Entrepreneurial Advice, Motivation & Startup Strategies

Many new companies spend months brainstorming their company names and brands, or employ expensive “champagne & smoked glass” branding agencies to come up with their company names and corporate identity. However many of the worlds largest and most established brands came by their identities by accident.

It is quite a famous fact that the name Google started as a boast about the amount of information the search-engine would be able to search. However the company was originally named ‘Googol’, a word for the number represented by 1 followed by 100 zeros. After founders - Stanford grad students Sergey Brin and Larry Page presented their project to an angel investor, they received a cheque made out to ‘Google’!

Adobe - came from name of the river Adobe Creek that ran behind the house of founder John Warnock.

Apache - It got its name because its founders got started by applying patches to code written for NCSA’s httpd daemon. The result was ‘A PAtCHy’ server — thus, the name Apache

Apple Computers - favourite fruit of founder Steve Jobs. He was three months late in filing a name for the business, and he threatened to call his company Apple Computers if the other colleagues didn’t suggest a better name by 5 o’clock.

CISCO - its not an acronymn but the short for San Francisco.

Compaq - using COMp, for computer, and PAQ to denote a small integral object.

Hotmail - Founder Jack Smith got the idea of accessing e-mail via the web from a computer anywhere in the world. When Sabeer Bhatia came up with the business plan for the mail service, he tried all kinds of names ending in ‘mail’ and finally settled for hotmail as it included the letters “html” - the programming language used to write web pages. It was initially referred to as HoTMaiL with selective upper casing.

HP - Bill Hewlett and Dave Packard tossed a coin to decide whether the company they founded would be called Hewlett-Packard or Packard-Hewlett.

Intel - Bob Noyce and Gordon Moore wanted to name their new company ‘Moore Noyce’ but that was already trademarked by a hotel chain, so they had to settle for an acronym of INTegrated ELectronics.

You have no doubt read and heard that barriers to entry are very important to investors when they are considering business ideas to back. It would be nice for every business to be in a position to have strong barriers to entry from the beginning.

However it’s relatively rare to be in a position to have a sustainable barriers to entry from the outset especially as it is becoming easier to duplicate technology or find ways around patents.

I believe it is preferable to focus on building the barriers to entry within the business, for example:

• Operating the business
• Having customers
• Good links with suppliers
• Press attention
• Creating a brand

These all create barriers to entry, perhaps not in the traditional sense but they do add serious value to your proposition in the eyes of the investor, and are things that every business can capitalise on when seeking investment.

It is common knowledge that traditional VCs don’t get out of bed for less than a million in investment. However there is a new breed of VC considering relatively small investments of the usual Angel variety.

With the increasingly lowering of barriers to entry and relative ease of bringing a business to mass exposure, the whole VC industry is rethinking their approach to investment. Of course there will still be market for high level investments for the big gun VCs but we all know the real money is made in getting in early with startups and small businesses with high growth potential.

Leading the way for small, early stage venturing is YCombinator, a VC backed initiative which supports early stage technology companies with resources and initial development funding. Another very exciting VC development is that of SoftTech VC who have raised a $12m fund purely to invest in early stage startups. Another notable VC investing in early seed stage startups is Charles River Ventures with their CRV QuickStart programme.

I think this move towards smaller VC funding is very encouraging and will mean that a lot more startups get that early stage seed funding they need to get their ideas off the ground. Of course until the rest of the VC industry re clarifies it’s expectations there are still plenty of Angel Investors out there looking to invest in your seed stage business.

I recently read an interesting post over on The Startup Laywer explaining why asking an investor to sign an NDA will at best get you laughed out the building. I particularly liked this part…

“Asking a VC to sign a NDA is tantamount to splitting 10’s at the blackjack table. You just don’t do it.”

It’s an interesting quandary, on one hand you want to protect your idea but on the other hand you want to impress your potential investor at your knowledge of how the pitching process works.

