Featured in Alltop StartUpRoar

Sunday, December 30, 2012

Top 10 articles for 2012 from the Startup Blog

Startup Blog has been on line for about 2 years now.  Changes you may have noticed are inclusions of photos (I shot  most of them) and more real-life experience stories.  More than 200,000 have enjoyed the articles in Startup Blog and more than 50,000 have read the Examiner articles.  The topics and content are not identical and both are something intended to help you in starting a company and building it.  There is no one central theme because running a business requires many skills.  Developing those skills often comes from on-the-job training. 

The blog is designed to be educational and helpful.  New topics sometimes come from readers. They are welcome and encouraged.  Please feel free to engage and help make the blog more helpful to you by commenting and requesting more on select topics. 

The articles below were the top 10 for 2012.  Some surprised me as to how fast they rose in the rank.  I hope you read them all ready, but if you have not, here they are:

Taffy Williams is on Twitter by @twilli2861.  Email questions to twilli2861@aol.com. More is available via his company website ,  photo website, or “LIKE” ColonialTDC on Facebook.  You can also find him in the group Startup Group on Linkedin. Other articles are in the Charlotte, NC- small business section of Examiner.com.

Wednesday, December 19, 2012

Take extra care when reviewing content

Errors look bad !

Twitter is full of blog links and other useful information for startups and job seekers.  The writers offer lots of advice and some articles are fun to read.  Startups create content they hope will attract customers and/or investors.  Job seekers prepare their resumes in hopes of finding the next opportunity.  There is a job shortage, investment funds are limited, and many companies have less money.  The combination creates a market more favorable for the consumer, investor, and company seeking employees. 

It is always best to have error free content, but people make mistakes and work product sometimes contains errors.  When the errors show in the final work product, it may send the wrong message.  In the words of a reader that caught a few of my errors,

 “it is extremely important in a tough competitive market to catch errors.  Resumes with inconsistent formatting or typos send the wrong message. I may get 10 resumes for the same job and they all may be equally qualified.  It can be the little things that make the difference when the margin in slim.”

The same holds for seeking investment, marketing products, or conducting any form of business.  Even blogs with errors may create problems by causing a reduction in readers’ confidence levels in the author. 

People make mistakes.  This can occur on occasion by failure to pay proper attention to the details.  Some individuals overlook the mistakes and look at the bigger picture while others have problems looking beyond the mistakes.  While mistakes do take place, finding ways to review the work and ensure it is error free serves to provide a better image to all.  Learning to take the hit for the mistakes and improve in the future is a value that enhances your image to many. 

Errors are irrelevant as far as the level of competition.  Elimination of errors is a task that we all must strive to accomplish. One can always correct work later, but it is much harder to correct bad impressions and you may never recover lost opportunities that arose from errors. For these reasons and more, do your very best to review and eliminate mistakes that will suggest to others you are not the person they want to hire or invest with.  You may not receive the position or the money, but at least it will not be for looking like a poor performer or that you do not care.  You only get one chance to make a first impression.  Check and double check your work, and then have someone else look over it if you can.  Why miss out because of a typo or worse!

Taffy Williams is the author of:  Think Agile:  How Smart Entrepreneurs Adapt in Order to Succeed to via Amazon 

Monday, December 17, 2012

Some things are beyond the entrepreneur control

Prepare in advance for those days you may be away!

People go through many different emotional states during each year.  The emotions range from the excitement and joy to the horror of losses like those seen in the Sandy storm or the killings in Newtown, CT.  These events affect the desire and ability to maintain normal function of a business.  During the great times, the business activities are not dramatically affected.  It is during those horrid times that one may wish to retreat from day-to-day activities and hide in a closet or worse. 

The horrid events of life need not be as devastating as the Newtown killings.  People have situations like deaths or sicknesses of family or friends.  Family breakups and arguments can contribute to the mood and desire to maintain normal daily functions.  Personal medical issues weigh heavily on decision-making processes and commitments to work.  As sad as it may seem, this is life and sometimes events are beyond our control.

