Monday, June 18, 2018

8 Secrets On New Venture Funding From The Shark Tank

secrets-from-shark-tankAs an advisor to entrepreneurs and active angel investor, I often get questions about the realism of the Shark Tank TV series, compared to professional investor negotiations. The simple answer is that with all the staging of TV lights and billionaire investors, it’s nothing like Silicon Valley. Yet the process is eerily realistic, and every entrepreneur can glean some important lessons.

Here are eight key points that I believe should be taken from the show by every startup founder looking for investors in real life, across the range of venture capitalists, angel investors, or even friends and family:

  1. You will be judged first as a person, then by your idea. If you’ve watched the show, I’m sure you remember entrepreneurs who appeared doomed by their presence, almost before they started. Others with the right confidence and personality were able to garner funding, despite a weak business plan. Investors invest in people, more than ideas.

  2. Grab investor attention in the first couple of minutes. Skip the background story and customer pitch, which every investor has heard all too often. Investors want to hear a quantified problem, a simple solution description, opportunity size, competition, traction, team qualifications, how much money you need, and what equity you are willing to give.

  3. Personalize your presentation, if possible, for every investor. Smart Shark Tank presenters have done their homework on each investor, and customize their sample product or anecdote for each. In a more general sense, find out as much as you can about every group and person you address, and tune your pitch ahead of time to match.

  4. There is no substitute for knowing your business. We have all seen the entrepreneur who believes that passion and emotion will overcome all investor objections and requests for answers. The most common failures on the show, and in real life, are people who don’t know their margins, cost of customer acquisition, channels, or other key data.

  5. Dress to impress and be credible to investors. A colorful costume may catch TV viewer attention, but may hurt your image and turn off investors. Remember that most business investors are from an era where sandals and frayed jeans were not associated with hard work and business success. Exceed the expectations of the investor.

  6. Keep calm, and never get defensive when questioned. Entrepreneurs who interrupt investor questions, or show a temper, will quickly lose investor respect, and likely lose the deal. Be sure to pose your counterpoints as clarifications rather than disagreements. Agree to evaluate investor views on subjective issues, rather than just dismissing them.

  7. The value of an investor goes far beyond cash. Many entrepreneurs feel that investor money is all green, and thus the same. On Shark Tank, you can easily see that some people need Lori and QVC, while others need Damon and his apparel connections. Investor knowledge and experience routinely have more value than the money.

  8. The initial outcome is the beginning, not the end. All handshakes in investor forums, or on the show, are subject to follow-on due diligence reviews. According to reports, the investors on Shark Tank close less than one-third of the deals as you see them on the show. On the other hand, many who don’t get an initial deal win later through good visibility and connections. Based on my experience, both of these are also true in real life.

Thus, while the forums and investors are different in the real world, there are many relevant lessons than an astute entrepreneur should take away from Shark Tank. So if you plan to face any forum of potential investors in the near term, position and practice your own pitch with advisors until you are ready to calmly face the bright lights. The last thing you want to hear from any of them is “I’m out!”.

Marty Zwilling

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Sunday, June 17, 2018

7 Questions To Focus Your Search For Venture Funding

Marcela Sapone, CEO & Co-Founder at Hello Alfred talks to DOL employees and outside attendees as they gathered in the Great Hall in the DOL Building fora panel on “Positive Choices in the Digital Sector: Building Good Jobs Principles into Emerging Platforms” "Future of Work."Too many entrepreneurs tell me they are looking for an investor, and can’t differentiate between venture capital (VC) investors versus accredited angel investors. They argue that the color of the money is the same from either source. They fail to realize that the considerations are quite different for each, which can make or break their investment efforts, and ultimately their startup.

Let’s consider some basic definitions. Accredited angel investors are non-professionals investing their own money, while venture capitalists are professionals who invest someone else’s money (usually from large institutions). The amounts from angels start as low as $25K, while minimum venture capital amounts usually start in the $2M range.

That doesn’t mean you should always go for the big bucks first. In fact, the reality is quite the opposite. Angels are more likely to fund new entrepreneurs, and early-stage or seed rounds, while VCs tend to focus on entrepreneurs with a successful track record, and later stage rounds. Of course, between these extremes is a large overlap of interest and potential.