The problem is that any good VC or Angel sees hundreds of proposals every week, if they were to sign every single NDA before hearing about the proposition they would leave themselves open to legal action if they decide not to invest in one company, but then do invest in another company with a very similar idea. As Ryan from Startup Laywer quite aptly put it…

“If VCs maintained the practice of signing NDAs for each submission they received, only two groups would benefit: lawyers and paper companies. Lawyers would benefit because they would get to draft, edit, and negotiate each NDA.”

This whole NDA issue interests me. A couple of weeks ago I went to the Startup Show in London, one of the main reasons for attending was to gather some competitive intelligence. One of my competitors in the Entrepreneur to Investor matching sector, who out of professional respect will remain nameless, encourage their users to submit full business plans for investor consideration.

I raised the whole question about non disclosure agreements with them and they assured me that every investor signs an NDA before being able to use their system. Of course they could of just said this thinking that they were putting a potential clients mind at rest, however as their business is based on submitting business plans to investors it is most probably the case.

Edge Venture’s position on NDAs

With Edge Venture, I have tried to keep things as simple as possible. I have always been concerned with the whole privacy issue that submitting business plans over the internet brings. Hence why with Edge Venture we recommend that you withhold business critical information at these early pitching stages and concentrate on the core areas of the pitch that help you attract interest from investors.

Non Disclosure Agreements do have their place, for example when talking with suppliers or when hiring employees with access to business data such as client lists, financial data, future business strategy etc. But as far as in the early stages of pitching for investment, it’s better to attract and stimulate interest with a summary overview rather than insisting on an NDA before submitting full business plan information.

I recently watched an interesting interview which I thought I would share. The interview discusses how Walid Al Saqqaf and Sokratis Papafloratos went about securing $1 million for a London based startup, trustedplaces.com.

I am actually a member of Trustedplaces, the website allows you to recommend restaurants to others and build up a social network of like minded restaurant goers. The site isn’t specifically focused on restaurant reviews but it would appear that is the direction the users are taking the site.

The interview covers some interesting points about raising angel money and how they went about raising $1m in 83 days. Some of the more interesting responses were to the questions What are investors looking for? When is the right time to raise money? and Do you still feel in control?

Definately inspirational stuff, it’s great to hear about fellow Londoner’s making a dent in the social space.

Catch the interview here on intruders.tv

This shortlist is inspired from a very extensive list of calculators found on the excellent Bootstraper blog. I’ve gone through the list and picked those that I feel are particularly relevant for entrepreneurs.

1. Break Even Analysis Calculator

This calculator allows you to work out the level of sales required to break even. Very useful for working out the minimum levels of conversion needed to break even and ideal for calculating your pricing levels when business planning and forecasting. The calculator also gives you target unit sales to achieve profit targets which is very useful.

2. Business Valuation Calculator

Looking to trade sale your existing business? This calculator can help you determine a guide valuation for your business. It takes in to account your profit and losses as well as current level of owners compensation, it also adds business sector and time in business to the equation. I’m quite impressed with the results, of course it can only be used as a guide.

It goes without saying that a professional accountant specialising in business valuation will be required to give you a realistic valuation, however it is a good starting point for those considering selling their businesses.

3. Gross Profit Margin Calculator

This one is very useful indeed and helps you decide on a market sale price of your product/service. Quite a straightforward calculator compared to the others, however it is one of the most useful to entrepreneurs, especially at those early stages of planning. This calculator can be used in a slightly different way for those with no tangible unit costs, for example an internet startup with a subscription service. In these circumstances you can experiment with using your CPA (Cost Per Acquisition) instead of costs of goods sold, and work out a gross profit margin after customer acquisition costs.

4. Starting Costs Calculator

Working out your set up costs is a very worth while activity when in the early stages of business planning. Using this calculator will give you a guide as to how much initial investment your business will require and how much safety net contingency you should account for.

The calculator takes in to account all of the major initial expenditure you may have when launching your new venture and is great for clarifying what growth goals to set yourself.

