Written by Dave Lavinsky on Wednesday, September 2, 2009
I read a very interesting blog post the other day about "survivor bias," an important statistical principle that could greatly affect your future success.
In brief, survivor bias occurs when an analysis excludes information since that information no longer exists.
Let me give you an example...
The English forces, during World War II, sent planes each day to bomb the Germans. As you might expect, several of these planes were shot down. And, the ones that did come back typically returned with multiple bullet holes.
Now, the English obviously wanted to maximize the chances of its planes and soldiers returning home. So English engineers studied the planes that returned. In doing so, they found patterns among the bullet holes. Specifically they found lots of holes on the wings and tail of the plan, but few in the cockpit or fuel tanks.
As a result, the English added armored plating to the wings and tail.
As you might have already concluded, this was the wrong thing to do. The better decision would have been to add armored plating to the cockpit and fuel tanks. For, the planes that were shot in those places were the planes that were shot down and never returned.
The English engineers' analysis missed this data because these were the planes that they were unable to examine. This is "survivor bias"-- their inability to include this critical data in their analysis since it was unavailable or didn't "survive."
So why does this matter to you?
It matters because as you start and/or grow your businesses, you will have to hire service providers and staff. And naturally, you will want to hire those with a track record of success.
But, when you hire staff who have only worked at successful companies, you may fall victim to survivor bias. That is, they have not learned many of the lessons that individuals and companies learn when they fail.
Likewise, when you hire a service provider that claims that every one of their clients has been successful, maybe they haven't learned from client failures.
They say that you learn more from failure than from success.
While that can be debated, from personal experience I can say that I've learned a ton from both failure and success. From successes, I have learned principles and formulas that worked. The ones I strive to replicate on a daily basis.
And from failures, I have learned things to avoid. I have learned flaws in my thinking. But importantly, many of my successes have come out of failure. From tinkering ideas and plans that weren't quite working. And making them work. And, these new ideas would never have come to me had I not failed first.
Now, clearly my advice is not to hire failures or those with a habit of failure. But, likewise, it's not to hire staff or service providers who claim to always succeed. Since a balance between success and failure often provides that winning combination of wisdom.
So, the next time you are interviewing a key hire or service provider, make sure to ask about their failures. Ask about tasks and jobs that they or their companies failed at. And find out what they learned from that failure.
Ideally they are the types of candidates that learned a lot from their failures and were able to overcome them. This is because the vast majority of growing companies fail at things over and over again. It is their ability to constantly modify and improve their businesses that enables them to excel. Surround yourself with people that have this ability.
Written by Dave Lavinsky on Wednesday, August 26, 2009
According to the book "How To Be Like Mike: Life Lessons About Basketball's Best," Jordan's practice habits and conditioning regimen amounted to an "almost alarming harshness."
In fact, many experts, such as Florida State University professor K. Anders Ericsson, argue that practice continually trumps talent. Prominent examples of success attributed to continuous practice besides Jordan include:
These same practicing principles apply when you are selling your company and your products/services to investors, customers, partners and/or employees.
With regards to your elevator pitch, which is often your opening communications with all outside constituents, practice it over and over again until it flows from your mouth and causes prospects to nod in agreement and understanding each and every time.
With regards to your investor presentations, you should practice them over and over again. And when you practice them, you should think about the goals of your presentation and simulate the questions you might be asked.
For example, you should be thinking:
By practicing your presentation over and over, you will get better and better at it. Just hearing yourself saying the words out loud will help. You will hear what sounds good and what doesn't.
Likewise, you should practice your presentation on real people -- your advisors, friends or family members. And after these mock presentations, ask them to recite back to you the key points you made. Importantly, make sure they recall the key points that you want to convey. If not, continue to improve your presentation content and your delivery until it reaches perfection.
Written by Dave Lavinsky on Tuesday, August 18, 2009
I attended a great online marketing conference a few months ago and learned a lot about marketing your business via Twitter.
The key Twitter advice that was given was to treat Twitter interactions just as if they were offline in the "real world." That is, act just like you'd act as if you were meeting at a cocktail party.
For example, at a cocktail party you wouldn't go up to someone and start screaming "this is what I do" and "buy my product now." (A lot of people do this on Twitter.)
Rather, you would get to know the person, ask them some questions, and hopefully provide some valuable information and advice. This process builds rapport, shows them that you care about them, and positions them to reciprocate in the form of wanting to learn more about and support your business.
So, how does this relate to pitching investors?
Well, I recently read an interesting blog post by Nic Brisbourne, a venture capitalist based on the UK. The key message of Brisbourne's post was that entrepreneurs should pitch him as if they were pitching their best friend.
