Category Archives: Entrepreneurship

Thinking of Quitting? Don’t Let Survivor Bias Ruin Your Life

Back to Fundamentals, Entrepreneurship, , , ,

You may have missed Alyson Shontell‘s piece asking an answering the question When You Should Quit Being An Entrepreneur? I marked it when it first appeared earlier this year, then left it in the back burner. If you’re an entrepreneur, especially if you’re engaged in a startup and not yet rolling strong and on your own, it’s a good piece to read. After musing about multiple pivots and startup failures, she concludes:

While we’re not trying to encourage quitting, more founders should ask themselves tough questions. Maybe it’s time to help someone else make their dream really big. Tomorrow’s companies depend on it. Plus that corporate experience could be what makes your next startup a success.

That relates to a really interesting comment added to my April 20 post on the myth of persistence. The comment, signed by faxauthority, was:

Most common phrase I hear from successful entrepreneurs: it was all about persistence. 

Most common phrase I hear from failed entrepreneurs: I’m glad I got out before all my money ran out…

That comment is a great illustration of survivor bias. We hear only from people who succeeded, never from people who failed. 

Have you read Seth Godin’s The Dip? Here’s a quote:

The old saying is wrong-winners do quit, and quitters do win

Do I sound negative about entrepreneurship here? I’m not. My wife and I own a multi-million-dollar company we started ourselves, without outside investment, that has 40 employees, profits, and no debt. But I am negative about sloppy thinking in entrepreneurship myths. On this one I’m with Alyson, faxauthority and Seth Godin. 

(Image: bigstockphoto.com. It’s suppose to represent a bottomless pit. Y’know, where the money goes, when an entrepreneur sticks with a bad business?)

The Paradox of Profits

Business Financing, Business Mistakes, Weblogs

We take it for granted. One of the main goals of a business is making a profit. Right?

Maybe not.

Answer this question: What makes a business more valuable? Is it profits, or growth? Or future prospects?

And then this question: Don’t you have a straight trade-off between profits and growth?

Assume you have money still in your bank account after you’ve booked costs and expenses.

  • That money could be booked right then as profits. 
  • Or you could spend it instead on marketing or product development to enhance future growth. 

Reinvesting profits really happens before the month is closed and that discretionary money is booked as profits. Once it’s down on the accounting statements as profits, it’s almost always going out of the company.

If you can, reinvest your profits before they become profits. 

(Image: shutterstock.com)

7 Bad Habits That Aren’t, plus a Great Title That Is

Entrepreneurship, Personal Productivity, , ,

Here’s a great title: The 7 Bad Habits of Insanely Productive People. That was on copyblogger last week, posted by Sonia Simone, one of the nicest plays on contradiction and irony I’ve seen a while. There’s some real truth here, but hidden in paradox, and a lot of humor too. Who wants bad habits? You have to read the post to see. 

For example, in her intro, musing on productivity advice …

And the truth is, I’ve gotten a lot out of productivity advice. If it weren’t for David Allen and Tony Schwartz, my life would consist of eating cupcakes and checking Netflix to see if there’s a new Phineas & Ferb out.

And all those bad habits? How does this sound:

  1. Being thin-skinned
  2. Flakiness
  3. Selfishness
  4. Greed
  5. Distractibility
  6. Self doubt
  7. Arrogance

Not so attractive at all, right? Except that Simone uses each of these to get your attention. Then she tears them back down.

For example, thin-skinned … 

Most of the successful people I know are sensitive and perceptive. And yes, when they get criticized, they feel like shit. Do they let trolls and whiners stop them from doing something great? No. But it’s not because they don’t feel the insults … it’s because their passion for what they do is stronger than the discomfort.

And on flakiness …

The truth is, if you’re building something epic, you’re going to be juggling a lot of pieces. They don’t always go together neatly. Sometimes they don’t go together at all. If you’re stretching yourself, you’ll drop the ball sometimes. Try to figure out the circumstances in which you should never let yourself drop the ball, Make sure the “A” tasks get done.
Do your best, and say sorry when you screw up. But don’t stop just because things get messy. 