Each entrepreneur has events and people they have a direct ability to improve or change; i.e., their direct circle of friends and situations where providing assistance is helpful.  Then there are those events and people you have less control over because they are out of your direct inner circle of friends or daily events.  All activities have an impact on your mood and may alter your ability to carry out your daily work requirements.  It is during these times, that having friends, family, and the community support mean the most.  They can be a source of strength.

One cannot prepare for many negative events, and it seems that they often they come in multiples.   For example, a family member in the hospital and two funerals in one week are unusual, but it happens.  The downside is that you may lose your direction and forget where you were in your work once you return.  Perhaps, you are the leader of the business and the team is lost while you are away.

There is really nothing to guide you on the emotional side or help prepare for the negative events.  You might consider the following ideas as a means of keeping the business functioning while you are recovering.   They all are advance planning and are good whether you have negative events or never experience one.

To-Do Lists:  Keep a list of activities that must be completed along with the dates required for completion.  If you must be away for a while, the list will help you understand what the work needs on your return.

Project Planning: Develop project plans with timelines.  The project plans allow the team to know their responsibilities and may keep them functioning while you are away.  Develop a reporting method that allows you to track the progress of the team at regular intervals.  The reporting method may be something you can review while you are away.

Team Leaders:  Appoint team leaders and provide them with clear objectives.  Empower the leaders to conduct the business as needed to accomplish the objectives.  Develop a means of reporting that allows them to keep you appraised even if you are not available for some period.

Second in Command: Identify and train a second in command.  A person you trust with all aspects of the company business.  Empower this person to run the business in your absence.  Developing a reporting method, you find suitable so that you may monitor activities if you are able.

You cannot prepare for all events, but you can prepare for your absence from the business.  You can also learn to trust your employees and count on them to grow the business.  The company, Cantor Fitzgerald L.P., lost 658 employees in the 9/11 attack on the One World Trade Center. This included family and friends along with much of the business.  The company found a means of rebuilding and assisting the families of those lost.   The leadership and courage of those that remain after devastation is the only way we can honor the memory of those lost.  These leaders through their guidance contribute to building a stronger community. 

Taffy Williams is the author of:  Think Agile:  How Smart Entrepreneurs Adapt in Order to Succeed to via Amazon 

Tuesday, December 4, 2012

Keep your business dealings as simple as possible

This path has more twists and turns than needed!

In the Sands of Iwo Jima, Sgt. Stryker (i.e., John Wayne) stated, “Life is tough, but it's tougher if you're stupid.   People can be very smart but do things that are not so smart.  The result may work out, but the path to the end can be hard to complete, consume excess energy and money, and confuse the team.   The goal should be to develop the clearest path to success and keep the dealings as simple as possible.   Otherwise, you fall in the trap of making life more complex than needed and potentially create delays or other complications.

The same is true for most aspects of business; business structures, deals, compensation plans, stock plans, marketing, manufacturing, etc.  Planning is an integral part of business.  Regardless of the intended purpose, starting simple and amending the plan as needed is often a good strategy.  The ability to keep things simple allows everyone to follow along with less confusion. 

One of the added advantages of keeping things simple is that should the originator of the plan depart, everyone remains able to determine what the intentions were.  Living with overly complex business dealings results in making the task of building a company more difficult especially if no one understands the situation after the originator departs.  Explaining the plan to investors is extremely complicated and review of the dealings in diligence becomes even more difficult.  The dealings may have worked, but certainly would require an understanding of it to carry it out!

Creating complexity is a natural reaction to adjusting to different situations.  Once something does not work properly, the analysis and modification are logical next steps.  The stepwise changes allow for monitoring and improvement yet keeping plans to the simplest form possible.  There are cases where individuals will contemplate all the ways something may fail and add layers of adjustments on day one.  Some of these have a tendency to cross from the realistic and workable to the ridiculous. 

When possible, try to keep your dealings as simple as possible.  Add the degree of complexity required to get the job done and ensure the plans are understandable by everyone.  If one of your team cannot describe the plan, maybe it is too complex.  You can count on them not carrying it out properly if they do not understand it.

For example, suppose you want vesting of equity.  You can go with simple time dependent vesting, you can pick select milestones for vesting, and you may be able to mix them.  It is possible that the mixing can become so complex the company and the employees will have problems tracking the vesting.  The reporting of the vesting is even more complex with an overly complicated plan.

