Lesson #192: Combat Management by Committee and Analysis Paralysis

Back in Lesson #15, I talked about "hands-on vs. hands-off" management styles, and my preference for a "hands-off"style, empowering a smart team to do their jobs without getting in their way, and only jumping into the details when absolutely necessary.  This post is less about management style and more about management process.

I once had a client that brought me in as an interim executive, to fill in for a departing employee.  I was excited to join the company and knew I could have an immediate impact.  In my first week on the job, I noticed something very strange.  My calendar started to fill up with about three days a week worth of committed meetings.  And, it was eating into my time to actually do my job.

Some of these meetings were related to my department (micromanaging my team).  Some of these were related to the executive team (with a culture of managing every department's decisions by committee).  And, some of these were related to other departments, and I had no idea why I was even needed in the room.  All in all, I was losing over half of my week doing everyone else's job, except my own!  That wasn't going to last.

So, I quickly reorganized the meetings.  I got my department meetings down to one per week, plus the one-on-one meetings with my team members (in case they needed me for anything--not me need to micromanage them).  I got the CEO to reorganize the executive meetings, so that we were only meeting one time a week (more to keep us updated on what we were all doing in our department, not for group decision making).  And, I cancelled all the meetings with the other departments.  I was able to get these meetings into one day a week, giving me two days a week back to do my job.

Related to this, I was watching how the CEO was making decisions.  He wasn't trusting his team to make the right decisions on their own.  He needed to be involved in all decisions they were making.  And, because he did not understand their jobs as well as they did, he would force them to run through circles creating numerous iterations of business cases and financial models until he understood it and could approve the decision.

All that did was irritate his team, from the lack of trust and again from slowing them down from doing their jobs.  And, the pace of making progress in the business screeched to a near halt, with managers having to wait for the CEO's approval before progressing.  The business had a materially bottleneck in their process for making progress--and the CEO was that bottleneck.

I told him this process was broken, and if you don't trust the team to make their own decisions, he should hire a new team.  That message resonated, and he changed his focus from helping make decisions for everybody else in their jobs, to actually doing his own job!  And, the business's growth and rate of change improved as a result.

So, make sure you all fine tune your processes.  Only schedule meetings that are absolutely necessary, trusting your team members to make their own smart decisions.  In a perfect world, the key department managers should be telling senior management what to do, for their support, not vice versa.  And, don't over-think and mentally masturbate every decision, since "analysis paralysis" can suffocate the life out of the business and your team.

For future posts, please follow me on Twitter at:  @georgedeeb.

Lesson #193: The Best Medicine For Your Business -- A Fresh Set of Eyes!!

Over the years, I have had many clients with problems in their business that they didn’t know how to solve.  They would invite me in to take a look to see if I could solve their problem.  And, sure enough, a very easy solution to the problem presents itself in quick order.  Not because I am smarter than them.  But, because I came in with no pre-conceived ideas or past experience with the company, and simply came in with a fresh set of eyes and logical business sense.

Let’s talk about an example.   I had one client that hit a wall with growth.  They successfully grew from zero to over $10MM in revenues, but then growth flatlined for a couple years, and despite their efforts to break through that level, revenues just stayed flat.  After I came in and looked at the historical sales and marketing efforts, it became perfectly clear what the problem was: they were not materially investing in sales and marketing at all!!

The founder had assumed that a “business as usual” approach would help him solve the problem, with him being the primary salesperson of the company.  But, that presented a huge bottleneck for the business.  One person has a fixed capacity for selling, and regardless how good he was at selling, he was never going to sell more, without expanding the sales team, and investing in marketing to help drive new leads.

The point here is, sometimes a CEO, especially a founding CEO, is just “too close” to the business, immersed in the day-to-day work, that they can’t take a needed pause to see the forest through the trees.
So, a few key learnings here: (i) set aside time to get out of the day-to-day work to better think strategically about how you are running your business; (ii) understand that just because something worked before, doesn’t mean it is going to continue to work forever; (iii) the needs of the business will change as your business scales, so adjust your plans accordingly; and (iv) oftentimes, bringing in a fresh set of eyes can help you more clearly see, what you may not have been able to see on your own.

So, it doesn’t matter whether that fresh set of eyes is a paid consultant, or a mentor or a peer in a similar role at a different company.  It just matters that you quickly identify when you have a need for a fresh outside perspective, and bring someone in to help you brainstorm through the problem.  As the odds are, an easy solution will be staring you in the face, but you just can’t see it.

For future posts, please follow me on Twitter at: @georgedeeb.

Don't Be Overly Infatuated With Your Own Startup Idea

I have previously written about the importance of being passionate about what you are building at your startup.  And, that passion would be the key driver to successfully get you through both the good times and the bad times of your startup’s growth.  This is still a very true assessment.  BUT!!

Read the rest of this post in Forbes, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

Red Rocket's Best Startups of 2014

Red Rocket gets introduced to a couple hundred startups each year, in the normal course of doing business, or via our involvement with FireStarter Fund, TechStars, Techweek, VentureShot, Founder Institute or other startup groups or events.  We wanted to honor the best of these startups that we met, or got reacquainted with, in 2014, in Red Rocket's 3rd Annual "Best Startups of the Year".  This list is not intended to be an all-encompassing best startups list, as there are many additional great startups that we are not personally exposed to each year.  And, this list is not intended to be only for businesses that launched in 2014, it is open to startups of any age, that they or their advisers had some personal interaction with us in the last 12 months.  The business simply needed to have a good idea, good team or good traction, that caught our attention.  Congrats to you all!!

