Friday, December 23, 2011
Thursday, December 22, 2011
This is not an article about funding your startup using such risky capital as a lottery ticket. However, there are lessons one can learn about winning the lottery. The lottery is nothing more than legal state sponsored gambling. Many of the states have them and the people that buy the tickets want their chance to strike it rich. Well most entrepreneurs want the same thing with their startup.
There are schemes that suggest how to buy tickets and most of them are nonsense. A few people however, have managed to use science and statistics to determine ways to increase their chances of winning. They determine in advance how many numbers they must purchase in order to increase their odds of winning. Then they organize teams to purchase the required number of tickets. You may have seen the news reports on these schemes because the group wins. Well in your startup, you organize the team and focus them on the projects and timings needed to win. If you are good, you also work to have the odds of success in your favor.
Like the lottery, your startup is risky and you may not make any money. You may also lose your total investment. The odds of your having a big hit are not in your favor, but you can increase your chances by planning. That is one of the most important parts of organizing your startup; i.e. putting the odds of success in your favor.
To this point the message is:
1. Entrepreneurs want to make it big
2. They need to organize the business & team carefully
3. The can increase the odds by good planning
4. They can lose their investment. Startups are not risk free!
There is a final point. The following story will help describe it:
“An old man was down on his luck and really needed help. For 10 years, he made the same prayer each day:
I need help. I am down on my luck and nearly broke. I cannot support my family. My home is going into foreclosure. The family needs food. My children need money for school. I feel like such a bad father. PLEASE LET ME WIN THE LOTTERY.
Finally, in desperation he said the same prayer for one last time. He was ready to give up. He was certain his prayer was not being heard. So he ADDED:
I have asked for these things each day for 10 years. I do not know what else to do. I thought you would grant my prayer requests. What am I doing wrong?
It was at this point that a voice answered “YOU HAVE TO BUY A TICKET”
Maybe you can guess what the last key point is. There may be risk and a need for planning, but if you do not start the company, you have lowered your odds to ZERO. You may not lose, but neither can you WIN.
So if you are an entrepreneur, BUY A TICKET = START A COMPANY. Plan well and increase your chances for winning.
Tuesday, December 20, 2011
As stated before, your startup will have little or no money for the first several months. The most important activities you can do in this time are to create as much value to make the company fundable. “Chicken or Egg” is the best analogy one can provide to the situation you will face.
It is possible to find help along the way from people that are former executives and have an ability to take a risk. These highly experienced people are some of the best employees you may ever have because they may work for equity, provide the much needed skill sets, and they serve as mentors for your startup.
You may be able to get some initial funds from Friends, Family, & Fools. These are the ones most likely to invest because they know you, they just do not know any better, or both. Government or not-for-profits agencies have granting processes, loan programs, research contracts, or other services. These are dependent on the field of your technology and the state your company is to reside in. Many companies are able to advance to prototype stage based on some combination of these funding sources.
At some point, you will reach the need to obtain some greater sums of funding. The funds come from a wide range of sources like VCs, Funds, Super Angels, Partners, and other business relationships. Most likely, you do not know these people and the game is a bit like the old TV show “Dialing for Dollars.”
One great way to get non-dilutive financing is by partnering a product you may not wish to develop or sell yourself. Identifying a company that may be interested can be via business associates, board members, advisors, or cold calls. Reaching out to them requires having a sales pitch that is product specific and demonstrates the value of the product in general and to the possible partner. If they are interested, the negotiations start and hopefully end with them paying money for purchase or license of rights to the technology. These deals can take many forms. Having a business advisor and a great corporate counsel is important to the final deals structure.
Finding investors can come from cold calls. Most often, it is better to get an introduction from someone that knows the fund. This can be your counsel, accountant, a friend, an advisor, or someone affiliated with the company for example. Most funding groups see large numbers of deals each year. When they do not know you, it makes it easy for them to ignore you and spend their time with a company introduced by a friend or contact. One local VC indicated they review more than 600 deals per year and invest in around 6. The VC said they typically only review those that came via introductions from friends. They just could not handle all the others.
