Lesson #50: Do What You Love!! Passion Drives 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. 

Webster's Dictionary defines passion as "an intense, driving or overmastering feeling of conviction" or "a strong desire for or devotion to some activity or concept".  I couldn't have said it any better.  Passion needs to ooze from every pore of a startup entrepreneur.  This passion is usually instilled by some core knowledge of the product or service that is being built, which translates into clear domain expertise and first-hand knowledge and confidence that you are heading in the right direction.  This passion also translates into infectious enthusiasm, that ultimately feeds the energy and drive of every employee in your office.  And, most importantly, this passion is the glue that holds the company together and gets it through its most difficult times.

When I launched iExplore, the whole business idea was conceived based on my personal frustrations experienced while planning my personal vacations as an avid adventure traveler.  I wanted a "one-stop shop" to look for all adventure tours in one place, I wanted the confidence of buying from a trusted resource and I wanted the flexibility to customize my itinerary and dates to my exact needs.  iExplore would fill the huge void in this highly-fragmented, packaged-tour industry, and our passion to build a better customer experience sparked the fire to iExplore ultimately becoming the #1 adventure travel website.  So, my personal passion as an avid adventure traveler and my personal experiences in the industry, fueled the vision and direction of the company.

But, it was more than that.  Because I was so passionate about iExplore, I came to work jazzed up every day, and that enthusiasm rubbed off on all of our employees.  And, I was intently-focused on hiring other empassioned adventure travelers, that shared the company vision based on their own personal adventure travel experiences.  It was like the iExplore staff was a team of whitewater rafters, all paddling in unison to avoid the potential business hazards of the rushing rapids, because, in fact, we all were whitewater rafters in real life.  So, our personal and business passions had become one, making for a very powerful combination and recipe for success.

And, had the iExplore team not had passion in the wake of 9/11/01 (remembering the company's dire straits in Lesson #29), the company would have never survived.  Believe me, it would have been a lot easier to close the business and move on from the carnage.  But, we were all passionate about what we were building, knew this was a short term hurdle and that we were committed to living and fighting another day.  A business only fails, when you stop trying.  And, passion was the lifeboat that carried us through those dark days.

Also, worth mentioning, there is no question that you are going to be a lot more passionate about your own startup, than you would be about someone else's startup.  I lived for iExplore and bled for iExplore for 10 years of ups and downs.  I can't say I would have done the same for another business that was not "my baby".  So, keep that in mind in your hiring practices, to find people that are equally enthusiastic about what you are building, and motivating them with equity incentives to share in your collective successes.  Or, when looking to join another startup, make sure to find products or services that you are truly passionate about, and which are willing to reward you for your hard work and effort.

I used to close every company meeting at iExplore with a question: "What are we building?".  And, like a football team breaking out of a huddle, the staff's response was loud and clear: "GREATNESS!!".  Passion cannot be taught, it has to be instilled into the DNA of your entire company, starting with and fueled by yourself: the Chief Cheerleader.

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Lesson #49: How to Get a Loan, or Not!!

I am chuckling to myself while typing this post, as the concept of startups getting traditional loans is the equivalent of first-timers trying to summit Mount Everest; it is nearly impossible for a true startup to have any realistic chance of closing a traditional loan with a bank, or elsewhere.  So, for all of you really early-stage entrepreneurs out there, your time will be better spent elsewhere, as it is very unlikely you will ever get through a bank's underwriting process and meet their very restrictive criteria (detailed below). 

If this describes you, and you prefer to raise debt instead of equity, it is most likely going to come in the form of a convertible debt instrument from a traditional angel investor, not a bank.  So, go back and read Lesson #5 on How to Find Angel Investors, and pitch those angels a debt instrument, instead of equity, and you will most likely negotiate towards some convertible debt instrument in the middle.  That said, if you are beyond seed stage, and are actually driving profits that can service a loan, keep reading.

Notice I said "driving profits", as without profits, the loan conversation is practically a non-starter from traditional sources.  And, frankly, in the current economic climate, the traditional banks are ultra-conservative, not looking at any company without at least $3MM in annual profit, and a proven multi-year historical track record at such level to boot.  Perhaps you can find a more aggressive bank, like Silicon Valley Bank that specializes in earlier stage businesses, which may be a little less restrictive.  But, they too will require meaningful profits to ensure you can cover the debt service costs and the ultimate repayment of the principal within the term.