More importantly, the focus on numbers tends to hide other more subjective issues that could be more important for any given startup. These considerations include the following:

  1. How much ownership and control are you willing to give up? VCs tend to demand more control of your spending and strategic decisions, with required board seats and lower valuations. Angels will likely agree to simpler term sheets, better valuations, and less restrictive terms on potential dilution, voting rights, exit options, and executive roles.

  2. How big is your startup opportunity? If your targeted business plan opportunity is not at least a billion dollars, most VCs won’t even be interested. Both angel and VC investors are looking for solutions that scale easily (product versus service businesses), and both expect revenue growth that can reach the $20M mark by year five.

  3. How large is the financial return you project? VCs will be looking for a 10X return on their investment in 3 to 5 years, or 30% annual IRR (Internal Rate of Return). That may sound high, but they know that up to 9 out of 10 startups fare poorly, so they are looking for one big win. Angel investors wish for the same return, but may accept a 5X deal.

  4. How many investment rounds will be needed? Angel investors are usually constrained to making a single investment per startup, but very few entrepreneurs make it to cash-flow positive on a single round. VCs tend to protect their initial investment, and they have the resources to make several multi-million-dollar rounds as required.

  5. How experienced is your team? First-time entrepreneurs rarely catch VC interest, unless they have one or more people on their team who have a track record of startup success, in the same business domain. Angel investors often have emotional motivation to give-back, and assume their own expertise and involvement will assure success.

  6. How good are your connections in the investor community? Sending unsolicited business pitches to every angel and VC investor you can find on the Internet is a waste of your time as well as theirs. You need a warm introduction for most VCs, to get their attention. For angel investors, you only need to do some local networking to get interest.

  7. How much help do you expect and need? Both VCs and angels can and will help you, but VCs are likely to be more “hands-on.” They tend to have partners focused on a given business area, with current insights, executive connections, and the ability to bring in new team members. If you are looking for money alone, angels are the better alternative.

If your startup can’t yet relate for any of these considerations, then your alternative is that popular first tier of investors, called friends, family, and fools (FFF). With these, you are on your own in negotiating amounts, valuations, and roles. These are people who believe in you personally, without evidence of previous startup experience, no current traction, and lack of valuation.

In all cases, investors tend to invest in people, more than the idea, or even the stage of execution. They are looking for a win-win deal, with entrepreneurs that demonstrate a positive chemistry and open communication. The color of any investor’s money may look the same, but it won’t help you if the price you pay is higher than the value it brings.

Marty Zwilling

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Saturday, June 16, 2018

6 Key Components For Success In Your New Business

failure-growth-businessThe best part of being an entrepreneur is having the independence to make your own decisions, the flexibility for a better work/life balance, and personal satisfaction from driving change. But nobody said it would be easy. The road to business success is filled with guidance on how to build and maintain the traction needed to survive and prosper. Of course, experiences and failures are the best challenges and frustrations that most aspiring entrepreneurs never even imagined.

In my role as advisor to many startups, I try to prepare them for the inevitable bumps in the road ahead, as well as to provide practical guidance on how to build and maintain the traction needed to survive and prosper. Of course, experiences and failures are the best teachers, but I find that learning from other people’s experiences is a much faster and less painful approach.

In his classic book on building a business, “Traction: Get a Grip on Your Business,” Gino Wickman, a similar experienced business consultant and developer of the Entrepreneurial Operating System (EOS), outlines five common frustrations that we both hear from entrepreneurs, as follows:

  • You are the boss, but you don’t have control. You don’t have enough control over your time, investors, the market, or your startup. Instead of controlling the business, the business is controlling you. By definition, the world of startups today is one of rapidly changing unknowns, where the inputs you receive will often conflict. It’s very frustrating.
  • All the constituents have their own agenda. You continually get frustrated with your team members, customers, vendors, and partners. They all have their own objectives and priorities, and don’t seem to listen, understand you, or follow through with their actions. You only expected that kind of a challenge from your competitors.
  • Persistent profit and cash flow shortages appear. Simply put, there’s frustratingly never enough profit or cash. Even when orders are clearly on the upswing, you need more funding to cover inventory and lagging accounts receivable. Then there are the expenses you never could have anticipated, driving down margins.
  • Constantly bumping your head on the growth ceiling. No matter what you do, you can’t seem to break through and get to the next level. Your growth has stopped, and you feel frustrated and unsure what to do next. You never have the time and resources for International expansion, acquisitions, venture capital investors, or going public.
  • Conventional strategies don’t seem to work for you. You have tried all the popular initiatives and quick-fix remedies, including social media, search engine optimization, and content marketing. None have worked for long, and as a result, your staff has become numb to new strategies. You are spinning your wheels, and need traction to move again.

