For every starving entrepreneur staying on the pulse of other successful small companies, here is some food for thought:
RedOctane, a small online game rental company in 1999, agreed to publish a new kind of game from developer Harmonix, who had no huge successes prior. Superior execution of an older idea -- a marriage of music, air guitar and video game visuals led to a three game franchise and acquisition by Activision.
One good idea, clever execution and some hard work and deal making behind the scenes has led to 6+ million games sold, even though they retail for double the price of competing titles (guitar included)
Happy Holidays!
Showing posts with label new business. Show all posts
Showing posts with label new business. Show all posts
December 23, 2007
December 16, 2007
Part 3: Funding
A topic top of mind for any starving entrepreneur is the funding of the venture.
In this post, I will try to cover some of the more straightforward options.
1. Self-funding: If you are employed, or have any sort of income, some of that can be used to fund your idea. Depending on your circumstance, this may mean dialing back some elements of the "lifestyle" or re-examining your income and expenses to see what you can really afford.
Pros: Ease
Cons: Often inadequate
2. Bootstrapping: This works best for short term, high pressure, low risk usage of funding. While risk in a young venture can be difficult to grasp, suffice it to say that massing credit card debt or high interest small business loans (angel funding) should be held until they are truly needed.
Pros: Quick, relative ease
Cons: High interest debt
3. Big Bank Small Business Loan: This could also be the use of home equity or similar low interest collateralized loan. Typically taken from a bank or large money lender at published rates. In my experience this is very difficult to get without at least one success story under your belt. Defaulting can cost you your house.
Pros: Large sums, Low interest
Cons: Collateralized debt, track record needed
4. Venture Capital: So many success stories involve venture funding that it is easy to think this is the only way business ideas get funded. This is a great option if you idea is in some facet revolutionary, or mildly innovative in a field of interest to the VC firm. VC firms typically take a controlling interest in the company in exchange for their capital, which can be frustrating for the passionate entrepreneur. However, VCs can often provide the monumental sums that cannot be raised any other way. Typically, you need to have a compelling and differentiating business plan, and the patience to be rejected over and over again.
Pros: Enormous sums, no repayment
Cons: Very difficult, and not suited to all plans. Loss of control, track record a plus.
5. The Rich Uncle: While not always an option, friends and family are more likely to trust and understand the passionate entrepreneur and will frequently provide better payment terms and interest than lending institutions. However, defaulting will make you feel guilty, and may make family life uncomfortable. That said, many successful businesses have gotten their start this way.
Pros: Ease, terms
Cons: Risking family money can be worse than risking your own.
6. Grants: A new option to me, and one I am still considering. There are many institutions, the US government included, that gives away money to people who are doing things of interest to them in some facet. If your idea is, or can be adapted to fit that definition, you may be eligible for grant funding. Several colleagues of mine have raised thousands of dollars this way.
Pros: No repayment
Cons: Difficult to research, difficult to win
--------------
Given the options facing a starving entrepreneur, what is the optimal path to funding?
The path I am going to explore follows:
Start with my own income capital, and build success on a small scale before approaching grant organizations for funding. Show them favorable track record on a small scale, and a detailed plan on how their funding will be used. This is an option for me as I frequently build charitable contribution into my plans.
Using grant funding to drive growth and payroll expansion, I will scout for a low interest small business loan, and more rounds of grant funding. The loan capital will be used as much as possible on appreciating or stable assets or property that can be used to collateralize it. After staying in the black for several months or a year, I will begin approaching VCs with the aim of structuring a deal that will pay off the loans and limit the level of control they seek. Ideal would be to gain funding from two firms so that their interests can be faced against each other when applicable.
Thoughts welcome.
In this post, I will try to cover some of the more straightforward options.
1. Self-funding: If you are employed, or have any sort of income, some of that can be used to fund your idea. Depending on your circumstance, this may mean dialing back some elements of the "lifestyle" or re-examining your income and expenses to see what you can really afford.
Pros: Ease
Cons: Often inadequate
2. Bootstrapping: This works best for short term, high pressure, low risk usage of funding. While risk in a young venture can be difficult to grasp, suffice it to say that massing credit card debt or high interest small business loans (angel funding) should be held until they are truly needed.
Pros: Quick, relative ease
Cons: High interest debt
3. Big Bank Small Business Loan: This could also be the use of home equity or similar low interest collateralized loan. Typically taken from a bank or large money lender at published rates. In my experience this is very difficult to get without at least one success story under your belt. Defaulting can cost you your house.
Pros: Large sums, Low interest
Cons: Collateralized debt, track record needed
4. Venture Capital: So many success stories involve venture funding that it is easy to think this is the only way business ideas get funded. This is a great option if you idea is in some facet revolutionary, or mildly innovative in a field of interest to the VC firm. VC firms typically take a controlling interest in the company in exchange for their capital, which can be frustrating for the passionate entrepreneur. However, VCs can often provide the monumental sums that cannot be raised any other way. Typically, you need to have a compelling and differentiating business plan, and the patience to be rejected over and over again.
Pros: Enormous sums, no repayment
Cons: Very difficult, and not suited to all plans. Loss of control, track record a plus.
