1.  Early stage investing is risky and tough.

2.  How do you do diligence on the product, people involved?

3.  How do you trust your investors?

4.  What value do they add?

Since crowdfunding has been around, some companies have successfully used it to launch.  In my own calculus, I see it replacing the friends and family round, and adding to the angel round.  But I don’t like crowdfunding to replace a series A.

Pando Daily recently reported that there is fraud in a few KickStarter projects.  That’s too bad because Kickstarter and platforms like it are pretty cool for entrepreneurs to get projects done.  But, it was inevitable.

My largest reservation with crowdfunding was fraud.  What happens when granny puts her last $20,000 in a project that is a fraud?  The ensuing legislative fall out could be horrific for the entire seed stage industry.

Kickstarter needs to find a way to vet these things before they go up.  They can’t afford to have a web of scams posing as actual projects on their site.  Additionally, if anyone gets defrauded they have to talk about it and name names.  Sunlight is the best disinfectant when it comes to fraud.  Lots of people talk about transparency, but when you are stung, you feel stupid.  It’s hard to be transparent then because you think the world will see you differently.

We have all been approached by fraudsters.

The great thing about the web is the ability to be very transparent.  That is the way we will root out fraud and deception when it comes to entrepreneurs.  Get enough shaky stuff happening in an entrepreneurial community and it will collapse.  It’s incumbent on the leaders and feeders of the community to set the tone.

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Summer is here.

Summer trades can be dangerous.  Things can happen that aren’t what they seem because volume drops.  Right now, there are a lot of people in the trading community that are a little butt hurt.  HFT trading has gotten more competitive.  It’s not shooting fish in a barrel.  Certain microeconomic things have happened in different markets causing position traders to scratch their heads.

Phil Pearlman was tweeting about some good looking stocks the other day on  the Stocktwits.com stream.  Paying attention to the stream might be a good idea in a summer market. Instead of trading out of boredom, tweet on the stream.  In the old pit trading days, we didn’t trade as much in the summer and really sat around and talked to each other.  Of course, that’s when a lot of the hijinks happened.

Only the stock market bulls feel like masters of the universe.

I always found that when I thought I had the market licked, it licked me back. This trade doesn’t feel like a time to load up.

The post The Summer Trade appeared first on Points and Figures.

When a leader is described as “hands on”, it means they are intimately involved in decisions that are made.  Hands on leaders are great leaders for startups.  The company is small, it’s pivoting and finding its way.  A hands on leader gets their hands dirty and helps the company navigate through the choppy seas.

However, there comes a point in a companies life where the leader needs to set broad goals and strategy, but then gives the reins over to their executives and let them run with the ball.  This is the point in a startup where the CEO isn’t managing the day to day operations of the business, but managing people.

Once the company gets here, it never changes. The CEO sets goals.  The CEO is the face of the company in many cases and its best salesperson.  But, the CEO doesn’t get involved in the day to day minutiae of operating the company.  Although, they have a clear understanding of how it all works.

Governments are also organizations.  Presidents are leaders.  Great Presidents are similar to great CEO’s of large multinational companies.  Although, the two are not interchangable because the economic incentives for running a business and a bureaucracy are different.

Harry Truman said, “The Buck Stops Here”.  Other Presidents before him knew the buck stopped with them.  Washington and Jefferson had difficult decisions to make.  John Adams and Thomas Jefferson feuded viciously over the decision over fighting a war.  Eventually very late in their lives they made up.  History has shown that Adams made the right decision.

The Musings of the Big Red Car and the Wall Street Journal have two interesting posts that combined, might give you some insight into a pending decision.  There are many forces at work that could cause the Obama administration to make a catastrophic mistake.

When a startup or a big corporation makes a catastrophic mistake, they go out of business, or lose money.  When a country does it, it hurts the people that are citizens of the country.

As a leader, it’s easy to talk.  Talk is cheap.  Talk doesn’t cause action, and talk doesn’t accept responsibility.  Talk can illustrate goals, but those goals have to be outlined with clear metrics of success.  The leader then begins pulling the levers that cause the organization to achieve those goals.

Sometimes, it pays to wait.

Companies and governments can avoid making decisions for awhile to see how things pan out.  Sometimes, as in the case of John Adams it pays.  Sometimes it doesn’t.  There are risk/reward trade offs in place with every decision.  Leaders need to clearly understand the economic relationships between the various risk/reward options in front of them.  They need to be able to internalize them and take the correct path.

