ZENtrepreneur

Zen | 10 | Universe

2008-12-29T13:03:00.001-05:00

To a mind that is still, the whole universe surrenders.

Chuang-tzu

The absolute most difficult task of an entrepreneur is to find inner-peace while everything around them is chaotic. It is more than simply the inability to relax - it is a deeper problem of conflict - where an entrepreneur is in a constant state of anxiety. It is near impossible for an entrepreneur to stop the mind - but it is critical you learn how.

The first step in allowing your mind to become still - is removing the feeling of guilt that you feel when you are not working. So many entrepreneurs are not able to stop, because they equate stopping to failure or laziness. Entrepreneurs are only comfortable when moving, in a chaotic way - toward some objective... and cannot live in the moment.

But there is something powerful in a mind that is still. There is a level of enlightenment and clarity that is difficult to achieve when in a constant state of movement.

As the mind becomes still - it will begin seeing all of the current challenges, opportunities and events as moments in time. Where they have no permanence, but rather are just experiences that have a beginning and an end. A still mind will force and allow you to focus.

Zen | 9 | Speed

2008-12-11T13:00:00.000-05:00

There is more to life than increasing its speed.

Gandhi

Everything you start as an entrepreneur has a pace. Some ventures have a fast pace. Some don't feel like they are moving at all. In either case, there is a danger of failure. Ventures require momentum, but the market sets the pace. A Zentrepreneur looks for the perfect balance of both.

It is more important to focus on the Path, than it is to focus on the Speed of a venture. If your venture is on the wrong path, then the speed you move will only drive you to certain failure faster.

The easiest way to accept that Speed is not crucial to success, is to look at any company (new or old) and how they were able to leverage and learn from the failure of companies before them that focused on Speed and not Path. You can be an innovator to a fault. If you take your venture too far beyond market demand, and too fast down the path - you will not be able to convert the innovation into revenue. This is one of the primary reasons why it is so difficult to commercialize technology out of University labs - because Professors typically push the limits of innovation with no concern (and no need) to commercialize their invention. There are a few that have closed that Gap, and those Universities have been the drivers of the new generation of technologies (e.g. Google, Yahoo, etc).

Many times entrepreneurs believe their idea loses value as the market matures, but it is the exact opposite. Only bad ideas lose value over time. Good ideas prosper as more competition enter the market, and as more customers begin to buy.

Just as Gandhi, appropriately said "There is more too life than increasing it's speed", there is more to a Venture than increasing it's speed. Of course Gandhi was referring to enjoying your life, and stop focusing on tomorrow - but I believe it speaks to the same point - which is focus on the essentials of life - the essentials of your venture.

Zen | 8 | Quiet

2008-08-11T13:03:00.008-05:00

The quieter you become, the more you are able to hear.

Lao Tzu

There is a power that very few entrepreneurs leverage when starting their business and even operating their business. The power to listen.

There are three primary causes that I have seen in entrepreneurs who refuse to listen to advice.

The first cause is the ego. It is natural that entrepreneurs have above average ego's, especially young entrepreneurs - but when it blocks genuine advice from colleagues, investors or even customers, it becomes a liability that many times leads to failure.

The second cause is silence. Most entrepreneurs don't seek advice or conversation for that matter, and so they work in a vacuum and they have no critics or mentors. One of the most effective causes of innovation is conversation. If an entrepreneur does not invoke conversation, then there typically is very little innovation.

The third cause is bad advice. Many entrepreneurs I have met are unable to distinguish between good advice (with good intent) and bad advice. So although they take initiative to listen, they are unable to qualify the source. And when they take bad advice to heart and fail, they assume all advice is bad and become unwilling to seek advice from someone new.

Despite these causes, many entrepreneurs have learned the power of "Quiet". It may take a while to consciously remind yourself to seek advice and listen intently, but the quieter you become, you will begin to see the benefits of this powerful tool.

In every business you have a cast of characters. There is the entrepreneur, customer and typically an investor. When you are starting a new company, you may think that the only value potential customers can only offer is money - but you are wrong. In any business, the feedback and advice from both investors and customers is more valuable than money. It is by listening, that you are able to finance your business, build a better product and close sales. Too many entrepreneurs build a product in a vacuum and try to "force" it down the throats of investors and customers. These businesses typically never get finance, and never are able to succeed selling product.

By being a "quiet" entrepreneur and listening to the market, you can expand and mold your ideas to fit the demand. Instead of trying to convince thousands of customers to listen to you - focus your effort on listening to them and then build a company that serves there demand.

If you think about the process of innovation, it is not driven by a single voice going to door-to-door convincing each person that they need their product - but the opposite. Innovation is driven by the entrepreneur who stops and listens to what the masses want, and then build a product that provides them the solution.

Zen | 7 | Idea

2008-08-11T12:55:00.016-05:00

An idea that is developed and put into action is more important than an idea that exists only as an idea.

Buddha

Everyone has a great idea. Very few take action. And of those very few - even less know how to take action.

There is a "action gap" between an entrepreneur and a Zentreprenur. A Zentrepreneur believes an idea only has value if it has action. Many (so-called) entrepreneurs believe that an idea with a business plan has value. To be blunt - it doesn't.

Before we discuss how to take action on an idea. I first want to discuss different "types" of ideas.

IDEA TYPE 1: The "Big" Idea

This is the classic "Think Big" type - where the entrepreneur wants to build something bigger-than-life, and not necessarily looking at just solving a problem but instead changing the landscape of the market. Some classic examples of this type of idea would include Disney World and FedEx.

There are very few entrepreneurs that can pull these type of ideas off, because they require a lot of industry credibility, capital and typically a lifetime of work. Another aspect to a "Big" Idea is the difficulty to start. Some businesses can start small, and they can scale to become large companies (e.g. Walmart) - but the "Big" Idea companies really start "big". FedEx started with a few jets and grew into hundreds of jets - but on day one, the company needed tens of millions of dollars just to open business. These are high risk - big return ideas, but takes a special entrepreneur to take action and succeed.

IDEA TYPE 2: The "Cookie-Cutter" Idea

The Cookie-Cutter Idea is based on a simple principal - "If it works here, it will work anywhere". When you look at companies like Starbucks, Walmart and Subway - these are Type 2 companies. They start as one store, and refine their business - and then with capital start to duplicate the store across the globe.

This type of idea requires less capital, but more patience. Starbucks operated for many years before scaling across the country. The first store has to be successful, produce operational history and show promise in being successful in other markets. Many times companies like this leverage franchising (e.g. Subway) to open new stores - which is another complex model for scaling the business.

Overall, this type of idea relies heavily on the concept in order to scale to different geographies. Unlike technology businesses, this type is based on geo-based marketing and addressing a demand not served by other "big box" companies. Some entrepreneurs look to an existing franchise with a known brand and solid operating history as their idea. This is sometimes a better approach if you lack a good idea and experience in operating.

IDEA TYPE 3: The "Garage" Idea

The Garage Idea is the classic "Silicon Valley" Idea. Where two guys in a garage come up with an idea and build a product on a boot-strap budget. These type of ideas tend to be based on technology because the funding requirements are much lower for a tech business than a bricks-n-mortar business. A Garage Idea relies heavily on the product and its unique value proposition to a market. Unlike Type 2 business where the product is more of a commodity (e.g. coffee, burger, etc) and you focus on market share.

Some examples of Type 3 Ideas are Microsoft, Apple, Google and probably 90% of all tech businesses in the world. Although these companies can build a product for little capital, in order to scale the businesses many times they require significant capital to market the products to a global market. And unlike Type 2 businesses where they can focus on a small geographic region and have limited competition, a Type 3 business has a wide range of competitors looking to build the next best version of their product.

IDEA TYPE 4: The "Novel" Idea

This is not too different than Type 3, but the origin of a Type 4 idea is much different. The Type 4 idea is the idea that you always say "Man, why didn't I think of that?". It is the obvious solution to a small problem. It is the classic "back scratcher" concept, that typically solves a common problem we all experience.

Some great examples of Type 4 Ideas are TV Remote Control, Post-It notes and Smoke Detector. These ideas took a very small problem, and created a practical solution. Many of these ideas rely heavily on "patent" protection, which does require some capital but nothing compared to starting a company. An entrepreneur has an option on whether they want to launch a company, or simple license their patent (if they get one issued for the idea). Like a Type 2 idea, this requires patience (Patents can take more than 5 years to be granted).

Of course, some ideas are a combination of these types. The reason to outline each type of Idea is to give some perspective on how to take action on ideas. Not all ideas are the same.

So, the first step in taking action on an Idea is to define the type. This will help you analyze what it will take to turn the idea into a reality. Lets start by looking at Type 1 Ideas. The bottom line is that very few people can pull off a Type 1 idea. These are BIG ideas that need more than just an inspired entrepreneur. When you talk to a lot of people with "ideas", they typically fall into this category. In my mind, this is why so few entrepreneurs take action, because Type 1 Ideas require much more than ambition and willingness to work - they require a lot of capital, years of experience, and typically a life long investment of work to accomplish the action.

You will here a lot of people say things like - "I have this great idea - why don't we invent a plane that runs on water?". Of course, this idea would be a big hit - but the reality is that there is not only a significant amount of scientific innovation and research required, but also the capital and time requirements would be unpredictable. A great idea - but impossible to take action.

Let me repeat this statement, because I feel like it relates to many ideas I hear from entrepreneurs - "A great idea - but impossible to take action".

The Type 2 Idea is much ore realistic for an entrepreneur to grasp. They can start small, and grow with the market. The first step of action can be as simple as taking out a small business loan, or investing savings into opening the business. Most of the Type 2 Businesses don't go beyond the single store front. Primarily because the objective of the entrepreneur is to create a lifestyle business, and do not want to take the risk and invest the time and money required to scale the business.

When taking action on a Type 2 business, it comes down to having a solid business concept and enough capital to get to profitability. Many times this is not a lot of money, and I would say that most entrepreneurial businesses are Type 2 businesses. Type 2 businesses do not typically require a lot of innovation, or even a unique product - but a solid business model, a good market and a motivated entrepreneur.

The Type 3 Business is the classic "technology-based" business. Typically there is a high level of innovation and novelty to the business, and the entrepreneurs are more product-minded versus business minded. Just like Type 2 business it doesn't require a lot of capital (and in many cases it requires much less, since it doesn't have the need to lease space, buy inventory, etc). The Type 3 Business is where the terms like "boot strap" and "sweat equity" have become cornerstones of success in launching new businesses. The attractiveness of Type 3 businesses is not just in the lower capital requirements, but in the scalability of the business model. Most Type 3 businesses have a product that can be sold globally and done so "electronically" without a large sales force or massive marketing budget. Type 3 Businesses like Google and Microsoft show that the potential of scale is limitless.

In my opinion, the optimal business to start is a Type 3 Business.

The Type 4 business is based on the novelty of an Invention. If you are an inventor, then you may be able to build a business from your idea if you are able to protect the concept through a Patent, and find a way to distribute or license the product. A Type 4 business may require a little capital to file a Patent, and to find a company to help build or license the product. The Type 4 Idea is very similar to a Type 3, but the main difference is that a Type 4 Idea is about a Patentable Product that can be sold via retail distribution to businesses or consumers.

So when looking at taking action on an Idea - it is important to first analyze what type of Idea do you have, and is it realistic you can execute the idea?

A true Zentrepreneur realizes their strengths and capabilities, and accepts that not all ideas they can take action on - and more importantly that Ideas do not have to be "BIG" to be successful.

Zen | 6 | Patience

2008-08-11T11:39:00.030-05:00

A jug fills drop by drop.

Buddha

Every entrepreneur has a dream. And typically it is a big dream. Most entrepreneurs expect their dreams to become a reality in a short period of time because they work longer hours (with the idea that they will reach their destination is a shorter period of time). In fact, one could argue that many are deceived into becoming entrepreneurs because they believe this is how people "get rich quick" or "change the world overnight", but in reality being an entrepreneur is the exact opposite.

Before we discuss the importance of patience to a Zentrepreneur, lets dismiss some of the great myths of entrepreneurship.

Myth 1: Entrepreneurs must work 80+ hours a week to make a venture successful

I am not sure who started this trend, but for some reason it took off. Perhaps it was a distortion of the famous declaration - "Hard work always pays off". Either way, it is definitely one of the most damaging myths of entrepreneurship.

It seems logical - If I work twice as many hours, then I get twice as much stuff done. The fact is that working more hours does not lead to success, and more times than not, it can lead to failure. Be aware of what is important to the success of your venture and focus on the priorities of today. The daily routine should not take 12 hours a day (and if it does, you need to change your daily routine).

Myth 2: Business moves at the Speed of Light

Certainly, it seems like in this Information Age everything changes overnight. Industries like technology and entertainment seem to be evolving at expodential rates. But does this really effect how you should work?

Even though technology advances daily, it usually isn't adopted for years. It may seem like there is intense urgency for you to work harder and faster to keep up with competition, but in reality the pace is set by the market. In most markets, the customers are not moving at the speed of light, in fact many companies fail because they over-innovate and build products that are too far beyond the market adoption.

Myth 3: If we are not first to market, we will lose

One of the primary reasons I think entrepreneurs work day and night on their new ideas, is the goal of being "first to market". The ability to be first, gives them an advantage in building a brand and having no competition.

I admit that being first to market has advantages, but only when the company has the ability to effectively market their product on a large scale (which means they need to invest millions into marketing). Most entrepreneurs boot-strapping their new company don't have much money to run a national marketing campaign, so in reality being first to market doesn't really matter.

More importantly, if you look at any industry - competition is good, it helps advance markets and increase adoption of new products. So although one company may be first, does not mean they will dominate the market. A classic example of this is Google. Google entered the market last, but had a better product and better execution.

Now that we have dismissed some of the biggest myths that make entrepreneurs impatient, lets examine other reasons why patience is important.

Patience is not just about waiting - it is actively practicing Zentrepreneurship. When you are paitent, you are living in the now. By removing the anxiety and pressure of looking ahead to the future, and accepting all things are in flux is by definition being patient.

By focusing on your daily routine and executing those tasks you control - you are practicing patience. You are ignoring all those external factors that you have no control over, and thus are patient in waiting for those events to occur as they may.

"A jug fills drop by drop" says it perfectly. It is a great metaphor for multiple aspects to Zentrepreneurship.

A practical man may say "we can fill up the jug faster if we pour water using a hose". But we know, that what is important is focusing on each drop (as a step) toward our goal. The drop can represent our daily routine and the focus on NOW.

A practical man may say "if its a small jug, we can fill it up faster". Again, this interpretation goes against the practice of Zentrepreneurship. It abandons the concept of having Capacity for Experience. By shrinking the jug, you shrink your capacity for experience and therefore gain no knowledge.

By exercising Patience, you can focus on those tasks you can control. Ignore the perceived urgency and pressure that creates impatience.

Some people say success is being in the right place at the right time. I interpret this saying different from most people. If you are patient, then you can wait in the "right place" until the right time happens. It is not a cosmic crossroads where time and place suddenly connect, but in fact it is simply the exercise of patience.

If you are patient, and diligent in your daily routine - good things will happen.

Summary

A Zentrepreneur must be patient. While focusing on the NOW, a Zentrepreneur cannot afford the anxieties that lead to impatience. Patience allows you accept that all things are in Flux, and you need only to focus on your Daily Routine.

Zen | 5 | Doubt

2008-08-11T11:39:00.016-05:00

There is nothing more dreadful than the habit of doubt. It is a thorn that irritates and hurts; it is a sword that kills.

Buddha

It is practical for someone to doubt. It is easy to see why something can not be done, instead of inventing a solution or doing the work necessary to get it done.

Before we discuss how a Zentrepreneur dismisses doubt, we need to understand the root of doubt and how it can destroy innovation.

If you think about basic fundamentals of entrepreneurship it becomes clear how doubt surfaces in almost ever thought and conversation. By definition Entrepreneurship is risky. There is more that is unknown, than known. And the natural response to the "unknown" is doubt. What makes a Zentrepreneur different is how they embrace the unknown, and how they interpret risk.

Instead of looking at a problem as confirmation of your doubt, you embrace the problem as an opportunity to learn. I realize this sounds like an over simplification - but in reality this is how doubt controls your expectations on success. In truly is a frame of mind that can change the most challenging tasks you face, into the defining moments of your success.

Start practicing this "frame of mind" in your every day life. If you feel challenged, then start with problems that are small. Instead of allowing doubt become a habit, create a new habit of looking at each problem as a moment to learn. As we discussed in the last chapter, the importance of having the capacity for experience. In order to adopt this frame of mind, you need to have capacity for experience.

As we also discussed in past chapters, we refer to living in the NOW as an important aspect of being a Zentrepreneur. When you begin to create a habit of doubt, you begin to live outside of the NOW, and hypothesize what could happen in the future. Doubt is fueled by projected events and not a pragmatic thought based on the here and now.

It is difficult to envision a daily routine as an entrepreneur not riddled with doubt. It is one of the most challenging aspects of being an entrepreneur to overcome. However, if you are successful in adopting the core principals of being a Zentrpreneur and consistantly live in the NOW, focus on the daily routine and have capacity for experience - than the challenge of doubt becomes non-existent. Not because it won't exist (certainly other people will continue to have their doubts) - but because it has no relevance to what you are focused on. You have reduced your challenges and barriers to what you can control today. You take away the strength of doubt, by not focusing on future challenges, and you just have faith that your path will find its way to success.

