This recent article in Fortune magazine introduces an interesting new trend: young venture capitalists leaving their VC jobs and becoming entrepreneurs.
The article cites Bartek Ringwelski, a former associate at Canaan Partners who recently launched SkillSlate, a site where you can rate and find individual service providers such as handymen, massage therapists and tutors.
It also mentions Dan Gellert, a former analyst at Time Warner Investments who launched GateGuru, which helps you "locate the best food, shopping and service options within any airport at the touch of a button."
So why should you care?
Well, to begin, I think it's interesting that neither of these business ideas are overly compelling; and they're certainly not any better than the business ideas I hear from entrepreneurs on a daily business (yet SkillSlate has raised over $1.1 million already.)
But, the business idea is only one part of whether these folks will be successful. And that's where the key lesson lies.
These VCs-turned-entrepreneurs have a lot of connections. From working at VC firms, they are friendly with other VCs and successful entrepreneurs they have met and/or funded.
This network gives them much more access to capital than the average entrepreneur. This network also gives them access to advice and connections (e.g., recommendations and introductions to vendors, partners, distributors, employees, etc.).
In addition, by sitting on the boards of portfolio companies, VCs get first hand knowledge of how to successfully grow companies.
So, what's my advice for those of you who don't have the luxury of becoming a VC before launching your entrepreneurial career?
Well, try to get the same experience these VCs did. Hang around with startups and investors. Go to startup events and meet other successful entrepreneurs. Learn from them. Start a mastermind group with them. Volunteer at a startup to get more exposure. Get involved with and/or serve on the board of a non-profit to meet other successful individuals.
To reiterate, the more you can surround yourself with successful entrepreneurs, the greater your chance of success. So do it!
Questions/comments? -- post them below.
Pepperdine University's Center for Applied Research came out with an interesting report last week about the future of venture capital.
The report was the result of surveys of 213 venture capitalists and found the following:
* Venture capitalists expect to offer their investors (i.e., limited partners) an average return of 15% over the next 12 months, compared with only 5% for the past 12 months. This is due to an expected increase in acquisitions of VCs' portfolio companies.
* Over 40% of VCs are currently raising more money or expect to raise more money to fund entrepreneurs within the next 1-2 years.
* 43% of venture capitalists expect general business confidence to improve in the next 12 months.
So what does this all mean for entrepreneurs? Venture capitalists are raising more money and will be funding more entrepreneurs.
So, if venture capital could help take your company to the next level, take action and go out there and get it.
Suggested Resource: In Venture Capital Pitch Formula, you'll learn exactly how to find and contact venture capitalists, exactly what information to include in your presentations, and how to secure your financing. This video explains more.
Some colleagues of mine recently told me about the new website Fiverr.com.
I think you should know about this site because 1) you may be able to use it and 2) it offers some good lessons to copy.
So to begin, what is Fiverr?
Fiverr's tagline is "The place for people to share things they're willing to do for $5." So, as you might expect, sellers can offer services for $5. And buyers can buy these services (or post other services they need/want) for $5.
So how might entrepreneurs like you be able to use Fiverr?
Well, entrepreneurs have used Fiverr and paid only $5 for things such as the following:
* Getting their logo modified
* Driving traffic to their websites
* Having someone write their brochure
* Getting their products reviewed on Amazon.com
* Having articles written for them
* Getting catchy headlines written for their website
* Creating/producing videos
* Having someone write a press release
So get creative. I'm sure there are tons of ways you can use this cheap labor to progress your company. (Do remember that you generally get what you pay for; so don't expect to get a big project completed for $5; but you can get tons of smaller projects completed for this small amount).
The second key point I want to make is the entrepreneurial lessons we should all take away from Fiverr... which I view as being highly successful considering that it launched less than 12 months ago and is now in the top 600 most popular website in the United States.
These lessons include:
* Simplicity. This is a pretty simple concept and the site works very simply. I'm sure that the founders have thousands of ideas to make the site better (e.g., adding things that people will do for $25, etc.), but they started simply with the minimal viable product). Now, with success, they are adding more features (based on what customers are saying they want!). This is the formula for success.
