7 Steps to Raise Startup Money From a Family Member

My family immigrated from Lima, Peru to the United States before I was born to give me a shot at the American dream. I owe everything I’ve achieved so far to my parents, which is why it’s my goal to support them financially as they get older.

Somewhat paradoxically, to achieve this goal, I raised $5,000 from my mom to start an online affiliate business for U.S. tourism to Peru, called Professor Peru. The idea, of course, is to generate enough revenue to fund her retirement.

But after raising more than $1 million from angel investors, which required an executive summary, Powerpoint presentation and financial projections, I can attest to the fact that fundraising from family members is equally hard, if not harder. The goals and fears associated a family member associates with investing in your business are a far cry from the goals and fears of a professional investor.

If you’re considering raising money from a family member too, here are a few tips to make the process pain-free — and rewarding for everyone:

Understand their financial philosophy. My mom is very protective of her money and absolutely loves to save — she has never before invested in anything. She would rather use her money to pay off the mortgage than to take a gamble at a business that might fail. My mom’s philosophy: “Save now; invest never.” Convincing her to invest in me, then, is a challenge to her very view on money.
Build trust by showing examples of success. To overcome my mom’s knee-jerk reaction to investing her money, it was important to show her clear evidence that success is possible with online businesses. I spoke with her at length about my good friends Cody, Sean, and Chris who have built successful online businesses, as well as my own experience building startups.
Listen closely to investor concerns. My mom was intrigued by the evidence, so it was time to pitch her my idea of an affiliate business for U.S. travelers to Peru. Like any savvy mom, she immediately listed reasons why it might not work! I listened intently to understand her hesitation points. I didn’t respond right away; instead, I waited a day to talk about my idea again.
Address hesitation points. One of the biggest fears my mom had was that no one in the U.S. was traveling. The constant barrage on the news about an economic downturn had led her to assume that no one had the excess income to travel, which of course was untrue. To break this fear, I introduced my mom to four close friends of mine that had recently traveled to Peru. Seeing is believing!
Pitch the bigger vision. While you should certainly consider documenting your agreement in writing, you should also be able to clearly explain the benefits in big-picture terms your family member can appreciate. I asked my mom when she wanted to retire. I then asked her, “What if you could retire in two years?” Though she was skeptical, the seed was planted, and the possibility of an early retirement made her hopeful. Though I didn’t sign any official documents with my mom, your situation may be different if the dollar amount or risk is higher.
Make your ask. There was nothing formal about my pitch; I took my mom out to dinner to her favorite Japanese restaurant to make my ask. No financial spreadsheets, no Powerpoint presentations — just a mom and her son. Note: While Excel spreadsheets intimidate my mom, your family members may want to see detailed projections. In either case, if you can show a well-thought-out plan to spend the money and generate revenue, then you’ll be that much close to closing the deal.
Give a clear timeframe. The pitch itself was a very small portion of dinner, but I did make it clear to her that I needed to know her decision by Friday (giving her two days to make a decision). I’ve learned through years of pitching that the shorter the timeframe, the likelier your pitch is successful.

The result? On Friday, I called my mom, and she told me she trusted me and that she would invest $5,000. And so far, so good – Professor Peru is going strong, with several new partnerships, and I’ve also started development for How to go to North Korea.

Have you ever raised money from a family member? What steps did you take to ensure that the ask was a success — for you and your investor?

Jun Loayza is the President of Reputation Hacks and the original creator of the Beginner’s Guide to Reputation Management. In his startup experience, Jun has sold 2 internet companies, raised over $1 million in funding, and led social media technology campaigns for Sephora, Whole Foods Market, Levi’s, LG, and Activision.

The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, the YEC recently launched #StartupLab, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses via live video chats, an expert content library and email lessons.

5 Things You Need to Know About Interviewing at a Startup

Everything that I learned in college about interviewing is essentially worthless. After speaking to those that are close to me who will soon be graduating, I decided to jot some pointers down.

Most pertinent to a startup or early-stage environment, the following points stem from hundreds of hours of actual interviewing experience. Tech interviews will be more tech-centric and sales interviews will be more dollar-centric, but all interviews with an entrepreneur will require an entrepreneurial approach.

1. The person interviewing you would rather be doing something else.

Don’t kid yourself. Very few entrepreneurial hiring managers look forward to spending hours of their day interviewing candidates. There is always a critical problem to solve, email to be answered or money to be made buried in their hectic schedule. Interviewing candidates is a need and not a want.

Make the experience as memorable as possible for them and capitalize on their limited attention span. Use the first 15 critical minutes of pitch time to communicate your personal executive summary. Succinctly highlight how you make a difference, how you help the bottom line, how you deal with problems, why you can be player and coach, what motivates you and why you’re there for that opportunity.

