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In an excerpt from his forthcoming book, Without Their Permission, Alexis Ohanian explains how to bring in those first few dollars.
Unless you get incredibly lucky (remember, there are already many factors going against you), you'll need to have at least built something people want before you can get your first round of funding. The application process varies, but most accelerators follow Y Combinator's lead and start with a written application (submitted online, of course) followed by offers for in-person interviews. I'm biased, but not only did Y Combinator create the blueprint, they also set the standard. So at least for as long as they're doing that, let's use them as a benchmark.
If you get in to Y Combinator, you'll trade some equity (typically between 2 percent and 10 percent, but usually between 6 percent and 7 percent) for somewhere around eighteen thousand dollars (on average) in funding and their three-month program. If you can't ship something in that period, you've got to hard reset.
What if you don't? Or don't want to? Well, you're not alone, as most of the successes in our Internet industry never went through an accelerator.
The cost of starting a company falls every day as the costs of hosting your website fall. When we started reddit, we ordered our servers online, as parts, and assembled them in our living room before schlepping them down to the co-location facility (a big room full of servers where you can rent space to put in your own). Just a few years later, Amazon launched a brilliant cloud computing service that did away with our need to ever see our servers-;all it takes is a credit card, and your site can be up and running for a pittance (a price that heads down every month). Hosting a website is now essentially a utility.
When you're not dealing with inventory, or a retail location, the barriers to entry plummet, and businesses can start from dorm rooms and coffee-shop tables. As long as you can cover rent and keep food in your belly (this is what Paul Graham means when he says that all startups aspire to be "ramen profitable"--that is, profitable enough to keep the founders living in their frugal, college-like lifestyle, with a roof over their heads and ramen in their bellies), you can keep your business going-;and growing-;long enough to get that next round of funding.
This funding may come from friends and family, or it may come from wealthy individuals known as angel investors. The phrase is rather generous; I prefer to think of them as wearing monocles and top hats.
The breadpig above captures exactly what I look like at the moment I'm deciding whether or not to invest in a startup. In fact, all investors look exactly like this. No halos or wings, just monocles and top hats.
But the idea is that these investors are willing to take a big chance on a very early-stage company in the hope that they'll get in on the ground floor of something huge. I've done more than sixty of these early-stage investments since selling reddit. For many of us, investing in an early-stage company is a risky investment strategy, but it's something we do because we were entrepreneurs ourselves once. We think of it as startup karma-;a way to give back to the community and honor all the folks who took a chance on us.
Additionally, young founders are challenged by a lack of connections and the appearance of youth, which in many industries, unfortunately, correlates with a lack of legitimacy. Adam Goldstein at hipmunk, then twenty-two, overcame these hurdles through sheer determination. Many other founders do their business development over the phone first, where one is only judged by one's voice and one's choice of words. Then when it comes time for an in-person interview, one's youth becomes an asset, as the executives who would've once been skeptical are now impressed.
Unless you've got a rich and generous uncle, you're going to have to be resourceful. Actually, even with a rich and generous uncle, you'd still better be relentlessly resourceful, because in this industry, if you're not making something people want, you're hosed.
Excerpted from WITHOUT THEIR PERMISSION: How The 21st Century Will Be Made, Not Managed, by Alexis Ohanian. Copyright 2013. Reprinted by permission of the publisher, Business Plus. All rights reserved.
Kathryn Minshew, founder of The Muse, gives practical tips for managing young interns who are new to the workforce.
A recent study by two freelancers compared the two sites.In the crowdfunding world, it appears Kickstarter is king-- at least according to a recent study. Two freelancers compiled crowdfunding data from the two sites and found that Kickstarter had nearly six times as much funding as Indiegogo. The researchers, Jonathan Lau and Edward Junprung, used Kickstarter’s public data and scraped Indiegogo’s website for data to compare the success of the two different platforms. Lau and Junprung included their methodology in their findings:We built a bot that scraped IGG’s projects section, which supposedly contains all campaigns ever launched. On August 17th when we ran our bot, Indiegogo had about 4900 pages of campaigns. The bot navigated through each page and grabbed the campaign page URL, amount raised, percentage of goal raised, category and time remaining on the campaign. We then threw the numbers into Excel and replicated Kickstarter’s stats table using IGG’s numbers. Lau and Junprung found that Kickstarter has raised $612 million for successful campaigns and Indiegogo had apparently raised only $98 million. Kickstarter and Indiegogo are reported to have raised comparable amounts for unsuccessful projects--$83 million and $70 million, respectively. The study found that Kickstarter has an average success rate of 44 percent, with Indiegogo’s success rate coming in around 34 percent. Additionally, it appears that Kickstarter has had over twice as many campaigns than Indiegogo. But could these numbers be right? One issue: Indiegogo delists campaigns that raise less than $500, whereas Kickstarter does not. Not to mention, Indiegogo claims these numbers are just plain wrong. An Indiegogo spokesperson told Venture Beat that "each alleged Indiegogo statistic in the post that you refer to is inaccurate." But when asked to provide corrections and other data, the spokesperson said it was against the company's policy A quick search of Kickstarter found that the Kickstarter campaign with the greatest funding to date has been the Pebble watch with $10,266,845 pledged. Indiegogo’s campaign with the greatest funding to date was the Ubuntu Edge with $12,814,196, which was unsuccessful--though Indiegogo allows projects that don’t meet their funding goals to keep their pledged funding for a higher fee. An email to Indiegogo's press office was not returned before press time.
How do you encourage a sense of play and risk-taking in your organization? The founder of Atari suggests you take one annual gamble.
Nolan Bushnell, legendary founder of Atari and Chuck E. Cheese, recently came out with his first book, Finding the Next Steve Jobs: How to Find, Hire, Keep, and Nurture Creative Talent.
In an interview posted by leadership speaker Skip Prichard, Bushnell--who hired a young Jobs at Atari in 1974--shared some pearls of wisdom about creativity and leadership with his publisher, Tim Sanders. Here's a sampling:
Sanders: I know it's your strong belief that leaders at companies need to foster a creative culture. If you were going to give leaders one piece of advice on how to think differently about a creative culture, what would that piece of advice be?
Bushnell: I would encourage them to say "yes" to at least one crazy idea a year.
Sanders: Give me an example of some of the crazy ideas you heard when you were in Atari.
Bushnell: Among the many that were pitched to me, one that stands out was this notion of making pretty pictures when music happened. It seemed ridiculous at the time. The product ultimately turned into Midi.
Sanders: Midi, of course, is the standard that still exists to this day for connecting music devices to each other and synchronizing them.
Bushnell: I think we built 20,000 of them, and I think we sold six at full-price. (Laughs.) But it did become a force within the industry, for sure.