THE BEST STARTUPS OF 2014 (in alphabetical order):

Abe's Market (CEO Richard Demb) - B2C E-commerce for Natural & Organic Products

Change Lane (CEO David Harig) - B2C Mobile Oil Change Station at Your Home

ClutchPrep (CEO Marcio Souza) - B2C Video Guides for College Textbooks

Datatopia (CEO Paul Brizz) - B2B Buy and Sell Data Marketplace

DoggyLoot (CEO Jeff Eckerling) - B2C curated ecommerce and deals for pet supplies

Dryv (Co-CEO Dan Parsons) - B2C Dry Cleaning Delivery App

eForward (CEO Josh Morales) - B2C Low Cost Overseas Shipping

Fitness Cubed (CEO Arnav Dalmia) - B2C Under Your Desk Pedal Exerciser

HealthIPASS (CEO Rajesh Voddiraju) - B2B Healthcare Payments Platform

Inventables (CEO Zach Kaplan) - B2C Digital Invention Manufacturing for Masses

Legal Funding Central (President Dylan Beynon) - B2C/B2B Legal Funding for Plaintiffs

MightyNest (CEO Chris Conn) - B2C School Donations From Kids Ecommerce

MoxieJean (CEO Sharon Schneider ) - B2C upscale resale ecommerce for kids clothing

Office Hero (CEO Marcelo Lanzarotti) - B2B Lease Free Office Space Finder

Options Away (CEO Robert Brown) - B2C Call Options For Airfares

Public Good (CEO Jason Kunesh) - B2C philanthropy portal site

Ridogulous Labs (CEO Sean Kelly) - B2C Smart Dog Collar Technology

Sensor Jet (CEO Julia McLachlan) - B2C Fire Supression System for Home Kitchen

Shelfbucks (CEO Erik McMillan) - B2B in-store beacon promotion platform

Social Market Analytics (CEO Joe Gits) - B2B/B2C Social Listening for Stock Trading 

The Tie Bar (CEO Michael Alter) - B2C E-commerce for Men's Accessories

ViralHeat (CEO Jeff Revoy) - B2B Predictive Social Analtyics

Wavve App (CEO Andrew McNealy) -B2B On-Premise Marketing for Hospitality Industry

WeDeliver (CEO Jimmy Odom) - B2B Same Day Delivery Service

And, don't forget to check out the 2012 winners and the 2013 winners, many of whom continue to be doing great things.

Congratulations to you all!!  Keep up the good work.  

For future posts, please follow us at: @RedRocketVC

Six Chicago Venture Capitalists Reveal the Best Pitch of 2014

Crain's Chicago asked six of the city's busiest investors to describe the best pitch each heard this year: the ones that got their attention and, in most cases, pried open their checkbooks. The front-running companies have two things in common: They solve a clear pain point in the marketplace and they're headed by dynamic leaders. Read on for an edited version of our conversations.

Read the rest of this post in Crain's, which published this week.

For future posts, please follow us on Twitter at: @RedRocketVC.

Lesson #191: Targeted Marketing Has Never Been Easier, Especially in Social Networks

The marketing world has substantially evolved over the last few years, in terms of how you can target prospective customers for your business.  Before, your primary options for targeting, were largely around demographics or geographies through media buys on larger websites and ad networks, or through keywords through the search engines.  But, the major social networks have made some very interesting strides in the last couple years, in terms of letting advertisers drill down like a laser beam on very narrow targets within their broader audience.  Below are a few examples of what I am talking about.

VIA LINKEDIN

If you are a B2B business, looking to target B2B buyers for your product or service, LinkedIn in the place for you, where you have a couple really good options to consider.  Let's use a case study, assuming you are selling technology that serves event marketers and you are trying to target heads of event marketing as prospective buyers.

The first option is to target your media buy around LinkedIn users that are members of targeted user groups therein.  In this example, look at all the groups that serve prospective end-buyers in the event marketing space, and target your ads only to those users.  As an example, the 20,000 members of the "Event Marketing Pros" group is probably a pretty good place to start.

A second option is to target your  media buy around LinkedIn users that have the right business title and work at the right size company you are targeting.  In this example, anybody with the title "Event Planner" or "Head of Event Marketing" in their user profile page and work for "Companies in Excess of 1,000 Employees" (if trying to get to Fortune 500 accounts), would be really great to target your ads.

VIA FACEBOOK

If you are a B2C business, looking to target B2C consumers for your product or service, Facebook is the place for you, where you have some really good options to consider.  Let's use a case study, assuming you are selling a new line of line of upscale men's fashion.

It has never been easier to steal potential customers from established brands in your space.  Imagine that you can now target yours ads to the Facebook fans of Giorgio Armani, Ralph Lauren or Tommy Hilfiger, or the male fans of logical retailers like Nordstrom or Saks Fifth Avenue.  These people are obviously interested in men's fashion, and with the right messaging might be interested in learning about new men's fashion brands.

The same holds true for targeting followers of major media outlets in your space.  Facebook fans of  GQ, in this example, would be pretty ripe fishing grounds for your product.  And, it would be a lot cheaper trying to access those users via Facebook's pay per click model, than paying GQ thousands of dollars for CPM based display ads in their magazine or website.

VIA TWITTER

And, let's not forget Twitter, whether you are B2B or B2C.  You can target your ads to users that have certain desired keywords in their profile description, or in their stream of conversations.  Or, again, piggyback on the followers of your key competitors, industry groups or media outlets, to get your messaging in front of those known users that should be really interested in what you have to offer.

Anyway, for all you startups out there on very limited budgets, or bigger companies trying to drive a higher ROI on your marketing spend, the better you can target your messaging to the right potential buyers, the higher your conversion rate, the lower your cost of acquistion and the higher your  ROI will be.  And, hopefully, examples like the above show it has never been easier or more affordable to get good levels of targeting into your ad campaigns, on this pay-per-click basis.

For future posts, please follow me on Twitter at: @georgedeeb.

The Top 4 Reasons Passion Drives Startup Success

Passion is one of those intangibles that drives an entrepreneur, gets them through the good times and the bad times, and ultimately dictates the success of any startup. If you are not passionate about what you are building, you might as well pack up your bags right now, as your startup will never work.

