Ask any venture investor. They would love to slather their startup investments with Nair. Why? Because every deal has unwanted hair – one or more significant flaws which make the deal imperfect. Savvy entrepreneurs also understand this reality. As a result, they do everything within reason to reduce the hair on their adVenture before they seek investment capital.

Startup hair is often related to two key issues, (i) the experience and maturity level of the Core Team and (ii) the adVenture’s stage of maturation. These two factors can counteract each other. For instance, if a Core Team is relatively inexperienced, but the adVenture is generating revenue, has a cadre of satisfied customers and a reasonable path to sustainability, then the operational risk associated with the Team’s limited experience is significantly mitigated.

Conversely, if the adVenture is in the product development, pre-revenue stage, the operational risk is reduced if the Core Team has a relevant track record of success. These two criteria are obviously not exhaustive of the factors investors consider when evaluating a venture investment. However, when these two risk factors are evaluated in tandem, the results can be enlightening, as depicted in the following four-by-four.

Who Loves Ya?
A Kojak deal is one with virtually no hair. In the above example, it represents a deal in which the management team has applicable experience and the adVenture’s business opportunity has been validated. Much like the fanciful storylines of the 1970s Kojak TV show, such deals are largely fictional.

Kojak deals command hefty valuations, which are advantageous for the operators, but ironically represent a form of hair to potential investors. As such, no matter how perfect a deal may seem, there are usually countervailing factors which will make the deal less attractive to a subset of potential investors. To quote the lollipop-sucking star of Kojak, the fundraising process is a painful way to determine, “Who loves ya baby?”

They’re Creepy and They’re Kooky

At the other extreme, Cousin It deals are covered with hair. Just as you cannot see Cousin It’s face in the 1960s TV show The Addams Family, Cousin It deals are so inundated with hair that it is often impossible to see the opportunity that might lie beneath. In the above example, management may lack relevant experience and the business opportunity is unproven. Such deals are best funded by customer dollars until the opportunity is adequately proven and/or management accrues an acceptable level of experience. Even if you soak these creepy, kooky deals in metaphorical Nair, it will likely only result in unsightly burns and itching, making the deal no less difficult to fund.

Despite the Kojak and Cousin It extremes, most deals that qualify for serious evaluation by institutional investors are Nair deals. These deals comprised both attractive and troubling attributes. No matter how attractive the opportunity, there are always risk factors that detract from a deal’s desirability. Entrepreneurs must proactively identify such concerns and either Nair them away or devise a reasonable story which acknowledges the problematic issues and explains why they will not materially impact the adVenture’s chances of success.

Throw Hubby Under the Bus

After many months of discussions with a promising software company, our venture fund declined to invest in the company, as the Founders were not willing to address the hair on their deal. In this instance, the Founders were married. The wife was the CEO and her husband was heading up sales, product development and customer service. Rather than proactively address the concerns that such a familial relationship raised at their startup, the Founders denied that it was “an issue.” As a result, we decided to not invest in the company.

My favorite counsel to someone who has a poor rapport with his or her boss: “If you have a problem with your boss, then you have a problem.” This same sage advice can be applied to a Nair deal. If your investors have a problem with your deal, then you have a problem. Denying an issue or trying to convince an investor that he or she is “wrong” are generally not viable strategies.

In the case of the software company, Nair could have been applied in the form of hiring other senior, strong-willed executives who could counterbalance the input of the married Founders. Although this would not have eliminated the issue, it would have mitigated potential investors’ concerns that the company might become a myopic dictatorship run by two very closely aligned people. Augmenting the management team with senior talent would also reduce the risk that deterioration in either the Founder’s marriage or the job performance of one of the Founders would fatally impact the organization.

Shining, Gleaming, Steaming, Flaxen, Waxen

Deal hair, just like the real thing, comes in a variety of colors and styles. Some of the most common types of deal hair include:

Junky Capitalization Table – A hodgepodge of small investors that could cause potential headaches for management and/or institutional investors.

• Nair Solution – Repurchase as much stock as is practical and convert any remaining preferred stockholders to common stock status.

Untenable Bridge Terms – Convertible debt terms that are prohibitive to an institutional investment, such as large discounts and/or warrant coverage that dilutes the intuitional investor’s investment.

• Nair Solution – Marginalize the relative dilutive impact of these terms. For instance, a discount of less than twenty percent is usually deemed reasonable. In addition, converting warrant coverage to non-participating status will also enhance your adVenture’s fundability.

Band of Brothers – Friends, family, former roommates and other unqualified people occupy senior management positions.

• Nair Solution – Replace such mis-hires with strong-willed, independent executives who have relevant, successful track records.

IP Confusion – Questionable ownership of key intellectual property, including non-exclusive licenses, potential infringement of a third party’s technology and/or inappropriate use of open-source tools.

• Nair Solution – In most failed adVentures, the only asset of value upon dissolution is the underlying intellectual property. As such, it is paramount that investors can unequivocally evaluate its veracity.

Legal Landmines – No matter how frivolous, lawsuits will seriously chill investors’ interest.

• Nair Solution – As noted in Roping In The Legal Eagles, it is generally advantageous to fight nuisance lawsuits to avoid becoming known as easy mark for unscrupulous lawyers. However, when fundraising, it is more appropriate to expeditiously resolve any litigation (potential or otherwise), rather than expend energy convincing a skeptical investor that your legal issues are without merit.

Geographic Dispersion – Significant physical separation of Core Team.

• Nair Solution – During an adVenture’s early days, virtual teams are often viable. However, as a company accelerates its growth by deploying its institutional funding, the Core Team cannot afford to be handicapped by disparate locales. As such, the Core Team should be prepared to relocate to a central location within a reasonable period after obtaining funding.

Way Outsourcing – Outsourcing core competencies.

• Nair Solution – Identify the areas of your adVenture that are critical to its success and internally develop the necessary levels of core competency. For instance, technology startups should maintain key development resources in-house, rather than relying exclusively on third-party, contract labor. If your business model is predicated on superior online marketing expertise, do not utilize consultants to craft and execute your online marketing initiatives.

Double Agent – Problematic agency issues, such as high salaries, non-entrepreneurial perks (car allowances, exorbitant travel expenditures, etc.), side businesses and/or cross-ownership of related businesses.

• Nair Solution – The addition of disciplined, experienced investors to your adVenture team will require you to run your business with a focus on creating long-term value. As such, eliminate any unconventional forms of compensation or other potential areas of Agency conflict before you are forced to do so by a prospective investor.