Introvert? Extrovert? Doesn't matter. The good news is, neither personality type really matters when it comes to managing people.
I've learned a lot about leadership lately. Back in my heyday as a middle manager in corporate America, and before that as a manager for a small start-up, I found my introverted personality worked against me most of the time.
Back then, I'd rather sit and read a book in a coffeeshop than kick back with employees after work. I shunned the spotlight and chose introspection instead.
Introversion as the Enemy
I once had a pivotal meeting with an employee. She was a project manager on my team (I had somehow worked up to a director position). Long story short: she told me I was the worst boss ever and she hated my guts. She asked how I ever got into this role. She wanted to quit, but I talked her off the ledge--mostly by apologizing to her.
At the time, I viewed this exchange as mostly my fault. I was just not social enough; I didn't check in with her often enough to see how things were going. Sure, I had budgets to manage and meetings to attend. But my introverted personality got the best of me.
I'm not alone. After writing my story about carving out a management career as an introvert, I received dozens and dozens of supportive messages. It was in influx of people who have felt my pain. In most cases, the message was--"I'm also an introvert who struggles with managing people."
The good news is, your personality may not dictate how well you manage people as much as you think. Both extroverts and introverts can do it. The skills can be learned, adjusted, tweaked, and augmented.
A Learned Skill
This study is a useful tool for understanding how your specific personality can help you lead in a small business, and that leadership is a skill, not a talent. To get a summary, I spoke with Jim Kouzes, the co-author of the report. Kouzes and Barry Posner wrote "The Leadership Challenge" book and conduct the Leadership Practices Inventory.
"Leadership is a set of skills and abilities that are learnable by anyone who has the desire to improve and the willingness to practice," Kouzes says. "That's true for extroverts and introverts alike. They each have particular preferences for how they energize themselves, take in information, make decisions, and organize themselves, but both are equally capable of providing exemplary leadership."
Kouzes told me every personality type has to lead by example. This hit home for me: I used to think I had to be big and blustery with team members when talking about my vision. In reality, I could have accomplished the same goal in my own way. I didn't need to try and be animated or social--I needed to improve my skills. The reason that employee thought I was a terrible boss was mostly due to my lack of communication, which didn't have to be blustery at all--it just had to be consistent.
"Extroverts tend to express their passion about principles with great vigor, while introverts would be more likely to engage in quiet conversation about expectations," explained Kouzes. For me, that would have meant more in-person mentoring with employees, learning about their needs and desires--something I've become very good at subsequently as a journalist over the past 12 years interviewing people.
Interestingly, I was exceptionally good at "visioneering" in the workplace. When I started in one corporate job with three people, it grew to almost 50 in only five years. We took on projects in every part of the organization, and I was good at selling our services. Many of these meetings involved one-on-ones with higher-level executives.
Kouzes says any personality type can learn the skill of communicating vision.
"Extroverts tend to demonstrate this practice by brainstorming opportunities or directly appealing to the desires of others," he says. "Introverts, on the other hand, are more inclined to imagine what could be in their minds or exchanging ideas in one-on-one conversations. Extroverts have to work a bit harder at giving space to others to share their hopes, dreams and aspirations, while introverts are very mindful of the need to be inclusive," he says.
It's still a journey for me.
What's your story? Post in the comments if you've been able to figure out your own successes and failures, and how your personality type hindered or helped.
The costs may be hidden, but they are still there. That alone should motivate you to treat your staff well.
You'll hear people talk about the high cost of turnover, but when you try to press for the actual costs they don't really know. It seems like a mysterious thing that people talk about.
And it's true--the costs are largely hidden. It doesn't hit your profit and loss statement. It's not something in the budget. There are some hard costs, like the cost to post a position on a job board, or for specialized positions, the cost of a headhunter. But, even if you recruit strictly through word of mouth and employee referrals, there are costs to losing an employee. Here are the things you're paying for.
Lowered productivity. The person who left was doing something, right? And who is doing that job now that the position is vacant? No one? That's lost productivity right there. What if you just farm out the tasks to other people? Chances are, the most important tasks will get done, but other things will fall by the wayside.
Overworked remaining staff. Can you measure this in dollars? If your employees are exempt, their paychecks remain the same, so how is this a cost? Well, as they get stretched thin, their quality of work goes down as does their satisfaction and engagement. Which means that they are more and more likely to start looking for a new job and leave. And the longer they stay in their overworked roles, the harder it will be for you to regain their goodwill even after you've filled the vacancy.
Lost knowledge. A ton of people can do what your former employee did, but they don't have the specific knowledge she had. It's not just about putting numbers in a spreadsheet, writing code, or selling a product. It's about knowing the people, the traditions, the location of relevant information, what the boss likes and a million other things that come from working for a company for a long period of time. All that goes away when someone quits. And sometimes it's more than just general company knowledge. How many of your employees have their jobs documented well enough that someone could figure it out with their documentation? Do you have people cross trained? Does one person have control of the passwords?
Training costs. Paid training costs are obvious. If you have to pay $5,000 for a seminar to teach your new employee your complex internal computer systems, that's a cost noted on a spreadsheet. But, when there are no training classes to attend, there are still costs. Someone has to sit there and show him what to do. Someone has to double check work until the employee has proven himself. And that all takes the "trainer" away from her regular job. Which means you're paying two people to do one job. Costly.
Interviewing costs. If you have to pay travel expenses, that's costly. But if all your candidates are local, you still have to take the time to go through resumes, talk with numerous people, do formal interviews (which take an inordinate amount of time), talk with colleagues, and figure out who is the best employee.
Recruiters. I'm not talking headhunter fees (which are absolutely worth it for some positions), but rather the employee who has to find the candidates. In some business, you have dedicated HR or recruiting staff that takes care of this. They all get paid. And for smaller businesses, this task usually falls directly on the shoulders of the hiring manager--you know the one who is extra busy because he's down one person? That costs too.
What do all these costs add up to? Well how much? Estimates run as high as 150 percent of annual salary. Much less for lower level positions, but still significant enough to make retention a high priority for your business.
This doesn't mean you shouldn't fire problem employees. You should--because they aren't being productive and they encourage your good employees to quit. But, you should first try to counsel and coach and correct. And you should consider your pay scales for your good employees and give raises and bonuses when appropriate because it will cost you more to lose that good employee than the $5,000 raise you refused to give.
Turnover is expensive. Sometimes it cannot be avoided, but when it can, you should avoid it by doing the right things for your employees.
Fifty-two percent of small businesses still don't have a website. Don't be one of them. Check out these tools that will get your brand online--today.
There is no excuse for this one.