* The entrepreneurs behind Fiverr took action. I mean, this idea has to be the type where a couple of friends were sitting at a bar and one of them said "wouldn't it be great if...." These conversations happen all the time. But these specific entrepreneurs took their idea seriously and TOOK ACTION.
So figure out how your venture could use Fiverr.com and model their success!
Did you know that Thomas Edison DID NOT invent the light bulb.
Why do I tell you this?
Because every single day at least one entrepreneur contacts me with some fear about someone stealing their idea.
And their fear is unjustified.
Successful entrepreneurs don't focus on the fear of someone stealing their idea. Rather, they focus on executing on the opportunity by bringing their idea to market.
Which is what the 22 inventors of the incandescent light bulb before Thomas Edison FAILED TO DO.
That's right. Twenty-two inventors had the idea before Edison (not only did they have the idea, but 22 people actually invented incandescent electric lamps before Edison did).
And Edison didn't steal their idea. Rather, Edison improved on their idea by first understanding the market. He realized that a more commercially viable and longer lasting light bulb was needed if light bulbs were to go mainstream.
So, he and his team created this product and the rest is history.
The moral is that he who has the idea first generally doesn't win. In fact, if your idea is so good, usually others have thought of it before you or at the same time. The winner is the one who takes is to market first, tweaks it based on customer feedback, and scales the business.
Most people don't have what it takes to go from an idea to a commercially viable product to taking it to market. That's why spending tons of time and energy protecting your idea is often a waste of time. Since the people you're protecting your idea from can't execute anyway. And those that can (i.e., successful entrepreneurs) generally have a ton of their own ideas to focus on. So you should be spending your time on execution.
(Likewise most ideas change dramatically once you start getting customer feedback; and you NEVER get that feedback if you keep your ideas to yourself!)
Importantly, the world is littered with quality ideas which never materialize. From motivational speaker Les Brown:
The wealthiest place in the world is a cemetery. Now one would ask, "For what justifiable reason is the wealthiest place in the world a cemetery?"
Simply put, in a cemetery, you will find that there are books that were never written. There are songs that were never sung. There are ideas that were never acted upon-dreams that were long forgotten. If one were to die today, then what ideas and what aspirations would die with him or her?
So, please stop focusing so much on protecting your ideas, and start acting on them!
Reed Hastings, CEO and Founder of Netflix, was recently named Fortune's Business Person of the Year. He is, in the mold of Tony Hsieh (Zappos), Richard Branson (Virgin, etc.), and Herb Kelleher (Southwest Airlines), truly an entrepreneur and businessperson to emulate. And the Netflix corporate culture one to strive toward...
There is one thing that invariably stands between an entrepreneur's idea and their ultimate success.
And that thing is naysayers.
Naysayers are everywhere. All too ready to say that your idea won't work. That nobody will buy your products and services. That it'll never work in "the real world."
Consider this great passage from "Rework" written by entrepreneurs Jason Fried and David Heinemeier Hansson:
"That would never work in the real world." You hear it all the time when you tell people about a fresh idea.
This real world sounds like an awfully depressing place to live. It's a place where new ideas, unfamiliar approaches, and foreign concepts always lose. The only things that win are what people already know and do, even if those things are flawed and inefficient.
Scratch the surface and you'll find these "real world" inhabitants are filled with pessimism and despair. They expect fresh concepts to fail. They assume society isn't ready for or capable of change.
Even worse, they want to drag others down into their tomb. If you're hopeful and ambitious, they'll try to convince you your ideas are impossible. They'll say you're wasting your time.
Don't believe them. That world may be real for them, but it doesn't mean you have to live in it."
Naysayers predicted failure when the copy machine was invented in 1956. Yup, in 1956, John Dessauer developed the prototype for the first paper copy machine. He approached IBM with an offer to license it to them. After 18 months of study, IBM concluded there was no market for this product. The said there wasn't enough copy volume. And that the xerography process was too expensive per copy as compared to the AB Dick mimeograph process which was being used at the time to make copies. I guess we can say that this was a pretty expensive naysayer mistake by IBM!