Before you seek investment capital, do what you can to make your adVenture smooth and shiny, with no nicks or cuts. Although judicious use of metaphorical Nair on your adVenture will help your fundraising efforts, it is often also necessary to unequivocally acknowledge the remaining deal hair. It should be shampooed, conditioned and styled in the most attractive manner possible. Trying to cover up deal hair with a cap and deny its existence is not a viable strategy. If you remove and groom the hair on your deal, there will be no doubt as to “Who loves ya baby?”

***************************

Special thanks to Jim Andelman, Founder and General Partner of Rincon Venture Partners (www.rinconvp.com) for his hairy suggestions.

— Get hands-on advice from your Uncle Saul, Subscribe Today. —

Copyright © 2008 by J. Meredith Publishing. All rights reserved.

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Hint: It is not a mouse.

The fact that you likely cannot name this creature confirms the reality that ideas are cheap.

All too often, inexperienced entrepreneurs struggle with sharing their ideas with potential investors, Donors and others who might be in a position to help them. The next time you wonder if it is safe to share your ideas, recall the fate of this long-eared, anonymous cartoon character.

Oswald The Unlucky Rabbit

After struggling for over five years, Walt Disney and his brother Roy scored their first hit with Oswald the Lucky Rabbit. Unfortunately for Oswald and Walt, Universal Studios, which owned Oswald’s intellectual property rights, assumed that Oswald’s initial success was formulaic and could be readily replicated.

Universal severed its relationship with Walt Disney, hired the majority of Disney’s creative team and began creating Oswald cartoons. Although an additional 140 Oswald episodes were produced over the next 14 years, none of them was nearly as successful as the first 26 installments, which were developed under Walt Disney’s tutelage.

Meanwhile, Walt tweaked Oswald, morphed him into Mickey Mouse, and parlayed the highly derivative mouse’s success into the $50 Billion Walt Disney Company.

Ideas Are Worthless

What was the inherent value of Walt Disney’s idea to draw an anthropomorphic rabbit?

Zero.

What was the inherent value of Walt Disney’s idea to draw an anthropomorphic mouse?

Zero squared.

Outside of adVentures based on hard science, most entrepreneurial ideas have a similar inherent value – zero.

The value of Walt’s ideas laid in their execution: the storylines’ humor, which appealed to both children and adults, the quality and believability of the animation and the intangible degree to which audiences could relate to and empathize with the on-screen characters.

Conversational Foundation

Some entrepreneurs confuse the identification of a market to be served or a customer pain to be assuaged with valuable ideas. Institutional investors are seldom presented with unique inspirations. Most businesses are based on variations of established themes, such as new ways of solving old problems and old ways of solving new problems. A potential or even partially implemented solution generally does not warrant rabid protection.

As noted in Your Personal Pitch, entrepreneurs must take chances and judiciously discuss their ideas, plans and dreams in order to bring their adVentures to life. If an entrepreneur does not share her thoughts, it will be impossible to marshal the necessary resources, recruit investors and inspire employees to join her adVenture.

Simply talking about your idea is seldom risky. As long no propriety information is disclosed, such discussions will almost never result in adverse consequences. However, as noted in the discussion of Big Bad VC, below, you must consider the capability of your audience (and their surrogates) to take advantage of your idea when deciding with whom to speak and how much detail to include in each discussion.

Parlay, Protect, Promote

Although it is true that businesses are built upon a foundation of conversations, there are a number of judicious things you should do to protect your idea while you are sharing it.

One inexpensive way to protect your idea is a provisional patent. The U.S. Patent Office allows one year from the date of a provisional filing before a formal patent application must be filed. A provisional filing allows you to publicly discuss your idea with potential Donors and Stakeholders. Such feedback will help you craft your definitive patent application.

Another simple means of protection is a Non-Disclosure Agreement (NDA). This agreement precludes the party that receives the confidential information from sharing it with others and, in some cases, from using the information for his or her own gain.

If you attempt to protect an idea too early, you risk expending energy and resources protecting an unworthy, ill-formed idea. Thus, it is important to exclusively discuss your ideas with trusted parties before you spend the time, money and effort to protect them.

Walt Disney learned the importance of owning his ideas the hard way. Despite the urban myth that Oswald was stolen from Walt Disney, the reality is that Walt never owned Oswald. This lack of ownership was a mistake that Walt Disney did not repeat. He never again allowed another party to control the destiny of his cartoon characters or his adVenture. As noted in (Non)Sense Of Entitlement, successful entrepreneurs uncompromisingly control their own destiny. To this end, properly protect your intellectual property before you promote it.

Who’s Afraid Of The Big Bad VC?

When attempting to raise money, reticence to share your idea will be perceived as amateurish and will cause most sophisticated investors to assume you lack the maturity and judgment required to lead a successful adVenture.

However, a bit of trepidation when dealing with Venture Capitalists (VCs) is wise. De facto protection in such discussions is difficult to secure, as most VCs will not sign an NDA during the initial stages of your discussions. There are pragmatic reasons for their reluctance, so do not argue the point.

If your dialog progresses to the point that it is necessary for you to communicate sensitive, proprietary information in order for the VC to fully evaluate your opportunity, entering into an NDA might be appropriate. However, during the early stages of your discussions, you will sound naive if you ask a VC to sign an NDA.

No reputable VC will steal your ideas. Note the operative word: reputable. As with any professional interaction, do your homework and know with whom you are speaking. You must have an adequate depth of knowledge of your target market(s) and where your idea or technology fits into the respective market ecosystems in order to determine how much information you can safely disclose.

Reputable VCs militantly protect their reputations. The cost of compromising their ethical standing is far greater than any gains they might achieve by co-opting your ideas. However, if you seek funding from a VC that has a potentially competitive company in its portfolio, you are placing your adVenture at risk. With no malicious intent, it is quite possible that a VC might communicate your business plan to a portfolio company which has the necessary knowledge, resources and inclination to transform your ideas into a business.

This unfortunate sequence of events occurred at a Voice-over IP company that I (many years later) tangentially helped go public. During the company’s initial stages, management made the mistake of communicating its plans (to create an Internet fax service) to a VC that had a telecom startup in its portfolio.

The portfolio company was struggling with its initial go-to-market strategy when the VC suggested that they consider the viability of the Internet fax market. The portfolio company subsequently refocused its product development efforts and entered the electronic fax market before the unfunded startup.

In this instance, did the VC steal the idea of delivering faxes over the Internet?

No. I would not characterize their actions as “theft.” The idea of Internet faxes was not unique; PC-initiated, phone-based faxes had been introduced nearly a decade previously. However, the fact that the technological infrastructure had evolved adequately to enable an Internet-based product was not readily apparent to the struggling portfolio company. Once the VC alerted them to the opportunity, the portfolio company applied significant resources, at great risk, to exploit the idea. As such, simply alerting the portfolio company to the Internet fax opportunity was worth little – the value was derived from the hard work that was required to turn the idea into a profitable venture.

