The Venture Edge

There are plenty of articles out there on the biggest mistakes you don't want to make when you start a business.  In fact, I've probably written one or two of them, but at least I can proudly say I actually committed a few of those mistakes so I know for a fact they're mistakes you shouldn't make.  What disappoints me is when a consultant ( an entrepreneur wannabe and professional service provider) who does business plans and financial projections for startups claims to be an expert on the subject and completely misses perhaps two of the biggest reasons new businesses fail.

I just had the opportunity to write for Forbes about what you need to think about if you believe it's time to leave your job in Corporate America.  This is an issue many women have faced as they begin to hit the glass ceiling and are frustrated that their job is not giving them everything it should.   In fact, that's why many women leave the corporate world to start their own businesses.  But surprisingly enough, I heard today from an engineer who said he had learned something from the article as well, claiming " Excellent advice, even for those of us among the weaker sex." 

We live in a dynamic, global marketplace that places a premium on speed and quick returns. Shareholder value is often considered more important than basic human values. Entrepreneurs are under so much pressure to achieve the unachievable and just survive in this environment that it causes stress; and when people suffer stress, they don’t always make wise decisions. That’s when your ethics come into play.

Now before you dismiss the title of this blog as a joke, or worse, the ravings of an idiot, hear me out. It’s an unfortunate fact that many universities and for-profit businesses are perpetuating the myth that entrepreneurs have to create business plans before they start businesses. Potential entrepreneurs are spending up to 200 hours of their valuable time in pursuit of the perfect plan to present at a competition (don’t get me started on business plan competitions – I’ll save that for another post) or pitch to an investor, only to discover that investors are more impressed by a founding team that has gotten the business up and running, even in a minimal way, to prove the concept than they are by a nicely bound document.

Several years ago I wrote about a trend for retail businesses--the kiosk approach to testing a business concept or product. What this entailed was setting up a small shop in the form of a kiosk, generally in mall space, with relatively low overhead, but the ability to directly reach consumers. I also wrote that some landlords found that, rather than sitting on an empty space until a new tenant is found, they could rent the space on a temporary basis so that their cash flow is not interrupted. Well, guess what? In these uncertain and depressed economic times, we’ve seen a real resurgence in these “pop-up” businesses.

Are you one of those people who claims they have no time?  Today most of us are carrying mobile devices that deliver a constant stream of information 24/7, whether we want it or not. Look around you—chances are you’ll see more than one person with a cell phone to their ear or worse yet looking like an escapee from a psychiatric institute talking to themselves through Bluetooth.  Problem is, entrepreneurs of the world, if you don’t shut off the noise once in a while, you’re going to miss a great opportunity. Don’t suffer from information overload. 

 Don't ask for investor money unless you're in business in a serious way. If you're going to ask investors  to risk their hard-earned money, you'd better be worth the risk. 

Kim and David Chauvin are no strangers to tough times.  Their shrimp-trawling business in Louisiana has survived four major hurricanes in five years, but the two had amassed enough savings to carry them through the floods that Katrina and Rita brought in 2005.  But 2008 brought Gustav and Ike (not to mention the financial crash)  and that meant that this family business had to apply for a disaster loan from the SBA. just to survive.  Now they're struggling with the losses brought on by the gulf oil spill, and the problem is, they already have a $170,000 loan from the SBA  they're paying back so they can't go after another emergency loan.  Instead, they've signed a contract with BP to work on the cleanup. 

Given the frequency with which entrepreneurs are discussed in the media,, it's not surprising that stereotypes have developed around them. Not all of these stereotypes are flattering, however,  and mostare simply false. I want to dispel three myths surrounding entrepreneurs so that you can begin your entrepreneurial journey based on facts.

 I just finished reading a recent edition of Leader to Leader put out by the Leader to Leader Institute and publisher Jossey-Bass (my blog-mate Peter is an Associate Editor for the journal). This time they included a special edition celebrating the life of management sage Peter Drucker on what would have been his 100th birthday (he passed away in 2005).  Often referred to as the greatest management thinker of the last century, he understood as far back as the 1950s that there is no business without a customer. 

This morning's LA Times (paper edition)  led with an article, "Economic Fears Rise as Stimulus Ebbs."  Here we go again.  Articles like these underscore the fact that no one seems to understand the economics of growth and job creation. One business owner is quoted in the article as saying that his biggest job this year was a stimulus project repairing a pipe at the Veterans Administration building.  "My company's on the verge of closing," he said. About $18 billion of California's stimulus funds has been spent on Medicaid, unemployment insurance, food stamps, schools, and job centers.  I'm sorry, where is the job creation?  Can you imagine what a bunch of entrepreneurs could have done with that $18 billion?

 How do you succeed in a tumultuous industry that can't seem to do anything right and that regularly sues its customers?  Meet the heroes of the retail music industry, Mike Boyder and Marc Weinstein, co-founders of Amoeba Music, a three-store California retailer that is the self-proclaimed "largest independent record store on the planet."

I'm posting this blog from beautiful Sioux Falls, South Dakota where, with my N2TEC Institute co-founder Tim Stearns,  I'm helping 9 entrepreneurial teams launch their new technology businesses. I can hear the response from all of you--South Dakota, do people actually live there?  Well, yes they do and unlike most of the rest of you, they have stubbornly refused to participate in the recession.  In fact, South Dakota was recently named in "the most entrepreneur friendly state in the Small Business Survival Index put out by the Small Business & Entrepreneurship Council (California ranked 49 and New York 48 - so much for the notion that nothing happens in flyover country).  This organization ranks the policy environment of all 50 states plus the District of Columbia.