And exactly 40 years later, when Google launched in 1996, even one of the world's top venture capitalists was a naysayer. David Cowan from Bessemer Venture Partners would not fund Google, thinking that there were already enough search engines in the market. Another incredibly costly naysayer mistake!
So what should you do if naysayers are telling you your ideas won't work? Here are 3 strategies.
1. Don't spend time with naysayers. If your friends are naysayers, then you have to make a choice - continue to hang out with them and give up your dream of becoming a successful entrepreneur, or get new friends.
2. Challenge naysayers. Explain to them the Xerox and Google stories above, and let them know that every new product or service has naysayers. And then get them to help you brainstorm new ideas. Ask them, "that being said [referring to the Xerox and Google stories], do you have any ideas that you think WOULD make this idea work?"
3. Surround yourself with optimistic entrepreneurs. It is often said that you are the average of the 5 people you spend the most time with. If that's true (which I believe it is), than shouldn't you be hanging around most with 5 successful entrepreneurs? Of course you should!!! Surround yourself with successful and optimistic entrepreneurs who can support you and your ideas. One easy way to find these entrepreneurs is to go to http://www.meetup.com, type in "entrepreneur" in the "Topic or interest" box and then enter your zip code and click "Search." You should find several local events where you can meet these entrepreneurs.
Have you encountered naysayers? Do you have any other strategies to deal with them? Let me know by adding your comments below.
Too many entrepreneurs conceive products and services with too many "bells and whistles." The problem is that creating these products and services become too expansive because they are too complex. As a result, the entrepreneurs have too many opportunities to fail....They can fail to raise the increased capital that is needed to develop the bells and whistles. They can fail by taking too long to get to market. And they can fail because when they finally get to market, customers may not want what they have.
A better solution is to start by creating the minimum viable product (MVP). The MVP is the version of your product or service that allows you to gather the maximum amount of customer intelligence with the smallest amount of effort.
For example, the minimum viable product could simply be a survey given to prospective customers. Or it could be sketches of a new product that you show to customers. Or it could be just a very basic version of the product you'd eventually like to create.
By focusing on the MVP, you need less capital (or no capital), and more quickly get to market to get customer feedback. This feedback will give you the best information on what additional features customers desire in order to buy your product or service. And it better positions you to raise outside capital as needed (since you've lessened or eliminated the key risk factor that customers truly desire what you are creating).
So, what can you do to simplify your proposed products and services and/or create and get your MVP to market?
We've all heard it before - eating Turkey on Thanksgiving makes you tired.
And the ingredient within turkey that's responsible for this is called Tryptophan.
Is this true?
Yes, tryptophan can make you sleepy. That is, if you ingest a ton of it on an empty stomach. But that's not what happens on Thanksgiving.
Rather, on Thanksgiving, people get tired from all the food they stuff into their bodies. Their bodies then need to work extra hard to digest all the food (particularly the carbohydrates and fats), and this in turn makes them tired.
And not only does all the extra food consumption make people tired, but I think the placebo effect comes into play too. Mainly that people THINK they are supposed to be tired after eating turkey.
So, people get tired both physically (body digesting all the food) and mentally (you think you should be tired) which is the double whammy that makes them really tired.
More importantly, I want you to think about the "tryptophans" you see every day in your quest to be a successful entrepreneur.
What half-truths are holding you back? What is making you physically and/or mentally tired so that you can't accomplish your goals?
Likewise, what excuses are you making? Are you saying you don't have enough time? That you don't have enough money? That you don't have enough expertise?
Well, everyone has these limitations, but the most successful entrepreneurs figure out how to overcome them.
Think about what's holding you back. And more importantly, how you are going to overcome them.
We still have plenty of time before the year ends. Write down one thing you want to accomplish before the year ends. And then get it done, and don't let anything get in your way.
One of my favorite movie lines, which I think about often, comes from the 1993 movie Rudy. In his pre-game inspirational talk in the film, Notre Dame football coach Dan Devine says, "No one, and I mean no one, comes into our house and pushes us around."
Yet, this happens all the time in our businesses.
We let competitors push us around. We let them steal our customers. We let them push our prices and margins down. And we let them dictate how we run our businesses.
So how do we stop this? How do we dictate how competitors need to act? And to go even further, how can we terrorize our competition so they don't even want to compete with us?