In addition to a proven multi-year history of company profits based on your tax returns, a lender is most likely going to want to see: (i) enough hard-assets in the business to collateralize the loan; (ii) a personal guarantee from you, so you are personally on the hook if the company goes under; (iii) sufficient equity invested in the business as a percentage of total capitalization; (iv) a credible business plan and financial forecast that shows a timely repayment of the loan; and (v) a good credit score for you personally.  So, if you don't have any of these things, or are unwilling to provide them, that pretty much ends the bank discussion, and it is back to the angel investors or venture capitalists for you.

Now, there are a few exceptions to the rule.  If you are trying to finance hard assets (e.g., equipment, real estate), or bridge known accounts receivable for working capital purposes, certain lenders or factoring companies could be a little easier to work with, lending 50%-80% of the asset value depending on the nature of the assets and risks associated with loan recovery.  This includes financing any equipment or other physical assets through capitalized leases, which require minimal upfront payment for the assets, but over the life of the lease, typically add up to 2x-3x the cost of the assets had you purchased them for cash upfront.  Just how mortgage payments add up on your house over time (therefore helping near term cash, but hurting long term cash).  These asset-backed lenders will also require personal guarantees, which are never fun if your business goes under, as it can take you down personally, as well (adding insult to injury).

And, if you are financing real estate, there are plenty of mortgage companies to reach out to.  But, you will need to have enough personal or other income to insure that the mortgage costs (combined with the costs of any other debts you have, like your home mortgage or car loans) are not higher than 40%-45% of your monthly income.  Not to mention, having enough other cash on hand to afford the 10-20% down payment.  I don't know many startups or entrepreneurs that will successfully meet this criteria, so most likely, this too will lead to a dead end.

One additional road to consider is trying to apply for an SBA-gauranteed loan.  In this case, the SBA is not the lender, the banks are still the lender to approach.  But, the SBA guarantees up to $200,000 of the loan,  hence making the loan a lot less risky to the bank.  So, a bank's lending criteria is a little more lenient for loans under this amount, assuming the SBA guarantee is in place.  And, the terms of the SBA-guaranteed loan, tend to be a lot longer, given you more time to repay the loan.  To see if you meet the criteria for an SBA-guaranteed loan, check out this link on the SBA Website.  But, keep in mind, you will have to have 10%-30% of additional cash sitting around, to contribute as additional equity, to close a loan like this.  So, in this case, once again, it takes money, to raise money (monies you most likely do not have sitting around).  And, the SBA will only provide a guarantee, if you really have run out of all other options (e.g,. no excess cash sitting around, and have been turned down by a bank already).

Sorry to be "doom and gloom" in this post, as that is not my style or desire, to demotivate entrepreneurs.  But, just keeping it real, to save you from wasting your valuable time.  I have personally approached enough banks enough times in my past, in better economic markets than these and with more sizeable businesses than your own, to know how really tough it can be to get through the underwriting process.  So, my advice to most of you looking for loans for your startups:  focus on angels, venture capitalists or other alternative asset-backed lending sources, not the banks, which will most likely lead to a dead-end for startups.

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Lesson #48: Trade Show Strategies for Startups

Following up on my previous post, about The Importance of Networking, I figured it would be good time to talk about trade shows and how a startup needs to incorporate them into their marketing strategies.

To start, it is my recommendation that B2B facing trade shows are more relevant than B2C facing trade shows.  Given the high costs of participating in trade shows, B2C companies are typically better served in redirecting those marketing dollars to higher reaching, higher ROI vehicles (e.g., search engines).  As an example, a $10,000 investment in a booth at a consumer show may get you in front of 10,000 people at a trade show, versus 50,000 people via the search engines.  Now that doesn't mean B2C executives shouldn't be networking at trade shows, as they definitely should.  But, they would be much better served attending more industry-related events where they can learn and network with their peers (e.g., gathering of online marketing executives).

