Done Or Done Right

Raising Money for a New Venture

noreply@blogger.com (Done or Done Right) — Mon, 08 Mar 2010 18:43:00 +0000

There are many things that quite frankly get the door closed or lead to the inevitable "string along".

Raising money really is an art form because you have to know more than the buzz words, typical paths, etc... but you have to know the little nuances such as "how do you value a company that has no tangible assets, very little revenues, but has growing traffic, a niche market and a business model that scales?"

How much should you ask for and how much should you be willing to give up? What introductions get meetings and what introductions lead to investments...

One of the most important things is gaining trust and confidence. Would anyone invest in a perfect stranger over a longtime friend or colleague who they've made money with or have seen make money for others?

At the end of the day venture investors are money managers. They have investors in their funds that require returns through responsible investing.

The truth of it is, most startups never get funding outside of friends, family and maybe a loan/line of credit.

The key is to build a business that is sustainable, not one that you want to get funded. If your business requires $1 million plus in funding you better be talking clean tech, bio tech or infrastructure. I think the days are gone or numbered where web-based product startups without a ton of traffic and meaningful revenues get funding over $250,000.

The Truth Hurts Less... When you hear it earlier...

noreply@blogger.com (Done or Done Right) — Sun, 28 Feb 2010 15:55:00 +0000

No one wants to hear "your idea is terrible", "that's not a business it's a hobby", "no one will ever invest in you, at least not now".

These are harsh things to hear and even harder to say. Investors and adviser's don't want to crush the dreams and passion of future entrepreneurs, however real entrepreneurs won't get discouraged by this honesty, they will be driven by it. If you don't believe in your vision enough to take criticism and keep moving you don't have the drive to make it successful anyway. I won't apologize for this statement as it is true. All businesses go through tough times and it is easy for the most confident and driven of individuals to get discouraged. If you can't push back on adversity you won't succeed.

Too often we want to encourage entrepreneurs and young thinkers to make them feel like they are smart and their idea is great. I believe in positive reinforcement for what is done right I also believe in honest harsh criticism for what is done wrong.

There are a lot of great ideas that don't make good businesses. I can't tell you how many times I've heard young entrepreneurs say "they loved it". My response is "will they pay for it?" We have all heard a friend talk about a concept that sounds amazing, like it can't fail... but that's because we haven't asked the tough questions. We bought into the passion and see that the concept does make sense but never stop to ask "how, how much, how long, how many, who, who is..."

How: How are you going to execute?
How Much: How much will it cost to execute?
How Long: How long before you can start selling?
How Many: How many customers do you need to be profitable?
Who: Is your competition?
Who Is: Who is working with you?

What is the point of all these questions? To determine if you have a plan of action for your idea and if it is a legitimate business or just a cool idea. One of the biggest mistakes entrepreneurs make is not surrounding themselves by people who know more, question often and don't believe the hype.

Hire someone you would want to work for, surround yourself with people who will challenge you, don't get discouraged... listen and learn.

Your idea may be a terrible business, but if you learn how to conduct due diligence on your own ideas you'll save yourself time and energy... and when you come up with that idea that does make a great business you'll be ready!

Where can we begin today?

noreply@blogger.com (Done or Done Right) — Mon, 22 Feb 2010 19:43:00 +0000

We hear so much about all of the renewable energy and infrastructure heavy energy solutions such as solar, wind and natural gas. The question I have to ask is "are these the right first steps?" I want to begin with a few fundamental business questions.

How much will it cost?
How long will it take to implement?
What's the payback period?
Where does the proposed solution fit into the "investment-return" hierarchy?

When I do this what I keep coming back to is a strategy that calls for conservation first, alternative sources second. I will get to what I mean by conservation shortly... because I don't mean turning off your lights. The reason I believe conservation first is the right strategy is, assuming there is still a capital investment, the investment is lower and the payback period is much faster. In addition, reducing the amount of energy needed;

Reduces the costs for the alternative, infrastructure heavy sources because there is a decrease in energy demand so fewer solar farms, wind farms or shales need to be developed or mined
Makes the potential for increased energy costs more palatable to consumers and business owners (save 30% today, pay 10% more tomorrow)... a net savings of 20% is easier to swallow then an increase or a new tax
Puts additional money back into the economy today through realized energy savings

Now, what I mean by conservation is true conservation strategies such as insulation or automated central air and hot water systems. While light bulbs and the numerous other smaller solutions are valuable, I just believe that it is not enough of a motivation for mass adoption "$5 light bulb, $.50 light bulb, how much will I save with the $5 light bulb?".

The best example I can give in a natural progression is for the energy and solar consultants out there. The average homeowner can't afford a $20,000 + installation regardless of the tax breaks. However, what if you could offer a simple, $3,000 solution that delivers energy savings of $1,000 per year?

We are so focused on what we all want to sell, we aren't thinking of what makes the most sense to solve the problem. We know the objectives, reduce energy usage and find alternative sources.

Why Businesses Fail

noreply@blogger.com (Done or Done Right) — Sun, 14 Feb 2010 23:12:00 +0000

...Mismanaging Money.... All businesses adjust, innovate and reorganize or restructure as their respective markets and the economy force change. The question is not if but when, how and on what scale. The problem is that many businesses do not have a financial plan to leverage new opportunities or adjust for economic shifts that threaten their survival. They simply manage their day to day, try to meet monthly bills or create products that have significant short term financial upside with no eye or concern for the overall risk-reward balance (AIG...) This mismanagement, as we have most recently seen, is not exclusive to a certain size or sector. The reason you hear the term "cash is king" so frequently is the importance of available capital, not debt financing but cash. The reason cash vs. debt financing is so important is because;

The opportunities created by external circumstances come and go very quickly. Having the capital on-hand to take advantage of these opportunities is the key to making the most of market and economic shifts
The weight of carrying heavy debt loads can run a company under. When the market is good carrying a little debt is considered part of doing business, when the market conditions are bad, ranging from a market crash to a major competitor, the ability to adjust prices, provide additional benefits/services or withstand a recession comes down to gross margins

Financial and business management must go hand in hand. It is all about strategy; a strategy that prepares for market shifts and the overall business objectives of revenue and market share growth.