As another example, you may want to acquire a technology for stock and cash.  You can develop a clear set of deal terms for the acquisition.  You may want to delay some of the cash payments.  Most of the transaction can be documented in very clear terms.  However, it is possible in the desire to do a great deal you develop a structure so complicated that no one will understand it in the future.  This presents problems with tracking and explaining the deal to others. 

The examples do not do justice to the complex deals they were describing.  The simplicity of the examples should help you get the points.  Maybe the simple explanation is satisfactory to present this message.  The actual deals were so horrible it is nearly impossible to describe them anyway.  In short, try to keep things simple.  No need to create a stupid arrangement that is overly complex unless that is the only way to do the job.

Taffy Williams is the author of:  Think Agile:  How Smart Entrepreneurs Adapt in Order to Succeed to via Amazon 

Sunday, December 2, 2012

Entrepreneurs are like artists

The start of a new company by an entrepreneur is like an artist creating a painting.  The easel is blank and the artist creates a masterpiece from a vision.  First, the sketch is drawn and then the colored.  The artist decides whether to use an oil-based paint or some unique method of adding color.  The artist sees the painting taking shape.  There are sections that may need to be re-done because they did not fit the desired image.   There are no numbers or instructions for the artist.  The whole idea develops from concept to reality based on a vision.

The same occurs with many startups.  Entrepreneurs have an idea for a product that should be important to the targeted consumer group.  The idea may be an early concept or it may have some research performed by a scientist the entrepreneur has identified.  The next step is identifying a process that will convert the idea to an exciting product.  The development path is committed to paper along with the marketing information and any relevant business information.  Eventually a business plan is created.

The entrepreneur must now create a company structure and find team members to work on the business.  Money must be raised to fund the business.  The entrepreneur now takes to the road on a treasure hunt.  The process of seeking money is a performance of sorts.  The entrepreneur must present the business in a manner to captivate an audience.  The investors must share a vision and that vision is the one the entrepreneur created.

The process of creating a company can sound a bit more business in description, but that hides the extensive creativity that many entrepreneurs possess and use to form their business.  A company created from scratch complete with plans, a team, and funding.  It takes imagination, an ability to convert images to reality, conviction, and salesmanship.  The entrepreneur must lead the process and adjust the business as needed.  The whole process arises from a vision.  Perhaps, one can characterize the entrepreneur as a magician.  Things appear out of thin air, but magic is an illusion.  The businesses created by entrepreneurs are real and the jobs that arise are real.

Art has similar characteristics as a company ages.  The better the entrepreneur and the more desired the business, the greater valuation.  Images that do not sell well eventually fade to being worth very little.  Those pieces of art created by the masters are recognized as fine art and are worth high prices; the same is true for the companies created by the entrepreneur. 

It takes time and thought to create a company.  The goals of all entrepreneurs are to create masterpieces.  The thought and energy you put into your masterpiece will ultimately determine the value you receive for it.  The recognition you receive will be part of your reward as well.  Your goal is to create masterpieces that everyone wishes they owned; be it part of the company or products being sold.

Thursday, November 29, 2012

Photo tour of the life of an entrepreneur

Every entrepreneur has dreams of great and wonderful things.  This is normal and expected.  They are highly motivated and dedicated to their technology and can find no flaws at all.  They are certain they will be successful and there is no one that can convince them otherwise.

They form a team ready to fight for success.The team prepares the development path and the operating plans.They start as much of the work as possible with little money on hand.

The CEO and other members go on the financial hunt. They need money and seek every possible source. Grants, loans, Friends & Family, and Angels are among the first sources approached. Few will see immediate success, but they will continue the search.
Given the tight money situation and highly competitive environment, the teams will continue but may soon become tired.  They may even reconsider their options. 

Some of the companies will not survive and will be eaten or die.  Many of the entrepreneurs start over at this point with a new company.
Some of the companies get their lucky break.  They become re-energized and enthusiastic.  They work hard to try to achieve all of the goals they established, hopefully, before the money runs out.
The winners emerge and go on to start new companies or become Angels.  They teach others to develop companies and coach or serve as board members. 

