Written by Dave Lavinsky on Wednesday, September 8, 2010
Albert Einstein is well known as one of the great geniuses of all time.
What most don't know is that Einstein started his career as a patent examiner. For two years he worked at the Swiss Patent Office evaluating patent applications.
During this time, Einstein encountered thousands of entrepreneurs doing the same thing - trying to convey why their ideas were unique and thus should be granted a patent.
To a large extent, this is the same challenge that entrepreneurs have in raising money; convincing investors that their ideas are unique and thus should be worthy of their money.
Interestingly, one of Einstein's most famous quotes provides great value to both the entrepreneur seeking a patent and the entrepreneur seeking funding. This quote is this -- "If you can't explain it simply, you don't understand it..."
Failure to concisely convey a business idea is one of the top reasons why business plans don't get read (if you can't convey your idea concisely in the first paragraph, the reader will most likely stop reading) and why most companies fail to raise money.
However, I would expect many entrepreneurs, particularly those who haven't been able to simply explain their businesses, to disagree with Einstein. And to feel that they really do understand their business.
And to a large extent I agree with those entrepreneurs. Yes, they may understand their business. But, they probably haven't fully thought through their business.
Let me explain. When you properly complete your business plan, you are forced to think through all aspects of your business, and answer questions such as:
* What customer pain are you solving?
* What are customers currently doing to solve that pain?
* What are the strengths and weaknesses of these solutions?
* What is the demographic and/or psychographic profile of your ideal customer?
* Why is your company uniquely qualified to succeed?
Importantly, answering these questions helps you to better understand your business. And thus to create a more concise explanation of it. Which is the point of Einstein's quote, and which is the key to raising money for your business.
So, make sure you have asked and answered all of the key business plan questions. And then, sit down and review your answers and come up with the one line or paragraph that most simply describes your business.
Written by Dave Lavinsky on Thursday, September 2, 2010
Now that September is here, venture capital activity will pick up as usual. That's not to say that tons of VC deals were done over the summer; since they were.
Here are a few of the companies who raised venture capital in August that I found really interesting.
JiWire: JiWire has created an advertising network which reaches users at wi-fi hotspots. The company raised $2.1 million from Draper Fisher Jurvetson, Panorama Capital and Comcast Interactive Capital.
Zimride: Zimride is a ridesharing service that combines social networks and a route-matching algorithm, to make it easy for people to share seats in their cars or catch a ride. The company raised $1.2 million from Floodgate, K9 Ventures and two angel investors.
CloudCrowd: CloudCrowd has created a unique Labor as a Service outsourcing platform. The company raised $5.1 million from Draper Fisher Jurvetson.
WePay: WePay helps groups easily collect, manage, and spend money. The company raised $7.5 million from Highland Capital Partners and August Capital.
Payfone Inc: Payfone has built a mobile payments platform. The company raised $11 million form Opus Capital, BlackBerry Partners Fund and RRE Ventures.
I'm not totally sure why these 5 caught my eye...maybe because they're products/services that I would use. Or maybe because they show that all types of companies can raise venture capital. Or maybe both.
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.
Written by Dave Lavinsky on Wednesday, September 1, 2010
Last year I watched a seminar given by public speaking coach Patricia Fripp.
In it, she repeated the phrase, "We speak to be remembered and repeated" over and over again.
And I think she's right. We do speak to be remembered and repeated. After you speak with an investor, or a prospective customer, or an employee, would you like them to immediately forget what you told them? Or would you like them to clearly remember what you said, spread the word about you, and take whatever desired actions you asked them to do. Clearly, you want the latter.
Unfortunately, few entrepreneurs speak to be remembered and repeated. Rather, most have so much to say that they rant uncontrollably.
I get this all the time. Whenever I'm at a party and an entrepreneur finds out what I do for a living, he or she starts to talk my ear off about their idea.
Now, I love what I do and I love listening to and helping entrepreneurs. But what I don't love it when 100 words can be replaced with 10, or a 5-minute company description can be shortened down to 30 seconds.
The key is this; you MUST spend however long it takes to create a concise, easy-to-remember elevator pitch for your company. If not, it's going to cost you dearly. You will turn off investors, partners, customers, and employees among others.
This is because in today's fast paced environment, no one's going to invest the time to listen to your full presentation or read your full business plan if they don't get it right away.