Maybe you can see why networking is so important. Finding a way to advance your company takes all the resources you can muster. This not only includes your energy, money, but your friends and associates. Your network includes your extended sphere of contacts plus the people they know. Any one of them may be the key to your getting an invite to show your company to a funding group or prospective partner. You will always be “Dialing for Dollars!” If you network well, you may be able to call fewer people before being invited for a visit or even getting the FUNDING.
Thursday, December 15, 2011
Simon and Garfunkel produced a song with the lyrics starting “Slow down, you move too fast. You got to make the morning last.” You might not think this relates to a startup, but in some cases, it does. It is important to execute in as an expedient manner in your startup. You have limited resources and potential competition breathing down your neck. After all, first to market may have a significant advantage especially if you have a superior product.
Entrepreneurs sometimes forget that they have limited time and out of concerns or fear go after more than they can handle. Everyone likes to think they can multitask, but not everyone is able to juggle as many balls as the next person. Maybe, they even have a hard time juggling at all and they do not realize it.
Part of juggling is knowing where all the balls are at all times and developing the timing and coordination to manage the process. This is the same for managing multiple projects. Startups may have several key events that need to be managed simultaneously: 1) find money, 2) build a product, 3) find partners, 4) set up overseas operations, and 5) manage a product launch. The team you build will be working on each of these tasks, but as the CEO you really need to be on top of the activities and know the timings, milestones, and issues. As first time CEO, you may even feel the pressure to try and do all of them yourself.
When you are not on top of the activities, there is too much chance for making mistakes. It is harder to monitor activities when you do not take time to develop a means of tracking them. For example, a project software, a spread sheet, a written series of notes, sticky papers on your mirror, or something else. Handling too many things at once with no means of remembering what needs to be done results in forgetting key events or generating confusion in the company. The more you try to do yourself the harder it is to remember what needs to be done especially when you do not develop a system to help remember.
· Develop a routine of meeting with your team and develop/idenfity timings and milestones
· Put timings and milestones in some format that allows you to track them
· Have timings and milestones available at all times and review regularly
· Split your personal activities with the team and help prioritize the events
· As the CEO you are the Money Person & Overall Manager. You cannot nor should you attempt to do it all!
· Review activities from time to time and narrow activities to a sharp focus to achieve the key milestones in a timely manner. You cannot do everything at once. You may not be able to do everything that is on your to do list. FOCUS on WHAT is IMPORTANT
· Remember the Simon & Garfunkel song lyric: “Slow down, you move too fast.” It is important to be expedient, but when you move too fast and miss things, you cost the company time and money.
Tuesday, December 13, 2011
Everyone has a sphere of influence. This may start with immediate family, close friends, then school or work place associates. Those contacts have contacts too, stemming from very close to distant contacts. If you are on LinkedIn, you will often see a connection list showing that via your 3rd level contacts, there are limitless people you have influence over. In reality, the level of influence you have occurs with you first, then with your closest and immediate sphere of friends and family.
It is easy to complain: for example about the bad economy, limited jobs, bad food, and/or whatever bugs you today. Your ability to change your environment rarely comes from complaining but from actions taken to solve a problem. The complaints most originate because you are unable to take direct action to solve the issues. If it were, you would have fixed the problem and moved on.
Complaints are fine, but solving problems is better. No one likes hearing the complaints nor do they like problem situations. You always have an ability to contribute to the solution of problems, but the level of contribution may be limited.
Keep in mind that you have a sphere of influence of your closest contacts. Those are the ones most likely to listen to your problems and get involved in creating a solution. It is not possible to change the way government functions all at once. You can get all your friends to rally behind a new candidate. By having multilevel support via distal contacts, you influence an election. This is part of the basis of campaigns. Changing government one politician at a time becomes a task utilizing extended contacts.