So how do we dismiss doubt?

Re-affirm the principals of Zentrepreneurship

1. Be in the NOW - Doubt lives and prospers in the future and past. Past experiences give others ideas of doubt, and the future (unknown) events are what make doubt difficult to dismiss. As you build your path step by step, the risk diminishes and the doubt becomes non-existent.

2. Focus on your Routine - Doubt is fueled by the unknown. By focusing on your daily routine, and those tasks you can control - you are consciously avoiding anything that is unknown. Even as your routine expands and changes, you are adjusting based on experience and not focusing on hypothetical events.

3. Dismiss by accepting Impermanence - If you truly accept that all things are in flux, then you can clearly conclude that by having doubt you are accepting there is permanence. Everything is possible, because everything is in flux. Doubt can be easily dismissed, once you accept that anything can happen.

4. Have capacity for Experience - And most importantly, by expanding your capacity for experience you will learn. The problems you face are opportunities to learn. Instead of creating a habit of doubt, create a habit for learning.

Summary:

A Zentrepreneur dismisses doubt. Instead of focusing on what could happen, or all the potential variations of the future, a Zentrepreneur focuses on the NOW, and keeps their mind on their daily routine.

Zen | 4 | Experience

2008-08-11T11:32:00.013-05:00

We do not learn by experience, but by our capacity for experience

Buddha

This statement most likely goes against what you have been taught about business. For the most part - "experience" is how one is measured in the professional world. The length and depth of your resume is how you are valued as a professional, and it typically dictates your path. But is that the right way to define and value "experience"?

An Experience can range from something simple like seeing a movie or reading a book - to working at a job for 3 years. Some experience we gain through constant repitition during our daily routine (e.g. Driving a Car, or typing on the Computer). These experiences become second nature and we can perform at a subsconscious level. Other experiences are moments in time, where we are not as effected (e.g. eating at a restaurant). Some experiences we will never forget, and most we forget the minute after they are over.

So do we actually learn from every experience? No. We learn by our capacity for experience.

Let's first look at the definition of capacity

ca·pac·ity (kə pas′i tē)

the ability to contain, absorb, or receive and hold

the amount of space that can be filled; room for holding;

the point at which no more can be contained filled to capacity

the power of receiving and holding knowledge, impressions, etc.; mental ability

When we refer to the capacity for experience, we are going beyond simply the "experience" as an event in time - and focusing on the ability to contain the experience. And even beyond the ability to contain, is the mental ability to accept new experiences. So we are really talking about two aspects of learning - containing experiences and accepting experiences. Only through capacity do we truly learn.

So now that we have clearly defined 'capacity' - how does this relate to being a Zentrepreneur?

The Zentrepreneur must have capacity for experience.

To simply go through the motions of a day, without having capacity for experience will allow you to learn nothing. Although you may have many experiences in a day, you will not learn anything. In order to truly grow as a Zentrepreneur you need to learn each and every day.

Just as we discussed in previous chapters about the importance of being in the NOW, and focusing your energy on your daily routine - the ability to have capacity for experience allows you to grow as a Zentrepreneur. As you learn, you expand your ability to take control over your daily tasks, and thus expand your daily routine.

If you recall from last chapter - we said "A Zentrepreneur focuses their energy on events they control, and accepts that all other events (past and future) are meaningless."

By learning, you are able to control more events and thus expand you capacity for experience. It essentially becomes the fuel for your growth. It becomes a cycle.

The first step in embracing capacity for experience is having an open mind. Try to remove all pre-conditions or pre-notions. Be willing to experience outside what you already know. To truly learn you must embrace the unknown. The greater your capacity, the more you will learn.

Think of it like a glass. If the glass is full of water (low capacity), it will never be able to hold more water, thus never learning anything new. A Zentrepreneur focuses on growing the glass so that is has infinite capacity. Most people accept the glass as a constant, and once it is full, they settle with what they know, and do not bother with the unknown.

To accept the possibility of infinite capacity is not easy. This is why most people are not entrepreneurs and accept that their glass is full, and they become inflexible and "stuck" in their daily lives.

Once you achieve infinite capacity, you will have a sense of confidence and freedom that empowers your abilty to innovate, execute and truly build something great.

Balance this ability to learn, with your focus on the Present... and your daily routine will be highly focused and constantly growing and in flux.

Zen | 3 | Flux

2008-08-11T11:26:00.010-05:00

"Impermanence is, of course, the essential fact which must be
first experienced and understood by practice."

Sayagyi U Ba Khin

Impermanence is one of the essential doctrines or Three marks of existence in Buddhism. The term expresses the Buddhist notion that every conditioned existence, without exception, is inconstant and in flux.

Nothing remains the same for two consecutive moments. Heraclitus said we can never bathe twice in the same river. Confucius, while looking at a stream, said, "It is always flowing, day and night." The Buddha implored us not just to talk about impermanence, but to use it as an instrument to help us penetrate deeply into reality and obtain liberating insight. We may be tempted to say that because things are impermanent, there is suffering. But the Buddha encouraged us to look again. Without impermanence, life is not possible.

If you suffer, it is not because things are impermanent. It is because you believe things are permanent. This concept as it relates to Zentrepreneurship is very important. It is Impermanence that defines the entrepreneur. It is through change, entrepreneurs can exist.

As most of the world is stuck in permanence, the Zentrepreneur finds strength and path by seeing the world in a constant state of flux. It is through this lens that the Zentrepreneur can tap into innovation and continue to strengthen their ability to see the invisible.

The Practice of Impermanence:

1. Observe how things around you are changing, and adapt your daily routine. In the last chapter we discussed the importance of focusing on a daily routine and to avoid creating dependency on hypothetical events in the future. However, what is also important is to address impermanence by adapting your routine. Watch yourself change, your colleagues, your customers and the market change each day, and you will find strength in impermanence.

2. Do not trust that everything you believe is true. Your experiences of the past have a powerful influence over what you believe to be true. By holding on to these truths you are practicing permanence. Re-affirm your thoughts and beliefs each day when you are faced with an important decision. It is not just experience that enables wisdom, but the ability to accept that impermanence exists in all things - even your own truths.

3. Don't just observe impermanence, accept your impermanence. As a Zentrepreneur you need to accept that everything is in flux. As the saying goes - "Men plan, God laughs." By being focused on the plan (e.g. the future) - you are not only not focusing on the NOW but also not practicing impermanence. Accept that your thoughts, ideas and ultimately your business will change.

Summary:

All things we know are in a state of constant flux - Impermanence. The Zentrepreneur must adapt their daily routine to the flux around them, and also accept that they are impermenent as well.

Impermanence empowers you to make the changes necessary to build your path.

Zen | 2 | Routine

2008-08-11T11:22:00.011-05:00

"Zen is not some kind of excitement, but concentration on our
usual everyday routine"

Shunryu Suzuki

Once you are able to focus your thoughts and actions on the present - the NOW - the next step is to build and follow a routine. Build your routine with actions that you control and you can ultimately finish. Do not create a routine that is dependent on anything but you.

A Zentrepreneur focuses their energy on events they control, and accepts that all other events (past and future) are meaningless.

In my experiences, I have seen myself and other entrepreneurs become fixated on a future "event" that they believe will propel their business to the next level. This event can be signing a big customer or partnership or hiring someone who promises they can elevate the company to new heights. These "false expectations" can cloud your judgment and distract you from what is real and most important - your daily routine. Once you are distracted from your routine, all progress stops and you are no longer in the Present.

A perfect example of how a business can easily fail by not following a daily routine, and placing expectations on future events is in the fund raising process. When an entrepreneur is trying to start a venture, the first thought that comes to their mind is "I need to raise capital to start this business." If you really think about this statement - you can begin to see how it is a completely absurd concept. Essentially the translation of this statement to an investor is "I have no operating business, no customers and no product and I am not sure if there is a market - but I would like for you to give me money".

This statement is not only absurd to the investor, but also it shows that the entrepreneur has made a critical mistake - by making their business dependent on a future event (e.g. funding). Instead of "waiting" for funding to start the business, the entrepreneur should focus on building a daily routine to build value and grow the business.

And more importantly - the daily routine must only contain tasks that you can control the outcome. If you cannot control the outcome of a task - then you may need to reconsider your path.

For example, if you want to start a Internet e-Commerce business, and you have no experience building a web site - it may be difficult for you to control the outcome. However, a Zentrepreneur would find a way to build the website by leveraging their network and finding someone with experience to execute the task (and therefore re-claiming control of the outcome). Controlling the outcome does not mean that you must execute the task alone, it means that you are able to find the resources to execute the task.

Here is a sample Daily Routine that I use for one of my businesses that may give you guidance on building your Routine.

DAILY ROUTINE

1. Wake up and answer all critical emails

2. Focus on top tasks that drive revenue
Building Product or improving product

Address any existing customer's concerns.

Execute marketing/sales tasks to gain new customers.
3. Research and Learn
Keep up with industry news / blogs

Have conversations with customers / partners

Brain Storm - white board new ideas
4. Have Lunch

5. Answer all new critical emails

6. Evaluate team progress on any projects

Re-affirm critical path tasks with team

Add new critical tasks (based on results of the day)
7. Go workout or go for a walk to re-engage with the Present and to
evaluate the day.

Of course, this routine is just an example, and relates to what I do when I am building a new company. If your company is pre-product, or pre-revenue your tasks will be oriented toward tasks related to launching the company. Either way, the key point is to build a routine that gives you steady and consistent progress each day.

Summary:

The Zentrepreneur is not distracted by potential events of the future or past. Each action you take is independent from future events and is under your complete control.

The first step is to focus on the Present (the Now), and the next step is to execute a daily routine that builds your path.

Zen | 1 | Path

2008-08-11T11:00:00.012-05:00

"Do not seek to follow in the footsteps of the men of old; seek what they
sought."

Basho

The essence of being a Zentrepreneur (now on referred to as "Z") is not based on following another's path, but instead focusing on your path.

If you follow another's path, you will only learn what they have learned. You will only see what they have seen. You will lose focus on what you seek. The essence of Z is centered around your entrepreneurial spirit.

It is important to define what you seek and clear your mind of external influence. Define what you want to create. See the world not the way it is, but the way you think it should be.

Once you are able to live in the moment and remove the dependency on past and future events to define your path - you will be able to embrace Z.

Before you can truly take the first step in your journey as an Zentrepreneur, you need to accept that the past and future have no relevance to your achievements today. Certainly, there is value in your experiences in the past and your vision for the future, but they do not effect positively or negatively your actions today. Focus on the present.

Do not dwell in the past, do not dream of the future,
concentrate the mind on the present moment.

Buddha

Once you are focused and absent of all external influence - define your next step. Release your mind from the limitations of goals or milestones you have defined. Everything is meaningless and irrelevent that is beyond the next step. The path has yet to be defined, therefore the destination does not exist. You are building the path in the here and now, and no longer following a path paved by others.

I know what you may be thinking - "If I completely ignore past and future thoughts, how do I define my goals? My plan?"

The answer is "You don't". By ignoring past and future thoughts, you are now able to truly focus on what matters - the NOW. You are liberating your time to focus on what you need to do today in order to continue to build your path. A plan is worthless if there is no action. Each day you focus on the NOW, you will gain new enlightenment on where your path is going.

Think of it like holding a flash light and walking through your house with no lights on. You are forced to depend on your instinct and what you can see directly in front of you. By focusing your mind and time on the next step, everything else becomes irrelevant. You eliminate all distractions (past and future) that are on the path, and focus on what is critical - your next step.

By focusing on NOW, you will be able to direct all your energy and time to what is most important, and remove all distractions of past and future. If each step you take is successful and receives your full attention - then the path you follow will lead you exactly where you want to go.

Summary:

Focus on your next step, and let each step build your path. Like a bricklayer building a road, focus your attention on the next brick, and remove from your mind the last brick laid and the road yet built.

One of the foundations of Z is to focus on the NOW and you will create your own Path.

A New Day - a New Book

2008-08-11T10:13:00.008-05:00

I am officially starting my new book - working title "Zentrepreneur". Like my last book, I will use my blog as my work place, posting each chapter.

Instead of focusing on lessons for young entrepreneurs (like my last book), I will focus more on the internal aspects of being an entrepreneur.

As some level, being an entrepreneur is like adopting a philosophy on life, and it effects the way you think and live. Not unlike the same path of a Zen Buddhist.

Thus, the working title - ZENtrepreneur.

As a great mind Lao Tzu once said:

"A journey of a thousand miles begins with a single step."

The "Ego Brand"

2008-07-19T08:34:00.010-05:00

I always find is fascinating watching companies evolve in the tech arena. It seems like there is always a single "ego" that defines the company (even if the company has 5,000 employees). With Apple was Steve Jobs, Microsoft was Gates, Facebook has Zuckerberg, and of course Google has Page and Brin. Within the "founders" ego you can learn a lot about a company and its future.

The ego becomes so strong and so embedded in the operations of the company, it itself becomes the dominating brand of the company.

The days of manufacturing a brand is over. Where 10 marketing executives sit in a room, and ask the question "what do we want our brand to represent?". The seismic shift of advertising and marketing to the user and away from the spoon-fed medium of TV and Radio, has made it close to impossible for a company to control their brand. They are at the will of the people.

So, what tends to happen is the company brand is created from the founders ego. This trend started with the bigger success stories in software - but now on the Internet is seems to be the absolute trend in all tech companies (big and small).

So what does this mean for an entrepreneur? Focus on your Ego, not your brand. You can try to spend thousands of dollars building a brand, but you will fail. Your brand will be built around the people who use your product and their interaction with you (via email, blog, website, etc).

Some things to consider:

1. Don't be Fake. The best advice in building a brand is to be authentic. You can try to "pretend" you are something you are not, because you may think that is what people want to buy - but at the end of the day - you can't pretend to be You. You are the brand, the brand is you. Whatever passion inside you that caused you to create your product - is what people will see. Not your logo or tagline. Just you.

2. Don't be a Jerk (to your users). I think its obvious that no one likes jerks... but it may not always seem this way. Steve Jobs is kind of a jerk, but people still buy IPhones. Mark Zuckerberg is a jerk, but people still join Facebook. The reason that their "jerked-ego" works - is because they are not Jerks to their users - but jerks to their competitors. Both are famous for their anti-corporate antics - but you can see some level of humility and dedication to their users that rises above the "negative" press they get from industry pundits. Its because the users decide the brand, not the media.

3. Don't ignore your ID. There is a certain quality in entrepreneurs that I believe most people embrace - the ID (alter-ego - the sub-conscious passions). It's the darker side of the brand, that is not necessarily always front and center, but looms in the unconscious. Typically, when users hear from the ID, it is in the form of an unconfirmed rumor. If you ask any marketing (self-proclaimed) expert - they will insist that "negative press" will kill your brand. We need to control our brand and message to the letter. Wrong. The brand (like you) is human. Its ok for the dark side of the mind to influence your message. Do you think Facebook turning down 2 Billion dollars was a sound business decision - or the ego at work? Do you think Google building a gPhone or funding a launch into Space is good business or ego? These actions based on pure ego is what creates the buzz around these companies.

So, if you are looking to brand your company - look in the mirror. Ask yourself, what made you want to start this company? What is my Ego telling me (after all, the fact that you think you can start a company, build a better solution to a problem, and build an empire proves that you have a big ego)?

Then, communicate with your users, and they will do the rest.

----end-----

According to Freud,

...The ego is that part of the id which has been modified by the direct influence of the external world ... The ego represents what may be called reason and common sense, in contrast to the id, which contains the passions ... in its relation to the id it is like a man on horseback, who has to hold in check the superior strength of the horse; with this difference, that the rider tries to do so with his own strength, while the ego uses borrowed forces [Freud, The Ego and the Id (1923)]

"Why Entrepreneurs will Save the World" (Part 2: Three American Illusions)

2008-05-08T08:52:00.012-05:00

When you look at the major problems facing America (and the World for that Matter), you can't help but feel helpless in what seems to be an impossible task for government to solve. Much like seeing a magician entangled in chains - wondering how he will get out? But never once thinking that it may be an "illusion", and in fact the magician is simply tricking us to believe its impossible....

Perhaps the biggest problems we face as a country are not steel chains around our hands and feet... but simply illusions created by special interests and the media - as a way to get us on the edge of our seats???

Lets start by looking at the 3 Major "American Illusions".

1. Energy

Our dependance on Oil is hurting our country on multiple levels - both on political and economic bases. To quote our President when asked what can governement do about the rising Oil costs and our dependance on oil - "If I had a Magic Wand, I would wave it... but there is not Magic Wand Solution" - George Bush, at his finest. Perhaps he can atleast show us how the "Illusion" works?

Ultimately, you hear politicians and experts talk about finding "New Energy", and reducing our dependance on oil. At the end of the day, what is shocking to me, is that we have had the technology for 60 years to reduce our dependance on Oil, but the American People weren't ready to accept it as a safe and clean energy - NUCLEAR.

Once again, the technology is available - and offers a very clear path to solving our problem with Energy - but the average American when they hear the word "Nuclear" think of a mushroom cloud in their backyard. What they don't understand (e.g. Quantum Physics) is that there is more energy available at the sub-atomic level of our world, then there is in all the oil fields of the Middle East.

So in summary, maybe we need to re-consider why we aren't building Nuclear Energy Plants throughout the USA to move rapidly toward energy independance??? Is the complexity of Energy independance an illusion??