The road is difficult but the challenge is worth the fight.  Entrepreneurs do what they do because they believe they can succeed and want to do something grand.  They all are winners but some have more money than others do in the end!

Tuesday, November 27, 2012

Entrepreneurs must excel at selling

Entrepreneurs learn to sell and negotiate or they never get to YES!
A recent comment via friends (@RevenueDoctor & @Bill_Simmel ) on Twitter reminded me of the quote by Zig Ziglar:   Every sale has 5 basic obstacles: No Need, No Money, No Hurry, No Desire and No Trust.”   The need to overcome the obstacles and close a sale is critical if a company wants to survive.  Sales are essential to prepare for even before the product comes to market.    

Marketing and sales of medical products are even more complex than many other types of products.  The regulatory requirements of the FDA ensure that approvals are supported by validated and solid statistical studies.  Any marketing claims not properly documented supported by data result in severe responses by the FDA.  It is even possible to go to jail if the infractions are severe enough.   The need to match the marketing claims to data collected to support the claims is the reason many companies have a marketing person closely involved in any study designs leading to a product approval.  Thus, an additional obstacle to overcome is “insufficient data.”   This obstacle also flows to the medical site where the sale takes place.  The physicians review the data and may fail to adopt the product usage for lack of data, loss of patient to a different practice, or other means, i.e. “loss of revenue.  The control of the patient and revenue to the medical practice is critical to each practice.  As a sales person, you may overcome all of the 5 basic obstacles Ziglar lists, but the insufficient data and loss of revenue are two that will kill a medical sale even quicker.

Entrepreneurs need to understand the dynamics of the market place for medical sales and they need to convince investors to participate with their money.  This attraction of investors is no small task.  The last decade has contributed to a downturn in the VC funds and other investors willing to take on such risky investments.  There are numerous companies with fantastic product ideas in development all competing for the limited capital in the sector.  The risk tolerance of the investors is understandable since many of the VC firms fail to come close to the returns their partners thought were possible.  The larger number of companies in later stages of development results in a wider selection and greater competition for the money from the remaining viable funds.  In turn, this results in cherry picking of the more developed and therefore less risky investment opportunities.

The selling process to the investors by the entrepreneurs in the medical sector is requires two selling aspects:  1) they need to demonstrate that they understand and can competitively market and sale their developed product, and 2) they need to convince the investors to support the growth of the company.  The investors will actually review the first criteria as part of their diligence on the company.  The diligence never starts if the entrepreneur fails to sell the idea of the company to the investor. 

A different set of issues and criteria may occur in other fields.  The thought that starting a company requires a great idea is only part of the equation.  Entrepreneurs must understand their markets and sales criteria for the products.  They must also be able to sell the idea of the company to the investor community and negotiate the best deals possible.  Getting to YES is difficult and knowledge of selling and negotiating is essential.  Several criteria help take a company grow from the early startup to a huge success.  Nearly every criterion requires some ability to sell something to someone and negotiate the result.  In short, entrepreneurs must become master salespeople and negotiators and use these skills to grow the company.  

Wednesday, November 21, 2012

Your gut does not always lead you to the best decisions

Do my eyes decive me?

In a recent article, brief description of a key point, your gut may be wrong, was mentioned.  Daniel Kahneman, “Thinking Fast and Slow”, made this case in his best-selling book.  A recent Facebook story told as if by a leading professor and modified a bit, leads you to the same conclusion.  The story is below:

A professor stood before his philosophy class and had some items in front of him. When the class began, he wordlessly picked up a very large and empty mayonnaise jar and proceeded to fill it with golf balls. He then asked the students if the jar was full. They agreed that it was.

The professor then picked up a box of pebbles and poured them into the jar. He shook the jar lightly. The pebbles rolled into the open areas between the golf balls. He then asked the students again if the jar was full. They agreed it was.

The professor next picked up a box of sand and poured it into the jar. Of course, the sand filled up everything else. He asked once more if the jar was full.. The students responded with a unanimous 'yes.'

The professor then produced two Beers from under the table and poured the entire contents into the jar effectively filling the empty space between the sand. The students laughed..

'Now,' said the professor as the laughter subsided, 'I want you to recognize that this jar represents your life. The golf balls are the important things---your family, your children, your health, your friends and your favorite passions---and if everything else was lost and only they remained, your life would still be full. The pebbles are the other things that matter like your job, your house and your car. The sand is everything else---the small stuff.

