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Tuesday, October 31, 2006
This was written by a VC based in Auz..see I have been trying to get over there and play the diggerydoo..Ivan is a smart Investor and a driven guy..have a read at what he says there is some good stuff..
A Laundry List for the Entrepreneur
BSI – Ivan’s Entrepeneurial Journey
Will it succeed??
BSI began as a consulting company, started - with 1000 dollars and one client-in 1989. Before we knew it, we had a real consulting business.
Once we had clients and revenue coming in, we realized that we had a real business that we could grow. We picked a business strategy, thought about what we were going to do for our client’s long term, what kind of company we wanted to have, both culturally and functionally and gave it a go!!
The business has always developed with an exit in mind…..
The Unique Selling Proposition is to retain brightest and best. Have living values and let them have the freedom to pursue their dreams. Give the “players” latitude with boundaries. Let the workplace be a place that they can achieve and enjoy.
BSI is a global model. By 2010 our business will be +$100m and will be approached by a larger company or get listed.
1. The importance of a Mission Statement:
Be prepared: have a clear vision of your company and its goals
“it must become the organization’s governing ‘constitution,’ the standard by which strategy, systems, structure, style, and skills are developed and judged” ,
The principles of creating and implementing a Mission Statement needs to encompass the following
· Identify the organization’s fundamental reason to exist
· Primary, long-term goals crystallized
· Core principles and values – solid corporate ethics
· Key needs of primary stakeholders
· It inspire and motivate both management and employees
· KISS – keep it simple stupid
· Concentrate on running the business. The rest will follow
A Goal is a Dream With a Deadline
2. Be a great leader
· Rule #1 – there are no rules
· Have a vision and articulate it –. Become a giant by standing on the shoulders of giants. You can be a midget! Get other people to buy into and join you in achieving your vision
· Be adaptive as situations change or don’t work out.
· Be decisive and implement decisions quickly.
· Have a mentor that gives you the energy, strength, and confidence you need when struggling with an issue, or when things weren’t working the way you wanted them . It is gr8 having somebody look out for me-and all they want in return is that I succeed!
3. Be able to sell and network.
· You need to constantly sell. You have to sell to customers, employees, shareholders; you have to sell ideas; you have to sell everything.
· Listen and be responsive to customers, suppliers, employees, and investors.
4. Passion And Drive
· You aint got passion – get a job!!
· Whatever can go wrong will go wrong
· Believe in yourself.
· Believe and do
· Without this constant focus and unwavering belief, the plight of the company will probably be less then ideal.
· Be willing to work seven days a week for the company if necessary. I do it, and I expect my people to as well.
· Be there. Be involved with the business 365 days a year. Even when I travel I stay in touch with what’s going on. You have to be willing to sacrifice time whenever necessary.
· Most entrepreneurial endeavor can cause huge personal and family stress. You must at least acknowledge that these stresses exist and find balance
· Hands on. Know every aspect of the business, from manufacturing to selling to collecting money.
5. Be honorable.
· You can’t fool people all the time, so don’t try. When we had rough times and payroll money came up short, I was always last on the list—everyone else in the company got paid before I did. A Good Hire is Hard to Find
· Be involved in all levels of the company’s operations—the more you know about how the people above and below you do their jobs, the better off you’ll be.
· Take time out to take your receptionist/secretary to lunch… they will let you know what is happening in your business.
6. Develop detailed plans and goals and go for it
· keep reviewing and updating. They are not static.
· Continually measure against your goals
· reward yourself. Take a day off for golf or take a holiday.
7. Focus on niche markets.
8. Cash and Finance
· Maintain CFN—cash flow now.
· Minimize layers of management.
· Maximize profits by keeping costs low and productivity high.
· Learn the numbers: you don’t need an MBA but you should take some courses to be able read balance sheets and income statements.
· Be a miser: spend your hard earned cash only on the necessities
· every decision you make should be guided by sound business instincts.
9. Team up with large companies that have similar objectives, but do not compete with you but are reaching the same people
· For example Lucent continually looks for innovative companies that can use their distribution to help commercialise
· A client had a small innovative system in storage software, and teamed up with Microsoft as it assisted there sql products – they were able to take product to market and now sold for many millions.
· Another had a CRM that used INTEL worldwide to get to market
· Small web developer aligning with service company to increase the service to their clients
· Financial Services Company aligning with Accounting Firms…. Using the name of the large accounting forms providing a niche service.
· If you have a fire in your soul, it will show through. Bigger fish will see themselves in you and want to work with you
10. Avoid FTI (failure to implement)
· Implementation is king
· Have courage to take the step of action: leaps of faith are a necessary action.
11. Getting Capital – where are you in the process
· From the perspective of a small business owner seeking capital, the “pass the hat” to relatives and friends scenario is usually the first source of financing.
· Then the growing company will seek a second round of financing through a professional source.
· Finally, the third or fourth round of financing replaces the founders of the company, usually creative and talented in their own right, are replaced by professional managers installed by the investors. Again, the driven entrepreneur may not be the best management solution for the now established business. This is not always the case at all, but management replacement does happen in the real world. The financing process is long and difficult, but necessary.
12. Aquisition Decisions
· Knowledge is key when it comes to buying other businesses—the more you know, the more money you stand to gain.
· Make sure it fits with your existing business and strategy
· Make sure it adds value vs sucks value
· Never get involved with a business that you and your associates are not familiar with. When in doubt, leave it out.
· only enter into negotiations when you can walk away.
· Don’t think you can ever protect your idea from someone who wants it. Charge forward. If they think you will be the first to cross the finish line, they’ll throw in with you.
· The seeds of mistrust are sown early. Don’t skew the benefits of a relationship too much in anyone’s favor. And make sure that each other’s goals and objectives are well defined and achievable.
· Leave something for the next guy
· Establish a workplace environment that fosters innovation.
· The entrepreneur must learn to be a manager of people as well. This is a very fine line and often goes completely unrecognized. Sometimes the entrepreneur is not a manager type and never will be. They end up burning through employees because they are long ideas but short on management skills.
· entrepreneur does not translate well into the task of a manager.
· Understand the value in having a talented set of people around you-an exceptional team is absolutely key. If you have people who are not first-class, building a real, meaningful, successful company is virtually impossible.
14. Growth is key but dangerous
· Leverage. What would happen if I added twice as much of x or stirred y for twice as long? Factor 4
· Growth is good but be prepared for the financial ramifications.
· When business is exploding you must act most cautiously.
· Rapid growth costs money, increased staffing, working capital, infrastructure and technology to meet additional demand is expensive.
· You must consider your balance sheet and sources of funds before quickly burning money on information technology and human resources.
· Do you have a sustainable pipeline of business to maintain cash flow?
· Can you find a cash infusion?
· If you aren’t growing and you have adequately consolidated, you are stagnating…. Eat or be eaten
15. Point of Difference
· If you don’t have a unique POD you probably shouldn’t be dabbling in that market
· Ideally – be indispensable to your clients
· The importance of uniqueness is critical to an investor. The world would still spin without most of the products we see. And no one is really in pain without them. So what makes yours special? It’s a tough question. Be ready to answer it.
· Know your market, business and industry.
· Marketing is key: when you have the best technology or systems, make sure your customer knows it.
· Every entrepreneur must have a feel for what makes a desirable product. You must seriously consider the demand for the product or idea that you seek to market.
· Accessibility and communication – Immediate and quality response to client inquiries. Service service service . Not just band aids.
· Know your customers: they are the key to your survival-listen to them.
· Know the competition
· Try to concentrate on:
· Offering unique products that public truly wants
· Adding a personalized touch that makes the customer feel special, (i.e. monogram)
· Providing value-the coveted more bang for the buck
· Ensuring prompt delivery-no one likes to be kept waiting.
· Focus on the little things
· As long as you have new people and new ideas, something new will occur—a different invention, a different method of distribution.
· Innovation is at the heart of competitiveness – the economic driver – needs a fertile environment. Government, Industry, Universities,Investors and Entrepeneurs are all actors on the stage, and all play a vital part in the ecosystem.
17. Corporate Database
· My most valuable asset is my customer database. In any business, the customer list is crucial to the company’s prosperity.
· Excellent customer records must be a priority.
· Demographic information like address and buying patterns can help you target clients and their needs.