Recently, a survey by a marketing company called Yodel found that 52 percent of small businesses still do not have a website. (They interviewed a sample size of about 300 companies.) On top of that, 56 percent of businesses surveyed also do not use any means to measure online success.
C'mon, people. In the past, the only way to start a new site was to pay a design agency a few thousand dollars and hire a programmer. That's ancient history now. Several sites offer a quick and painless approach where you can plug in your own company graphics, type in some text, and have an amazing site with full SEO and social media integration by supper. Here are four.
One of the my recent finds, Webflow is smarter, savvier, and better-looking than some of the older build-your-own tools like Weebly or Webs. The interface is intuitive and the templates are amazingly good, but the main draw is that it is a full Web editor. You can use CSS3 style sheets that dictate the format and allow easier changes. There are alignment grids, custom form options, and even versioning to help you track your site design.
2. Jimdo for Mobile
Jimdo is a powerful template-driven tool for creating a website. I wrote about it last fall in the magazine. Now, there's a mobile version. You might wonder: do you really need to the ability to create a website from your phone? The mobile version allows you to snap photos and integrate them right into your site. As you might expect, it's great for designing a mobile website. And, you can start a site on the Web and make the finishing touches on your phone or tablet.
I also wrote about Sidengo for the magazine last fall, but it's still a favorite of mine for a quick, easy site with a trendy look. There are two main advantages. One is that Sidengo automatically re-formats the site for Web or mobile. And, you can create multiple sites with one account--e.g., one for each new product or marketing campaign.
Okay, maybe you don't have time to plug in graphics and text for a full site with navigational links. Smore is another favorite site builder of mine and it's intended for people who are pressed for time. At the very least, you can plug in a few details about your company and create an online brochure, one that has your contact info and mailing address. And, the finished sites look really professional.
Location data is money. Foursquare's got plenty of it, plus a new product that promises to make it profitable. Is the start-up finally having its moment?
In January 2013, PrivCo, the research firm, said Foursquare would fail by the end of the year.
Granted, the year isn't over--but it's pretty clear PrivCo was wrong.
On Thursday, Bloomberg reported that Foursquare was "in talks with multiple large technology companies about a potential strategic investment." According to the report, Foursquare is now back on track to beat sales expectations by the end of the year, and the business development team has been successful in attracting several new advertisers to their "post-check-in product."
What is their "post-check-in product," you ask?
As TechCrunch explains, the new Foursquare "will ping phones with personalized recommendations based on a user's targeted physical location, without needing them to check in at all."
In a recent interview with Fast Company, co-founder and CEO Dennis Crowley explained this product is basically the holy grail of local discovery, and one that has the potential to turn Foursquare from a fun, though niche social check-in site, into a massive local data company.
Personalized recommendations may seem like a marginal step forward--a decent iteration on an otherwise underwhelming product--but I'm inclinded to believe there's a bigger story here. As writer Austin Carr put it, "If Google has built a $294 billion business based on your explicit searches, Foursquare's bet is that the data behind your implicit intent are just as lucrative."
If the new product is a hit, big tech companies will be champing at the bit. Plenty of firms have attempted to become the "local layer" of the Web, but no one's really succeeded. (Perhaps Yelp has come the closest, but the recommendation site is continually bogged down with allegations that users are manipulating reviews.) The new product may--finally--put Foursquare in a good position for a big exit.
The question becomes: Who could be the highest bidder?
Perhaps the obvious answer is Apple. Over the last several years, Apple has been building out its own local programs. Its most recent acquisition, Locationary, is basically a local data broker--a nice complement to the company's new iOs map (which it's surely trying to improve).
Foursquare could potentially turn Apple Maps into a more social product, one that would likely boost user engagement and be an attractive selling point to advertisers. As Romain Dillet says on TechCrunch:
Foursquare could replace everything related to Yelp in iOS. At the same time, Apple released Find My Friends a year ago. It has very few active users and bad ratings in the App Store. Apple could safely forget about Find My Friends if Foursquare becomes an Apple app...It remains to be seen whether Apple could be tempted by its talented team of 150 people in order to develop the product further. Foursquare data becomes even more valuable for the users as people check in and add other users as friends.
The other obvious answer is Google. Like Apple, Google has poured a ton of time and resources into developing its local products. Buying Foursquare's data could be a huge play for Google, especially if the company's data can translate into higher ad-revenue from local businesses that already advertise on Google.
Say you live in New York City and you like bowling. Google probably already knows this about you, based on various search indexes associated with your account. Right now, when you log in, you're likely going to see ads for bowling alleys in New York. The only problem is that when you're on your computer, you probably don't have plans to bowl. But with Foursquare's location data, Google would be able to sell your location data to its existing local bowling advertisers at a premium price, giving them access to you when you're on-the-go. That gives advertisers the chance to hit you with an ad at the right time--and place.
Also, let's not forget that Google recently purchased Waze for $1.1 billion, reaffirming the company's willigness to shell out large amounts of cash to boost its local division.
Marissa Mayer and Dennis Crowley are old buddies. Back in 2005, when Mayer was still at Google, she was in charge of the acquisition of Dodgeball, Crowley's first start-up.
Since taking the helm of Yahoo in 2012, Mayer has been almost exceedingly vocal about the company's need to make serious acquisitions to boost its mobille and local products, and align itself with a younger generation. Enter Foursquare.
In June, Kara Swisher of AllThingsD reported on comments made by Yahoo CFO Ken Goldman:
Goldman added that Yahoo would continue to do acquisitions, "to help basically accelerate our progress… and continue to see the velocity of products in the mobile space."
Of most interest is "localization of the space," especially in providing search and content to consumers.
Hey, Dennis Crowley of Foursquare, that sounds like you!
It also fits the rubric of a standard, Mayer-approved Yahoo acquisition. As Quartz put it:
Like Tumblr’s rabid fan base, Foursquare has something going for it that makes it uniquely valuable. That’s its location data, which it shares with companies like Instagram and sells to various advertisers. While Yahoo’s approach to making Tumblr pay for itself is to load the site up with ads, the approach would probably be different with Foursquare, which only has 33 million users. Yahoo could use Foursquare’s technology and data to beef up its web search, by offering people search results based on where they are. Or maybe Yahoo could just make Foursquare profitable through ads, since Yahoo, being bigger, can more easily negotiate deals with advertisers.
A Credit Card Company?
Foursquare has a long-standing relationship with American Express, a partnership forged in 2011 that gave discounts to card members that checked in at various stores.