Every financial plan should have 3 components;

A rolling 1 year financial plan that is reviewed and updated each month
A historical financial analysis by month, year and season with notes as to special conditions that impacted revenues or profits
A 5 year projected growth financial plan showing the revenues and capital required for the growth objectives

In the end, it is all about the numbers. They will tell you everything about your business, your customers and the market as a whole.

Consumer Engagement... What does it really mean?

noreply@blogger.com (Done or Done Right) — Sun, 14 Feb 2010 22:36:00 +0000

Consumer engagement all too often is defined as "a means to a sale". But that is not what engagement is all about. Think about the steps in a successful, committed relationship.

Dating: All fun, mostly chemical with no ties, commitments or loyalty.
Boyfriend/Girlfriend: The decision to be exclusive. This decision usually stems from the belief that there is the potential for something more, that the partner has special qualities not easily found elsewhere. There is a commitment here, but the potential to find something better is still a real possibility.
Engagement: Showing a willingness to commit exclusively to one partner for a lifetime. This requires trust and a feeling of equal participation in the future of the relationship.
Marriage: The binding commitment to one partner for life.

I know that the divorce rate is very high, but focusing on getting to the point of engagement is the key as there are very few things that are truly permanent in this world.

To truly engage with any product or person there must be trust; trust that the reward is greater than the risk and trust that there is the ability to have an active role in the future of the relationship. Trust comes down to the person or brand; if you can't deliver, don't make the promise. If you can deliver, engage the consumer in the vision. Make them part of the decision making process and they will be a part of the process, rather than just a potential customer.

Viral marketing stems from consumer engagement. People share what they are most interested in; themselves. Allow your brand to become part of a desire to interact, enhance social status, improve health, etc... and you will find consumers sharing your message as if it were their own.

Facebook, the iPhone.. all of these are but mere channels to reach consumers. So the next time you think about how many different ways you can spam potential customers STOP! step back and ask, what message would I share willingly with my friends and family?

What Happened in Venture Capital over the last 10 years?

noreply@blogger.com (Done or Done Right) — Sat, 30 Jan 2010 21:30:00 +0000

For the last 10 years venture capital has been polluted.
Polluted by people with money posing as smart money managers.
They are not intentionally trying to deceive anyone, they just don't belong in the industry.

Many new venture funds were started by smart engineers, marketers or business professionals that provided tremendous value to successful public and private companies. They understandably took that money and wanted to put it to work to help other entrepreneurs succeed. Don't get me wrong, some have done very well.. but many more have failed miserably.

The challenge is that Venture Capital and what it was meant for has been changed and the definition of "technology" is now associated more with websites than actual technology like data infrastructure, microchips and operating platforms.

Venture Capital was meant for businesses that require significant capital to build infrastructure, create real intellectual property or acquire tangible assets with quantifiable value.

Best intentions aside, what does this really mean for the industry?

It means that the funds with real returns and true financial management experience are battling for investment dollars, making it harder to put the money in the hands of those that can do more than just write a check.

The real Venture Capitalists understand that it is about much more than the money; it is about the support, the network and the ability to spot real management talent.

Making Money in a Down Economy

noreply@blogger.com (Done or Done Right) — Mon, 23 Nov 2009 15:34:00 +0000

The phrase "this is when the rich get richer and the poor get poorer" is only as true as each investor makes it. It is true that having enough money to continue making investments has an impact, but it is all relative.

All of us know someone who lost 40%+ of their net worth over the last year, the question is have they done anything to recover that loss?

As an example let's say you lost 40% of $1 million when the market tanked. When the Dow was at 6500 you could have bought into quite a few stocks that were down but were key to the recovery of the U.S., in other words, if they failed things would have gotten a lot worse. These investments, AIG and CITI for example, would have provided an average of ~550% return within the first 90 days after the stock market bottomed out. If you would have taken ~15% of your remaining net worth and invested that money in these two stocks you would have recovered the 40% you lost and been up. It may seem like this sounds easier then it really is... you know hindsight is 20/20, but at the end of the day managing your money is up to you. Trusting a low level number cruncher or customer support rep at some money management firm is not going to get you your money back... no offense to them but these are the same people who recommended or were invested in Madoff.

Anyone can make money in an up or down economy. To be successful with any investment you have to be willing to do the following;

Put some money at risk, no matter how small. Too often we get caught up in the thought that we need to look for an investment that can provide a 300-400% increase on a minimum of $50,000 or it isn't worth the time. I will use a baseball analogy here, if you hit a bunch of singles you will score runs. Grand slam or strike out is not a smart way to invest money. Start somewhere and realize that you won't get rich overnight but in time you will build real wealth and your money will be working for you.
Spend the time to understand where you can get the best return for your money. Don't just blindly trust anyone with your money. The great thing here is that with the internet and many talk shows you can hear what the true investment experts think are good investments and why. You can follow their advice for a while and overtime you will learn what to look for.
Pay attention. Managing your money is an ongoing commitment. You can't set it and forget it. Once you set up an account with one of the online trading platforms you can track your investment performance and set sell maximums and minimums... which leads into the final step.
Stop making excuses... Start today! There are so many great tools out there to track your investments and minimize losses. TDAmeritrade, eTrade, Schwab... You can get started with any one of these sites in a couple of days and with less than $100.