· Lillian said of his direct marketing business:- “In 1960, I had 125,000 names and did proportional business. Today, the corporation has in excess of 18 million names and our sales reflect the exponential growth in our name acquisition. You must look for new ideas in building clientele as well as developing great products”
18. Image and Perception
· The best way to deal with the big boys is act like one. Talk the talk and walk the walk Do what the big boys do and be recognized for it.
· Be at Clubs, Seminars and Events….
· If people perceive you as a leader, performer, and creator, then that is reality. PERCEPTION IS REALITY
· Be in customers’ sights everywhere they turn. Go on constant sales calls, advertise, attend trade shows, and get coverage in the trade press.
· Become so good that you shut out your competition.
· Another good rule is to be first.
· Dominate the niche with the highest quality product possible. When you begin to show success competitors either think you already own the market, or it’s too small for them to bother.
· Know what cross-sells. If you can do a joint promotion with a much larger, non-competitive brand, some credibility will rub off on you.
19. Developing your brand
· A strong company must produce more than good products or services—a good name is equally important, and this you must work for. It’s not enough simply to be the best; you have to be perceived as being the best as well. The payoff? Wait until you try to raise money. What investor doesn’t want to have a stake in the best?
· Have confidence in your product and your company’s abilities. This confidence should manifest itself in all aspects of your business: in conversations with suppliers, skirmishes with competitors, and interviews with the industry press.
· Building a reputation is not a passive process. Work to establish an image and mold it into the shape you want. Then don’t stop polishing it .
· Be better than your competition and be prepared to prove it. When you have all the ammunition behind you, it’s easy to ask for a premium price and be reasonably assured you can get it.
· If you have the reputation and the product, a strong sales force , obviously, completes the picture.
· Perception is crucial . Often times in marketing, a company’s appearance is as important than function or value. Add the best packaging and sizzle you can afford without skimping. These are great places to appear larger than you are- and reduce the chance of someone jumping in because you appear strong. So, not only must you sell customers on your product, you must also sell us.
· Look professional. The step up you get from having a well designed, well printed business card, brochure, stationery, web site, and collateral material is a real boost. People want to feel that you will be in business for a while, and looking professional helps them along.
20. Worthy Offices are Welcome Sites
· A well-conceived, uncongested office will give your company the edge. Be a winner in this category, and it will carry on into others.
· Banks and investors don’t go on sales calls with you. Rather, they observe what they can observe—i.e., your office and workplace.
· Impressing your customers is as important as impressing your bank. If you don’t deliver, your competition will.
21. Sound Mind and Sound Business
· the key to running a business is thinking every detail through.
· Once you understand the marketplace, you can trust your gut reaction. If someone calls you with a business plan and you possess the basic knowledge, then you can go after it.
· Before you do, first write down the complete sequence of what it will take to get the product to the market. Then arrange the sequence in a logical order.
· Next, weigh the plan to see how much of it you can enact yourself. If you already have most of the talent yourself, then you can tackle the plan yourself without much cash. If you have to buy the talent, the plan is still possible but will require more cash. I had the talent and started with little cash. It worked.
22. Strong Business Plan
· A quality business plan is essential. It needs to be focused and well thought-out. A business plan will only get you in the door. A business plan is what investors and financiers have to judge you on. How you lay it out counts almost as much as what is in it. People look at both. Also, listen to investors’ concerns when you shop the plan around. You can always go back and improve the business plan.
· The executive summary, obviously, is most crucial in that it answers in a short space. The who, what, when, how, and how much?
· Your business plan must demonstrate that you’re organized in your thinking. There are some basic things in a business plan,
· Like clearly defining the business concept,
· The economic model- how you’re going to make money in this business.
· The market you’re addressing,
· The product and service you’re providing for that market,
· Who you’re competing with,
· Who the management team is, what their skills are, and why they’re ideally suited for this business;
· What they’re providing to the customer that has value, that somebody’s actually going to pay for. This needs to come out in several of the sections-in the market section, the product section, the competition section (because it shows how you differentiate yourself).
· where the revenue is going to come from. It’s really easy to list different revenue models that apply to your business potentially. It’s a lot harder to say here’s how we’re going to make money for the first year. And then here’s how we’re going to build on it and build on it and build on it.
· And really, the basic quality-attention to detail-really make a business plan stand out. I’ve read so many plans that were just poorly written-grammatical errors, poor formatting, missing big chunks of information, not proofread.
· A business plan is a sales document and I’m going to draw my impression of people and their capabilities from how much effort and care they put into writing their plan.
Once a plan gets above the good threshold, I don’t have a clear understanding of whether or not the concept is great and the business is great, until I spend time with the entrepreneur and until I try to really understand the products and talking to potential or existing customers.
The qualities of the people are fundamental in determining whether we will invest or not.
I also have to think hard about the revenue model and make sure that the business has appropriate economic parameters.
The actual numbers in a business plan are less important than the structure of the cost and expense model and the revenue model. It has to fit with the relevant KPI’s. I’m not worried about whether it’s a 50 million dollar company in year five or a 10 million dollar company in year five.
But if it’s a 50 million dollar software product company in year five and it’s making $700,000 per employee, then their model’s screwed because there are very few software companies that have more than $200,000 a year in revenue per employee. In that way I try to see if it holds together when I look at it from thirty thousand feet.
23. In Summary
Entrepreneurs come in a million configurations, but some of these configurations have been proven to be more successful than others.
· When planning the launch, take advantage of all the entrepreneurial services—BSI – Business Planning , Growth Strategies, Governmentt Incentives, Investors
· NETWORK, NETWORK NETWORK
· Think of every customer as a partner and business as a mutually beneficial relationship
· Avoid being backed—or backing other people—into corners.
· Innovation is the lifeblood of entrepreneurs, but ensure the backroom and systems are strong.
· Anticipate Your Obstacles
· When starting a business, the only certainty uncertainty. Use all the resources at your disposal to prepare for it.
· Your passion won’t be felt by all - handle it
· Secure enough capital to get you through the unprofitable growth period. Entrepreneurs who are too optimistic at the outset can run out of money early on—and watch their enterprises crumble.
· Know your market
· Getting the company off the ground is only the first of many tests to come. The successful entrepreneur is always looking forward and planning ahead for what’s next. Plan each month something new to tell your investors
· keep overhead low during the growth period. Minimal overhead is sure to impress investors down the road.
· Cash flow cash flow cash flow
· Hire people based on your actual needs, not your projected needs. A small, agile company can best respond to the ever-changing marketplace.
· You must earn your customer’s trust, and crisis situations, though harrowing at the time, are the ultimate test of your mettle. If you can perform when the chips are down, your customer will have complete confidence in you when everything is running smoothly. Always be sure your system can handle a breakdown.
 Dr. Stephen R. Covey “Principle-Centered Leadership”
Chuck DeMarest, Rocky Mountain Rescue Unit,
Established BSI in 1989 and since that time has assisted clients with raising capital, debt and grants, acquisitions, divestments and advisory engagements. Has been involved in several venture capital investments as an advisor and as a sophisticated investor. Prior to this, Ivan worked with Arthur Andersen and Coopers & Lybrand.
Monday, October 30, 2006
10 Ways to Empower Your Employees
The word empower is often overused. Many employers talk about empowering their employees but often employees feel disempowered. Here's a list of the top 10 things you can do that will empower your employees,
1. Allow employees to actively participate in team and company goals.
Look for every opportunity to include employees at every level of the organization, in being active participants. Employees often report getting one-way directives instead.
2. Allow employees to suggest better ways of getting their jobs done.
Ask for employee suggestions for other ways of getting the task or project accomplished. Listen and be willing to really hear the employees' comments. Employees often report that they have no input and are told exactly how to perform their jobs, leaving no creativity.
3. Provide positive reinforcement.
Always listen and acknowledge your employees. Employees often report that their decisions and actions are second-guessed and that most, if not all, feedback given is negative.
4. Clearly delegate responsibility and give the employees authority along with the responsibility.
Do you give inconsistent messages? Do you ask the employee to handle a problem or project and then give them negative feedback or give them an assignment and then say "never-mind?" Employees often report that they are given tasks and then told they did it wrong.