'If you put the sand into the jar first,' he continued, 'there is no room for the pebbles or the golf balls. The same goes for life.

If you spend all your time and energy on the small stuff you will never have room for the things that are important to you.

Pay attention to the things that are critical to your happiness.

Spend time with your children. Spend time with your parents. Visit with grandparents. Take your spouse out to dinner. Play another 18. There will always be time to clean the house and mow the lawn.

Take care of the golf balls first---the things that really matter. Set your priorities. The rest is just sand.

 One of the students raised her hand and inquired what the Beer represented. The professor smiled and said, 'I'm glad you asked.' The Beer just shows you that no matter how full your life may seem, there's always room for a couple of Beers with a friend.”

The story above describes how you view the surroundings and make decisions using your gut and intuition.  Such decisions can often be less than optimal.  The use of analytics helps when applied to such events.  Analytics has even become an early trend in investing.  One VC actually raised capital on an analytic tool that uses investment patterns of other VCs.  They review by computer the lead firm and the lead partner making investments.  If you come to them with such information, this firm will invest based on the statistics of success of that partner and firm!  Other investment firms on Wall Street use analytics in a similar manner.  The point being that review of your decisions in a more analytical manner may allow for fine-tuning. You may end with a superior decision.  That is your ultimate goal in the end.

Taffy Williams is the author of:  Think Agile:  How Smart Entrepreneurs Adapt in Order to Succeed to via Amazon 

Tuesday, November 20, 2012

Dilution concerns by founders and investors

What is the dollar value of your ownership in the company?

Investors and co-workers in your startup often express dilution concerns.   A past article addressed this issue in part and a description of the need to communicate and educate your investors formed the basis for a different article.  This piece further addresses the issue of dilution as a result of an excellent question from a reader commenting on a recent article covering the summary of a conference.

“Regarding the comment on continually seeking capital: How is it that this approach, though desirable from the point of view of the entrepreneur, is not looked upon with some alarm by investors who will be diluted unless they are the ones who again capitalize the startup?  What's the thinking on that from the investor standpoint? In for a penny?”

The point made in the question is a very real concern expressed by many investors and team members in startups.  Just recently, a company’s team exchanged numerous emails discussing valuation and downstream dilution.  In a different company, the issue of downstream dilution was of high concern to the Angel Investor pool.  Even 15 years ago, a Board expressed these concerns as the company raised capital $18M.  The question is a one that requires thought and consideration as you seek to raise capital.  It even becomes a personal concern should you ever leave the company and the company continues to raise capital.

A few key areas to consider:

Does the capital raise enhance development and increase valuation of the company?

It is important to develop a long-term budget that shows expenditures required to become a profitable company.  Your investors are entitled to know this requirement and understand how it might affect them.  Raising capital for a company that does not increase or may decrease in valuation dilutes all shareholders and decreases the value of their ownership; this does happen by design.  Many times the company does not achieve their anticipated valuation increase and the dilution effect hurts investors.  No entrepreneur ever develops a startup to lose money for investors. They always believe the valuation will increase with development and sales of a product.  Sometimes the company does not capture the desired sales or attention and the company value never goes up. 

Plans to raise capital must fit the company development plan and launch schedule.  Raising all the money up front is dilutive and possibly in a negative way. For this reason, capital raises should take place with increased valuation increments; e.g., the last shareholders bought at $1 / share, the next round is at $5 /share.  Valuation should increase if the company meets their milestones and sales estimates.  The required cash should support this activity.  Many well informed investors will review the proposed spend and accomplishments.  They understand the need to progress while having adequate cash reserves to overcome difficult times.  They expect dilution to take place but look at the value of their ownership as important. 

Does failure to raise capital harm the company valuation?

One way all investors are harmed often occurs when the company needs capital because they are out of money.  The new investors realize there is not gas to fuel the company and they negotiate very hard for a larger piece of the company or a greatly reduced valuation.  Terms like “cram-down” or “down-round” originated from such events over the last 10 years or so.  The phenomenon became a real issue as the year 2000 bubble burst for technology.  The lack of investor interest for several years afterward forced many companies to expend their cash reserves.  These companies may have developed on schedule, but the reduced economy and fear by investors slowed financings.  The firms making investments cherry picked the best companies and negotiated very favorable terms.  Clearly, this form of dilution harmed those not participating because of the down-rounds.  

