Here's the scenario I encounter almost daily: Entrepreneur has great idea in great market and wants a half a million dollars to get started. And that half million is earmarked for founder salaries, administrative costs, office space, new equipment and so on. And they're quick to point out that this "investment" will pay off for the investor because the idea is just so right.
Problem is that experienced investors invest in proven entrepreneurs - ideas are a dime a dozen. And I'm not talking about an investor with a track record of one or several successful businesses. What the investor is looking for is an entrepreneur that can get things off the ground without investment. A crafty individual that can leverage assets, utilize collaborators, and put some personal risk into the game. Someone who can move the needle forward just enough to validate the business model and more importantly, his or her abilities. Someone who needs some cash to take the proven model to the next level.
So, if you're just starting out, consider these two steps:
1. You don't need as much cash as you think. I wish I had a great class A space office to work out of the luxury of a salary to allow me to focus on building my business. But in reality, no one, outside a wealthy relative, is going to fund this. And this is a good thing. This forces you to work hard and act fast. And every good entrepreneur needs to do both, because your competition definitely is. And choosing to spend cash on new equipment and expensive office space is a clear signal to an investor that you're really great at wasting cash.
2. You are going to need cash, a whole lot of the stuff down the line for growth. Good business strategy plans for this with projections. And an investor is looking to invest in this growth and the entrepreneur that has realistically planned for this on top of the startup bootstrapping.
Summing up, investors invest in great people who can bootstrap a great idea and anticipate long-term costs. Be that entrepreneur. Getting from here to there is business strategy. It may seem academic, but nothing is more critical to an investor. When he or she asks the tough questions, have the right answers.
Wednesday, October 28, 2015
Wednesday, October 21, 2015
So-Called Entrepreneurial Expert Part 2
A developer/investor and all around genius at everything according to himself decried Kronicity's mission and vision as too broad, demanding "Do one thing and only one thing!" He complained we were timeline generators - I never stated that and were, 'cause we're not. He complained about our market segment as well stating that our focus should be "schools or not schools" and not the general public. He said commercial accounts for health and fitness and music were way too different and would doom Kronicity to failure.
Idiots like this are really great at quoting crap like that without actually understanding what the originator of the statement meant. Kronicity does focus on one thing. It's in our Vision and Mission Statements:
Vision (Where we tell ourselves we want our future to look like)
Provide validation, perspective, and enhanced value to the internet by becoming the world's next technological jump in how data is collected, disseminated, and integrated into the human quest for knowledge.
Mission (Internal statement of How we plan to do it)
to create a web-based platform for easy data collection, organization, validation, and value enhancement from any source.
We're not a collection of timelines and we don't create content. We provide tools for others to do this in any field of study. I mean seriously, does microsoft office focus only on law practices? Does google focus solely on schools as a market? Absolutely not, they provide tools to be used in ways they never considered.
Lesson here is to understand your product and its market segment. You've been living this project for months or even years. If someone thinks they understand it after a few minutes and insist they know better than you, leaning on a stack of best selling How To books, just walk away.
What you do want to look for is an investor who will ask more questions than dwell on obstacles. The fist meeting is to understand the product and the market. If you can't get past that, stop. If they do understand both and have valuable insights, usually from working in that market, start the dialogue.
Idiots like this are really great at quoting crap like that without actually understanding what the originator of the statement meant. Kronicity does focus on one thing. It's in our Vision and Mission Statements:
Vision (Where we tell ourselves we want our future to look like)
Provide validation, perspective, and enhanced value to the internet by becoming the world's next technological jump in how data is collected, disseminated, and integrated into the human quest for knowledge.
Mission (Internal statement of How we plan to do it)
to create a web-based platform for easy data collection, organization, validation, and value enhancement from any source.
We're not a collection of timelines and we don't create content. We provide tools for others to do this in any field of study. I mean seriously, does microsoft office focus only on law practices? Does google focus solely on schools as a market? Absolutely not, they provide tools to be used in ways they never considered.
Lesson here is to understand your product and its market segment. You've been living this project for months or even years. If someone thinks they understand it after a few minutes and insist they know better than you, leaning on a stack of best selling How To books, just walk away.
What you do want to look for is an investor who will ask more questions than dwell on obstacles. The fist meeting is to understand the product and the market. If you can't get past that, stop. If they do understand both and have valuable insights, usually from working in that market, start the dialogue.
Five Minute Expert Critiques
This Blog was started to promote my consulting business by sharing what I've learned from 29 years of independent consulting work and from lessons learned obtaining my MS in Technology Commercialization. But lately it seems to have morphed into a journal, nay, a sounding board for frustrations I've encountered while building Kronicity. One of my partners laughed that it would be great to have Kronicity fully developed to chronicle all these frustrations along a timeline. With any luck, that's 12 weeks away and I do plan to use it for that purpose.