Sometimes, events that are out of the leaders control happen and they are forced to take action.  No one wants to be seen as “leading from behind”.  If a leader continues to fall behind the curve instead of playing chess and correctly anticipating what their rivals will do, they won’t be the top dog for very long.

The buck does stop with the leader/CEO.  It’s why when people talk about them, they say it’s extremely lonely being in that position.  The loneliness comes from the fact that it’s their final decision.  The leader is responsible for the aftermath, and what happens to the employees/citizens.

Related articles

• Core Leadership Skills
• How Many Key Leadership Principles Do You Practice?
• Lessons From Fast-Growth Company CEOs Go Beyond Social Media
• 10 Traits of Great Leadership Figures
• Where the IRS Scandal Buck Stops

The post Sooner or Later, You Have to Make A Decision appeared first on Points and Figures.

There are specific regional preferences when it comes to BBQ.

A massive debate roils in Eastern, Western and South Carolina. I have had them all. They each have their own appeal. The Boss had me out to a great place in Texas, County Line BBQ. The view was incredible. The beef ribs were great.

My favorite place in the world for BBQ is still in Memphis, TN. The Commissary. Pork BBQ, with a tomato based sauce. They do everything well.

One of the key pieces that you can measure quality at every BBQ shack you’ll ever go to is the quality of their hot links. If it’s authentic, they make the links themselves. It’s skill.

The links show the creativity of the place.

They key to great BBQ is cooking low and slow over a longer period of time. Then, it’s all about the sauce. People tell me I make a pretty mean BBQ sauce. Here is the recipe. Have a great day.

Ketchup
Chili Sauce (Make your own if you can)
Lee+Perrin’s Worcestershire Sauce (quite a bit, 6tblsp)
Red Wine or Apple Cider Vinegar (around 4-6 cups or more depending)
Brown Sugar(maybe 6 tablespoons)
Hickory Smoke Powder (1 tablespoon)
Smoked Paprika, hot (6 tablespoons)
Cumin (to taste, too much and it overpowers)
Mustard Powder, or some mustard in a pinch (1 tablespoon)
Chipotle Chili powder (enough for smoky heat, not enough to make it overpowering)
Garlic powder (1 teaspoon or maybe a bit more)
Onion Powder (1 teaspoon)
Oregano (1/2-1 teaspoon)
A little cocoa powder
A little Tabasco
Salt (1 tablespoon)
Fresh ground black pepper (1 tablespoon)
Occasionally I will put some molasses in it. Darkens and thickens, adds a smoky sweet flavor.

A couple of things I am going to add next time-a teaspoon of fish sauce. It’s full of umami. That’s why the Lee+Perrin’s is nice. Umami is addicting.

The important key is to get the tang, hot, sweet thing right. The smoked paprika, chipotle and smoked powder will add the right amount of smokiness. I start with one 32 oz bottle of ketchup and then the chili sauce. I have tried to use Open Pit as a base, then reduce it by simmering it to make it more intense, but no one likes that as well.

The important thing with a sauce is to create layers of flavor that roll through your taste palette-not just heat or sweet.

If you want to make Carolina Sauce, it’s easy. Apple Cider Vinegar, Brown Sugar, Cayenne Pepper. All there is to it. Add a little mustard and you have South Carolina Q. Add a little tomato and you have a different Carolina Q.

My grill is a Primo Jr. It’s a ceramic grill, and it’s super easy to do an all day smoke on. Recommended to me by my friend Bill G., who is a big shooter in official BBQ circles. So far, if you use the right charcoal, it’s beautiful. I don’t recommend Cowboy Charcoal. My friend Moshe from Make It For Us recommends Royal Oak Lump.

Fire up the smoker, pour yourself a neat glass of bourbon and wait. With BBQ, you should drink an American craft beer. Wine doesn’t hold up, unless it’s champagne.

Happy Father’s Day.

Related articles

• 10 Summer Grilling Tips + Zesty BBQ Ribs Recipe
• 5 Unthinkable Healthy BBQ Meals
• BBQ- Italian Style
• Paleo Ribs in a Smoker Bag

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If you have never been around angel investing or venture capital, you probably haven’t seen a pitch deck. A pitch deck defines in broad terms what the business is about. It’s designed to spark more question and answer, and eventually investment in the firm.

PRISM is a new startup out of Washington DC. Would you invest?

The post New Pitch Deck You Have to See for Startup Called PRISM appeared first on Points and Figures.