5. Be clear in your communication.
When you express goals or explain projects, be sure the employees really understand what you are asking for. Employees often report that the goals are unclear and that they are not sure what they are being asked to do.
6. Show you have trust in your employees.
Allow them to make mistakes as a form of learning. Show that it is really ok to make mistakes. Let them know you really support their decisions. Employees often report that someone is always looking over their shoulder to make sure they do things right.
7. Listen. Listen. Listen.
Do you do most of the talking? Employees often report that conversations are one way, comprised mostly of their ideas being criticized. They don't feel they are heard.
8. Be interested in the employees' career development.
Meet with employees and discover their goals and their wants. Employees often report that their goals are not viewed as important in the organization.
9. Let the employees help you achieve success.
Are you doing it all yourself? Employees often report that their managers do all the tasks and that they have no way to make contributions outside their job descriptions. Look for opportunities to delegate and enhance the employees' career development at the same time.
10. Be a coach.
The best way to empower employees is not to manage them. Coach them to success. This is a process of developing their skills and providing them specific feedback to meet high standards. Employees often report feeling like children rather than being on the same team with their bosses. Be their coach and lead the team to success!
How to Hire a CEO
At sometime in the future as you grow the business you are probably going to have to hire a C.E.O. this is the game plan that I propose, I have interview for a couple of C.E.O. roles and see it executed badly and seen it executed well, I hope these notes help you when it comes to that traumatic time to hand over your company to a new C.E.O. that bit easier.
You don't appoint a selection committee . Assign ONE person to lead the effort: a board member or a top executive. This doesn't mean you don't want input from multiple sources you certainly do.
The game plan:
STEP 1. Get the organization's major stakeholders in one room: The CEO's direct reports, board members, department heads and a few of your best customers.
Standing at an easel pad, pump the group for "outcomes.": What results or outcomes does the group want to occur as a result of the CEO doing his/her job reasonably well? Don't set impossible outcomes (we'll discuss standards later) it's self-defeating. Outcomes/results should be described as specifcally as possible.
The CEO is expected to: Increase profit Improve productivity Gain market share Increase share value
STEP 2. Have the group achieve consensus (not an easy task) on developing bench marks with one or two assessments that final candidates will take. The value of assessments is that they can reveal critical information about the candidate that the candidate is either unaware of or can't demonstrate, such as:
Is the candidate a fast learner? What is the candidate's preferred communication style?
How agile with numbers and words is the candidate? What is the candidate's management style?
Relative strength in: What motivates the candidate?
| Decisiveness/results-oriented Objectivity|
Sense of urgency Independence
Future vision Assertiveness
Motivating others Energy level
Listening Following policy
Follow-up Attention to detail
Consistency Handling paperwork
STEP 3. When the outcomes list is complete, consolidate similar items, and gain consensus on the final list. Opposite each outcome, get the
group's input on standards the measurable levels at which the outcomes should be achieved: If any standards aren't quantifed and measurable, they may sound exciting, but they're worthless don't waste your time. Beware of grandiose or unrealistic standards. They are self-defeating, and only set up the chosen candidate for failure.
For example :
Increase net profits 2% year one, 3% year two, and 4% year three.
Increase output 5% per year for five years, and reduce capital resources required by 5% per year for five years.
Capture 2% more market share per year for five years.
Increase stock value 3% per year for five years. etc., etc., etc.
STEP 4. Get the board's stamp of approval on the outcomes and standards. Do not proceed further until this set in concrete.
STEP 5. Given the outcomes and standards, determine the competencies necessary to achieve them. At TBC, we use an excellent tool, based on solid research, that identities 68 competencies that have been shown to be directly relevant to managerial success in all kinds of organizations. We use this tool to: Provide consistent language describing the behavior of someone who has the competency, the behavior of someone who lacks the competency, and the behavior of someone who overuses the competency.
Provide solid content for a job description.
Provide excellent performance planning material.
Provide excellent performance evaluation material.
Provide on-target material for individual development planning.
The 68 competencies cluster around eight categories:
1. Future skills
2. Day-to-day management skills
5. Leading change
6. Inside skills
7. Personal and interpersonal skills
8. Growth and balance
STEP 6. From the competencies list, develop a behavioral interview format to be used with every candidate.
STEP 7. Now have the group develop initial selection criteria what every candidate must bring to the table to be considered for an interview sometimes called "price of admission." The criteria will depend on a number of factors: Do you want a candidate with experience in your industry OR do you want someone with years of experience as a CEO OR are you willing to consider a highpotential individual who is ready for entry to the CEO spot? How much education is REALLY needed for the job? This is the most frequently inflated requirement I see. The problem is that it often excludes available talent that can do the job. No matter how dazzling the resume or persuasive the referral, only candidates who meet the criteria should be considered for an initial interview.
STEP 8. Identify and pursue candidates. Where are the best candidates likely to be found? They're probably currently employed. Either network your way to good candidates through referrals, or hire somebody who knows how to reach them. Tap all of your contacts to identify likely candidates.
If, after a couple of weeks of doing this, you haven't identified six or more interested candidates, then it's time for a search firm or an ad.
STEP 9. Conduct as many interviews (using the behavioral interview format developed in step 6) as you can fit into one week. Rank the candidates on the extent to which they meet each of the competencies (0= does not meet; 1=meets; 2=exceeds).
STEP 10. Check the references of those candidates who scored well on the initial interview, and performed acceptably on the assessments. Use only professional references (no personal ones), and do an in-depth exploration with one each of:
1) current or recent boss;
2) current or recent peer;
3) current or recent subordinate; and
4)current or recent customer.
STEP 11. Have the remaining qualified candidates complete an assessment or two to see how closely they match the bench marks for the job.
STEP 12. Arrange for the board to meet the top three finalists. Provide every board member with a complete package on every candidate: resume (with compensation history), initial interview results, assessment results, reference notes. Since you have already determined that the candidates can do the job, the board should focus on two issues:
How's the board's "chemistry" with the candidate:
How enjoyable and productive do they think it would be to work with the individual?
How well does the board think the candidate will "fit in" the organization's culture?
STEP 13. If one of the candidates proves to be the board's choice, and the candidate wants the job, it's time to negotiate probably a contract. Make sure you provide the candidate with the written outcomes and standards developed in steps (1) and (3).
STEP 14. After the candidate accepts, with process followed above the new CEO is likely to succeed!
Thursday, October 26, 2006
Continuing from yesterday I had a few thoughts on conflict in the workplace as a company grows and below is the summary of that, and remember guys and gals to bring the homework tonight
Conflict - An Essential Ingredient For Growth:
Conflict is inevitable in business relationships, just as it is in social relationships. Without conflict, growth is limited. Conflict is feared and avoided by many managers because they don't know how to deal with it. Unresolved conflict can be as poisonous to the productivity of your company as the virus is to the computer. Having an understanding about how people deal with conflict gives the manager an additional tool for managing effectively.
Everyone uses a variety of styles in conflict situations. When looking at conflict resolution, the persons involved, the importance of the issue, emotional states, and desired outcomes may all come into play. Resolving conflict has to do with one's willingness to be cooperative (helping others get what they want) and one's assertiveness (getting what they want). Everyone uses, to some degree, five styles when dealing with conflict. Let's examine each style.
1. Avoiding - When employees avoid conflict, they often withdraw and detach themselves from the issue. They are not willing to assert their own wants nor do they want to help others get what they want. For example, they tend to "mind their own business" and look the other way when other employees are discussing office politics or ways to equalize the work load.
2. Accommodating - When your employees accommodate others in order to avoid conflict, they will do whatever they can to help the other person get what they want, often to their own detriment. They give in to demands, even unreasonable ones, to avoid disagreement. For example, your employee may choose to do someone else's job rather than suggest that the responsible person complete it.
3. Competing - When your employees compete to "be right," their primary interest is in resolving the conflict their way. They have no interest in helping others get what they want. They become very defensive of their position and have difficulty understanding the reasons others don't see things their way. Employees may insist that everyone else drop what they're doing so their project can be completed in their time frame. Those who compete often take advantage of those who accommodate others.
4. Compromising - When employees compromise in order to resolve a conflict, they are willing to "give and take" with the others. They want both parties to be either satisfied or dissatisfied with the outcome. Compromising is frequently used because it is expedient and both parties make concessions. For example, your employees in the Marketing Department may agree on the logo for the new sales initiative and disagree on the color. So they both may give up their first choices and select a second color that they both marginally agree to use.