But, for B2B companies, trade shows can be one of the most important and targeted ways to market their businesses to prospective clients, given the highly targeted nature of the audience at that show (e.g., corporate buyers of their product or services).  As an example, if you are a developer of a digital video platform for government clients (e.g., Department of Defense, NASA), where better to find targeted clients than at the annual Government Video Expo, where sellers of government facing technologies exhibit to government buyers of such technologies in this very niche market segment (where all key people will be in one place at the same time).  So, as a B2B company, it is critical you research the key trade shows in your industry, and incorporate them into your marketing plans.  And, the more targeted the trade show the better (e.g., Government Video Expo, better than Video Expo, in this example).  So, prioritize accordingly.

Now, identifying the trade shows are only half of the exercise.  More importantly, you need to decide how you plan on participating at these trade shows.  Will you exhibit with a booth?  Or, sponsor the show? Or, be a presenter or a panelist?  Or, simply attend?  The answer to that question is directly proportional to: (i) the importance of the show to acheiving your overall sales goals; and (ii) your budgets to afford the various options. 

As a rule, sponsoring a show tends to be very expensive, but can be a good way to get branding benefits for your business and exposure in front of all the attendees of the show, both during the show, and in any marketing materials for the show.  If you feel sponsoring the show would be important for you, find the least expensive options to get your name out there (e.g., buying name tag lanyards with your logo on it, would be cheaper than buying the entire lunch for the event). 

Exhibiting with a booth is also an expensive proposition.  Not only do you have to pay for the design of the booth itself, but you have to pay to ship the booth to and from the show, store the booth after the show and pay for the time and travel expenses of the people who will be running the booth.  As a startup, you only want to go down this road if having a booth presence at the show is mission critical.  As an example, if all your key competitors are exhibiting with live demos of their products via booths, perhaps you should also be there with an equal presence.  But, only if the audience of the show are direct buyers of your products.  For example, if you are selling technology to CTOs, you want to make sure the CTOs are the ones attending the show, not CMO's.  And, where you can, focus on shows with CTOs (in this example), not lower level technologists that ultimately will not be making the buying decisions.  But, this is not always possible, and you may have no choice than to meet the junior level person and then work up the chain of command.

Simply attending a show is a very inexpensive way to have a presence at the show, gathering business cards as you roam the room and network with other attendees and exhibitors.  But, where you can, actually getting invited to be a featured speaker or panelist at the show, is typically free to attend and gets you quickly exposed to everybody at the show.  And, as we talked about in the previous post, it is always preferable to be the "hunted" at shows like this, where prospective clients are searching for you, than having to track down your prospects on a one-off basis.  So, apply to be a speaker or panelist at all of these events, and come up with a unique pitch to the event producer on why you would add value to the official program (e.g., "hottest new innovation in the industry", "real life data you can share with audience").

So, in summary, trade shows typically work better for B2B companies than B2C companies, given the lack of better marketing alternatives.  Both, B2B and B2C executives need to participate in trade shows where their peer executives are participating.  And, you need to prioritize your participation at these trade shows (e.g., sponsor, exhibit, attend, present), based on the importance of the show to your revenue goals and the budgets you have to spend.

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Lesson #47: The Importance of Networking

The old adage, "it is not what you know, it is who you know", resonates particularly well for startup entrepreneurs.  And, it holds true across most all areas of a startup's business, including driving sales, hiring employees, raising capital and securing key partnerships.  Therefore, establishing, nurturing and mining a deep network of relationships can often make or break the success of a startup.  I know many of you may be uncomfortable with networking, but hopefully this post will help you understand the importance of networking and the need to break down any barriers between you and your network.  Let's discuss the various types of networking opportunities available to you.

Firstly, when people think networking, they think attending events to meet people that may be able to help them.  This could be industry specific events related to your business, or business task events (e.g., strategy, marketing, technology) related to certain specific business needs, or other events bringing together like minded individuals (e.g., fellow CEO's, fellow startups).  Do your best to stay abreast of all of these types of events via your respective industry trade associations, professional associations or local startup groups with the calendars posted on their websites. 