Some see Foursquare's location data as valuable to advertisers and local retailers, but it coud also be just as lucrative to credit card companies, who collect transaction fees on each and every purchase that's made. As the VC Hunter Walk explains:
Your credit card company has a tremendous amount of data on where you, and the world, shops. Not purchases at the SKU level--they largely don’t know what you bought at West Elm or Cheesecake Factory--but they do know that you spend $350 at a furniture store and $75 at a casual food chain. Now extrapolate this over millions of customers. Using covisitation data they could recommend to me other establishments visited by folks with similar spending patterns. “Hunter, because you enjoy West Elm you might also like SF Modern Design located at 1000 State St.” This would be especially helpful when traveling.
But none of these credit card companies are (a) skilled at building consumer facing applications, (b) upstream of purchase decisions and (c) have place level data for retail establishments. Oh but wait, Foursquare has all of those. By combining with Foursquare, the credit card companies could finally justify and preserve their transaction fees (in the face of competition from other payment options) but working to drive demand to the local retailers. Today they do this in very non-scalable ways such as one-off marketing programs such as AmEx Small Business week.
[Update: Microsoft is rumored to have its eye on the company too. A Foursquare partnership would give Microsoft a strong foothold in the social and mobile sphere's, especially as it develops its own set of tablets and smartphones.]
This is the dark horse option--the bizarre scenario in which Foursquare's future involves an IPO or bankrupcy. Both are equally unlikely, but considering the company's raised north of $100 million, Crowley may not find any acquisition offer under $1 billion palatable for himself or investors.
What is certain, however, is that a company that was once perceived to be the next "highly-funded casualty" is very much alive.
London calling ... New York technology companies. Submissions for the GREAT Tech Awards are due September 6.
If your start-up has been itching to open a London office -- or at least to get a British phone booth photo op -- now may be your chance to score a free plane ticket over, courtesy of the Queen. The UK goverment is sponsoring the GREAT Tech Awards to bring 5 New York-based technology companies to London for a week-long visit.
In addition to a "premium economy" plane ticket, winners will get a variety of introductions, a two-day business development program, limited legal services and company registration, and other benefits.
They'll be selecting a winner in each of five categories: hardware, education, lifestyle, finance and media. If you're interested in applying, you must be headquartered in the United States with a New York presence, have "a verifiable international client base and be ready to grow internationally," focus on technology, and have between three and 100 employees. Also, companies with a current UK presence are not eligible.
Applications are free and must be submitted by 11:55 pm EST on September 6. Winners will be announced on October 2 at the GREAT Tech Awards Gala in New York City.
When your day job--starting up a business--involves a lot of risk and uncertainty, your own finances should be a lot less unpredictable.
A lot of entrepreneurs won't admit it, but here's the cold, hard truth: Just because you manage the finances of your own business doesn't mean you're savvy at managing your own money.
In fact, often because entrepreneurs are busy starting up and managing businesses--an inherently risky endeavor--they overlook their own personal financial risks. But you can't afford to do that. Especially when your business introduces a fair amount of uncertainty in your life, your own financial situation should be comparatively less exciting and unpredictable.
Here, then, are five money moves every entrepreneur should consider.
Get a Game Plan
First-time founders: If you haven't already, figure out how much money you have (i.e., emergency savings) and how much you have coming in (say, from investments or part-time work). Then, estimate your expenses, both personal and business-related. You want to be clear about what you need in order to get your idea off the ground--and how long you can feasibly bootstrap until you enter the danger zone. I recommend shoring up at least six months' worth of emergency savings for individuals and nine months if you're a parent. If you're paying off debt, see what you can automate to make your life easier and ensure those expenses get paid.
Take a Money Minute
Each morning, I like to take what I call a "money minute" and check my account on LearnVest's financial tracker. Mostly I'll do this when I'm just getting into the office and planning my day. I'll simply log in and take a peek at my investments, then check for any erroneous fees, which sometimes happens when I dine out. From there, I'll try to get a sense of my personal spending--have I been eating out too much or overspending on travel? The answer usually keeps me and my husband, who shares my credit card, in line.
Side note: I've learned to do this for LearnVest too, except rather than view things all at once, I take some time each week to review separate emails and a dashboard which shows how many users signed up each month. As with my personal finances, I try to figure out what we should be doing more or less of and understand why something is happening. I look for patterns, behaviors, and insights to see where we should invest, where we should cut back, and how to plan for next season.
Know Your Risks
As an entrepreneur, knowing how your personal finances are connected to your business is crucial because you're so vulnerable. Let's say you take out a credit card for your business expenses. You'll be liable if you default and the card's in your name rather than a corporation. Similarly, if you take out a small business loan, the bank could come after your personal assets. Neither scenario is ideal, so if you're boostrapping, be sure you know your limitations. If you're running your business as an LLC, a limited partnerhip, or a sole proprietorship, your actual accounting of your finances will appear on your tax return, so it could impact your personal finances, not just those of your business.
Get a Roth IRA
Saving for retirement is probably not high on your to-do list when you're in the process of staring up--but it should be. A Roth IRA, which grows absolutely tax-free, is one of the best and most flexible vehicles out there for retirement savings (though there are some limitations, depending on income). You can invest in it almost whatever you want--from mutual funds to bonds up to $5,500 in 2013 ($6,500 if you're 50 and older)--and if you're ever in a bind, you can access some of that money without major penalties. Another perk of the Roth IRA? If you've just quit your day job, you can roll a traditional IRA or 401K into it.
Consider Umbrella Coverage
Let's say a colleague slips and falls at a company party and decides to sue. He threatens to wipe you out financially and shut down your business. With an umbrella or excess liability coverage, you help to protect yourself from big financial threats. This kind of policy goes above and beyond auto and home insurance, which is good since you have more to lose. Think of it as an additional layer of insurance, worth up to $1 million to $2 million. Most umbrella insurance claims are related to car accidents, but they also offer protection for accidents at work.
Thanks to bigger companies focusing on their mobile apps, smaller developers have found themselves in a more expensive and competitive market.
As the number of mobile app downloads increases across the United States, the cost for app developers to gain loyal customers has risen to its highest rate in two years, according to a new study by Fiksu.
The Boston-based mobile app marketing company found that the cost for acquiring new loyal app users through advertising has reached $1.80 per customer, an increase of 20 percent since June. Fiksu defines loyal users as people who open an app three times or more.
Fiksu's App Store Competitive Index, which tracks the volume of downloads per day in the top 200 ranked free iPhone apps, shows a four percent rise, from 5.6 million daily downloads in June to 5.8 million in July. Last year, that number was just 4.37 million. Because of this rising demand, a greater number of name-brand companies are focusing on mobile strategy.
"The continuing surge in mobile app users is attracting bigger brands eager to use apps to create long-lasting, ongoing engagement, and their spending is pushing up costs," Micah Adler, chief executive of Fiksu, said.