Lesson learned? Before disclosing the basic premise of your idea, determine whether or not your audience is in a position to leverage your idea, either directly or via their affiliations.

Oswald Comes Home

Nearly 80 years after its creation, the Walt Disney Company purchased the rights to Oswald the Lucky Rabbit. Now Oswald stands side-by-side his heralded cousin Mickey, as an infamous example of an idea’s relative lack of value in the absence of unyielding execution.

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A startup-oriented lawyer may not be able to convince a jury of a guilty man’s innocence, but they can guide your adVenture through the menacing legal shoals it will no doubt face. Working with startup lawyers also minimizes the risk of losing control of your adVenture, as they can help you avoid common fundraising and investor pitfalls. Such attorneys can also add tremendous value in your negotiations with Big Dumb Companies (BDCs), as they can ensure that you focus on the deal points that are of most significance to a small entity. As such, a startup-oriented lawyer is a critical member of your extended adVenture team.

Substance Over Form

As outlined in Beware the Consultant, be wary when selecting a professional services firm. Often, the Rainmaker with whom you initially establish a relationship will not be your primary point of contact once the Engagement Letter is signed. As such, you must be comfortable with all of the team members who will work on your engagement. In addition, there is often an inverse relationship between a firm’s size and the amount of attention that you will receive from experienced professionals. The larger the firm, the less “quality” attention you may receive.  Do not be swayed by the hundreds of other startups the firm represents. Remember – you are hiring a lawyer, not a law firm. Before you sign an Engagement Letter, obtain written assurance that your lawyer will directly attend to your matters and that you will not be shuffled off to become a training ground for the law firm’s junior associates.

Like most mature markets, the legal profession is highly segmented with respect to the services provided and markets served. Even so, the majority of firms focus on servicing well-established BDC’s. Fortunately, in most communities, there are usually a few firms that cater to the specialized needs of startups. As noted in Nature vs. Nurture, startup lawyers tend to congregate in entrepreneurial enclaves. As such, your likelihood of finding an experienced, top-shelf startup lawyer will be higher if you place your adVenture in a geographic region which enjoys a strong entrepreneurial ecosystem.

Some startup attorneys will accept a portion of their initial fees in the form of equity. This will allow you to defer a portion of your of up-front legal costs. In addition, such an arrangement will further cement your lawyer’s incentive to help you succeed. When you hit the inevitable bumps in the road, a lawyer who has an equity stake in your business is more likely to be flexible with respect to payment terms and more willing to give you quick, off-the-clock feedback and guidance. Ensure that your lawyer’s goal is to establish a relationship, not just a retainer. If you are charged for every nanosecond you spend with your lawyer, consider finding one who is willing to “invest” more aggressively in your success.

When managing your legal affairs, never lose sight of the fact that your lawyer works for you. It is surprising how often entrepreneurs forget this simple fact. Your lawyer is a trusted advisor, but in the end, you run your business, your lawyer does not.

In Search of an Oxymoron - The Ideal Lawyer

When assessing a potential lawyer, consider the following criteria:

Yes Man - Many lawyers think that their job is to say, “No.” You can only hope that your competitors are working with such lawyers. Search until you find a businessman in lawyer’s clothing who will respond to your inquiries with replies such as: “Yes, here’s how we can do that.” In other words, find a lawyer who will take the time to understand the issues underlying your business and advise you how to best accomplish your objectives while minimizing your legal exposure. Such a lawyer will help you look at all sides of each deal, as outlined in Agreements From The Fringe.

Independence - Be cautious of any lawyer recommended to you by one of your investors. The reference may be well-intentioned, but the lawyer’s allegiance may be divided between the investor and you. Such a lawyer will not go out of their way to screw you, but when crafting the investor documents and in future investor-related issues, your lawyer’s allegiance must be to your company. He or she must be willing to fight for your company and go toe-to-toe with your investors. A lawyer with a long-term interest in keeping one or more of your investors happy might sacrifice your company’s best interest at a critical juncture in order to remain in good standing with the investor.

Act Like A Three-Year-Old – Do not be afraid to frequently ask your lawyer, “Why?” Your lawyer should be willing to explain the legal issues that impact your operational decisions. Ideally, you will be fortunate enough to find a pseudo-professor who is willing to take the time to explain the issues at hand. I established such a relationship with a fantastic lawyer and he taught me a great deal over the 10 years we worked together. Even though you will, to some extent, pay for such training in the form of billable hours, understanding the why of the law will ultimately save you money, as you will eventually be able to answer many basic legal questions on your own. However, be respectful of your lawyer’s time and acknowledge the fact that they have multiple clients. In addition, believe it or not, a few startup lawyers actually have a life outside of their legal practices.

In order to get the most out of your discussions with your lawyer, take one or more Business Law classes. A basic understanding of common law precepts, contract law and business law is one of the most important academic foundations you can utilize in your startup. If taking part-time evening courses is not possible, seek out an online curriculum.

Money Is Time

No matter how entrepreneurial your lawyer is, he ultimately is in the business of trading his time for your money. Thus, the burden of maximizing the return on your legal dollars is squarely on your shoulders.

Drop Dead Deadlines - Your lawyer cannot read your mind. Thus, every time you submit a request to your lawyer, make it very clear when you really need a response – this will help your Legal Eagle to effectively manage his time and ensure that he meets your expectations. This is a courteous, professional way to manage your relationship and will also benefit you. If you do not cry “wolf” every time you request something, your lawyer will know when something really is urgent and they will do whatever is necessary to meet your deadline. Nothing is more frustrating for a lawyer than to work late into the night in response to an urgent request, only to have the client not act upon the response for several days.

Draft First – As the businessperson with the most intimate knowledge of a particular deal, you should draft as much of the “business-oriented text” of your contracts as possible. At the very least, you or the appropriate member of your team should document the primary deal points in bullet-point form. The more specifically you document the business terms, the fewer iterations will be required to finalize the agreement. Even a highly attentive, business-oriented lawyer cannot put himself in your shoes. They do not work at your company, so there is no way they will have your insights. Thus, the more work you do upfront to document the business issues, the less you will ultimately be charged and the more closely the agreement will reflect the spirit of your verbal negotiations.