4 ways to get automatically rejected by an angel investor

noreply@blogger.com (Done or Done Right) — Thu, 12 Nov 2009 04:18:00 +0000

This is a republishing of a post by Jason Cohen but I found it so well written I wanted to pass it along....

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There are lots of good articles out there about pitching, and surely everyone who pitches me has read some of them. Still though, a few problems appear over and over again. If you’ve ever had to sort through resumes and cover letters, you’ve seen this effect: People tend to have the same misconceptions and therefore make the same mistakes. What follows are four problems I see all the time, each of which makes me roll my eyes and sometimes even terminate the conversation early.

Be dismissive of the competition.

Let me guess what your feature-comparison chart looks like: You have all the checkmarks, they have few. Even when your competitor has a checkmark too, your implementation is still better. There’s nothing they have that you don’t. Oh, and they’re more expensive too.

When I see this chart, all I know is: It’s a lie.

The point of “competitive analysis” isn’t to say: “I’m better than everyone else.” Rather, it’s to define your niche in the market and explain how you own that niche better than everyone else. Need to be further humbled? Here are some things not in your little feature-comparison chart:

Those competitors probably have more customers than you.
Those competitors probably have more revenue than you.
Your potential customers have possibly heard of one of these competitors but almost certainly never heard of you.
Those competitors are already ahead of you in discovering, defining and attacking the market.
People rarely buy on the basis of “most features.”

So what should you do instead?

Define the segment of the market that’s being underserved. Part of this is admitting what part of the market is being well served, and who is serving it.
Admitting where your competitors are strong earns you the credibility to point out where they are weak.
Explain how there’s a portion of the market being missed rather than having to displace a product. Once you have your own niche you can talk about creeping into another niche.
Explain how having fewer features or different features makes for a product that’s more exciting or versatile or more relatable or usable or viral.
Give testimonials of people being “fed up with” the competitor and how they’ll run into your arms.
Explain how it’s not possible for competitors to compete on your terms. Maybe the competitor’s business model uses channel sales, so by using a direct model you can compete on price. Or perhaps the competitor has $30m paid-in-capital so they must roll the dice on big market plays while you can be smaller and safer. It’s also possible the competitor maintains a “big company” image to land enterprise sales, so they cannot copy your folksy small-business cool persona. Give concrete examples.

Have five-year projections.

I don’t care what you’re projecting — seats, customers, revenue, profits, market growth — it’s all crap. That’s right, it’s crap. You made it up, and you know it, and now you’re insulting me by expecting me to believe it.

Oh wait, you say it’s a “conservative estimate?” No, the conservative estimate is that you burn through all your cash in nine months and start taking on consulting gigs to delay a return to a “real job” in corporate America. (Not that I blame you.)

But, really, this is good news! You don’t have to invent crazy models that no one believes. You can focus on useful stuff instead. Like what?

Show how fast you can get to cash-flow-positive. After that you’re not burning money, and that’s the hardest part of your journey, so address that first. If the rest takes longer, that’s ok.
Explain how revenue will outstrip expenses as you get customers. That’s something you have more control over, and that makes it clear that as you grow, you have a sustainable, profitable company.
If you must give projections, at least make a range, and make the distance between max and min widen the further out you go. And maybe stop at two years? If you can’t be profitable within 24 months, either it’s a bad business idea or you need to raise big VC instead of angel money.
Actually say, “I would show you five-year projections, but we both know those are crap. Let’s talk about how I’m going to make this business profitable.” Just that one sentence alone sets the tone of the conversation.

Gloss over your strategy for customer acquisition.

Here’s the typical slide I see for customer acquisition strategy:

Google AdSense
Ads on selected relevant web sites
Blogger outreach
Social Media presence (blog, Twitter, Facebook)
Co-branding
Partnerships

Yes, these are ways to get customers, but here’s the problem: Every company on Earth tries these things – and most fail anyway. Therefore, this list is uninspiring – and it isn’t enough.

Anything that everyone else does is boring and unconvincing. There’s no competitive advantage. There’s nothing there that makes me more likely to think you will pull this off.

Of course it’s true that to some extent marketing has to be “trial and error,” or better yet “experiment and measure.” And it’s ok to say that, and it ok to list some traditional modes, but this isn’t sufficient.

After all, if all your strategy is “We’ll try stuff until something works,” I have no reason to believe something will ever work!

So here’s what you should do:

Internalize that your route to getting customers is critical to your success. Admit that to me and yourself — this is one of those things that makes or breaks the entire venture! Spend real time in your pitch on this subject.
Be specific. Specifics are compelling and paint a picture in my head that I can get behind. Examples:
Not just “Blogger outreach,” but “We’ve done a few guest-posts on mommy-blogs and given the comments and traffic that seems to be a good outlet for us, so now we’ll expand in that area with more posts, ads, etc.”
Not just “Facebook presence,” but “We’re using a Facebook application platform that’s been proven to work in such-and-such parallel business and we think we can duplicate the mechanism.”
Not just “Community outreach,” but “The founders have lined up speaking engagements at these five local groups and we’re hoping that after collecting feedback and testimonials from that we can branch out into neighboring cities.”
Something creative. If I haven’t heard about this marketing technique before, that’s probably a good thing. At least you’re not just doing what everyone else is, which in this day and age is already an advantage.
A viral product. If “viralness” isn’t baked into the product itself, you’re already behind. Especially if it’s a web-app. If you can show how the app helps spread itself (i.e. invites, sharing, integrating with social media crap, only works with a friend, affiliate program), that helps me see how X customers leads to X+1 customers.