Here are two exercises I recently developed to help you create an elevator pitch that others can "remember" and "repeat":
1. Tell your pitch to a child and then have them repeat it back to you. One of my Crowdfunding clients read his originally highly complex business summary to his 6-year old granddaughter. The 6-year old repeated back a concise summary that anyone in the world can immediately understand. We went with the 6-year old version.
2. Try to develop a 30-second television spot. I recently worked on a 30-second television spot where I tried to explain who I am, what I was offering, and what I wanted the audience to do next. In doing this I put together 10 extremely brief PowerPoint slides. I then read the slides aloud and timed it. It took 53 seconds. Getting it down to 30 seconds was serious work. But the result was a really concise message.
Try doing the same thing. Put together a draft 30-second commercial. What would you want your audience to learn? To remember? To repeat? And to do after watching your commercial? If you can achieve this in 30-seconds it will help with every aspect of your business. And start teaching you to be more concise, more memorable and more impactful.
Written by Dave Lavinsky on Monday, August 30, 2010
Are you a thermometer or a thermostat?
Thermometers are instruments that measure temperature.
Thermostats are devices that control the desired temperature.
The difference between the two is critical.
Thermometers are reactive. They sit by passively and accept whatever conditions their environment has created for them.
Conversely, thermostats exert control. When the environment isn't quite right, perhaps it's too hot or too cold, the thermostat pro-actively adjusts to obtain the desired conditions.
I think that few of us are completely on one side or the other, being completely reactive or completely controlling.
But I do think that most of us need to be more like the thermostat. We need to be less accepting of our current circumstances, and exert more control into positively changing them.
In fact, virtually all budding entrepreneurs are trying to improve their current environments. Typically they are not living the lives they have dreamed about. And thus, they use entrepreneurship as their thermostat. Specifically, they start their companies to change their circumstances and to achieve their goals.
But oftentimes, the fight to become a successful entrepreneur is truly great. It's rarely easy, and things don't always go as smoothly as we'd like. But if it was too easy, everyone would be an entrepreneur and there would be less opportunity.
The key is to CONTINUE to act like a thermostat through thick and thin. You must act like a thermostat at the beginning of your entrepreneurial journey. This is when you take the idea out of your head and first jot it down on paper, and then you develop your business plan and incorporate your company.
And then, you must NEVER stop acting like a thermostat. You must constantly be pro-active in raising funding, getting customers, hiring and managing your team, etc.
What are you doing today that's truly proactive? What should you be doing? Here's an exercise to try right now:
1. Make a list of things in your environment that you are not satisfied with? Are you not making enough money? Do you not have enough customers? Are you dissatisfied with the performance of some of your team members? Do you not have enough funding to execute on your plans? Etc.
2. Prioritize your list to figure out which items are most important for you to change.
3. Create an action plan to start achieving your most important item. Then move on to number 2, 3, etc.
Think about the most successful entrepreneurs of today and yesteryear. Individuals like Thomas Edison, Henry Ford, Bill Gates and Sir Richard Branson. Do you think any of these individuals accepted undesirable circumstances and environments? Do you think they complained about them? I doubt it. Rather, they identified these negative environments, and went about fixing and overcoming them. We all need to do the same. Every day.
Written by Dave Lavinsky on Thursday, August 26, 2010
Throughout my life I've met a lot of really smart people. People with really high IQs that excelled in school.
And I've also met and worked with a lot of extremely successful entrepreneurs. Entrepreneurs worth 7, 8 and even 9 figures (yes, that means they're worth over $100 million).
And interestingly, the two groups are pretty much mutually exclusive. That's not to say that the extremely successful entrepreneurs aren't smart. They are. But not as smart as a lot of the other folks I know.
So why is it that the high IQ folks haven't achieved as much success in life?
The answer is that IQ, your intelligence quotient, is less important then RQ, your risk quotient.
To become successful as an entrepreneur, you must take risks. You must get out of your comfort zone and try things that might not work.
Interestingly, throughout our early lives, we were trained NOT to take risks. I know I do this all the time with my kids. "Don't cross the road until there are no cars in sight," I tell them. Or "stop playing lacrosse; it's getting late and I don't want you getting hit in the face with a ball." We were all taught this to improve our survival.
But once we get older, survival is not enough. I don't want my tombstone to read "Dave survived." I want it to read that I thrived. That I accomplished my potential. That I made a difference.