In doing so, entrepreneurs should:
Like in your Twitter conversations, it's not all about you. You need to listen to the needs of your investor audience before you pitch them. You must develop rapport. And you can't pitch, pitch, pitch. You need to slow down and deliver your pitch in a more integrated fashion (such as giving some information, allowing the investor to ask questions, and responding as appropriate).
So, before you speak with your next prospective investor, you should create a checklist in your mind. Make sure you understand the needs of the investor, make sure you ask questions and do a lot of listening, and make sure that you effectively convey your message without being overbearing.
Written by Dave Lavinsky on Tuesday, August 11, 2009
I came across a very interesting advertisement in my Sunday paper the other day.
Start learning now to start, finance, grow, and exit your company.
2) Have a monthly income of $5,000.00
Start a business. Work hard. Make it successful. $5,000/month is nothing if you have a successful business.
3) Win enough money to never have to work again
Build a successful company. Sell it.
4) See my kids do really well in their studies
Work hard in starting and growing your successful company. Because you are the boss, you can spend more time with your kids helping them. Your hard work will also provide the funds to hire a tutor as needed.
5) Be on TV
Once you've started that successful company I've mentioned a couple of times- hire a good PR firm.
6) Attract men/women
Working hard and being successful will give you the confidence to better attract members of the opposite sex.
In fact, the majority of things on this "wish" list...
Written by Dave Lavinsky on Monday, August 10, 2009
Several months ago, I came across YouNoodle, a website which offers tools and a platform to help startup companies succeed. What I was initially drawn to was their Startup Predictor tool. The idea of a tool that could help predict the success, or lack thereof, of a new company really intrigued me.
Written by Dave Lavinsky on Monday, August 3, 2009
I'll be the first to admit that this fundraising strategy isn't for me. But I have a wife and kids, so maybe, a few years back, I would have given this one a shot.
The strategy: renting out the extra space in my apartment or house to travelers on a budget.
For three entrepreneurs, this fundraising strategy took on a life of its own. The three entrepreneurs, Joe Gebbia, Brian Chesky, and Nathan Blecharczyk, used this creative fundraising strategy (renting out the extra space in their apartments) to generate revenue after they quit their jobs to become entrepreneurs.
But, interestingly, they found the strategy so successful, that that turned it into a business that is now thriving.
The business, Airbnb is essentially the "eBay of space." It works like this...People list their apartments and houses (if they aren't going to be home), and even spare guest rooms, futons, and couches on the site and set a price per night. And then travelers who are looking for a place to stay search the listings for an accommodation that's right for them.
So, real estate owners and renters earn money, travelers get a discount, and Airbnb earns a 10% fee on all transactions. A true win-win-win. As you might imagine, Airbnb is doing very well, and is now in over 1150 cities in 82 countries.
My takeaways/lessons here are two-fold: first, if you have extra space or are traveling, you should consider listing your space on Airbnb to generate some revenues to invest in your business. Second, as this company illustrates, you can never be too creative in coming up with ideas to fund your business.
If you want to see a brief video of the Airbnb team, including their story of how Barry Manilow's drummer is one of their top users, here is a cool clip:
Written by Dave Lavinsky on Monday, August 3, 2009
The other day, I had the pleasure of interviewing Brette Simon.
Brette is a partner at Jones Day, a top tier law firm with offices in New York, Los Angeles, Silicon Valley, and several major international cities.
Written by Dave Lavinsky on Wednesday, July 29, 2009
I’m excited to announce that today is the first day of registration for the Capital Raising Bootcamp!
To register your spot, go here.
And here are a couple of important updates about the Bootcamp.
Update #1: I realize it’s the middle of summer, and many of you have probably planned vacations – or may even be on vacation right now (lucky you!). To account for this, I’ve decided to provide recordings and transcripts as an added bonus when you register, in case you have to miss all or part of one of the sessions.
Update #2: I’ve decided to add an extra day to the Capital Raising Bootcamp curriculum, to allow for questions-and-answer time. I’m going to dedicate this 4th day (Friday August 7th) entirely to Live Q&A.
So, now, the finalized Capital Raising Bootcamp curriculum/schedule is as follows:
Day 1: Tuesday, August 4th: Essential Overview of Raising Capital
Day 2: Wednesday, August 5th: Venture Capital and Angel Funding
Day 3: Thursday, August 6th: Debt, Grants, and Creative/Alternative Financing
Day 4: Friday, August 7th: Questions and Answers
(Each session runs from 2:00pm EST to 3:30pm EST).
Remember: There are only 50 spots available.
