Find out on March 30, 4pm, at OTBC, when we’ll pose questions about common start-up legal issues, and compare your answers with the answers of two Perkins Coie attorneys, Neil Nathanson and Jeff Bock. Learn more and register at this link.
Archive for the 'Entrepreneurship' Category
A recent Venture Beat post from Will Herman raises a question that has crossed my mind more than once: Why do entrepreneurs flock to loudmouths as mentors? A worthwhile question to consider if you’re starting a company. I agree with Will’s suggestions: recognize that you’re your only savior, access many mentors, and learn about what each prospective mentor has actually done.
And keep in mind that you’ll get contradictory advice from mentors – you’re the one that gets to decide what’s the right advice for you. That is, I think, a corollary to “access many mentors”.
And find mentors that have “the ability to communicate they way that works best for you”. Not to contradict Will, but if high volume is what works for you, well, maybe a loudmouth is the right strategy.
A Venture Beat post, Ask the Attorney: What issues do I need to consider when forming a start-up? has a good summary of the issues that founders should be thinking about very early on. At OTBC, we frequently see start-ups making mistakes relating to these subjects – mistakes that may not be fatal, but that take a lot of time and effort (and pain) to go back and fix. These are important! If you’re starting a company, read the Venture Beat post.
In a recent post “A VC” Fred Wilson explains How To Calculate A Return On Investment – because he has seen multiple cases of financial projections from entrepreneurs who don’t quite understand ROI. As Fred points out “You don’t need to get a finance MBA to be able to do this kind of thing.” Read his post, and you’ll be one of those who gets it.
At OTBC, we meet with a lot of entrepreneurs who want to raise venture capital to fund their idea. If they haven’t raised venture capital before, they tend to underestimate how difficult it is and how long it takes. One way to increase the odds of getting funded is to understand what VCs look for in an entrepreneur. (Of course, it also takes an investible business concept and enough headway to reduce the risk – but that’s a different story.)
Mark Suster, a partner with venture fund GRP Partners, made 3 posts to cover his list of “10 skills I look for before writing a check”. He cheated a little, and actually listed 12. Still, it’s a good list of traits that are important for a start-up entrepreneur. You can find the list in these three posts:
The short version is:
- Tenacity
- Street smarts
- Ability to pivot
- Resiliency
- Inspiration
- Perspiration
- Appetite for risk
- Detail orientation
- Competitiveness
- Decisiveness
- Domain Experience
- Integrity
It’s hard to argue with the list. The only thing that surprised me is that Integrity came as almost an afterthought, at the end of the list. I know investors who would put that at the top. But all in all, it’s good food for thought. If you’re launching a company, I suggest you read all three of Mark’s posts.
Dharmesh Shah published a great post with 50 Three-word phrases that can make your start-up a success. And I agree with (almost) all of them. The only one that makes me a little nervous is the one about “avoid business plans”. But I actually believe in effective business planning more than business plans (I’ve seen a lot of bad business plans that clearly were not the result of good planning…), so I can even go along with that one. This would be a list for entrepreneurs to post above their desks for a daily reminder of the basics – all in nice, digestible 3-word phrases.
You may recognize the George Bernard Shaw quote. The rest of it is: the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man.
From WSJ.com: Venture Capital Dispatch Turning Unreasonable Ideas Into Reality
It started with 284 unreasonable ideas. Those were whittled down to 42 unreasonable ideas. In the end, 25 such ideas may become a reality thanks to the Unreasonable Institute – a 10-week incubator for entrepreneurs who aim to make a difference in society.
The project of Rafael Smith, whose idea is to produce emergency shelters that provide humane living conditions to refugees. Smith is one of 42 finalists for the Unreasonable Institute’s 10-week incubator program.
The incubator’s name, which carries an adjective that might usually turn investors away, is inspired by the George Bernard Shaw quote, ‘The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man.’
The Unreasonable Institute will unite 25 entrepreneurs from around the world to attend an intensive 10-week summer training program. Among the 42 finalists, announced today, are a computer engineer from Brazil creating devices that will make blind people more marketable for jobs and an MIT graduate from Pakistan working to create heat saving insulation for shanty town homes, thus reducing indoor air pollution and money spent on heating for their poor inhabitants.