Do what you think you “should” do instead of what feels right.

There’s a ton of advice on raising money. Don’t take any of that advice just because you read it somewhere.

Yes, including this article! Yes, including this tip too. (Wait a minute…) Seriously, be yourself. Filter all advice through your own lens. Think of this like you’re getting married — if you’re not yourself, not honest, how will you hook up with an investor that gets you, likes you, and believes in your core motivations and values?

Now go out there, tell the truth, be real, and raise some money!

What makes a successful venture investment?

noreply@blogger.com (Done or Done Right) — Thu, 12 Nov 2009 02:30:00 +0000

I've spent the last 2 years sitting on the investment side of the venture investment table. What I've found is a real disconnect between domain and business expertise. As hard as I have seen my colleagues try it is impossible for one individual to be a domain expert across all investment areas. Entrepreneurs walk in the door having spent the last 10 years of their life in a specific technology and the last 5 in a specific space and they know their market better then most if not all of their potential financial backers. After the market crash every investment vehicle and strategy has rightfully been questioned from the transparency of FOF holdings to the process for identifying early stage venture investments. So what makes the venture community so different?... The relationship with the business. Investing at such an early stage provides an opportunity to help shape and grow a business. The challenge, or should I say hurdle, is the willingness of the entrepreneur to accept guidance and assistance from someone with more business but less domain expertise. As a money manager you can't step too far into any one business without losing site of the entire portfolio performance picture but you must know enough about the business and market to understand if, when and why a company is under-performing. The reason why so few venture investments provide returns, in my opinion, is a combination of three things

Incomplete due diligence. Not knowing or learning enough about the team or the market prior to making an investment.
The inability to proactively monitor company performance. Real monitoring on revenues and expenses or performing milestone trend analysis to understand where, why and how many times a business has missed key milestones. Entrepreneurs are so resistant to this... IMO, people who are resistant to disclosing basic information have something to hide.
The inability to effect real-time change when it is needed from leadership to product or sales strategies.

What I have witnessed is that venture investments fail primarily due to entrepreneurial stubbornness. I have been there, you know your market better than everyone else, you have traffic, customers and revenues... so why should you listen to someone who only gives your business part time attention?...

Make no mistake, it is very difficult to be a startup CEO. CEO's of new ventures must wear many hats, often being forced to neglect some core business functions. The difficult decision is what gets the majority of their attention?... The market? Money management? The product? Marketing? Fundraising? Strategic relationships? ... I repeat... Why should you listen to someone who only gives your business part time attention?... Because great decisions come from the collection and analysis of information and input. Listening doesn't mean taking orders, it means being a real CEO... so know what you know, know what you don't know and always be open to listening and learning from others.

Due Diligence, what does it really mean?

noreply@blogger.com (Done or Done Right) — Mon, 09 Nov 2009 20:41:00 +0000

"Due diligence" is a phrase used to describe a range of assignments, legal obligations, reports and investigations which take place in business, manufacturing and law. Its most frequently heard version is the one pertaining to business, where "due diligence" refers to the steps taken by venture capitalists before investing a round of capital in a startup, the ongoing investigation as to how the funds are being distributed, or the precautionary steps taken by a larger company in deciding to acquire a smaller company.

In venture capital, due diligence involves looking into the past and present of the people and structure of a company requesting venture funding. For instance, venture capitalists are wary of investing in companies that lack people with credentials or a proven track record. Depending on the overall level of caution in the investment environment at the time, a due diligence investigation may be more or less stringent.

Due diligence is not a panacea against investment failures. Even a company made up of well-educated high achievers can falter due to unpredictable market conditions, unforeseen competition, or technical setbacks.

Due diligence generally refers to the background checks conducted after a venture partner has already made a decision about the company. Typically, partners will prefer to invest in companies led by people they already know are very trustworthy, and probably have been given funds in the past.

Savvy investors know the tricks of the trade and want to make sure that they don't attach their money, name and reputation to a risky company or person. If you are preparing for due diligence it would be best if you are ready for the following,

A complete financial and credit history
A comprehensive criminal and background check
Personal and professional references that ideally know and are trusted by the potential investors
A deep competitive and market opportunity analysis. If a savvy investor likes the space they will look to see what other companies exist that could provide better traction or terms

If a perfect stranger came to you and asked for $1 million; What you want to see? How many hoops would you make them jump through?

Twitter, the new spam

noreply@blogger.com (Done or Done Right) — Thu, 05 Nov 2009 21:22:00 +0000

Has anyone noticed that many comments on blog posts, articles and news are now full of people with bite size, tiny URL or twitter tags?

Why would anyone click on your link if you can't take the time to craft an intelligent comment or response to the topic that brought them there in the first place?

The shorter the messages we can create the easier it makes for us to spam people and dilute the value of the content we have access to online.

Everything shouldn't be reduced down to a text message. If you can't take the time, neither will any of us.

Conducting Market Research... why this phrase is so intimidating...

noreply@blogger.com (Done or Done Right) — Tue, 03 Nov 2009 20:06:00 +0000

Conducting market research. That statement in and of itself is intimidating, but why is it so intimidating? Maybe because many of us don't even really know what it means. Maybe because we have no idea where to start. Do we look at how many similar businesses are in the area?... How many people are there who will buy our product or service?... What is market research, what should I be looking for and what do I do with it if I can find it? To keep it simple, let's break research into 3 groups.