 I've been told I'm pretty passionate about the things I do and I jump into life with both feet (they don't always land together), but I can't come close to Tony Magee, author of an inspiring paperbackaptly named, Can't Shove a Great life into a Small Dream!  The man literally defies gravity with his enthusiasm for life and the people he is helping.  And with bestselling authors like Mark Victor Hansen and Jack Canfield of the Chicken Soup for the Soul®, and Zig Ziglar, of See You at the Top, singing his praises, Tony is definitely on his way to helping a lot of people achieve the life they've always wanted.

Emerging industries are the Wild West of the 21st Century, and nowhere are things wilder than in the emerging private space enterprise industry. Driven by entrepreneurs, many of whom put their own wealth from successful Internet ventures into their new space companies, it's the natural venue for the search for opportunity where no one has gone before.  In this case, the opportunity is to make space transportation better, faster, and cheaper; and at least one famous entrepreneur, Elon Musk, secured a big win with the successful launch of Falcon 9 last Friday.  

 Peter and I have written numerous posts about the benefits of social media to entrepreneurs who want to promote their businesses and get customer feedback and to individuals like consultants and service providers who want to promote their personal brand. But there is a dark side to the social media groundswell and it's found in the increasing rate with which we appear to be losing our privacy.

My good friend Peter asserts that it's time to get NASA out of the way and hand over the reins of space exploration to private companies like Space X and Virgin Galactic. (See Privatize space now). Speaking as someone who has been involved with the private space or New Space industry for several years and knows a lot of the major players, including those that Peter mentioned, I need to set the record straight. For one thing, private companies like Space X get significant government funding and contracts (the most recent was $1.6 billion from NASA to launch 12 cargo missions) and Virgin Galactic will launch from a taxpayer-funded spaceport in New Mexico. This is hardly getting the government out of the picture.   

I have just returned from witnessing up close and personal the launch of the final mission of the Shuttle Atlantis at the Kennedy Space Center in Florida. Needless to say, the launch was one of the most amazing sights I have ever seen. The tension leading up to the final ten seconds before launch was palpable as my engineer colleagues from Pratt & Whitney Rocketdyne, which developed and produces the shuttle's main engines, worked through the launch sequence of activities in their minds in solemn tribute to their colleagues in the launch center who were making the vital countdown decisions. When you consider everything that must go right in just the right sequence, it truly is a marvel of engineering and foresight. Those of you who have come to view these shuttle launches as “business as usual” (and that’s most everyone), you might be interested to know that there was a time when no one was convinced the shuttle could ever be developed.  

 If there is one common theme among all the stories I've heard entrepreneurs tell about their ventures (and my own experiences as well), it's that you have to get the team right or you'll struggle--or worse--fail. I could talk all day about teams but I want to focus on a major issue that leads to big problems: an incomplete or mismatched team DNA.

 I'm as bummed as the next business person about the government over regulating the marketplace, mostly because it means higher costs for businesses, which translates to higherprices for customers.  Businesses generally can't survive unless they pass on those higher costs to their customers whether they want to or not.  But, being the glass-half-full kind of person that I am, I believe that every negative situation usually contains the potential for an opportunity that someone will take advantage of, and regulation is no different in that regard. 

 You've just been hired as a project manager at ABC Start-up, a new media company. Because it's a start-up, you're given a relatively low salary in addition to stock options (the right to purchase stock at an agreed-upon price at some future date) that look promising because the founder says she's expecting to complete an IPO in the next 3 years on a valuation of at least $500 million. That's exciting!   Before you get too excited, however, (Wow, that means my 1% of the company will be worth $5 million in three years and I can retire at the ripe old age of 26), you might want to consider some red flags and a little item called "dilution."

This week I had the pleasure of meeting and talking with Scott Lenet, co-founder and managing partner of DFJFrontier, an early-stage venture capital fund with offices in Los Angeles, Portland OR, Sacramento, and Santa Barbara.  To be quite honest, until now I did not have a very favorable impression of venture capitalists--hence the term vulture capitalist, which is often applied to disparage them.  Venture capital funds are professionally managed investment funds that typically invest in companies at the rapid growth stage or just prior to an IPO (initial public offering) or M&A (merger or acquisition).  If you've ever been in a room with a bunch of venture capitalists, you know that the arrogance is palpable.  And you've no doubt heard the horror stories of the nasty VCs who wanted to steal a company from its hard-working entrepreneur.  In some cases, the stories are true...but not always.

After several posts on this issue of employee ownership, I have come to the conclusion that Peter and I don't really disagree on the importance of employees having a vested interest in the companies for which they work - we're just coming at this from two different perspectives. 

We're comparing apples and oranges.

In his recent post Peter wrote about the benefits of making employees feel like owners by giving them stock so they'll act like owners.  On the surface that seems like a logical way to go but if not considered carefully, your good intentions could become a train wreck of problems.  What do we mean when we say that we want our employees to "think like owners?"  If employees wanted to think like owners, it would seem that they wouldn't have chosen to be employees in the first place but would be out there starting businesses. 

In a post last week about the potential effect of the new Healthcare bill on small business, I talked about the importance of assessing your business's cash flow position so you can weather the changes that will be coming. Insuring that your business is sufficiently cash flow positive is the first step.  The second step is to make sure that your business remains flexible and ready to change quickly.  That means not taking on non-essential capital expenditures such as a new building,  new equipment, or even extra people for that matter.

For most people, March Madness is about basketball, but for entrepreneurs who create inventions that have social impact, March brings "March Madness for the Mind," an inspirational event sponsored by the National Collegiate Inventors and Innovators Alliance (NCIIA).  NCIIA is a non-profit organization that supports technology innovation and entrepreneurship in higher education with the goal of creating experiential learning opportunities for students and ultimately socially beneficial businesses. I just returned from speaking at the 14th Annual Conference, which took place in San Francisco and I was impressed and inspired by the inventions I saw.. 