5. The Rich Uncle: While not always an option, friends and family are more likely to trust and understand the passionate entrepreneur and will frequently provide better payment terms and interest than lending institutions. However, defaulting will make you feel guilty, and may make family life uncomfortable. That said, many successful businesses have gotten their start this way.
Pros: Ease, terms
Cons: Risking family money can be worse than risking your own.
6. Grants: A new option to me, and one I am still considering. There are many institutions, the US government included, that gives away money to people who are doing things of interest to them in some facet. If your idea is, or can be adapted to fit that definition, you may be eligible for grant funding. Several colleagues of mine have raised thousands of dollars this way.
Pros: No repayment
Cons: Difficult to research, difficult to win
--------------
Given the options facing a starving entrepreneur, what is the optimal path to funding?
The path I am going to explore follows:
Start with my own income capital, and build success on a small scale before approaching grant organizations for funding. Show them favorable track record on a small scale, and a detailed plan on how their funding will be used. This is an option for me as I frequently build charitable contribution into my plans.
Using grant funding to drive growth and payroll expansion, I will scout for a low interest small business loan, and more rounds of grant funding. The loan capital will be used as much as possible on appreciating or stable assets or property that can be used to collateralize it. After staying in the black for several months or a year, I will begin approaching VCs with the aim of structuring a deal that will pay off the loans and limit the level of control they seek. Ideal would be to gain funding from two firms so that their interests can be faced against each other when applicable.
Thoughts welcome.
December 13, 2007
Part 2: The Team
Even the most well designed concept would go nowhere without a team to execute.
Sometimes the right choice is no team at all -- but this is not the sustainable or scalable option for most operations.
How does an entrepreneur, and a starving one at that, build a team of like-minded, competent, individuals who will work with and not against the entrepreneur or each other?
I don't know the right answer, but have a running theory:
The optimal team is build both with trusted associates, as well as with experimental new talent.
Sometimes the right choice is no team at all -- but this is not the sustainable or scalable option for most operations.
How does an entrepreneur, and a starving one at that, build a team of like-minded, competent, individuals who will work with and not against the entrepreneur or each other?
I don't know the right answer, but have a running theory:
The optimal team is build both with trusted associates, as well as with experimental new talent.
Unfortunately, payroll takes capital. If you're starving, that capital comes out of the marketing budget or the R&D budget, or food/rent.
So how do you compensate a resource without funding?
Stay tuned for an upcomg post on incentives...
I have launched a social experiment of my own for new talent that includes both experiential incentives and targeted good faith.
My current team includes a few trusted associates, all part-time, and freelanced admin and skilled labor resources. If the experiment above goes well, it will include a few more feet on the ground. Full details to be released after the event is completed.
Keys To Success: Competence
One of things I hope to accomplish on this blog are to capture the elusive concept of "success" in various KPIs.
What exactly is competence? That mystical quality that makes some people get things done, and others just not. That lets some people hit the ground running and face unseen issues with poise, and some just to get flustered.
I frequently hear my clients tell me that my productivity is unbelievable and that my analytics are incomprehensible -- and this is not a bragging point to me but a case study: I don't think of myself as any more capable or intelligent than any other human being, but I deliver what I promise.
I propose that competence is tied to two things: the ability to take calculated risks, and the fortitude to do what is needed to complete a task in the face of unseen obstacles.
Can you invest capital that you don't yet know you have, or build skills that you don't know how to build and then execute with them? I think that's all it takes.
What do you think?
What exactly is competence? That mystical quality that makes some people get things done, and others just not. That lets some people hit the ground running and face unseen issues with poise, and some just to get flustered.
I frequently hear my clients tell me that my productivity is unbelievable and that my analytics are incomprehensible -- and this is not a bragging point to me but a case study: I don't think of myself as any more capable or intelligent than any other human being, but I deliver what I promise.
I propose that competence is tied to two things: the ability to take calculated risks, and the fortitude to do what is needed to complete a task in the face of unseen obstacles.
Can you invest capital that you don't yet know you have, or build skills that you don't know how to build and then execute with them? I think that's all it takes.
What do you think?
November 30, 2007
Part 1: The Concept
What comes first, the concept or the market? Maybe I'm old school, or just naive, but I firmly believe that a solid concept will lead to a more successful business in the long run than a small target market to whom you try to backfit a product or idea.
The other side of that is that if you can conceive a product or service that you yourself would buy, there is a very good chance that you belong to a market that needs it too.
I want my business to be both easily targetable to a variety of niches, so that it is straightforward to get off the ground, but broad enough to appeal to a mass market when it has matured.
Since I believe strongly in living well, eating healthy, being active, and dressing stylishly, I would like my brand to embody those ideals as well.
Since I value premium goods with strong design, comprehensive support and broad warranties, i would like to offer the same in any product I provide.
My question to you is: What do you like most about the companies you buy from?
The other side of that is that if you can conceive a product or service that you yourself would buy, there is a very good chance that you belong to a market that needs it too.
I want my business to be both easily targetable to a variety of niches, so that it is straightforward to get off the ground, but broad enough to appeal to a mass market when it has matured.
Since I believe strongly in living well, eating healthy, being active, and dressing stylishly, I would like my brand to embody those ideals as well.
Since I value premium goods with strong design, comprehensive support and broad warranties, i would like to offer the same in any product I provide.
My question to you is: What do you like most about the companies you buy from?
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