My first answer to all these frustrations is to step back and focus on the basics. Every great business is made up of a core group of key components. Wickman outlines six of these in his book as the entrepreneurial operating system for success:

  1. Vision – Communicate a compelling image to everyone describing where the business is going, and how it’s going to get there.

  2. People – Surround yourself with great people. You can’t build a great company without help. It’s having the right people in the right seats.

  3. Data – Define a handful of key metrics to free you from managing personalities, egos, subjective issues, emotions, and intangibles.

  4. Issues – Constantly provide updates and direction on the challenges and obstacles that must be overcome to execute on your vision.

  5. Process – These describe your way of completing each key element of your business. Each must be documented clearly and refined regularly.

  6. Traction – Entrepreneurs gain traction by executing well, with focus, accountability, and discipline.

There is no magic here, and none of the six key components is rocket science. In my experience, entrepreneurs who are highly frustrated in their startup have overlooked or have dropped their attention to one of the six basic business components.

Learn from the frustrations of other entrepreneurs, or you are doomed to relive their pain. Put your entrepreneurial operating system in place, and you too can trade in your frustrations and join that select group who enjoy making their own decisions, achieve their work/life balance, and relish the personal satisfaction of their dreams.

Marty Zwilling

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Friday, June 15, 2018

8 Keys to New Venture Funding Success from the Crowd

crowdfunding-todayCrowdfunding has come a long way in the last decade with the Internet and many popular platforms, including IndieGoGo and Kickstarter. In fact, crowdfunding now rivals both venture capital and angel funding as the money source of choice for new entrepreneurs. As a small business advisor, I often recommend it as the best alternative for aspiring entrepreneurs.

But don’t be misled – it is no panacea or shortcut to funding success. According to statistics, more than two-thirds of crowdfunding campaigns do not meet their monetary goal and have to return anything they do collect. That’s not as high as the failure rate with professional investors, but it should convince entrepreneurs that even the crowd requires you to do your homework first.

Based on my experience, and input from the experts I know, here is a quick summary of the key strategies and practices that can be instrumental to your success in your crowdfunding efforts:

  1. Build a support community before launching a campaign. Successful crowdfunding requires anticipation and early momentum, which can best be built by social media, viral videos, and traditional marketing. If you see little traction from these efforts, it may be time to rework your idea before making a bad first impression with the crowd.

  2. Prepare with the same intensity as finding angels and VCs. There is no easy money for funding a business, so prepare with the same planning, prototyping, and dedication you would expect from someone taking your own money. You can’t build and run a crowdfunding campaign in your free time. Seek advice from peers who have succeeded.

  3. Avoid equity crowdfunding if you need multiple rounds. Crowd investors with little or no investing experience can be very high maintenance. Such a messy investor pool will make the company less attractive to subsequent professional investors. Experienced bankable entrepreneurs will find conventional raises have a lower "cost" of capital.

  4. Time your campaign around a prototype, not just an idea. People want to see that you have something before they commit real money. Anyone can come up with an idea, but few can execute. I recommend a polished minimum viable product (MVP), which you can demonstrate in a video, rather than asking people to visualize your solution.

  5. Calculate carefully how much funding you really need to ask for. Asking for too large an amount is the surest way turn people off, and asking for too little will only cause you to fail in delivery. Making something awesome always costs more than you expect, and starting a business is hard. You need just enough of a start to qualify for VC funding later.

  6. Move fast after crowdfunding to stay ahead of competitors. Be aware that potential competitors are monitoring crowdfunding campaigns for market interest and solutions. Your pricing, design and feature list, in addition to your exact launch timing is there for anyone to react to. Successful startups are always working one generation ahead.

  7. Crowdfunding success does not assure business success. Many successful campaigns, including iBackPack, Kreyos Smartwatch, and Ubuntu phone, have failed as a business due to inability to deliver, poor launches, or one of the many normal business challenges. Plan for and keep your focus on business success, not just funding success.