Cheetah (Photo credit: fatedsnowfox)

External employees can create market based solutions to problems because they have to survive in the market.  Some call it having the “pulse” of the market but it’s more than that.

Cheetahs have to survive too.  They hunt and if they don’t catch anything, they die.  Cheetah’s have evolved so that there body is like a highly innovative corporation.  The New York Times had an interesting article on cheetahs.

They also found that a cheetah can slow down by as much as 9 m.p.h. in a single stride — a feat that proves more helpful in hunting than the ability to break highway speed records. A cheetah often decelerates before turning, the data showed, and this enables it to make the tight turns that give it an advantage over its fast and nimble prey.

“Its muscles are very powerful,” Dr. Wilson said. “They’re arranged in a way that gives it the ability to accelerate very quickly.”

Along with those leg muscles, cheetahs have a flexible spine and big claws that give them a great deal of grip — “more grip than even a motorbike,” as Dr. Wilson put it. This anatomy helps the cats get their feet in the right positions to turn and maneuver.

While the cheetah has big centrally planned systems in its body for forward propulsion, it gives massive empowerment to the most external pieces of its body.  It’s claws.  When it senses a change in the market, i.e. direction of prey, it changes direction on a dime.

Using your most external employees to drive change through your organization can mean the difference between survival, and bankruptcy.

The post Want to Be Innovative? Be A Cheetah appeared first on Points and Figures.

plane crash (Photo credit: Antibubbles)

If you are young, the gold standard for corporate innovation is a company like Google ($GOOG) or Apple ($AAPL).  They come out with new products and create new streams of revenue all the time.  Wall Street puts pressure on other corporations to be more like them.  Those companies make innovation look easy, so why can’t everyone do it?

If you are of my vintage, the gold standard for an innovative company was $3M.  Ironically, in the later 1980′s and 1990′s, Apple was considered a stick in the mud.  Microsoft ($MFST) was the innovator.  3M is an innovative company and rolls out new products that contribute to its top line revenue all the time.   Again, they make it look easy.

In my initial research, I wondered what are the impediments to corporate innovation?  Why is being “corporate” an acronym for being in a straitjacket?

There seem to be a lot of ways to say the same continuous problem that stops corporations from being more innovative.  It’s a people and policy problem.  Even small businesses have the problem.  Fred Wilson’s blog today outlined one:

A few things about that infographic. The placed I’ve checked into the most, The Coffee Shop, is a place I will never go to again. Sometime in early 2012, I was treated badly by a hostess, and on the way out I vowed never to return. I haven’t and won’t.

Here are some impediments that corporate executives have identified.  I know a fair amount of corporate executives from across the spectrum of industry, and the dominant  topic those conversations revolved around was:  Corporate Culture-it’s not designed to take risk; it’s set up for perfection (Six Sigma Processes).

In effect, it’s an organizational design problem. A people problem.  Not a technological or functional problem.

Two examples.

When I was a sales rep for 3M, I was talking to a parts manager at a GM ($GM) dealership.  He told me GM was giving them fits on returns and it was costing his department a lot of money.   “Could you put Post-It adhesive on a tape?”, he asked.  I immediately called my boss, Harry Toussaint.  I relayed the problem to Harry.  Within around two weeks, I had rolls of tape to take to parts managers that were specially cut.  I handed them out and tracked the results.  I wasn’t the only sales rep with the tape.  Other reps across the country in other branches were doing the same thing.  Within two months, a corporate marketing person, John Zoia, came down from Minnesota and travelled in the car with me, talking to customers.  Within eight months(and it might have been sooner, I can’t remember), we rolled out a new product which is in the Auto Trades line to this day, Post It Tape.

That tape was a door opener at GM dealerships for 3M sales reps. No doubt they sold ancillary products out of the catalog because of that product.

Because of corporate culture that I learned in training, I felt empowered to act.  It was a part of my job description.  Once I relayed information, my boss carried the water for me in the company.  At each level of management, they all had been empowered to take action, and could make decisions.  3M spent some money, did a test, and then tracked the results.  The marketing manager’s job description was to take research out of the lab, take information out of the field and synthesize it into new products.  Upper management gave them the power to roll out new items.  Sometimes those things failed and it cost money.  Sometimes it didn’t.  But they weren’t afraid to fail.

Contrast that to my American Airlines experience.

American Airlines isn’t worried about innovation.  They don’t see themselves in the innovation or customer business. Airlines worry about operations.  Get people on planes, get people off of planes, and keep the planes working and in the air.  Planes on the ground cost them money.  Get randomization out of processes to save costs.  People are an impediment to operations.