You may dislike your boss. Guess what, the person is still your boss. You can quit or find a way to work with the person. Your boss has influence over your future career and finding a way to work with the person will help your future prospects. You have influence even in those that you do not like. It comes down to how you use that influence to change your situation.
You have little chance of changing things outside of your immediate sphere of influence. This is why EXPANDNG THE SPHERE has great value to you over time. The extended influence you build can help find solutions to current issues in your startup or personal life. Hopefully, you have read the articles in this blog on networking that lay out why it is so essential. Networking is a great way to enhance your sphere of influence.
You cannot change the world all at once. You can change a little bit around you by using your influence. Close friends and family are often more than willing to help if you just ask. This may be from getting advice, speaking to someone on your behalf, or finding you funds for your NewCo. The more people in your current sphere the more your reach. You will become stronger and greater with ability to take on greater challenges because your influential control has expanded.
In short: Quit Complaining and Expand your influence by making new friends. Get them into your inner circle and help each other. Take control of your surroundings and make your life and company better. Rather than complain, find a way to solve a problem.
Monday, December 12, 2011
I have written about the fact that bad things happen for all kinds of reasons. In fact, this is a common theme in personal endeavors and startups. You cannot control everything around you especially your own Stupidity. It is easy to get help doing dumb things it can be a joint effort. It is what you do to resolve the situation that can make or break success of your startup.
Just the other day I had some help getting in trouble. A decision made to relocate some furniture in the house lead to my agreement to do this. It does not matter that is really was not my decision in the first place nor that I had moved the furniture out of the house a month ago because it was old. I took on the task and as in any business endeavor; I generated a “Quick Well Thought-out Step Wise Plan.”
· First I asked if a neighbor was around to help, but the answer was no
· Next, I reviewed the path from the location of the furniture to the new location
· I determined if I could lift the item alone
· Mapped the shortest path which included taking the item up steps
· Got help opening the door and clearing the path to the room
· Then proceeded to lift and move the item myself
Well this plan had one major flaw and I missed it. I assumed I could lift the item one-step at a time on the way up. After all, I did lift it one-step at a time on the way down to where it was stored. I forgot that I used a narrower entryway with fewer steps that had a way I could brace myself as I negotiated the stairs. You got it! I dropped the table, which broke falling half the length of the stairs; yep, me too. I fell on the concrete and rolled. Luckily, I was not hurt too badly; except for my EGO and it may never be the same!
After I recovered, I reviewed the situation. The Table looked ruined. I picked up the pieces to move them to the trash. Immediately, I realized the top was not damaged it had just come off. The table was now in two pieces and easier to move. I saw that the top could be re-attached so I moved the items separately and reassembled them in the new location. The maars and scratches I was able to touch up via some supplies I found at the hardware store.
I could have gotten angry because I hate to move furniture. I could have been upset because no one could help move the furniture. I could have blamed a number of people for different reasons. However, I made the mistake of moving the item alone.
I could have thrown in the towel and said forget it I am too hurt. I could have gone out and bought new furniture. What I did do was assess the real problem related to my approach and got over it. I then figured a way to get the job done.
Remember the title of an earlier article I wrote. “Get Over It and Move On!” This is a real life example. Remember my discussions on importance of project planning or on using your TEAM. I ignored all of that.
You will have major problems in your startup. I dealt with turn-around of small companies for more than 14 years and there are many types of problems. How the companies get into trouble is a learning exercise, not the final product. The goal has to be fixing the situation and getting back on track to deliver the final product.
I saw a movie a long time ago where one of the actors said, “Fix the Problem, Not the Blame.” In doing so, the staff does not become afraid and are more likely to become part of the solution; “everyone wins.” The table story shows that problems happen even when you think you have a plan. The product was what was intended, the route just became different. The resolution came by not giving up and recognizing a lucky break; i.e. furniture in the right place. I felt stupid, but no one else needed to make to feel bad because of big mistake.