Are there preferences or anti-dilution provisions that may harm unprotected investors? 

Consideration of preferences and anti-dilution are important, but become less so if you are out of money.  The choice of closing the doors or completing a down-round is difficult for all involved.  No one wins if the company shuts down, so entrepreneurs try to close on a financing under the best conditions possible.  They may try to reduce the harm of liquidation preferences or anti-dilution provisions by trying to negotiate with the holders of these rights.  If successful, the dilution effects in down-rounds are not as bad; however, these deals do not usually work out favorably.

How do you answer the investor concerns?

The important piece of information for the shareholders is whether the percentage of ownership one holds shows an increased value with the anticipated dilution.  It may take time to realize the improvement, but this is an important point. For example, a 10% ownership of a $5M company is $500K, while a 1% ownership of a $1B company is $10MM.  Not all investors or team members accept this at face value and it takes time to help them see the long-term benefit. It takes time to raise capital and requires making countless presentations and developing relationships.  Entrepreneurs must immediately start the networking after each financing round to ensure they relationships are developed and investors are interested when it is time to complete a new round.  The key take home message is it is better to have a small part of a big number rather than 100% of nothing.

Sunday, November 18, 2012

Networking is not a one sided activity

What do you mean you want my help, knowing me should be enough

Some new and established networkers may have missed the office memo: “Networking is far more than asking for help.”   Networking is meeting others followed by establishing a relationship.  This requires more than a 5-minute intro in a bar.  Often it means meeting with people again and getting to know them better.  In addition to getting to know the people, you should learn their skills, likes and dislikes because that is part of the person.  This takes time and you can expect these people to want to know you as well.

It is a very odd email to receive when someone sends a note after a brief intro and they ask for intros to people that may invest in a company.  A brief intro to a person does not allow one to develop a sense of the right type of people that may help the requesting party.  Secondly, the personality of the person making the request may not be a fit with those were a referral is made.  Finally, some people never adequately describe their company in a brief meeting.  This does not allow for identification of the correct people that may be helpful.

It is equally odd to receive an email from people you have never met where they request help in finding investors for a company.  This happens rather often.  It is even more surprising when the person requesting introductions wants the help with nothing to offer back.  One interpretation of this type of behavior is “please help me get rich while you watch.  That should be satisfaction enough.”

Stranger still are the networkers that may have a great idea but fail to describe it.  Telling someone you just got a patent is wonderful, but that is not adequate.  Perhaps 1 in 5,000-10,000 patents are actually of significant value.  Often the people seem do not understand what having a patent means.  A patent gives one the right to block people from selling your product.  It does not give you the right to sell your product.  A lot of other work is required to understand whether you have a freedom to operate!  Some of the patent holders cannot even elaborate what their patent protects.  This sounds bad and it is.  You need to know what your intellectual property covers!

Meeting someone you wish to develop relations with requires your intentions to reciprocate; i.e. when you get a call, you will help them!  Perhaps you know people that are one-sided and always come with a handful of “give me.”  They may even be the ones with alligator arms when it comes to picking up a check after lunch: i.e. their arms seemed to get so short they can reach the bill.  No matter how often you go out with the person, they never pay the tab.  Guess they expect their company is good enough.

Networking means establishing a relationship.  You want my A-list of contact; you have to earn my trust.  Asking for help means, you may have to help me in the future and I have to trust you.  I have to understand why you need help and what you are trying to accomplish.  Can you imagine calling someone to make an introduction and not be able to provide any info what so ever?  I may lose credibility with my contacts or worse, introduce them to a person they will regret meeting.

Think of networking in the correct manner.  Developing a solid network is critical to your future.  People in your network are people you would help if they call you and available if you need help.  You are not to abuse your privilege and should be appreciative of what help you receive.  If you never get a request for help, that is fine.  However, you should never approach the relationship with only yourself in mind.  That makes it one-sided and doomed in the long term.