On Tuesday, Nation's Restaurant News asked its readers to let them know how their restaurants would fare under the new health care reform bill (which is still under revision). It appears that restaurant owners, among other types of small businesses, are feeling a great deal of concern.  "This will close our business.  The downturn in the economy and the escalating cost of labor, food, and fuel has us using our own savings to meet restaurant expenses," claimed one Savannah, GA business owner. 

Peter and I seem to be on a funding streak lately with our recent posts, probably because so many people are asking for advice on how to fund their businesses in these difficult times. In the past week alone, I've been contacted by four entrepreneurs looking for money from me or my network.  To a person, they all approached the issue in the wrong way.

 I want to follow up Peter's great post about angel investors with my two cents from the perspective of an angel investor.  In addition to all the great advice in that post, it's important to note that angels are generally bypassing companies that don't have customers yet.  They might get involved to mentor the team to prepare them for money, but they won't risk their money in this economy until the business is revenue generating.  

Tuesday I had the pleasure of meeting the producer of the documentary film The Triumph of the Dream, Norman Seeff, a medical doctor turned photographer.  In a a visually intimate and compelling style, Seeff explores the human and emotional side of the Mars Exploration mission during which engineers at Jet Propulsion Laboratory (JPL) successfully landed two Mars Rovers on the surface of the planet. It turns out that the technical achievements of the mission served merely as the context or backdrop for the very real inner journey experienced by the team members as they struggled to overcome the inertia of previous failures with the Mars Polar Lander mission in 2000.

More than one entrepreneur has looked forward to the day when his or her company might become the dominant player in the industry, the company that everyone wants to emulate.  In the search business that company is clearly Google.  But this week's headlines give you a different picture of what it's like to be number one--as number one you're also the biggest target of expensive, lengthy, and often damaging lawsuits. 

Lights! Camera! Action!  "Oops, I didn't know you were actually going to film EVERYTHING."  That's what small business owners are learning as they let TV cameras into their businesses and their lives 24/7.  Most like Duff Goldman who owns Charm City Cakes LLC in Baltimore, which is now featured on the Food Network's "Ace of Cakes, would say that if they had read the fine print in their contracts, they would have probably said no.  "But we learned to deal with it all," claims Goldman in an interview with WSJ journalist Emily Maltby.  His business found that because of the intrusion of the film crew, they were making fewer of the unique cakes for which they're known, which meant less revenue. To make up the loss, Goldman had to develop licensing deals, write books, and do speaking gigs.  He did receive money for doing the show, but it wasn't enough to make you do the show for the money.

Just three years ago, I had the pleasure of meeting one of the smartest and most interesting people on the planet--Nathan Myhrvold, Microsoft's former chief technology officer and director of research.He's unassuming and approachable with a quiet confidence that hides the fact that he is a very wealthy man.  In 1999 when he left Microsoft, he was on the Forbes list of the 400 richest Americans.  He could have simply retired, enjoying his wealth; but having money is not that important to Nathan--in fact, he's notoriously frugal.  Money's only value lies in what he can do with it to solve some of the world's biggest problems.

 Unless you've been hibernating in a cave in Alaska, you've heard a number of people talking about tort reform when it comes to reducing the costs of health care.  But I wonder if you are aware that as an entrepreneur you can be held liable for the tort of negligent hiring, which essentially means that you hired the wrong person for the job or didn't use a duty of care in selecting that person.  Well, guess what--you and lots of other entrepreneurs are at risk.

Small business owners are some of the brightest and hardest working people on the planet.  They have to be because they now find themselves competing in a global environment for customers, employees, suppliers, and distributors.  And their competitors are coming from places they had never even heard of.  It's not your grandma's small business anymore.  So are SB owners going to rush out to grab up the announced government subsized loans through the SBA?  I'm not so sure

Apple just announced its long-awaited tablet device and they've dubbed it the iPad. Upon hearing this,  I immediately tweaked a number of my female friends to see if they were laughing as hard as I was.  They were.  I guess Jobs thought it was time to bring feminine products into the digital age. 

When you work with someone for a long time, you begin to get in synch on things you're thinking about.  Don't know how that happens, but once again Peter has posted a topic that I've been thinking about recently.  In his recent post A great big leap of fath, he talks about the importance of not losing your belief in what you're doing when you start to hit the obstacles that are sure to block your path.  One of the biggest obstacles I see in people who have decided on a quest to achieve something big like The New York Times bestseller list is the problem of getting traction.

I had to laugh when I read Peter's post Free is the New Black because I had just decided to cancel my online subscription to The Wall Street Journal (for which I was paying $155 dollars a year - up from $99 in the past two years alone).  It seems that everything I wanted to read in the WSJ was already available to me for free on the site.  Sure, WSJ probably won't let me search its archives once I'm not a member but there are other ways to find that information if I really need it. 

Wow!  This time I really have to disagree with Peter in hisrecent post where he asserted that if Google leaves China it will be to protect its shareholders and the integrity of its data, not because of principles and business ethics.  Protecting your online business from hackers is something that every business must do no matter where in the world they operate.  China does not have a monopoly on hackers.  But, Google's mission is to make the world's information "universally accessible and useful," and its corporate motto is "Don't be evil."  That goes to the heart of the problem in China.

I don't know about you, but I am watching closely to see how Google ultimately deals with the recent problem it's had in China.  You would have to be in a coma not to have seen the news about what Google founders Larry Page and Sergey Brin have called a "highly sophisticated and targeted attack on our corporate infrastructure originating from China that resulted in the theft of intellectual property."  They are now looking at potentially leaving China because they no longer want to remain silent about these attacks and they no longer want to censor their search engine in China, something that has been required of them since 2006

Have you been noticing that your customers have been delaying their payments to you?  Not surprising in these times that customers want to preserve their free cash--the cash that is available to operate and grow the business.  This practice may be great for your customers (you may be doing this yourself to your customers), but it can wreak havoc with your company if you're not careful. If you have a business that depends on active cash management (and what business doesn't), you need to monitor your daily cash flow

In my previous post just before the New Year, I talked about the fact that we should strap ourselves in for some interesting times and that it's better to be proactive about change rather than reactive.  In the 2008 election, about 52% of the country voted for change.  They were expecting change, and change is what they got (one could argue whether it was the change they wanted, but I digress).  The point is that it's an established fact that our minds tend to give us what we expect. if not always in the exact form we want.

