You are not a self-starter. If you need someone else to tell you when to develop your business plan and organize your time, then “one of these days” will probably never come for you. With the entrepreneurial lifestyle, it’s up to you to set the standards, be the model, and actively do the follow-through.

According to Psychology Today, some twenty percent of people identify themselves as chronic procrastinators. Among wishful entrepreneurs, I think the percentage is nearer to ninety. If that is your current state, it need not be a life sentence by default. Some of you will change your outlook and your behavior, one of these days. When will you get around to it?

Marty Zwilling

How To Decide If A Celebrity Can Help Your Venture

Most startups dream of attracting a celebrity endorsement, and assume that it will take their startup to the stars. Startups such as Chirpify have managed to flourish and raise millions with endorsements from folks like Lil Wayne and Snoop Lion. Others go the way of 12Society, an LA subscription commerce startup with six celebrity sponsors, but still couldn’t get any traction.

Startups using celebrities is such a hot topic these days that Gary Vaynerchuck, noted author and entrepreneur, has coined a new term “star-ups” for the phenomenon. New books are popping up on the subject of how and when to seek celebrity endorsements, including “Will Work for Shoes,” a popular one by Susan J. Ashbrook, who has courted celebrities for twenty years.

She helps you decide if celebrity endorsement is a viable and reasonable alternative for your business, and how do you go about selecting and approaching the right celebrity. Following is a summary of the challenges that Susan and other “experts” have outlined:

1. Finding a match between your offering and a celebrity. That means finding the perfect person for your brand. Their values need to match your brand image, including the perception of quality, educational value, as well as recognition by your target demographic. Be sure the celebrity really believes in your product.

   You should start with a service like Q Scores, which attempts to measure the appeal of various celebrities within your target market. If you are selling to young consumers, Miley Cyrus or Justin Bieber may be high on your list. For technology products, well-recognized investors such as John Doerr or Ron Conway are seen as celebrities.

2. Funding the relationship. Celebrity endorsements don’t come cheap. Does your marketing budget allow you to roll out the red carpet to meet celebrity lifestyles, including the investment in appearances, videos, and perks? Big fat advance checks and long-term royalties are often the norm.

   On the other hand, maybe you can emulate Priceline.com, whose official spokesperson, William Shatner, agreed to do the spots for free in exchange for stock in the company. The arrangement turned out to be quite profitable for Shatner, who has since made approximately $600 million from Priceline.com, despite the dot.com bust.

3. How to find and connect with the celebrity you want. As with all aspects of business relationships, funding, and partners, nothing beats a pre-existing relationship, or at least a warm introduction. Beyond that, the place to start is with publicists, agents, and other handlers. Major groups include CelebExperts, Baker/Winokur/Ryder, and 42West.

   One of the inside secrets of finding and meeting the right people is working with charities. Celebrities have a passion for giving, and they respect people and companies who share their passion.

4. Potential for celebrities funding you. More and more celebrities are jumping on the entrepreneurship wagon. For example, Ashton Kutcher not only has the most Twitter followers of any “entrepreneur” (16 million), but he has actively invested in several startups. He's poured $100 million into companies like Airbnb, Spotify and Foursquare.

5. Make the endorsement part of a bigger campaign. Building a brand and a successful company is a lot bigger than just getting a celebrity endorsement. The endorsement relies on a major marketing campaign to get the message out and setting the context for a successful delivery on the promises implied.

6. Prepare to handle endorsement success. Customers are a fickle bunch. You must be ready with the right array of retail partners, manufacturing, and distribution arrangements before the demand hits. Marketing momentum fades fast in the face of disgruntled potential customers and long waits in line.

Many entrepreneurs and investors assume that the fascination with celebrities is a passing fad, and not worth the effort. But the evidence is just the contrary. With the advent of the high-speed Internet for videos, real-time messaging via Twitter, and everything going mobile via smartphone, I don’t see things changing any time soon. The world now has an insatiable appetite for anything and everything celebrity. Take a hard look for your own startup.

Marty Zwilling