5. Collaborating - When employees collaborate, they are interested in seeing that everyone's wants are met fully. These employees tend to consider themselves a team. They work creatively and are solution-oriented. The outcome of the conflict often leads to one that neither party held prior to the collaboration.
The reasons we use different styles varies. We often avoid when we don't want to get involved or we decide it's not worth the effort to pursue. It's important to "pick your battles" since they can't all be fought and won. We compete when we strongly believe in our ideas. We accommodate when we want others to like us or we like things to run smoothly or we don't feel like we have the right to remind others of their responsibilities. We often compromise when we are in a hurry. We use collaboration when we want everyone involved to feel "ownership" for the outcome.
When you recognize how you and your employees deal with conflict, your effectiveness as a manager will increase. Encourage your employees to acknowledge, deal with, and appreciate their disagreements. Dealing with conflict up front leads to open communication, conscious cooperation among your employees, and increased productivity!
"Growth can be fun, if you are carefull"
Somethings that have been happening here at FDD and in life in general made my see some things really clear W.R.T. growth in an organization. There are two ways that a company can grow organically or by acquisition, with past experience of the latter I would have to say that acquisition is a hard road to go down, and should be weighed in light of the hidden costs and disruption vs the benefits you will gain.
The Organic growth path is not an easy road to run either, there is a statistic that 92% of the companies in Scotland have only 10 employees, there is a barrier at 10 employees which is hard to cross for most of these companies, as I have grown 5 companies from early doors to head counts of more than a 100 employees. I have had to manage some of the traditional issues of founders not being able to delegate or let loose the reigns of the company, this is a well known challenge for the start-up, and understood by the Venture capital community, I have touched on this in previous bloggings on growth. The key thought I want to bring out, was that as a company grows it needs structure but the structure in it self can kill the the very same dynamics that have made the company grow, I am not advocating a WL Gore or John Lewis's approach but I am say be very careful in how you build and apply the structure to the organization, best to have the initial structure in place near the very beginning as it will be hard to introduce the structure later in the companies evolution. The recruitment process can damage this as well I have seen hires that have introduced a whole level of bureaucracy into an organization that it can impair the companies ability to achieve its objectives and goals.
Wednesday, October 25, 2006
"Some wizdom from my rear view mirror"
People always want their start-up company to be immediately profitable, but sometimes a little struggle at the beginning can be the best-case scenario.
Why? Because when things go too smoothly right from the start, two dangers can emerge:
- Owners and employees may become complacent, thinking that it will always be as easy to make sales and maintain profitability. Then, if the economy or specific industry changes and sales drop or profit margins grow thinner, it can be tough psychologically to put in the extra effort suddenly required to achieve what once came so easily.
- A company may not have the incentive to streamline operations and strengthen the fundamentals of the company to maximize chances for long-term profitability. A new company becomes strong by squeezing costs to a minimum, making the most of employees, securing the best terms from suppliers, negotiating tough terms for leases and loans, learning how to analyze expansion, adding new products/services, making the most out of every marketing spend and all the other factors that can allow a company to weather future changes.
Tuesday, October 24, 2006
Starting is easy finishing strong is harder
I was listening to a pastor over the weekend and something he said caught my attention more than usual and it got me to churning the grey matter, the gist of the thoughts were "it is easy to get an idea to build a company around, but to continue can be a lot harder ". I mulled over the last five start ups I have worked for and the others that I have mentored lately, it came through strong and clear again as (I wrote in my early blog entries) you need to have a deep passion for what you do to be successful, and the Passion is not for the "making of money" unless you are printing your own :), but it is for the creating of something new and fresh. There always needs to be the drive to create "meaning" from what you are working on, you need to see the "worth" of what you do this will give you the strength and courage to make your adventure successful.
I have had times in my career where I have lost the vision and focus for a project and only when I have stood back and thought through the "Why" has the picture come back into focus and I have been able to commit myself back into the project. For me there always needs to be a reckoning on what it is costing me personally in life years when I commit to a project and I have found that when I am working with others who have the same thought process and commitment a project will be successful in my interpretation of success.
Monday, October 23, 2006
"The performance is what it is all about"
I was driving into work today listening to the local radio show and there was a reporter using a phrase that caught my attention, the customers journey he was explaining about a new text service which was undergoing beta testing and it was there to help improve the connection time between the customers and the company he wished to talk with a fascinating service, but it left me with a thought....What is the experience like of your customers journey ?
I thought off some different areas that we as customers interact with suppliers of services , the one that caused the most amusement was airlines and check-in desks, followed by call centers and I and I walked through the experience at the end of it I thought I pay for that ? The most pleasurable interactions I have had are isolated to one or two restaurant that I frequent, is the food always great no! But the service is first class, lesson to be learned there guys and gals.
I would challenge you to think about the customers journey with your company, one company I worked for was an early stage telecoms business, which lost a major customer due to the arrogance of the senior engineering staff, they knew best and the customers knew nothing, as it turned out the customer did know best and went elsewhere. The customer always knows best, until they change there mind.
Today have a look at your customers journey through all the media that they can use to interact with you, and ask yourself is this a pleasurable journey, do e-mails get answered same day? Does the customer talk to a real person or is it VM prison ? How does your receptionist or who ever makes first contact at your premises make the person comfortable ? Is the customer king and does he feel like he is ? These are only a few of the questions that should be getting answered, companies starting up die without customers , and are in general the worst at managing the customer relationship, from cradle to repeat business, those who are good at the process are usually successful, and remember once you have a customer pleased with your service and his customer journey it is easier to manage the problems that will arise from time to time.
Well time to go and get ready for another day at ForthDD..Hope your weekend was good
Saturday, October 21, 2006
Marketing technical stuff
A entry from John dodds blog
Marketing/Business Consultant with background in public and private sector businesses in UK and US including most consumer media industries. E mail: firstname.lastname@example.org
Following various comments I've made about deficiencies in technology marketing and my disagreement with Doc Searl's provocations, I've been rightly harassed into prescribing some solutions to my complaints. So I give you Geek Marketing 101.It is so named because I see amongst many geeks a pervasive misunderstanding and consequent distrust of what marketing is, and a failure to recognize that much technology marketing is no longer geek to geek since complex products are increasingly being bought by non-geeks. Of course, these observations are equally applicable to geek to geek and non-geek businesses.
1) Marketing is not a department.Marketing is a combination of elements that creates the environment in which it is possible to meet a customer need (starting right back at product development). Promotion and sales are just sub-sets of marketing.
2) Marketing is a conversation, but most people don't speak geek.Successful technology marketing must translate the creations of the uncommunicative into the needs of the untechnical. Spin is not good marketing. Lucid two-way communication is.
3) Simplicity does not negate complexity.Reductive marketing that simplifies ideas does not undersell your complex creation. It facilitates an entree to your world. You can't have passionate users until they start using.
4) Think what, not how? Think of the "product" in terms of what it does, not how it does it. You may be interested in the latter, but your users generally aren't. Portable computer memory is not a difficult concept to enunciate, yet flash drive and USB drive nomenclature is predicated on technological aspects not the actual function. Long words confuse, don't they?
5) Think will, not can.Think of the "product" in terms of what most people will be happy doing with it and not in the myriad possibilities it offers. You may think speed and multiple settings are hot, but outside the lab such attributes may not provide the greatest satisfaction. Simple, intuitive interfaces will.
6) Only you RTFM.Regular people don't read the manual. It's too big (see 5), too complicated (see 3) and thus incomprehensible. It's not that people are averse to science and technology - they're averse to being made to feel helpless. The demand for books that simplify science is huge the world over. Your manual is marketing.
7) Technical Support is marketing.In the absence of all of the above, your users inevitably need help. A technical support department speaking in non-technical, hand-holding language transforms their purchase from waste of money to life-enhancing boon and is the greatest marketing tool you have.
8) You're not marketing to people who hate marketing.Don't allow your misguided prejudices about advertising and snake-oil to infect your approach and damage sales. People hate hype, spin and unfulfilled expectations. They do not hate having their needs met (see 1).
