Monday, October 16, 2017

Gold or Grit? How to Make Your Startup Shine


From The Book: Are You Fundable? To find out more about the way Investors think you can get our book Are You Fundable? on Amazon Amazon, Kindle or directly from our site areyoufundable.com.


Like minerals or metals, no two business sectors have the same inherent value. Some are gold and some are gravel but if you understand how Investors rank these companies you could turn this around.

Remember that mining gold can be prohibitively expensive while digging up gravel is cheap and is used every day and everywhere.

Although gold will always get more attention than grit, there are many ways to make your gravel look like gold to Investors.

Remember that while the crowd will always be attracted to the next shiny thing, most money is made on reliable, boring and often unappealing businesses.

So if you don’t have gold learn how to make your gravel look like it - usually by showing that you can make profits with much lower risk and startup costs.

Here are some ways to do this:

1. Is Your Industry Support or Sales?
The no. 1 attraction to investors is growth - dramatic growth. So no matter how ugly the industry, if your business increases sales or any kind of business activity - especially if it enables business growth that would not otherwise occur - you may have gold.

Gold: Examples of Sales Enablers or Boosters:

 Door Opener - If your business enables companies to enter marekts they previously couldn’t reach.

 Sales Booster - When companies that were local can now go global or that could only sell in one category can now sell in more. This is especially good if these are high-growth low-competition categories.

 Sales Platform - Investors are most interested in platforms that allow others to bring the value and then you get to take a cut (think: stock market, auctions etc.)

Businesses that Will Put Investors to Sleep.

You may love what you are doing and think it's the most important thing in the world. Investors will almost always see it differently. The good news is that if you understand this and think creatively, you may be able to turn it around.

Gravel - Examples of businesses Investors don’t love - but which you can still turn around. 

If your business plan is based around the following, be aware that they may sleep-inducing triggers for investors:

 HR, customer or corporate support. These are expenses and not sales growth inducers. They are hard to measure and often managed by gatekeepers with limited budgets and murky agendas.

- Possible solutions: if you can show these really make a difference or have happy returning customers, then say so up front - it could make a difference! Otherwise, you always want to frame a new paradigm in the industry and claim to have a platform that other players will have to use to enable overall growth.

• Government agencies of any kind.
Possible solutions:  If you have special access of some kind. Contracts or something along those lines, you have a chance. Otherwise only investors who know that specific branch of government will be interested. They are just too many gatekeepers with murky agenda to interest Investors.

• FDA Trials
- Anything that requires money for trials is a no-no for general Investors. Specialized Investors might be interested but only if they have experience in the area.
Possible solutions: Find areas to prove the idea that don’t face these upfront barriers. Sometimes it is a game or an overseas market. Find it.

• Education
Possible solutions:  There are some known areas of value here - such as SAT and GRE’s and so on. Anything that “cuts the fat belly” of the industry by more than 70% might be of interest to investors but they generally have to be specialized or experienced in Education. For most investors there are just too many gatekeepers with murky agenda to interest them.

• Ad supported Media
- If your business plan just assumes it will be supported by advertising - and you have never been in the business of selling ads - then you may be in trouble. Ad networks don’t pay that well, and ads generally don’t sell by themselves. You need a sales force to handle customers who are generally hard and fickle. The only want to get around this is to show that you can sell or that for some compelling reason you have partners that deliver sales. Better yet, your idea is so good that at least 10% of your users are willing to pay a subscription fee.

• Value is in the Data
- In an era when hackers can steal credit card info from Equifax of download the CIA’s list of most active spies, your amazing data just doesn’t seem so valuable any more. However, if your tool or platform enables others to extract data - which you also get to keep - then you might have something. Real-time actionable data is different though. That is like fresh fish - and people will always prize that. You just have to show the investors who your fish buyer is.



           

From: Are You Fundable?
Order the Book Are You Fundable?

Friday, October 6, 2017

Is Your Startup Gravel or Gold? How to Make it Shine, Regardless.


From The Book: Are You Fundable? To find out more about the way Investors think you can get our book Are You Fundable? on Amazon Amazon, Kindle or directly from our site areyoufundable.com.


Like minerals or metals, no two business sectors have the same inherent value. Some are gold and some are gravel but if you understand how Investors rank these companies you could turn this around.

Remember that mining gold can be prohibitively expensive while digging up gravel is cheap and is used every day and everywhere.

Although gold will always get more attention than gravel, there are many ways to make your gravel look like gold to Investors.

Remember that while the crowd will always be attracted to the next shiny thing, most money is made on reliable, boring and often unappealing businesses.