There is no magic language which makes an agreement legally binding; in fact, in most cases, the simpler the text, the better. Many a binding contract has been written on the equivalent of the back of a napkin. Once you draft the straightforward text, sans the legal mumbo-jumbo, ask your lawyer to review the text to ensure your layman descriptions do not result in an unintended interpretation. As noted in Tom and Huck, plans and agreements written in plain language reduce confusion and benefit all parties. If you select the right lawyer, he will not load up your text with gratuitous legal jargon (leave that job to the BDC’s legal squad).

Bill Review – Believe it or not, lawyers and their staff are human (insert “gasp” here). They make mistakes. Just as you expect your accounting department to review your corporate credit card bill, you should always take the time to review your legal invoices. Your lawyer should provide you with detailed bills that describe each charge. Ensure that whomever has the closest working relationship with your lawyer reviews the bills for potential billing errors.

Sometimes You Do Get What You Pay For

Just as you would not ask your family physician to perform a coronary bypass, do not ask your corporate lawyer to help you write your patent application. Most corporate attorneys can give you general guidance with respect to securing your Intellectual Property (IP) rights, especially with respect to trademarks, copyrights and other non-patent-related items. However, you should seek a patent attorney when it is time to craft your patent application.

As noted in Frugal is as Frugal Does, entrepreneurs on The Fringe only spend their cash on items that add value to their adVentures. However, they also know when it makes sense to save money and when it is appropriate to pay a premium. The money you pay your IP lawyer should be judiciously spent, but you should not attempt to save money by working with someone without the appropriate experience in your technical domain. Familiarity with the relevant “prior art” is one of the most important considerations when crafting a patent. You do not want your IP lawyer to learn the prior art associated with your technology on your dime. Save money on your office furniture, not on your IP lawyer.

Appropriate patent “design” can allow you to later add related claims, yet still have the benefit of the initial filing date. It can also ensure that your patent is not too broad, which might make it indefensible, or too narrow, which might limit its applicability and thus its value.

In the eyes of a potential acquirer, your IP may be one of your most valuable assets.   You cannot rely on the IP lawyer to coax such vital information from you.  Similar to the process of creating a contract, you or the appropriate technical person on your team must first document the novel and unique technical aspects of your solution. In order to enhance its value and reduce the risk of someone easily circumventing your solution, you cannot abdicate responsibility by relying solely on an IP attorney to translate your technology into a patent application.

Your Lawyer is not a Doberman…

Do not be litigious – you cannot afford the loss of focus or the energy required to use the courts as a weapon. It is also unlikely that you will have the financial wherewithal to successfully wage legal battles. Some companies use lawsuits as an arrow in their competitive quiver. Rather than trying to tear down competitors by suing them into financial ruin, spend your time building value within your business.

… but They Make Great Guard Dogs

When you are sued and you are “in the right,” your lawyer may advise you to settle the case in order to put the lawsuit behind you and minimize your cash outflows. Do not do it. Repeat: do not act “rationally.” Even though it may cost you more money in the short-term to fight a fallacious lawsuit, when viewed from The Fringe, it is clear that such spending is a sound investment.

Spending your precious dollars to earn the reputation in the legal community as an irrational entrepreneur who will fight frivolous lawsuits, even when it is in your economic best interest to not do so, is money well spent. The last thing you want is to become an easy mark for unscrupulous lawyers who make a living filing extortionist lawsuits. There is a small army of smarmy lawyers who share “tips” regarding how to extract money from honest, hardworking entrepreneurs such as you. They also trade lists of “easy marks” – companies that roll over when faced with a frivolous suit.

Go Nuclear

During the Cold War, the Russians were fearful of President Nixon because of his heavy drinking and erratic behavior. His threats carried weight, as the Russians could never be sure of his stability or rationality. With one finger on “the button” and a bottle of Jack Daniels in the other hand, they were forced to keep their distance. It is difficult to imagine Brezhnev invading Afghanistan knowing that Nixon was wandering the halls of the White House late into the night in varying states of sobriety. Unfortunately for the Afghans, President Carter poised no such threat to the Russians.

When it comes to nuisance lawsuits, make it clear to the predatory legal community that you are Nixon and the bar is open. Demonstrate that you will act irrationally and outside of your own best financial interests to ensure that every lawsuit filed against you is lengthy and expensive for both sides. Clearly communicate that you have no intention of performing a quick ROI calculation and deciding to pay off the predatory lawyer to “make him go away.”

If you can successfully convey that the lawsuit will be an expensive effort for both parties and that you do not intend to fold, the predatory lawyer will see that the payoff is not there and they will move on to easier prey. Remember, even an unscrupulous lawyer’s time translates into money. If you make it clear that you plan to force them to spend as much time as possible on your case, then they will be more likely to move onto a company that will pay them off early in the process and thus net them a better return on their time.

The rash of spam lawsuits from a few years ago is a good example of how two-bit, loser lawyers who cannot make an honest buck go after companies who are trying to do the right thing. One of my adVentures was hit by several such lawsuits and we refused to pay any sort of settlement. Only one of these cases ever made it to court.

Here Comes The Judge

When we arrived at the courthouse, the judge required us to first meet with the smarmy lawyer and attempt to work out a “settlement.”  The lawyer was right out of central casting – he was as creepy a cretin as you can imagine. He initially tried to “settle” for a thousand dollars to “cover his travel costs.” He then asked for “a couple hundred dollars” and encouraged us not to bother taking the case to court so we could “get on with our day.” After a lot of fake smiles and attempts at launching an ingratiating conversation, he finally gave up when it became clear that we had no desire to pay him anything.

Once the case was brought in front of the judge, she levied the lowest possible fine she could impose: $80. She was very unhappy with the smarmy lawyer because her docket for the day was filled with his nickel-and-dime lawsuits. She berated him for bringing such petty lawsuits into her courtroom and told him that each case would be settled for the minimum fine. Sometimes justice actually does prevail.

Judas Suits

If Judas were around today, he would probably get a smarmy lawyer and sue Jesus, rather than turning him over to the Romans.

Treat nuisance lawsuits brought by disgruntled, former employees in the same manner as those filed by a predatory lawyer. If you settle, not only does there appear to be an admission of guilt, your largesse will also encourage future lawsuits. If you feel you treated the former employee fairly, invest the dollars to show the world that you will spend wildly to protect your principles – do not let your lawyer talk you into acting “prudent” and settling.

Most employee lawsuits are brought on a contingency basis, in which the lawyer attempting to perpetrate the extortion only gets paid if: (i) the former employee wins the case and is awarded monetary damages or, (ii) the company pays the former employee to make the case “go away.” Otherwise, the employee’s lawyer is not compensated for the time they put into orchestrating the shakedown. You can greatly reduce a contingency lawyer’s appetite for a particular case by making it clear to them that you are Nixon and they are Brezhnev.