9) You're not marketing to people who hate technology products.They're not Luddites, but nor are they geeks - that's what you're paid to be. However, they often hate how technology products make them feel because blinding with science is as bad as baffling with bullshit.
10) Marketing demystifies.As the conversations develop, the users comprehend your products better and you better understand their needs. With increased confidence, they utilise more and more of your geekiness and, with increased awareness, you are better able to adapt to their behaviours. They feel more warmly about geeks and you may get the chance to buy them a drink. That doesn't sound so bad, does it?
Slainte Gordon ...Bored on a Sat afternoon...
Friday, October 20, 2006
This is an introduction to a lecture I am giving this evening for a class of emerging entrepreneurs (Guys and Gals hope you are reading) it is the hardest thing for a founder to confront as his baby is growing up, it is learning to move from Doing to Leading , notice I missed the managing part that is a given. The baby you have worked so hard on giving birth to is now growing up from adolescence to maturity it means you have to grow as well , than can be hard and some founders don't make it, but if you want to succeed you need to learn to lead a commercial enterprise, Marketing and Sales now takes over from DOE and Taguchi, Breakeven to Profit; you have a responsibility morally and ethically to make good on the investment from all your stake and shareholders (Take a minute and list all the stake holders start with family and friends ? get my drift). It maybe that you can't don't want to take the company through that gate, then plan for succession and bring in someone who will complete the transition for you, and give the new man some time and support to settle in, and remember he is in charge now do not hamstring him from the beginning, let him get on with the task at hand.
But for the rest of you read on...comments welcome..
18 Symptoms of the Founder's Dilemma
1. Lots of talk but little action resulting in unfulfilled promises. As one founder said, "We knew what we needed to do differently. We just were not doing it."
2. Enormous frustration. Founders get very frustrated when execution lags behind vision. Sadly, what may be clear to associates often eludes the founders - that they are the cause of the limitations.
3. Limited executive team role. Executive team members often don't understand or appreciate the corporate vision and don't understand their corporate responsibility (e.g., trustee, stewardship role). Except for the CEO, everyone on the executive team has a silo or vertical slice of the firm to lead and manage. Every executive team member also has another larger "hat" to wear - one that requires a big picture, enterprise-wide view (like that of the CEO, customers, investors) - a "corporate hat." When this is not understood and appreciated, executive team members come only from their "silo" perspectives, feed conflict and a "my turf" mentality. The effect is no real executive team.
4. Weak closure and decision-making process. A founder recently said, "If as an executive team we were more functional we would collaborate on the issues and come to a consensus. If we had confidence in our decision-making process, we would respect rather than subvert the ones we do make".
5. Driving each other crazy. Conflict, lack of mutual respect and deference among executives as leader-managers. They may like each other but don't respect and defer to each other in their leader-manager roles. I hear a lot of, "He's a great visionary and a good entrepreneur but I can't respect him as our chief executive."
6. Too little honest feedback including regular performance reviews between the founder and executives. Founders need it and so do executive team members. CEO-founders are often like the emperor with no clothes. Everyone knows, but no one is willing to be honest.
7. Too few fully qualified leader-managers with no apparent way to change the situation. Inexperienced leader-manager-entrepreneurs in one or more key roles lack the ability to take their team to the next level.
8. Overdependence issues. Revenue related over-dependence includes reliance on too few customers, too few leads, too few prospects, too few solutions and services. Founder related over-dependence is a "Catch 22,"the company cannot survive without him and cannot succeed with him in the CEO role.
9. Poor use of time. Leader-manager imbalances include overemphasis on reaction versus pro-action; analysis over synthesis; trivial matters over the vital few. Founders completely wrapped up in fund raising at the expense of guiding team leaders.
10. Mixed signals and other inconsistencies. Entrepreneur is moody. Theme of the day follows mood of the day and conflicts with constancy of vision purpose and mission.
11. Too little guidance. As one young manager said, "We need less supervision and more guidance." We cannot give to others what we do not have ourselves. Much of what leader-managers in these companies need, founders do have, but fail to provide. A coaching approach to leading and managing, teaching and learning is what is needed.
12. Not managing by the numbers or managing only by the numbers. Numbers can define some things that are important and without measurement will be missed. Numbers don't define everything that is important.
13. No "engineered" business model. Vision remains an intangible mental construct in the founders' head. It is not shaped, designed and engineered into a tangible business model, essential to its communication. Each executive leader has a different and often conflicting concept of the business model.
14. Unplanned and unmanaged customer base and sales funnel, unpredictable revenues and margins. This important subset of the business model is missing. No design or plan to communicate the vision as a preferred choice to a well-defined customer base.
15. Lack of organizational clarity. Reporting relationships are unclear, not observed. Accountabilities are not defined. Functions and process are not designed and mapped to connect and align leader-manager roles with the business model.
16. Lack of any measured performance-pay system. Salary and stock options are not a substitute for measured performance pay tied to measured quarterly results with the accountabilities for individuals and teams.
17. Incomplete infrastructure, fuzzy process including too little emphasis on enterprise-wide process to integrate the business model.
18. No strategy process to facilitate and integrate change for growth and improvement of executives, teams and the company.
The answer to the Founder's Dilemma depends on coming to grips with these symptoms and the essential underlying cause - a prevailing mind-set that conflicts with the vision.
The Founder's Dilemma appears to leave only a choice between two undesirable alternatives; the company can't survive without the founder and can't succeed with him. Fortunately, there is a third and better solution for founders and companies. Its requires a shift in mind-set away from a limited, closed-perception, conflict mind-set to an expanded, open to a larger vision mind-set.
The solution lies in clarifying, understanding and properly applying these two basic and necessary mind-sets.
The conflict mind-set is essential to doing things, i.e. engineering and managing things. The vision mind-set is about identity, i.e. being who you really are in leading and working with people.
Here is some advice to those who want to ditch this limiting, debilitating syndrome. It is a road map that offers a real choice and will avert, check and resolve the dilemma.
1. Acknowledge the problem. If the vision is limited by conditions identified above, simply admit it. Owning up is one big step toward changing the ball game.
2. Don't accept unacceptable performance. Remember the old maxim: We get what we accept. Effective CEOs and other effective leader-managers do not tolerate poor performance - from themselves or from others. The founder must lead by example.
3. Value honest communication. Create feedback systems and make them a part of your culture. Our blind spots are plainly visible to others, but we can only change that of which we are aware. Communication and feedback is key. The best way to make others want our feedback is to be open to theirs.
4. Shift to a new, truer vision mind-set. It will assure the values and perception that integrate rather than conflict with the business vision and its execution. Mind-set is the root cause of perception, thinking, behavior and action. It controls our perspective. Use a simple mnemonic to reinforce a powerful perspective and paradigm for designing and building your high potential company. It is V-I-P. It stands for Vision - Implementation - Passion; a very strategic yet overlooked cycle.
5. Obtain outside, objective help and use it. Resolving Founder's Dilemma requires experienced objective feedback and guidance that is usually not available from within the company. If it were available and utilized, there would be no dilemma.
6. Redefine your idea of success to include and value a balanced life.
7. Share in CEO related functions with the executive team.
Mind-sets also impact external conditions that are beyond the direct control of even the most ardent founder-CEOs. Weak market conditions, a downturn in the economy and what seems like bad luck--will a shift in perception help here, too? Minds that are in a state of fear, conflict and confusion are not successful. However, minds that are clear, confident, cohesive and consistent - free of excessive fear and conflict - are much more likely to succeed in influencing and dealing with uncontrollable factors.
Within many emerging technology companies in the Founder's Dilemma syndrome needlessly festers at great cost to everyone involved. Unchecked or unresolved it soon becomes critical, then deadly.
To resolve Founder's Dilemma requires a shift in thinking which is not an easy one. It may be the most challenging shift that a founder will ever make. However, it is doable. A bold commitment to make this transition has a great payback and should be encouraged.
Founders who succeed well beyond start-up can attribute their success significantly to the CEO role. Either they hire successfully or develop the skills and mind-set to do it themselves. Those who stumble or fail often do so because they fail to provide their companies with CEO level direction and guidance. Either they did not hire successfully or they did not grow as CEOs.
When treated effectively with practical systematic care, these conditions largely melt away. However, it takes a visionary founder willing to improve as CEO and an objective partner, usually an outside, experienced professional.