This is bad news for smaller developers, especially for the ones building free apps, as they often rely on their customer base to make in-app purchases. While established brands have bigger budgets that can keep up as marketing costs rise, start-ups have to take on larger risks to capture those loyal users.
Adler said there are two additional factors "applying upward pressure on user acquisition costs." First, Apple's new App Store ranking algorithm forces low-ranked app creators to spend more money to enhance their rating. Second, larger companies are flocking to Facebook's mobile app advertising platform, which came out late June, driving up the price of ads.
In short, as the growing mobile app market becomes more tempting to larger businesses, it will only become harder -- and more expensive -- for start-ups to compete.
Before you pop the bubbly and celebrate that new big client, ask yourself: is this a blessing or a curse?
Enjoy the pop of a champagne bottle being opened. You just put a leash on your first Big Dog. An international company on the Fortune 1,000 list is now your client. Following the arduous process of becoming an approved vendor, there’s an immediate cash stream. Not bad.
That’s the blessing and curse of the Big Dog, the one client that comprises more than 50 percent of your revenue. Huge success on the front end and the possibility of instant, fatal failure when it all evaporates in the blink of an eye. You’re not a good businessperson if you don’t exploit the Big Dog, but you’ll never be a brilliant businessperson if you don’t mitigate the risk that comes with it.
Ride the wave, but look for the next one.
I’ve been there--as much as 80 percent of our business came from one client several years ago. Clients happily referred us to their colleagues within the same company. We worked hard to diversify our client base so when Big Dog missed a quarter and cost-cutting began with "vendor consolidation," we weren’t chained to the fence.
Here are your next steps:
1. Exploit your win, inside and out. Spend half your time building new business inside the big client and half your time leveraging the client to win business with other companies. The money you’re winning from the Big Dog needs to be discounted by the risk. And the credibility you’ve earned has got to be leveraged into new prospects.
2. Follow people. Some of your peeps at Big Dog are going to leave to join other companies. This is the best way of diversifying your business. People, not companies, sign you and your company. The respect and credibility you’ve earned persists when those folks join another firm. Your business obligation is to monetize it.
3. Bank your success. Remember that part about the discount on the earnings from Big Dog? Talk to your accountant. A percentage of those earnings must be banked into a "rainy day fund." Remember Aesop’s fable: Are you an ant or a grasshopper?
4. Divide and Conquer. Use your staff wisely. Assign someone to focus on building business at Big Dog. And someone else to focus on building business outside it. As a business owner, you need to be the one coordinating the effort--but stay out of the picture for a while. You shouldn’t be in the first meeting because there needs to be a second and third meeting.
5. Make hay while the sun shines. Can you get your clients to give you a public endorsement while everything is hunky dory? On LinkedIn? On your website? In a letter of recommendation? It’s a lot easier to get that endorsement before the winds blow in a different direction, the cost reductions start, and the layoffs begin. When that happens, everyone thinks about themselves and generosity evaporates.
Remember that there’s nothing wrong about big cash flow--except the fact that it rarely continues forever. So mitigate the risk of the reward. That Big Dog can keep you warm on a cold night. Just make sure there are a few puppies around, too.
Part 1 of 3 in a series on the questions you should ask a VC/PE when you're looking for an investor for your business.
I was fortunate enough to have a fairy tale startup--we bootstrapped, raised $5M, grew to be a market leader, and had a great exit. Since then I’ve played all the other roles around the table in other companies’ stories--some fairy tales, some tragedies--as an angel, VC, seller, acquirer, advisor, and Board member.
What I’ve found is that those seeking capital usually don’t understand the motivations and limitations of those providing capital. When I was running my business, I certainly didn’t.
This lack of understanding makes it harder than it has to be on the entrepreneur. Running your business, figuring out a growth strategy, getting an investor to believe in your story--these things are hard enough. Divining the opaque rationale behind decisions that investors make is the burden I’m trying to alleviate here.
Find a structural fit, not a strategic fit.
Since equity is the most high profile of capital options, in Part 1 of this series I’m going to concentrate on "The First Questions You Should Ask a VC/PE."
These questions are not intended to address strategic fit, such as whether the investor has market knowledge of your industry, or whether the partners are value-add board members. The focus here is finding the right structural fit--whether the investors have the ability and desire to put cash into companies like yours right now.
All things being equal, I always found that structural fit was a higher priority over strategic fit. My company was a great strategic fit for lots of investors, but it wasn’t a structural fit for most. So I got nowhere. In the end, I raised money from a group that was not a strategic fit, but was a terrific structural fit.
Go get the cash.
In the end, strategic fit is neither necessary nor sufficient to raise capital, but structural fit is. So, onto the questions.
Your question: "When did you close your current fund?"
Their answer: "We closed our fund within the last 24 months."
What it means: "We have money burning a hole in our pockets and need to invest in as many businesses as we can right now."
VC/PE firms are General Partners in 10 year "closed-end" legal Limited Partnerships. That means the fund is contractually bound to invest and divest its investments and return money to its Limited Partner ("LP") investors within 10 years of when it is created (investments can and do go longer--frequently---but it’s not the goal).
Firms want to put their money into companies within 3 years so they have time to mature and get to exit, because average hold times are approximately 7 years. If their last fund closed four to five or more years ago, they still have money in their fund, but it’s almost all reserved for their existing investments.
Timing is everything.
All this means that your company could be a perfect strategic fit that the firm loves, but they can’t invest because it’s not a structural fit for the fund due to timing--because they’ve already placed their bets. There are two exceptions to this:
- If the firm has had a lot of big exits in the first few years (this is statistically rare), they’ll be able to recycle the returns into new investments like yours and still have time to exit within the 10-year time frame.
- If your company has a direct and high probability path to exit in a very short time period
Probability-wise, though, your chance for greatest success is to concentrate your efforts on VCs/PEs that are in the honeymoon phase of their latest fund (within 3 years of latest close). They’re ready, willing, and able to invest--indeed, they have to get the cash out as soon as possible because they have a "burning platform" of the 10-year total time window.
A firm’s initial investments define its style.
Your question: "What size is your average total investment?"
Their answer: "We typically invest $2M at first and reserve $4-6M total for each investment."
The answer tells you a lot about the firm’s style--early stage, late stage, growth, buyout, etc. For example, you can have two identical size funds, but a larger initial investment means they are looking for either larger companies or to control positions in smaller companies.
Importantly, this also means they will have fewer investments to get to their target return--that means they want less risk (more mature companies means less chance of an investment going to zero) and have a narrower target return window (they don’t need investments to be a Google-type exit to offset a lot of zeros). This makes sense because when fewer companies fail, the remaining ones don’t have to be intergalactic home runs for them to get the fund to its target returns. (The next section will elucidate why this is important.)
Your relationship with risk should guide your search.
