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One Reason You Shouldn’t Worry About Getting Venture Capital

August 11, 2015 Comments off

Dileep Rao posted an interesting article entitled: Why 99.95% Of Entrepreneurs Should Stop Wasting Time Seeking Venture Capital. It was posted in Forbes Entrepreneur Blog.

Venture-Capital

It is an interesting analysis stating that odds are likely you will grow your business without Venture Capital.  It simply reinforces the notion that working on your business to build and please customers might do you better than chasing the odds of gaining traction with a VC, at least in the early stages of your company.  Still, the VC community, as Rao contends, is a formidable PR machine and the populace (i.e. press) seems to look their direction for validation and guidance.  Is this the right place to look?  If it is not, where should entrepreneurs (and policy makers) seek a “gold standard” to pursue?

Should Funded Entrepreneurs be paid a “Living Wage”?

August 4, 2015 Comments off

So, you’ve reached seed funding or even Series “A”.  Have you built in any compensation for yourself?  Should there be? If not, why not?

Do investors demand no salary of the founders as they perceive this as a sign of commitment by the entrepreneurs? Would they still fund it if you proposed your own salary?  Does salary or no salary make the difference in an early stage company?  Sure, there’s items such as dilution (because you are burning more investor cash), and other considerations, but I would like to focus primarily on the salary idea…

Tlwagehis thought rambled through my mind recently.  The national press frequently posts on minimum wage and how or if it is important to pay people to “live” at a certain standard.  There’s now a significant movement at the city level to move minimum wage higher absent of activity at the national level.

I’d like to ask this question of the entrepreneurial and investor community, and extend this as a challenge to those who study entrepreneurship.  Does paying founders at the early stage make a positive or negative difference on the outcome of the enterprise?  Does it help or hurt the disposition of the founding team?  Does it accelerate or hinder timing to a milestone event?

It’s interesting. There’s a lot of postings on what the “average” CEO and founding team gets paid in certain rounds of funding, but does not posit any reasoning or research supporting this.  Just what to expect, on average, using historical data.

Many questions, but not much data.  Should founders get some sort of income after seed rounds just to help pay the bills? Should it be a “standard rate”?  What’s your impression?

Categories: Uncategorized

Venture Capital: A Transition in Progress?

April 19, 2013 Comments off

vctreeIs the VC risk profile changing?  That thought came to mind after reading commentary by Kent Bernhard Jr.’s article: “Venture capital gets a serious smackdown in the Harvard Business Review”.  Both articles are great reads.  Bernhard comments on an article in the HBR that makes the case that the VC world is shrinking due to, among other things, not providing an adequate return to its investors.  The article contemplates perhaps the industry is destined to failure – or a change of business models?

I agree with Bernhard in that VC’s will stay and continue to fund in a sweet spot that’s needed in the market.  I also think that the incredible growth in Angel Funding and the upcoming potential for crowd funding plays right into a stronger return of the VC industry.  How could it not?  Now, the VC industry can look across a horizon of companies that either make it or not in development and proving a product to the market.  Thus, I believe the VC market will move up a risk-class and place less risky bets on more proven technologies.  Look out Angels on your Series B, C, or D, rounds.  VC’s will be looking to secure a return for their investors and secure their traditional compensation models.  Until they can’t, but that’s a long time from now.

Even though, the disruption of the financial markets have been tough on all of us, I believe this transition has created opportunities never imagined before – and that’s a good thing for everyone.  Look for even more investing models to emerge in the coming months and years.  Nature abhors a vacuum!

3 Reasons to Write it Down Before Action

March 18, 2013 Comments off

pencilLast week was full of surprises.  Teams converged to address a very sticky, emotional and difficult issue.  No surprise, it also involved money, faulty decisions and blame all around. But, I’m getting ahead of myself.