Hope you all have a great weekend
Thursday, October 19, 2006
Top Ten : - Ways to Avoid Becoming a Jerk-Boss
I’ve seen it countless times – you emerge from solo success and discover that you’re going to need help. When you assume the role of “people-manager”, you also discover that this is an entirely different role from that of “Lone Ranger.” Success as a solo is no guarantee of success as a leader of people. In order to create a motivating, highly-productive workplace, you must avoid earning a reputation as a jerk.
Herewith, the top ten things to steer clear of (no matter how tempting), these I have learned from the school of hard knocks...
1.Micro-managing. Just because you know it all doesn’t mean you should do it all. A great way to wreck productivity and motivation is to look over another’s shoulder and nit-pick.
2. Punishing mistakes. (read my blog entry on the M word) Expect mistakes. Chalk them up as the price of progress. Focus instead on the gold within the mistake – the lesson to be learned and control your temper.
3.Yelling at people. We’re not on the playground anymore. Recognize that your yelling is probably closely attached to anger. Adults don’t respond well to being yelled at. (If this is a toughie for you, hire a coach.)
4.Nonchalance in hiring help. Getting the right talent on board is the most important determinant of your future success. Make sure you choose wisely and gain people whose work styles, expertise and preferences are different from yours. Casually loading the payroll with your clones creates an ugly outcome.
5. Over-demanding. Just because you’re a workaholic, don’t expect your employees to surrender well-balanced lives in order to meet your expectations.There are always times to push hard but when it is a time not to then ease of and relax the team a little, don't burn them out
6.Ignoring outstanding achievement. Nothing is more demoralizing than having one’s efforts go unappreciated. Ignoring it is also a good way to ensure that the extra efforts will cease.
7. The appearance of favoritism. Just because she’s your relation doesn’t mean she deserves special consideration or that the rules don’t apply to her. Don’t think others don’t see it. They’re neither blind nor stupid and the last thing you need is to breed resentment in your staff.
8. Not walking your talk. Even in small matters (e.g. “I’ll get back to you on that.”– followed by silence) the discrepancies add up, sometimes to the point that nobody either believes you or is willing to depend on you. Not a rosy work picture.
9. Threatening. Intimidation never brought out anybody’s best. Instead of threats, simply describe consequences (in a calm manner and voice) and leave the decision to the individual. If the person fails to deliver, impose the promised consequence again in a calm manner and voice. (See number 8.)
10. Not making your expectations clear. Even the best-intentioned employees aren’t mind-readers. You tell them (preferably in writing) the WHAT and let them figure out the HOW. That’s what makes their job challenging. (See Number 1.)
11. BONUS! Taking credit for others’ work. Probably the most effective way to drive talent out the door! Nothing is more demoralizing, disappointing, frustrating, angerinducing and resentment-creating than having your insecure, egomaniacal boss step up proudly and display your work as his own
PSS have a read at Adelino de Almeida's Blog @ adelino.typepad.com, some excellant stuff on analysis of markets etc...a good read you should pay him a visit..
Wednesday, October 18, 2006
This was the summary of a pitch I gave to some of the scottish executive last year, I wish they got it and really thought through there game plan for new buisness creation in Scotland, there are some good guys involved in the business gateways, but there needs to be some education of the Scottish Executive ,Jack Mconnell and the Scottish Parliment. I was trying to get over that the Academi in Scotland and the Scottish executive need to devlop focused teams that can help build new buisness in Scotland and cut away a lot off the cover there ass attitudes that prevale which in turn creates a lot of red tape. There also needs to be better use of the incubator sites of which there are to few, and they need to kick out companies like MED ( Micro Emissive displays) at SMC (the scottish microelectronics center) and the like who hog the facilites and abuse the intent of these facilites, anyone can run a company if you have subsidized rent and free access to facilites. I would like to hear your opinions on this subject guys and gals and I will see you on Friday, meanwhile have a read through the summary below...nothing new I hope.
This is what it takes to attract an investment (and a management team) to some science. It won’t be easy, but it can be done
The right attitude: Something is better than nothing. It might gall organizations to learn that their science is the basis for a multi-billion dollar exit, but that’s a high-quality problem. More or less, their research is a sunk cost—if not, indeed, something that taxpayers underwrote—so anything they get is upside.
This means expectations for ownership in the new entity should be in the 10-20 percent range. Royalty, if there is any, is also in that range. Upfront payments should be zero—or less. Finally, very few investors are interested in backing a non-exclusive, short-term deal (where “short term” is defined as anything less than “forever”).
A product or a tactical path to a product. Customers buy “products” not “technology,” “science,” or “research findings.” Technology, science, and research findings are a long way from a product. The closer the technology is to an actual product the better.
Warm bodies. Technology is the first 90% of what is necessary to create a successful company. Unfortunately, the second, and more important, 90% is the employees who invented or discovered the technology. Simply giving a startup CD-ROMs or white papers doesn’t cut it. The company needs the brains behind the science because it’s one thing to discover something in a lab, and it’s quite another to ship a product on a large-scale basis.
These employees will have to reboot their brains, and they may choose to stay in their current jobs. (Or the startup may choose not to take them.) Here’s why:
They have to chose revenue over peer acclaim in scientific journals. The choice boils down to being famous or rich--although if you make enough money, you can be both. :-)
They have to pick “good enough” over Nobel-Prize-winning state-of-the-art. Most customers don’t care about being at the bleeding edge of technology and are happy if something simply worked dependably. Computer operating systems, for example, fit in this category.
They have to listen to, if not love, customer feedback. At the end of the day, either customers buy the product or doesn’t. This isn’t the same as “submitting research findings to a journal.”
They have to understand that investors don’t invest on a cost-plus basis. The size of the bank account is limited, and the clock is ticking. And there's no politician who is trying to protect jobs by influencing budgets and cost-over runs.
To put this in a positive light, startups should find the gems who are frustrated that their work isn’t seeing the light of day much less changing people’s lives. For them, a startup dedicated to commercialization is great news.
A hands-off attitude. The final ingredient is that organizations/ universites can either actively help but at least get out of the way of the company. It’s tough enough dealing with customers, competition, investors, and the government. To add another stakeholder might be the straw that breaks the camel’s back. It might look like it’s fun to start a company, but it’s very hard work. Harder, in fact, than “doing research.”
Tuesday, October 17, 2006
The Top Ten Lies of Venture Capitalists (Guy Kawasaki)
Venture capitalists are simple people: we've either decided to invest, and we are convincing ourselves that our gut is right (aka, “due diligence”) or there's not a chance in hell. While we may be simple, we're not necessarily forthcoming, so if you think it's hard to get a “yes” out of venture capitalist, you should try to get a conclusive “no.”
This is because there's no upside to communicating a negative decision. Entrepreneurs will simply hate us sooner--instead the game is to string along entrepreneurs in case something miraculous happens to make them look better. (An example of a miracle would be Boeing approving a £5 million purchase order.)
Alas, entrepreneurs are also simple people: If they don't hear a conclusive “no,” they assume the answer is yes. This is an example of the kind of breakdown of communication between venture capitalists and entrepreneurs that causes much pain and frustration for entrepreneurs.
To foster greater understanding among the two groups, here is an exposé of the top ten lies of venture capitalists.
- “I liked your company, but my partners didn't.” In other words, “no.” What the sponsor is trying to get the entrepreneur to believe is that he's the good guy, the smart guy, the guy who gets it; the “others” didn't, so don't blame him. This is a cop out; it's not the other partners didn't like the deal as much as the sponsor wasn't a true believer. A true believer would get it done.
- “If you get a lead, we will follow.” In other words, “no.” As the old Japanese say, “If your aunt had balls, she'd be your uncle.” Well, she doesn't have balls, so it doesn't matter. The venture capitalist is saying, “ We don't really believe, but if you can get Sequoia to lead, we'll jump on the pile.” In other words, once the entrepreneur doesn't need the money, the venture capitalist would be happy to give him some more--this is like saying, “Once you've stopped Mike Tyson cold, we'll help you tackle him.” What entrepreneurs want to hear is, “If you can't get a lead, we will.” That's a believer.