PE firms focused on more mature businesses average a capital loss ratio (how much of their investment capital goes to zero) of about 15 percent, whereas early stage VCs average about 35 percent. That means those PE firms take on much less risk than the typical VC, and that means they are looking for more experienced management, and companies with more revenue and profits, diverse and large customer bases, and a leading market position.
Knowing this is important because the VC/PE firm’s style has to suit who you are and what you want. Let’s say you’ve been slaving away to get your business to $10M in revenue. You see big opportunities but you’re sick of the grind and want some cash now while someone else sweats the pressure of growth and competition.
You need a firm whose strategy will allow a control recap (give you some cash for a majority of your equity) and growth capital (new cash on top of the cash that goes to you) and is comfortable finding new management. This is typically a firm with a larger fund (>$200M) that makes larger first investments (>$5M).
You might find a VC/PE firm that’s a great strategic fit (that knows your product type and market), but if they make smaller investments, they are looking for minority equity in a hungry entrepreneur who wants to lead the company to world domination. Your situation won’t be a structural fit and therefore they would be unlikely to invest.
Understand their funding from their point of view.
Start by asking the following:
Your question: "How big is your current fund?"
Their answer: "Our current fund is $100M."
What it means: "We need to return $300M to our Limited Partners."
VC and PE behavior is driven by aggregated returns to their LPs. A typical target return for a fund is 3x cash-on-cash return and >20% IRR (net of fees) to LPs over 10 to 12 years. With such returns they’ll be a top performer in most years and will be able to raise another fund--which is most professional investors’ ultimate long-term goal.
This return target is a pretty universal rule for all equity investors, whether a $25M or $500M fund, a VC or PE, or early or late stage specialists. An individual firm’s focus may vary--which determines strategic fit--but all firms need to rattle their cups to get money from big pools of money (ie LPs), and managers of those pools are similar in looking for such returns.
Here’s why this matters: Fund size determines everything in a deal that matters to an entrepreneur.
Do the math.
Think of it this way: If I’m a $100M, early stage VC fund, about $20M goes to management fees (10-year fund, 1.5-2 percent management fee per year, plus deal fees, plus dead deal costs, etc), and about $30M goes to zero (average VC capital loss ratio is 35 percent). That means only $50M will actively make returns. On average, about $25M will just return the original investment, leaving $25M of investment bets to make $300M.
A typical such fund averages 15 bets, starting off with a $2M investment per company and reserving an average of $5M (which not every company uses). Based on the average numbers, 5 companies will be a total loss, 5 will return the original investment, and 5 will be responsible for returning the lions share of the $300M.
That means each of those winners must return $50M+ a piece. That’s a 10x multiple of the total $5M investment in each company. We’ve all heard how VCs look for "10 baggers" and this math substantiates why. What entrepreneurs don’t know is that this drives the types of companies the VC/PE can invest in, and the price they can put on those companies (their valuation).
If they love your company, can it still work out? (No.)
Let’s say a VC loves a company--the industry, the product type, the stage, the entrepreneur. It’s a 100 percent strategic fit. They can’t make the investment unless they can structure the deal to potentially get them their target return of $50M+. How do they do this?
First of all, they need to believe the business can eventually sell for enough to make the return. For example, you have a $2M revenue software business, and your plan says it’ll grow in five years to $15M with a $2M profit. Excluding the fairy tale world of Instagram, a good price is 2-4x revenues, so let’s say 3x revenue, or $45M.
That means even if the VC owned 100 percent of your business, they can’t reach their target return of $50M+ (absent an Instagram lotto ticket). So even if a VC loves everything about your company, and objectively growing from $2M to $15M in five years is great, the investment is not a structural fit for the fund because of return potential.
Second, a VC/PE’s ownership percentage needs to support the return target. Let’s say your projections show explosive growth from $2M to $50M revenue and $10M EBITDA in five years. That’s an eventual projected sale price of $150M (at that size, EBITDA multiples are more common, and 15x EBITDA is a generous middle-of-the-road valuation). The VC needs to own one-third of your business at that sale price to get their $50M. If you want $5M, the maximum valuation you’ll get is likely $10M or less.
Here's the take-home: Listen to the math.
Math around what the VC/PE believes will happen at sale--not your plan, your product, or you--is what drives valuation. And valuation is usually the hot button issues for entrepreneurs.
So if you know how fund math contributes to VC/PE investment decisions, you can more efficiently determine whether your company is a structural fit with a particular VC/PE.
These questions should help you ascertain the key characteristics of a VC/PE to see if they’re a structural fit for your company. In Part 2 of this series, I’m going to go over the questions you should ask yourself so that you know if, what type, and what amount of capital is appropriate.
After a poor grade this spring in its San Jose State University partnership, online education start-up Udacity reports new data with better results.
The ever-ballooning field of online education took a big hit this summer when news broke that more than half of the students who took Udacity's online courses at San Jose State University this spring failed the class. The poor results inspired the college to temporarily suspend its partnership with Udacity for the fall semester.
Now, the Palo Alto-based company, which is one of many providers of massively open online courses, or MOOCs, is making a comeback.
Udacity has just released the pass rates from its summer program at San Jose State, and the results are substantially more promising. Pass rates were up across the board, and in some classes, including Elementary Statistics and College Algebra, they even surpassed pass rates for on-campus students. Here's how they stacked up:
- Elementary Statistics: Spring pass rate: 50.5 percent; summer pass rate: 83 percent; on-campus pass rate: 76.3 percent
- College Algebra: Spring pass rate: 25.4 percent; summer pass rate: 72.6 percent; on-campus pass rate: 64.7 percent
- Entry Level Math: Spring pass rate: 23.8 percent; summer pass rate: 29.8 percent; on-campus pass rate: 45.5 percent
- General Psychology (not offered in the Spring): Summer pass rate: 67.3 percent; on-campus pass rate: 83 percent
- Intro to Programming (not offered in the Spring): Summer pass rate: 70.4 percent; on-campus pass rate: 67.6 percent
According to Udacity co-founder and CEO Sebastian Thrun, the company changed a number of pieces of its strategy to improve pass rates this time around. For starters, Udacity re-recorded some of its least successful course videos. The company also changed the pacing of the courses, so students knew ahead of time when they were falling behind, and added more staff to support students online.
Though he's pleased with the results, Thrun recently told me by phone, "We're not perfect yet. There are a lot of improvements we can make, but invention is a process. You have to work really hard, look at data, and improve to get better and better and better."
Another big change this time around is the fact that for the pilot program this spring, Udacity made a concerted effort to recruit students from underserved high schools in California. After all, Thrun says, the purpose of MOOCs is not to replace a college education for people who have access to one, but to expand access to education to people don't. "A lot of people say, 'How does this compare to on campus?' but I think that's the wrong question," Thrun says. "The question is, 'How does it compare to nothing?'"