Here are 7 of my favorite ways:
1. Know More Than Them
By investing in the latest education, you will always have an edge on your competitors (assuming they don't also do this). Learning the best new techniques in sales, marketing, operations, finance, HR, etc. will allow you to outperform your competition on multiple fronts.
2. Create a Vision and Stick to It
Spend the time to create a solid vision of the company you want to create. For example, my vision at Growthink is to become the number one place where entrepreneurs go for assistance starting and growing their companies.
When you have a solid vision, you will not make knee-jerk reactions to your competitors' actions. Rather they will react to you. Also, while competitors' actions may cause you to shift your strategies, if you have a set vision, you will spend less time strategizing and more time executing.
3. Really Listen to Your Customers
One of my favorite quotes is from marketing expert Jay Abraham which goes, "Your customers are geniuses; they know exactly what they want."
By spending more time listening to the needs of your customers, you will create better products and services than your competitors.
4. Focus on Customer Retention
Focus more on retaining your customers than getting new ones. Studies have shown that it costs up to 7 times as much to acquire a new customer than it does to retain an existing customer. The profit is in retaining customers and selling them more things (that they need) over time.
Let your competitors fail to make profits, burn out, and go out of business by exclusively focusing on acquiring new customers.
5. Hire Right
As you grow your business, the less "doing" (e.g., building the product or providing the service to the customer) you will do and the more "managing" you will do. So your success will be put into the hands of those you hire. Spend the time to hire right and to train them well. And if you ever have the concern, "what happens if I train them and they leave?" then think the opposite, "What happens if you don't train them and they stay."
6. Create Systems
I heard the following acronym definition of "system" at a conference last week (yes, I am practicing what I preach and constantly invest in my own education).
The definition is:
Yes, systems may take time to develop. But once you've developed them, you will save time, energy and money on an ongoing basis.
7. Do Something Your Competition Would Have a Hard Time Duplicating
I know of one business that has an extremely rigorous client development process. Among other things, it consists of 6 months of pre-written emails sent to prospects twice per week, and weekly letters and packages sent to them in the mail. The process works extremely well, and not only would it take competitors 6 months to learn their systems, but creating a similar program would be a significant undertaking.
Other companies create a host of niche products that make it harder for a new competitor to enter their market. For example, if someone wanted to compete against Growthink with a capital raising product, it would be hard for them as we offer a product for raising angel capital, a product for raising venture capital, a product to get loans, a product to get grants, etc.
So, think about how you could create a company that your competitors can't replicate. In doing so, your competitors will be at a huge disadvantage. Also in doing so, you will become a great acquisition candidate for larger companies who realize it's easier to buy what you've developed than try to recreate it themselves.
Do you have any other ways you've used to "terrorize" your competitors (ethically speaking of course)? If so, please add them in the Comments section below.
I recently came across this poster:
Pretty funny (although not for the fish).
While it's amusing, there is an important lesson to it.
That lesson takes shape when you consider that starting and growing your business is your "journey of a thousand miles."
And when you haven't clearly planned out where you want to be at the end of the thousand miles, and precisely how you're going to get there, it could end very, very badly.
As Yogi Berra once said, "if you don't know where you're going, you might not get there."
This is very true for your business. In developing your business plan, you need to think through your vision for your company. Where would you like to see it in one year, three years, and five years?
What will your company look like at these times? How many employees will it have? What will you be doing on a day-to-day basis? What other companies will you be working with? And so on.
Once you have that clear vision, think through what it will take to get there. What specific milestones and accomplishments will you need to achieve? What are realistic dates for achieving them? What resources (money, people, etc.) will you need to achieve them?
The last thing you want is to go the thousand miles only to have your company fail (or be eaten by the bear in the poster).
So, spend the time now formulating your vision and your action plan for achieving it. And document it in your business plan. Sure, your business plan will change over time; it is not set in stone. But you must create it (and continually modify it) if you expect your journey to end with the success you desire.
Think about the successes you've achieved in your life already. For each of them, did you previously envision success? Did you have a formal or informal game plan that led to your success? Please answer these questions in the Comments section below. I look forward to reading them!