- “Show us some traction, and we'll invest.” In other words, “no.” This lie translates to “I don't believe your story, but if you can prove it by achieving significant revenue, then you might convince me. However, I don't want to tell you 'no' because I might be wrong and by golly you may sign up a Fortune 500 customer and then I'd look like a total orifice.”
- “We love to co-invest with other venture capitalists.” Like the sun rising and Canadians playing hockey, you can depend on the greed of venture capitalists. Greed in this business translates to “If this is a good deal, I want it all.” What entrepreneurs want to hear is, “We want the whole round. We don't want any other investors.” Then it's the entrepreneur's job to convince them why other investors can make the pie bigger as opposed to re-configuring the slices.
- “We're investing in your team.” This is an incomplete statement. While it's true that they are investing in the team, entrepreneurs are hearing, “We won't fire you--why would we fire you if we invested because of you?” That's not what the venture capitalist is saying at all. What she is saying is, “We're investing in your team as long as things are going well, but if they go bad we will fire your ass because no one is indispensable.”
- “I have lots of bandwidth to dedicate to your company.” Maybe the venture capitalist is talking about the T3 line into his office, but he's not talking about his personal calendar because he's already on ten boards. Counting board meetings, an entrepreneur should assume that a venture capitalist will spend between five to ten hours a month on a company. That's it. Deal with it. And make board meetings short!
- “This is a vanilla term sheet.” There is no such thing as a vanilla term sheet. Do you think corporate finance attorneys are paid £400/hour to push out vanilla term sheets? If entrepreneurs insist on using a flavor of ice cream to describe term sheets, the only flavor that works is Rocky Road. This is why they need their own £400/hour attorney too--as opposed to Uncle Joe the divorce lawyer.
- “We can open up doors for you at our client companies.” This is a double whammy of lie. First, a venture capitalist can't always open up doors at client companies. Frankly, he might be hated by the client company. The worst thing in the world may be a referral from him. Second, even if the venture capitalist can open the door, entrepreneurs can't seriously expect the company to commit to your product--that is, something that isn't much more than a slick (10/20/30) PowerPoint presentation.
- “We like early-stage investing.” Venture capitalists fantasize about putting £1 million into a £2 million pre-money company and end up owning 33% of the next Google. That's early stage investing. Do you know why we all know about Google's amazing return on investment? The same reason we all know about Michael Jordan: Googles and Michael Jordans hardly ever happen. If they were common, no one would write about them. If you scratch beneath the surface, venture capitalists want to invest in proven teams (eg., the founders of Cisco) with proven technology (eg., the basis of a Nobel Prize) in a proven market (eg., ecommerce). We are remarkably risk averse considering it's not even our money.
- I'm at a Starbucks in London writing this blog. I've been at it for ninety minutes. I don't have my charger with me. My laptop is out of gas. You're going to have to be happy with the top nine lies of venture capitalists until I get a laptop that lasts longer I.e a Transatlantic flight time longer....
Well have a great day..and I fell better now that I have exposed the dark side a little...sorry guys don't mean to slag you VC men and ladies...it's all good fun....until I need cash...
Monday, October 16, 2006
I was listening to the pastor on Sunday and one thing struck me more than usual, he mentioned the phrase "Sheep make more sheep" not the Shepherd, and that is so true not just in the church but also in the Secular world hence my title today good employees make more good employees.
I have seen it often in start ups you get a nucleus of a team and all is well, you are able to keep on track with the development projects and keep up with the customers, then the business starts to expand outrageously and that's is what you wanted and your VC brothers "explosive growth" is their mantra, but you notice that there is more cars going home earlier in the car park, folk are not starting as early, in fact some are even actually going home....You have a sick company and the culture is going sour, faster than full cream milk in a tanning parlor.
This has all happened because you let it ? Because you said it's ok to work normally...No it was nothing to do with you in the main, there maybe was one or two actions you could have taken to help the situation..( I can be off assistance if this is your company just hire me) but it was because you had a few bad employees, it does not take much to corrupt the team....
If you focus on hiring A players, and keep religiously to the probation period, this may help..You can tell within the first few days if someone has the correct attitude, and if you find that they have a PPP then get rid of them quickly before it rubs off on the others, always take time to talk to the good troops/ employees and strengthen the company culture you want to maintain...Work hard play hard, give opportunities for both.
Well that's most of what I wanted to say, so to repeat, Good Workers will in turn produce more Good Workers.
Friday, October 13, 2006
Building the right team
An article that from a "start up website"...basic but has a few truths for the ealrystage entreprneur, the early lesson that we need learn very quickly when the company is growing is that of we are not superman/woman...and if you want to grow fast you need to get a team that you trust in place quickly...
Being a jack of all trades is a phrase often associated with starting up and then running a small business. This works so far as being the decision maker, creative input and tea maker but what happens when you come up against an area you can't handle - we're not all salesmen, for example.
This is the point where you are forced to acknowledge that although it's entirely your business, you can't do everything. That's the hard part. The easy (or easier) bit is then building up the expertise you need around you without having to employ leagues of people you can't afford.
You need an extended, partly virtual, team.
Company and marketplace
The first thing is to identify what skills and experience your company needs to grow and make it a success. Only once you know this can you start to work out where your team is strong, where it is lacking and how to rectify this.
- If you haven't already done so in you business plan, define the exact nature of your product or service and its marketplace and how to recognise the problems of that market.
This doesn't have to be complicated, simply testing at a local level to see how your company fits in can be your first step:
Sophie Brown runs Marmalade Cards in Cambridge, "I started by trying different designs in different local outlets - testing what sells in the post office, the pub or the shop. This helped me build up a basic range." She basically got to grips with what her market would accept and what it wouldn't.
Brian Steel at Business Link Berkshire and Wiltshire has four key questions, which can help in identifying areas for improvement:
- What does the company do well?
- What does it do badly?
- What it needs to start doing?
- What it needs to stop doing?
All this might seem rather theoretical but if you put it in context of customer service, advertising, growth, product range and so on you'll build up a picture of areas to address.
What are your strengths?
This is the part where you identify where you can reasonably manage without the expertise of others by relying on your own resources. In some ways this is the most important stage.
"The areas that the business plan shys away from are often the areas where the problems are," says Jon Howes of chip design company NEuW. "For example, there might not be a proper marketing plan or the financial side might be weak."
It's a variation on facing your fears but the whole point is that you don't have to face them on your own, these are the areas to seek help. It will also equally show you where your strengths are.
"It's vital to be strictly honest about your strengths and weaknesses," agrees Brian Steel. "And it should be an ongoing process, continuous improvement comes through continuous monitoring."
Practically speaking, you can learn to market your own product - after all you are the expert on it - you can run the office and develop new custom. But if for example on top of this you are spending far too much time struggling to balance the books when you don't have a head for figures, it's time to pay someone else to do this. It won't be a full time job and the time saved will be worth the money.
Thursday, October 12, 2006
Sailing the start up Seas
I like analogies. I especially like those that are vivid and graphic and speak to large numbers of us. Building a technology company, startup or otherwise, is a complicated, dynamic and, I hesitate to say, even chaotic, activity. I tried to think of another human activity that parallels this at least in some ways and I think I've come up with one: sailing the oceans. Actually … sailing in the good old days at the time of Columbus in wooden sailing vessels. Let's look at the parallels:
- Both are done in vessels made by a group of people. Startup companies are like smaller sailing vessels. Big corporations are more like clipper ships. Columbus was a startup.
- Navigating the ocean (or the ocean of business) is a tricky business, subject to winds and tides and other elements beyond our control.
- Our ability to navigate these aided by only the most primitive tools. In Columbus's case he had primitive maps and perhaps a crude sextant. We have marketing surveys and the media, the modern maps for navigating our technology companies. Columbus's maps only went so far, and showed the edge of the Earth with notes like "Monsters be here". There is, of course, a big difference between these maps and a marketing survey. The warnings on the maps of monsters and the edge of the Earth were myths, while the oceans were quite real. In a marketing analysis, the description of the market and its potential (the analog to the ocean) are myths, while the very real dangers of falling off the edge or getting eaten by monsters are unmentioned, unmarked and undreamed of, but quite real.
- You may be sailing along smoothly, but at any moment the environment can turn quite nasty, develop into a big, nasty storm … and sink you.
- Pirates could appear at any time, shooting your ships to bits, capturing your crew and plundering your assets.