A different business with some of the same principles is hotel operations.  Do you know why people love to stay at the Ritz Carlton?  It’s because they have a culture of innovation.  They empower employees to take care of problems.  Don’t focus on the money in this quote, focus on how the problem or perceived problem was solved.

My wife and I enjoyed a Ritz-Carlton experience this year. During one especially busy time at the hotel’s restaurant, the waiter apologized for the wait, gave us complimentary appetizers, and paid for our desserts. When I asked him why he did so he said, “I’m empowered to keep my guests happy.

Ritz Carlton employees use two words a lot, “Certainly”, and “My Pleasure”.  It says a lot about how they approach business.

Airlines also understand supply and demand economics exceedingly well.  See how prices for seats change over time.  They have first, second, third and in many cases fourth and fifth degree price discrimination.  The milk as much money out of each customer as they possibly can, and try to keep as much producer surplus (microeconomically speaking) to themselves-giving consumers very little.

Airlines are Six Sigma operators.  That’s why when one little thing goes wrong it’s a massive hassle to change anything.  A weather pattern flows through, guaranteed money loser for airlines.  It’s clear, their culture isn’t designed to be innovative.  Is there anyone that loves their flying experience from start to finish with airlines?  It’s the worst part of the job according to my friends that fly all the time.  Like going to the dentist.

Prior to the weather, I realized that I had incorrectly booked my travel.  I wanted to rebook.  On Southwest ($LUV), no charge.  They are the only airline that does that to my knowledge. On American, massive issue.  A $200 charge to rebook on a ticket that cost $341.00.  In this case, it wasn’t a space issue since the flights at that time were not even close to full.  An empowered employee that had been trained to be customer focused would have seen a flight that wasn’t full and made the change for free.

I wound up changing it the day before for $75.

Then the weather hit.  Massive delays.  I got to the airport early. I checked my bag through the new bag self checkout and went to the gate.  The gate was crammed with people.  No where to sit, or hardly stand.  My flight was delayed, and instead of giving a realistic time for take off, every fifteen minutes, they moved the time about ten minutes.  At the last minute, they moved the gate.

I was late to the gate.  The lady behind the counter said they had closed the door and reassigned my seat.  I wasn’t going to be on the flight-but my bag was.  Houston, we have a problem.

Because of logistics it made no sense for me to travel.  So, I told the gate agent my problem.  She pointed me to a phone bank of four phones and said I could talk to someone there that could handle it.  I went, finally got an agent, and then that agent told me I could get back on the flight.  I explained that it had left the gate.  I said, “I want a refund, and I need my bag delivered to my place in Chicago.”.

At that point, an empowered American employee could have followed Marshall Field’s rules for dealing with customers.  ”Give the customer what they want.”  Put another way, “The customer is always right.”.  Put in Lean Start Up vernacular, “If you don’t build what your customer wants, and don’t listen to them, you will be out of business.”.

Last I checked, American was coming out of yet another bankruptcy.  Airlines go bankrupt all the time because they don’t value their customers, they value operations. Customer service isn’t a point of innovation for them-and it permeates the organization.  Think, how quick were they able to deploy wifi in a cabin?  Years.

The person on the phone told me there was nothing they could do, talk to the gate agent.

So, I went back to the gate agent, and she said, Nothing I can do, talk to a customer service agent.  There was one right there, she said, nothing she could do.

This is why American’s get sick of dealing with faceless corporate bureaucrats, and don’t see a difference between very large corporations and government agencies.

I went to the ticket counter.  I explained my situation there, and that person had to get a supervisor.  They were the first people that could do anything to rectify the problem.  But, while they tried they weren’t empowered to take care of it.  But their virtue is they explained everything clearly so I understood.  I asked them if they had the authority to make decisions, and they said they didn’t.

Ironically, that’s why you see a lot of automation at the front end of airports.  The airlines don’t see their front facing employees as true customer service reps-they are just machines.

To rectify the problem, I had to go through two separate departments.  Baggage and customer service.  I went to baggage, and that guy gave me a number to call.  He didn’t have the authority, but had the number.  Remember, at this point I have dealt with five separate people, each could have been empowered but wasn’t. Neither was he.

I called. I spoke to a person, then was put on hold.