Those of us involved in starting and running businesses (and that's millions of us) could describe the first decade of the New Millennium as a wild ride to say the least.  I won't reiterate here all the events we know so well that affected businesses large and small (every journalist and blogger will be doing that over the next couple days).  What I will say is that if the first decade is any indicator of what life will be like going forward, everyone should consider putting on their entrepreneur hats and tying them tight because it's going to be a bumpy ride.

Even though the U.S. Senate is determined to give us all a present on Chirstmas Eve that we'll definitely want to exchange or regift to someone we don't like, I have to say that this is one of the best times of the year. People are out and about--they may not be buying as much this year, but they look happy and less frightened abut the future than they did last Christmas season.  Optimism is a good thing.  Entrepreneurs tend to be optimists who look for opportunities in situations that other less creative types might find daunting.  The cup is always half full, I say..

Small businesses need to manage their cash flow, and in times likes these, that's not so easy.  If their customers fail to pay on time (or at all), they're left having to find a way to pay their employees and purchase their inventory until the cash comes in.  Since for now banks are not cooperating with small business loans, many owners have resorted to business credit cards to carry them over the rough times.  That's fine if things go smoothly, but beware--business credit cards are not as friendly as they used to be. 

The big buzz in the start-up world is mobile communication, whether it's to find things, opt in to special deals from marketers, or conduct your buy/sell transactions from your iPhone.  In the last few months alone I have seen a number of these businesses--it's the wild West out there--but the jury is still out on which ones will stick and which will simply disappear. With a global mobile payments market expected to reach nearly 2 Trillion in the next decade, it's no wonder that entrepreneurs and investors are scrambling to find the platform that will become the standard.

Friday night I was having dinner at a wonderful restaurant in downtown Los Angeles.  It's called Provecho , a modern, upscale Mexican experience, and it was started by a former graduate student of mine and her chef husband.  Now you would think that downtown Los Angeles would be hopping on a Friday night, but no.  You could find more people at upscale restaurants in Sioux Falls, South Dakota on any night of the week than you'll find at the terrific restaurants in downtown Los Angeles. 

I was so distressed when I read Peter's recent post about Kiva.org (A little less love for Kiva.org) because I am a lender and I've given Kiva gift certificates to people to get them involved in helping others start or run their small businesses.  Peter wrote about how big business Kiva has become and how the very thing that drew most people to them (one-to-one lending) is the very thing they tinkered with to the dismay of many of their most loyal customers. The precarious position that Kiva has put itself in reminds me of how often some entrepreneurs foresake the core values that were the very reason for starting the business in order to grow and make more money.

In my last post I asked if you were ready for investor money.  I'm sure some of you said, "Absolutely! Bring it on!"  However, if you honestly answered the questions in that post, you know that taking other people's money is serious business.  And it also doesn't happen overnight.  So how do you find investors who might want to help you out?  It starts with some detective work on your part to learn where investors congregate.  This is important because investors aren't always easy to spot--they don't exactly put a sign on themselves so entrepreneurs can find them.  In fact, it's quite the opposite; they usually rely on their own network to supply them with leads on potential new business investments. 

At least two to three times a week I hear from an entrepreneur seeking money to start or grow their business. Usually they need the money yesterday.  Sometimes the request comes from people I know, but, more often than not, I've never heard of the person or they've found me through six degrees of separation on Linked In.  Believe me, cold calling people who know nothing about you or your business is not an effective strategy for raising money.  How to search for money will be the subject of my next post, but today I want to focus on whether you're even ready for investor money.

You know the old saying about the three most important factors in real estate--"location, location, location."   Could the same be said for where you start your business?  Fortune Small Business and the Kauffman Foundation certainly think so.  This month they once again brought out their "Best Places to Launch" report and the findings just might surprise you.  It did me because California, where Peter and I are, is nowhere to be found on any of the lists that include the top 50 cities in small, medium, and large categores. 

If you're one of the thousands of potential entrepreneurs who want to make their mark on the Internet, you need to understand where things are going and there's no place better to do that than at the annual Web 2.0 Summit, which took place last week in San Francisco.  Unless, like my grad students last night, you get the chance to have a conversation with CEO/founder Richard Rosenblatt of Demand Media, arguably the person who knows more about how to deliver unique content to users in a way that is meaningful to them than almost anyone today.  That's because his company in just 3 short years has not only become the leading producer of unique content on the Web through its network of freelance creators, it is also the undisputed leader in distributed social media, powering the conversations of 3 billion users on sites such as USA Today, Fox News, and CNN.

Who would have ever thought that you could base an entire business on Twitter, but as Peter's prodigious post  pointed out (don't you just love alliteration), anything is possible in the world of social media.  I don't want to throw water on that notion, but I do want to caution that there is a dark side to Twitter that you should be aware of if you're going to do business on it.  For one thing, it can quickly become a viral nightmare of negative press if you don't nip it in the bud. 

In the category of "you can't make this stuff up," Peter and I are collaborating on this post to tell you about a proposed mandate by your friends at the California Air Resources Board (also appropriately known as CARB), California's equivalent of the Environmental Protection Agency.  The new mandate will have enormous unintended consequences for businesses large and small.  On the heels of their recent losing effort to ban black cars because they absorb more heat causing their owners to use more air conditioning, CARB has come up with yet another ridiculous regulation to supposedly save energy.  This time they're proposing mandating that automakers install metallic reflective glazing on all new vehicles weighting under 10,000 pounds and sold in California beginning in 2012. . 