Read the rest of this post in Forbes, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #190: Selling Stories, Not Products

Most early-stage sales teams lead with their products.  They are typically so excited about their new products, that they get bogged down in selling the minutia of their product's features and functionality.  They think that is what their clients will care about, and that is what is going to drive a sale.  A common rookie mistake.  As clients don't really care about you or your products (at this preliminary stage), they care about themselves, and how you are going to help them to solve their problems.

The best sales teams are masters in story telling.  They artistically layout a big picture problem in the industry, that the client is dealing with, and slowly rope them in with their elegant solution to this problem.  It is not until several meetings in does the salesperson even talk about their products.  They only detail them once the client has taken the bait, and they need to set the hook.

Let me give you a example.  Let's say your business has built a social media amplification tool (e.g., it helps clients virally spread their message through social sharing).  The wrong pitch would be talking about how great your technology is and all the "bells and whistles" you have built into the product.  A client really doesn't care, especially since you are one of a hundred other companies peddling similar products to them.  Creating a lot of confusion for them on who to trust.  Which often means them doing nothing, to not make a bad decision and waiting for the dust to settle in the industry.

But, what would they care about?  They would want to hear that instead of communicating to the 1MM fans the client has on their Facebook page, you have a product that will help them communicate with the 100MM followers of those fans, increasing their reach by 100x.  Better yet, they would want to hear how you have cracked the code on driving an ROI on their social media spend, as their bosses have been all over them to prove ROI or risk having their budgets cut.  And,  how your last ten customers have averaged a 10x return on their investment with you, turning their social media marketing into a driver of clearly attributable sales.  If they buy your product, they are going to look smart to their boss and see their budgets increase.

Did you notice the difference?  In the first example, it was all about YOU.  In the second example it was all about THEM!  And, more importantly, it got their attention with clear metrics about their business, and helped to paint the picture on how this was going to be a big financial win for them.  Hence, minimizing the risk they look foolish by buying your product.  But, to the contrary, you will help them to get bonus points with their management, and get more budgets and internal credit for the success.

This is a key point.  In this case, the THEM is them personally, not the company!! The more you can speak to them, the individual, the higher odds you will close the sale.  So, do your homework on your clients before you even approach them.  Figure out the company's painpoints, and then figure out how you are going to make your individual contact look smart to their boss.

At the end of the day, a good sales person is like William Shakespeare weaving an intricate story line or Leonardo Da Vinci painting brushstrokes on a canvas.  Artisans of their craft.  Because the truth is, nobody wants to be feel like they are being sold something.  They want the personal win of making a smart decision that helps solve big problems.  The better you craft a story that speaks to them and their pain points, the better your sales success will follow.

For future posts, please follow me on Twitter at:  @georgedeeb.

The 4 Types of Entrepreneurs--Which Type Are You?

I read an interesting book called “Entrepreneurial DNA” by Joe Abraham, the founder of BOSI Global, an operating partner to venture-backed and owner-operated companies. The book is based on Joe’s study of over 1,000 entrepreneurs.  The research confirmed the discovery that all entrepreneurs are not all “wired” the same way.  The book suggests that entrepreneurs fall into four distinct types of "entrepreneurial DNA’s” that leverage unique strengths, weaknesses and tendencies that are typical in each specific type of entrepreneur. Here are the four types:

Read the rest of this post in Forbes, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

The Best Medicine for Your Business: A Fresh Set of Eyes

Over the years, I have had many clients with problems in their business that they didn’t know how to solve. They would invite me in to take a look to see if I could solve their problem. And, sure enough, a very easy solution to the problem presents itself in quick order. It's not that I am smarter than them, but because I came in with no pre-conceived ideas or past experience with the company, and simply came in with a fresh set of eyes and logical business sense.

Read the rest of this post in Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #189: How to Price Your Software Technology

Oftentimes, tech startups are so focused on building their technology, that once it is built, they have no idea how to price it.  This lesson will provide some high-level guidance on how to do that.

HOW MUCH DID IT COST TO BUILD?

The first thing you need to do, is quantify how much investment went into to building the technology in the first place.  How many developers were working on the project, at what hourly rate, etc. And, since you are most typically competing with a "buy vs. build" decision for your prospective clients, it is OK to use market prices for the costs of your tech team (e.g., $150 per hour, even if you are investing sweat equity and it really didn't cost you that much in cash out of pocket).  So, for an example, let's say you had a team of four developers working full time (40 hours per week) for three months.  Your cost would be $312,000 (13 weeks x 40 hours per week x 4 people x $150 per hour).

DETERMINE AN APPROPRIATE ROI AND TIMEFRAME

Just like a venture investor shoots for 10x ROI on their investments, businesses need to shoot for a reasonable ROI on their investments.  And, since we are talking about technology that may have a limited useful life before it becomes obsolete, you need to have a reasonable timeframe that you want that ROI to be realized.  My rule of thumb, where you can, is to shoot for a 10x ROI on your technology investment within a three year period of time.  Continuing our example, that means you need to recover $3,120,000 in revenues in the coming three years, or around $1MM per year, on average.

DETERMINE YOUR SALES ASSUMPTIONS

Next, you need to reasonably estimate how many sales of the technology you will have during the three year ROI period.  You need to take into consideration: (i) how big of a market are you serving; (ii) how many potential buyers are there; and (iii)  how much sales and marketing investment are you making to drive leads and close sales.  In our example, let's say you have one salesperson calling on prospective clients and one salesperson can close one transaction a month.  In order to close $1MM in sales a year, the salesperson would need to be selling the software license at around $80,000 per sale.

SANITY CHECK YOUR ASSUMPTIONS VS. MARKET

The above assumed there were 36 prospective clients that would be closed in a three year period.   And, with a 20% conversion rate in B2B sales, that means your sales person needs to have identified 180 prospective customers.  When you sized the market above, how many potential customers did you reasonably think you were out there?  If not at least 900 customers (assuming most business have a hard time growing beyond 20% market share), then your sales assumptions may be too aggressive, and you may need to adjust your projections (e.g., shoot for fewer customers at a higher average price--maybe 18 transactions in three years at $160,000 price).