Due to the complexity of the issues involved, I decided to try to create a factual summary of the past and what led up to the present situation. I presented the timeline to all parties to help us all recast the sequence of events. By trying to remove emotion and script only facts along a timeline, we realized, like a lot of difficult decisions, many people and situations conspired consciously or unconsciously to bring us to where we were.  Reducing the facts to a timeline and having everyone agree on what happened quickly allowed us to move forward with the present challenge.  So, write it down, use the facts and you can gain:

1. Clarity

2. Perspective and

3. Build a reasonable plan going forward

The exercise allowed me to also see there was error with “my team” and “their team” – and once we took responsibility, it opened the door to collectively take responsibility and work together on solving what got us there.  We focused on the problem, not the people.  Try it sometime.

Fix That E Mail Address – Before It’s Too Late

February 27, 2013 Comments off

atsignCredibility, consistency and striving for the correct first impressions.  Then, there’s the little detail about your e mail address.  In the land of godaddy instant websites and e mail combined the ability to link your gmail address to virtually any server; why aren’t we doing that?  Meaning to establish, as start-ups we have at least gone through the motions of creating a small web presence and a decent, credible address name.  Then again, there’s the best and worst, as presented by Fast Company – would you have your taxes done by someone with an e mail address taxplaya at hotmail dot com?  Enjoy.

Inclusive Management, Messaging and Trust

February 8, 2013 Comments off

slide-39-638I recently found a great report – a global study called the Edelman Trust Barometer.  There’s a lot to learn from this report, but the key take aways for me are the following:

  1. A trusting culture requires a dynamic, not “top down” management – here they call it Inclusive Management – and it just doesn’t mean getting people’s opinions.
  2. “Credentialed Experts” are far and away more trusted than CEO’s as communicators.
  3. People (customers and employees) need to hear a message 3 to 5 times from various sources to change behavior or influence their opinion.
  4. CEO’s and Government Officials – Hit the bottom for worldwide trustworthiness in delivering a message

There’s much more to this report and a lot of learning.  Perhaps its time to have your “expert” on staff start delivering your message 3 to 5 times across multiple communication channels to ensure you have a trustworthy image that you can live up to.  In our world of increased transparency, you may not have any option but to have integrity.

Doping and Finance – Similar?

January 31, 2013 Comments off

bikemoneyAfter reading the “Post Lance Future of Doping” by my friend Michael Joyner, I took a moment to realize how similar the entire “doping culture” and drive to win by athletes has a very similar parallel in our corporate world and financial markets.  Especially in light of Armstrong’s interview with Oprah; and Michael’s perspective.

In Michael’s post he uses the statement, “Most people, including journalists, fail to understand that a 1% edge in something like a 10,000m running race means the doper wins by 100m, a huge margin.   This also means that there is no need to use industrial strength doping. ”  This is similar to the fact that most people, including journalists, fail to understand a 1% edge to a hedge fund has a similar huge margin, and a 1% edge to a CEO and his corporate team could mean the difference between a huge and marginal bonus. A tempting incentive to cheat, just a little.

Joyner goes on to say,  “Some argue that all the sports federations, leagues, sponsors and TV networks want is the appearance of clean play and that depending on the situation they intentionally or unintentionally turn a blind eye toward doping.”  As the financial industry grew before it imploded (think just recent history: Arthur Anderson, World Com, Tyco, then think the mortgage crisis),   An entire industry was building around those institutions getting the 1% margin, its difficult to fire a really good customer or client that’s growing like wildfire.

Finally, he makes the point: “Everyone was doping therefore it is “dope or be marginalized”, that is more or less one of the arguments Lance made to Oprah.   Just like the average person and journalist do not understand what 1% is worth, most don’t understand what it is to be immersed in a micro-culture where the only things that matter are the last race or workout or the next race or workout.”  Sound similar to quarterly earnings or investment performance?

I think in the end, we are studying human nature and the ebb and flows of ethical behavior in our society.  Perhaps we should think about studying the core of human behavior and ensuring we parents and educators instill ethical decision making early in our next generation.  We can only hope for a better future, but we are, indeed, human.