We are putting a strict limit on registration in order to make the experience as valuable as possible for each participant – and, most importantly, to allow enough time for each person to have his or her questions answered during the Q&A time.
To register go here.
Written by Dave Lavinsky on Wednesday, July 15, 2009
I'd like to tell you brief story about a Chihuahua who was taken along on a safari vacation. The story is important as it probably holds the answer to your capital-raising needs.
On the first day of the Chihuahua's trip, the Chihuahua wandered off too far and got lost in a bush. Unfortunately, within minutes, the Chihuahua encountered a very hungry looking leopard.
Realizing he was in trouble, but, noticing some fresh bones on the ground, the Chihuahua started to chew on them, with his back to the leopard. As the leopard was about to leap, the Chihuahua smacked his lips and exclaimed loudly, "Boy, that was one delicious leopard. I wonder if there are any more around here."
The leopard stopped mid-stride, and slinked away into the trees.
"Phew," said the leopard, "that was close - that evil little dog nearly had me."
A monkey nearby saw everything and thought he'd win a favor by setting the leopard straight.
(Fortunately, the Chihuahua saw the monkey go after the leopard, and guessed he might be up to no good.)
When the leopard heard the monkey's story, he felt angry at being made a fool, and offered the monkey a ride back to see him get revenge.
As the leopard and monkey approached, the Chihuahua once again turned his back and pretended not to notice them. And when the pair got within earshot, the Chihuahua said aloud, "Now where's that monkey gone? I sent him ages ago to bring me another leopard..."
The moral of the story is that the Chihuahua survived because he was creative, and because, the second time, he planned ahead.
The same is true when it comes to financing your business. While most entrepreneurs are extremely creative when it comes to coming up with unique business ideas and marketing plans, they tend lack creativity in the area where they need it most - fundraising.
Remember, without adequate capital, even the best business and marketing ideas will fail.
Fortunately, I am just about to release Growthink's "Definitive Guide to Creative & Alternative Financing Sources." The report gives you a detailed overview of the twelve most common types of capital used to start and grow business. And then, it provides twenty-eight (28) creative and alternative sources of financing that resourceful entrepreneurs have used to more easily finance their businesses.
One of the stories in the Guide is one of my favorites...the one about Kenneth Cole. Well before global retail sales of Kenneth Cole products reached $1.5 Billion last year, Kenneth Cole was a struggling entrepreneur with no money.
But he believed in himself and his designs, and used his creativity not only on his products and his marketing, but on his financing plan. Cole's plan was this - to find a struggling shoe manufacturer in need of customers (because the economy was weak then like it is right now) to manufacture his shoes on consignment. That is, Cole would only have to pay for the shoes AFTER he sold them.
Well, Cole was able to easily find the manufacturer who financed his business buy giving him hundreds of thousands of dollars of shoes. The rest, as they say, is history.
If you are seeking financing for your business, and you have not devised a creative plan to raise capital, I urge you to learn these great, creative financing ideas and use them to raise money for your business.
I will be releasing this report later this week. But I prefer it if you start right now. Take out a sheet of paper and write down your creative ideas to raise capital. Then, later this week, I'll give you 28 more ideas so you can complete your list, figure out which sources you are most comfortable raising money from, and begin financing and really growing your business.
Written by Dave Lavinsky on Monday, July 13, 2009
One neat thing about helping entrepreneurs fund their businesses is that whenever someone comes up with a cool way to finance their business, I end up hearing about it.
Whether they email me directly, or someone else finds out and lets me know, it always ends up in my inbox. Which is a good thing.
For years, I’ve been keeping track of these emails and stories and have decided to put together a report. The report, which will be called Growthink’s “Definitive Guide to Creative & Alternative Financing Sources” will detail tons of ways to finance your business that you probably don’t know about or haven’t considered.
One such creative financing technique is using donations. Months ago I received an email about a horoscope website, Birdielawson.com, which solicited donations from its visitors. The site has generated thousands of dollars in funding from these donations. And it’s using these donations to grow further.
Another great example of donation financing is FeedDigest. FeedDigest was founded by entrepreneur Peter Cooper in 2004. At that time, Cooper added a PayPal button to his website and asked users of his website to donate money.
His visitors subsequently donated enough money to allow him to start really growing the company. Soon after, an angel investor wrote him a check for even more money. FeedDigest grew and grew based on those investments, and in August 2007 was acquired by Informer Technologies, Inc.
And finally, perhaps the most famous recent example of donation financing is Wikipedia which has raised several million dollars in donations to date.
So, if you have a website (if not, you should create one), one source of capital that you should consider is donations. Soliciting and accepting donations is as simple as creating a PayPal account and adding a PayPal button to your website.
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