SANITY CHECK YOUR ASSUMPTIONS VS. COMPETITORS

So, let's say the $80,000 price held up based on your market analysis.  But, how does it compare to your competitors? Where are they priced?  If you are materially more expensive for a similar product, then you need to lower your price to get competitive (hence, lowering your ROI expectations at the same time).  Or, are you materially cheaper than your competitors?  If so, now you can afford to actually raise your prices (and grow your ROI expectations beyond 10x, which is a really terrific situation to be in).  But, if the ROI starts to dip below 5x, you really need to question doing the project in the first place, given all the risks you will be taking in launching this new product.  So, make sure you do your revenue projections before you start building one line of code.

SANITY CHECK YOUR ASSUMPTIONS VS. CLIENTS

Lastly, you need to ask yourself two questions, as it relates to your prospective clients:  (1) is the price affordably within their budgets (e.g., enterprise clients can easily afford a $80,000 software licence, but SMB's would not); and (2) how much would it take for them to build the software themselves, in a buy vs. build decision.  In this example, they are getting a $3MM technology investment for $80,000 (that feels like a steal for them, and could argue raising your prices).   If you were trying to sell $80,000 software that would only cost them $160,000 to build themselves, then they would start to think about the merits of doing it themselves to "own it".  I like to pitch "we are only 10% of the cost of building this yourself", which suggests we could raise our prices to $300,000 in this example, and still be a big value to clients.

Anyway, pricing is more of an art than a science.  Play with it, test it out on a few clients and adjust accordingly based on how fast or slow they are to act on your offer.  Hope this helps point you in the right direction.

For future posts, please follow me on Twitter at:  @georgedeeb.

The Top 5 Traits Needed for a Startup Management Team

I previously wrote about the key success factors for startups, and the importance of having a solid business plan and model.  I would argue  it is even more important you have a solid management team to execute that plan. Below are the top five things to look for when identifying candidates to fill out your management team.

Read the rest of this post in Forbes, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #188: When Picking a Startup to Join, Focus on the Company (Not the Role)

Startups are really risky.  And, if you are looking to join one, know going in you have a 9 in 10 chance that company won’t be in business within a couple years from now, and you’ll have to be looking for a new job again.  Venture capitalists can get around these odds, by investing in ten companies, hoping one hits it big, with a portfolio driven mindset.  Unfortunately, you as an employee, only get one “bite at the apple” at a time, since you cannot concurrently work for ten companies. 

That means, if you are looking to join a startup, (i) make sure you interview at least 10 companies, before picking one to join (yes, I said YOU interview them—you are not picking a job, you are making an investment bet); (ii) make sure you  pick one that has solid fundamentals in place for success (be sure to read Red Rocket's Definitive Checklist for Startup Success, to learn what that means);  and (iii) you can’t think about it with a specific role in mind—with an early stage company about to take off, sometimes you just need to jump on board anyway you can, buckle up, and enjoy the ride.

This is an entirely different mindset than most people have when looking for a job.  We have been programmed to look for job postings of companies hiring, apply for those specific roles and hope you get a call.  That process, in general, is broken, even for big companies, with too many applicants, and not enough returned phone calls from your applications.  And, with thousands of startups hiring, placing job postings, you have no idea which ones of those have a fighting chance for success.

What I am suggesting is to think like a venture capitalist when looking for a startup to join.  A VC may look at 1,000 business plans a year and only invest in 10 of them.  And, they don’t want to invest in strangers; they prefer to invest in successful people they know or were credibly referred to them (so work your networks).  And, let’s face facts, it is often a herd mentality, they want to find the “hot” companies.  And, often times, that means following the money.  If other respected investors have cut a check into that company, assume they have done a lot of due diligence, and that company must be on to something interesting.  And, if a startup has successfully raised professional capital, they are one step further along in their development curve, to lower the odds of going out of business, and increase your odds your career move will have longevity.

So, with this all said, once you have found that company to “invest” your time in, make sure you get a meaningful equity stake to make it worth the risk and effort, and jump on board in whatever opening they may have at that time.  And, even if they don’t have an opening, creatively figure out how to create a role for yourself.  In early stage companies, there is often a wide range of work to do, and “jacks of all trades” can come in handy, especially if you are willing to put in some “sweat equity” (work without cash salary) for some period of time. 

I am not saying, you as a technologist should try to fit into a finance role, as those skillsets are too far apart.  But, what I am saying is, you as a proven marketer, may be able to fit into a marketing, sales, business development or general management role.  So, be flexible in your thinking, as it is more important to find the right company, than the right role at these early stages.  Happy hunting!

For future posts, please follow me on Twitter at: @georgedeeb.

How to Structure Your Board of Directors or Advisory Board

Properly structuring your board of directors or advisory board could be one of the most important pieces of determining the success for any venture.  These are the people you are going to be relying on for strategic direction, or voting on all key decisions.  So, it is important you understand their role, and correctly set them up.

Read the rest of this post in Forbes, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

[AUDIO] @georgedeeb Discusses Keys to Entrepreneurial Success With @entrepreneurjim at @school4startups Radio

This week, Red Rocket's George Deeb had the pleasure of being interviewed by Jim Beach at School For Startups Radio, a great resource for entrepreneurs, serving over 110,000 listeners.  Hear George talk about his entrepreneurial learnings from his CEO roles at iExplore, Media Recall and Red Rocket, and get juicy tips for entrepreneurial success, based on collective case studies he has seen from the over 500 companies Red Rocket has consulted or mentored over the years.

You can hear the interview by clicking the play button at this link.

For future posts, please follow Red Rocket on Twitter at: @RedRocketVC.