5. Conversion Rate Calculator

This is one of my favourites, it allows you to predict how improvements to your websites conversion rate will impact on your profit potential. Very useful for internet startups.

We all understand how important the conversion rate is as a metric for not only website success but also potential investors valuation. I highly recommend that all internet entrepreneurs focus on improving conversion rates. I will be exploring various conversion rate improvement techniques in future posts.

Edge Venture Calculator

We are currently concentrating on developing our Investment Pitching System but we also have our own business calculator in development. We are working on a calculator which combines, business startup analysis with conversion rates and business valuation for investment purposes. Make sure you subscribe to the feed to be the first to have a play.

Updates

I will be updating this list on a regular basis as I find decent calculators on my travels around the internet. Of course if you find any I would love to hear about them please email me at info [at] edge-venture [dot] com.

Earlier this week I attended the Startups Live event in London. Unfortunately the event did desend in to a Microsoft sales pitch at one point but the highlight of the evening was a light-hearted, motivational talk from Micheal Smith, one of the founders of firebox.com, a highly successful UK based Gadget & Boys Toys ecommerce website.

The Firebox founders both left college to pursue corporate careers but it wasn’t long before they came to the realisation that working in a corporate environment wasn’t for them. They loved gadgets and knew there was money to be made online.

Off they went to knock on the banks doors for startup funding, only to be knocked back time after time. (I’m sure the banks regret their reticence now) Stuck with no startup capital they made the brave choice to volunteer for medical experiments!

10 Experimental Injections later…

They spent their time in hospital fleshing out their business plans and spent their “earnings” totaling £800/$1600 setting up the website and developing a prototype for their own invention, a chess drinking game.

They are now a multi-million dollar ecommerce success story.

Now I’m not suggesting that every entrepreneur go to the extremes of volunteering for medical experiments to fund their startup but this story is a great example of an entrepreneur going to great lengths to realise their entrepreneurial dreams.

Fortunately to use the Edge Venture pitching system we don’t require you test any drugs.

I was talking with an ex colleague of mine over a few beers last night and we were debating the merits of protecting your business ideas from copy cat rivals. It got me thinking about many of the current internet success stories and how their lack of any real IP hasn’t stopped them becoming multi-billion dollar companies.

We have this TV show here in the UK called Dragon’s Den. The concept, for those that don’t know, is you need to present your investment idea to a panel of “Dragons” and you must walk away with all the money on the table (The money is literally on the table) or you walk away with nothing. It’s pretty entertaining TV, you can tell that the producers pick businesses that aren’t at all prepared to make it more enjoyable for the viewer (unfortunately it’s the British way to like to see others make a fool of themselves I am afraid to say).

What I find quite interesting is the same negotiation point coming up again and again. The Dragon’s use the lack of IP protection as a way to make outrageous equity demands in return for disproportionate funding. It is true that a lot of the investment opportunities featured on Dragon’s Den are product related and therefore Patent protection is favourable. However where does that leave those of us with internet ideas or other service businesses that can’t be protected?

It is worth remembering that Dragon’s Den is a TV show and that in the real world it is very probable that the lack of IP protection of a new internet startup will make little difference to those forward thinking, new-breed investors looking for the next big thing on the internet.

Market Traction

I believe that market traction can make lack of IP irrelevant. An example I have used before is eBay, they were the first to build up the network of online auction users. No matter how much money Yahoo! threw at their online auction platform they couldn’t catch up with eBay’s market traction. Subsequently Yahoo! scrapped their version of eBay after spending millions promoting it.

The list doesn’t stop at eBay, the majority of the online successes haven’t any real IP in the traditional sense, the only thing stopping others creating a clone and competing is the dedicated following these websites already have. Dedicated, loyal user base equals market traction.

When launching a new internet venture special focus should be made to increase the “stickyness” especially if it is a unique concept, these initial early adopters will be your evangalists and help you build a very loyal user base which are stuck to your website like superglue, no matter what copy cat competitors comes along.