And the only way to do this is to take risks. Some risks have relatively little downside. Like starting a new business that could possibly lead to bankruptcy. Other risks have bigger downside. Like Dr. Martin Luther King Jr.'s risk to fight for civil rights which ultimately resulted in his death. But, Dr. King's risk also resulted in such amazing positive change, and the betterment of millions upon millions of lives.
I'm not suggesting that you take such a risk as Dr. King did. I am suggesting that you need to get out of your comfort zone if you aspire to be a successful entrepreneur. You need to have an honest talk with yourself. Write down what goals you truly want to accomplish with your life. And then write down what you're willing to risk. Since if you're not willing to risk anything, your goals will remain dreams.
Jay Turo, my co-founder at Growthink, wrote a great blog post called "Entrepreneurship and Overstating Fear of Loss" a few years back about how "human beings greatly over-estimate the pain they think they will feel regarding a prospective future loss." Basically, when we do take risks and fail, the pain isn't so bad.
So how can you increase your RQ quotient? Try this:
1) Write down your goals.
2) Write down all the actions and associated risks you might have to take in achieving these goals.
3) Start taking the actions with the smallest amount of risk. As you start taking risks and getting out of your comfort zone, taking bigger risks will get easier an easier.
For me, the biggest inspiration that helps me take risks is my tombstone. While not trying to be morbid, I think about how people will remember me and how I want them to remember me. How do you want people to remember you? Once you figure that out, figure out that actions and risks you have to take to achieve it.
Written by Dave Lavinsky on Tuesday, August 24, 2010
Several years ago, a very interesting experiment was conducted.
In the off-season, a basketball team was split into 3 groups for a month. The first group practiced shooting free throws for 30 minutes per day. The second group didn't practice shooting free throws at all. The third group also didn't physically practice shooting free throws at all, but this group spent 5 minutes per day visualizing themselves shooting free throws and getting them in the basket.
The results: The first group improved their free throw shooting by 24%. As one might expect, 30-minutes a day of practice led to improved performance. The second group had a 0% average improvement. Once again, as you would expect, by not practicing, the players didn't improve their performance.
The most interesting result was the third group, who increased their free throw shooting by 23%. This group improved performance by virtually the same amount as group one. And they didn't even take a single practice shot. And, they only spent 16% of the time (5 minutes visualizing vs. group one's 30 minutes of actual practice) trying to improve.
Now, I'm not saying that people should never physically practice things to get better at them. No, real practice is essential to success. But, when you add visualization, your success can go through the roof.
Visualizing yourself achieving success is also known as "mental rehearsal." And mental rehearsal has been proven to improve performance in a variety of situations from job interviews to presentations to sales calls to athletic performance.
And the big one I want to focus on is presentations. Contrary to what most entrepreneurs want to believe (most want to believe they can simply send an email to an investor and receive a funding check in return), no one is going to invest in your company without first meeting with you.
And when you meet with them, you want to go through a well thought-out and delivered presentation that explains what your company is, why it's exciting, and why they should invest now.
To succeed in this endeavor, the entrepreneur must first create a compelling slide presentation. Then, they must practice giving the presentation over and over to increase their fluency and comfort giving the presentation.
And finally, as we learned with the free throw shooting experiment, the entrepreneur must mentally rehearse the presentation. They must visualize themselves giving the presentation, and having the investors nodding in agreement, and ending the meeting with the desired outcome (e.g., the investor writing a check to you).
The mind works in funny ways. It seems odd that visualizing yourself successfully giving a presentation would make a difference. But it definitely does. And it is often the difference between an entrepreneur receiving a big check that funds their business, and going home empty-handed.
Written by Dave Lavinsky on Saturday, August 21, 2010
Recently, the Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted into law.
One type of consumer that the Act tries to protect is angel investors. Specifically, the Act modified the qualifications for being an accredited investor.
Previously, an accredited investor was defined as an individual with at least $1 million in assets, $200,000 in personal annual income or $300,000 in joint-spousal annual income. The Act modified the asset calculation to exclude the value of the individual's home. As a result, many angel investors who were previously categorized as accredited are no longer accredited.
However, this is not the end of the world to entrepreneurs seeking angel investments. Regulation D still allows up to 35 non-accredited investors to participate in a private placement. As a result, you can still receive funding from some angel investors who are no longer accredited due to the revisions stipulated in the Dodd-Frank Act.
If you are seeking to raise funding from angel investors and/or through a private placement, read this article which details the Regulation D exemptions you need to be aware of.