The New Rules of Startups, an Interview with @georgedeeb at @RedRocketVC

When small technology startups around Chicago need a friendly ear to help sort through their problems, many call on George Deeb, managing partner of Red Rocket Ventures in Chicago and the author of “101 Startup Lessons—An Entrepreneur's Handbook.” The 45-year-old adviser has consulted with some 500 local small businesses since Red Rocket's founding in 2010.

Read the rest of this post in Crain's Chicago, where George was interviewed this week.

For future posts, please follow us on Twitter at: @RedRocketVC.

What Fuels a Startup's Success: The Drive to Win or Fear of Failure?

What fuels a startup’s success?  Are you “driven to win” or have a “fear of failure”? I think both sides of this argument are pretty self-explanatory, but let’s just make sure we are clear on what we are talking about here, and settle this debate once and for all.

Read the rest of this post in The Next Web, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

[NEWS] The @RedRocketVC Blog Passes 300,000 Reads!!

Thanks to all of you, our loyal readers, we are excited to announce, that as of today, the Red Rocket Blog has been read over 300,000 times!!  It is has been quite an unexpected result, since launching the blog back in February 2011.  And, our readership continues to accelerate, month-over-month.  We are thrilled you our finding our 101 Startup Lessons useful and spreading the word to your colleagues.  Thanks again for all your continued readership and support!!

For future posts, please follow us on Twitter at: @RedRocketVC.

K-12 Curriculum Needs Major Overall to Develop Entrepreneurship Skills

I am not one to be doom and gloom, preferring to take an optimistic view of most things, but what has me really nervous is the state of K-12 educational curriculum in our country, as I am witnessing first-hand with my school age kids.  Let's take a look as some key trends, and why their needs to be a shift towards teaching entrepreneurship.

Read the rest of this post in Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

Microsoft Supports 100,000 Startups With BizSpark Program

I recently met Martin Schray, a senior technical evangelist at Microsoft.  He introduced me to an interesting program that Microsoft offers startups, called BizSpark.  I thought it would be useful to share it with all of you, in case it could be beneficial to your businesses.

Microsoft's BizSpark program targets startups building software, software as a service or online services as their primary product or service offering.  BizSpark provides free software, support and visibility to help startups succeed, and they power a community of over 100,000 startups in over 100 countries.  They also aggregate special offers for startups from a network of third party partners.

What do you get as a startup joining BizSpark?

1.       You get developer and production licenses for over 900 Microsoft products like Visual Studio, SQL Server, Windows Server, Windows 8.1, Microsoft Office, etc. (this is the equivalent of MSDN Ultimate). 

2.       You get $150 of monthly access to Microsoft’s cloud called Microsoft Azure (expandable to $60K for one year if your startup is approved for BizSpark Plus). 

3.       You get support incidents for those hard to solve challenges and premier forum support to get your questions answered.      

4.       And, a really unique aspect here, BizSpark will also help startups gain market traction by offering the opportunity to be selected to promote your offerings on the BizSpark website, through the Featured BizSpark Startup series and other promotional opportunities.  

What are the criterion for getting accepted into the BizSpark program?

• Less than five years in business
• Less than $1 million in revenue
• Privately held
• Building software, software as a service or online services

BizSpark is a three-year program, after which time you graduate.  Companies that graduate retain perpetual licenses to all the software used while in the BizSpark program and significant discounts on support and new software they may need.

Some immediate questions: 

• What’s in it for Microsoft?  They hope you will build on their platform and tools and hopefully run on their cloud.  Note that Azure supports Linux, PHP, Python, Java, Node.js and others.
• What if I do not build with Microsoft technologies?  Azure supports Linux, PHP, Java, Python, Node.js, and more so run what you want.
• What if you exceed $150 a month?  Microsoft has a program called BizSpark Plus where your startup can be nominated for up to $60K of Azure benefits for a single year.

What can your startup do with $150 a month of free cloud access? 

• You can host your website
• Run a Linux or Windows virtual machine 24/7 (perhaps hosting services for your startup)
• Store, query and update data from a SQL Server database
• Store, query and update data from a cloud database backend for your iOS, Android or Windows/Windows Phone apps
• Use Azure’s Active Directory Services for authentication

If interested in learning more about BizSpark, and are in the Chicago area, free free to reach out to Martin at mdwade @ microsoft.com.  Or, for other regions, you can contact BizSpark or get more information through their website at http://www.microsoft.com/BizSpark.

How to Find Angel Investors for Your Startup

Angel investors (not venture capital firms) are the most likely candidates to get your businesses from a piece of paper to a proof-of-concept.  These angel investors typically come in four distinct groups.

Read the rest of this post in Forbes, which I guest authored this week.

For future posts, please follow me on Twitter at:  @georgedeeb.

Chicago: The Next Big Startup Ecosystem

When I started iExplore in 1999, Chicago was jokingly referred to as a “flyover city” because the big venture-capital firms in Boston and Silicon Valley would fly back and forth to each other looking at deals, ignoring Midwestern startups altogether. Even worse, these funds would insist that any startup wanting their support would need to relocate to their city (which many aspiring entrepreneurs did, having no other choice) in order to leverage their expertise and tap into their local ecosystem.  That was a different time for Chicago, before it started to build a robust startup ecosystem of its own.

Read the rest of this post in the Wall Street Journal, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

Busting the Lean-Startup Myth

The below is a really great guest post by Howard Tullman (@tullman), CEO at 1871 (the largest shared space for startups in Chicago), Partner at G2T3V (an early-stage venture capital firm) and good colleagues of Red Rocket.  I couldn't have said the below any better, myself .  Thanks, Howard, for sharing your wisdom.  You can also check out the original post on Howard's blog at Inc.com.

_______________________________

One of the greatest TV commercials of all time featured a crotchety old Chicago woman (Clara Peller) whose plaintive 3-word inquiry ("Where’s the beef?") became not just a huge advertising home run for Wendy's but a national catch phrase. Every comedian, late-night television host, news commentator, and politician seized on the expression and couldn't use it enough.