So you see how that goes, right? Selfishness has to do with drawing lines and setting priorities, greed is motivating, and distractibility is creativity. I like this quote:

Creativity is the residue of time wasted.
~Albert Einstein

And this one too, under self doubt:

Jim Collins showed nicely in his book Great by Choice that one marker of a business leader who succeeds over time is what Collins calls “productive paranoia.”

And finally, concluding my post on Sonia’s post, a final thought from bad habit #7, arrogance:

for your project to become truly epic — to help an epic number of people — you’re going to have to get out there and talk it up. Which will make some people uncomfortable. 

That’s just a quick summary. Read the post. 

The Problem With the Myth of Persistence

Back to Fundamentals, Entrepreneurship

How often do you see successful entrepreneurs, experts, teachers, and various other experts telling would-be or wanna-be startups that starting a business is all about persistence? Too often. It’s a dangerous myth. brick wall

Why: persistence is only relevant if the rest of it is right. There’s no virtue to persistence when it means running your head into walls forever. Before you worry about persistence, that startup has to have some real value to offer, something that people want to buy, something they want or need. And it has to get the offer to enough people. It has to survive competition. It has to know when to stick to consistency, and when to pivot.

So persistence is simply what’s left over when all the other reasons for failure have been ruled out. Those successful entrepreneurs who talk about their experience? They’re not lying. They look back on it, and it was persistence that saw them through. Because every startup is a lot of work, a lot of mistakes, a lot of failures. So a lot of startups that might have made it otherwise fail because it’s just too damn hard to stay with it.

And then, if everything else is right, persistence matters.

(Image: bigstockphoto.com)

True Story: Programming, Paradox, and the Pot of Gold

Back to Fundamentals, Entrepreneurship, Technology, True Stories, , , ,

Paradox is the spice of life. Maybe. Because life is full of contradictions and other hands. Take this very interesting juxtaposition. Kevin Systrom, founder and CEO of Instagram, just sold it for $! billion to Facebook. And he built the Instagram prototype himself, in his spare time, after teaching himself to code, also in his spare time. Here’s more detail, from Instagram’s product genius is a self-taught programmer on The Next Web:Pot of gold

Systrom, an active user on Quora, is a largely self-taught programmer. While working in the marketing department at Nextstop, which Facebook acquired in 2010, he would spend his evenings learning to program. According to Systrom, small projects included combining elements of Foursquare with Mafia Wars.

Now consider this: The success of this do-it-yourself programming story generates a flood of pay-others-to-do-it designers in Silicon Valley, according to User interface designers invade Silicon Valley after success of Instagram, as reported by Reuters, on The Verge.

The “new breed” of Valley people are dubbed “user experience designers” and can fetch as much as $80,000 for an entry level position. In some situations, designers are becoming embedded in the conceptIon of new features — Facebook, for example, has begun assigning a designer to consult with a team of engineers led by a project manager.

True, designers aren’t engineers. But they aren’t do-it-yourself programming-at-night entrepreneurs either.

Go figure. The pots of gold aren’t always where they are supposed to be.

(Image: shutterstock.com)

From the Rice Million-Dollar Business Plan Competition

Business Plan Contest, Venture Contests,

Today and tomorrow I’ll be judging the Rice Business Plan Competition again for the fifth time, enjoying the event thoroughly and proud to be a part of it. Rice Business Plan Contest

This one, now in its 11th year, has prize money totaling $1.3 million. Its also covered in Fortune Magazine and elsewhere, and rivals the University of Texas Venture Labs (formerly Moot Corp), the SuperBowl of business plan contests, in prestige. It’s a real coup for Rice University, Brad Burke, The Rice Alliance for Technology and Entrepreneurship (Brad is managing director), and Brad’s very-well-organized team.