  8. Don’t expect crowdfunding traction for enterprise products. If your solution is aimed primarily at businesses (B2B) versus consumers (B2C), then I recommend more conventional fundraising. Regular people in the crowd are less likely to understand or care about more complex business systems, such as manufacturing or billing.

Thus, even though crowdfunding is here in a big way, and projected by Statistica to grow almost 30 percent annually to reach US$26 billion in 2022, I don’t see crowdfunding replacing or crowding out angels and VCs in the near future. There is just never enough money to feed the startup beast, and it’s always nice to have another a great alternative.

If you want your share, be sure to heed these reality checks, and don’t hesitate to get some advice and counsel from peers and advisors who have been there before you. Very few crowdfunding campaigns lead to the success of the Pebble Watch, or the Oculus Rift acquisition by Facebook for US$3 billion. But if you do the job right, you could still be the next one.

Marty Zwilling

*** First published on Inc.com on 06/01/2018 ***

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Wednesday, June 13, 2018

6 Ways To Start Marketing Before You Have A Product

concept-marketingSavvy entrepreneurs start testing their ideas on potential customers even before the concept is fully cooked. They have enough confidence in their ability to deliver that they don’t worry about someone stealing the idea to get there first, and they don’t forget to listen carefully to critical feedback. They become walking public relations machines for themselves, as well as their idea.

The alternative is to spend big money later on pivots, lost credibility with investors, and delays at rollout trying to build visibility and credibility. I’m not proposing that anyone promise things that they don’t intend to deliver, but it’s time that founders switch to start selling their product before they build it, rather than believing the old adage of “if we build it, they will come.”

I still hear too many excuses for not working early on the elevator pitch, like wanting to fly under the radar, don’t have the team together yet, or can’t afford an agency. In fact, you don’t need a third-party public relations agency at this stage. There is real value in doing the key things yourself, before your startup is even started:

  1. Demonstrate thought leadership before selling a product. Highlight the problem and your concerns in industry blogs, speaking in public forums, and making yourself visible on social media and networking opportunities. You want people to see you as an evangelist for hydrogen fuel, for example, so your later auto engine will have credibility by default.

  2. Craft and hone your elevator pitch early. Before the product is set in stone, you can test your message and continue to refine it until it connects well with investors, as well as customers. Later you may have the problem of being told by public relations firms to stay on message, even after you suspect it is not working.

  3. Visibly be a bit controversial to test the limits. This early in the game, any coverage and peer review is better than just being another unknown entrepreneur. It’s human nature that challenging the status quo gets more attention than quiet concurrence. People tend to forgive controversial views if you aren’t perceived as pushing a product.

  4. Proactively seek out thought leaders and journalists. Entrepreneurs who wait to be found are destined to spend a lot of time alone. Social media sites today, including Facebook, LinkedIn, and Twitter, provide ideal forums for presenting your cause and your concept. Start actively blogging on your own site, as well as on industry forums.

  5. Make your business cards stand out in the crowd. Everyone exchanges business cards, and most are forgotten immediately or never really seen. These days, images are especially important, as well as a tag line, and your social media links. Unique and professional business cards are still well worth the investment.

  6. Follow up personally on every new connection. Key introductions in a networking meeting will be quickly lost, unless you take the next step of calling or emailing later to request a personal meeting. Use these meetings to build the relationship, more by asking questions than by pitching your concept. Requests for investment come later.

Every entrepreneur has a story, perhaps the inspiration for your idea, or the path taken to get to this point, or a key lesson learned from past mistakes. Stories are the grist reporters look for, and they make you unique and memorable. Find your personal hook – it can be more key to your entrepreneurial success than any given product or service that you are about to offer.

If you are a social entrepreneur, a natural hook is the environmental or humanity cause that you espouse. Perhaps you can amplify your position by sponsoring an event, travelling to a visible location, or donating your time and other resources.

These days, winning in the crowded startup world is all about marketing. The sooner and more effectively you utilize all the available marketing channels, the more visibility and impact you will have later when your product or service arrives. As an entrepreneur, you are the most important part of your brand, not the other way around. Capitalize on yourself early.