"Where's the beef?" is a question that's still worth asking today, specifically at those many startups that have jumped aboard the latest and greatest craze--"lean" everything. That's because, when it comes to "lean," the same question applies: Where, exactly, is the beef?

Is There "V" in Your "MVP"?

I find myself thinking fondly of Clara's pronouncement whenever I have to sit through another bogus business review session where someone with the bare bones of an idea is trying to convince a group of otherwise intelligent investors that there's a real business opportunity buried beneath all the B.S., and that (a) all the shortcomings of the story being spun and (b) all the gaps in the gospel aren't actually problems at all. They're not bugs, oversights, or misses; they're the intentional result of trying to be "lean" and trying to launch "something" (not to say, "anything") to get the ball rolling.

I'm not sure when it got to be OK to try to do the least work possible in developing  something that you are seriously trying to do well, but maybe I missed a memo or two. But when people tell me that it's the minimum viable product (MVP), not the meat of the matter, that actually counts I remember that Clara knew better. This entire lean startup movement not only misleads and misdirects people into building mediocre products and potential services, it's also much more of a curse than a cure.

We're encouraging an entire generation of young entrepreneurs to rush things out to prospective customers--to throw a bunch of stuff against the wall and see what sticks. In the old days, people thought this was a good way to test to see if the spaghetti was al dente, but it actually wasn't. Pasta that sticks to the wall is most likely overcooked and too gummy to taste good.

Like so many other things in life, there's no simple shortcut or quick way to do these things right.  It takes time and craft and patience to build things that will matter and last. "Quick and dirty and out the door" sucks as a strategy for successful startups. Maybe you can never be too thin or too rich, but a startup can clearly be too lean. The ultimate goal isn't to build skinny start-ups, it's to build smart ones.

I understand that it would be naïve to delay your launch until you thought you had every single detail exactly right. We know that even the experts can completely overlook glaring interface flaws or other obvious omissions that the simplest novice user will see right off the bat. And it's equally arrogant to assume that you can't learn a single thing from the marketplace or your users. But that's a different issue. 

As I see it, there's a basic flaw in the common understanding of the "lean startup" concept, and then there are three main problems with the way most young entrepreneurs are trying to adopt and implement it.

The Basic Flaw

Even the best MVP won’t succeed without an MVA. An MVA is a Minimum Viable Audience (that's my simple shorthand for a bunch of potential buyers). Long before you start creating your product, crafting your code, and designing your UI you need to find out if anyone gives a damn about your idea and your proposed solution. This isn't easy work. You have to actually get off your butt and get out into the field and find and talk to actual people--not your co-founders or your folks--about what you're hoping to do.

You have to find actual problems that are generating real pain for a large number of people. You have to determine whether those people recognize the problem, appreciate the pain, are willing to admit that they have the problem, and are willing to pay for a solution. Then you might have a fighting chance to define and build a viable solution

You have to also recognize that: (a) there's an infinite demand for the unavailable (anyone can say they'll buy something that you don't have for sale); and (b) the easiest way for a buyer to get you to leave them alone is to say "Yes" and "Come see me when your product is ready," and then show you the door.

Problem 1: They Won't Care

If you haven't done your homework and identified the right pain points and the right target customers, you might as well take a hike because no one wants the cure for no known disease; no one is going to invest in solutions in search of problems; and you'll end up building and wasting a lot of time on the greatest software never sold. The way you start the process determines where you end up, and these businesses are hard enough even for the people who do all the proper research, preparation, and planning.  A goal without a plan is just a daydream on someone else’s dime.

Problem 2: They Won't Suffer

The idea that you can dump some partially-baked solution on your first prospects and they will then help you figure things out is another pipe dream. Trying to make your first users into your last beta testers is a waste of everyone's time because smart users want simple solutions that work right out of the box, not more problems. And it doesn't really matter what the problems are (implementation, training, support, stability, or security) because they're all just more noise and aggravation that busy people don't need. We are quick to try and even to adopt things that work for us, but we're much quicker to dump stuff that doesn't. And while there is an obvious trade-off between the degree of the customer's pain and the customer’s otherwise heightened expectations, in the end no solution that simply swaps one set of problems for another is going to get out of the gate.  

Problem 3: They Won't Wait

As the Heads & Shoulders people say, you don't get a second chance today to make a first impression. Customers won't (and don't) wait for you to figure things out; if your first attempt falls flat you can bet that they won't let you come back. It's ridiculously easy to burn your bridges and impossibly hard to rebuild them when there are fast followers and copycats galore standing by, watching your mistakes. Customers don't want stories or excuses; they want workable solutions.

The Right Way

There is a right way to do this and it's pretty simple. Do your homework and find an important unmet market need. Recruit the right early users who are invested (by virtue of their own desires) in your success. Build your MVP to their specifications and with their input and buy-in.  And then prepare to enter the perpetual iteration loop.

Launch, Measure, Modify, Re-Launch and Repeat the Process ad nauseam.

Successful solutions today are all the same: moments of mad creativity followed by months of maddening maintenance. Continually raising the bar and improving your offerings is the only way to stay in the game. 

For future posts, please follow us on Twitter at: @RedRocketVC

Innovate or Die: The Stark Message to Big Business

Big companies that fail to innovate risk extinction. That's the stark truth in the era of "digital disruption". Just look at the likes of Woolworths, Polaroid, Alta Vista, Kodak, Blockbuster, Borders... the list goes on. All steamrollered by strings of ones and noughts and changing consumer behavior. But why are so many big companies so bad at it?

Read the rest of this article at BBC, which we contributed to this week.

For future posts, please follow us on Twitter at:  @RedRocketVC.

Lesson #187: The 1,024 Types of Salespeople. Hire the Right Ones!