At the kick-off elevator speech competition last night, Brad had some interesting numbers: in 10 years, after a humble beginning, the Rice contest has had 128 competing companies funded, for a total of $450 million.

That number highlights the evolution of these contests. What started at the University of Texas in 1984 as an academic exercise (hence the name “moot corp”) is now a launching pad. There are dozens of these contests every year now. Most of them have ties to MBA programs, and startups need to have at least one member enrolled in an MBA institution. The best of these contests attract very real startups with very real prospects. It used to be that a few were actually launched, and nowadays the majority are launched and funded.

Then, after we heard that number, we saw 42 teams present one-minute elevator speeches. They were timed, 60 seconds each. And there are some very impressive startups in that group. Today will be interesting.

 

Valuable ‘Lessons from the Recession’

Books, , , ,

I was happy to see in this morning’s email that James Barrod and Brian Moran’s Lessons from the Recession is out now and being promoted on an innovative crowd funding site IndieGo.com.

I like the title because that’s exactly what this book is: lessons learned. Remember 2008? Particularly the end of 2008, September and October? All economic indicators plunged together. We all worried about what now-president Obama could do to keep us out of a depression. Those were some hard times. And they put business fundamentals to the test.

lessons_from_the_great_recession.jpg

James and Brian subtitled it: Real Solutions for Every Small Business Riding the Economic Roller Coaster. I think that’s accurate. I’m one of about a dozen co-authors who contributed. My chapter uses some case studies to show how the right kind of business planning can help to manage change and uncertainty by keeping control on the dashboards of the business. Other chapters are written by experts I consider friends, Rieva Lesonsky and Barbara Weltman, and a roll call of experts I’d like to know better.

Disclosure: I got a check for writing a chapter.

More disclosure: one of the three companies I used as a case example for my chapter is not doing well, and I’m not sure about the other two. You be the judge of that factor. I’ve been wrong before with my praise of early startups that didn’t do as well as I expected. I think I’m too much of an optimist. Sometimes wanting these people to succeed clouds my judgement.

On that of course I’m in good company. Jim Collins’ excellent book Good to Great included Fannie Mae and Circuit City as great (and both tanked). And In Search of Excellence by Tom Peters and Robert Waterman included some (Digital Equipment, Wang, for example) companies that they called excellent that tanked later.  Predicting the future is tough.

Which, by the way, is the main point of my chapter on business planning: with the right kind of business planning, you don’t predict the future, you manage the future by setting specific goals and milestones and following up with tracking and revisions as necessary.

One final thought: the IndieGo.com site is an interesting approach to funding a book effort. Take a look. I hope it works for James and Brian. They put a lot of work into this book, and what they created has some very good content.

What Business For You? Look in the Mirror. Two Good Posts.

Entrepreneurship, Work Life Balance, , ,

I’ve always said that what business is right for you depends not on the market, or what’s hot, but on who you are. So look in the mirror. Today I stumbled on two excellent blog posts that put this in good perspective.

Balance_at_sunset_bigstock_3393994.jpg

First, What Kind of Startup is Right for You, a post by Nellie Akalp on Mashable today. Nellie goes right to the heart of an often misunderstood core concept of small business, which is that the best business for you depends almost entirely on who your are, what you want, and what you do.

The best business is always a matter of context. You look in the mirror and figure out who you are, then you apply that to business. Here’s just a quick piece, two paragraphs:

Create a list of skills that covers what you’re good at and areas where you’re a subject matter expert. Then list out the things you like to do. Compare these two lists and see if any patterns emerge, or point to any business type that aligns both your strengths and passions.

Imagine yourself at a cocktail party, Tweetup or other networking event, and you’re asked that inevitable question: “So, what do you do?” Think about how you’ll respond with each potential business option. Are you proud and excited to describe your new business? Or a little embarrassed and looking to steer the conversation elsewhere?

This is really good advice. She has five points in the post, all of them worth reading.

The second one today is a really nice post called How to Fit Freelancing Into the Rest of Your Life, on freelance folder, written by Laura Spencer. It’s another reminder that what’s best for each individual you depends on your specific needs and nature.