This post is coming to you from midtown Manhattan--the Waldorf Astoria to be exact.  As I'm sitting in the lobby taking advantage of the free Internet and doing some people watching, you would never believe we are in a down economy.  The place is hopping with business people, all on what seem to be important missions--at least they act like they're important.  Of course, part of the explanation for the activity is that many of the investment banking firms moved to midtown from the financial district after September 11 and the Waldorf seems to be at the center of things.  Even our President thinks there is money here because he came to Manhattan for two Democrate Party fundraisers last night.   

A recent Wall Street Journal headline asserted, "Videogame firms make a play for women."  It seems that videogame publishers are racing to launch games geared to both young and older women by the holiday shopping season.  Well, what took them so long?  Women aren't exactly a niche market; in fact, they now constitute more than 51 percent of the population--they ARE the mass market.

It's not often that I disagree with Peter, and actually I'm not really disagreeing with Peter.  I'm disagreeing with one of the entrepreneurs he cited in his most recent post.  The entrepreneur, Justin Kan of Justin TV, claimed that "90 percent of start-ups fail because the founders get bored, discouraged, or something else, and they move on to other things, not because of some catastrophe."  Well, I don't know where he got his statistics but let me give you the top five reasons new businesses fail.

In the past week I have been frustrated by entrepreneur wannabes who are enjoying the planning phase just a little bit too much.  They figure that they can feel like they're real entrepreneurs by simply talking about their yet-to-be business without ever actually getting down to starting the business and making it real.  In fact, I know at least several of these wannabes who have been talking about their business for at least two years with nothing to show for it except a business plan.   Some of them have entered (and in some cases won) one or more of the ubiquitous business plan competitions that seem to be a mainstay of every university or college on the planet.  Still, they don't have a business.

I wonder how many entrepreneurs really think about all the possible markets for their products and services and devise a roadmap for rolling them out over a period of years.  I suspect very few.  Why? because,  to use a quaint phrase, too many entrepreneurs start businesses that are one-trick ponies.  They have nowhere to go from where they started. 

I hate to say this, but Google has made us all a bit lazy--not to mention fatter from sitting for hours in front of our computer screens.  It's just too easy to search for what we want without moving more than our fingertips, but that deeply ingrained habit has negative ramifications for what we do as entrepreneurs.  There is no substitute for getting out of the office and talking face to face with customers, suppliers, distributors, and anyone else who affects the success of your business. 

I teach a course in entrepreneurship for engineers at the University of Southern California, so I'm used to having to persuade budding entrepreneurs whose lives have focused on technology  that it's not about the technology when you're designing a new business venture.  It's always about people, their needs and how you deal with them.  It wasn't surprising then when USC alum and successful entrepreneur Shannon Blake Gans came to class this week to talk about her company and the lessons she's learned that students figured she would focus on what her company does.  After all, it is a pretty sexy company in the film industry, but they quickly found out that although the technology is important, it's probably not the critical success factor for the business. 

Remember Famous Amos the cookie guy?  He's known for the now way-overused phrase "when life hands you lemons, make lemonade."  It's his mantra for entrepreneurs to take charge of their lives when things get tough.  Well, if you plan to cater to the luxury market with your new business, you may have bought a lemon and will have to figure out how to make lemonade in this weak economy.

I've said it before and I'll say it again.  The surest path to a healthy economy is through innovation and entrepreneurship.  Apparently Sramana Mitra, technology entrepreneur and columnist for Forbes, agrees with me.  In her latest book, Bootstrapping: Weapon of Mass Reconstruction, which, by the way, is self-published, she showcases 12 successful entrepreneurs who made it to the top by bootstrapping at the start.

We all love a good story--a great plot, compelling characters, a challenge that the protagonist has to overcome, and an ending that makes us feel satisfied.  Stories serve many purposes--to explain, to entertain, to inspire--but for entrepreneurs stories help to craft an identity that gives the new venture legitimacy in the eyes of investors, competitors, partners, and customers.  What I mean by this is that for entrepreneurs to secure the resources they need to launch and successfully operate their businesses, they have to be viewed as legitimate members of the business community and that doesn't happen easily. 

Are you suffering from Facebook Fatigue?  Are your friends annoying you with trivial tweets about what they're eating? Do you really want to join and socialize on Wal-Mart's facebook page or learn what your Congressperson is doing at any point of the day or night through his or her attempts to act like the average joe? Who has the time for all this connecting in cyberspace

One of the hot topics in business today is executive or management compensation.  With Congress firmly convinced that businesses and their shareholders can't make wise decisions about how to compensate their people, a number of compensation reforms are being floated that have a common theme--government telling businesses how and when to compensate their employees. 

Peter reported on a very upbeat VC study in his his last post.  I'm not disagreeing with the study, but I'm not sure I'm ready to declare anything close to robust investment activity.  The reason I'm skeptical is that the most recent MoneyTree Report from PricewaterhouseCoopers LLP and the National Venture Capital Association (July 21, 2009) is claiming that although there's an "overall increase in investment levels...," the number of deals has remained flat at 1996/1997 levels. 

I don't know about you but I am scrambling to understand all the acronyms that have been popping up in text messages lately.  Apparently I'm not the only one who can't tell whether I should be concerned about whether NSFW is a good thing or a bad thing. 

For years people have moaned and groaned about the outsourcing of U.S. manufacturing capability to other countries, namely countries where the cost of labor is substantially cheaper.  Whether or not outsourcing is a good thing is really a moot point because it's now a fact of life.  I'm afraid that it won't be too long before we say the same thing about innovation.  The fact is that an amazing number of corporate research laboratories are being opened in China.