Hiring good salespeople is one of the hardest things a company has to do.  Typically, companies need to go through three salespeople, in order to find one successful one with long-term closing power.   This hard fact can take its toll on early-stage companies, that have limited budgets, can only afford small teams and can’t afford to make any mistakes which will result in revenues getting delayed down the road.  Hopefully, the below categories of salespeople, will help point you in the right direction of which type you should hire for your business.

Enterprise vs. SMB

Enterprise sales is typically a much longer sales cycle, and needs someone who knows how to work numerous parties and divisions within an organization over time.  With smaller businesses, you are typically closer to the decision makers and budgets at the top of the organization for a quicker sale with fewer people involved in the decision making.

Early-Stage vs. Late-Stage

Early-stage salespeople tend to need more leadership, passion and brand ambassador skills.  And, later stage sales people tend to work better within structured and repeatable processes.

Inbound vs. Outbound

Inbound salespeople prefer limited travel and leads coming to them in the office.  Outbound salespeople are typically road warriors that spend most of their time selling and schmoozing prospective buyers at the clients’ offices.

Simple vs. Consultative

Most any good salesperson can sell a product that is simple and easy-to-understand.  It takes a really special salesperson that can put on a consultative hat with clients, to help them better understand a complex product and remove the fear of the unknown.

Competitive vs. Non-Competitive

Again, most any good salesperson can have success with limited competition in the market.  But, finding a good salesperson that knows how to win business with “hand-to-hand” combat skills up against entrenched competitors is much harder.

Big Ticket vs. Small Ticket

The bigger the ticket, the longer and harder the sale process, as more decision makers are typically involved in larger ticket purchases.  Not all salespeople have the persistence and nurturing skills required to succeed in longer sales cycle products.

Hunters vs. Recipients

Any good salesperson should be able to close leads that are handed to them by the marketing department.  But, many salespeople do not have the “hunter mentality” to have to drum up leads on their own, with persistent and long term success.

Doers vs. Managers

Make sure your salesperson actually has demonstrated recent success in selling, as opposed to managing a team of salespeople.  It is very different when you have to “dial for dollars” yourself and are building your own Rolodex of relationships.

Lone Wolves vs. Team Members

Very few virtual salespeople working from their home offices have the discipline to stay focused and put in the hard work required.  And, some salespeople just prefer the team environment of working alongside their peers in the office.  Don’t put a square peg in a round hole.

Direct vs. Reseller

Typically, you want to hire someone with past success selling one specific product or service, inside that company.  Resellers, distributors or channel salespeople are often selling multiple brands, leveraging a broad portfolio of products, and may not be able to show success for one specific product therein.

So, with ten categories above and two options in each category, that equates to over 1,024 specific types of salespersons (two to the 10th degree).  Try to hire ones that check off the most skills needed for your specific business.

Be sure to re-read Lesson #127, How to Screen Salesperson Candidates, for a list of key questions you need to ask during the interview process.

For future posts, please follow me on Twitter at:  @georgedeeb.

When Picking a Startup to Join, Think Like An Investor

Startups are really risky. If you are looking to join one, know you’ll probably be looking for another job within a couple of years because there is a nine-in-ten chance the company won’t be in business.
Venture capitalists can get around these odds by investing in 10 companies hoping one hits it big, but employees only get one “bite at the apple.” You can't work for ten companies concurrently, so you need to pick wisely.
Read the rest of this post in Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb

Is a Startup Incubator or Accelerator Right for You?

One way to help get your business off the ground, is to leverage the mentorship and investor relationship benefits of a startup incubator or an accelerator. First of all, what is the difference between an incubator and an accelerator.

Read the rest of this post in Forbes, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

[VIDEO] George Deeb Talks Employee Benefits for Startups on FOX Business

I had the pleasure of chatting with Lauren Simonetti at FOX Business today about startups, and whether or not they should offer employee benefits.  To hear what I had to say, you can check out the video interview at this link:

http://video.foxbusiness.com/v/3747600102001/should-startups-offer-employee-benefits/

For future posts, please follow me on Twitter at:  @georgedeeb.

Why Big Companies Struggle With Innovation

As I have been doing startup consulting at Red Rocket, I have also had many executive conversations with several big companies. These companies were anywhere from $150MM to $25BN in revenues in size, so definitely well-established businesses in their respective industries. But, one thing had become perfectly clear in all cases: once a company gets to a certain size, it starts to lose its appetite for risk, across many facets of its business. And, the bigger the company gets, the more risk averse it gets, regardless of whether or not the company had innovation wired into its original DNA as a high-flying startup from years before. There are many reasons for this.

Read the rest of this post in The Next Web, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

A Guide to Hiring the Right Type of Salesperson for What You're Selling

Hiring good salespeople is one of the hardest things a company has to do. Typically, companies need to go through three salespeople, in order to find one who is successful with long-term closing power. That takes a toll on early-stage companies. They can only afford small teams and can’t afford mistakes that delay revenues down the road. Knowing these categories of salespeople will point you in the right direction when hiring for your business.

Read the rest of this post in Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #186: Marketing Automation Tools

As the name suggests, marketing automation is software designed the automate your marketing efforts. There are companies that power marketing automation specifically for B2B companies (e.g., Pardot, owned by Salesforce.com), specifically for B2C companies (e.g., ExactTarget, owned by Salesforce.com) and companies that try to power both with their solutions (e.g., Marketo, HubSpot, and Eloqua owned by Oracle), which can be tough to do, since the needs are so different between B2B and B2C companies. So, be sure to research the various features and functionalities therein, to see which platform, can best meet the needs for your business.

I just did a deep dive on this space for one of my clients looking for a B2B solution.  So, below is a summary of example types of functionality these marketing automation platforms offer.

Dynamic Content in Website/Email:  Personalize your web or email content specifically to the users' needs or interests, based on information about them mapped in your CRM.  Dynamic content can increase sales by 20% with more targeted messaging to the users' exact needs.