Written by Dave Lavinsky on Wednesday, August 18, 2010
Most of you came to this blog post from an email I sent you.
The email read as follows:
Subject Line: The Most Important Email
You'll Ever Read
I have an ultra-important message
to share with you.
Visit my blog to read it.
PS. It will only take about 3 minutes to read this.
And you'll benefit for a lifetime.
Visit my blog to read it.
So why is this the most important email (or blog post) you'll ever read?
Because it gives you a critical lesson in communications that is absolutely essential to your success as an entrepreneur.
The lesson is this: 1) be as simple/clear/concise as possible in all important communications, and 2) sell ONE thing at a time.
Let me explain.
1) Be as simple/clear/concise as possible
My email message was extremely concise. It said that I have an ultra-important message
to share with you and that you should visit my blog to find out what it is.
2) Sell ONE thing at a time
My goal in the email was to "sell the click" or convince you simply to click on the link. I wasn't trying to get you to do anything else.
The results: Because I was clear and sold just one thing, you clicked on the link.
So let's apply these lessons to raising funding for your business.
The other day, one of my Crowdfunding clients sent me the email they were about to send to their friends to get them to donate.
The email was very long and gave tons of details about their company and why their friends should donate.
THIS WAS THE TOTALLY WRONG APPROACH!
To begin, the story about the nature of the company should have been no more than ONE LINE long. If you can't already sum up your venture in one line, than stop everything and figure out how to do it. Importantly, that one line doesn't have to provide every detail about what's unique about your business. Rather, it just has to give people the essence of your business.
Secondly, the goal of the email should have simply been to get their friends to click on a link to learn more. To go to a page with a video and a nicely laid out story on why they should donate.
The point is that you can't get many people to donate just from the email, but you can get many people to click. And then once they click, you give them the information they need to donate.
The same is true with angel investors and venture capitalists. No venture capitalist has EVER invested based on an email they received. So why would you ever send an email with the hopes that they will invest?
Rather, the initial email you send to investors should just be to gauge their interest. That's ALL you're selling in the email. Say here's what we're doing and include 5 interesting bullets about your company. And then say, "would you like to learn more?"
That's it. Sell one thing, which is "would you like to learn more?"
And then, if they say "yes," you're goal will be to sell them on investing the time to meet with you.
And then you're selling them on letting you present to the other VCs in their firm.
And then you're selling them on giving you their money with the best investment terms. And so on.
I'm very lucky. My son is a fifth grader. So I have built-in tester. If I tell him a message and he can't repeat it back to me as clearly as I told it to him, then my message is flawed.
And if I ask him to do a complex task and he does it wrong, it's because I tried to sell too many things at once, rather than selling him on doing just the first step.
Many of us have heard the acronym KISS, standing for "Keep It Simple, Stupid." Simplicity in communications is essential. While some people think complexity makes them sound smart, it confuses their messages so the recipients of those messages don't take the desired actions.
In fact, I rather sound like a moron, but convince others to do what I need them to do, than appear as a genius, but a genius that fails to accomplish his goals.
So to reiterate, if you want to succeed as an entrepreneur, you must communicate clearly and simply, and sell just one thing at a time. This is key when selling to everyone from investors, to customers, to partners, to your employees.
Three resources for you:
Readability Score: this cool free tool allows you to see how easy your text is to read. You simply copy and paste your text into the box and click Submit.
FYI, according to this tool, my email was written at just a 2nd grade level. Meaning that even a 2nd grader would have understood exactly what I wanted them to do. This blog post was written at a 6.5 grade level (I have to work on getting that down so it's even easier to read my posts (the New York Times is written at a 6th grade level)).
Truth About Funding: This guide shows you exactly how to raise all the money you need. Importantly, it walks you through 3 different approaches and exercises to create a hard-hitting concise pitch for your company.
Crowdfunding Formula: This program shows you precisely how to raise money from Crowdfunding, the newest and probably the easiest way to raise money for your business. Crowdfunding allows you to leverage the communications techniques explained above.
Written by Dave Lavinsky on Monday, August 16, 2010
I just learned about an interesting new website called My Dunk Tank.
The site helps you raise money by asking your supporters to create dares for you and vote with their donations.
Here's how it works:
1. You make a list of dares you're willing to do
2. Your friends vote for their favorite dare by making a gift in your name to the organization you are supporting
3. You do the dare that gets the most votes
So far, people have done some pretty interesting dares from jogging naked to eating worms to kissing a pig.