Target Customer - Where do the greatest # of my target customers live and work and what do they look like (demographics). Remember that target customers are not anyone who would buy your product or service but those who do buy similar products or services today or will have a need to buy your product or service in the near future.
Competitive - How many other businesses in my area fill the same need. Notice I wrote "fill the same need" not sell the same service. A need can be filled by someone selling a different service. Anything that could be chosen to replace or substitute your product or service is a competitor. For example, you want to open a health club in an area where there is an outdoor park or great mountains 15 minutes away...these other options for staying active are competition for your business.
Financial - What will starting and running the business by geographic area and type of location cost. What financial benefits could each option provide? A strip mall may cost a little more for space but provide instant exposure...or competition... A location a little bit off the beaten path may be cheaper but could require more marketing to create awareness.

Doing the research is never fun, but it is necessary to understand what you and your business are really getting into. Research at its core is just answers to questions. Come up with the questions you need answered to give your business the best chance of success, identify the type of people that you need to answer your questions and ask away.

Place your bets

noreply@blogger.com (Done or Done Right) — Fri, 30 Oct 2009 15:29:00 +0000

As a business, an investor or an individual we must decide where to place our bets on a daily basis. Whether deciding where to go on a first date or where to invest $1 million every decision that we make sets a course of action that at times is irreversible. If you've ever played or watched poker you will notice that the best players utilize two basic processes for making a decision on where to place their bets and how much to bet.

What are the odds? What are the odds that you have the best hand, in other words the position of power. Do you have the big stack or will you be bullied by the larger corporation if the negotiations become contentious? What are the odds of you having to go all in and lose it all if your opponent pushes back or comes over the top?
How does my opponent play? Watch how your opponent plays. Are they loose and aggressive or very tight? If you know that your opponent plays very loose and aggressive than you must be prepared for them to come at you with ridiculous offers or bets because they want to test you to see if you will fold. If they play very tight than you should prepare for a very numbers driven process where the financials make the decision, not emotion.

Negotiation is an art form. How hard do you push? When do you push? At what point are you going to push the opportunity out the window? We all make mistakes the first time around, but here are some lessons that I have learned and practices that I now employ to help in those tight moments.

Be prepared. The more prepared and knowledgeable you are the more comfortable you will be in any negotiation to quantify and qualify any terms that you are requesting.
Be calm. Never, ever lose your cool. You will be tested, pushed and manipulated as the younger or less experienced party. That is ok, let them push, don't react... just take everything in and think before you speak.
Be patient. There is no rush. Don't feel like you need to make a decision in that moment. You can always use language like "I have to pass this by my board, but we will take everything into consideration." Waiting a week to provide a response is not going to kill a deal, a poor, unprepared response will.
Be willing to walk away. No matter the position or lack of strength your ability to walk away without your business being significantly compromised is the greatest negotiating power that you can have. Never put the success or potential failure of your business or job in the hands of one person, vendor or partner.

The question that will linger here is "how can I prepare for something I have never done before?" Well, I will beat the horse once again to tell you that it comes down to your team. Surround yourself with experienced individuals who will challenge you when you are missing something, encourage you when you are doing well and support you when you're in uncharted territory.

Do your homework!

noreply@blogger.com (Done or Done Right) — Mon, 26 Oct 2009 17:14:00 +0000

There was a line in the movie Sentinel where Keifer Sutherland said that “once a forensics investigator has a notion of how a crime was committed all of the evidence they find is used to support their assumption”.

Many of us in business and life do the same thing. We guess, have a hunch or have talked to a few people and then look for evidence to support our theory rather than try to poke holes in it. The danger in that way of thinking is that you can quickly end up married to an idea that leaves you in debt and a year down a path that doesn’t really make sense. Don’t feel bad, there are a lot of great ideas that don’t make great businesses and we have all had that moment where we realize our great idea would be a terrible business.

The key to making good decisions is information. Whether it is an article, a traffic report, a lecture or a look that says I am going to slap you...Everyday we react based upon information, information that we seek out because knowing that Microsoft has just launched a competitive product, there is a back up on 76, your significant other is upset because their cousin passed away or the CEO of your company was arrested for streaking through city hall helps us to decide how we should act or react.

So why do entrepreneurs and business owners guess? Because, quite honestly gathering information is a pain in the you know what. We all hated homework when we were in first grade and nothing has changed. It may not be fun, but you have to do it. Knowing where potential customers live, work, what they buy the most, what they read or watch, how many competitors are in the area, how much it will cost to advertise, your advertising ROI and how much it will cost to start or grow your business… this type of information is either used to create an effective business plan or turns out to be an “oh #!&*” moment when it is too late.

Conducting effective market research starts with identifying what you need to know. What questions do you need to answer to ensure success? I will give you a few hints.

Size of the market opportunity/demand (how many consumers currently or could buy your widget?)
Market competition (how many businesses already serve this need?)
Operating costs (how much does it cost to run this business?... from office to supplies and marketing to staffing)
Revenue projections (how much can you make from this business?... this is the result of your marketing and advertising plan)

The Miracle of Child Birth, also known as Starting a Business

noreply@blogger.com (Done or Done Right) — Fri, 23 Oct 2009 14:57:00 +0000

Sorry for the comparison ladies, but I am trying to make a strong point to all the entrepreneurs out there who have the wrong perception about what it means and takes to start a business. So guys let's be real, none of us really get this, but for those of you who have been through it with your significant other it is an intense roller coaster ride. So what does this have to do with business?... the steps in starting a business can be compared to the steps of conceiving a child.