So if you don’t have gold learn how to make your gravel look like it - usually by showing that you can make profits with much lower risk and startup costs.

Here are some ways to do this:

1. Is Your Industry Support or Sales?
The no. 1 attraction to investors is growth - dramatic growth. So no matter how ugly the industry, if your business increases sales or any kind of business activity - especially if it enables business growth that would not otherwise occur - you may have gold.

Gold: Examples of Sales Enablers or Boosters:

 Door Opener - If your business enables companies to enter marekts they previously couldn’t reach.

 Sales Booster - When companies that were local can now go global or that could only sell in one category can now sell in more. This is especially good if these are high-growth low-competition categories.

 Sales Platform - Investors are most interested in platforms that allow others to bring the value and then you get to take a cut (think: stock market, auctions etc.)

Businesses that Will Put Investors to Sleep.

You may love what you are doing and think it's the most important thing in the world. Investors will almost always see it differently. The good news is that if you understand this and think creatively, you may be able to turn it around.

Gravel - Examples of businesses Investors don’t love - but which you can still turn around. 

If your business plan is based around the following, be aware that they may sleep-inducing triggers for investors:

 HR, customer or corporate support. These are expenses and not sales growth inducers. They are hard to measure and often managed by gatekeepers with limited budgets and murky agendas.

- Possible solutions: if you can show these really make a difference or have happy returning customers, then say so up front - it could make a difference! Otherwise, you always want to frame a new paradigm in the industry and claim to have a platform that other players will have to use to enable overall growth.

• Government agencies of any kind.
Possible solutions:  If you have special access of some kind. Contracts or something along those lines, you have a chance. Otherwise only investors who know that specific branch of government will be interested. They are just too many gatekeepers with murky agenda to interest Investors.

• FDA Trials
- Anything that requires money for trials is a no-no for general Investors. Specialized Investors might be interested but only if they have experience in the area.
Possible solutions: Find areas to prove the idea that don’t face these upfront barriers. Sometimes it is a game or an overseas market. Find it.

• Education
Possible solutions:  There are some known areas of value here - such as SAT and GRE’s and so on. Anything that “cuts the fat belly” of the industry by more than 70% might be of interest to investors but they generally have to be specialized or experienced in Education. For most investors there are just too many gatekeepers with murky agenda to interest them.

• Ad supported Media
- If your business plan just assumes it will be supported by advertising - and you have never been in the business of selling ads - then you may be in trouble. Ad networks don’t pay that well, and ads generally don’t sell by themselves. You need a sales force to handle customers who are generally hard and fickle. The only want to get around this is to show that you can sell or that for some compelling reason you have partners that deliver sales. Better yet, your idea is so good that at least 10% of your users are willing to pay a subscription fee.

• Value is in the Data
- In an era when hackers can steal credit card info from Equifax of download the CIA’s list of most active spies, your amazing data just doesn’t seem so valuable any more. However, if your tool or platform enables others to extract data - which you also get to keep - then you might have something. Real-time actionable data is different though. That is like fresh fish - and people will always prize that. You just have to show the investors who your fish buyer is.



           

From: Are You Fundable?
Order the Book Are You Fundable?

10 Steps to Getting Funded - from the book: Are You Fundable?

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From The Book: Are You Fundable?
To find out more about the way Investors think you can get our book Are You Fundable? on Amazon Amazon, Kindle or directly from our site areyoufundable.com.

To give you an idea of what you need to get in front of investors consider the 10 Steps to Funding:

1. Know yourself
– the product and why you should be the one to make it work.

2. Know your sector
– the market and how investors see it

3. Know your Investor
– what have they invested in before and why

4. Know your Opener and Closer
– Find out what key words get Investors' attention. Find out how to close them

5. Know your gameplan
– customer acquisiition, its cost and the sales strategy 

6. Know your plan B (and C)
– Or, How to turn a No into a Yes. Very few Investors believe that the company will proceed exactly as you say. It might even fail. So what alternative pans and do you have it ready to go.

7. Know your numbers
– Know your costs, your margins, your burn rate or overhead. Most of all - look like you will be a good steward of someone else’s money!

8. Know your tech
– You’ve got to be conversant with your technology and sound like you know how to pass it on if your developer leaves in a huff. 

9. Know your team
– Show who's on board and why - but not too much background! 

10. Know Your Exit
– Who’s going to buy you. Why, how much and tell us about genuinely comparable deals.

From: Are You Fundable?
Order the Book Are You Fundable?