2. Health Care

Health Care is one of the grandest illusions. I won't lie to you... its a complex illusion, but I will do my best to break it down.

People get Sick > See Doctor > Doctor gets Paid via Insurance > Insurance gets Paid by People. And the cycle continues. (of course, there are a lot of people that don't have insurance - so the cycle looks more like this >>> People Get Sick > No Insurance > Hospital gets Stuck with bill)

The problem behind health care is not the process or the quality of care - it is the overhead. Like any business, you can't make money if your overhead is too high. Why is Health Care overhead high - because the industry refuses to "upgrade" to the 21st Century.

If you took two Doctor's offices, one which is completely digital (from patient records to billing) and compared it to an office which runs everything through paper-based system, you have a difference of up to 25% in profit. This is a big difference. Not only does the Digital office make more money, but it is more efficient in providing care, and ultimately is able to reduce the overhead in all its partners as well (Insurance Companies, etc). So not only does the Digital office make itself more efficient, but also the entire Supply Chain as well.

Once again, the illusion has been presented to us as something that requires heavy policy changes and government intervention. Wrong again. The technology is widely available. In fact companies like Google have been looking at solutions for building digital medical records. The talent and technology is readily available. We just need to give medical companies, insurance companies more incentive to build a Digital Supply Chain to lower their overhead and thus be able to maintain competitive rates for Insurance and Health Care.

And much like our fear of "Nuclear" Energy, we need to get beyond our fear of "Privacy", and accept that we live in a connected world - and Digital Medical Records and Electronic Billing will save us all money.

3. Education

The 3rd grand illusion is education. We hear buzz words like "Leave no Child Behind", but do we really understand the basis of this Policy? Is the problem that we are not giving every kid a good education? Is this a problem of our education system? or is this just the nature of our society - that each person has their own capacity for learning? It just seems like this policy is focusing on the kids that are falling behind, instead of perhaps looking at the entire system of Education.

Think about this - do you see Video Game companies complaining about their inability to market their games to any kid or do you see Television struggling to entertain every kid? For some reason kids from all different backgrounds have the ability to play a very complex multi-player interactive video game by just picking up a controller, but they can't learn their multiplication tables at School???

The illusion is that 80% of our kids are doing great, and we need to make sure we get the other 20% on board. The are just falling behind....

Wrong. All kids are falling behind. Our education system is out-dated, and for the most part the things we teach our kids are not applicable in our current economy or society.

School has become boring, irrelevant... and the problem is that the illusion has worn off. Kids are aware that school is behind the times, because they go home login to the Web or watch TV and see the world as it really is. The level of entertainment and education they receive through other outlets overshadow the average classroom 100 times over.

Once again, the solution presents itself in our every day lives, but for some reason we ignore the obvious. The Internet is one of the most powerful mediums our society has ever seen. It has advanced our society, economy and lives in the past ten years more than any other technology has done in 100 years. Yet, we don't leverage the power of this medium nearly enough in schools or at home.

The capacity of a child's ability to learn is a direct consequence of their interest in the process. Why is it our society is so close minded? Why can't we teach our children using video games? We teach our soldiers how to fight and our pilots how to fly using virtual video games? Why can't we have children do homework on the Internet? Leverage multimedia and interactive studies to peak their excitement? What about Social Networks to enhance their ability to meet new friends? Why are we teaching the same way that we did 1,000 years ago?

Our fear of that our kids will have "fun" learning is ridiculous....

The Illusions of Energy, Health Care and Education. Are they really Problems with no Solution? or are they Problems with Solutions that we are not able to accept because of our ignorance?

Much like a good magic show... even though it happens right before our eyes... we still can't believe it......

Abracadabra.

The future of the American Economy

2008-04-20T10:10:00.012-05:00

I meet and talk with entrepreneurs on a daily basis, and I read hundreds of business plans a year -so at some level, I feel I have my fingers on the pulse of American innovation. It may not be enough to make some conclusions, but I think one conclusion I feel I can make is that the opportunity of new ideas and new companies is shrinking and NOT expanding. This is not a statement of pessimism, but a statement of change. And unless, entrepreneurs embrace this change and understand the new dynamics in play for building new enterprises, they will continue to beat their head against the "wall" on why their ventures are not being funded.

Let me explain:

1. America can no longer be competitive in the "manufactured" product industry.

The global economy, cost of labor, taxes and the Internet have made it close to impossible for an U.S. based company to manufacture a product, assemble and ship and be competitive on pricing and quality. It is not just China making it cheaper - it's the inability for a local store to compete with the global store. If someone can buy a piece of furniture on the web for 20% less than they can at the local furniture store - it spells certain death for the local merchant. Whether the furniture is made in China or not, there is a clear GAP in operating costs and overhead in running a website versus a 4,000 square foot store front.

So, the next question would be "Can a U.S. Based economy become a distributor for these products?". Essentially trying to leverage outsourced manufacturing, and add value through distribution, sales and marketing. The answer is "Yes, but not for long". In fact, this is what we have been doing for the past 10 years. Many businesses transformed their business model to being more of a middle-man - but this is only life-support for a business and not a long-term business. As foreign companies continue to control the price of product, they will squeeze the profits from the middle-men, and ultimately find cheaper ways to ship direct and market their products through larger outlets (e.g. Walmart, Target, etc). So for the small business, they will not be able to be survive just a distributor. They won't buy enough to get lower costs of goods, and won't be able to compete with pricing and distribution of large outlets.

So, the final question is "Well, sure but what if the US Based company invents the product, and just has it build in China - won't it still make good money since it owns the product?". Sure, for a little while, and if it is successful, China and other countries will copy the product and distribute its own version for less money. Even if you have a Patent, do you have the capital to pursue legal action against a company in China? Probably not.

So in conclusion, there is no business for small businesses in manufactured products. Even if your product is innovative and unique, and you can sell it to millions of people - you will be forced to embrace outsourced manufacturing, lose control of the intellectual property and be limited to distribution which will shrink profits and ultimately lose to a competitive "copy-cat" product built and distributed directly from China or other country.

2. America needs to embrace the Digital Economy.

If there is one industry we can still claim to be #1 - it would be the digital economy. Whether it is content like music or film - or applications like Google and Microsoft - we are not just the leader - but we are the sole innovator in this industry. Despite our leadership and clear success in changing the way we live and work with technology - it seems the U.S. economy still refused to embrace technology as the path for our future. The amount of investment made in technology by our government has decreased, not increased. States like Florida cuts programs that fund technology innovation, but do anything they can to save our Oranges. While airlines, car companies and manufacturing plants are going bankrupt, companies like Google are reporting 30% increase in profits?

The transition to a Digital Economy will be a challenge, and it will mean a dramatic shift in unemployment and a divide will be created between older workers who have expertise in the "old" economy and new workers educated and trained on the "new" economy. Anytime there is an economic shift of this proportion, there is massive pain in change. And the current state of the economy is demonstrating it is not an option - the change is happening now.

In conclusion, America has always been the pioneer in economic shifts, and we should continue our legacy as the dominating economic power by embracing change and position ourselves as the leader in the Digital economy. Not only will this secure our ability to bring our economy back in strength, but also nullify the competitive advantages of foreign countries like China, who will not be able to undercut cost and distribution. They will have to compete on a level playing field.

3. America can make it an easier transition by supporting the Service Industry and investing heavily in Technology.

I don't have all the answers (I am not an Professor of Economics), but I think to make this transition we need to look at our strengths and pave a road that lifts our existing work-force and introduces the new wave of workers over the next 20 years. In order to do this, I feel we need to lessen the burden on services businesses in the U.S. and invest heavily in Technology.

One industry in America that will continue to thrive is the services business. Primarily because services businesses are required to be local and serve the community, and do not suffer (as much) by overseas competition. (You can't buy a beer or get your laundry cleaned by a company in China). However, they still need to improve profits in order to hire new people and expand their business. Therefore, the government needs to look at policies that help local service businesses expand and not just be profitable but keep our economy strong during the transition.

Secondly, I think the government needs to invest billions (not millions) into Technology. It is the only sound path to building a strong economy (digital based economy), independence from an oil-based energy policy, and bridging the gap of education in-equality. Both Federal and State governments need to accept the risks of investing in innovation and technology, and show leadership to the universities, business community and finally (most importantly) to the entrepreneur.

Why George Bush gets a "F" as CEO of America

2008-03-01T13:14:00.012-05:00

I try to be fair and balanced in my views of politicians. I realize its hard to serve millions of people, political interests and a very complex international community. However, I feel when it is all said and done, the President needs to be treated like a CEO of a corporation, and should be judged and graded accordingly.

Instead of dwelling on "approval ratings" and the political opinions of radio show hosts, I will judge President Bush on the basics. Much like when you look at a Company's Profit and Loss and Share price... I am going to attempt to do the same.

#1 - National Debt as Percent of GDP

This is an interesting way to measure the economic policies and spending of a President, because the GDP may vary, so it gives a fair way to compare how he manages spending. Under Bush, it went up around 10%. Not Good.

#2 - Annual Gross National Deficit

Another good way to see how a President manages money is looking at the Total National Deficit. Bush has taken us from a Surplus to 600B deficit. This is like taking a company from Profitable to Bankrupt in 4 years (see the graph how quickly the debt mounted). If Bush were a CEO, he would have been fired in 2002.

#3 - Strength of the Dollar

As we all know, our currency is our stock price in the International Market. It effects all aspects of our economy, and our ability to strengthen trade with other countries. You can see the same trend patterns going from 2000 to 2008. Our dollar was becoming stronger pre-Bush and then from 2001 onward the dollar weakened significantly. (btw, the graph is going up, because it is showing how many dollars it takes to buy a Euro)

#4. The Price of Oil

Usually I wouldn't consider the Price of Oil to be a major component of grading a President, but since this is a very relevent to this President, I think it makes sense to review. Notice during Bush's reign it had gone from $30 to $100 per barrel. So not only has oil tripled in price, but our dollar has weakened almost 50 percent.

In conclusion, I don't care if you are a republican or democrat. I don't care what you opinion is of the war, global warming or same-sex marriage - you have to conclude that George Bush may be the worst economic president in the history of the US.

You cannot argue against the facts:

1. He increased spending
2. He increased the debt
3. He weakened the dollar

As an entrepreneur and a small business owner - It makes no sense to me how someone could perform so horrible as the CEO of America. You can assign some of the blame to the tech bubble, 9-11 and the recent housing market... but every President has gone through similar crisis and was still able to not completely destroy the economy.

George Bush gets an "F" as CEO of America.

... and if you don't agree with me, then you are in the minority. Here is another graph of Bush approval ratings.... pitiful.

"Why Entrepreneurs will Save the World" (Part 1: Losing the American Dream)

2008-02-19T20:01:00.008-05:00

Perhaps saying the American Dream is "over" is a bit extreme. But I think it may be time to discuss or reset how we pass the American Dream onto the next generation.

Many people have different definitions of the "American Dream" - some focus on wealth, some focus on fame, some focus on freedom. I suspect it is all relative to where someone comes from and what they yearn for... but to me I am going to focus on what I feel the American Dream represents - the entrepreneurial spirit. The dream of coming to America with nothing but the will to create something from nothing.

In today's society, I feel the dream is fading. When kids go to school, the inclination is to grow up to be doctors and lawyers... this is how we measure success in education. Nothing against these professions, but it seems like we place to much importance on income and perhaps social status - and less about what really matters - letting kids do what they love.

Being an entrerpreneur is not necessarily someone interested in starting their own business. An entrepreneur is someone who has passion about something, and doesn't just see how the world is, but how is should be. So that brings me to my point... why don't we teach kids how to be entrepreneurs?

We require students to study biology, physics, algebra and many other topics that I think many of us question the real relevance to being a well rounded person. I understand if someone wants to be a biologist, biology is important... but in general education - shouldn't we try to instill ideas that focus on self-improvement and showing the next generation how to take an idea, execute a plan and achieve?

We continually ask ourselves why our children drop out of school. Perhaps it is because they are bored. The curriculum we teach is outdated, and more relevant in the industrial age, and doesn't seem to translate well into what is happening outside the school.

We have kids that get C+ in math, but when they go home they spend 2 hours on a multi-player video game that requires intense memory and logic to play through complex and convoluted levels. It is clear to me, that it's not just because games are "fun", and math is not - its more than that... its because the game gives kids what that want - adventure and challenge. We consistently blame our children for their grades or performance, but we never think for one moment that perhaps we have failed our children.

I realize it may seem like am going off on a tangent... I will bring together my argument. We are not teaching the American Dream. In fact, I would say that most parents may discourage their children from folling their American Dream. What a better place to recapture the dream, then in school.

Over the next 20 years we are going to see the world economy turn upside down. We see all "industrial" jobs being automated or shipped overseas. We are seeing more innovation being supported and funded abroad because of the "lost" American Dream. We are seeing companies break into the Fortune 500 overnight, and creating the youngest and most dynamic class of millionairs and billionairs in world history. Yet, we still sit in denial. Instead of making major efforts in duplicating the successful ventures on the Internet, New Energy, Biotech and other innovative fields... we spend our time and money trying to bring the old economy back from dead.
My final points:

1. I would rather see my children learn about the basic of economics, business and practical experience in the work force, then learn biology and physics. Save the fringe sciences for kids who want to go into the field.

2. Transform education into a project-based curriculum. In is in our culture to want to create, build and finish. It is what America thrives on. We need to move away from the monotone of how we teach. Memorization does not correlate to success and intelligence. In today's world, I don't need my kids memorizing Abe Lincoln's speech... what I want is for them to know how to find it on the Internet, and write a short paragraph on how the speech was relevent and used to change America.

3. No more doctors and lawyers. Why is it, that "Pre-med" and "Pre-law" carry so much weight? When did the pinnacle of achievement in America get twisted? Nothing against these professions, but they are exactly that - professions. We need to teach our children to follow their passion. If their passion is law, then so be it.... but lets not build a path that is based on prejudice.

We need to revive the American Dream for the next generation. If we want America to compete in global marketplace, solve poverty, solve disease, solve our dependance on oil and find new ways to improve life for all human beings - we need to have a graduating class of entrepreneurs and not a class of employees.

This is the first post in a series "Why Entrepreneurs will save the World"

Why Obama is best for Entrepreneurs

2008-02-16T22:35:00.004-05:00

First, let me say that I never felt politicians could help entrepreneurs. Primarily because the time it takes a politician to enact policy, the entrepreneur's needs have changed. However, many politicians seem to have good intentions in helping the small business and I think in today's economy we need to pay more attention to the ones that can make a difference.

I was encouraged by Senator Obama's post he made on LinkedIn asking how he could help the small business person. This simple gester goes above and beyond what I have seen any other politican do. Let me explain:

1. First, the fact Obama understands that LinkedIn and social networking is a place to reach people with valuable opinions and as a place for valid feedback is big deal. It shows that he is in tune with technology and how today's entrepreneur communicates.

2. Second, just look at how he runs his campaign. Not only is he executing every aspect perfectly, but you can clearly see he is running it like a business. His marketing and public relations are near perfect, and he is managing every aspect of probably one of the biggest upsets in political history. He may be a politician, but running a national campaign they way he has, clearly shows me he understands how to manage a business.

3. Third, I truly believe (if you read his policies on business and taxes) that he understands there is a clear need for investment in technology and innovation. The current government just talks about investment, but is fearful of overstepping their bounds with Big Oil and Auto. By Obama not taking funds from lobbying groups.

4. Fourth, look at the team is brought on to run his campaign. Instead of hiring a bunch of Washington has-beens and lobbyists, he has stocked his Capitol Hill staff with employees whose résumés include McKinsey, the old Andersen Consulting, and other nonpartisan business advisory firms. This shows me that he appreciates real experience and business minds, more than he appreciates the "old" way Government works with handouts and favors.

5. And Fifth, and most important.... this is the first time I have ever heard a politician consider the following as part of their tax policy.

In Obama's tax policy and TO INSURE AGAINST A NEGATIVE impact on innovation and new business formation, Obama would have a zero rate on capital gains for entrepreneurs, venture capitalists and small-business owners forming new enterprises.

He has won my vote.

True Story #4: How Digg got Started

2007-07-09T07:46:00.000-05:00

This is a great story on how to create buzz for your company by following two rules

1. Compare your company with a known branded company, but give a simple explanation on how you are different

2. Leverage other platforms to create a buzz for your company.

Kevin Rose introduced Digg to the world in a December 2004 episode of The Screen Savers (Kevin was a host of the show). The video clip, now safely archived at YouTube, is embedded below.

Kevin discusses Slashdot to start the clip, saying its a great site, but he also says that the fact that editors control what’s on the home page of Slashdot “takes the power away from the people.” He then gives a demo of digg (great v.1 screenshots), which he says “looks much like a Slashdot,” but gives the power “back to the people.” At no point in the clip does Kevin state that he is the founder or in any way connected with Digg.

It’s always fun to go back and review vintage video of startups before they’ve rocketed to success. Given the ease of sharing and archiving video clips today, all startups should be sure to take the time to record the early days. And using video to spread the message of your company virally isn’t a bad idea, either.

True Story #3 - The Cisco in San Fran'cisco'

2007-07-03T14:49:00.000-05:00

Founding legends are a specialty of Silicon Valley, and none is more appealing than that of Cisco Systems: i/In the 1980s a young Stanford University couple invent the multiprotocol router and starts Cisco in their living room, using their own credit cards for financing.