The summer session, however, which was open to the public, primarily consisted of students who already had some sort of post-secondary degree. This switch does call into question just how well MOOC providers like Udacity are able to serve communities that have little to no access to a college education. In a recent speech on affordability in higher education, President Obama referenced Udacity's upcoming partnership with Georgia Tech University, which, beginning this January, will offer a Master's in Computer Science for $7,000. President Obama listed this as one example of how universities are embracing "innovative new ways to prepare our students for a 21st century economy and maintain a high level of quality without breaking the bank."
While Thrun commends President Obama for encouraging technological innovation in education, he says the San Jose experiment has taught him that MOOC providers like Udacity, Coursera, and edX still have a long way to go before they're a viable substitute for a traditional college degree.
"I believe Obama is really after creative new solutions, and I'm extremely hopeful that we can bring a hardcore education to people who have no access whatsoever, but that doesn't mean we won't fail a lot," Thrun says. "We have to be humble. It's a serious topic. It's not going to be solved overnight. We have to be honest about the fact that we're experimenting, and we haven't solved the problem, but we're making progress."
Engaged employees are productive employees. Here's how to foster a more motivated workforce.
When you're starting a business, every day brings with it some new unexpected twist or turn. However, the moment you add employees into the mix, that challenge increases many times over.
The good news is that there are some simple things you can do to ensure that your people are fully involved in, dedicated to, and enthusiastic about their work. Take these 7 steps and your employees will be as engaged in your business and its success as you are.
1. Create a Partnership
The best way to encourage your people to consistently give their very best on the job is to create a partnership. Treat each employee as a valuable member of your team, and give them the autonomy to make decisions and do their work as they see fit, so long as they meet their performance standards.
2. Involve Your Employees
Involve employees more deeply in your organization by inviting them to join cross-functional teams that draw on the expertise and talent of people from different parts of the organization. Let each team have the authority they need to make decisions on their own -- especially when the decisions directly affect them.
3. Let Your Team in on the Plan
Be as transparent with your people as you can be, in terms of providing information on how the company makes and loses money, letting them in on any strategies you may have and explaining to them their role in the big picture. When your employees understand the overall plan, they will view themselves as an important, vital piece of the puzzle.
4. Provide Feedback on Performance
Regularly set aside time to tell your people what they are doing right and point out any areas for improvement. If performance is not up to par, work with them to develop ideas on how to improve. It’s important that employees feel they are supported by you and the organization, rather than being left behind because of an occasional mistake or bad call.
5. Keep Promises
Never make a promise you can’t keep, and when you do make a promise -- no matter how small it might be -- be sure to follow through with it. Even if you think your employees don’t care about it, you can be sure that they are keeping score. If you aren’t certain that you will be able to follow through on a promise, then don’t make it.
6. Create a Productive Work Environment
A workplace that is trusting, open and fun will be the most productive and successful. Be open to new ideas and suggestions that come from your employees, and show them that their voices are being heard. Regularly set time aside for team-building exercises and meetings, and make them fun so your employees actually look forward to participating rather than looking for reasons to ditch them.
7. Thank Them
A sincere thank-you for a job well done can be a powerful motivator for continued success and is an essential tool for every manager. Thank your employees personally and promptly when you catch them doing something right by writing a quick thank-you email or text message, or by dropping by their office to tell them in person.
Take a walk in your employees’ shoes -- would you be enthusiastic about working for yourself? If not, then give these 7 steps a try.
We asked Inc. readers to confess their worst habits ... and what they're doing to improve.
You need a lot of good habits to successfully build a company. But admit it: you've probably developed a bad habit or two along the way. We asked Inc. readers to spill their worst business behaviors (and how they're trying to correct them).
The biggest problem people confessed to? Trouble staying focused.
"...lack of morning focus! Always scattered. Trying to organize the morning better and seriously prioritize!" -- @rcsolak
"Bad habit: allowing the URGENT (and sometimes the TRIVIAL, such as an email with its hair on fire) to block out the IMPORTANT" -- @KevinLMK
"Taking on too many projects at once...so I set a goal to work on high priority ones for >= 3 Hr per day." -- @BrentBrewington
If those sound like you, there are plenty of tricks for improving your focus. "Project management blackbelt" Tony Wong lays out the 7 things highly productive people do, like cutting out multi-tasking and working in 60- to 90-minute intervals. 14 founders shared their own secrets, including whiteboards, playlists, and walks. And if you're really struggling to focus, you may want to look at your diet: nutritionist Barbara Mendez suggests committing to breakfast, avoiding sugar, and always pairing coffee with food.
Some other bad habits readers mentioned were:
- Working weekends when it's not strictly necessary
- Letting business relationships get personal (instead, work on building extraordinary relationships)
- Forgetting names (try making a vivid association when you meet someone new)
And in the "most ironic" (or honest) category, several people confessed to Tweeting during meetings. On this one, there are two easy fixes. First, cut the multitasking, which studies have found makes you worse at switching among tasks. Then consider shorter, more focused meetings for your company.
Did this list miss any habits you're trying to break? Let us know in the comments or on Twitter or Facebook using the hashtag #BadBusinessHabit.
Choose from among too many options makes people feel paralyzed and unsure of themselves.
Consider what your brand offers and think less, not more. This is true especially when you’re developing new products or services. Fewer choices translate to higher sales. So if you’re hurling myriad selections at customers, blindly hoping that one will fill the bill, your customer may just leave with his or her basket empty.
Research backs me up. Barry Schwartz, a psychology professor and author of The Paradox of Choice, found that when people are confronted with too many options, they’re likely to experience anxiety, regret, and even paralysis.
Sheena Iyengar’s 2000 study at Columbia University, which compared consumer behavior when shopping for jams, found a whopping 30 percent of customers presented with a limited 6-jam selection made a purchase, compared to just 3 percent of those who saw the extensive 24-jam selection. And Daniel McFadden, an economist at the University of California, Berkeley, also found that consumers become disconcerted with an abundance of options. Will they misunderstand the alternatives or even their own tastes if they yield to a whim. And will they regret it later?
The lesson for the marketplace is indispensable. Don’t let your customers worry that they’re making the wrong decision. Make it easy for them.
People Need Hand-Holding
Countless studies show that the more clearly people understand the unique features of a new product, the more likely they are to buy it. CEB’s Managing Directors Patrick Spenner and Karen Freeman said that after surveying 7,000 consumers and experts to understand what made consumers “sticky,” it turns out that “decision simplicity”--the ease with which consumers could gather trustworthy information and confidently weigh their options--was the single biggest driver of purchasing and brand commitment.