When you find problems, and you will, “Fix the Problem, Not the Blame.”
Friday, December 9, 2011
Starting a company is tough enough without having your personality get in the way. Interactions and first impressions are essential. “You never get a chance to make a first impression.”
A recent discussion with a company prior to a presentation to a VC highlighted this issue, as did the joke presented later. The company scheduled a first meeting and management considered it as an informal discussion. The amount of time for the presentation was 30 min. It may be informal, but this is the first time the management will see the VC. Why take a chance on having the investor remember them as anything less than a stellar investment opportunity? They should prepare to make their same high quality presentation.
When having partnering meetings, the same thing applies. Always have your prospective partners leave wanting to interact with you, not wondering what value you bring to the table. First meetings are always important. This goes for all meetings. The joke below highlights this in a different way:
One day a florist went to a barber for a haircut.
After the cut, he asked about his bill, and the barber replied, 'I cannot accept money from you , I'm doing community service this week.' The florist was pleased and left the shop.
When the barber went to open his shop the next morning, there was a 'thank you' card and a dozen roses waiting for him at his door.
Later, a cop comes in for a haircut, and when he tries to pay his bill, the barber again replied, 'I cannot accept money from you , I'm doing community service this week.' The cop was happy and left the shop.
The next morning when the barber went to open up, there was a 'thank you' card and a dozen donuts waiting for him at his door.
Then a Congressman came in for a haircut, and when he went to pay his bill, the barber again replied, 'I cannot accept money from you. I'm doing community service this week.' The Congressman was very happy and left the shop.
The next morning, when the barber went to open up, there were a dozen Congressmen lined up waiting for a free haircut.
And that, my friends, illustrates the fundamental difference between the citizens of our country and the politicians who run it.
BOTH POLITICIANS AND DIAPERS NEED TO BE CHANGED OFTEN AND FOR THE SAME REASON!”
This story says that some people come with a hand full of “Give Me”, while others are willing to share the wealth. When it comes to the final analysis, how do you want your first impression to be?
Thursday, December 8, 2011
Have you ever made a mistake? If your answer is no, maybe you are not human. Everyone has made mistakes and that they range in degrees of complexity. Mistakes occur even when following the best advice from the best people. What is important to startups is that you recognize the mistakes and quickly recover and get back on track.
One of the impediments to getting back on track is EGO! You feel ashamed, stupid, like it was not your fault, or any of a variety of other feelings. These feelings can impede on your ability to review the situation and determine how to fix the newly created issues. The longer you wait to repair the damage, the more likely the degree of damage will get worse.
Fixes can be extremely difficult and costly but failing to fix the problems may be more costly. Just a simple example is getting a flat tire after driving over a board with a nail. You were not attentive and could have missed the hazard. Failing to stop quickly and safely can enhance the damage. Driving on a flat can result in increased damage to the rims and poor control of the car.
What should you do when you learn of a big or small mistake in your startup? Here are a few ideas:
· Get over the feelings associated with the event; i.e. anger, frustration, fear, etc.
· Quickly analyze the problems that have been created
· Determine where you are and where you need to be
· Review the issues with your team and/or advisors
· Chart a path to the new target that resolves the problems the best you can
· Then: Execute, Execute, Execute
You may notice that the suggestions are similar to what you would do on any new project. The biggest difference is getting over all the emotions than can inhibit you from fixing the problems and moving forward. In short: “Get Over It, and Move On!”
Monday, December 5, 2011
In a recent meeting, I asked company founders if they would take $10MM for their technology and just walk away. The question was a bit of a trick question. Any answer provided would be revealing valuable information about the team. My intentions were to see if the founders thought of the company as a life style company; i.e. a place to do the kind of work they wanted but not to make money for investors. In addition, any responses would show level of team commitment and possibly founders thoughts on company valuation.
