When Are Business People Entitled To Be Entitled?

Image via Flickr

Image via Flickr

Where did this sense of entitlement in our business culture come from? I’ve written about this before, but I was reminded again a while back at a conference for startups when an entrepreneur started berating investors for not funding early-stage startups. It sounded to investors like me that they felt a funding entitlement for their startup idea. Of course, I’m sure entrepreneurs sense that many investors feel entitled to deals with no risk. It’s bad news either way.

As a society, we seem to think we’ve evolved to the point where we can fashion a large portion of existence according to how we wish it to be. We notice what we like and what we dislike, so we work to make society match our dreams. Somehow, these dreams and wishes have morphed in many people’s mind to an entitlement. Read more

How important is trust in business partnerships?

There are three separate questions you’re asking here, so let’s take them one at a time:

How important is trust in business partnerships?

It is critical. Vital. The single most important thing. Without trust you will spend the entire relationship looking over your shoulder and second-guessing everything your “partner” does and says. This may well destroy your entire business.

Are a lot of business people sneaky?

No. Are there some who are ‘sneaky’. Sure. Just like there are sneaky teachers and artists and construction workers. But people in business are no more ‘sneaky’ as a class than anyone else. Contracts are not primarily designed to prevent sneakiness; instead their purpose is to make absolutely sure that everyone involved in a transaction or relationship understands explicitly clearly what everyone’s rights and responsibilities are, and what exactly is expected from each party.

What should my company do about this specific potential business partner?

Skip him and move on to someone else. Our intuition is an extremely powerful and little understood faculty that subconsciously integrates all of our experience and knowledge into one ‘feeling’.  If your co-founders are telling you that they don’t trust this person, then you should run, not walk, in the other direction. When entering long term partnerships (especially in ones where they are representing you, your products and your reputation) it is imperative that you enter into the relationship with trust, and if that’s lacking, the partnership is doomed regardless of how attractive it might otherwise be.

*original post can be found on Quora @ http://www.quora.com/David-S-Rose/answers *

If I have a great startup idea why should I ask for funding?

“would a great idea be promoted without any marketing?”

By whom?

According to that theory, Apple should cut out its entire multi-billion dollar sales and marketing and retail store divisions, because all of its great products will sell themselves.

It’s wonderful that you can (now and forever) program, maintain, market and support your product yourself. But if you ever expand to the point where that becomes difficult, you may find that you need to bring on some help. If you can pay the salaries for that help from the profits you have already made, that’s great too.

But if you need to expend money for salaries, hosting, advertising or anything else before your venture is successful enough to pay for it out of your profits, you may want to consider whether it is worth parting with some of your future profits in exchange for access to immediate cash today.

But rest assured that nobody can force you to take an investment against your will if you don’t want to (or need to.)

*original post can be found on Quora @ http://www.quora.com/David-S-Rose/answers *


Think Hard Before Jumping From Corporate To Startup

Photo via Flickr by Eric Chan

Photo via Flickr by Eric Chan

I talk to many people who have spent years struggling up the corporate ladder who dream of jumping ship and becoming an entrepreneur. I hasten to tell them that every job move is fraught with risk, but the move from employee to entrepreneur is on the high end of the risk curve. It’s a big jump, especially in today’s economy, so do your homework first on this one.

According to an article in the Harvard Business Review a while back, “Five Ways to Bungle a Job Change,” there are at least five common missteps that professionals make when moving to a new job. I will assert that each of these has a comparable relevance for those of you contemplating leaving a company employee role to create or join an entrepreneurial startup as follows: Read more

Is there a difference in expectation and attitude between Angels in the USA vs those in other Geographical regions and are there disadvantages because of this?

Surprisingly, no. Angels of a certain ‘level of professionalism’ have more in common with each other regardless of geography, than do novice and ‘super angels’ in the same city.

I am friends with many professional angels from around the world, and my analyses (allowing for our individual investment preferences) are virtually identical to those of Dave Berkus in Southern California, Matey de Nedkov in Montreal, Phillippe Gluntz in Paris and Dušan Stojanovic in Sweden.

That said, I have seen slight regional differences, including: a preference for Big Ideas on the West Coast, financial and advertising technology on the East Coast, and gaming and retail in Europe.

*original post can be found on Quora @ http://www.quora.com/David-S-Rose/answers *

Where Is Your Technology In The Gartner Hype Cycle?

Image via Wikipedia

Image via Wikipedia

The Hype Cycle was a concept put forward by Gartner, Inc. back in 1995 meant to apply to technology product evolution and acceptance. As I was reading about it a while back, it occurred to me that the concept relates directly to how investors see startup opportunities and potential success as well, at least those with technology in their offerings.

For those of you unfamiliar with the concept, the Gartner Hype Cycle characterizes the over-enthusiasm or “hype” and subsequent disappointment that typically occurs with the introduction of new technologies. Hype curves then show how and when technologies move beyond the hype, offer practical benefits and become widely accepted. A hype cycle in Gartner’s interpretation always comprises five phases: Read more

What are key issues for companies to keep in mind when obtaining investment from an Angel group?

The main one is simultaneously obvious and under-estimated in both directions: you are likely getting a bunch of small-ish investors at once. This might typically be anywhere from five to twenty-five investors each putting in somewhere between $10,00 and $100,000 (depending on the group.)

The good side is that you now have 5-25 smart, connected people rooting for you. If you handle this correctly and make your expectations clear up front, they can be a *major* asset when it comes to introductions, connections, advice and follow-on funding.

The not-so-good side is that you now have an equal number of people with a legitimate interest in the details of your business, to whom you have a fiduciary responsibility both to safeguard their money and to keep them informed. While usually this works out well for everyone, I’ve seen cases where a couple of small investors can aggravate the CEO by constantly calling with questions, intruding with operating advice and generally being a pain in the neck.

The solution, however, is pretty straightforward:

  1. Make sure you have a good working relationship with your lead angel, who will often be on your board. Establish up front that he or she will be your primary interface with the group.
  2. Communicate early, often and fully with ALL your investor members. If your term sheet calls for quarterly reports to investors, SEND THEM! And make sure that financial reports are accompanied by a management letter explaining what’s actually happening.
  3. Use an investor relations platform ([cough] like Gust [cough]) to keep all your investor material, reports and contact info up to date. That’s likely what the group is already using to collaborate with each other.
  4. Have a regularly scheduled conference call with your angels to keep them in the loop and let them ask questions of you. My gut tells me that quarterly is probably too frequent, but semi-annually may be just about right.
  5. Make it a point to reach out to them when you need something, including introductions, leads, team members, etc. (this is where most Founders drop the ball!)
  6. Right from the beginning, make it clear what you expect from the relationship, promising regular communications TO them, in exchange for putting rational limits on communications FROM them. (It’s a “one to many” relationship, so that’s the only way it can work.)
  7. If you’re an LLC instead of a C-corp, be SURE to get all your investors their K1s in good time to file their taxes…or else you run the risk of being burned in effigy.
  8. Finally, make sure to keep all your books and records (including your option program, cap table and 409a valuations) accurate and up to date, so that you can respond quickly and professionally when your investors request information to establish valuations for their portfolios.


*original post can be found on Quora @ http://www.quora.com/David-S-Rose/answers *