Repeated for years by Cisco's marketers and the news media (including the Mercury News), the story of the couple, Leonard Bosack and Sandy K. Lerner, mirrors the Silicon Valley dream: Come up with a breakthrough, found a company and become a millionaire.

But the Cisco legend is incomplete. It omits many people who helped develop the multiprotocol router, a device critical to the early Internet. It omits a battle with Stanford that almost killed Cisco at birth over charges that the founders used technology that belonged to Stanford to start their business.

Perhaps most important, legends like Cisco's obscure the true collective nature of the innovation that built Silicon Valley long before the hype and froth of the Internet bubble. A good idea is followed by hundreds of major and minor improvements; the entrepreneur in the group forms a company around the idea, and makes still more improvements.

"One can't define who did what, because it was pretty much of a cooperative effort,'' said Nick Veizades, one of many Stanford staff members who worked on the router. "People tried to improve certain things so they worked better, and in this way they propagated.''

But Silicon Valley legends are hard to kill. Even a Stanford Web site still credits Bosack and Lerner with developing the device "that allowed computer networks to talk intelligently to one another'' in a description of a Cisco-endowed professorship.

Pieces of the full story have slowly emerged, beginning with an exchange of Web postings that followed a 1998 PBS documentary, "Nerds 2.0.1,'' that gave Bosack and Lerner sole credit. Since then, several books have tried to unravel the true story. Cisco spokeswoman Jeanette Gibson now says: "Obviously it was a team of people.'' Lerner also acknowledges the many contributors, saying in an e-mail to the Mercury News, "The only person I'm certain had nothing to do with it is Al Gore.''

Yet the legend lives on, retold again and again.

I published my book on Entrepreneurship

2007-06-29T10:42:00.000-05:00

Here is the formal press release:

Serial Entrepreneur and Venture Capitalist Rich Swier announced the release of his first book "Pros and Cons of Hitchhiking - A Guide for Entrepreneurs" today. The book is targeted towards entrepreneurs and anyone involved in a startup business.

Over the past ten years, Rich has interfaced with hundreds of entrepreneurs in numerous industries including retail, health care, communications and hi-tech - as has personally been the founder or angel investor for numerous startups. These experiences were the catalyst for the new book and were the motivation to share the stories and lessons to entrepreneurs looking for guidance in their new venture.

“Rich is a very sharp, no-nonsense business man. As a venture capitalist in Clinipace, he has been outstanding to work with and understands how to add value to the relationship. I enjoy our relationship. More venture capitalists should aspire to be like him.” states Jeff Williams, CEO and Founder, Clinipace.

The book is currently available on the website http://www.richswier.com

Pros and Cons of Hitchhiking
Genre: Business & Investing
Paperback: 135 pages
Description: A Guide for Entrepreneurs who are starting a new venture.

Synopsis:

Hitchhiking is the only experience that encompasses the same elements of starting your own business fear, ambition, blind-trust, risk and true self-exploration. This book is for entrepreneurs who are walking the road alone looking for a lift.

Book Details:

· Paperback: 135 pages
· Binding: Perfect-Bound
· Publisher: Rich Swier (June 2007)
· ISBN: 097973570X

True Story #2 (from my Book) - The Lesson of "Listening to your Customers"

2007-06-28T17:40:00.000-05:00

The "Adobe" Story

As told by Charles Geschke

This theme will seem utterly repetitive by now, but like almost every other startup, Adobe set out to build the wrong thing. We envisioned creating a computer/printer combo package that we would sell as a complete self-publishing solution. We were approached by Digital Equipment and later Apple, who were both very interested in the printing software we had developed.

By this point though, Adobe had raised $2.5MM in funding under the story that we would sell the computer/printer combo package and we were stubbornly clinging to the original plan in spite of two large potential customers begging them for just the software.

We went back to our board and received the sage advice from the chairman to ditch the plan and listen to our customers. Q.T. Wiles said,

“You guys are nuts. Throw out your business plan. Your customers - or potential customers - are telling you what your business should be. The business plan was only used to get you the money. Why don’t you rewrite a business plan that is focused just on providing what your customers want?”

We followed the advice resuming talks with DEC and Apple and soon after closed deals with both. The rest is history.

True Story #1 - The Best Angel Investment in History

2007-06-26T06:58:00.000-05:00

"Instead of us discussing all the details, why don't I just write you a check"

- Andy Bechtolsheim to Google Founders when making the first Angel Investment

Unable to interest the major portal players of the day, Larry and Sergey decided to make a go of it on their own. All they needed was a little cash to move out of the dorm — and to pay off the credit cards they had maxed out buying a terabyte of memory. So they wrote up a business plan, put their Ph.D. plans on hold, and went looking for an angel investor.

Their first visit was with a friend of a faculty member. Andy Bechtolsheim, one of the founders of Sun Microsystems, was used to taking the long view. One look at their demo and he knew Google had potential — a lot of potential. But though his interest had been piqued, he was pressed for time.

As Sergey tells it, “We met him very early one morning on the porch of a Stanford faculty member’s home in Palo Alto. We gave him a quick demo. He had to run off somewhere, so he said, ‘Instead of us discussing all the details, why don’t I just write you a check?’ It was made out to Google Inc. and was for $100,000.”

The investment created a small dilemma. Since there was no legal entity known as “Google Inc.,” there was no way to deposit the check. It sat in Larry’s desk drawer for a couple of weeks while he and Sergey scrambled to set up a corporation.

True Entrepreneurial Stories

2007-06-26T06:47:00.000-05:00

I have decided to start a new direction with my Blog. Over the past year, I have been jotting down lessons I have learned as an entrepreneur - and try to share my experiences in hope that others could benefit.

Over the next few months, I have decided to post "True Entrepreneurial Stories" that will share real stories from real entrepreneurs about their experiences when starting their venture.

Some of the posts will be my experiences, some will be infamous stories from well-known entrepreneurs, and (hopefully) I will get stories from my readers I can share as well.

If you have a good story - post as a comment to this post.

Lesson #24 - Build a Reputation

2007-05-29T18:34:00.000-05:00

"You can't build a reputation on what you are going to do."

- Henry Ford

An Entrepreneur is only as good as his or her reputation. In the business of startups, maintaining a solid reputation is difficult. A reputation is built on consistency - and living in an ever-changing environment of a startup makes it very hard to demonstrate consistent behavior, action and attitude.

The first thing I learned about building a reputation is that is has nothing to do with success and failure. Entrepreneurs fail. Entrepreneurs succeed. The reputation is built on how the entrepreneur handles success and failure.

Here are some keys to building a reputation:

1. Action not words. I have learned a reputation lives and breathes on action. Nothing is more empowering to a reputation than telling someone you will do something, and then actually doing it. There is always doubt in the minds of people when you promise action, and unless you prove to them you act on your word - the doubt will be confirmed.

2. Accept responsibility. With actions comes responsibility. When you take action, you are making a decision to own the result. Whether the result is good or bad, you must take responsibility. Failure is not a weakness - it defines your character. The words "I take full responsibility" are the words of a leader, not of a loser.

3. Do what is right. As an entrepreneur, you are faced with a lot of difficult decisions. You are constantly torn between what is best for the company and what is best for the founders, investors or even employees. Many times "conflict of interest" is in the forefront of major decisions and there is no way to avoid or remove it. Obviously it is important to have full disclosure, and to maintain an open and honest dialogue - but above all else - you must do what is right.

4. Be Blunt. In order to build a reputation with someone you first need to earn their respect. As you have conversations with co-workers, investors or partners - it is important to be honest even though the truth is damaging to your agenda. When someone asks a "Yes/No" question, answer with Yes or No. Be honest, and be blunt with your answer. A colleague of mine who worked in sales and business development for many years told me "Any answer other then the word 'yes' is 'no'". If someone asks you if you have experience raising capital - and you begin a long diatribe about how you have experience in investment banking, and worked for a VC funded company once....etc...etc - the answer they will hear is "No"... so just say "No". Don't be embarrassed or ashamed to answer "No". Its good answer.

5. Be Yourself. Sometimes in life in order to be accepted or "fit in" you need to behave differently and downplay your personality. Sometimes you need to sacrifice your values, beliefs and potentially your morals just to avoid feeling alienated. Big mistake. Building a reputation is only possible is you consistently be yourself and convey your own values, beliefs and morals to others.

6. Be Humble. Success speaks for itself. One of the values of having a good reputation, is that you don't have to "sell your credibility" to everyone you meet. Letting your actions speak for your character is the best way to communicate who you are. Be humble, and let other people speak highly of your achievements.

7. Build your Brand. Reputations are powerful, but typically limited to your local business community and your extended network. If you are like most entrepreneurs, you want to grow your network and reputation beyond where you live. One of the most effective ways to build a "personal brand" is to have a strong online presence. There are many tools that allow you to grow your network including social networking, forums and blogs. There is a fine line between self-promotion and stroking your ego - but the exercise of online networking and publishing can be a very effective way to meet new people, express your ideas and create an 'online' reputation.

8. Keep in touch. If you are like most people - keeping in touch with colleagues, friends and even family can be very tough - especially when you are focused on a new venture. Make it a point to prioritize your network and gather information about your business connections that make it habit to connect frequently. Even if your current daily activities don't ever cross, it is important to reach out to past relationships and to maintain the friendships.

9. Get Social Proof. One of the most powerful ways to build credibility and a relationship is to have social proof. Social proof is when credible 3rd parties validate you. A good example would be if you served on the board of a local charity, or if you were a speaker at a convention. The idea is that you were "approved" by known parties that have an existing reputation. In order to get social proof, you need to donate your time to good causes and organizations.

10. Create Passion. You can do everything right that I outline above, and build a large network of people who know your accomplishments and think highly of your reputation - but if you lack passion - no one will care. Passion is contagious. In order for a reputation to flourish, it needs to spread beyond your close network of friends. Just like a bad reputation can spread due to a few passionate people, a good reputation will spread faster if you create passion. Have passion for your work, your life and your family and friends - and your reputation will blossom.

Lesson #23 - Wear a Harness

2007-05-26T13:17:00.000-05:00

Entrepreneurship is absolute risk. It is the financial equivalent of bungee jumping. Investing everything you have (time and money) in one single venture is like jumping off a bridge with no harness. One lesson I learned (after hitting the ground a few times) is that diversity is necessary to be a successful entrepreneur.

Diversity has always been a buzz word when talking about investing - put some money in real estate, some money in bonds, and some in the market. That part is easy. The difficulty comes when you attempt to diversify your time. How does a dedicated entrepreneur (and probably CEO) spend time on projects outside of his or her company? After all, isn't the founder and leader supposed to invest 110% of their time in their venture? The answer is no.

Some entrepreneurs feel diversifying your time is a sign of doubt or betrayal? The obvious question is asked - "Why are you spending time on that, when we have so much work to do?" Its a logical question, and by no means am I saying abandon your duties to your venture, but what I am encouraging is that you find ways to diversify your time to meet the best interests of you and your venture.

Diversity will vary depending on your situation and your ventures situation. If you venture is profitable, and well capitalized and everything is going right - then diversity could simply mean looking at spin-off opportunities, investments in other ventures or sitting on the board or active as an advisor to other ventures in exchange for stock. The time spent on these types of activities can be managed and controlled easily. If your venture is a startup, and profitability and stability are off in the distance - then you need to look at other opportunities that could yield income. If you have a million dollars in the bank from your last venture, then you probably have enough security to not worry about personal diversity. If you depend on cash flow to maintain your life style, then you need to have a plan on how to diversify income.

Here are some ideas on how you can invest time in your venture, but also diversify your income and risk as an entrepreneur:

1. Keep your Day Job - Many times first time entrepreneurs just jump ship from their day job to start their new venture. It takes a unique individual that jumps without a harness -and I think a lot of people who could be great entrepreneurs fail for this very reason. They simply can't survive without a paycheck. I realize being an entrepreneur and having a day job can interrupt your tee times and favorite TV shows - but its better you get used to making sacrifices early - because entrepreneurship is built off sacrifice. If you work at an innovative company, you may be able to allocate time during the work day to work on your new venture, otherwise you need to spend nights and weekends. Companies like Microsoft, Google and Dell were started in college dorms in between classes - so drop the excuses.

2. Be a Consultant - If you have expertise and knowledge that you can offer to companies as a consultant - then you may have the recipe for success. Consulting is the ultimate balance between entrepreneurship and a day job. As a consultant, you don't have strict hours, a boss or any restrictions related to starting your company. Consultants can also have more control over their hours and their work load. It may be worth finding a few customers willing to pay you a retained of 2-3k per month for 10 hours a week - to ensure you have income while you venture is starting up.

3. Lower your Bills - Depending on where you are in life -single, married, with or without children - this is your best option in preparation for becoming an entrepreneur. When I launched by second venture, I sold everything I had, left my house on the beach and moved into a one-bedroom apartment. I was single, so I didn't mind living like a bum - and I knew it was necessary if I wanted to dedicate my time to my new venture.

4. Leverage your (non-critical) Assets - If you happen to have equity in real estate (other than your home) or own any depreciating asset that can be sold, you may consider building up a 3-6 months of capital in the bank before making the jump. DO NOT risk your home or sell off a bunch of stock you own. This would be completely against my point of diversification. Look for assets that you don't need that could have value. For example. do you have an old jet ski or perhaps an old computer you don't need anymore? Sell it on eBay.

The key to diversifying your time is to understand you don't need to dedicate all your time to your new venture. Every startup has a certain pace - and it usually is slow in the beginning -and doesn't require as much time as you would think. In fact, a startup usually doesn't completely dominate your life until it starts to gain traction and succeed. In the first year, you will be waiting on certain factors in the critical path that are out of your control. For example, you will wait on vendors to finish the product. You will wait on the first customer to make their decision to buy.

After starting multiple ventures over the past ten years, I started to see that the pace of a new venture is not dependant on how hard you work or how much you work - but only in how smart you work. The key is to have patience and too let the venture gain momentum on its own. If its a good idea, good market and good people are involved - it will happen.

Lesson #22 - Learn a little about everything

2007-05-23T06:37:00.000-05:00

'Wisdom is not a product of schooling but of the lifelong attempt to acquire it.'

- Albert Einstein

One aspect of entrepreneurship that I always felt was critical in my success, and I think is something that is important in life despite your occupation is the commitment to learning. You cannot rely on what you know to be successful, you need to invest time in learning new skills and continuing education as you build your company.

Every new skill I learned when running a venture became a critical stepping stone to future ventures. Understanding all aspects of operating a business including technology, marketing, sales and financials empowers you to be able to manage a business, but also take control when necessary in order to succeed.

I will be the first one to agree with statement - "There is no substitute for experience", but the precursor to this statement is that there is "No experience without education". In order to truly experience all aspects of being an entrepreneur you need to learn the basics, understand the concepts and then enhance your knowledge with experience.

Here are some tips and suggestions on how to continue education while being an entrepreneur:

1. Talk to the Experts - If you want to get a snapshot of an industry, technology or any subject that pertains to your business - find an expert and spend some time asking questions. You would be surprise how much you can learn in an hour of Q&A with someone who has spent a life time studying a subject. Experts come in many forms - Academic (Professors), Experienced (Successful Professionals) and Evangelists (Innovators). Find a few experts, have questions in hand and prepare to learn.

2. Webinars - Another great way to hear experts is through conferences and seminars. If you have the time and money, it may be worth it to attend these types of events. Its been my experience that it can be hit or miss, so the investment of travel and time may amount to zero value. Over the past years, I have spent more time attending webinars. Webinars are typically free (or very cheap) and you can attend over the web, and not have to leave the office to get 1-2 hours of education. Also, because it is a webinar, the presenter is usually an expert sitting at their office as well. Most webinars also give attendees the ability to ask questions - which is sometimes impossible at conferences and seminars.

3. Shadow - If you don't have much experience as an entrepreneur (just left your day job, or just graduated from school) - a great way to learn is to shadow experts during their day. This can be accomplished multiple ways - including becoming an apprentice or assistant. Many of the successful entrepreneurs I have met throughout my years I have spent numerous days shadowing them as a way to see how they interact with other people, make decisions and ask questions about their experiences.

4. Podcasts - If you are like me, you probably spend a good time in front of a computer and listen to music in the background while working. Although I do a lot of reading, I have found listening to podcasts while working can be just as informative. There are a lot of experts that publish podcasts about different subjects, and if you are interested in learning about something it can be integrated easily into your day. While you are sitting in front of the computer working on some mundane task, play a podcast in the background.

5. Online Forums - Most people think Forums are just a place for people who are lonely or nerds who want to share a new hack. Not true. Forums can be a great place to ask questions and get smart answers. Yes, most forums do tend to be technical in nature - but there are more and more business related forums which encourage entrepreneurs to contribute experiences, recommendations and help answer common questions. Obviously, you want to always qualify your source before you take a post as gospel, but if you are looking to just share ideas, get feedback or ask for opinions - forums can be a great resource for learning. A few that I have used at LinkedIn Answers and Yahoo Answers.

As you can see, learning can be accomplished in a variety of ways, and can easily be integrated into your busy schedule. You don't have to block out 4 hours to take a class, or spend 20-30 hours reading books. Learning can become part of your daily routine while sitting at your desk or networking with other entrepreneurs.

Lesson #21 - Create a Culture

2007-05-22T06:21:00.000-05:00

Of all the startups I have been a part of as a founder or investor - I always found the ones that succeeded had an X Factor that was not something that could not be manufactured - it just happens. For lack of a better name - I call it "culture".