Tuesday, September 12, 2017

Survive & Thrive – What We Learned at this Innovative Retreat


Everyone has a plan 'till they get punched in the mouth. 
Mike Tyson

The real lesson of this imaginative retreat, Survive and Thrive last weekend at Club Getaway in Kent, CT is that if you want to thrive – showing that you can survive is the real challenge.

This is what investors look for and this is what speakers like Jesse Itzkey (co-founder of Marquis Jets and the guy who got to marry Spanks Sarah Blakely), Kevin Harrington (former Infomercial King who had to reinvent himself in the post TV world) and and author Susie Carter (a millionaire former hairdresser) had to say.

Sometimes this is about changing your idea precisely because you got knocked out of the ring! When that happens – whatever you were left with after the KO, whatever looked it was working, is what really matters. This is truly how most entrepreneurs realized they were really Entrepreneurs and went on to make millions.

That is also what we tried to do at the Pitch Contest finale on Sunday and what my company, Startupalooza does every months in major cities in the northeast – with our pitching contests and workshops. The winner, NY-based Bellhop – a ridehailing aggregator along the lines of Kayak, truly came through it all

This imaginative first-time Retreat combined, upbeat conferences, group challenges, super networking, great dining and fun partying. It was like a cruise ship on land for cool people who own the future but still know how to dance and make karaoke come alive!

Most interesting was just how diverse and international the Entrepreneurs, mentors and Investors were.

Turning a No to Yes: Winning over Investors After First Punch.

While there were a lot of winners, there were others who have work to do. Thats normal - there are very few startups that are ready for investors out of the gate.

There are many great lessons to be learned: The first is to find out if the investors even look at your segment, if not, give them a very brief idea and ask for a referral. They usually will, even if it is to get you off their backs.

It they are interested in your segment and the answer is no, or the dangling maybe keep in mind that you can always go back to them but only if you have news, such as:

1.     You listened to what they said, and implementing it has improved the company this way.
2.     You have more buy-in: customers, revenue, new investors.
3.     You have pivoted – and it seems to be working. What do you think?

Your True Idea: Its Not the Punch – Its How You Get Up
Most Entrepreneurs and Investors have taken a hit, and its usually a KO. So getting the punch is normal - its what you do after it.

If you are a real entrepreneur, its where you find your true idea, your true market or just your real hook for Investors. It is so important that Investors will hit you with it just to find out if you have stress-tested the idea and whether you have a Plan B and C, just in case your assumptions go wrong, the market implodes, or real customers just dont love you like you say.

This helps you find your true role. So who are you – seller, technician, visionary? When you know that, you know who to partner with or hire to fill the gap. Maybe you dont like to sell then find the partner who can – though engineers who do the best they can often get a lot of credit for trying. If youre not a programmer show that you know enough to manage and even fix if the site crashes or upgrades need to be done in a hurry.

This challenge also helps you find your true market value – working companies have comparables (similar funding companies) - ideas and possibilities are whatever Investors feel is fair and thats usually low.

B Students Rule
Most of our successful entrepreneurs and speakers were not great students or often not even college grads, they were great doers who wound up hiring the experts. That doesnt mean you shouldnt have an MBA – it just means that degrees don't start businesses, scrappy risk takers do. So what ever it is that you do you have to know that you can jump overboard with it and stay afloat and still get to shore.


Alan Brody is the founder of Startupalooza, a seed investor and author of Are You Fundable?








Thursday, July 6, 2017

Uber's Real Threat:

The NY Times did an interesting depth piece on the battle between Londons Black Cabs and Uber. Unlike other face-offs where the legal Taxis are a mostly entry level job for immigrants, London Cabbies are a true craft profession. In order to qualify, they have to study every route combination in a very complicated city for about 3 years. After passing a long series of grueling tests, they are said to have The Knowledge.  There is even evidence that acquiring this mapping information expands the brain.

Uber vs London's Black Cabs
Then, along come GPS and Uber and all that Knowledge plus the street hailing monopoly was upended. Moreover, the people who have the Knowledge tend to be white and local (growing up in the terroire gave them the obvious advantage) while Uber drivers tend to be foreign-born and brown.

The Times piece is mostly concerned with the xenophobia and racism of many of the Cabbies vs the struggle of the Uber immigrants and its relation to Brexit. While this is certainly an issue, I would like focus on the business story because it was mostly overlooked and there is clearly a worldwide lesson in this.

This is much more than a taxi tale……

(Note: in my student days I drove a London radio taxi known as a minicab - a fascinating experience that arguably gives me a unique perspective since I am now a Startup maven.)