You conceive the initial idea... That is always the fun part, your drunken moment so to speak... You think of this great opportunity, love the idea of creating your own business and enjoy the initial pursuit.
You find out your pregnant... this would be the oh my god moment when you see that this is real. You are excited and a little nervous. You actually start to ramp up preparing to open the business.
You start to feel the effects of pregnancy... morning sickness, bloating, eating for two, mood swings... You are excited one minute and mad the next because some things work out right and some don't. It is a lot of work to nurture a business from idea to reality. Incorporation, funding, marketing collateral, business strategy... it's not as fun as it was when you first found out you were pregnant.
Complications set in... we all pray that this never happens in giving birth especially, but in a business, however this happens all the time. Things happen, things out of your control start to drive the final delivery of your child.
Your baby is born... now comes the really hard part because having a kid is 3 full time jobs. You have no life, get no rest, spend every waking hour and penny on your baby and have no idea how all of this work will turn out. Will they be an astronaut, will your business succeed... will your child be a petty criminal, will the business fail... will your child live at home until they are 50, will the business linger on but never get out of the break even phase.

The real lesson is this, starting a business is not easy... so don't get discouraged, but don't be delusional. It requires a lot of work, patience, commitment and care. If you want to prepare for starting a business, talk to one of your female family members or friends with kids and ask them what it was like to carry, give birth to and raise a baby. It will have its glorious moments, but like anything in life, it will have its trials and tribulations.

From Cool to Dead Pool

noreply@blogger.com (Done or Done Right) — Thu, 22 Oct 2009 12:32:00 +0000

I bet each of us could rattle off 10 applications or websites, web and mobile, that were hot today and gone tomorrow. What is it that makes a new app stick around for the long haul and what drives so many to the dead pool? Is it luck, a rock star management team, endless financial backing? It is the combination of a unique value proposition to the user and real revenue potential. You can get lucky and see a spike in user traffic from buzz on TechCrunch, you can have a ton of money poured into your business, but if the user value proposition isn't there or you don't have a viable self-sustaining business model you will be cannon balling into the dead pool very soon.

How do you know if you have a unique user value proposition and how do you combine that with a real revenue generating business model? A unique user value proposition should have a strong yes to the following questions.

Is there a real loss or gain that occurs for the user if they don't have a service like yours? Some examples; will they... miss their favorite band, be able to find old friends, be able to communicate in an emergency or have their website go down during peak usage.
Can the user need be filled easily and with a comparable quality through another source? This is the grey area. Every entrepreneur will say no, but the answer is almost always yes. You must challenge yourself to define what is truly different, why a user will choose you and stick with you.
Is this something people will share with others? Will they say, "you have to try google, it really makes doing research easy" "you should sign up for Facebook because you can find and keep in touch with so many old friends" "you have to get the iPod, you can actually listen to music and run with this little thing"

Don't fool yourself here. Everyone thinks they have a truly unique value proposition, but most do not. They have something cool, that is fun and will be replaced by whatever comes next two months from now.

This leads to the next test; do you have a real, sustainable business model. Can you make money, how much, how fast and from whom?

If you create value, real value then odds are someone will pay to target your loyal users or just to use your service. What that number looks like, how many will pay and how quickly is different for each industry, each market and each decade.

The two most important roles in a new company are the product manager and CFO. If you have an innovative, user-centric product manager and a tight-belted CFO you will give your business the best chance for success.

Strategic Business Planning

noreply@blogger.com (Done or Done Right) — Mon, 12 Oct 2009 14:28:00 +0000

There is so much data available today and so many tools to measure search advertising effectiveness, email response rates, TV viewership, site opportunity, investment ROI... where do you start?

Start with your objectives. Do you want to drive brand awareness, user impressions, revenues, or target gross margins? Remember that your objectives do not have to be, nor should they be mutually exclusive. Creating an effective business strategy should involve the right combination of brand awareness, user impressions or revenues with target gross margins. The question really lies with what is of the uppermost importance today. What short term objectives do you have, long term goals and how do the two meet through your strategic business plan.

At the core of all strategic planning is data such as target customer behaviors, market size or financial projections. Data drives good business decisions. Good business decisions give you the best chance for success. Understanding how each piece of information translates back to your bottom line numbers is the key.

The challenges with data, in my opinion, are identifying what information is most important, what information is dependent and then turning the results into a plan of action.

Keep it simple and work backwards. What are your objectives based upon in hard numbers?

How much money do you need to make this month to cover bills?
How many impressions do you need to show up on the "buy list" for target advertisers?
How many stores do you need to have your product in to meet your target sales growth?

Once you know what you need to achieve, identify what efforts can help you meet your objectives with the greatest margin. If you set up the right spreadsheet, for lack of a better term, you will easily be able to see which tactics move the needle across any category from impressions, to gross margins to product sales.

CEO's of the 21st Venture Century

noreply@blogger.com (Done or Done Right) — Sun, 11 Oct 2009 15:52:00 +0000

There are hundreds of thousands of CEO's in the U.S. today and I would venture to say that the average age is 25. Not because major companies are being led by young rockstars, but because engineers are launching web-based products, iPhone applications and anointing themselves CEO's.

A fancy logo and a business card and they are out telling everyone that they are now the CEO of flipperdoodle.com... stupid name but how many of those have we heard of over the last 5 years.

All of a sudden they are a domain expert expecting c-level executives to take their calls, thought leaders to trust their opinions and consumers or companies to pay for their product.