Here is a definition of Culture that I think describes exactly what I see in successful startups

"The system of shared beliefs, values, customs and artifacts that the members of society use to cope with their world and with one another"

When a culture doesn't develop in a company - there is something wrong. I realize this is a very general statement, and I am sure their are exceptions - but from what I have seen culture thrives when people are engaged, happy and motivated to do whatever it takes to succeed.

Lets take a minute and break down the definition above, so I can add some color to the definition of startup culture.

1. Shared beliefs - A startup is 95% trust. Everyone knows a startup is risky, and when you cut through all the hype of any early-stage company - there is a high likelihood you may not see a paycheck next month. The only thing that keeps people from going insane is the shared beliefs. The job of a CEO is to show a path to success and have everyone believe it is achievable. If one person doesn't believe - its like a virus of doubt that will spread throughout an organization - and ultimately kill a company's culture. Everyone needs to believe.

2. Shared values - Everyone in a startup must share the same values. In a dynamic and hectic environment where everyone is pushing the rock up a hill, you can't afford to have someone pushing in the opposite direction (or not pushing at all). Core values like honesty, hard work and team work are always critical - but more importantly values like self-sacrifice are what makes good companies great.

3. Shared Customs - Every time I see a custom develop in a startup (no matter how ridiculous or immature) I see culture personified. Whether its someone ringing a bell when they close a deal, or everyone watching a movie together on Friday nights - a custom is the voice of culture. It ties everyone together in a simple act. There is no culture without customs.

4. Shared Artifacts - Every culture marks history through artifacts. Artifacts are the physical representation that capture a moment in time and allows people to savior the memory of how they felt that day. A common artifact of every startup is the first purchase order or first dollar of revenue. Highlight your successful milestones by creating artifacts. There is nothing more motivating than remembering history and appreciating the investment of hard work and time you have made and reminding you of the work that needs to be done.

And finally, the last part of the definition which I think is highly relevant - "use to cope with their world and with one another". What a realistic statement. The word cope is a great combination of acceptance and patience. Culture is not easy. Some people may feel that the "shared customs" are sophomoric or feel that the developers don't share the same value system as the sales team. Friction is a part of culture and needs to be acknowledged and accepted. Sometimes the differences in each person are what brings us together and enable each person to contribute and make the culture personal and unique.

Lesson #20 - Don't let Good Money follow Bad

2007-05-18T10:41:00.000-05:00

Let's face it - being an entrepreneur and starting a new venture is not too dissimilar to being a gambler. There are so many elements in gambling that make for great analogies, but none more relevant than the old saying "don't let good money follow bad".

One of the most challenging decisions of an entrepreneur (and a gambler) is to walk away from the table and accept their losses. You never know if your losses where due to bad planning, bad execution or just bad luck - but there comes a point where you lose faith in your ability to turn your luck around, and you just need to stop.

I have been involved in multiple ventures (including ones I was the CEO) that raised millions of dollars around solid business plans, great management and a clear idea on the market opportunity - but never seemed to turn the corner and reach cash flow positive. So they continued to raise capital, round after round, hoping their luck would change. They always insist that success is just a matter of time and money. They rarely are able to accept that maybe the business plan wasn't flawless after all, and maybe they need to change their game plan ... or maybe, just maybe .. they need to fold and walk away from the table.

Here are some of the warning signs that in hindsight were obvious but difficult to accept nonetheless.

1. Sales Cycle - To me this is probably the most accurate way to determine if there are problems ahead. There are many factors that determine a sales cycle including the sales person, the product, the price and the buyer. But when you boil it down, the biggest factor that determines a sales cycle is market demand. If there is no real market demand for the product, the company will have a long road to reach success. I have seen a lot of startups close sales where there was no real market demand - but the sales cycle was brutal, they had to jump through hoops, and ultimately the sale wasn't profitable. I know what you are thinking - "what about million dollar deals... they always have a long sales cycle". Yes, big deals can take longer - but remember we are talking about startup companies, not established companies with a track record. If you are a startup, and think you are going to close big six digit deals - then you definitely need to rethink your business model.

2. Proactive Operations versus Reactive Operations - Here is another great litmus test to see if your venture is gaining real momentum, or you are operating in denial. Proactive operations is where the CEO has to actively push operations - referring back to the business plan almost like it is an unfulfilled prophecy. Reactive Operation is where the market is pushing the company - the phones are ringing, opportunity is knocking and customers are demanding product. The difference is obvious when you are looking outside-in, but sometimes is difficult to see when operating in a vacuum. Every company when it first opens its doors will operate in proactive operations for a little while, but if you are still proactive in Year 2 - there is a problem.

3. Gross Income per Employee - Here is a great way to measure the health of a company. So many of these early warning signs are subjective, but this is a clear cut number. Before you use this test - you need to wait until the sixth month of sales (which could mean you're 12-18 months into operations). At six months of sales, total up gross income for the past 3 months (total sales minus total cost of goods for the last quarter) and divide it by one month payroll.

Here is the equation:
X = (Gross Income for last quarter) / (Monthly Payroll)

So for example, let's say I did $120,000 in sales in the last three months. And my cost of goods was $20,000. My gross income for three months would be $100,000. If my monthly payroll is $33,000 then my number is 3.

Here is the scale to determine the health of the company (and whether you need to make changes)

Less than 1 - If you number is less than one then you need to make changes NOW. You are upside down, and your cash burn is way to high. The first suggestion is to cut payroll immediately. Your company could be doing well, but your staff is too big to support.

Between 1 and 3 - This is the danger zone. Most startups are in this zone during the first year or two of operations because they are in growth mode and in early stages of sales. However, you can't survive in this zone for a very long time. If you have capital in the bank to help with cash flow and sustaining operations for 12 months, then you are reasonably healthy, but if you don't have the cash to fund 12 months of operations - then you need to consider reducing overhead or really hustling on sales.

Between 4 and 7 - This is a healthy state. You may still have cash flow issues due to accounts receivable and investing in growth - but overall you have turned the corner in validating there is customer demand, now you just need to focus on scaling the business.

Over 7 - You are a rock star - prepare for an exciting journey - you clearly have the lion by its tail.

Hopefully, you can look objectively at your business and ask the hard questions to really determine if you are heading the right direction. One of the greatest strengths (and greatest weaknesses) of an entrepreneur is their blind-faith in their idea - and the willingness to fight until the bitter end.

Just remember that success usually follow failure, but only if you have the courage to make the necessary changes.

Lesson #19 - Don't be Lost in Translation

2007-05-18T09:09:00.000-05:00

A big part of being an entrepreneur is raising capital. I have had the fortune of being on both sides of the table - an entrepreneur pitching my business plan and as an angel investor and fund manager. As an entrepreneur I have learned a lot about the process of raising capital and what fatal mistakes you can make when presenting an investment to an investor. As an investor, I have seen a wide range of business pitches (ranging from bad to okay), which led me to understand why venture capitalists are skeptical and occasionally synical.

Before I give you my tips and techniques on how to have a conversation with an Investor, lets get into the mind of a typical investor, so you can appreciate what you are up against.

1. Investors are pessimists, not optimists. Investors are looking for weakness the minute you walk into the room. They are making a list in their head of reasons NOT to invest.

2. Investors have seen it all. All businesses are 80% the same, and the remaining 20% is what makes it unique. A novel technology and business model will spike their interest, but there is a high likelihood they have heard a variation of your pitch before.

3. Investors do not want to be alone. Investors feed on validation. The best way to validate an investment opportunity is to create demand. Investors want to invest with other investors. There are very few venture capitalists that will lead an investment, and even fewer will go in alone.

4. Investors are patient. Investors are in no hurry to write checks. They will wait until the last possible second before committing to an investment. And usually the only event that gets them to pull the trigger is if the investment round is closing due to other investors interest.

5. Investors don't like surprises. Investors want to know more about the business than you. If you withhold information, or forget to tell them you won't hit your numbers, or you just lost a key employee - they will be livid. Investors will accept bad news only if they knew it was coming.

Now that you have an idea of the investor's mindset - I can give you some tips on how to interpret what an investor says, and how they interpret what you say.

Here are some common questions and statements you will here in a typical "pitch" to an investor.

1. Investor Question - "What is the history of the Company?"

Interpretation - "I am interested in knowing if you have any proof whatsoever that this is a good idea? Any customers? revenue? Anything that can be classified as "operational proof" that this is actually a "company" and not just a business plan."

2. Investor Question - "How much have you invested in the Company?"

Interpretation - "Please don't tell me your only investment is "sweat equity". Please tell me that you invested real money, showing me that you are willing to put a large portion of your own money into this idea. If you aren't willing to invest... how can I really believe you are 100% committed?"

3. Investor Question - "How much capital are you raising in this round?"

Interpretation - "I already know how much you need to raise based on my experience, I just want to see how realistic you are about what type of funding it will take to grow a company. Also, I want to see if you dodge the question - or really have confidence in your financials."

4. Investor Question - "What is the valuation of the company?"

Interpretation - "I already know what I think its worth, but I want to see if you are in the ball park, or completely off the chart. I also want to see how desperate you are for money, and if you are ready to give up half your company"

5. Investor Question - "What is your exit plan?"

Interpretation - "Please give me a list of names of companies that you feel would benefit from acquiring your technology and business.... don't just say IPO or Acquisition."

6. Investor Question - "Who is your competition?"

Interpretation - "Please give me a list of names, details on size, market share, etc... don't say 'I don't have competition'"

7. Investor Question - "Who is your Market?"

Interpretation - "Do you have experience selling this to someone? Give me specifics? Who wants to buy your product and why? Describe the perfect customer - don't rattle off a list of industries or basic demographics."

8. Investor Question - "Who else are you talking to about investing?"

Interpretation - "Is another VC interested? Do they see something I don't? I am interested, but I need validation before I spend more time looking at this?"

9. Investor Question - "What is your current funding status? How much capital do you have?"

Interpretation - "How desperate are you? Are you not going to make payroll next week... or do you have plenty of funds and really don't need me?"

10. Investor Question - "What is your background?"

Interpretation - "Are you a seasoned entrepreneur? former VP of a Fortune 500 company or a Ph.D. Scientist?? If not... there is the door"

Ofcourse these are only a few of the questions you will be asked, but I think you get the idea. Just because an Investor asks a question, doesn't mean they don't know the answer. They are more interested in how you answer, then what the answer is.

One of the most difficult aspects of being an entrepreneur is learning how to bridle your excitement and your optimism for your idea. Think of it like fire. Fire in a controlled environment can be a very powerful tool, but if it gets out of control you can destroy everything.

Lesson #18 - Control your Destiny

2007-05-17T14:24:00.000-05:00

“It's choice--not chance--that determines your destiny.”

Every entrepreneur is faced with decisions that relate to power and control. If you decide to raise capital and bring in investors, you are giving up some level of control and power. Even when you hire a management team you can relinquish too much power and control if you are not careful.

Anytime you make a decision to include another party in the management or ownership of your venture, you need to make sure that you still control the destiny of the company.

How do you maintain control?

1. Make sure any action to change the operating agreement or bylaws of the corporation require your approval.

2. Make sure any issuance of stock or sales of assets in the company require your approval.

3. Make sure your employment by the company can not be terminated by anyone or by the Board of Directors without your consent.

So many entrepreneurs make the fatal mistake of trusting a partner or investor in the early stages of a venture, and not putting the proper controls in place to ensure their interest is protected.

It is absolutely critical in the early stages of your venture that you have clear documentation on who are the stakeholders and what powers they hold. Here are some classic examples of ways a founder can be hijacked if they are not cautious:

1. 51% Force Out - In most corporations the majority of shareholders rule the company. If you have partners or investors that total up to over 50% ownership - then you are vulnerable to being forced out. You can be the CEO, on the Board and feel like you are the most valuable employee - but at the end of the day - one vote by the shareholders can put you on the streets. They may not be able to take away your stock, but I have seen companies maliciously dilute a large shareholder to literally nothing over time.

2. The Power Drain - Most entrepreneurs raise capital to grow their company. Many times the company is desperate for capital to survive, so investors balance their risk by making the terms of the investment very onerous. Typically, investors not only want to take a big chunk of the company and limit their downside - they also want to drain the power of any major shareholders (especially the founders) in order to protect their interest. One example. is having the founder (who is typically the CEO) sign an employment agreement that gives the company (or Board) ability to terminate their employment based on subjective reasons. One of my favorites is when Investors create a new class of stock and require all corporate decisions to have majority approval of all classes of stock (which essentially gives equal power to the investors and founders, even though the investors may only own 10% of the company).

3. Outsider Board - I have had a lot of experience with Board of Directors. I have sat of many Boards and I have answered to many Boards. Every time I have raised capital, the investors demand a seat on the board, and then once they do get a seat, they demand to have an "outsider" on the board. Although they tell you its because they want an industry expert with experience, they are really trying to stack the Board to their favor. Here is my short advice on Board of Directors. Only major investors (of time or money) deserve a seat on the Board of a startup company. If you want "industry expertise" than just ask the person to be an advisor, and when you need advice pick up the phone and call them. They don't need to be on the Board. Keep your Board small (ideally 3 people) in the early days. Don't put too much energy in thinking Board's are critical. A Board can be a powerful sounding board if you choose the right people, but if its constructed simply as a way for investors to keep tabs on their investment - it most likely will be impotent.

4. The Dilution - If you have ever raised capital, you know the word Dilution well. Essentially, anytime you sell stock in a company - all existing shareholders are diluted (which typically means their investment is losing value or they are losing power). When a company is underperforming and continues to raise capital to fund operations dilution becomes a major problem. You can start out owning 100% of a company, and after a few rounds of capital have less than 20% of a company - and not much to show for it. Unfortunately, this is something you cannot avoid if you need the capital to survive but it is something you can minimize by being smart with your capital, and making sure you can reach cash flow positive in your first round.

In summary, make sure you understand who has the power in the company - and realize their are inherant risks associated with distribution of power. There is also a sense of security for investors when there is a balance of power - and many entrepreneurs are forced to relinquish power when they bring on new partners, but just make sure you are not giving too much away. Think about all potential outcomes - from worse case to best case - and make sure you have the ability to control your destiny.

Lesson #17 - Tell the World about your Business

2007-05-15T06:43:00.000-05:00

The famous saying "If you build it, they will come" only applies to gambling and graveyards. If you are in a different business, then you need to tell the world about your business.... every single day.

I can't overstress enough how important marketing is for a new business. It doesn't matter whether you are opening a sandwich shop or an enterprise software company - if you don't market your business consistently - you will fail.

I know what you are thinking "I wish I could spend money on marketing every day, but I have a limited budget, and can't afford expensive advertising, printing costs, design, etc".

I understand, so I will focus this blog on how to execute a reasonably aggressive marketing strategy for a minimum budget.

Here is my TOP TEN ways to market your business for under $100.

1. Website - You absolutely need to have a solid website, that gives people a great first impression of your business. To save money on high-end design, I suggest you purchase a template from a website like http://www.hypertemplates.com. Templates range from $30-$50. Once you buy a template, you can plug in your content, or pay them a nominal consulting fee to insert the content into the template. The goal is to have a simple, powerfully designed website that gives a great impression of the company.

2. Email Newsletter - Start building an email database of all people connected to your business - including customers, employees, partners, etc. Email is an inexpensive way to keep everyone up to date on the latest happenings, and can be deliver very professionally through services like Constant Contact - http://www.constantcontact.com. For less than $30 per month, you can send email newsletters to your 2,500 contacts. They manage the entire list, unsubsribes and give you a tool to design the email so it looks professional.

3. Blog - Start a Blog. In fact, start multiple Blogs if you want. You can never Blog enough. Blogs allow you to get personal with your readers (unlike a corporate website). Blogging can be a great way to keep people informed on your products, the company itself, or simply be a place to talk to your community in an informal matter. Services like Blogger - http://www.blogger.com are free to use.

4. Press Releases - Make news. The best marketing any company can hope for - is for a magazine or newspaper to pick up a release and print it in their issue or incorporate your company into a future story. You don't need to spend a lot of money on a PR Firm or Press Distribution service like BusinessWire - what you need to do is spread the word on the web. Here is a list of Press Distribution services that you should use to post and distribute your press.

Fast Pitch Press http://www.fastpitchpress.com (offers Free Post with optional upgrades)
PRWeb http://www.prweb.com (starts at $80)
PRLeap http://www.prleap.com
PR.com http://www.pr.com
PRFree.com http://www.prfree.com

We suggest one or two press releases a month, and posting those press releases on one or more of the sites above. The more exposure your press gets through syndication, submission to Google and Yahoo, and through the community will drive traffic to your business.

5. Search Engine Optimization - Getting top ranking in search engines is key to building long term traffic to your website. Instead of spending hundreds or thousands of dollars with an SEO firm, here are some things you can do to help boost your rankings:

a. Join Social Networks - Websites like Fast Pitch (http://www.fastpitchnetworking.com) and LinkedIn (http://www.linkedin.com) provide basic SEO services for people who create profiles. Although its driving traffic to your profile (not direct to your website) - it still drives traffic to you.

b. Create Links to your Site - Make sure you create content on the web, and link it back to your website. The number of links to your site (from relevant sites) matters. This is something that is tough to do - but start by leveraging websites that let you create pages or links (a great place to start is social bookmarking sites like delicious, Technorati, Furl, Digg and others.

c. Use tools on the web (like SEOMoz http://www.seomoz.org/) to find out how search engines view your website. Make sure you have all the right elements, keywords, etc on your site. There are great sites that walk you through basic SEO steps.

d. Participate on websites - join forums, groups (Google Groups, Yahoo Groups, Answers, etc) and contribute content. The more content you create - the bigger net you are casting to find customers and drive traffic.