The team indicated they were not interested in selling at the $10MM level suggesting that they were committed to the technology and believed they could turn the business into a strong enterprise. This part is good. The bad part comes when one factors in the following parameters: 1) no investment has been made by the founders, 2) it will take several million dollars and 3-5 years to get the product to market, and 3) no risk has been drained from the company.
This is not a trivial issue. The founders are firmly behind their technology and believe the company can become successful. In today’s financial market the issue of raising capital and building a successful company is not a given. The ability to walk away with $10MM pre-tax is nothing to sneeze at, especially when minimal effort has gone into the startup at this time.
Most first time founders tend to get lost in the value of what they may get in the future and forget what they can get now. No investor wants to have a founder that sits on the company and never delivers an exit. Likewise, the investors want a good exit when the opportunity arises. Investors must be able to their funds out and derive a profit or they will not invest. Founders should consider this option for themselves as well.
Taking the $10MM in this case would have allowed the team to form a second company. They could keep the profit from the first company and invest it. The dividends would likely supply salary for the rest of their lives. The family financial pressures during on future startups would be reduced and the team would only have normal pressures of the business.
So, is a “bird in the hand worth two in the bush?” You really need to consider your options and do not take any opportunity for an exit lightly!
What would you have done?
Taffy Williams is the author of: Think Agile: How Smart Entrepreneurs Adapt in Order to Succeed to via Amazon
Thursday, December 1, 2011
Everyone has a history, some may be more exciting, but everyone has one. Accomplishments in prior jobs provide some sense of ones abilities for getting things done in the future. Thus, a RESUME highlights those accomplishments and future employers review then during a candidate search. This is why resumes tend to have the positive spin approach to cast a better image to those reading it.
Many people tend to offer their credentials in daily discussions. Sometimes it is the “Mine is Bigger than Yours” type of discussion. Impressing the boss or a colleague is important to some and it helps create an inflated image. Look at people running for public office. How many times have you heard things that were just a bit different from the reality of the situation in order to help sway an improved opinion and get votes?
The whole process reminds me of a cartoon I saw a number of years ago. Picture the following scenario: Scientist have performance objectives that include the number of published papers, number of inventions, and the total dollars received in grants as part of the annual review criteria. It is not easy to put much of a positive spin on the information because all one need do is count them. Now, picture a scientist in front of his supervisor. The supervisor reading from the list provided documenting the annual review.
Reviewer: “So you published 35 papers last year. You were investigator of the year 3 years running in the past. You filed for 10 patents 6 years ago, and they brought the institution $50MM. 2 years ago you were voted as most outstanding scientist in the institute.”
Scientist: “That is Correct”
Reviewer: “That is great, but what did you do for me today? What results will I get from you this year?”
The point is even better demonstrated by a review of intuitional bankers a company intends to retain to assist with a financing or an M&A activity. Banks and bankers come in all shapes and sizes and clearly, some of the bankers can afford clothes that are more expensive. But, when it comes to getting a deal done, the past does not reflect completely on the future ability to get either a financing or a M&a completed.
In reality, there are only two types of deals, “those that get done, and those that do not.”
The same holds for people in managerial positions. They will either perform their activities or accomplish them in the future or not. The past is suggestive but many factors influence one’s ability to complete a task.
The Point: There is always some hype and some reality in most situations. Ability of individuals may be reflected in past performances, but, individuals are no better than their ability to get the next task or deal successfully completed! The chest thumping and bravado just do not get one very far. The ability to sort through the details and complete any task is measured by actually doing it, not by what you did yesterday. Hence, “WHAT HAVE YOU DONE FOR ME TODAY?” In fact, “WHAT ARE YOU GOING TO DO FOR ME THIS YEAR?”
Take it to the next level. Think of your board or your investors as the supervisor mentioned above. You may look good on paper, but that does not last forever. Your accomplishments do! Those accomplishments must translate to increased value for the investor to benefit.
Taffy Williams is the author of: Think Agile: How Smart Entrepreneurs Adapt in Order to Succeed to via Amazon