You can also greatly reduce the risk of employee lawsuits with a few simple preventative steps:

• Employ consistent and disciplined hiring procedures, including background checks, backdoor references (i.e., speak with at least one person who knows the applicant but was not included among the applicant’s references)

• Require all employees to sign iron-clad invention assignment and confidentiality agreements

• Enforce the employment policies defined in your Employee Handbook and requiring all employees to sign a form acknowledging that they have read the Handbook and agree to abide by its policies during their tenure

• Document all personnel issues, including the specific steps an employee placed on probation must take in order to avoid termination and whether or not the employee abided by the terms of the probation

• Include two company employees in all personnel meetings with a problem employee and take contemporaneous notes during and immediately following the meeting

• Encourage terminated employees to sign a release which absolves your company of all liability before the termination process is completed

A good startup lawyer will help you establish such policies and agreements from the outset of your adVenture.

BDC Bark vs. Bite

The bark of a BDC lawyer is often much greater than their bite. The usual approach of the BDC lawyer is to initially deal with an entrepreneurial company in a highly aggressive and threatening manner, in the hopes that you will be intimidated and scared into following a particular course of action.

Hold your ground. As every entrepreneur on The Fringe is well aware, BDC’s are most concerned with limiting their liability. Although they may bark loudly, they know that the US courts lean toward the “small guy” and thus they will think long and hard before doing anything that may expose them as a corporate bully.

I once received a very aggressive letter from a Fortune 500 BDC who felt that our remote access product was being used improperly by certain users to circumvent the BDC’s licensing scheme. They demanded that we send them our entire customer list and that we issue a letter to all of our customers indicating that they were not to use our product in violation of the BDC’s licensing terms. The indicated that if we did not promptly comply with their request, they would seek an injunction that would shut down our company.

This ludicrous demand is akin to asking the phone company to send a letter to all its customers telling them not to use the telephone to make prank calls and that if it does not send such a letter, its ability to offer phone services will be discontinued. Just like the phone, our remote access product was simply a tool. Some people will use a tool for the greater good and others will use the same tool for a nefarious purpose. We certainly did not encourage or even make it very easy for users to violate third-party licenses. However, if some of our users did misuse our products, it clearly was not reasonable to threaten our viability with a blanket injunction.

I called the BDC’s lawyer and “nicely” made it clear to him that his letter was insulting and that there was no way we were going to send him a list of our customers, let alone issue a letter to our users asking them to use our product “legally.” I also suggested that if his BDC was so worried about users violating their licensing scheme they might consider revising their legacy, shrink-wrap license to reflect modern Internet usage. Although he was not happy that we did not kowtow to them, we never heard from him again.

In another instance, we received a very strident letter that indicated that one of our product’s URLs was causing “confusion” with a BDC’s URL. However, surprisingly, if we agreed to pay a significant amount of money, the BDC would overlook this “confusion.” Hmmmm … does anyone smell extortion in the air?

Once again, I promptly responded to the overly aggressive letter with a quick phone call telling them that we felt their assertion was ridiculous and we would welcome the chance to prove it to them in court. As with the BDC with the legacy licensing scheme, we never heard from them again. The key to our success in both instances was that we had the guts to speak with them voice-to-voice and communicate our willingness to fight their assertions in court. We did not allow the situation to escalate by sending warring letters back and forth. Get on the phone and let them hear the irrational resolve in your voice.

Capitan and Navigator

Your lawyer may be the most important member of your extended adVenture. The difference between a great lawyer and a good lawyer is startling and you will know it once you experience both.

Despite the importance of this relationship, your lawyer is not driving the bus. They will often sit shotgun, to act as your navigator and help you reach your destination. However, you are in the driver’s seat. It is up to you to fill the bus with the right people, ensure that the gas tank never runs dry, and keep the bus moving in the right direction.

To paraphrase the late, and not so great, Johnny Cochran, “If the lawyer don’t fit, then you better split.”

I rest my case.

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Copyright © 2008 by J. Meredith Publishing. All rights reserved.

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Anger at receiving bad news is a natural human reaction. Sophocles, Shakespeare and the Bible all reference the killing of the bearer of bad news. When someone is critical of your adVenture, it is natural to dismiss the detractor and even demonize them to undercut the validity of their message. Fortunately for your competitors and detractors, you do not have a license to kill. However, as an entrepreneur, you do have a license to thrill.

Every successful entrepreneur must eventually learn to delegate. An even more challenging skill is learning what to delegate. As noted in PR Passion, shaping your adVenture’s messaging is not something you should leave to others. Control your messaging by crafting it yourself and exciting your messengers to the point that they willingly deliver your company’s message on your behalf.

Energize your messengers and encourage them to tell your story in a spirited, fervent and accurate manner.

There are a variety of ways to control the messaging delivered by a trusted third party. The most direct manner is to create your messages in the form of third-party quotes, articles and product reviews. In many cases, once you gain the trust and respect of your messenger, they will welcome your help crafting the messages.

Validation Proclamations

Sometimes finding a powerful messenger is a matter of timing and luck. For instance, during the early stages of one of my adVentures, I Bro’d up with a Vice President at a large Internet Publisher. During a casual conversation, he said something to the effect of, “Your product is great, our users would be nuts to not try it.” I asked him if I could quote him on that, to which he agreed.

We added his company’s logo next to the quote to enhance its impact and proceeded to use it for the next several years, displaying it on millions of banners, landing pages and promotional emails. We preformed extensive “A/B” marketing tests with and without the quote and the ads that included the quote consistently outperformed their non-quote counterparts.

Lesson learned? Do not underestimate the influence that such seemingly innocuous endorsements can have on your adVenture, especially during its early stages.

At the outset of your adVenture, you may be forced to rely on endorsements from friends and family. However, over time, your growing credibility will allow you to obtain validation proclamations from progressively more and more influential messengers, as shown in the following table.  Such validation proclamations often begin with a simple endorsement quote and may eventually evolve into more powerful and collaborative messaging, such as a joint press release, if you properly cultivate your relationship with the messenger.

Progressively Increase The Number of Validation Proclamations Delivered By Your Messengers

I Will Quote You On That – Write Stakeholders’ Quotes

I have written hundreds press releases in which I drafted the quote attributed to the other party associated with the release, (i.e., the partner, customer, distributor, etc.).  In nearly every case, the Stakeholder accepted my suggested quote with no changes. When changes were made, they were generally immaterial. In fact, it was more common for a company to refuse to include any quotes from their employees, as opposed to heavily editing a quote drafted on their behalf.