6. Write Articles / Papers - Become the expert in your field, and write intelligent articles about your field. You would be surprised on how quality content is duplicated throughout the web. A great place to start is eZine Articles http://ezinearticles.com/ for posting your papers. Just like Press - there are a lot of websites that allow you to post your article for free or a nominal fee (just search Google for "Submit Articles")

7. Formalize a Referral Program - Some businesses can't support a referral program, but most do - and it is a powerful way to grow your business without spending precious marketing dollars. Depending on your business, you can intice partners/customers/anyone to refer business to you in exchange for discounts/cash/product. In order to really promote it, and make it part of your culture, you need to formalize the program. Write it down, and promote it to people you think can open new doors. Make it easy to - print out referral cards, coupons, or setup a website to capture leads. Put the tools in place to really drive people to act.

8. Build Relationships with Local Press - The only way to "get ink" is through networking and building relationships. Newspaper and Magazine writers want good stories - and if you have an interesting business, or something news worthy - you need to find a way to pitch it to a local reporter. Even small stories (like hiring a new manager) - tell the press - and they will mention it in their JOBS section, or if you feel like you have something "ground breaking" - then call up the editor and give them the "scoop". Local Press can quickly turn into Regional Press, which can turn into National Press.

9. Create Buzz - This is one of those marketing techniques that is more an art than a science, but if you do it right - you can be the "topic of the day" for literally zero investment. The trick is finding a way to create buzz. Its impossible for me to give any ideas without knowing the product, market or company's brand - but here is an example of what I am talking about. Let's say your company sells Computer Services for businesses. Call up all the local radio stations, and offer to take care of their computers at no charge for a small plug on the morning radio show. Or another example would be a local pizza restaurant running a "Pizza Eating Contest" every month, and the winner gets free Pizza for one year.

10. Hit the Streets - At the end of the day, if you want to spread the word - you need to put on the suit and press flesh. A new business needs to be out in the public all the time. Attend local events (check Chamber events, local networking events, or local clubs/organizations). Get involved on boards, or on comittees where you have the potential to meet more people on a frequent basis. Most networking events cost less than $50.00, and if you are active you can meet 10-20 people.

I hope this helps get you thinking about how you can really spend 50% of your time marketing your business, without having to spend a tons of money. At the end of the day, you need to invest time in marketing, and you need to be consistent and constant in your message. After a while, it takes on a life of its own, and that is when your company becomes a brand, and word-of-mouth takes over.

Lesson #16 - The Answer is "Networking"

2007-05-10T06:44:00.000-05:00

When I am asked by anyone - "How do I _________"? I always seem to answer with "Networking".

The old saying "Judge people by the company they keep" - holds a lot of truth when you are an entrepreneur. There is nothing more important (other then perhaps their reputation) to an entrepreneur then their network. If you do not have a network, then you will have a tough time being an entrepreneur.

Let me elaborate with a FAQ breakdown:

1. How do I raise capital? - Networking. There is no magic to raising capital. Sure, you need to have a good idea, plan and a nice suit - but the main ingredient is connecting to the investor through your network. If you don't know the investor, then find someone in your network that does. If you don't know someone who knows the investor, then you need to work on your network (see my tips below on how to start building your network).

2. How do I close this deal? - Networking. Sales is about having a need and a product, but its also about knowing your customer, building a relationship and creating trust. Anyone who has sold "big ticket" items knows sales cycles can be brutal, and getting to the decision maker can be impossible at times. People don't buy from strangers, and in order to close a deal - you need to know the people who are buying.

3. How do I find a good VP of Sales? - Networking. It doesn't matter who you are hiring - the first place you look is in your network. The entire process of hiring key employees was flipped somewhere down the line - the idea you look at resumes, then interview, then check references - makes no sense. The hiring process should be - check references (e.g. Network), then interview, and then look at resume. What is more powerful? A trusted colleague tells you he worked for a guy who was a rainmaker at IBM and was a great person - or reading a line on a resume that says "Sales Executive at IBM 2001-2003".

4. How do I know if I am making the right decision? - Networking. Everybody makes mistakes. Everybody makes bad decisions. However, not everybody asks for advice (which in my mind is an unforgivable mistake). Any time an entrepreneur feels like a decision can really effect their company or them personally - it is important to reach out and get advice. Unfortunately, rarely do friends or family have the experience - so it is important to have a network of colleagues, fellow entrepreneurs who can give you some feedback when you are faced with a tough decision.

As you can see - Networking is the answer - to a lot of big questions that face an entrepreneur. In the life of an entrepreneur (especially when you are starting a company) you meet a lot of people for the first time, and it becomes very difficult to build trust and credibility each time you meet a new potential customer, investor, employee, etc. The best and most valuable way to build immediate trust is to share a relationship. There is nothing more powerful in a conversation then these words "Oh, you know ____ , too?".

Tips on Building a Network

As promised, I will give you some great tips on how to get started building (or enhancing) your network. I probably should dedicated an entire blog to this - but I will kick it off with my top 3.

1. Network Online - Get started by building your personal brand online. Social Networking has become the de facto way to meet people on the Internet, and here are some great services you need to join ASAP.

- Fast Pitch
- LinkedIn
- XING or eCademy (if you are in Europe)

Start building your network online, and use these tools to meet new people in your community and industry. If you are looking for capital, start connecting to local business leaders, successful entrepreneurs and financial planners/accountants/lawyers.

Remember - this is about building relationships - not about blasting your business plan, or product data sheets to hundreds of people on the first email. Networking is building relationships - NOT - building a contact list.

2. Get a Life :) - I say this with a smile, because when I started as an entrepreneur, I worked 100+ hours a week, never saw the light of day - and it wasn't until after I sold my first company, and started to have a life outside of the office - I started meeting interesting people - and thus -my network started to blossom. In order to build a network - you need to like meeting people, and they need to like meeting you. You can meet very powerful people just through daily activities like going to the gym, going to kid's birthdays, or even at church.

3. Give back. Even if you don't believe in Karma - it is important to give back to your community. Whether it is volunteering at the local YMCA, or sitting on the board of a local charity - investing time in good deeds will not just grow your network, but will also feel good.

I remember once, an entrepreneur approached me after I spoke on a panel about Angel Investing, and he asked "Where are all the angel investors in this town? I spend time at the boat club, talking to guys at the golf course ... but I haven't really met any high-net worth investors?" - and my answer to his question - "If you want to know where all the successful entrepreneurs / angel investors are - they are giving it all back".

Lesson #15 - Know what to In-Source and know what to Out-Source

2007-05-04T20:39:00.000-05:00

In a startup (or really any small business) it is critical to manage spending, and keeping overhead at a minimum. Companies that start to experience growth, or have a chunk of new capital hit the bank, have a tendency to over-spend and try to "buy progress" - which is a dangerous game to play. This article is going to focus on what I consider one of the biggest mistakes startups make when it comes to controlling costs - deciding on what to insource (or hire) and what to outsource.

What is the difference? Two key factors - quality and cost. Every time you make a decision that you need to hire someone - first ask yourself - can this be outsourced?

Outsourcing can provide better quality of work for much lower cost and risk. Here is a classic example. Some companies hire a CFO and pay them 7k-10k per month, even though they don't have a large AP/AR staff, and may not even have 1M in revenue - but they feel they need a manager for the financial side of their business. They are probably not wrong - every company should have a financial resource - but to commit 100-120k per year in fixed overhead is ridiculous. A company can hire a Top 5 accounting firm for 20 hours a month and spend less than 40k per year (and you will get not only someone with better qualifications, but an entire company behind that person that can bring expertise and experience to the table).

Here is my breakdown of what I think should be heavily considered as outsourced positions versus hiring:

1. CFO/Controller - Any company that has less then 2-3M in revenue should consider outsourcing their CFO and/or Controller. There are a lot of great firms that offer these services, with people that would normally go for 250k-350k per year in salary - that you can put on retainer or pay as consultants hourly.

2. Legal - I have never seen a startup have on staff Counsel, but you never know. I will state the obvious - there is no reason to have a full-time lawyer on staff.

3. Secretary / Assistant - I have mixed feelings about having an assistant. Depending on how "scatter-brained" the CEO and management are on daily tasks. an assistant can bring order to chaos. However, for a startup with limited capital - I would recommend looking into a Virtual Assistant service to handle incoming phone calls, messages and some basic services.

4. Marketing / PR - For a company that is bringing a new product to market, and trying to orchestrate a marketing campaign for an emerging market - the marketing and PR resource needs to be experienced, smart and very in tune with the market. My personal opinion is that it is close to impossible to hire a top-notch marketing person into a startup. I know what you are thinking - "but our marketing guy is great - he updates the website, and helps with trade shows" - stop right there - that is not a marketing guy. Take my advice - find a consultant, or even a firm that can really help you define and execute your marketing plan. You may have to use a few different firms - one PR firm, one Ad Agency and one Marketing consultant - and it may cost you more than what you are paying on a month-to-month - but once they develop all the marketing assets, plan and give it to you to execute their cost/retainer can be reduced.

5. Technology (Developers) - This is another tough one -especially for software/internet companies who's primary asset is the technology/software that their engineers build. However, I think its always worth considering outsourcing - if the cost/quality equation makes sense.

Lets start with the CTO/VP of Engineering. Most likely the founder of the company fills this role - if not, then you need to hire this person (if you are a technology company). If you are not a tech company this would be the equivalent of your Product Manager or key Consultant, etc. This is the guy who has the vision for the product or service. This is not a job you can outsource.

The next level - Developers and Engineers. Here are my thoughts on balancing insourcing and outsourcing in engineering - if the job is working with the "secret sauce" of the company where innovation and competitive features are being built then it should be in the hands of an internal resource. If the job is working with more mundane tasks or part of the process that is not clearly part of the IP portfolio or expertise - then outsource. An obvious example, is a consumer product company hiring their product developers but outsourcing the manufacturing. For a software company - the internal staff is writing the code of the product, but they may outsource quality assessment and testing of the product before it goes to market.

So , I think that gives you some ideas on how you can outsource tasks to great talented people for certain jobs and actually save money and keep your overhead low.

The success of any company is based on the quality and capability of the people, and the type of people you want to be part of your venture you won't find on the job boards - because they don't have a problem finding a job.

Lesson #14 - Know your Market Inside-and-Out

2007-05-02T19:03:00.000-05:00

I am surprised on how many entrepreneurs I talk to (especially ones who are pitching a new business idea) do not know their market. I can't express enough how important it is know everything about your market - size, profile of ideal customer, number of potential customers, competitors, current market share of each competitor, etc. Over 90% of the business plans I read - essentially sum up their market research in this way - "Gartner reports that our market will be 2 Billion by 2010". This is absolutely useless to the investor, and to the entrepreneur.

Here is a diagram, that I see all the time - and personally, I hate it.

Why is knowing your market important? For starters, I think 50% of the startups out there wouldn't even exist if the entrepreneur did research on the market. They would find out quickly that their product ... 1) already exists 2) has no demand or 3) is or will be obsolete before it gets to market.

I encourage everyone really spend time (from the day you start your business, until the day you sell your business) on market research.

Here are some tactics I have learned that can help you kick off your market research, and put together information that can actually help you build your business.

1. Survey 100 people. Find 100 people that you "think" would buy your product and have them fill out a survey. Depending on your product, you can do this online (using a tool like http://www.surveymonkey.com/) or in person through interviews. If you don't know anyone, you can purchase email lists by industry, company size, etc. You will need to send the survey to about 10,000 people, and need to offer something (like an entry to win something). I suggest 15-20 questions that ask direct questions ranging from "would they buy", "what price", "is this a must-have or nice-to-have", etc. Getting feedback from your future customer before you launch the company or product is priceless. It will not only validate your idea, but will give you ideas on how to improve or refine your product.

2. Infiltrate your Competition. You need to know everything about your competition. Size of company, features of their product, revenue, key customers, etc. In fact, don't settle for reading press releases off their website, and "google'ing" the CEO - you need to talk to them. Call them up, and ask them questions about their company. You would be surprised how much a secretary would tell you. It wouldn't hurt talking to the CEO either. Try to understand where they are in their cycle, what they are focusing on. How are they making sales? Where do they get leads? What have they learned in the past year? I know what you are thinking "Why would the competition tell me this?" - Simple, be aggressive. One method I found works a lot is calling up the competition as an independent writer and tell them you are writing a comparison article about the industry on your Blog.

3. Go to a Conference. Conferences and Seminars are a great way to achieve two things - learn about your competition, and get to see the latest and greatest products. You can also have open and insightful conversations with people at the booths. In a few days, you can learn everything about a specific market if you go to the right conference.

4. Hit the Blogosphere. Reading the right blog, can feel like reading the future. So many thought-leaders and innovators post their works, insights and visions on their blog. Another powerful thing about blogs, is you can comment on articles, and open a dialog with the author and other readers. Its a powerful medium to test some theory, expand your ideas and get "industry-expert" validation without paying thousands of dollars to Gartner.

5. Call Customers - Not your customers, your competitors' customers. Call up their customers and ask for the key contact (if its a technology product ask for the IT manager). Tell them you are calling to get a reference, and then have a conversation with the guy who implemented the solution. Ask him what he liked? disliked? Why did they buy it?

These tactics should give you a head start. As you can see, this research will help you in many aspects of your business - product development, sales tactics, marketing programs, etc.

Most importantly - you will validate the need for what you want to build.

Lesson #13 - Running a Startup is a Marathon, not a 100-yard Dash

2007-05-01T15:17:00.000-05:00

I think everyone has read or heard the tale of the Tortoise and the Hare. The famous conclusion Aesop makes...

"Slow and steady wins the race”

Despite the fast-paced, every-changing world of a startup company - this fable holds true. For some reason startups (especially technology startups) are expected to have explosive growth, and almost overnight become a multi-million dollar business skyrocketing to an IPO in less than five years. Sometimes I wonder who is writing the rules for building new companies - the entrepreneurs or the capitalists?

Either way - its wrong to have a mind-set of quick and speedy growth. For one, it is not healthy for a company to grow quickly, and two the faster you grow, the more mistakes you make, and the quicker (and more likely) you fall. Remember, slow and steady.

I know what you are thinking - "My company/market is different, I need to go 100 mph to keep up with competition". Wrong. You don't need to keep up with competition - you need to keep up with the customer - and last time I checked customers are never on the bleeding edge (only blood is).

The further you distance yourself ahead of the market, the more mistakes you will make. And mistakes cost money and time - and ultimately can cost you the business. The key to winning the marathon is holding a constant, steady pace - and plot your course wisely. There will be plenty of time to sprint to the finish line when you get to the last 1/4 mile.

Here are some common mistakes made by the "Hare" and avoided by the "Tortoise".

1. Over extending R&D - So many startups continue to innovate beyond the customers needs, and beyond any real market demand - just to be "ahead". There is no reason to invest significant time and money into future products that won't be sold in 2-3 years. Don't get me wrong - you need to continue to innovate - but don't out-innovate your customer. (Plus, I bet marketing would really like some of that budget, so we can increase sales)

2. Don't grow Fast - A lot of companies (especially ones that get VC funding) think they need to grow the company in order to grow revenue. As soon as they have capital in the bank, they start hiring 2-3 sales people (even though their current sales guy still has capacity) - and they start hiring full-time operations guys - just because they need to manage all the new employees they are hiring. Just because you have a million bucks in the bank from a new investor, or just collected on a big purchase order- doesn't mean you need to turn around and spend it.

Keep your capital for survival down the road, and if you are going to invest in growth - make each dollar count. Don't add to fixed overhead unless you are bursting at the seams. If you want to boost revenue - try investing in variable overhead - like advertising, or attending a trade show or even hiring a part-time telesales guy to bring in leads. There is a certain pace to growth, and the idea of "spending more money, will increase growth" is not entirely true. It can have an inverse effect as well.

3. Work smart, not hard - As an entrepreneur have had my share of 100 hour work weeks, spending the holidays on my laptop. Sometimes, work calls and you have to answer - but make sure you are working smart. Just because you spend 100 hours a week working - doesn't mean you will achieve your goals twice as fast. Time (like money) is not a catalyst - unless it is spent wisely.

The key question - is who sets the pace? If you are running a 100-yard dash, then you know you need to beat 10 seconds if you want to place. However, if its a marathon, you know you have a longer road ahead, and need to be patient, pace yourself, and conserve energy for the right time. A startup is no different. Pace yourself, make smart decisions and don't run in every direction - just run straight ahead.

4. Take breaks, and take them often - If you are like I was when I was running my first few companies - I never took a vacations. If I did, I was online 90% of the time. Big mistake. Not because I wasn't able to relax - it was because I was not able to think. When you get so focused on your work, you start to build blinders - and become disconnected to opportunities that could be critical to your success.

This is why it is important to take breaks - (30 minute breaks in the day to brain storm, 3 hour breaks during the weekend, and 3 day breaks every month, and finally 3 weeks of breaks per year). What is a break? It is taking your mind off work, and focusing it on something completely different. It doesn't have to be completely unrelated, but it needs to be outside the box. For example, if I was running a software company - I might take a 30 minute break one day to read some blogs by well-know software innovators. You may spend some time on a hobby, or with your kids - the important thing if you are fueling creativity and innovation more by stepping out of the office - then you would be knee-deep in the conference room.