One of the bigger winners so far was Beth and Katie Cooke who raised $2,913 for The Spina Bifida Resource Network via the dare of "wearing a full head of cornrows in our hair for 2 weeks."
To date, it appears that all the fundraising has been for non-profits like the National MS Society, the Susan G. Komen Race for the Cure, and Talk About Curing Autism.
And the amount of the funding is relatively low, with most funding amounts ranging from $500 to $2,000.
So, if you have a non-profit organization looking for $500 to $2,000, you could certainly try MyDunkTank. But for the vast majority of you, this amount of funding is not going to really help.
However the bigger lesson here might be that dares and stunts can give any type of venture lots of attention.
Consider newspaper man Henri Desgrange. In 1903, his French newspaper was suffering from poor circulation. So, they developed a stunt to promote a new newspaper service route. That stunt garnered national attention and eventually turned into the Tour de France.
So, what kind of stunts can you do for your business to gain attention? I don't think silly stunts like kissing a pig or shaving your head are the answer. They're too short lived. Can you think bigger?
And specifically, is there anything that you can do that's interesting and related to your venture? One of my favorite example is when the manufacturer of Blendtec blenders made a video showing that it could blend an iPhone. That video has gotten over 8.8 MILLION views to date on YouTube (you can watch it here).
The good news is that with brand new funding sources like Crowdfunding, even a startup with no revenues can raise hundreds of thousands of dollars if they can generate enough attention.
So get your creative juices flowing, come up with ideas to generate buzz, and you can parlay that into investors, customers, partners and more.
Written by Dave Lavinsky on Friday, August 13, 2010
Emeril Lagasse is no doubt one of the most famous and successful chefs of all time.
In fact, Emeril's media, products and restaurants generate an estimated $150 million in annual revenues. Not bad.
One of the reasons for Emeril's success is his personality. And in particular, his ability to make cooking exciting. Particularly when he shouts his catchphrases including "Kick it up a notch!" and "BAM!"
I want to focus specifically on Emeril's "BAM!" and its implications.
Emeril say "BAM!" only at a specific time. He says it when he adds a pinch of a certain ingredient that will make a good recipe extraordinary. Also, like other chefs, Emeril spends time "plating" or focusing on the appearance of the dish.
So why am I telling you this?
Because Emeril gives us a great lesson in developing business plans, particularly if we hope to present our business plans to investors and/or lenders.
To begin, your business plan must have a "BAM!" factor. The "BAM!" is what makes your plan extraordinary or worth reading. I believe that the biggest "BAM!" factor is your list of success factors that MUST go on the first page of your business plan.
Specifically your success factors must detail, ideally in bulleted form so it's simple to digest, why you are uniquely qualified to succeed.
Most business plans neglect this, and most entrepreneurs think that the quality of their idea is more important than this. Not true. Your ability to execute on the idea is of paramount importance.
In addition to including your "BAM!" factor, like Emeril, you need to spend time "plating" or making sure your business plan has a great appearance. Since if it doesn't, investors won't read it.
Making your business plan graphical appealing, with pictures, logos and the right fonts and spacing helps. But even more important is laying the "story" of your business out in a format that constantly compels the reader to want to read and learn more. Rather than bombarding them with every detail about your venture, you lead them down a path.
You succinctly tell them about what your venture is all about. You tell them why you are uniquely qualified to succeed. You show them the market need. And customer wants. And your marketing plan. Etc.
Few people, including investors and lenders looking for deals, really want to sit down and read your business plan. Those business plans that are inviting, and have the "BAM!" factor are the ones that investors pick up and can't put down. And those are the ones they fund. So make sure yours is like that too.
Watch this video for tips and shortcuts for completing your business plan.
If you want to raise capital,
then you need a professional
business plan. This video
shows you how to finish your
business plan in 1 day.
to watch the video.
"The TRUTH About
Most entrepreneurs fail to raise
venture capital because they
make a really BIG mistake when
approaching investors. And on
the other hand, the entrepreneurs
who get funding all have one thing
in common. What makes the difference?
to watch the video.
The Internet has created great
opportunities for entrepreneurs.
Most recently, a new online funding
phenomenon allows you to quickly
raise money to start your business.
to watch the video.
"Barking orders" and other forms of
intimidating followers to get things
done just doesn't work any more.
So how do you lead your company
to success in the 21st century?
to watch the video.