Marty Zwilling

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Monday, June 11, 2018

8 Disciplines That Indicate A Business Versus A Hobby

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

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

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

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

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

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

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

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

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

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

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

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

Marty Zwilling

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Sunday, June 10, 2018

8 Key Learning Insights To Thrive In A Changing World

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

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

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

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

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

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

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

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

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

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

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

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

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

Marty Zwilling

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Saturday, June 9, 2018

7 Key Follow-up Steps To Take Your Idea To A Business

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

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

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

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

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

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

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

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

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

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

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

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

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

Marty Zwilling

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Friday, June 8, 2018

7 ‘Best Practices’ Have To Change For Survival Today

IBM-Quantum-ComputingMost companies today claim they are embarked on a transformation to ensure their long-term survival in this era of disruption and rapid change. But in their day-to-day practices, many of their leaders and employees blindly follow the same practices they always have. The results include a rising tide of fading stalwarts, including Sears, Toys R Us, Borders, and Men’s Wearhouse,

Based on my own experience at IBM during the personal computer revolution, I learned first-hand that transformations are a tough challenge. I was impressed to see the issues outlined well in a new book, “Detonate,” by Geoff Tuff and Steven Goldbach, based on their own executive roles with Deloitte Consulting, working with many top clients, and struggling with the same challenges.

I like their summary of the “best practices” that don’t work during today’s disruptive change, and their practical and empowering advice on how to free organizations from old-school practices. With these tips, you can reinvigorate your own and your company’s long-term health with next generation thinking:

  1. Revenue should not be the key thing you worry about. When established companies think of growth, it’s always some function of looking at past revenue, comparing it to “expert forecasts” of projected industry growth, and thinking of how they will increase their revenue share. That is extrapolated to capital requirements, staffing, and profits.

  2. This approach doesn’t work when you need to penetrate new markets to compete. When we at IBM felt the need for PC technology to thrive many years ago, personal computer revenue projections were low to non-existent. Technology and thought leadership are harder to quantify and sell to management, yet are really critical to long-term survival.

  3. A strategic planning cycle is largely a waste of time. Every year on a fixed schedule, most companies task a small group of people to go off-site, juggle financial data, and come back with a strategic plan. Unfortunately, market disruptions don’t happen on schedule. Planning and budget horizons should center on the timing necessary to change customer and employee behavior to achieve new goals in the marketplace.

  4. Syndicating past data alone creates no advantage. The challenge is to look ahead, where there is no data, as well as behind. All your competitors are looking at the same past data, so you need your own proactive market experiments, proprietary trend analysis, and organizational transformations to stay ahead of the crowd and prosper.

  5. Don’t just wait for customers to tell you their needs. Customer inputs are good predictors for incremental needs, but most customers can’t predict transformational events. They may only recognize a good thing when they see it, so they need your experiments, your thought leadership, and your incentives to see new opportunities.

  6. Discard one-size-fits-all risk management systems. Successful companies with proven business models typically use an inflexible risk management process, for incremental changes as well as disruptive technologies. In today’s environment, small step execution and testing are the key, with incremental risk analysis between steps.

  7. Celebrating failure without analyzing the cost is an excuse. Large companies, or even small ones with too much funding, tend to allow a pivot to expand too long before calling it a failed experiment, and celebrating the learning. That’s why small startups have such an advantage when it comes to innovations.

  8. PepsiCo went far overboard in time and money back in 1992 to enter the “new-age beverages” market with its clear, caffeine-free Crystal Pepsi. Webvan spent $800 million expanding before they realized that some cities didn’t have the critical mass to support profitable home grocery delivery.

  9. Embrace impermanence in org charts and team members. Every organization needs to bring a beginner’s mind to the scene on a regular basis. People need new challenges, and organizations need wholesale restructuring to deal with disruptive change. Current organizational design should never be the cause of your actions, or lack of action.

Even with all our team efforts to rethink these debunked best practices, IBM never fully adapted to the personal computer hardware market, and abandoned it after a few years. Yet IBM did learn the emerging value of services and solutions from their personal computer experiments, and have since totally refocused in the services direction for a dramatic business recovery.

It’s probably past time to start a conversation in your organization about some best practices that aren’t working anymore. If you hear answers that sound like “this is the way we’ve always done it,” then it’s time to start blowing up things before your company and your job are on the fuse.