All of the points I make above is not just about avoiding "burn out" or minimizing dumb mistakes - it is about winning the race. Building a great company is not just about management, product and market. It is about timing, pace and management of time and money.

Here are some common "Myths" I hear from entrepreneurs all the time (some of which - I believed when I was building my first company)

1. "My window is 6-12 months to build the product and beat the competition" - First of all, anyone who says their is a finite window of opportunity - is not building something that is innovative, and certainly is not addressing a dynamic market. Any market over 50M in size takes years to mature, and 500M size markets take decades. Nothing real, and sustainable has tight dead lines.

2. "We can grow the company from 1-2M in revenue next year to 20M in year 3" - Sure, this is what VC's want to hear - but give me a break - this is ridiculous growth. Even if a company achieves this type of growth, it doesn't not set a healthy pace for the company. If the CEO has committed to building a 20M run-rate in 3 years, then he will over-invest sales and marketing an an immature market, and potentially waste 50% of his budget just trying to reach his goals.

3. "I need a staff of 10 sales people around the US to meet my first year projections" - Sure, we would all like to have a large, untrained staff walking the earth - but its not a realistic plan. It takes time to train sales people. Once they are trained you need to feed them leads, so they can close and make a living. Hiring a bunch of people as a prerequisite for growth is not a good plan.

In summary, just remember to keep a slow and steady pace toward your objective, and try not to get distracted by what the market says or the competition is doing - focus on what you need to do to get customers and keep customers.

Lesson #12 - Sell... don't be Sold

2007-04-29T16:53:00.000-05:00

I have hired a lot of sales people in my history as an entrepreneur, and I can honestly say I am horrible at it (but I have learned a lot). I am hoping this blog may shed some light on the challenges of finding the right sales person.

I believe one of the most critical hires, and probably one of the biggest risks an entrepreneur has to make is the first sales person. I have seen ventures fly and die based on this one person. So here is my quick guide for Hiring a Sales Person.

1. Don't hire a manager - hire a sales animal. I have made this mistake one too many times. Here is why - I always hired a resume, and never a person that can execute the task I need done. Managers don't want to sell - they want to manage. They certainly don't want to cold call, do demos and get on a plane every week. Its hard to avoid this pitfall, because of the environment of a startup. You always want to have a solid "VP of Sales" on the business plan, and able to convince the investors that we can hit 10M in revenue in three years. You need to get out of this mindset - remember - don't follow their rules - focus on building a company. Who cares if your first sales person didn't work at IBM- if he is closing deals - you made the right choice.

2. Eat the dog food first - or you will end up hiring the wrong dog. I can tell you, that despite my inability to spot talent - I am actually a pretty good sales person. Not because I wanted to be when I was growing up - but because it is 90% of what an entrepreneur does and must do. I have been the first sales person of every venture I have founded, and it I can't tell you how important this is for multiple reasons. The first reason - you need to make sure you have something to sell. Timing is everything in hiring people - and hiring a sales person before the product is ready for prime time is just a waste of time and money. The second reason - you need to know what kind of sales person you need. Interacting with prospects will give you insight on who your customer is, what they want and what they know. If you are selling a product to tech guys at Fortune 500 companies - you need to consider this when you look for the right person to hire.

3. Check references - History is the great predictor of the Future. Call managers who they worked for and ask tough questions. What was their quota? What did they sell? Did they work alone? What was their commission? In my second company, my first sales person hire was a guy who sold ads for the local newspaper - and my partner thought I was crazy for hiring him because we were selling enterprise software for ERP systems. Not exactly the same. The reason I hired him was based on the conversations I had with his former manager. He said "This guy can sell... period." I knew it was going to be tough to train him - but what I learned was - it was a lot easier training a guy about a product, versus training a guy on how to sell. He ended up being a great sales person - sold millions of dollars of software - and is still doing it today (in a different tech company).

4. Hire someone Hungry (and preferably with a mountain of debt) - If a sales person has money, there isn't much incentive to hit the streets. If a sales person is paid a large base salary, there isn't much incentive to work for the commission. You need someone who wants to create wealth (primarily for themselves). If the person you are looking to hire drives up in a Mercedes for the interview - make sure its a lease. Sales is about success-based compensation. If a sales person pushes back on a compensation plan that has commission as a big component - then they are not a sales person.

5. Make the Interview a sales pitch - it really works. A colleague of mine, who happens to be a very successful entrepreneur, and much better at me in hiring great people - gave me this tidbit of advice. Make the interview a sales pitch. As an angel investor - I can't believe I didn't think of this as a manager (since I see hundreds of pitches by people who aren't qualified to be an entrepreneur). You will see immediately how the person handles pressure, the tough questions and is able to sell you (probably the toughest customer). If your product is a little too complex for the person to sell during his interview - make up a product that they can get up to speed on quickly. For example - the new IPOD, or maybe a new HP Printer. As long as they can do 2 hours of research on the web, and put together a powerpoint and cover the highlights of the product - it should be plenty to show you their strengths and weaknesses.

6. Give a personality test - you never know what you'll find. I have never done this for any employee - but one of my portfolio companies started doing this - and they seem to have gained from the experience. There are a few free services on the web that offer tests (like http://www.mysalestest.com/)

7. Set Expectations and clear, measurable Goals - with a timeline. One reason why sales people sometimes don't perform in a startup environment is because their are no clear goals. Its hard to set quotas, when there is little or no sales history to base it on. And even if you setup quotas - you need to setup the critical steps that need to be taken to reach the quota. Make sure every task is sales related. Don't have the sales person waste time reviewing data sheets, or editing the website. They are there to sell - any distraction you give them will dominate their attention - because its an excuse not to pick up the phone and make calls.

8. Micro-manage. In the first 90 days of having a new sales person on the job - meet with them every morning - set the days agenda, and make sure the next day you go over the task list. This may sound over-whelming - but its the only way you will know this is the right person, and you need to figure this out in the first 90 days. On day 91, have a staff meeting, and get all feedback and make a tough decision - thumbs up or thumbs down.

9. Ask the hard questions - even if they are rhetorical. A startup environment can be very hectic - everything is changing, moving fast - and due to the chaotic nature of being in a small team - its natural that friendships form. This is a very dangerous aspect to being in a startup. Its tough being a "boss" to a friend, and it is especially tough putting them on the spot and asking the tough questions. This needs to be addressed up front. If there is mutual respect, and you work as a team - and no one is taking personal attacks - it will become a very natural part of running the business.

10. Feed the monster - invest in your sales person. If you believe you found the right person, and he passes the litmus test - its time to invest. The only thing that is worse then a lame-duck sales person, is a rain-maker with no marketing behind him. You need to feed the monster. Whatever it takes - telemarketing, email marketing, advertising, events, etc - find ways to get your superstar leads. So many companies spend all their money on R&D and the salary of the sales guy - and that's it. You absolutely need money for marketing - in fact - if you hired a sales person (which means your product is ready) - you need to be spending atleast 1-2x of the sales persons salary on marketing. So if you hired a guy for 5k per month base - you need to spend 5-10k in marketing per month.

I am sure I missed a few lessons that I have learned - but I tried to focus on "preventative" lessons that can make sure you get the right person, instead of focusing on "my sales guy is awful, what do I do now??"

And remember - don't be sold by your new hire on "the reasons" they can't sell - or they need more time, training, a better website, a new feature, etc.... They are selling you, and not selling your product.

Good luck - follow your gut.

Lesson #11 - Don't chase Money, and don't expect it either

2007-04-17T15:09:00.000-05:00

As an active angel investor and having run an angel fund for a few years, I often am asked by entrepreneurs "How do I find investors?". Its a hard questions to answer, and even harder where I live in Florida - where venture capital is far and few between.

I have two answers - one optimistic and one a little pessimistic. But I think there needs to some levity to the answer, because raising capital is not easy, and in many cases even when you do raise capital it may be something you regret down the road. It is a classic case of "be careful of what you wish for - you may just get it".

My first answer is - a question. Before I can give you my opinion on how to raise capital - Answer the following:

Are you a scientist at a University? a successful Entrepreneur who has sold a previous venture? or a industry veteran who was a VP at a Fortune 5000 company?

If the answer is no, no and no. Then your chance for raising any institutional capital is less than 1%. If you do not live in Boston, New York or Silicon Valley - then your chance is less then .01%. I realize this is pessimistic - I am the last guy who wants to be a buzz kill for an entrepreneur - but I am trying to save the entrepreneur time and money - and convince them to focus on other paths.

The fact is - Venture Capitalists are bankers. They know the statistics, the know the variables, and they are in the business of reducing risk in their investments. One of the biggest risks in backing ventures is the founder/CEO - and if you do not fit the mold - its almost an immediate "No".

So, what is my second answer - Don't chase the money. Focus on building your business. Entrepreneurship and starting a company is not easy. If an entrepreneur is not prepared to sacrifice, invest their life savings and survive day-to-day on a string budget - then they probably should not be an entrepreneur. Many people I advise them to work for a startup that may have capital, learn the ropes and then go out on their own. Some people I talk to - are not necessarily convinced their idea is the next "billion" dollar idea - but just want to experience the life of an entrepreneur. You don't have to start the company in order to qualify as an entrepreneur. If there is a hunger for risk - there are multiple options. Join a VC -backed company looking for experienced talent - or join a larger company - and look for opportunity for spin-off opportunities.

If you are a hard-core entrepreneur, and you do believe your idea/company is the next big thing - then you need to take this advice to heart - DO NOT chase money. Focus on building your business, and the money will follow. Create value.

Don't spend your days working on a business plan, financial pro-formas based on "what if's", and building skin-deep partnerships with other companies. This is a complete waste of time. It doesn't build value - it distracts you from building a business.

Entrepreneur = Building a Business

Are business plans important - sure. Do you need one - maybe. I can tell you I have personally looked at 3,000+ business plans over the past few years - and I can't remember saying "wow, I really like this plan - I am going to invest". Realize - I am an Angel Investor and don't run a VC fund - but I don't think my thoughts are to different then that of a GP at a major firm. We all invest in companies that show traction - and have proven the model. We want to experience the business - not read about what it could be.

My thoughts apply to both Angel Capital and Venture Capital. The bottom line is - Venture Capital doesn't invest in concepts anyway - so the only hope for a startup to raise capital is through Angels.

So the obvious follow-up question is "what about Angels? or Friends/Family". Yes. you can raise money with a business plan. There are a lot if angel investors who will write checks - just because they like the idea and like your enthusiasm. But I think this is a dangerous process - for both you and the investor. First of all, you should always consider your investors money as if you were making the investment yourself. Second, you owe it to the investor and yourself to take the venture as far as you can until you are convinced your business will use the capital wisely and to grow - and not to "prove out some ideas".

To summarize - focus on your business. If you have something special it will attract attention, momentum and eventually money. Investment should not be in your business plan. If you want to write a business plan that makes an investor say "wow, I like this business plan" - it should show how you have grown the business with little or no capital, show consistent revenue and a financial plan that shows a valuable company in 12-24 months with no outside capital required.

Then, they will want to invest.

Lesson #10 - Tell the Truth

2007-03-16T22:56:00.000-05:00

"We must not promise what we ought not, lest we be called on to perform what we cannot." — Abraham Lincoln, 16th American president (1809-1865)

Honest Abe has a point. And nowhere is it more true then in entrepreneurship and in a startup. In every aspect of building a venture, I have found that the allure of stretching the truth, or spinning facts in my favor is difficult to overcome. To some degree, entrepreneurship depends on the extended truth - it has many names - Financial Projections, Market Size, etc - but more importantly 80% of selling an idea to employees, vendors and investors - requires a little buzz building, and to some degree lying.

The question is "why do entrepreneurs lie?" I have a theory. First, I think most entrepreneurs are lying to sell, not to deceive. I don't think entrepreneurs are evil, but are (to some degree) victims of the environment that has been created by "the others". Who are the "others" - well it's hard to define them all - but I would include Venture Capitalists, Analysts, Media and Icons.

Lets walk through some examples, before I dig deeper into my theory.

Why does an entrepreneur lie about financial projections? Simple - to please the Venture Capitalist. VC's have created a template of the "perfect deal", and entrepreneurs feel if they don't fall into that template - they will be dismissed.

Why does an entrepreneur lie about number of customers to an analyst? Simple - so they can be seen as a leader. Analysts may dismiss a companies viability based on simple stats - e.g. number of employees, number of customers.

I think you get my point. In order to get through the front door, or on the front page - you need to (what I like to call) project the truth. In essence, answer each question with what you feel the truthful answer will be in 6 months to a year.

If you don't project the truth, how else can you get ahead? Where does the momentum come from? If an analyst won't consider your company in a report due to the number of customers, then you won't be able to get customers because you are not in the report. If an investor won't fund you because you miss revenue targets, how do you close customers without funding for sales and marketing?

It's not easy telling the truth. So here is my theory and basic assessment of entrepreneurship today. First - the theory -

"Entrepreneurs are forced to lie, because there is no respect for the truth in entrepreneurship anymore"

The entire "economy of entrepreneurship" has been turned upside down by the "others". (and I know what you are thinking - I sound absurd - of course people prefer the truth over lies). You are right - they do prefer the truth - but the expectations have been set beyond what is feasible and realistic - so in reality the "truth" falls short everytime. Thus - the bubble.

Think of it as a math equation ....

BUBBLE = EXPECTATION - TRUTH

Consider my last blog about Facebook. Yahoo! offered 1.6B, and they turned it down. A Board Member felt it was worth 8B. How big do you think his bubble is?

So, now that you accept or deny my theory - I want to throw my assessment on the table. If Entrepreneurs continue to lie, and don't embrace the truth - then we are headed for another disaster (ala dot-bomb). If Entrepreneurs tell the truth - even when the truth is bad news - we will have an economy that has never been matched in history.

If entrepreneurs don't close the gap between expectation and truth - everyone will suffer. The expectations set on the market by the "others" is setting us up for failure. My advice, ignore the "others", ignore their measurements, and focus on what matters - the truth.

Lesson #9 - Don't turn down a billion dollars

2007-01-30T23:37:00.000-05:00

This is a tough lesson to teach, and I am afraid this is one you need to experience for yourself (but I will go ahead and post it anyway). Where there is a good idea - there is money waiting to be invested, and where there is a great idea - there is money to be turned away.

I felt it was timely to post this lesson with the latest news on FaceBook turning down a $1 Billion dollar offer from Yahoo. To add more color to the story - FaceBook is a website, started by a 22-year old, that is 99% content generated by teenagers. It is essentially our modern-day Teenage Wasteland. However, the "experts" spin it a different way. FaceBook is one of the most visited websites in the Internet with 8 million users a month, and it dominates the 17-25 year old market as #1 website. Whichever analysis you agree with it doesn't matter - the fact is the market has spoken, and it says FaceBook is worth 1B.

So, lets break it down, and really try to understand why Facebook = 1B. First, I assume it has a premium value because of its web traffic (8 Million visitors per month) and it has a lock with a very valuable demographic. So lets start with the obvious question - how does it make money. Well, first lets look at advertising. Facebook currently has ads running on its site, and I am not sure the economics they have negotiated with providers, but I am going to make some basic assumptions and try to project their potential revenue.

First lets just assume they fall in the same "rate range" a Google or Yahoo sells advertising. This would be around $0.10 to $0.50 per click or $.02 per impression.
Lets start with CPM (Cost per Impression). If they have 8 million visitors, then we can assume they have around 200 Million impressions (each visitor goes to around 25 pages). Then lets assume they sell 5 ads per page. So basically their "maximum" ad inventory is 1 Billion impressions (basically they can sell 1B impressions per month to advertisers). Which if they sell at $0.02 per impression, they could sell a maximum of $20,000,000 of ads per month. Which is $240M per year.

Now realize I am taking the high side on all aspects (5 ads - most sites do 1-2), and I assumed every impression was on a page that had ads (which is not going to be the case, for example the homepage gets 30% of those impressions and has no ads).

So best case $20M per month - but more likely $10M per month.

So this can't be the reason they are worth $1B? Perhaps there are other revenue streams (affiliates, cross-sale opportunities, or even subscription based revenue?) I don't know - but what ever they come up with it has a lot of ground to make up.

At the end of the day, the objective of every entrepreneur is to make millions of dollars so they can continue to work on what they love. Do we want to change the world - sure, but banks, investors and shareholders don't really care about it, and to be honest it shouldn't be what drives an entrepreneur - because we live in a world that changes so rapidly - by the time something innovative hits the streets, it is overtaken by something bigger, better and faster. Ideas and Innovation are measured by seconds, not by years anymore - and the only thing that can truly change the world is wealth.

FaceBook.com will not change the world, in fact I would bet that it becomes a novelty within 3-5 years (not because the concept of social networking is a fad, but Facebook like so many other websites will become bloated, lose its focus and it will not be "cool" anymore). I am afraid the only way FaceBook.com could have changed the world, is if Mark (the founder) sold it for 1B, and turned his focus on giving away his wealth to better mankind by funding new projects, donating to charitable organizations and educating the world.

Lesson #8 - Money comes First

2006-10-30T22:19:00.000-05:00

This may be the most important lesson of all - Money comes First. I think a sign should be hanging above the garage door for every entrepreneur to look at when they come into work and when they leave to go home. For some reason, Money has taken a back seat in most of the business plans that come across my desk. Don't get me wrong - I am a sucker for a "cool idea" or a "disruptive technology" - but I think that innovation (or call it intellectual property) is a far second to what matters most - having people pull out their wallet and pay to play. Much like a hitchiker needs to start walking down the road with their thumb out - heading the direction they want to go until they get a ride - it is critical to be out in the market and communicating with customers. So many entrepreneurs are wearing blinders, never asking the market what they really want.