Smart Lead Capture Forms:  Require users to use corporate email address, not personal addresses where competitors may be fishing for information. Power walled content and white papers with a sign-up page.  And, automatically sync and de-dupe all contacts from here, with your CRM.

Progressive Profiling:  Allows you to slowly gather database information about a user over time, instead of scaring them away with a big survey form upfront.  Ask a couple different questions about them and their needs, with each different user session, that aggregates into the CRM over time.

Lead Scoring:  Determine how serious a lead is based on their website behavior.  For example, did they visit your pricing page or not?  How much time did they spend on your key web pages?  What is their work title in the CRM, and is that a logical buyer for your services?

Lead Nurturing:  Allows for automated email follow-ups to leads within the CRM, based on their user behavior?  For example, they didn't respond to initial email outreach, so send a follow up email.  Or, you know you sent a proposal and didn't hear back from them, send an automated email asking their reaction. This saves manual time for your sales team, keeping them focused on selling.

Real Time Alerts:  These will trigger automated emails to your sales team based on user behavior tracked with cookies.  For example, if one of your "hot leads" just came back to the website, let their matching salesperson know, so they can immediately check-in with them.

Dynamic Targeting:  Don't mass email all your users the same messaging.  Personalize and customize the messaging based on their user profile.  For example, send customers vs. prospects a different message.  Or, you know they already bought product A in your CRM, promote them product B.

Email Blasting Platform:  You no longer need a separate email blasting system, like Mail Chimp or Constant Contact, as all of that same functionality is built herein, typically with much deeper functionality.  So, now, both your email system and CRM will automatically be in sync for unsubscribes and other user activity.

Responsive Design Templates:  By powering your website with this platform, you can often automatically tailor the web experience to the platform the user is coming in from (e.g., PC, tablet, phone).

Auto Task Creation:  The system can create automated tasks for your sales team, based on data being stored in the CRM.  These tasks could be time-triggered or user-behavior triggered, based on whatever business rules you want in place and enforced.

A/B Testing:  Help your marketing department automatically test various creatives and various offers with small subsets of the list first, and then, pick the best performer to blast to the broader list.

Integration With Paid Search:  Many platforms allow you to tie your pay-per-click marketing activity on sites like Google to the system, to allow you to serve customized landing pages on your website, based on the keyword the user was searching for.

Integration With Social Media:  Many of these systems also offer integration with social media.  That could include tying users' social media profile information into your CRM.  Or, automatically posting target messaging to your company's social profile pages.

Reporting/Analytics:  Most of these tools come with sophisticated reporting and analytics packages to track success against objectives overall, by user and by employee.

Hopefully, this gives you a better understanding of marketing automation and the various functionalities the better systems offer.  But, worth mentioning, these platforms can get expensive, where licenses can start from around $1,000 per month for medium-grade solutions, and go up from there.  So, these tools are most-likely not a good use of limited resources for very early-stage startups, where budgets may not be able to afford it. But, these are a must-have to automate and optimize your marketing efforts, as soon as you can afford them.


For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #185: B2B Marketing Mix & Budget Benchmarks

Back in Lesson #171, I wrote about the Basics of B2B Marketing.  This lesson takes the discussion to the next level, and talks about how much budget should you set aside, and more specifically, how that overall budget should be split up, across marketing tactics.

To help me here, I referenced data from the 2013 Tech Marketing Benchmarks Study from IDC.  The study basically suggested that most B2B tech companies spend around 4.5% of their revenues on annual marketing spend.  The average was 7.0% for B2B software companies, 3.9% for B2B hardware companies and 1.9% for B2B tech services companies.  So, in the example chart below, that would suggest a company shooting for $5,000,000 in revenues, would have budgeted $225,000, or 4.5% of revenues, on average.  That spend would cover both the media dollars and the team implementing such initiatives.

The study further goes on to recommend a mix of how your overall B2B marketing budget should be spent, based on the marketing mix reported by the comparable companies in their study.  I applied that mix to our $225,000 overall budget below, as a case study.  For your business, you would simply adjust the below chart for whatever revenue target you are shooting for, times the 4.5% average (or the other percentages suggested above), times the percentages by tactics recommended below.

For convenience, the first part of the chart looks at the mix by marketing type, the second part of the chart looks at the mix by marketing channel (e.g., digital vs. offline) and the third part of the chart details the suggested mix solely for the $76,500 digital marketing budget, in this case study.

Here is a link to the data from IDC's 2013 Tech Marketing Benchmarks Study, to which the above chart was based.

The above is not intended to be a perfect science, but more a rough ballpark to help point you in the right direction.  As an example, the mix of things you would do for a $1MM business, would be different than the mix of things you would do for a $10MM business. But, the above should help to get you close.

So, long story short, B2B revenues should not solely be driven by your sales team.  Your sales team needs support, in the form of leads coming to them from your marketing efforts.  And, the above, is a good way to help you calculate how much marketing budget you should set aside, and how best to spend that budget. And, thank goodness you are not a B2C business, where your marketing budgets could be 10-30% of revenues!!

If you need any help setting a marketing plan for your company, don't hesitate to contact Red Rocket.

For future posts, please follow me on Twitter at: @georgedeeb.

Should Your Startup Offer Employee Benefits?

In years past, companies of all shapes and sizes needed to offer a good employee benefits program, with which to attract the best candidates.  That was even true for early-stage startups, since that was one of the hooks to get someone to leave their big company jobs and rich benefits packages.

But, a lot of things have changed over the years, and my feeling today is early-stage startups should not worry about offering benefits.  If you can afford them, great, offer them.  But, honestly, how many startups can really afford them, on their tight startup budgets. To help me frame the topic, I am going to focus a lot of my discussion around healthcare benefits, since that is typically the most demanded, and most expensive of all employee benefits offered.

Read the rest of this post in Forbes, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.