Like most disruptor stories, there is a precedent but one that is only really understood in retrospect.

Ubers precedent is Londons Minicabs. Beginning in the 50s, renegade cabbies used postwar Motorola radios to skirt hailing laws with a dial-a-cab service.  This was controversial and initially, hounded by the law. Cabbies obviously hated them but, over time, coexisted. After all, Cabbies often refuse fares, favoring inner London and short rides over suburban trips since meter flips make the most money and they fear returning empty. They were even known to throw passengers out of their cabs for whatever reason they chose.

On the other hand, once established, minicabs, didnt evolve much either. Radios got better but they couldnt get the impulse or hailing passengers away from black cabs. Instead, individual drivers became notorious for blagging - illegally hustling for fares outside clubs, bars, bus stops etc. So, other than running ads with easy-to-remember phone no.s minicabs never figured out how to leverage cellphones as a hailing device.

Enter Travis Kallaneck – a techie and not a cabbie – who stumbled upon a giant opportunity in the marketplace. Result: worldwide disruption!

But there is clearly more to this than just a clever app. Eventually, the full story of his rise from organizer of struggling black cabs to the king of the gig economy will emerge. However, from the simple outlines of its story and my own experience of the tough world he conquered I can best compare him with a primitive military genius who developed a new weapon and then adapted in a ruthless way to confront a world of brutal competition: Shaka Zulu.

Taxis are all about owning territory and they are generally a monopoly backed by local authorities. There are many places where taxis engage in open turf warfare and that was before Uber. It is entirely possible that Kallanecks magic app had already existed in some other form, but whoever had it lacked his militant instincts.

Shaka Zulu was a renegade warrior who invented a new spear who went on to change the face of African warfare, creating one of the largest empires on the continent. The key is not just that he had a better weapon but that he understood how to change tactics, training, strategy, use a total war concept called uMfekane and even introduced a fundamentally sexist motivational system based on the accumulation of brides according to conquest. Despite this, he even had women war brigades.

What both Kallaneck and Shaka confronted was an established way of life and a protected class with entrenched rights. In London, the Cabbies happen to be the tribal royalty. In a very class-conscious country these Cockney Kings, unlike the landed gentry, actually earned their status and they let you know it. For this reason, minicabbers may have resented them but they also admired them – probably more so than the toffs.

However, like most entrenched thinking which includes landed gentry and professionals of all kinds, they rested on their privileges and felt free to ignore progress. They refused credit cards for the obvious advantages of earning pure cash and avoided radio or app-hailing devices. They also continued to pick and choose their fares.

Technology, on the other hand, is inherently attracted to the upending of these privileges. Just as Shaka figured out how to disarm his opponents, Kallaneck developed programs to disarm the authorities and the taxi industrys sense of protection. Shaka added a hook to his new shield, which enabled him whisk away his opponents protection, leaving a wide open target for his shorter stabbing spear.  

With Uber, it was the public that really sank in the spear because they got a much better deal from Kallaneck.

What the public realized - as they will with most protected groups – that they exist in opposition to the publics actual needs and the law was probably rigged by them for their own self-interest.


For this reason, protected groups of all kinds should study this for what it is. It is not just a story about a bunch of Luddite cabbies, but one of a well-qualified business group hiding behind a legally protected shield – only to find that, once lifted, however momentarily – it is really not supported by the public.

The true message here is, this is as likely to happen with doctors, lawyers, unions – even police – as it is with toll clerks, paper shufflers, middle managers, truck drivers and entrenched classes of any kind.

Their only protection is to rethink what jobs, knowledge and professions really are and innovate in line with the public interest.

The sad truth is, when stripped of their shields, most protected groups are revealed for what they are: a drag on competition and a barrier to progress. Or as Adam Smith once noted in The Wealth of Nations: People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.  

That was fine before globalization but increasingly, an absurd relic. By blocking progress, like taking credit cards or developing their own apps and refusing fares, Cabbies ensured the popular support for Uber – which now faces its own disruptors like Lyft and Via. Likewise, unions, doctors, lawyers and other professionals are increasingly competing on a world market where claiming a divine right merely forces the publics search for viable alternatives – now made easier by the Internet.

There will always be people willing to pay a premium for better service but forcing the acceptance of non-progress is just a racket doomed by technology and globalization. Trade groups need to get the message and swap their protectionism for innovation or they will find themselves marching along with the taxi drivers.

https://www.nytimes.com/2017/07/04/world/europe/london-uk-brexit-uber-taxi.html?hp=&_r=0