Steve Jobs understood the value of simplicity, and made it a hallmark of Apple’s renewed success when he returned when as CEO in 1997. He drastically reduced the number of products the company offered, and made all of them easy to use right out of the box.
According to Jobs’ biographer, Walter Isaacson, Jobs learned the power of simplicity while working the night shift at Atari after dropping out of college. Atari games did not come with a manual and the makers understood that the games had to be “uncomplicated enough that a stoned freshman could figure them out.” For example, its Star Trek gave players only two directions: “1. Insert quarter. 2. Avoid Klingons.”
Simplicity is about subtracting the obvious and adding the meaningful,” says John Maeda, the president of the Rhode Island School of Design and former MIT Media Lab professor in his book, “The Laws of Simplicity.” The takeaway: Pare product choices down to understandable alternatives, and make the differences between those alternatives immediately clear.
Sometimes leadership is quite simple: Avoid these three phrases.
Great leadership is hard. Very occasionally, it's pretty simple-- like just not saying dumb things.
In the spirit of simple leadership, I give you my personal top three dumb things leaders shouldn't say. No doubt your mileage will vary:
1. "Don't bring me any surprises."
I hear it all the time, and so do you (maybe you're even guilty of it yourself)-- a leader is blindsided by some event they couldn't have predicted, and, out of embarrassment, swears they'll never be caught unawares again.
At first they work harder, longer, assimilating data like an apocalypse is on the horizon that only they can avert, but then...bam. Another unexpected shoe drops, another unpredictable event occurs, and our leader is left with egg on their face all over again.
Redoubling their efforts, the leader adds another layer of protection against catastrophe - a mantra they begin doling out to all their direct reports: "Don't bring me any surprises" (or its close cousin "Don't bring me any bad news").
Well, guess what happens when you tell people often enough not to bring you any bad news or surprises? They don't bring you any bad news or surprises. Does that mean that all of a sudden there isn't any bad news items or surprises going around? Of course not.
It just means they're brushing them under the carpet...because, well, because you told them to. (Where did you think they were going to put all the bad news and surprises you told them not to bring to you?) Which in turn means that there is now a time bomb waiting to explode right in your face.
If you're concerned about predictability and consistency, do yourself a favor and don't try to wish away bad news or surprises. Try the opposite. How about telling people "The first whiff you get of bad news or a surprise, bring it right here." That way you do actually stand a chance of controlling things.
2. "If you were an animal, what kind of an animal would you be?"
Or "What body of water would you be?", or "What books influenced you when you were young?" or "What's your favorite color?" --any question, in fact, that you think provides some deep insight into whether or not a potential employee has the 'right stuff'.
It's all meaningless pseudo-psychological mumbo jumbo, and adds precisely zero to a true understanding of a candidate's ability to do the job you're hiring for. If you need to ask one of these pointless, irrelevant questions for your own peace of mind, by all means go ahead. Just don't confuse what's going on with an effective job interview.
3. "Don't take it personally."
Really? You're talking to, let me check...yes, a person, about them, their work, their livelihood, their ideas, their sense of competence, their choices, their discretionary effort, their life's work, and you're telling them not to take it personally?
How about you give every person who works for you a free pass for a week to make whatever comments they like to your face about what you say, do, or suggest, in whatever terms they wish, so long as they preface it with "Don't take this personally...".
If you don't think the act of working with others is in any way 'personal', perhaps you might be better thinking of a career as, I don't know, a beekeeper, perhaps? They really don't take things personally.
Looking for additional tips on leveraging your leadership potential? Download a free chapter from the author's book, "The Synergist: How to Lead Your Team to Predictable Success" which provides a comprehensive model for developing yourself or others as an exceptional, world class leader.
Shazi Visram, CEO and founder of Happy Family, explains how to get through the growth phase--without resorting to private equity.
In May, Shazi Visram sold her organic food company Happy Family to Danone--the only acquirer she had ever been willing to consider. Technically, that wasn't the only option she had. She could have tried to go public, but that would have meant she wouldn't have had a strategic partner. What about private equity? Now that would have been a cop-out, she says.
Here are her tips on getting through the growth phase--without selling your soul to private equity.
1. Find world-class advisers who have done what you want to do. Learn from great examples of how you can do what you want to do your way.
2. Be ready to do more work. It's harder and takes more work to raise money from individuals. But it can be done--many people seek the emotional reward of supporting something socially responsible. So pitch and pitch and pitch. When you get investments, it will be from people who believe in you and your vision and want to be a part of it.
3. Create a phenomenal team you trust. Constantly think about whether your staff can do what you need today and also tomorrow. Match your vision of the future with that of the people on your team. When you have great advisers, great investors, and a great team, you don't need private equity: You have everything.
Don't confuse collaboration with consensus. Here's how to make sure your team is moving forward and not getting stuck.
In today's increasingly complex business world, most work gets done within a matrix of internal teammates and external partners, some of whom report directly to you and other who do not. Gone are the days of traditional functional structures, particularly for businesses with multiple products, services and locations. Today, organizational charts have more dotted lines than Los Angeles freeway. As a result, collaboration is a critical success factor for winning teams. The word says it all: "co-labor," to work together.
A common problem in this area is confusing collaboration with consensus. Consensus is a form of decision-making, whereas collaboration is a way of working together. Business is not a democracy, and everyone does not get to vote on everything. Sliding down the slippery slope of consensus will put the brakes on your business. Morphing collaboration into consensus can start looking like a trial jury--it enables any one person to hit the emergency brake on a decision. As we know, juries are not known for speedy decision-making.
Certainly, there are strategic decisions that you want all team members to buy into before moving forward, but 99% of business decisions within a matrix organization are made with a collaborative process.
To collaborate well, you must clarify four key roles on any team. There are plenty of models and cute acronyms for these roles, but I prefer the clarity of simple language and definitions:
LEAD the team.
This role is the person ultimately responsible for the completion of a project or task, and the one who delegates work. There must be only one lead specified per project or task, and s/he is the one who makes final decisions after considering input from others.
DO the work.
People with this role directly perform the tasks assigned by the lead. Others can be delegated to assist in doing the work. Performers seek input from subject matter experts.
In a consulting role are those whose opinions are sought, typically subject matter experts. There must be two-way communication between the performers and experts about best practices and alternative approaches.
The final role belongs to anyone who is kept up-to-date on progress, often only on completion of milestones. Here, communication is just one way.
Clearly communicate and agree to these roles before you begin any project or initiative. Keep it simple and your effective collaboration will generate fast results!
Download free book chapters from the author's book Stick with It: Mastering the Art of Adherence for more tips on leadership and collaboration.