Take advantage of this rare opportunity to put words in someone else’s mouth. In order to ensure that the other party will approve your quote, compliment the Stakeholder, while making a strategically important statement about your company. For instance, you might put the following words in a Partner’s mouth, “As the market leader, we are always looking for best-of-breed solutions to incorporate into our award-winning products.” Identify your Partner as a “leader” while they tell the market your solution is “best of breed.”

Most people are busy, some are lazy and a few are both. As noted in Your Personal Pitch, do all the heavy lifting for your Stakeholders, including drafting their quote. I wrote the two sample quotes shown below. Both were attributed to senior Fortune 500 executives and both were virtually unchanged from my initial draft:

First Example

“Small Company’s fast, easy interface and high levels of security present an ideal solution for the large and growing number of Big Dumb Company (BDC) customers who need to access and work on their office PCs from remote locations,” says Executive X, BDC’s Communications Group President.  “This alliance reinforces our commitment to offer both our narrowband and broadband subscribers the highest-quality services for enhancing their experience on the Internet.”

In this case, it was important to communicate that our product was secure and that it worked in both narrowband and high-bandwidth environments. By directing an executive from a notable company to parrot this positioning on our behalf, we were able to gain significant market validation.

Second Example

“We are committed to providing BDC members and Web users with the very best in online tools, content and convenience,” states BDC Executive X. “By leveraging Small Company’s products, users have greater flexibility to be productive on their desktops from any online location. Small Company’s product is a great application for making the BDC Service and the BDC brands an even more central and valuable part of our members’ daily lives.”

In this example, we wanted to sign up additional Internet Service Providers (ISPs), so I referenced the value that we brought to our ISP partners. I also reinforced our end-user value proposition (i.e., a work productivity solution that enabled users to seamlessly work remotely).

As previously noted, most of the quotes I wrote for partners were published verbatim. However, in some instances, the BDC did make some modifications. Even when changes were made, the final quote usually retained the key aspects of our desired validation proclamation.

Below is an example of an initial quote, followed by the final version that was included in a joint press release with a BDC. The salient points, which were carried over from the initial quote I drafted, are shown in bold.

Initial Quote Submitted To Partner

“The ability to quickly and seamlessly share a remote desktop within our chat solution, even via a dial-up connection, is a feature that many of our customers are demanding. This feature greatly expands the utility of our CRM solutions, as customer support agents can escalate a chat session to a shared desktop session and address an issue directly on a customer’s PC. This functionality will decrease the length of customer support sessions and increase their effectiveness. Our extensive investigation of the remote control market led us to conclude that Small Company’s solution is the best-of-breed remote control solution.”

Final Quote Released By Partner

“The technology integration stemming from this partnership will make the <BDC’s Product> even more appealing to companies seeking ways to optimize customer satisfaction through rapid resolution of inquiries while at the same time keeping operational costs down and simplifying the ways in which employees work with customers. The ability to quickly and seamlessly share a remote desktop through <BDC’s Product>, even via a dial-up connection, is a feature that many of our clients are demanding,” said Executive X, BDC’s senior vice president of worldwide alliances, business and market development. “Our extensive investigation of the remote-control market led us to conclude that Small Company’s solution is a high-quality solution offering clear value to our clients.”

No Comment - Avoid Too Many Quotes

At BDCs, press coverage often serves a branding function. As noted in Pulp Facts, a startup’s press coverage should stimulate revenue. One way to facilitate revenue creation is to quote the member of your team who is primarily responsible for the particular issue addressed in the release.

For instance, a partnership announcement should reference the VP of Business Development, while a product-oriented release should include a quote from the appropriate product executive. This approach makes it easier for third parties, such as industry analysts and potential partners to contact the appropriate member of your team. If you only quote the CEO in each release, you are increasing the friction associated with getting a third party in front of the right person in your organization.

When drafting your quotes, avoid PR clichés like, “pleased, delighted, excited.” If you cannot think of anything more creative than, “We are delighted to partner with XYZ” than consider excluding quotes in your release. These words are so overused that they have lost all meaning in a PR context.

Avoid an excessive number of quotes. For partner-oriented releases, two is usually adequate (one from each partner), unless it is germane to include a quote from a customer or Industry Analyst. Irrespective of the release type, in most instances, a single quote from a member of your team should be adequate. At one startup I was associated with, both the Chairman and the Founder insisted on being quoted in nearly every release (see Founderitis for more background regarding this particular adVenture). This sort of ego indulgence can cause your company to appear unsophisticated and amateur.

Partner Piggyback – Leverage Your Partners’ PR Channels

Bilateral releases that include a quote from both parties are the most impactful type of Partner release. Bilateral releases are issued both by your firm and the BDC and thus garner significantly more attention than a release distributed solely by your company.

A bilateral release with a quote from your company, but not from the BDC, is the next most effective type of Partner release. In such instances, consider adding a customer or Industry Analyst quote to bolster the third-party validation of your message.

An even less-desirable Partner release is one in which the parties independently issue unilateral releases. The obvious downside of this approach is that you cannot control the content of the BDC’s release and thus it is likely that the manner in which your company is depicted in such a release will be diminished. In fact, it is possible that your company may not even be mentioned in the BDC’s version of a unilateral release.

Last in the Partner-release pecking order is a unilateral release that does not include a quote from the BDC. If the BDC will not even allow you to specify them by name, do your best to describe them in such a way that even the most casual dolt can figure out which company you are referencing.

A Joint Release With A BDC Quote Is The Most Desirable Type Of Partner Release

Ultimately, the least desirable form of Partner release is the one that is never issued. As noted in Kiss Of Death, maintain control of your public relations strategy when negotiating agreements with BDCs. In some BDC partnerships, the public validation you derive from your association with the BDC will be the most valuable aspect of the relationship. As such, do not relinquish your ability to control your PR destiny when partnering with a BDC.

All The News That Fits Your Message – Video News Releases

A Video News Release (VNR) is a brief, two- to three-minute video that your company creates and distributes to local news affiliates across the country. TV stations have the option to show it intact with your narration, or they can localize the piece by overdubbing the script using one of their on-air personalities. Larger, more enterprising stations will occasionally edit the video and rewrite your script. However, in most instances, just as most press release quotes are published by BDCs unaltered, most TV stations run VNRs with no changes. VNRs can be very powerful, as they couch your messaging in the context of news.

As noted in Kiss Of Death, incentivize the VNR distributor with a performance-based bonus, predicated upon the number of TV stations that pick up your release. This will encourage them to promote your VNR more heavily and to leave it in rotation for a longer period of time than they otherwise would.