At the end of the 10 weeks, the entrepreneurs are connected with socially responsible venture firms that might be interested in investing. One firm, Atlanta-based Gray Ghost Ventures, which invests in business that improve low-income communities, is setting aside $150,000 for a fund with a twist. The 25 entrepreneurs will decide which companies, up to four of them, will get the money from the “Unreasonable Village Fund.”,
Imagine that – the entrepreneurs decide which, out of 25, will receive an investment from Gray Ghost Ventures. OK, I suppose that seems like an appropriately liberal approach given the social-good orientation of the Unreasonable Institute’s mission.
But it’s interesting food for thought. Would a group of entrepreneurs make better investment decisions than a VC firm or angel group? Would 25 entrepreneurs choose to “vote” against themselves, if there could be only 4 winners? And would entrepreneurs make good investment decisions? Hard to say – group dynamics sometimes lead to surprisingly rational decision-making.
But what am I thinking – entrepreneurs making investment decisions for angel groups and professional venture capitalists? The tail wagging the dog? That’s clearly unreasonable.
I’ve often heard it said (and for that matter, I’ve often said myself) that when starting a growth company (one that’s likely to be looking for investment capital from angels or VCs) the entrepreneur’s concept has to be compelling – not just a “want” but a “need” – a “must have” as opposed to a “nice to have”. But I have to admit, I occasionally have second thoughts about “need” versus “want”.
Then today I ran across VC Don Rainey’s blog post: 6 Easy Steps to a Great Idea (Or one that turns out great. Don talks about figuring out what people currently (or will) want, as opposed to what they need:
This is distinctly different than something people currently or will need. People need healthy food but any hour long drive down any Interstate highway in the United States should convince you they “want” crappy fast food. Maybe they “should” want something but that doesn’t mean they ever will want it. They want $3 oily, bitter coffee from Starbucks because it is conveniently offered whenever and wherever they want it.
So I had to revisit this whole question of want versus need, and the more I think about it, the more I think Don is right. An iPhone is not a “must have”. My old Treo worked just fine. But I decided I wanted an iPhone enough to buy one (and enough to buy a second one when the first one started having problems 2 months after the warranty expired.) And I don’t think the sub-woofer I bought a couple of months ago was a “must have” either – but I sure like the way the floor vibrates when the T-Rex footsteps send ripples through the coffee cup in Jurasic Park.
The word “compelling” still works for me. I decided that both the iPhone and the sub-woofer were compelling, albeit for different reasons. So in the future, I’ll shy away from the “must have” label, and stick with the need for identifying a compelling need.
And with that, it’s time to read another post on the new iPad. I have to decide just how compelling that latest tech toy is…
Here are some of the posts I ran across this weekend that I thought other entrepreneurs might find interesting:
Startup Operations
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Separating Your Personal and Business Finances – And Keeping them Separate
Legal
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Top 10 reasons why entrepreneurs hate lawyers
Bram Cohen: “Lawyers can’t tell you you can’t do something”
We need an independent invention defense to minimize the damage of aggressive patent trolls
Venture Capital
Entrepreneurship
I’ll be giving a seminar later today at OTBC on “How to (Prepare for and) Write a Business Plan”. One drawback of most of the business plan seminars I’ve seen is that they review what goes into a plan, but don’t really address the big question: what’s the homework that needs to be done before you sit down and start writing?
It takes some research and thought to put together a compelling, believable plan — one that will stand up to investor scrutiny. Here are the 12 steps I put together for today’s seminar:
- Start with a compelling, unmet need
- Define, size and segment the market – and prioritize the segments
- Validate the market
- Value price the product or service
- Analyze the competition
- Clarify your sustainable competitive advantage
- Decide on a strategy
- Decide on a sales and marketing approach
- Map out a 3 to 5 year action plan (this drives the assumptions for your financial projections)
- Develop 3-5 year financial projections
- Test and iterate 9 and 10 until the action plan & the projections are believable
- Your ready to write!
I’m sure one could add more steps, but these cover some of the most important aspects of a business plan. Whether you put it together in a complete business plan, or put together a compelling executive summary backed up by detailed financial projections and underlying assumptions. the work listed above is what it takes to be confident you have a business – and to convince an investor of that. It doesn’t take months to do. It can be done in weeks. And it’s worth doing!