With this title they feel entitled. But entitled to what? Building a product and building a company are two skill sets at the opposite end of the business spectrum.

Reality check, 99.9% of you will fail, be in debt and have very little marketable skills.

So now what? Realize your limitations. Hire a real CEO or let an advisor lead you... or, forget the business card and big dreams and make money. Demonstrate that you can build a business, not a product or cool website, a business that makes money and has customers.

You want the title, you have to earn it!

Worth your time

noreply@blogger.com (Done or Done Right) — Thu, 08 Oct 2009 17:11:00 +0000

As an EIR with ETF Venture Funds I get to see a lot of entrepreneurs and the one thing that they all have in common is that they all think their idea or product will be the next $100 million exit.

I have learned a lot over this last year working with some of the brightest people in the industry over at ETF. The most important thing that I learned was that your time is your greatest asset. How you choose to value your time will define how others value it as well.

Over the last 18 months I have had hundreds of entrepreneurs come to me with opportunities. All of which are interesting and all of the entrepreneurs are the type of people you want to be around. It is so easy to be sold on the opportunity because entrepreneurs are so passionate that their enthusiasm becomes contagious. So how do you decide?

Well, here is what I do. I start with my high level goals personally and professionally. Those goals are:

Stability, I want to know that I have some sort of consistent flow of income to offset my bills
Personal freedom, I need the freedom to take time when I want it to go to a game, see my family or travel
Passion for what I am doing, I have to enjoy the role that I will play
Financial independence, I want a real upside... not "i will work for 40 years, save money each year and have something to pay my retirement home bills when I am at the end of my rope"
Make a difference, I want to feel like I have contributed back for all of the blessings that I have been given

Now that I know what my personal and professional goals are I simply weigh each option and come up with the option that provides the best balance.

All of life's decisions can't be put into this type of neat life matrix but the one thing we can do is take a step back and decide where our time will be best spent.

Entrepreneurs are a different breed. We are born with a different way of looking at life and it can lead to an exciting roller coaster ride or a rough existence.

Keep your eyes and ears open! Don't be sold! Don't be muscled! Don't be rushed! Don't be afraid to take great risks!

Ego vs. Arrogance

noreply@blogger.com (Done or Done Right) — Thu, 01 Oct 2009 14:43:00 +0000

It is the same ego that makes an individual believe that they can build a $100 million business up from an idea that causes them to fail. When that ego turns to arrogance and the entrepreneur is no longer willing to listen to their team, their advisers, their competitors or the market conditions.

There are many smart people that fail time and time again because they don't know how to listen.

What is worse, having to shift directions and admitting that your vision or execution was off or trying to force it to prove everyone wrong and failing even more miserably? Stupid question, but many entrepreneurs don't consider the fact that if they are being told by many the people they trust that they will fail and they don't listen and fail anyway, not only have they tanked a business they've burned those relationships.

In the beginning and the end business is about relationships. People will work with you if they believe in you, not your business, you. If you fail, but you learn and they believe in you as a person they will bet on you again. If they can't work with you they won't work with you.

There are many smart young entrepreneurs that I know will work with one day. There are exponentially more entrepreneurs that I would never work with, not because they aren't smart, because they are too arrogant.

Listen to what people are telling you. When they say they don't believe in your business idea there is a reason, and the reason isn't that they just want to crush your dreams.

The entrepreneurial and investment community is very tight nit because we like to work with people we trust. Trust is gained through respect and demonstrating the ability to execute.

Every great leader knows that they must learn to follow to truly succeed. Following means giving up control and putting trust in your partner.

Be confident but check the ego at the door. Ego leads to arrogance and arrogance leads to failure.

Chasing the Whale

noreply@blogger.com (Done or Done Right) — Tue, 29 Sep 2009 17:35:00 +0000

The allure of the big catch, the promise of the exponential growth that will happen if you can reel in the big relationship and the inevitable starvation of a business that does not bring in food to keep themselves running while working on the big opportunities.

There has to be a balance. Every entrepreneur knows that hauling in the 80 pound Marlin would be huge for their business and most entrepreneur's can at least get in the door, or on the boat. The problem arises when they take an all or none approach to business.

Having small successes will get the attention of the larger relationships, not to mention that when you give them your pitch the first thing they will ask is "who are you doing this with now?". If the answer is no one, there will be no deal because they will not be the test dummy.

In every sales, business development and product meeting I repeat the same question "what can we control?" Where is your business able to have the most control over the outcome? The more control you have to give up to get something done the less likely it is to happen.

When deciding which paths to pursue for short term gains with long term value I put the options into a matrix to compare the following;

Time and resource commitment required to bring the opportunity to a close
Projected time to close
Short term revenue potential
Long term revenue potential
Sector revenue and growth potential
Long term value of relationship with principals
Strength of successful use case for new opportunities

Taking an extra week to make a decision will rarely kill the deal, but making the wrong decision could kill your business. Take your time, make the best choice based upon the information that you have and execute!

Great Idea vs. Great Business

noreply@blogger.com (Done or Done Right) — Thu, 24 Sep 2009 11:01:00 +0000

What is the difference between a great idea and a great business? Execution, Execution, Execution. So what exactly does that mean? There are a lot of very smart entrepreneurs that execute their butts off and still fail. They fail because execution is about more than pointing your finger and running. I wrote execution three times for a reason. There are three key components of successful execution.