Eventually, the call dropped-so I got on the L.  I began Tweeting about it.  Eventually the @Americanair twitter told me to DM them. Once home, I left a message on their Facebook ($FB) wall.  Via Twitter and Facebook, I got a full refund, and hopefully my bag will get back to me today-delivered to my residence.  Why do their social media platforms accomplish what people can’t?

At each step of the way, the corporate culture of the airline is not to innovate.  Innovation is problem solving.  Airlines have not set up their companies to solve problems.  They set them up to operate like a machine.  One slip up and someone gets hurt.  Their goal then is to minimize the damage to themselves, not their customers.  It’s a one way street.

Innovation starts at the top.  99% of CEO’s will say their company values innovation.  It’s what shareholders want to hear.  But, unless  they empower employees, they won’t innovate.

Executives get worried about risk. They make decisions from fear.  What if the American execs had empowered someone at the airport to take full control and solve the problem?  All they see is money out the door because a machine isn’t working.  But the reality is, they lost a customer.  Once people read this, they might lose even more customers.  I guarantee that 90% of customers view flying as a commodity so they are indifferent on airlines-except I am hearing different things about Southwest.

Companies that don’t innovate don’t create economic incentives for their employees to problem solve and innovate.  Google pays an employee up to $1M dollars for an idea that is implemented.  There is economic incentive to solve problems.  Solving problems means getting in touch with customers and finding out what they want.

This is also why when undertaking due diligence with a startup, it’s critical to find out what pain point they are solving.  Is it a real pain point?  Or an iterative feature?  Big corporations can iterate on existing features because it’s a low cost way to make them stickier to customers.  But, startups need to blow up their targets in order to be really successful.

Execs at other airlines probably think Southwest is profitable because of their operations, which have been programmed to be incredibly efficient.  They also think it’s because of their success at hedging jet fuel-another operational risk management process.  But they are wrong.

Which airline makes money?  Which handles their customers more like Marshall Field?

The post Can Corporate America Innovate? Only If They Solve Problems For Customers appeared first on Points and Figures.

I was talking to some people that are responsible for innovation inside their companies.  They were intrigued by co-working.  It’s a great way to work. I find Regus way too sterile.

The post Desktime Pitches at Technori Pitch In Chicago appeared first on Points and Figures.

Hope the Hawks can win Game 2. Winning in Boston won’t be easy.

Here are some old highlights just after it wasn’t the Original 6 (expansion in 1967)

I am headed to New Orleans today.  National World War Two Museum board meeting and Victory Ball.  If you can’t join us, a donation to the museum would be much appreciated.  Donations are important in building the museum-but what’s really important is to make a trip there.  If you have a living person that lived through the war, bring them along.  The museum jogs a lot of memories for both the battlefield, and the home front.

The post Wow, What A Game appeared first on Points and Figures.

However, most startup companies fail.  It’s a highly risky proposition.  The city of St. Louis would be better off if they invested the money in a no load mutual fund that replicates the S&P, and let the private sector solely invest in startups.

But, what can cities do to engender a startup community?  There must be some role, right?

In fact, there is a role for cities to play, but it’s not a Lead Actor.  Cities are more like the key grips and best boys that work behind the scenes on a movie.  Cities aren’t going to win Academy Awards.  But, they can enjoy the process.

Here is a checklist of things cities can do to try and create an entrepreneur ecosystem:

1.  Open all their data to entrepreneurs.

2.  Have very little, or no costs to open up a business

3.  Low property taxes so building owners can charge lower rents

4.  Provide a good educational system-or have a charter school/private school/voucher system

5.  Keep the streets plowed, the sidewalks level and crime low.

6.  Have no regulation and don’t use city laws to codify legacy businesses.  Example, Uber and existing cab companies or food trucks.

7.  Make the process simple so a city can become a customer of an entrepreneur-then remit payment on time.

8.  Charge no income taxes.  Encourage your state to eliminate its income tax.  Have low sales taxes so money changes hands easily.

9.  Use the city’s media soapbox to publicize local entrepreneurs.  Spread the good news in the church of capitalism.

10.  Use the cities network to create connections from entrepreneurs to big companies.  Encourage big companies to hire failed entrepreneurs.  (Hewlett Packard used to hire failed entrepreneurs all the time at the beginning of Silicon Valley)

11.  Realize your place in the ecosystem.  If you want a startup community to grow and thrive, let it be lead by entrepreneurs.

State governments can eliminate all taxes on building an entrepreneurial business, and investing in them.  Nowhere should any government organization invest or set up an agency to support entrepreneurs.  Let them build the community they want to support themselves.

In other words, stay out of the way.

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