And, certainly, make time to attend the most important of these events.  I used to think time spent on networking was time away from the business, and tried to avoid it.  But, over time, I quickly learned a strong network can actually help me build my business faster than I could on my own, and should be a vital part of a startup executive's efforts.  You never know what new client, investor, employee or other business colleague will come out of events like these.  And, they can be a lot more productive than in-the-office initiatives, given the face-to-face natures of these events.

But, you do need to be sensitive to investing your networking time wisely, to get the biggest bang for your buck.  When assessing in-person networking opportunities, I try to have a good sense to: (i) the expected size of the event (hoping to meet more people than less); (ii) the quality of the attendees (hoping to meet more CEO's than lower level staff members); (iii) the location of the event (less time consuming to attend events in my home city, than having to travel, if I can avoid it); (iv) the type of event itself (e.g., hoping to avoid dinner events where locked into one table of people, instead of roaming the room); and (v) the reputation of the hosting organization (e.g., looking for the leading brands in the space to put on the best events).

Equally importantly, I want to make sure I have a clear mission for the event (e.g., what specific companies or executives do I want to meet based on announced presenter or attendee lists made available prior to the event).  This often means trying to arrange a meeting time with your desired targets prior to the event itself, which can often be crazy bedlam and tough to find the people you are looking for.  And, keep in mind, you don't always have to be the "hunter" at networking events.  Sometimes you can get in front of more people faster, by being the "hunted" as a featured speaker or panelist at the events.  So, figure out a reason for you to be the "featured attraction" (e.g., "one of the hottest startups in town", "pro in online marketing"), which can also save you on any event fees.

But, your networking efforts should not be limited to in-person events.  Networking has never been easier with the internet.  You should be an active user on networking sites like LinkedIn, Twitter, Facebook or other sites or list serves specific to your industry or location (e.g., The BuiltInChicago.org business networking site for tech startups in Chicago).  This means having a rich profile page that positions you as an expert in your field, posting relevant news and updates to your status updates and joining/engaging with the relevant "sub-groups" within that network.  But, remember, when networking online, it should not be a "one way sale" to the audience, it must be a "two way conversation" to get the dialog started.  So, an an example, answering forum questions (in a "non-salesy" way) can also be a great way to meet new relationships.

We all know how busy you are as a startup executive.  But, you can't bury yourself in your office, and you can't be bashful when building your business.  Start building your network, and great things (e.g., new clients, employees, investors, partners) are sure to follow.  And, don't forget, networking is more than simply the networking event itself:  you are building long term relationships and need to follow up with these new colleagues after the event, and over time.  So, manage this network nurturing process accordingly.

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Lesson #46: 23 Motivational Quotes for Entrepreneurs

Entrepreneurs can always use a "pick me up", from time to time. And, I thought these 23 famous quotes would provide just the right inspiration to keep you marching along:

"Our greatest glory consists not in never falling, but in rising every time we fall." –Confucius

“Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win.” --Sun-tzu

“Life grants nothing to us mortals without hard work” --Horace

"Energy and persistence conquer all things." -- Benjamin Franklin

"I am a great believer in luck, and I find the harder I work, the more I have of it." --Thomas Jefferson

“Always bear in mind that your own resolution to succeed is more important than any one thing.” --Abraham Lincoln

"Don't go where the path may lead, go instead where there is no path and leave a trail." --Ralph Waldo Emerson

“Do not hire a man who does your work for money, but him who does it for love of it.” --Henry David Thoreau

"Many of life's failures are people who did not realize how close they were to success when the gave up." --Thomas Edison

"You can't build a reputation on what you are going to do." -- Henry Ford

"Why climb Mount Everest? Because it's there". --George Mallory

"Imagination is more important than knowledge." --Albert Einstein

"Insanity: doing the same thing over and over again and expecting different results." -- Albert Einstein

"Everything should be made as simple as possible, but not one bit simpler." --Albert Einstein

"A good plan, executed now, is better than a perfect plan next week". -- George Patton

"Courage is being scared to death, but saddling up anyway." --John Wayne

"Success is a journey, not a destination." --Arthur Ashe

"Perpetual optimism is a force multiplier." -- Colin Powell

“You can't rest on your laurels. Your own body of work is yet to come.” --Barack Obama

“Real success is finding your lifework in the work that you love.” --David McCullough, Author

"The secret is to hire great people, don't interfere too much and when they're great, take the credit. Works like a charm." - Woody Allen

"Confucius always said, a schmuck is defined as someone who has achieved all their goals." --Sam Zell

"Summiting the mountain requires stamina and strength of heart, and you won't know if you have it, until you need it." --Jacob Kyungai, Kilimanjaro guide


Do you have other quotes you think I am missing? Add them to the list in the comments section.