I just returned from Sioux Falls, South Dakota where the non-profit institute that I co-founded with Tim Stearns has been running a Technology Accelerator Program over the past 8 weeks.  The goal is to get 7 new technology companies through the last mile of development and launched. This week we held a deal -dating event where the entrepreneurs pitched their businesses to a series of investors. 

Starting a business is not for the faint of heart and, unfortunately, many would-be entrepreneurs don't stop to question themselves before they make the leap.  If things go well, the successful entrepreneur will often blindly dive into the next deal feeling like he or she is golden.  That's what one billionaire entrepreneur I know did; in fact, after a huge sale of his very well-known company, he dove into three very diverse high-risk ventures believing that he couldn't lose--he had the Midas touch. 

Have you recently tried to get a domain name for your new company?  If you haven't, let me fill you in on the facts.  The chances of your getting the name you want is zero and zip.  Sorry, that's the truth. Unless you're going for something a bit nonsensical such as Zooomr, or Oooooc, you going to find a veritable wasteland of possibilities. 

I hear too many people complaining that it's tough to make money with the economy in a deep slump.  Well, some very ingenious people. with what could only be described as wacko ideas, have managed to make money, in some cases A LOT of money.  I guess it's true that there's a sucker born every minute, because whatever you want to sell, there does seem to be someone in the world crazy enough to buy it.  Take a look at some unlikely businesses that have made money for the people who founded them.  Then ask yourself---why didn't I think of that?

This afternoon I was monitoring NASA TV for what was to be the launch of the space shuttle Endeavor.  Ultimately, once again, the mission was aborted for weather, but as I listened to the rocess leading up to the scrubbing of the launch, I couldn't help but see the parallels with the kinds of things entrepreneurs go through at the run-up to the launch of their ventures, or the challenges that thwart a company attempting to secure an investment or complete an IPO.  As with a shuttle launch, it's all about timing and polling all the relevant stakeholders for a go/no-go decision before the final committment is made.

Peter's post on signs of a turnaround was certainly welcome to most of us, but those of us who decided not to participate in the recession in the first place did not wait for recovery signs before starting or growing our businesses. Nevertheless, it seems we may not be in the majority .  Today during an interview, a reporter told me that my view of California's competitiveness going forward and the ability of entrepreneurs to be successful in a down economy was quite contrarian compared to some of the entrepreneurs he had interviewed. 

This summer I’m working with five new technology companies that are in the process of going from bench to business. What is common with all these entrepreneurs is the belief that once you have a product, all you have to do is find a customer to buy it and you’ve got a business. (Remember I talked about going from idea to prototype in my previous post) Yes, Peter and I are famous for saying that without a customer you don’t have a business, but that’s just a clever saying. It completely overlooks the fact that a business has a lot of moving parts and the entrepreneur, the product, and the customer are just three of them.

If you saw my previous post, "With Apologies to Mr. Richter," you know that every technology business experiences the valley of death.  But, no matter what type of business you're trying to start, you need to do a proof of concept before you go all out and launch the business and to do that you need a prototype, which is simply a working model of the business--the product or service being offered.  Why? Because you can't get good feedback from customers if you don't have something they can see, touch, and interact with. 

One thing we writers are good at is taking others' concepts, repackaging them, giving them a new name, and then proclaiming a new discovery.  Geoffrey Moore essentially did that when he popularized the work of the Department of Agriculture in Iowa in the 1930s on the technology adoption-diffusion cycle in his very successful book called Crossing the Chasm.  Blue Ocean Strategy, another best-selling business book, gave a new name to an old entrepreneurial strategy--looking for unserved needs in the market.  So, not to be left out of this game, I developed what I call the Allen Technology Richter Scale, with all due apologies to Mr. Richter who helped us measure the intensity of earthquakes.

New entrepreneurs often think that they don't have a chance if they enter a market that has some big-name players in it.  Really, would you want to go head-to-head with Microsoft or GE or Google?  Only if you have a death wish.  But there are ways to enter a market with major players and still be successful.  Why?  Because the big boys (also known as the "incumbents" in research lingo) have some serious things going against them.

I have to admit that I took three days off and did absolutely no work.  I didn't even have access to the Internet or email.  It was fantastic!  I highly recommend it to all you Type A, multi-tasking, think-you're-so-productive type business people who can't be away from your networks.  Trust me, your network will survive.  Yes, you'll return to a full inbox or Tweetdeck, but, frankly, most of it you'll be able to delete without reading (saves lots of time). 

If your sales are declining, it may just be time to give your customers a break.  At least that's what Dana Mattioli contends in her Wall Street Journal artice today. More and more small businesses are figuring out ways to entice customers to buy even in a down economy.

When you think of technology businesses, it's not likely that South Dakota is the first place that comes to mind.  After all, for most of you, the entire center of the US is simply "fly-over" country.  But I have had the good fortune to discover untapped opportunity there through the work I've been doing with the institute I co-founded, N2TEC Institute.

I couldn’t let Peter’s post pass (notice the alliteration) without commenting because I’m not sure I agree totally with the premise of the New Yorker article he referred to. I have served as a director of a NYSE company for 9 years and on several private company boards and have talked to many public company directors across the country. We need to be very careful about painting a broad brush when we talk about some of the things the public is unhappy about because of the subprime debacle and the auto industry implosion.   

The other day I received an email from someone I've known a long time who is definitely a promoter type - big on hype and talk about how what they're doing is the greatest idea on the planet.  You may know someone like this - they surface every couple years touting the next big thing they're working on.  After a while you think - yada, yada, I hear the talk, but where's the result?

We all talk about friends and family money as an important source of startup capital, but before you grab that cash from mom and dad, you might want to consider why it may not be a good idea.  Here are the top five reasons why you shouldn't take money from relatives.

