Would You Invest in YOU?

When asked what I do for a living, my usual answer is that I massage startups into something fundable. This requires a lot of work and starts with a screening process. I don't want to waste time on non-fundable projects. And screening step #1 is to ask the founder what he or she would do with $10 million if they won it in a lottery.

I'm surprised at how many entrepreneurs would invest in almost anything BUT their own project. Seriously y'all, if you won't invest your money in your own project, how can you expect anyone else to.

It gets better, when I confront the entrepreneur with this question, they often respond that they are looking for an investor who can afford the risk and wouldn't feel the loss of it didn't work out. And they say it with a straight face.

Look folks, people with money didn't get that way by not caring about losing any of it. They do take risks, that's the norm, but they take calculated risks. And part of that risk calculation is examination of the entrepreneur. After all, you are a part of the product.  If you have a profitable business that is seeking growth funding, well you're pretty much vetted. But for startups, the investor wants to see some passion and skin in the game. This might be a cash commitment, acceptance of debt, returning to graduate school for some expertise or simply doing what's needed, when needed.

I recall a story about a prominent China manufacturer in Britain that only hired mute people as a means of protecting the secret to their unique manufacturing process. A man who later successfully started a competing company faked being a mute to get a job there until he learned the craft. Now I don't recommend this kind of corporate espionage today, but you get the point. This guy was investable.

Key Learning here: Before asking for money from any investor, ask yourself, Is this good enough for me to invest in?"

Building Corporate Culture and "Love Buddies"

Imagine calling this guy your "Love Buddy"!
http://en.wikipedia.org/wiki/File:Mudlogging.JPG

Everyone understands that a corporate strategy requires a corporate culture that can execute it. Unfortunately, so few corporations understand how to build that culture.

I recall my stint in the US oil industry back in the 80's and 90's. High paid consultants were brought in to tell employees how to build that culture. They were told how interact and how many hours should be spent doing leisure or team building activities. They teamed up employees with each other and assigned titles, like "lover" and "love buddy". Imagine a corporation of engineers and geologists who cut their teeth in the oil patches of West Texas and Oklahoma suffering through that nonsense. It, of course, failed.

The problem I experienced back in the day wasn't that corporate culture building was a bad idea. It was a great idea. Building it was the problem. No one can build a corporate culture. Cultures develop over time. What the manager and CEO can do is ENABLE a culture to develop and guide its direction. This involves developing and understanding the company Vision and communicating that Vision to all employees.

But a moment about Vision. If you want employees to be committed, that Vision must be one they want to support. Making a bucket of money selling groceries for the stockholders rarely invigorates an employee. But reducing neighborhood unemployment by 74% and/or funding a local school through a grocery coop will. Employees working towards the latter Vision will not only be more committed, but actually alter Mission, the how the Vision is achieved, to be more effective. This is done through commitment and employee cooperation. Have some faith. With a clear achievable and desired goal, you'll be surprised by employee performance. This is culture. The CEO's job is to create the environment where that culture will develop and then reward high performers. It is not the CEO's job to dictate how the employee built that culture.

So what does the CEO do to enable a culture? Pretty much a four phase job, communications, enabling and rewarding. Develop that vision, communicate the vision, listen to employees, enable employees to act on good ideas and develop mission, and reward good performance. And keep in mind, a proper CEO will be sure to include not only the stockholders but employees in the financial rewards, further incentivizing everyone to continue to build on a successful culture.

Best of luck "love buddies".

Develop The Pitch First!

Developing the pitch for a product or service is often done long after development and prototyping. I personally feel this is a big mistake and want to make a case for making this priority number one for any entrepreneur.

Pitching helps define the product. If you can’t state what it is in a few sentences, you don’t understand what it is. Humans are bombarded with data and tend to screen the noise for what interests them consciously and subconsciously. Practice a pitch until it narrows down on the single most desirable feature of feature set. 

Even if you are able to accurately describe the product in a short concise way, you may be leaving out the real meat for an investor. Testing a pitch can help identify those features that are important to those you need to collaborate with or seek funds from. I’ve found that what the meat is depends on the person pitching to. With that in mind, I tailor a pitch to appeal to as many stakeholders as possible. This may include the products unique tech-related coolness for the developer or the value in terms of human betterment or financial success to others. 

The practiced pitch may also reveal additional features that a product could use or markets that the founder hadn’t considered. My favorite example is a product I’m developing that requires a large scale rapid ramp up to generate revenue. Pitching indicated that the product was more valuable as a tool that others could use to monetize their large databases. 

Most entrepreneurs pitch to an investor as someone that can finance their vision. A well-developed pitch should focus on presenting a joint opportunity for both investor and entrepreneur. Practicing a pitch forces the entrepreneur to consider the other side of the investment table can help reveal those common interests and opportunities. 

Finally, pitching is a nerve racking experience for any entrepreneur. The clock is always ticking and each rejection seems to speed up the clock.  Practicing a pitch can help alleviate the stress and make the entrepreneur look more confident and prepared. 

You might want to checkout Bill Kenney's site Developing the pitch for a product or service is often done long after development and prototyping. I personally feel this is a big mistake and want to make a case for making this priority number one for any entrepreneur.

Pitching helps define the product. If you can’t state what it is in a few sentences, you don’t understand what it is. Humans are bombarded with data and tend to screen the noise for what interests them consciously and subconsciously. Practice a pitch until it narrows down on the single most desirable feature of feature set. 

Even if you are able to accurately describe the product in a short concise way, you may be leaving out the real meat for an investor. Testing a pitch can help identify those features that are important to those you need to collaborate with or seek funds from. I’ve found that what the meat is depends on the person pitching to. With that in mind, I tailor a pitch to appeal to as many stakeholders as possible. This may include the products unique tech-related coolness for the developer or the value in terms of human betterment or financial success to others. 

The practiced pitch may also reveal additional features that a product could use or markets that the founder hadn’t considered. My favorite example is a product I’m developing that requires a large scale rapid ramp up to generate revenue. Pitching indicated that the product was more valuable as a tool that others could use to monetize their large databases. 

Most entrepreneurs pitch to an investor as someone that can finance their vision. A well-developed pitch should focus on presenting a joint opportunity for both investor and entrepreneur. Practicing a pitch forces the entrepreneur to consider the other side of the investment table can help reveal those common interests and opportunities. 

Finally, pitching is a nerve racking experience for any entrepreneur. The clock is always ticking and each rejection seems to speed up the clock.  Practicing a pitch can help alleviate the stress and make the entrepreneur look more confident and prepared. 

You might want to check out Bill Kenney's site http://www.testmypitch.com/. Great concept for the founder.