TEAM, Team is capitalized because a one man business is destined for failure. Surround yourself with people who will challenge you, not people who are along for the ride. Challenge each other to make the best decision that takes into account the trends in the marketplace, your financial position and staffing resources and the upside potential, most likely outcome and worst case scenario of any decision.
Timing, Set milestones based upon metrics, not intangible goals such as "we have someone using our product". How many do you need? What do they need to do? What metrics decide success, failure and adjustment? The window is limited, the market is moving and there are 1,000 other businesses that are working on the same thing you are... so you need to move, measure and adjust quickly... which leads into # 3.
Agility, It is important to be agile as a new business, and I mean that in all senses of the word. Don't be tied down to a specific service, target market or even location. Sometimes market factors can make something that was a great idea 6 months ago a one way trip to the dead pool... think recession. So be tied to a mission and execute on that mission. How you execute on that should be fluid. As an example, your mission may be to make it easier for consumers to manage their personal finances and lower their bills. Just in case you live under a rock a company called Mint just got bought for $170 million because they delivered on this mission.

Many entrepreneurs have dreams of being the next Marc Cuban, Zuckerberg or Trump... You know what I've found as the common factor in successful entrepreneurs, they were driven by providing something different and valuable that served a real need, they worked very hard to make their business successful and grew over time with the market, instead of trying to change it.

So to all my fellow entrepreneurs out there...

Be confident!
Be open minded!
Be focused!

Making a Decision

noreply@blogger.com (Done or Done Right) — Wed, 16 Sep 2009 18:07:00 +0000

There are thousands of resources and experts that provide guidance on the right way to make decisions for a business. Each expert has an opinion about the process that needs to be followed for effective decision making. What I find lacking in most of the reviews is the mention of the unique set of factors for each decision.

Are there time pressures? Financial pressures that shouldn't impact the business, but impact individuals making the decisions? Is the market moving and the business model changing? Does the CEO want more time with his or her family?

Business decisions are never easy, that is why the people who are responsible for the tough decisions get paid the big bucks, because their neck is the one on the chopping block. Hero or villain, there really isn't an option for an in between.

One of the greatest examples of making a tough decision is Advanta. They decided to get out of the small business credit card business. That is their business, not part of their business, but their core business. They recognized that there was a greater risk of sitting in the back seat and crossing their fingers than mitigating their losses, retaining some assets and starting over.

I remember what a trusted professional and friend once said when I asked about a business that was on a roller coaster. "Sometimes the best decision that you can make is to walk away". To give him credit, his name is Gil Beyda. His simple, yet powerful message was that you can't force things. You have to take the information in front of you and make the best decision possible. Walking away from a business, an ideology, a product, employee, geography... we have to make decisions every day that create a feeling of loss. It is very hard to walk away when so much time, energy, sweat and money has been committed. But what is a worse outcome? Cutting your losses or incurring more? More stress, more money, more time... more missed opportunities.

The key to sound decision making is finding the right balance between planning, timing and objectives.
What are your short term and long term goals?
What are the potential outcomes that are unacceptable?
What are the potential outcomes that are most desired?
What are the time, monetary, quality of life and missed opportunity costs associated with each option?
What is the best, worst and most likely outcome for each option?
With whom can you surround yourself to ensure a timely, well-informed decision?
Remember that good decisions are NEVER MADE ON AN ISLAND!!! Sorry to yell, but you don't know it all...none of us do. The truly wise gain wisdom from others with different experiences, insights and outlooks.

So,
1. Create a simple matrix in excel
2. Weigh the benefits and risks
3. Make the best decision possible
4. Track the progress
5. Measure the results
6. Prepare to adjust along the way

Read and React

noreply@blogger.com (Done or Done Right) — Wed, 16 Sep 2009 02:48:00 +0000

That phrase was repeated dozens of times a day at practice. Know your initial responsibility, go through your initial read and react.

I bet there are a lot of smart young entrepreneur's that wish it was this simple. Well guys and girls, it really is. Don't focus on what you can't control and don't build a business based upon the "ifs", like "if we get this distribution deal", or "if we can raise $1 million". Know your objectives, define responsbilities, read and react. Let's break that down into basic steps.

Objectives: What does your business or product do? Keep it simple. Your business or product may be able to do 100 things but at the core it does 1 thing, solves 1 problem...
Responsibilities: What needs to be done to launch the business and start getting customers? Don't think about acquisition, think about revenues... that means what needs to and can be done today.
Read: What is the market telling you about your service? Don't push the shirt you want to sell, sell the shirt they want to buy.
React: Adjust to the market demand

I get it... It is easy to get pulled in many directions by people who you think will invest in you, get you that distribution deal you need to grow your business... etc... but the truth is their vision isn't necessarily what's best for you, it's what's best for them. If someone shows interest they have motives. Their motives could simply be that they believe in you and want to drive a high return for their LP's, but there are motives.

As a CEO, even a young one, it is up to you to be the coach. You must motivate people when they are down, kick people in the butt or out the door when they are not delivering and make sure that everyone is on board with your vision because a company only succeeds when a team is working in unison to achieve a common goal.

The reason that businesses fail is mainly because of the leadership. They mismanage funds, try to operate a yacht with a two man crew or bury their head in the sand and let the market pass over them.

You have been in the league for 2 years. The first string quarterback goes down and it's now your shot. What will you do? What type of leader will you be? Will you become one of the greatest to ever play the game, or dissapear into obscurity?

Remembering 9/11

noreply@blogger.com (Done or Done Right) — Fri, 11 Sep 2009 18:37:00 +0000

Too often we forget about tragedies very soon after they occur. We apologize for our wrong doings, have a personal need to be a better person and then put this memory away and move on.

Remember the people who live and die for our way of life every day. Remember those who gave their life without choice. Remember to be someone you can be proud of today, just in case tomorrow never comes.