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5 Criteria For Splitting Equity In Your New Venture

I always tell entrepreneurs that two heads are better than one, so the first task in many startups is finding a co-founder or two. You need to find the skills or experience you don’t have in business, technology, or money. So the first question I usually get is what percent of the company or equity is that person worth? Giving a co-founder a salary won’t get you the “fire in the belly” you want. The default answer, to keep peace in the family, is to split everything equally, but that’s a terrible answer, since now no one is in control, and startups need a clear leader. The next default of waiting until later is equally bad, since partners who bow out early will still expect an equal share of that first billion you make later. Now comes the reality check. Just because it was your idea doesn...

How Today’s Full Customer Buying Journey Is Critical

In today’s totally interconnected world with its abundance of information, choices, and marketing, how your customers buy has drastically changed. Buying has evolved from a simple transaction decision to multi-faceted experience. Whether you are an executive, an entrepreneur, a marketer, or a salesperson, it’s time to look beyond how you sell, and focus on how your customers buy. For example, you may think that buying a commodity like bottled water is still all about price, yet buyers today check their smartphones first for positive brand reviews, environmentally friendly bottles, positive buzz from social media, and the nearest outlet for purchasing. Think about how much Starbucks customers have changed what you need to consider to sell a cup of coffee. I found a good outline of the key e...

7 Business Realities To Temper Invention Excitement

Every inventor seems to think their invention is worth a million dollars, but I haven’t seen anyone pay that much for one yet. In fact, I often have to tell aspiring entrepreneurs that their inventions have zero value, at least not until they are put in the context of a business plan, with qualified people committed to executing the plan. Early-stage ideas fall in the same category. Don’t get me wrong. I have the greatest respect for inventors and idea people, who think outside the box to envision and even create solutions never before seen. But I have also learned from experience that there is often quite a distance between a great invention and a great business. A business is about making money, while inventions are more about spending money. According to an old Harvard Business Review a...

Grant Applications Often Provide Early-Stage Funding

A critical stage for most first-time entrepreneurs is getting their idea developed into at least a prototype to validate their technology. This process costs money, which professional investors are not willing to contribute, since their interest is in scaling a proven product and business model into a growth business. Investors want potential for a large and timely return, with reduced risk. Acquiring seed-stage funding is admittedly tough, but a source that I find often overlooked is government grant funding, accessible in the U.S. through Grants.gov, an online directory of more than 1,000 federal grant programs that don’t look for equity or payback. Specifically, I often point to the NSF or the Small Business Innovation Research (SBIR) program for high-tech startups. Government grants st...

How to Keep Your Business From Running Your Life

Every entrepreneur I meet in my role as a small business advisor dreams of making the business run like clockwork, even without them. You are all frustrated when that never happens, even after years of 16-hour days, repeated efforts to hire the right people, and multiple campaigns to delegate more and sign up for less. There is no time for fun, and vacations never happen. For example, Elon Musk, while being a highly respected and successful entrepreneur for years, still readily admits to regular 100-hour work weeks, no social life, and sleeping under his desk all too often in the Tesla factory. Is this the definition of success you want to experience? Frankly, I’ve never been sure what to tell entrepreneurs who want to break free of these bonds. Recently, I completed a new book, “Clockwork...

A Startup That Imitates, With Innovation, Often Wins

It may not be as sexy, but starting a new business which builds on an existing technology or business model is usually less risky than introducing that ultimate new disruptive technology. There are many levels of innovation that go beyond copying someone else’s idea, but stop short of pushing the leading edge (bleeding edge). Many of the major business successes started this way. McDonalds didn’t invent the fast food model – they simply improved on the cookie-cutter White Castle process. Before Wal-Mart made the low-cost high-volume business model famous, there was Ben Franklin and Two Guys who touted it way back following World War II. And we all know Facebook didn’t invent social media. The advantage of imitation, with innovation, is that it gives you a solid base for building experience...