Marty Zwilling

*** First published on Inc.com on 05/25/2018 ***

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Wednesday, June 6, 2018

7 Force Multipliers Accelerate Your Business Growth

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

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

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

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

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

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

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

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

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

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

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

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

Marty Zwilling

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Monday, June 4, 2018

7 Best Practices For Winning In Today’s Sharing Model

sharing-economy-best-practicesAs dialogs with peers become easier and more trusted via smartphones and the Internet, people are more willing to share their assets with others, and capitalize on the potential for a quick return for very little effort. This new sharing economy is rapidly becoming the new “online shopping” model, with major winners already including Airbnb (rooms), Uber (rides), and SnapGoods (stuff).

Experts are calling this the “we” economy, instead of “me.” It seems like a simple movement, but like any change in business, there are some new best practices that you need to learn, to make it work for you. Here are tips to keep your business from landing on the failure heap, like Carpooling.com (long-distance ridesharing), Beepi (used cars), and Homejoy (home services):

  1. Provide relationship building opportunities for your customers. Customers today expect two-way relationships with the companies they choose, rather than transactions. To facilitate this, your team must use and embrace available interactive communication modes, including social media, blogging, web site forums, and special events.
  2. For example, on Instagram, Airbnb encourages users to use the hashtag #Airbnb in order to be featured on the company website. If the company likes your picture, it creates a post showing how, in this scenario, city dwellers easily belong to the swimming enthusiast community.

  3. Deliver personalized solutions and memorable experiences. The new demographic wants to provide input, and wants to be treated as one-of-a-kind in their solution, delivery, and service. The days of mass production and commodity pricing as an asset are gone. Being good in business now needs to feel like an art, with creativity and innovation.

  4. Build your market by focusing locally before globally. Narrowing your initial focus actually builds exclusivity and allows you to charge a premium because you are “the expert.” Start with a niche that you know especially well, and build a reputation of being the best. This will give you the credibility to expand to other niches and grow the market.

  5. Uber and Lyft recognized that local regulations are different from region to region, so they launched market by market in order foster loyalty from their customers, maintain quality of the service, and comply with the region's laws.

  6. Develop a culture of innovation and creativity in your team. This requires leadership from the top on purpose and shared goals, and being the model for actively listening to customers and incenting change. Team members need to be taught to think like innovators, and see a reward system that fosters change, rather than punishing failures.

  7. Let people be pulled to you, rather than pushed by marketing. Both customers and employees expect to see value beyond a product or service, especially for social and environmental good, as leading the way forward. The result is an enhanced loyalty, both inside and outside your company, which is a strong component of momentum and profit.

  8. This works especially well for services. In my own blog and speaking engagements, I talk about generic requirements to attract investors, but never mention that I offer a service to assist. Entrepreneurs are incented to followup with me for more specific fee offerings.

  9. Communicate with stories and engaged customer advocates. Personal stories and testimonials are the best way to draw in customers and grow your business. Stories always trump marketing content for improving recollection and understanding. They help people remember in a way that numbers and text on a slide with a bar graph won’t.

  10. Provide value to the community, as well as customers. If you provide real value and give-back to the global community and employees, thus generating trust and loyalty, you will appeal to more customers. The result is the desired win-win situation, with more profits for your business, more satisfied customers, and happy employees at all levels.

  11. For example, Citi Bike is building themselves a great business by providing bicycles everywhere for sharing, but also is enhancing tourism and providing native New Yorkers with a fun and affordable new way to get around town.

The world of commerce has been forever altered by the growth of the world-wide Internet and pervasive mobile telecommunications. The customer and business universes are now globally and intimately connected. This means that all customers see relationships, culture, sharing, and social needs as part of their own world, and expect these to be part of every business focus.

Thus, as the new sharing economy challengers continue to evolve their new business models, the traditional incumbents will be smart to adapt, or forced out of the marketplace. It’s time to take a reading on where your business is in this spectrum. Are your company practices consistent with the ones outlined here, or are you still operating on yesterday’s model?