- When you get somewhere, you may think you know where you are, but in actuality, you may not have a clue as to where you truly are.
- When you have finished your voyage of exploration and returned to your homeport, people will have trouble understanding where you've been and what you found, even if you bring a captive or two to show off.
- The actual results of your voyage will not be apparent, even if you think they are. It may take quite of bit of time to see the real results, and you may not be the one to profit from them.
- If you don't bring back the gold and jewels the sponsors of your voyage expected, you might lose your head.
I'd like to go on, but the parallels get weaker and I think the point was made, enjoy your voyage it will change you for ever and have fun.
Wednesday, October 11, 2006
"He who has a why to live for can bear almost any how"
Well back to the on the hoof blogging today, one of the critical things you are going to have to be if you start your own company is a leader, not a manager or techie who thinks he can be a leader. I have talked about this before, the difference in the manager Vs leader but it is so important in an early stage company that you lead and not manage, and when it's time for you to move over make sure you bring in a leader, who has won a few battles and as an old friend Bill Wilson used to comment carries a few defeats as well, battle scars teach you a lot, ask me.
So before you take the bad mens money and sell your body to the Venture Capatalisits or Angel Investors you need to have your own "Why" and be comfortable with it, because that is what will bring you through the dark days that will be ahead at sometime in your adventure and will become your source of strenght and comfort, I know this sounds touchy feely and the VC's hate that but it is something I keep coming back to, are you comfortable in your own skin, and why do you do what you choose to do, if you do not choose to do it then thats another story.
I like to read a lot and one book that I read during one of my latest trips .I.e waiting for connections at the airport was the book "Mans search for meaning" by Viktor E. Frankl, it will stop you and make you think about your "Why" and every great leader needs to have his Why. I have finished this post with an introduction to the book, get yourself a copy and pass it around to your friends, it does not take away from any of your own belifes but it will bring context and form to it. Have are great week and I will see you guys on Friday.
Man's Search for Meaning by Viktor E. Frankl is among the most influential works of psychiatric literature since Freud. The book begins with a lengthy, austere and deeply moving personal essay about Frankl's imprisonment in Auschwitz and other concentration camps for five years and his struggle during this time to find reasons to live. The second part of the book, called "Logotherapy in a Nutshell" describes the psychotherapeutic method that Frankl pioneered as a result of his experiences in the concentration camps. Freud believed that sexual instincts and urges were the driving force of humanity's life; Frankl, by contrast, believes that man's deepest desire is to search for meaning and purpose. Therefore, Frankl's logotherapy is much more compatible with western religions than Freudian psychotherapy. This is a fascinating, sophisticated and very human book. At times, Frankl's personal and professional discourses merge into a style of tremendous power. "Our generation is realistic, for we have come to know man as he really is", Frankl writes. "After all, man is that being who invented the gas chambers of Auschwitz; however, he is also that being who entered those gas chambers upright, with the Lord's Prayer or the Shema Yisrael on his lips." --Christine Buttery
Tuesday, October 10, 2006
"amazing things a person will do for money, a street artist in amsterdam"
The Top Ten things not to say when you pitch to a VC
These have been gleaned from previous mistakes that I myself have made and some stuff that Guy Kawasaki has spoken about, Guy is a the one of the few VCs that I have a lot of time for look up his company Garage, the other guy I like a lot is Jock Holliman from Valley Ventures; all good guys.
- “Our projections are conservative.” An entrepreneur's projections are never conservative. If they were, they would be £0. I have never seen an entrepreneur achieve even her most conservative projections. Generally, an entrepreneur has no idea what sales will be, so she guesses: “Too little will make my deal uninteresting; too big, and I'll look hallucinogenic.” The result is that everyone's projections are £50 million in year four. As a rule of thumb, when I see a projection, I add one year to delivery time and multiply by .1.
- “(Big name research firm) says our market will be £50 billion in 2010.” Every entrepreneur has a few slides about how the market potential for his segment is tens of billions. It doesn't matter if the product is bar mitzah planning software or 802.11 chip sets. Venture capitalists don't believe this type of forecast because it's the fifth one of this magnitude that they've heard that day. Entrepreneurs would do themselves a favor by simply removing any reference to market size estimates from consulting firms.
- “Key employees are set to join us as soon as we get funded.” More often than not when a venture capitalist calls these key employees who are VPs are Microsoft, Oracle, and Sun, he gets the following response, “Who said that? I recall meeting him at a Churchill Club meeting, but I certainly didn't say I would leave my cush $250,000/year job at Adobe to join his startup.” If it's true that key employees are ready to rock and roll, have them call the venture capitalist after the meeting and testify to this effect.
- “No one is doing what we're doing.” This is a bummer of a lie because there are only two logical conclusions. First, no one else is doing this because there is no market for it. Second, the entrepreneur is so clueless that he can't even use Google to figure out he has competition. Suffice it to say that the lack of a market and cluelessness is not conducive to securing an investment. As a rule of thumb, if you have a good idea, five companies are going the same thing. If you have a great idea, fifteen companies are doing the same thing.
- “No one can do what we're doing.” If there's anything worse than the lack of a market and cluelessness, it's arrogance. No one else can do this until the first company does it, and ten others spring up in the next ninety days. Let's see, no one else ran a sub four-minute mile after Roger Bannister. (It took only a month before John Landy did). The world is a big place. There are lots of smart people in it. Entrepreneurs are kidding themselves if they think they have any kind of monopoly on knowledge. And, sure as I'm a Macintosh user, on the same day that an entrepreneur tells this lie, the venture capitalist will have met with another company that's doing the same thing.
- “Hurry because several other venture capital firms are interested.” The good news: There are maybe one hundred entrepreneurs in the world who can make this claim. The bad news: The fact that you are reading a blog about venture capital means you're not one of them. As my mother used to say, “Never play Russian roulette with an Uzi.” For the absolute cream of the crop, there is competition for a deal, and an entrepreneur can scare other investors to make a decision.
- “Oracle is too big/dumb/slow to be a threat.” Larry Ellison has his own jet. He can keep the San Jose Airport open for his late night landings. His boat is so big that it can barely get under the Golden Gate Bridge. Meanwhile, entrepreneurs are flying on Southwest out of Oakland and stealing the free peanuts. There's a reason why Larry is where he is, and entrepreneurs are where they are, and it's not that he's big, dumb, and slow. Competing with Oracle, Microsoft, and other large companies is a very difficult task. Entrepreneurs who utter this lie look at best naive. You think it's bravado, but venture capitalists think it's stupidity.
- “We have a proven management team.” Says who? Because the founder worked at Morgan Stanley for a summer? Or McKinsey for two years? Or he made sure that John Sculley's Macintosh could power on? Truly “proven” in a venture capitalist's eyes is founder of a company that returned billions to its investors. But if the entrepreneur were that proven, that he (a) probably wouldn't have to ask for money; (b) wouldn't be claiming that he's proven. (Do you think Wayne Gretzky went around saying, “I am a good hockey player”?) A better strategy is for the entrepreneur to state that (a) she has relevant industry experience; (b) she is going to do whatever it takes to succeed; (c) she is going to surround herself with directors and advisors who are proven; and (d) she'll step aside whenever it becomes necessary. This is good enough for a venture capitalist that believes in what the entrepreneur is doing.
- “Patents make our product defensible.” The optimal number of times to use the P word in a presentation is one. Just once, say, “We have filed patents for what we are doing.” Done. The second time you say it, venture capitalists begin to suspect that you are depending too much on patents for defensibility. The third time you say it, you are holding a sign above your head that says, “I am clueless.” Sure, you should patent what you're doing--if for no other reason than to say it once in your presentation. But at the end of the patents are mostly good for impressing your parents. You won't have the time or money to sue anyone with a pocket deep enough to be worth suing.
- “All we have to do is get 1% of the market.” (Here's a bonus since I still have battery power.) This lie is the flip side of “the market will be $50 billion.” There are two problems with this lie. First, no venture capitalist is interested in a company that is looking to get 1% or so of a market. Frankly, we want our companies to face the wrath of the anti-trust division of the Department of Justice. Second, it's also not that easy to get 1% of any market, so you look silly pretending that it is. Generally, it's much better for entrepreneurs to show a realistic appreciation of the difficulty of building a successful company.