Growing A Services Business Requires Selling Yourself

The critical success factors for a product business are well known, starting with selling every unit with a gross margin of 50 percent or more, building a patent and other intellectual property, and continuous product improvement. If your forte is a service, like consulting or web site design, it’s harder to find guidance on what will get you funded, and how you can scale your business. On the product side, once you have a proven product and business model, all you need is money to build inventory, and a sales and marketing operation to drive the business. With services, scaling the business often implies cloning yourself, since you are the intellectual property and the competitive advantage. You have no shelf life, so you can’t make money while you sleep. Indeed, there are some success fa...

7 Reasons To Turn The Enemy Into A Strategic Partner

Entrepreneurs seem to have blinders on when looking at competitors. Generally they are so focused on killing competitors that they fail to see the positive potential of a strategic partnership or some other type of collaborative relationship. Sometimes you have to put aside the emotion and the passion, and just look at what is best for your business. Strategic partnerships in this context can take the form of joint ventures, intellectual property licensing, outsourcing agreements, or even cooperative research. All of these offer the potential for a win-win relationship with a nominal competitor, rather than a win-lose deal, as long as both sides can remain humble and not try to dominate the relationship. Always start with a formal proposal, limited in scope to a specific common objective o...

7 Growth Choices That Can Make or Break Your Business

Most of you new venture founders I meet as an angel investor seem convinced that starting the business is the hardest part. You look forward to the day when your business becomes self-sustaining, and settles into a long-term growth curve, ensuring financial success. Unfortunately, sustainability is proving to be a more and more complex challenge in this era of rapid change. I’m sure you can all think of several examples of businesses that popped up quickly, with great business models, but then faded just as quickly. Examples would include Pets.com, Webvan, and Blockbuster. Most executives will tell you that sustaining top-line growth with bottom-line profitability is perhaps the most persistent and vexing challenge they face on a daily basis. The problem, according to Tiffani Bova in her n...

7 Equity Crowdfunding Risks Feared By Many Investors

Although professional investors may discount the impact of crowdfunding, they can’t argue with the growth of this new industry in the last few years. According to statistics by Fundly, crowdfunding contributed $34 billion in funding last year around the world, including peer-to-peer lending. That exceeds the amounts contributed in the U.S. by either angel groups or VCs alone. Yet crowdfunding is no panacea for hungry entrepreneurs and startups. According to Yahoo Finance, less than a third of crowdfunding campaigns currently reach their goals, and the rest have to return anything they do collect. Crowdfunding may look easy, via popular sites like Kickstarter and Indiegogo, but their cost in time, effort, and money by entrepreneurs is daunting. In fact, there are many types of crowdfunding,...

8 Management Behaviors Drive Change Without Crisis

In this era of rapid market and technological change, I know I have to challenge my small business advisory clients to keep innovating and stay ahead of the game. As you can imagine, it is human nature to look for a stable and unchanging business process, after all the pivots and chaos of starting your business. Innovation driven only by crises is not leadership and growth. For example, I’m even getting worried about Apple not showing the kind of innovative leaps that Steve Jobs was famous for. Per a well-known Apple evangelist, Guy Kawasaki, real innovation is a lot more than “simply making the iPhone smaller or the iPad bigger.” Apple needs a product that jumps to the next curve. Customers and analysts are always looking for innovation indicators. These indicators are a mindset and actio...

7 Reasons To Reconsider A Planned IPO Exit Strategy

Despite the fact that the number of IPOs (Initial Public Offerings) for startups have continued to stay low, I still hear it touted often as the preferred exit strategy. I suspect the exuberance for an IPO is still being driven by the highly visible successes of a few companies several years ago, including Facebook, Yelp, and Twitter. Everyone dreams of becoming a billionaire overnight. According to Investor’s Business Daily, even though IPOs in 2018 through July were up nearly 39 percent from last year, the total of 115 companies so far is still nowhere near the rate required to match the yearly total of 486 hit way back in 1999. The market for recent IPOs also remains extremely volatile, and as a result many of them are currently trading below their opening price. Concerns over val...

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