Marty Zwilling

*** First published on Inc.com on 05/22/2018 ***

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Sunday, June 3, 2018

8 Keys To Recharging Passion And Purpose In Business

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

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

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

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

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

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

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

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

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

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

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

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

Marty Zwilling

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Saturday, June 2, 2018

8 Rungs On The Accountability Ladder Drive Leadership

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

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

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

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

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

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

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

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

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

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

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

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

Marty Zwilling

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Friday, June 1, 2018

Don’t Let Outdated Innovation Myths Limit Your Career

business-innovation-mythsEveryone knows that starting a new business, or even keeping an old one competitive, requires innovation. But in my role as a mentor to many aspiring entrepreneurs, I find many who never start because they assume that they don’t have what it takes to be innovative. Chances are, they have accepted one of the common myths that keep innovation outside their range of thinking.

I’m convinced that every one of us has innovative insights from time to time, but an entrepreneur is one who acts on these thoughts now, rather than just dismissing them or waiting for more validation. For example, I have a friend who had a couple of long-standing very innovative ideas, which could have been patented, only to find that someone else recently beat him to the punch.

So, the next time you are about to dismiss an innovative idea, check this list of myths (or excuses), before you let a potential opportunity of a lifetime slip through your fingers. Time is of the essence, since innovations today are “old news” tomorrow. Here is my prioritized list of innovation myths that stand in the way of too many business professionals:

  1. Innovators are born with special DNA, which can’t be activated later. Even the best work from Harvard on this subject concludes that innovation is only about 30 percent individual genes and 70 percent learnable and driven by motivation. They suggest that everyone focus on associating, questioning, observing, networking, and experimenting.

  2. Innovation is like art and music – it can’t be planned and managed. More recent research confirms that innovation is a discipline, and it can be maximized, measured, and managed through formal processes. The well-known management consultant Peter Drucker was the first to outline the key areas for focus, inside and outside the business.

  3. Within your company, look for unexpected occurrences, incongruities, process needs, or changes in an industry or market. Outside the company, look for demographic changes, changes in perception, and new knowledge.

  4. Innovations are sparked by outside-the-box thinking activity. There are some techniques for training a team or yourself to think outside-the-box, and this process does result in some innovations, but others are simply the result of trying to do your job better, or having a bad experience. Many other innovations are just the result of lucky accidents.

  5. True Innovations require creativity and right-brain thinking. Innovation and creativity are two different things. Creativity is more about ideas, while innovation is all about implementation. If your strength is in being logical and organized (left-brain), that talent may actually give you an advantage in the real world of business, delivering innovations.

  6. The way to leverage creativity into innovation is by pairing your creative people with left-brain implementers who will make change happen.

  7. Real innovation requires new technology from experts. Experts may create technology, but regular people apply it to customer needs, For example, Jeff Bezos of Amazon energized online commerce with his early one-click patent, which had some technology behind it, but was basically a simple red button to complete and ship an order.

  8. Large organizations and stable processes stifle innovations. It’s true that startups may be quicker to seek out and adopt innovations, but there are clearly some problems that can only be solved by companies with highly specialized resources. Indeed, there are large companies, including Toyota with Kaizen, that have built cultures of innovation.

  9. Of course, individual technical entrepreneurs often have the specialized talents, as well as the motivation to tackle these innovations, creating an ideal opportunity for a win-win relationship through funding or acquisition.

  10. Companies need a culture of change before innovations can emerge. In reality, innovations come from people, not culture. Keep your culture customer-focused to recognize opportunities for innovation. When people change, due to new leadership, new motivation, or business changes, innovations occur, rather than the other way around.

  11. Innovations need to be validated and perfected before market exposure. In fact, the only way to test the value of an innovation is to take it to market. Of course, it pays to start with a minimum viable product (MVP), and assume some pivots will be required. In these days of rapid market change, extensive pre-market testing is not recommended.

There are many more myths that inhibit innovative ideas in new businesses, as well as old. But without the reality of execution, innovative ideas really have no value. Customers are interested in solutions, and investors want to see traction and results. Your real challenge as a business professional or an aspiring entrepreneur is to move from idea to action quickly.

The market and your competitors never stand still, so every moment you don’t execute on an innovation, you are losing ground, or losing an opportunity. Don’t let a few outdated and unproven innovation myths stop your career or prevent you from achieving the lasting legacy that you always dreamed about.

Marty Zwilling

*** First published on Inc.com on 05/17/2018 ***

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