1. My parents believe in me and want to do this.  Of course, they believe in you - what they believe is that you're a good person so you would do nothing less than take their small investment and turn it into a fortune that will take care of them for the rest of their lives, right?  Remember, to your parents you're always a kid--even if you're 45!  So, if you have their money, they're going to watch it and you like a hawk.  That sounds like fun, doesn't it?
    

Although I have a background in music and have done my share of performing (in my previous career), I would never be confused with a hip-hop artist.  But that's OK because if I want to I can become one and actually get my original work showcased on MyCypher.com, all courtesy of entrepreneur Curtis Jewell. 

I’m in the middle of preparing some materials for a three-day corporate seminar I’m giving in June on innovation and technology commercialization and I’m trying to decide on the key concepts I want to focus on. One of those concepts is definitely the idea that we should worry less about the competition and focus more on how we position ourselves uniquely, so that in the customer’s mind we stand out from the crowd. 

Last fall creative writer Jaime Case found herself out of a job when the Internet start-up she had been working for ran out of cash and shut its doors. Is that a familiar story?  After about three months of searching for a job that would let her use her talents and not finding anything that would pay her enough to keep her in the style to which she had grown accustomed (eating, roof over her head, etc), she decided to take matters into her own hands and begin the life of a freelancer. Today, she has several contracts, is in control of her days, and is finding new ways to leverage her skills. In short, she has become one of the thousands of freelance entrepreneurs who are discovering that while all sorts of jobs are in decline, contract work has actually increased.

There is a huge cultural change going on all around us--you would have to be in a coma not to see the evidence--and it has ramifications for innovation on a global scale that we don't yet understand.  I'm talking about the cultural shift to short-term thinking and instant gratification.  We see it in every facet of life, from short selling in the stock market, to investors opting out of really early-stage ventures because the time to exit is too long, to students leaving PhD programs in science and engineering for lucrative business jobs right out of college, to communication tools like Twitter.  We want what we want right now--we have no patience for long-term thinking.

I'm not really a follower of American Idol and it's mean-spirited producer/judge Simon Cowell.  And I've never seen the British counterpart "Britain's Got Talent" until this morning when a colleague sent out a YouTube link that I would like to pass along because it speaks so well to the idea of persistence and to the power of talent to win out in the end. 

One of the really great things about teaching budding entrepreneurs is that sometimes they come back to tell you how much they've used what they learned or what an impact you had on their lives.  I think that's why a lot of people have found so much joy in teaching.  I don't know about you but the days when someone takes the time to tell me how much they appreciate what I did are the best days of all.  Some of them thank you in a way that just keeps on giving.

The popular reality show Survivor got people talking about tribes and voting people off the island (much like Jim Collin's Good to Great mantra of getting the wrong people off the bus).  But the idea of modern-day people organizing themselves into tribes actually stemmed from the work of British anthropologist Robin Dunbar and was popularized in Malcolm Gladwell's The Tipping Point. 

If you've been hungering for a community of thinkers and doers who can inspire you to be the best you can be, look no further than TED.  TED is not a person; actually, it's an acronym for technology, entertainment, design.   In 1996, Chris Anderson, a magazine publishing entrepreneur,  set up a nonprofit foundation, the Sapling Foundation, to support the mission of TED, which is to give "millions of knowledge seekers around the globe access to the greatest thinkers and teachers." 

There's hardly a more interesting time to be in Washington DC than now (apparently the President didn't agree with me because he was in Burbank yesterday).  No, I did not come to Capitol Hill to beg for a piece of the stimulus pie, although it seems that everyone else has and no one seems to know how we'll pay for the pie.  The cafeteria of the Rayburn Congressional Office Building was jammed with lobbiests plotting and planning how to snag some bucks from the government (that's us). 

I would like to claim ownership of the title of this blog, but if I did that I would be plagiarizing the very person who is known for the Character Counts program that educates more than six million kids about the importance of character and integrity, trustworthiness and good citizenship.  That person is Michael Josephson, the entertaining ethicist who is founder of the Michael Josephson Institute of Ethics in Los Angeles where he also hosts a national radio show focused on--what else?--ethics and character. 

Well, the Allen-Economy Stimulus Package for entrepreneurs started off with a bang, with Peter giving every individual a million bucks from the government.  Makes sense when you consider that it probably amounts to less than the proposed budget. by a whole lot!  I have no problem with wealth - I just don't think it's the government's job to make us wealthy.  Entrepreneurs are pretty good at doing that themselves, thank you. 

I am a huge fan of Warren Buffett's investment philosophy because I think it applies not only to investments in stocks, bonds, and other cash equivalents but to entrepreneurs as well.  Today I was reading Buffett's letter to the shareholders of his enormously successful company Berkshire Hathaway Inc.  Now, believe me, with the exception of a notable few, I don't spend my time reading annual reports because most are pretty boring.  But I always find that I learn something new when I read Buffett's annual letters to the shareholders, and they can be quite entertaining as well. 

Recently Peter posted an interesting piece on Mark Cuban's solution to stimulating the economy.  While I agree in principle that entrepreneurship is the way to make things happen, one could question Cuban's motives in his approach.  Actually last night one of USC's great grad students did question those motives, so I'm sharing his thoughts in my post. 

If you want a push to get that business started and you need a little seed capital, you will find both in an innovative program in South Dakota.  Yes, I did say South Dakota.  I realize that many people don't know that part of the country even exists- those of you who fly from one coast to the other without ever stopping in the middle - but some very entrepreneurial things are going on in the northern plains states.  One of those things is the N2TEC Technology Accelerator program, which is providing $15,000 grants to entrepreneurs to spend 8 weeks in South Dakota and get their businesses ready for launch.

The more information you have, the easier it is to solve a problem.  Unfortunately, entrepreneurs typically don't have all the information they need to define the problem they're actually trying to solve.  Defining the problem correctly is absolutely essential to coming up with a business opportunity that can succeed in the market. 