VNRs can be produced economically. You can spend as little as a few thousand dollars per release. One way to reduce the cost of your VNRs is to shoot footage for several concurrently. In this way, you can interview your Industry Expert on several subjects in one sitting, changing their wardrobe at the start of each interview, in order to give the appearance of multiple, disparate interviews. You can stretch your production dollars even further by utilizing B-roll footage shot in one sitting in multiple VNRs (e.g., screen shots of your website, people using your solution, etc.).

If your VNR is an overt sales pitch, it will not gain wide exposure. Care should be taken to discuss the “problem” and list various “solutions,” one of which includes your product. Include in your script phrases such as, “Products like, <your product> have proven effective” or “There are a number of solutions on the market, including <your product>.”

For instance, at one of my adVentures, we devised a VNR that focused on what to do during a natural disaster or significant weather event. Included in the preparation tips was the suggestion to “subscribe to a remote access solution” in order to work from home when weather or any other uncontrollable circumstance made it impossible for the viewer to commute to their office.

One technique we used to camouflage our sales pitch was to direct the Industry Expert to reference our product rather than include our product’s name in the narrator’s script. In addition, rather than saying our company’s name, we displayed a screen shot of our website, emblazoned with our corporate logo while the voice-over narration generically described the various solutions to whatever problem the VNR was addressing.

The Danger Of Improv

In addition to their status as “news,” VNRs are highly effective because they are delivered by TV – a costly and powerful advertising medium that is otherwise not available to most startups. The power of TV was made clear to me during the late 1990s, when I was introducing one of my adVenture’s medical robots to the world’s top cardiac surgeons. A top-rated TV show, “ER,” incorporated our robots into several episodes.  I was a bit appalled by the extent that our robots became more real, to these highly intelligent people, by their inclusion in a fictional, high-brow soap opera. Value judgments aside, Hollywood’s use of our robots as props significantly helped us in our missionary sales efforts.

Although we were delighted with the validation our robots gained from their use as TV props, it was a dangerous dance with potential disaster. We did not have any direct influence on the scripts and thus we could not control this powerful messenger.

For instance, one of the proposed plot lines was for our robot to lose control and injure a patient. This was clearly detrimental to our claim that our robots were always under the surgeon’s direct control and thus could not become “rogue” killers. After we threatened to remove our robots from the set, the scriptwriters rewrote the script and made the robot a source of conflict between two of the surgeons. One surgeon feared that the introduction of robotics into the operating room would result in patient injury and another was depicted as a visionary who believed that robots represented the future gold standard of medical care. We were pleased, as the visionary surgeon was one of the show’s attractive protagonists, while the other surgeon was a bald curmudgeon. This storyline was carried through several episodes, viewed by tens of millions of people and fortunately no fictional characters were killed by our robotic props.

Ghosting For Journalists – Generating Article Content

Although journalists and editors will not relax their editorial standards to the point of shilling for your company, they are often willing to utilize text written by companies and incorporate it into their articles and reviews. As noted in Pulp Facts, an effective way to work with media gatekeepers is in the guise of an industry opinion leader.

By creating verbiage to be used by a journalists, you can guide the manner in which journalists describe your industry, the users’ pain points, etc., such that it is congruent with your company’s messaging.

One way to have your language accepted by editors and journalists is to submit it in the form of an article. Often, the byline for such articles is the company’s CEO. This approach can work for trade publications, but most popular press publishers will not print articles written by CEOs. However, if you give the publisher the latitude to reference such “CEO text” in an article or product review, you may be surprised by the extent to which such text is repurposed verbatim.

Antiparalysis Analysis – Spoon Feed Product Reviewers

Setting the proper expectations of Product Reviewers is one of the most important determinants of whether or not you will be skewered or obtain a positive review. For instance, at one of my companies, we released a minimally viable product that could not compete with the more established products on a feature-by-feature basis. Our value proposition was in our solution’s simplicity and ease of use. However, to the uninitiated, there was a risk that our product would seem thin and not suitable for our target market of prosumers.

Fortunately, we effectively managed the messaging surrounding our product by clearly defining our positioning vis-à-vis the existing offerings. We invested considerable time with journalists, discussing our product’s proper place in the market in order to ensure that any comparisons with competitive solutions would be done in the proper context.  A significant portion of the text we created and provided to journalists found its way into a number of articles, analyst reports and product reviews.

License To Thrill

Extra! Extra! Read all about it! You have a license to thrill and you are not afraid to use it.

Reducing all aspects of uncertainty associated with your adVenture is something you should do whenever possible. You can reduce the uncertainly of what others will say about your adVenture by thrilling your messengers and exciting them to tell your story off of your script.

— Get hands-on advice from your Uncle Saul, Subscribe Today. —

Copyright © 2008 by J. Meredith Publishing. All rights reserved.

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The answer may lie within successful, yet cash-strapped organizations that lack the ability to grant their employees stock ownership, lucrative performance bonuses or other incentives often deployed by entrepreneurs.

How are such organizations able to recruit and retain talented and motivated team members?

Make Money Not Strife

On its face, how could the Marine Corps and the Peace Corps be similar? One is primarily populated by short-haired, nationalistic conservatives while the other generally comprises long-haired, one-world liberals.

Despite the divergent personalities attracted to each respective corps, the tenets that motivate achievement and foster high morale within these institutions have broad applicability to most startups. The following chart depicts the characteristics shared by these otherwise disparate organizations, both of which foster a high level of esprit de corps and unify their respective teams toward the accomplishment of a common goal, while paying salaries which are far below market rates.

 The Marine and Peace Corps Share A Surprising Number of Organizational Characteristics

Sense of Purpose, Mission Clarity & Group Identity

One of the most obvious similarities between the Marines and the Peace Corps is that all members of each organization understand and identify with their organization’s overarching mission. The fulfillment of the organization’s mission is the source of a powerful sense of purpose that motivates the team to persevere, even under extreme stress, fatigue and duress. The clarity of the group’s mission eliminates ambiguity and allows each member to focus on how they can contribute to the fulfillment of the organization’s mission.

The existence of a common enemy also helps bring both organizations together. The Peace Corps’ enemy might be diphtheria, cholera or the lack of adequate shelter. The Marines’ enemy is often more easily identifiable.

The focus on defeating a common enemy under arduous conditions engenders tremendous camaraderie. The feeling of “we are all in this together” is a binding force that money cannot buy. As noted in Frugal Is As Frugal Does, care should be taken to not make life too comfortable at your startup. A durable solidarity arises from overcoming adverse and stressful circumstances.

The respective groups’ slogans also offer clues as to their similarities: “The toughest job you will ever love” and “It’s not just a job, it’s an adventure.” Unless you are familiar with the ad campaigns, it may be hard to identify which slogan applies to the Peace Corps and which is used by the Army, a close cousin to the Marines. The Marines’ slogan, “The few, the proud, the Marines,” serves to further establish the group’s identity as an elite organization comprising high achievers.