I think the British equity investment market is slightly different from that of the US, hence why we at Edge Venture have decided to go full global with our investment pitching system. We have a lot of creative talent in the UK and I am sure given the right vehicle we can attract some investment from US VC’s and Angels in to the UK. Maybe that will shake things up a bit and make the reliance on IP protection less of an issue for UK investors.

Today we did a final full system wide test and I am very excited to announce that we should be ready for a full Beta public release of the system by the end of the month. All the hard work seems to be paying off and we feel very proud of the system we’ve created, of course as with any technology startup we will let our users be the judge, jury and hopefully not executioner.

In the meantime I will give you a heads up on some of the functionality to expect.

Flash Video Recorder

One of the main benefits of The Investment Pitching System is the online video recorder. Once an entrepreneur registers and goes through the pitch creation process they will have the opportunity to record their Elevator Pitch over the web using their web cam! I must say that it is pretty impressive technology and seems to work well. The user has the ability to keep re-recording the pitch as much as they like until they are fully happy with it. There is a backup if the entrepreneur doesn’t have a web cam, they can opt to record an audio only version via their computers microphone. Doesn’t have the same visual appeal as the video but the audio only option still adds weight and substance to the pitch.

Amazon S3 Video Upload

If the entrepreneur decides they would prefer to record their pitch offline and perhaps edit in a few product demos and tidy things up a touch there is the option to upload the video. Initially we have decided not to apply any limits to file size and quality for the uploaded videos because we are using Amazon Web Services Simple Storage System to process and host the uploaded videos.

Blog, Website and Social Network Sharing

When you record a video using the embedded Flash video recorder you have the option to copy out the video embed codes and paste them straight in to your blog or social network site, not only will the entrepreneur be able to expand the reach of their pitch but they will be able to get valuable feedback and support from friends and colleagues.

This is just the first Beta release we already have new features and benefits in development including a Facebook and OpenSocial app which are coming along very well indeed. More updates on that and other developments can be found in this blog shortly.

Thanks again for everyone’s support, especially Carey who deserves more than just a few beers for all his hard work. We hope you like the system and you appreciate the little usability touches implemented, of course as ever if you have any feedback we would love to hear it.

Do you consider yourself to be a doer or a thinker? Doers concentrate on the day to day operational aspects of a business, they often concentrate on working on their to do lists, micromanaging ever aspect of the business and keeping control of every minute detail.

On the other hand thinkers delegate, they don’t concern themselves with every minor detail and most importantly they think.

Now I’m not saying that doers don’t think, or that doers aren’t a necessary element to any businesses success. If it wasn’t for those with the “doer” mentality nothing would get done. The thinking entrepreneur is one that steps away from the day to day running of the business and dedicates time to strategy and planning.

I’m sure we can all think of at least one business owner we know who is so engrossed in the running of the company that they seem to at best be standing still, this treadmill effect comes from the need for that business owner to be consulted on every minute detail and the business owners own need to be in control.

Before the whole coffee phenomenon, there were many “doers” running small coffee shops. One small coffee shop owner in Seattle had that “thinker” mindset, he understood the need to step back to think about the bigger picture, the strategy behind what they were doing. This entrepreneur built what is today the global institution known as Starbucks.

What I am saying is that the founder, the guy running the business should have this thinker mindset. Of course the doer aspect shouldn’t be neglected but the entrepreneur needs to be constantly thinking about strategy and not be concerned about releasing a little decision making control to employees.

So can an entrepreneur be both a doer and a thinker? I’d say this is a must but entrepreneurs should consider setting aside at least one full day to work on strategy and business development in every working week if not more. If this means delegating decision making power to an employee then you really should think about doing this.

Ultimately it should be your goal to be 100% strategy and business development, let others run the business for you, you have the entrepreneurial spirit, the drive to succeed, surely your energies should be applied where they will be most effective, in driving business growth.