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Lesson #45: Find a Business Mentor or Business Coach

Earlier this week, I had the distinct pleasure of meeting and mentoring the 2011 class of 10 startups in the Excelerate Labs accelerator program in Chicago.   I am looking forward to a fun summer with these guys.  There is nothing more invigorating than being surrounded by a bunch of excited and motivated entrepreneurs, and trying to help them acheive their goals of building world class companies.  And, I am happy to contribute learnings from my 20 year career to help them get up the learning curve faster and for me to give back to the local Chicago entrepreneurial ecosystem, of which I am a part.  When I was launching iExplore back in 1999, I wished I had a pool of proven entrepreneurs I could freely approach to help show me the way. 

Mentors are one of the most valuable resources an entrepreneur should tap into.  Especially, if the mentors are freely organizing themselves into "on call and free consultants" via incubator and accelerator programs.  The idea of launching a business should no longer be a scary or daunting experience.  It should be a collaborative experience accumulating the learnings of the scores of local entrepreneurs who have already built successful businesses, and can help you move faster and avoid known pitfalls based on their years of experience, as an entrepreneur themselves.

And, what's great about mentors or business coaches is that they come in all shapes and sizes that can handle the myriad of topics that you may be having a problem.  So, search for the mentors based on your various business size, your various industry, or your specific business problem, on a case-by-case basis.  Unlike finding a long term person for your board of directors or advisory board, as we discussed back in Lesson #12, mentors are more like "hired guns" on one-off topics that present themselves over time. 

As an example, one of the startups I met this week needed help in structuring a strategic partnership with the leading media company in their industry to assist them with promotion and building up an audience.  And, modestly, who better to help them than me, who structured a very similar media-related strategic partnership with National Geographic, while I was building iExplore.  Having the benefit of hindsight of cutting a strategic deal with a big media company, I have first hand experience of where the plusses and minuses of that relationship presented themselves after the ink was signed, and it was too late to change anything in the agreement.  So, hopefully, this startup can benefit from my experience, and can write a better agreement in their deal, than I did in mine.

In terms of actually finding these people, it should be as easy working your offline and online business networks.  And, if some cases, willing mentors freely make themselves known on websites of the various incubator or accelerator programs' websites.  For example, here is the list of the Excelerate mentors you may be able to research and politely approach, whether you are formally in the Excelerate accelerator program or not.  And, I am a big fan of working my LinkedIn network (nationally) and my BuiltInChicago.org network (locally in Chicago).  The concept of six degrees of separation to anybody and everybody has never held more true:  I am never more than two or three degrees away from anybody that I am trying to reach out to.  And, sites like LinkedIn and Twitter makes it easy to search by keyword for domain experts on any topic you may need help with.

And, don't be intimidated or afraid to reach out to prospective mentors.  We don't bite ;-)   The worst thing that can happen is the mentor may be too busy to handle your specific problem, and they will politely decline or point you in the right direction to someone who may be able to help in their absence.  That said, you have to be sensitive to the mentors' time.  It is one thing to get one random question a month, that requires a little bit of time to solve.  It is another thing to get ten random questions a week, that requires a lot of time to solve. 

If you find yourself approaching this latter situation, now may be the time to move that person to your formal board of directors or advisory board with equity incentives to compensate them for their time.  And, in all cases, do not take your mentors for granted:  if they do something very helpful for you (e.g., help save you a ton of money, or negotiate an even better deal), send them a thank you note, or gift card, or bottle of wine or whatever to show you much you appreciated their help and keep them excited to continue to help you in the future.

Always remember: you are not alone in your startup efforts, there is a wide base of mentors and business coaches you should tap into to help you accelerate and optimize your efforts.  Good luck.

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