Give people a reason beyond financial wealth creation to be excited about your adVenture. You may not be able to send your employees to Zimbabwe in order to satisfy their sense of philanthropy, but there certainly are things you can do within your organization to make it “more than a job.” Not every venture can claim to be world-changing, but when possible, communicate a greater good from which your team can obtain psychological rewards.

At one of my startups, we helped create the medical robotics market. The non-monetary, psychological rewards were quite clear, as we helped doctors perform minimally invasive surgical procedures that previously were conducted highly invasively. Our robots allowed patients to walk out of the hospital within hours of surgery, rather than suffer a painful recuperation that could last as long as eight to ten weeks, in the case of cardiac surgery.

At my remote access software company, we relished the fact that we allowed working parents to spend more time with their children by leaving work early to attend school plays, soccer games and other important events, while having the ability to finish their work in the evening, from home, once their children were in bed. Helping busy professionals address their work/life balance may not “save the world,” but it makes a positive difference in tens of thousands of peoples’ lives. Celebrate such positive impacts made by your startup as a means of filling your employees with a sense of purpose beyond your products’ more obvious features and benefits.

You can also inject a sense of greater purpose by encouraging your team to become involved in one or more local charities. Establish a mechanism by which employees can work together to further a charity’s mission, rather than just giving their money. For instance, at one of my startups, we sorted food in a local food bank once a month. This gave people from different departments a chance to get to know members of our team whom they would otherwise have little interaction with at the office.

Educational Opportunities

The educational opportunities afforded members of the Marines and Peace Corps are usually outside a traditional classroom setting. Both organizations require members to gain life skills that can be utilized for the remainder of their professional career.

People learn and grow when they are given the chance to solve problems on their own, rather than follow a recipe. It is impossible to teach someone how to solve all the problems they will encounter at a startup. However, you can instill within your employees the courage and confidence they will need to autonomously solve problems as they arise. Not everyone will thrive in such an environment, which is why hiring the right type of individual is especially important during your adVenture’s early stages (see Finding An Entrepreneurial Gem).

One of the most fulfilling days at one of my startups was when it became apparent in an Executive Staff meeting that a major problem had been resolved without the involvement of any of the senior executives. Previously, this had not occurred, as the organization was still relatively early in the maturation process. It was very gratifying to know that we had created a culture in which our employees were comfortable confronting and resolving major issues without relying on a member of senior management to give them tactical directions.

Personal Fulfillment and Ability To Make An Impact

Both the Marines and the Peace Corps allow their members to gain professional and personal fulfillment. Such fulfillment is often derived by the ability of a member to witness the direct impact of his or her efforts. In the case of a soldier, it might be saving the life of comrade. For a member of the Peace Corps, it could be saving the life of a villager by administering antibiotics, cleaning a flesh wound or generating potable water.

Another way to make a low-paying, difficult job more rewarding is to foster an environment that allows employees to reach their personal potential. For instance, allow employees to take on as much responsibility as they can effectively manage. If someone in the Peace Corps says, “I think I can fix that dilapidated water pump,” no one will say, “Step aside, that’s not your department’s responsibility.”

Bill Hewlett and David Packard understood this principle at a time when most organizations relied on a highly centralized management structure. They realized that HP’s employees and customers would both benefit from an organization in which responsibility was delegated as close to the customer as possible. According to Mr. Packard, “…our success depends in large part on giving the responsibility to the level where it can be exercised effectively, usually on the lowest possible level of the organization, the level nearest the customer.”

The Marine Corps is a rank-driven, hierarchical organization. At first blush, it may seem antithetical to the typical startup. However, when confronting their enemy, soldiers are empowered to define the specific tactics necessary to carry out the overarching strategic goals defined by the generals. This is especially true during times of crisis. For instance, a squad may be given the strategic order to “take that hill;” however, the manner in which the hill is taken is left up to the squadron commander and his or her troops. As your adVenture grows, there will eventually be too many hills to take for you to dictate the tactics in each case. As noted in Founderitis, entrepreneurs must exercise judgment regarding which hills to conquer directly and which ones to delegate to others, in order for their startup to grow and prosper.

Lousy Cash Compensation, No Equity, No Bonuses

Numerous studies have shown that cash compensation is a temporal motivational tool. In the near-term, it can positively impact morale and enhance productivity. However, in the long run, most employees are more motivated by non-cash factors, such as personal growth, the “meaning” inherent in the organization’s mission and non-cash “trophies” which publicly validate their efforts.

In addition to the strong sense of unity and pride associated with exclusivity and the sense of accomplishment from helping to achieve the group’s mission, the Marines and Peace Corps offer their employees other forms of non-cash compensation. For instance, the Peace Corps afford their volunteers the chance to travel to remote destinations they would likely not have access to via commercial travel agencies. Such wild places are quickly becoming yet another domesticated corner of our largely homogenized world. As such, the chance to experience pristine locales is highly valued by Peace Corps volunteers.

Marines have access to discounted food at the commissary and often are provided with free base housing. I am not suggesting that you create a “company town,” in which employees shop and live in your stores and housing. However, elements of such non-cash compensation can be highly valued. This can include free meals, on-site dry cleaning services, etc. Billions of dollars worth of software code has been fueled by free pizza and gallons of Red Bull. However, do not fool yourself. Great cultures are not solely built upon free Cheetos and diet sodas.

Marines also have the opportunity to engage in activities that are unattainable in the private sector, such as flying planes, operating sophisticated weaponry and driving exotic vehicles, many of which cost hundreds of millions of dollars. Although you cannot afford your employees the chance to land a jet on an aircraft carrier, you should be able to motivate your personnel by allowing them to do things that would be unattainable at a BDC. For instance, at one of my startups, I was able to lead an initial public offering while I was in my mid-30s. I had no prior experience and frankly I did a heck of a lot of on-the-job learning (and I had a lot of help along the way). At a BDC, I would have never had the chance to lead such an effort. Look for similar opportunities you can make available to your employees as further incentive for them to accept the risks inherent in your startup.

Can’t Buy Me Love

 You cannot buy your way to success when recruiting employees for your startup. However, you can establish a culture in which employees are motivated by the shared sense of purpose and the organization’s overall mission.

If the Peace Corps can motivate volunteers to travel across the world and endure extreme personal discomfort and the Marine Corps can inspire people to place their lives in harm’s way, you certainly can devise a culture, mission and compensation structure that motivates your team without breaking the bank.

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Copyright © 2008 by J. Meredith Publishing. All rights reserved.

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