What are the main motivating factors for someone to take up entrepreneurship?

A) In a capitalist economy, because they seek to generate an economic return in the form of fungible cash that can support their personal needs and desires.

B) In many cases because they find it fulfilling and a good match for their skill sets, just as artists, dentists, lawyers or competitive athletes finds it fulfilling to go into their respective fields.

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

What is the most viable model for equity based crowdfunding?

One of the following two:

Revenue-backed, interest-bearing notes with a kicker multiple
The funds go into the company as a loan, and get repaid with interest by distributing a fixed percentage of gross revenues (say, 5%) among all the note holders. Once the base+interest has been returned to the investors, the company continues to pay out a percentage of revenues (perhaps at a lesser figure, say, 2.5%) until the investors have received a fixed multiple of their original investment (say, 5x). At any time, the company may retire the note(s) by paying off the base+interest+5x kicker.*
Some sites will use a similar approach, but limit the repayment by time (say, 5% of revenues for the first three years) rather than a multiple of the investment, but this is problematic for a number of reasons. Read more

What are good questions to answer for business plans?

This is my answer on Quora to ‘what are good questions to answer in a business plan?’

Congrats on your question. Basing your planning on what questions to answer, as you suggest, is a really good way to do it. Everything in business planning is case by case, and every plan is unique, so you’re on the right track.

First answer these core fundamental questions: Read more

Tim Berry , Founder, Palo Alto Software
September 3rd, 2013

Are You ‘Hands On’ Enough To Succeed In A Startup?

Image via McCombs.UTexas.edu

There is no substitute for diving into the key details of a new startup. Executives from large companies have sometimes long forgotten how to do this (“My people will contact your people to work out the details.”). Others hire consultants, or outsource much of the real work. These executives won’t survive long in a startup environment.

An obvious reason is limited funds, but a more important reason is the need to know and intimately understand what is really going on in the business and the market. A diligent entrepreneur should certainly work the important details for his or her startup, especially when it comes to assessing any negative fluctuations in the business.

In his book, “Out-Executing the Competition,” seasoned executive Irv Rothman provides tips to corporate executives on how to dig in and “get their fingernails dirty.” I’ve taken the liberty of extending these for entrepreneurs, based on my own experience: Read more

Martin Zwilling , Founder and CEO, Startup Professionals
September 2nd, 2013

Good Advice, Bad Advice, Land Mines on a Path to Heaven

Having just read James Altucher’s Ultimate Cheat Sheet for Starting and Running a Business, I’m fascinated by a collection of bold, very well written, and remarkably unambigious advice, most of it great, some of it terrible. The effect is like a path to heaven with hidden land mines.

Read it, but don’t believe it. Think about each of the 100 points. Reject a lot of them. Be especially careful with the ones that are usually true but not in your specific case. 

And you’ll enjoy it thoroughly. Sometimes right, sometimes wrong, sometimes hilarious, it’s great thought-provoking writing on this subject. It’s one of the best blog posts I’ve ever seen, especially on this topic.   

That’s so hard to explain that I’ll just give you some examples, 10 of the 100 numbered pieces of advice, in no particular order:

  • Should founders vest? Yes, over a period of four years. On any change of control the vesting speeds up.
  • Should I ever focus on SEO? No. 
  • Should you go for venture capital money? First build a product, then get a customer, then get friends-and-family money (or money from revenues which is cheapest of all) and then think about raising money. But only then. Don’t be an amateur.
  • When should you have sex with an employee? When you love her [SIC] and the feeling is mutual.
  • Should you patent your idea? Get customers first. Patent later. Don’t talk to lawyers until the last possible moment.
  • Should you require venture capitalists to sign NDAs? No. Nobody is going to steal your idea.
  • My wife/husband thinks I spend too much time on my startup? Divorce them or close your business.
  • How do you get new clients? The best new clients are old clients. Always offer new services. Think every day of new services to offer old clients.
  • Should I do social media marketing? No.
  • How much equity should you give a partner? Divide things up into these categories: manage the company; raise the money; had the idea; brings in the revenues; built the product (or performs the services). Divide up in equal portions.

See what I mean? Good advice, and bad advice. Which is which? That’s up to you. 

The “funny” doesn’t show fully in those 10 examples, so look at these:

  • My customer called me at 5 p.m. on a Friday and said, “We have to talk.” And now I can’t talk to him until Monday. What does it mean? It means you’re fired.
  • Why didn’t the VC or customer call back after we met yesterday and it was great? They hate you.
  • Should I have sex with an employee? Stop asking that.

Take my advice. Read his advice. 

Tim Berry , Founder, Palo Alto Software
August 27th, 2013