For example, one of her points is “Know Yourself:”

What enables you to do your best work? Do you need quiet, or do you thrive in the midst of chaos? Are you your most creative first thing in the morning, or are you best late at night? What inspires you? Some freelancers are inspired by music, others by art or nature. Does clutter bother you, or can you work just about anywhere? Once you understand what enables you to do your best work, you can make sure that your work environment fits the bill.

Two very good posts. Conclusion: generalizations are dangerous. Every startup entrepreneur, ever solopreneur and freelancer, is a different case.

(image: bigstockphoto.com)

True Story: Begin With a Job at a Startup, Then Start Your Own

Business Stories, Entrepreneurship, Starting a Business, ,

The title of this post is taken from Martin Zwilling’s Begin With a Job at a Startup, Then Start Your Own on the Gust blog. In that post, Martin starts with this:

For those of you who want to get in on the ground floor of a new venture, but haven’t yet worked up the nerve to start your own, begin with a job at a startup.

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I say that it’s not just the nerve to start your own; it’s also the resume, experience, and resources. And that you shouldn’t feel that every entrepreneur proves him or herself by jumping straight from childhood to business owner. Breathing first, and learning something, is a good idea.

When I was in business school 30-some years ago, Professor Steve Brandt paused on one point, in front of the class, and reflected. He was teaching developing a business plan and getting funded. He said:

Most of you are too young and not ready to jump from school into your own business. Don’t worry about it if that’s the case. If you’re serious about entrepreneurship, just choose the right stream to swim in. Get out of school and do something that relates to what you’d like to do eventually.

I repeated that advice often during my 11 years teaching entrepreneurship one quarter per year at the University of Oregon. Some of my students took it to heart. They didn’t jump straight from college to starting a business. Instead, they worked with startups in their field of interest and eventually started their own.

I’ve noticed since then that the world changes very fast, and the startup leap is happening much more often at a much younger age. But the fundamental value of that advice still applies.

Martin Zwilling goes on to list some concrete specific tips that might help. If you’re interested, that’s a good post to read.

For another taste of that post, let’s finish this post with this quote. I agree with this …

But a word to the wise, be picky about what startup you join. Ask around about the founders. Make sure you meet more than the boss and check the culture before you take the job. Reporting structures are fluid in startups, and unfortunately many startups are like dysfunctional families.

… except that I’d add: well, but not too picky.

(Image: istockphoto.com)

Can’t Get Funded? Maybe There Are Better Ways

Bootstrapping, Business Financing, , , , ,

Today I joined Ian Sigalow, Jim Estill, and Mike Edelhart on a free webinar titled “Revolution in Venture Funding.” If you’re interested, here is the link to the permanent archive: http://myventurepad.com/93875/audio-archive-revolution-venture-funding.venture-funding-revolution

The sizzle in this one is the idea of crowd funding: specifically, there’s a bill in congress that would loosen up restrictions on small-time investments in startups, relaxing the constraint related to “accredited investors.” A lot of people are excited about that. Me too, but I’m also worried about opening up a floodgate of spams and scams. I have mixed feelings.

I’ll be adding in some suggestions for alternative funding and bootstrapping, including my own experience of funding a new product by giving a professional programming shop a percent of future revenue rather than percentage ownership in the company, and of getting a big company promising to purchase a product to fund the development. And, in the end, my experience of bootstrapping Palo Alto Software so that as it stands now, we own it outright, with no outside investors.

In that vein, I was searching the web and came up with this Smoothspan: Directory of Bootstrapped Companies listing some very well-known companies (37 Signals, WordPress, Zoho, and several others) that were bootstrapped. And you can add Palo Alto Software to that list.

And I want to add that Ian and Jim are world-renown pros in venture capital investment, and Mike is a smooth moderator, so the discussion will also get into a lot of other angles on the main theme, revolution in funding. I hope you join us.