So what is "not so obvious" about this lesson. Let me start with the more radical ideas I have, and then dive into my more basic principals. First, I think companies should strive to show revenue on Day One of the business. No more statements like "we should have our first customer in month 12" or "First revenue should hit, once we hit 10,000 users and we begin to monetize traffic". These are statements only a few people can make and be taken seriously in my book. I want to hear the entrepreneur say "Our goal is drive our primary revenue from X, but right now we believe we can sell Y until we are ready". To summarize - find a way to make money NOW! If you are a software company building a new product - try to find a customer willing to pay you to develop the product for them - or better yet - find a company with a similar product and resell their product until you are ready to sell yours. If you are a web-based business - think of creative ways to monetize users - and not depend on long-term traffic to drive revenue. By thinking "Money comes first" it will not only get you customers and pay the rent - but it will fine tune your business plan and ultimately may open your eyes to a a better idea.

Here are some other reasons why you need to change your business plan to focus on money first.

1.) Investors - if you want to raise money - the single most important thing an investor looks for is a proven business model. Which means you sold a service or product and someone paid for it. It is that simple. Investors who say "management team is number one" are either full of shit or are investing in people who sold their businesses to Google or Microsoft and are launching a new venture. When you are an above average entrepreneur - you need to focus on revenue.

2.) Customers - there is nothing more obvious - but I need to state the obvious - customers are the best way to turn your business "idea" into reality. Not because they give you money - but because they tell you what they want, and the allow you to focus on what is important, and forget the rest. It is shocking to me how many entrepreneurs launch a product or service without doing basic market research, like sending out a survey, or even talking to customers about the product. Research and Development should start with the customer, not end with the customer.

3.) Employees - we all know that the driving force in a startup are the few people that show up (usually underpaid or not paid at all) and rally around the vision of the company. For the first 12 months of any new venture - it lives and dies on the momentum and excitement that spawns from the employees. In my opinion, there is nothing more exciting then landing a customer. It is the fuel that will give employees the energy to work that much harder, and gives them a sense of security in what they are building.

4.) Entrepreneur - Lets be honest - every entrepreneur (no matter how much they believe in their idea) has some level of doubt. There is always one "IF" statement when describing a great idea. For the sake of sanity, and more importantly for the sake of not wasting 2 years of your life - make sure there is a market for your vision, and go get a customer to confirm your beliefs. It is hard enough being an entrepreneur - let alone a mind reader. Pick up the phone, call a customer and ask the questions. Don't be afraid of the answer.

Lesson #7 - Shoot First and then Plan

2006-09-27T22:21:00.000-05:00

For years we have been trained to follow a certain process before we take action. The classic direction "Ready, Aim, Fire" is how we were all taught how to live life. The problem is that when starting a business, especially a technology startup where you are building products the world has not seen yet - it is almost suicidal to follow the process of ready, aim and fire.

Here are some reasons:

1. One of the classic problems an entrepreneur faces is "analysis paralysis" - where they get stuck in a rut while developing the product (that is, aiming at the target for too long but never pulling the trigger). I have seen more companies stuck in perpetual R&D then I have companies driving revenue and customer innovation. The most critical step in the life of an early startup is building customer relationships. Customers not only drive revenue, but they drive innovation. Stop aiming, and start firing - (if you miss - atleast you learned why, and you can fix it).

2. The second biggest problem with the "Ready, Aim, Fire" mentality is choosing the target. Unfortunately in an early-stage company - the target is not always a large circle painted in red and white. An entrepreneur may have a vision, and may even have a product - but very few have a clear idea on how to go to market (e.g. the target). So if there is no target, what are we aiming at? The more practical approach, is to fire as many bullets as you can, see which ones hit something, and then by deduction choose the optimal target.

3. The third problem - time and money. With any early-stage venture there is never enough time and money - and thus, we should never waste it. Too much planning can kill a company. Too much deliberation can kill a company. Decisions need to be thought through, but need to be made quickly. If a company is raising capital, it is more impressive to an investor to talk about customer experiences and references, then it is about what cool product is in development. Get customers first, and then finish the product.

Lesson #6 - A Startup is not a Corporation

2006-09-13T18:09:00.000-05:00

Now that you are heading down the highway, looking out the window - its easy to day dream about everything that can be done on the way to the destination. Staring into the green pastures, and watching the tress fly by can be intoxicating and make even the most focused lose sight of what is important.

The first thing you realize when you start a company, is that it is nothing like company. You can pretend that you are running a "corporation", and go through the cycles of buying name plates, letterhead and give everyone titles, but in reality, running a startup is more like running with the bulls in Pamplona.

When running a "corporation" - a person can hide between middle-management, delegate important tasks, and disappear in bureaucracy when everyone is too busy meeting about the new logo change. In a startup, you focus on the essentials or die. You run with the bulls, or they run over you.

Here are the essentials:

1. Run fast, and don't look back - When running with the bulls, you need to focus on what's ahead - you can't afford to slow down, or risk tripping on someone. When running a startup, you need to make decisions quick - and they need to be great decisions. This is probably the hardest part of being part of a fast moving startup - is trusting your instinct.

2. Protect your Ass - When you know a bull is behind you and it has foot-long horns ready to stab you from behind - you need to protect yourself. In a startup - this is probably the most important thing you do. Not only do you need to protect your interests (personal and business) - but you need to protect the company's interests. A Startup is extremely vulnerable to people looking to steal ideas, demand more than they are worth in pay and stock, and more importantly find a way to kick you out.

3. Don't get distracted - As you are running through the streets, certainly you will hear screams of people being thrown and rundown. You may see some easy way out - an alleyway that looks appealing to hide in and getaway from the rumbling noise of bulls trampling behind - but don't. There are many distractions when running a startup - and due to the long nights, exhausting days and constant pressure - it is easy to get distracted. By keeping focused, and executing what is critical, and not wasting time on minutiae is critical. People live off minutiae in corporations - in a startup - minutiae is a virus.

4. Embrace the pressure - In a high-pressure environment, sometimes it can build up and begin to trigger real angst in an office. In a corporate environment, due to "political correctness" - pressure, turns into frustration and it builds up inside everyone. There is no outlet. In a startup, its pandemonium - like Pamplona - people screaming, running over each other - forgetting peoples feelings. A startup needs to operate the same way - Pressure needs to be embraced, and a culture needs to be created to allow people to laugh about failure and laugh about the stress. Imaging running with the bulls, and everyone politely walking through the streets, saying excuse me, and sensitive to each persons feelings - I think the bulls would win.

Lesson #5 - The Driver - Does he know the way?

2006-08-16T07:08:00.000-05:00

Like with any long road trip - you may have many drivers. Some get tired and fall asleep at the wheel, some simply don't know where they are going, and others drive too slow or too fast. Choosing the right driver at the right time is a key part of a successful trip. In the beginning of any venture it is less important to designate one person as the CEO, since you are focused on building a product and and everyone is working day and night and too busy to argue about roles and responsibilities. However, at some point a critical decision needs to be made on who is at the wheel.

Sometimes it is a difficult decision to make because everyone feels the title of CEO means "his way or the highway". But this is not the case. The role of CEO is to focus on execution and maximizing everyone's talent and capabilities. Sometimes a key decision needs to be made, and (yes) the CEO may need to make a tough call - but if the executive team is able to agree on a business plan - these decisions are far and few between. Much like a road trip - if everyone agrees on the destination - the driver has map to follow.

How do you know if you have the right CEO?

This is a tough question. If the company is a startup - the CEO needs to be a good communicator and evangelize the vision of the company. He doesn't have to be the visionary or the "idea" man - but he absolutely must be able to convince someone in 5 minutes or less that your company is the next big thing. Whether you are motivating partners to work late nights, or convincing a potential investor to write a check - the CEO needs to be a great sales person.

If the company is beyond the early years, driving revenue and in operational mode - then the CEO role expands. Some CEO's (rare) have the capability to sell the vision and execute the operational plan. Although "selling the vision" never loses importance, the ability to execute a plan and manage all aspects of a growing and dynamic organization is extremely challenging. Sometimes, a CEO balances their capabilities by hiring a good COO or CFO to help manage operations - but this only delays the inevitable - of having a CEO who can execute.

Here is a simple way to determine if you have the right CEO to help build a new company:

1. Has he been a CEO of a startup before?
2. Has he successfully raised capital in a startup before?
3. Does he speak with conviction and passion?
4. Does he solicit feedback and opinion before making important decisions?
5. Does he roll up his sleeves and work with the team to execute?

When choosing a CEO, set your expectations high, and make sure he is someone you would want to grab a beer with after work, because no matter how inspirational or experienced a CEO is - he needs to be able to bring the team together. Otherwise, he will be driving alone - and at that point - the destination doesn't matter much anymore.

Lesson #4 - Gas Money : Everyone needs to chip in

2006-08-14T20:17:00.000-05:00

When you start a new venture, it doesn't take long before you look around the room and ask "How are we going to pay for all this?". For some entrepreneurs (who have had success) they may be able to fund the first leg of the trip, but for most - they need to find a way to get "Gas Money".

Much like a road trip, it would make sense for everyone to chip in equal share for the gas. No free rides, right? Unfortunately, it rarely happens when starting a company. This is where I feel most entrepreneurs make their first critical mistake. The classis example, is three guys get together, form a company and split it three ways - 33% each. They work hard (sweat equity) for a month or two and build a nice business plan, perhaps even put together a rough prototype, and then realize they need some more money. At this point, they all should put out their wallets, and invest equally the seed capital to fund the next phase - but this rarely happens. Usually, it will be one of the guys who gets a second mortgage, or begs friends and family for cash.

Now I understand not everyone can write a check for $10,000 or afford to take the risk associated with a new business - and this is why we call them "employees" not "entrepreneurs". If an individual is not willing to invest real money into the company, then the terms of the relationship MUST change. He or she needs to earn their equity, and not be given 33% of the company, just because they happened to spend a few long nights searching godaddy.com for a domain name. Money is not just "gas" for the business, but it is one thing that keep people motivated and invested in the business.

Ofcourse, dividing up equity in a startup is not an easy task. Its like measuring the value of each person at the table. It can become very personal, and at some level insulting for some. However, this is what partnership is all about. This is the first big test in setting expectations and having everyone understand what they bring to the party.

My solution is simple. Give everyone fair share of the company. Make them earn the equity over time. For example if Jon is given 33%, make him work for 3 years to earn 11% per year. And if Jon invests cash, then set a price on the stock, and let his investment be treated like a venture capitalist investing in the company. This will dilute those shareholders who are not investing with Jon.

So next time, when you pick up a hitchhiker, and you pull over to get gas, and he looks at you and says "I ain't got any cash on me" - either kick him out, or make him wash the van and earn his ride.

Quote of the Day

2006-08-08T07:07:00.000-05:00

"Business opportunities are like buses, there's always another one coming."

- Richard Branson, founder of Virgin Enterprises

Lesson #3 - The Road Trip : Plan for rough weather and the occasional falling cow.

2006-08-06T17:12:00.000-05:00

Now that you have your team pumped up and your destination plugged into the GPS - its time to start the road trip. Like any trip, there will be road blocks, detours and maybe falling cows - but as long as you keep driving towards the destination - you will never feel lost.

I want to share with you a great "Destination" story. It is a story about two hitchhikers who had their fair share of rough weather. The story begins - Two guys (ages 23 and 24) meet in college. At first they can't stand each other - always arguing - but eventually the mutual respect surfaces once they both realize they share similiar ambitions. They started working together on an ambitious project (nicknamed Backrub). Neither knew exactly how they were going to get to their destination, but there was no doubt in their minds where they were going.

Once that had a working product, they decided to call some potential customers. Each discussion ended the same - "Guys, that's interesting, but not interested right now." Unfortunately, with limited money and busy trying to finish college, both were faced with a big decision. Both decided to leave college and start the company - but they knew they needed cash to continue operations and reach their destination. (Everyone needs gas money).

They started talking to people they knew - looking for prospective investors. After months of searching and coming close to calling it quits, they got an inpromtu meeting with a colleague of their professor. As one of the guys tells the story - "We met him very early one morning on the porch of a faculty member's home in Palo Alto. We gave him a quick demo. He had to run off somewhere, so he said, 'Instead of us discussing all the details, why don't I just write you a check?' It was made out for $100,000."

The rest is history. Those two guys are Larry Page and Sergey Brin, the founders of Google,Inc.. Their company is worth over 100 Billion dollars. Their Destination was simple - create a more powerful search engine, and give users more relevant results. From day one, nothing went as planned, but they knew exactly where they were going.

So remember, despite the lightning storms, the flat tires and the occasional falling cow that hits the hood of the car - nothing that happens in the journey can change the Destination.

Lesson #2 - The Destination : Get everyone to agree on atleast one thing - the destination

2006-08-05T14:06:00.000-05:00

"There are many paths to the top of the mountain, but only one view." -Harry Millner.

Building a company is a journey. Much like hitchhiking from one city to the next, there are many paths, many people along the way - but without a destination - there is no purpose. Everyone has a different opinion on the details of the trip - where to eat, sleep, stop, etc - but in order for the journey to have meaning - everyone needs to agree on the destination.

So many companies start with what is labeled as a "vision" or a "mission statement"... but most of the time the words they use make no sense, sound like something copied off a motivational poster or a weight-loss clinic brochure. A company needs to define a "Destination" before it can really build a plan, a team and achieve success.

The Destination is more than seeking fortune, power and glory - it is a bold statement of where you will be in 1,5 and 10 years.

Lesson #1: The Team : When Hitchhiking,Pick your Passengers Wisely

2006-07-31T18:36:00.000-05:00

The first big lesson I learned in business, was beware of the passengers with you on your journey. In order to make it easy to remember, I have created stereotypes for the types of people you are bound to encounter. One of the most difficult aspects to any venture is knowing if you have a great team. (take a look at these losers on the left? Would you join their startup?)

The first type is the STONER. This one is easy to spot (most of the time), and can slow you down, and maybe even take 33% of your stuff. The Stoner is someone who has no passion or drive to create - they never bring original thought, never carry their weight, and always expect to share equally the bounties of the trip (especially the food). In my first business, one of my partners was a "STONER", and its was never a lack of intelligence, or inability to add value to the venture - it was simply his choice. One of the biggest challenges, is confronting the stoner, because they are usually very cool, and are great to work long hours with and grab a beer - but when the time comes to build the business - you will be alone. And when you sell the company - he will be first in line, motivated as hell to cash that check.

The second type is the BACKSEAT DRIVER. This is the guy who thinks your an idiot and questions every decision you make, even when you ask his opinion. Sometimes, a backseat driver is useful to have in a venture (especially if a stoner is driving). But in most cases, the person is too cowardly to lead, and the only passion he has is demonstrated when he is challenging your ideas. The best thing to do with a backseat driver is to put in the front seat and make them drive. This will either wreck the car, and humble him - or will allow him to prove to you that he can drive better than you - and then you may have found the perfect CEO (because lets face it - you are not a good CEO).

The third type is my personal favorite - the NAVIGATOR. This is the guy who is constantly looking at the map, trying to plan every mile of the journey. He is usually very anxious, nervous and anal. This is the last guy you would tell that you may not make payroll, or that you just sold a bunch of vaporware to a Fortune 500 company. I was generous with the name "Navigator" - it sounds important and very cool - because I actually think Navigators are great to have around. However, you need to make sure they have some level of entrepreneurship to handle the unexpected, and not drive you nuts answering stupid questions like "When are we going to close on the round of Investment?" and "How much money do we have in the bank?"

The fourth type is the DRIVER. This is the single most important person in the car. The Driver is making every decision on the direction of the car, including who gets picked up, and who gets kicked out. The Driver is also the one who gets blamed when the car drives off a cliff and explodes in a towering flame. There are different types of entrepreneurs - but the one type who really deserves the title - is the Driver.

As you are walking down the highway, with your thumb waving in the wind, and a rusty van pulls up aside you and honks - make sure you take a good look around at your fellow passengers before you throw everything you own in the trunk and buckle your seat belt.

Entrepreneur = Hitchhiker

2006-07-31T18:21:00.000-05:00

When people ask me "What do you do?" - I usually pause and say "I am an entrepreneur". I never get a look of satisfaction with that answer - perhaps because it sounds like I am hiding something... or perhaps its because many people don't know what an entrepreneur does?

So, in order to rationalize in my own mind what I do... I looked for the best metaphor of what its like being an entrepreneur. What other occupation is filled with the risk, excitement, absence of order or predictability? And then it dawned on me - being an entrepreneur is like being a hitchhiker.

I borrowed the title of my blog from Roger Waters (Pink Floyds) album - so this is proof I am an entrepreneur - because I simply borrowed a brilliant idea from someone more brilliant then me. (but also in the entrepreneurial spirit - I want to return the favor - so here is the link to buy the album.)

I am not entirely sure what I am going to write about, or how often - but I felt it was time I started to share my experiences and stories for those about to become a hitchhiker.

Quote of the Day

2006-07-11T15:38:00.000-05:00

"What's the quickest way to become a millionaire? Borrow fivers off everyone you meet." - Richard Branson.