I can't begin to tell you how many requests I get from people who are looking for someone to write their business plan.  The request usually starts with something like "I've got this fantastic widget I've created that is going to change the world, but I need a business plan so I can pitch to venture capital, and i don't know anything about business." 

I have to say that Peter hit the nail on the head when he decided to take a vacation from the news and everything else that was being pushed at him. One of my dearest friends is a very prolific inventor.  He is Dr. Berok Khoshnevis at the Viterbi School of Engineering at USC.  He has come up with more solutions to more problems than you can imagine and he's done it by spending time alone with his thoughts. 

One of the best things about what I do is that I get to meet some really interesting people.  So when an entrepreneur with an apple pie business left me a message on my phone, I was intrigued. (I LOVE apple pie).  But little did I know that the Mary Beth Schwartz who contacted me is better known to her millions of fans as Mary Beth Evans  who plays Kayla on NBC's hit soap "Days of Our Lives." 

The good thing about ideas is that we never run out of them.  If you're an opportunistic person, you will find that your biggest challenge is figuring out which of your many ideas are worthy of some investment in time and maybe money.  I've found that answering three quick questions will help you make that decision.

One of the most important lessons I've learned in my years as an entrepreneur and investor is not to get greedy, not to hold out for the bigger deal, and not to negotiate a win-lose situation.  I have seen entrepreneurs turn down great offers because their egos told them that their companies could command a bigger number.  Trouble is, these days offers don't come often, so the risk of turning down a good offer in hopes of getting a great offer is huge. .

Opportunity is out there for the taking.  That's an indisputable fact, even in this economy.  Would it surprise you to learn that innovation actually goes up in recessionary times?  Well, it's true.  For example, during the 1982 recession, the PC was born and the 1990 recession produced a record 174,711 patent applications.  What's going on here?  A lot... 

A while back Peter blogged about the importance of  focus,  specifically, focusing on what your business does well.and not getting pulled in a lot of different directions.  I agree with that, and especially if you're a rocket scientist, brain surgeon, or race car driver ,you definitely need to focus or you're in big trouble.  But if you're facing the unknown--uncertainty--the LAST thing you want to do is focus... 

Everywhere you look today the pundits are making predictions about what’s going to happen in the coming year, in the next 4years of Obama’s presidency, and even as far out as 2020. With so much uncertainty out there, how do they think they can predict anything? After all, life is not a sterile, controlled laboratory.

I agree with Peter that everyone seems to be making New Year's resolutions--all with great intentions that they will be accomplished.  But, really, how many of you have actually achieved those goals?  I want to suggest a contrarian point of view, which will be strange coming from me, since I have spent my life setting goals and achieving them.  But give me a chance to explain. 

I have to admit that like most entrepreneurs I'm an optimist.  As an optimist, I have two choices: 1) I can watch the news everyday and get depressed because everything sounds so negative, or 2)I can create my own reality, which is based on my inherent optimism.

If you had to pick a time to look for a job, you wouldn't pick the holiday season in a down economy when the press tells us that one--not even Starbucks--is hiring.  But it's an unfortunate fact that man of you out there--my daughter for one--are feeling the effects of the economic situation...

When it comes to business ideas, bigger is definitely better. Why? Let’s face it, starting any business is a risky proposition at best—the main risk being that you might fail. So, if you’re facing the possibility of failing, why not fail big so you learn a lot more!

Before you spend a lot of time and maybe money doing due diligence on your great business idea, I strongly recommend that you do a quick vetting of potential fatal flaws and big payoffs. Why? Remember when I talked about the Black Swan effect in a previous post, fatal flaws and big payoffs are less likely to occur than other types of events; but, when they do occur, they generally carry a huge impact on your business concept. Fatal flaws are those events or business design issues that will kill your business

Tis the season to be jolly. In fact, if you think about it, there is a lot to laugh about. Just when you thought you had seen it all, that things couldn’t sink any lower, along comes Illinois Governor Blogojevich and his senate seat folly – ya gotta love it. This is stuff you can’t make up. Seriously though, this depressing example of public service does serve to remind us why integrity and ethics in our business dealings matter.

In an earlier post (The plumber’s sink is always plugged), I talked about an experienced angel investor who totally blew his pitch for his business by making some very fundamental mistakes. I ended the post by saying “what you know can hurt you,” and it’s so true. The more you know about what you should do, the greater the chance you will mess up—

I have to thank Nassim Nicholas Taleb for writing one of the best business books I’ve read in a long time—The Black Swan: The Impact of the Highly Improbable. It has really changed the way I think about start-ups, success, failure, and the ubiquitous and annoying bell curve. Let me explain. Taleb’s core thesis is that the inventions, companies, and events that have the biggest impact on society, either positively or negatively, are not predictable. You can’t see them coming because there are no obvious signs announcing their arrival. In other words, you can’t plan for Black Swans (BS). You can’t, for example, come up with a business concept and an ingenious strategy to create the next Google (a Black Swan business). Even the founders of Google didn’t know when they started what impact their little search engine would have. After all, there were plenty of other search engines out there. Why did the funky, plain toast version offered by Google hit the mark? The truth is: BS technologies, inventions, and businesses—those that change the world—are rare events that hit us when we’re not looking and when we least expect them.

The other day I sat in on an angel investor screening where two entrepreneurs were pitching their businesses for capital.  If you ever get the opportunity to do that you should, because it’s a great learning experience.  As many times as I’ve heard people pitch their businesses and as many times as I’ve coached people in their preparation to pitch, I always either learned something new or reminded myself of something I had forgotten.  This session was an eye opener.

I don’t know about you but I’m a glass-half-full kind of person, so I find it troubling that everywhere you look today, the news seems to be negative—layoffs, tight credit, foreclosures – you name it, it’s there.  I would never deny the reality of these problems, but as an entrepreneur, I tend to see opportunity in any situation.