Today's frustration deals with entrepreneurial experts - and who isn't one today. After all, the $12.95 latest "How to think outside of the box" book that literally ships to the newly minted expert in an actual freaking box is all it takes. They're usually 200 pages of mantras that could fit on a post card - easy to understand and repeat. I was actually able to mouth along with the objections of one self ordained expert as he quoted from one of the more popular best sellers. I reactively argued my point with a few of these fellows, but only a fool argues with a fool and I've come to understand that a polite and rapid exit is usually the best thing to do.
One of the latest in my long list of frustrations is from a so-called Venture Capitalist. He passed on Kronicity, as if I was actually considering him, citing we had too many partners and our target market was too difficult to work in. But I didn't have to argue with the guy. He'd already let loose the reasons not to.
First, he described how he'd made a mint from selling a tech-based company. Had he left at that, I'd have lengthened the conversation a bit. But I used a technique I've adopted years ago. I let him keep talking. He continued to describe how he knew absolutely nothing about the industry he operated in, that it developed in the early 1990s and the real kicker, that he started it as part of his dad's business at dad's request and, of course, funded by dear ole dad. I immediately thought I should be talking with dad. But I kept quiet and it got better. He then complained that I had too many partners to deal with. I have seven critical thinkers in my business including myself. He and his accountant then started talking about diluting the current partners as quickly as possible. Hello! I'm right here idiot! He then concluded with talk about how rich he was and how my financial needs were nothing to someone like himself.
This guy was telling me he was going to be trouble, would create a hostile environment and had an inferiority complex in our first five minutes. A few more minutes of complaining about how difficult it was to sell to schools made it obvious he didn't even understand our business model. We're free to schools.
As for it being difficult to work with schools, everything your dad doesn't fund is going to be hard dude. Obstacles are opportunities for entrepreneurs.
This may be the first of a series of posts as my encounters are so numerous. But, ending on a positive note, I've managed to avoid a host of these self appointed experts forcing me to be clever enough to fund Kronicity with minor investments in cash and major investments by qualified partners and collaborators. We're a better company because of this. And by the way, I believe there were nearly 50 equity partners in What'App that sold for $19 billion. You can dilute me all day long for those figures.
Today's frustration deals with entrepreneurial experts - and who isn't one today. After all, the $12.95 latest "How to think outside of the box" book that literally ships to the newly minted expert in an actual freaking box is all it takes. They're usually 200 pages of mantras that could fit on a post card - easy to understand and repeat. I was actually able to mouth along with the objections of one self ordained expert as he quoted from one of the more popular best sellers. I reactively argued my point with a few of these fellows, but only a fool argues with a fool and I've come to understand that a polite and rapid exit is usually the best thing to do.
One of the latest in my long list of frustrations is from a so-called Venture Capitalist. He passed on Kronicity, as if I was actually considering him, citing we had too many partners and our target market was too difficult to work in. But I didn't have to argue with the guy. He'd already let loose the reasons not to.
First, he described how he'd made a mint from selling a tech-based company. Had he left at that, I'd have lengthened the conversation a bit. But I used a technique I've adopted years ago. I let him keep talking. He continued to describe how he knew absolutely nothing about the industry he operated in, that it developed in the early 1990s and the real kicker, that he started it as part of his dad's business at dad's request and, of course, funded by dear ole dad. I immediately thought I should be talking with dad. But I kept quiet and it got better. He then complained that I had too many partners to deal with. I have seven critical thinkers in my business including myself. He and his accountant then started talking about diluting the current partners as quickly as possible. Hello! I'm right here idiot! He then concluded with talk about how rich he was and how my financial needs were nothing to someone like himself.
This guy was telling me he was going to be trouble, would create a hostile environment and had an inferiority complex in our first five minutes. A few more minutes of complaining about how difficult it was to sell to schools made it obvious he didn't even understand our business model. We're free to schools.
As for it being difficult to work with schools, everything your dad doesn't fund is going to be hard dude. Obstacles are opportunities for entrepreneurs.
This may be the first of a series of posts as my encounters are so numerous. But, ending on a positive note, I've managed to avoid a host of these self appointed experts forcing me to be clever enough to fund Kronicity with minor investments in cash and major investments by qualified partners and collaborators. We're a better company because of this. And by the way, I believe there were nearly 50 equity partners in What'App that sold for $19 billion. You can dilute me all day long for those figures.
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