2. The person interviewing you will speak to dozens more like you.

You likely have been “chosen” to interview less than you think. With stacks of resumes piling up and a never ending to-do list, the entrepreneurial hiring manager has made a quick, educated guess to speak to you based on the need to solve an immediate problem. Something in your resume, LinkedIn profile or referral has gotten you in front of them.

Make it worthwhile. Be the first appointment on their schedule or the last appointment that day. Give them a reason to remember you throughout the day or during their evening commute. Connect on a personal level and appeal to their emotions. Work days will be stressful, highly charged, energetic and sometimes painful. Give the hiring manager a sense of comfort that when difficult situations and long hours arise, you can be the professional family member that they can count on.

3. The person interviewing you knows the textbook garbage.

Just like you already know how to respond to textbook interview questions, assume that the entrepreneurial hiring manager knows when they are asked by a candidate. Further, if you get the textbook interview questions, run away…run far, far away. It’s a sure sign of things to come but that’s a different topic. Instead, craft questions that are intelligent, pertinent, thought-provoking and challenge the hiring manager.

Likely, you will come up with something that’s already been thought of. The key is to find the sweet spot where the question/thought was previously their own or introduced by someone that they respect. This is impressive and says a lot about your ability with creative problem solving. Understand the business and craft questions related to expanding the business rather than defining it. Repeating facts from a Google search or simply perusing the website is classic, textbook mediocrity.

4. The person interviewing you is not mediocre.

Startups and early stage companies have little time, money, patience and tolerance for layers of mediocrity. You are likely interviewing with someone who is either the direct decision maker or a trusted previous hire. This means that they have either developed their own tests or have already passed the tests so never assume that a half-a**ed approach will fool anyone.

No organization needs mediocrity. Startups and early stage companies especially are not looking for the typical 9-to-5′er looking for defined vacation schedules. Set yourself apart by highlighting flexibility, adaptability, comfort with uncertainty and a general can-do attitude. There’s nothing wrong with living for work in the entrepreneurial hiring manager’s eyes.

5. The person interviewing you is a salesperson.

They have no choice in the matter. Every day they are either selling a product, a service, a solution, an idea or themselves to someone internally or externally. You need to have the same exact mentality in the “everyone sells” model. With limited experience, highlight entrepreneurial endeavors that you started in school.

For pros, highlight bottom-line milestones from previous engagements. Talk facts and figures and make it all relative. Focus on your personal brand and use your reputation as your strongest asset. This reputation can come from your studies, collegiate organizations, co-ops, internships, professional organizations, or employer experiences. No matter what the examples are, show that you identified an opportunity and capitalized on it. Be prepared to sell yourself or don’t bother at all.

There’s more, of course, but these five points should get you started. There’s no substitute for practice, practice, practice so if you are fortunate enough to have a trusted mock-interview resource, use them. The worst interviews in the world are the ones where both parties walk away feeling like the hours were completely wasted. No one has the spare time for that.

This post originally appeared on the author’s blog.

Max Sobol is Partner and President @ IdeaEvolver. He’s passionate about startups: getting them built, staffed, supported, optimized, growing and then some.

Fueled by cardboard lessons you could learn from 2 nine year old kidpreneurs.

Is Your Business “Partnership” as Solid as You Think?

Good contracts make for good relationships. It doesn’t matter if you and your new business associate are the closest of friends, mere acquaintances or siblings. Yes, even siblings would be wise to ensure they’re covered, should anything go awry.

I urge every person considering entrepreneurship to resist putting personal relationships or financial well-being in jeopardy by failing to clearly delineate the terms of agreement in a professionally prepared, legally binding document. It is not a savvy choice to rely upon what has been said, what was written in an email, or even what was casually drawn up between the two of you. These measures to protect yourself may not hold up in court. They sure didn’t for me.

In 2004, I entered into business relationship that I thought was a partnership. My new “partner” and I were going to take the blogosphere by storm with a daily videoblog about Internet culture. (Note: these were the pre-YouTube days, so putting video on the Web was fresh and exciting.)

For nearly two years I acted as a company partner because, well, I thought I was one! Since I was told verbally that I was in a partnership, I acted as a partner in meetings with potential investors, set up the company’s bank account and filed our trademark paperwork. In fact, in order to set up a bank account, we needed a signed contract between company founders specifying the terms of the partnership. I wrote up a quick one-pager, and we both signed it.

The work commitment was as expected for the co-founder of a startup. Basically, I had no social life — everything was about making the show and business a success. Newly 23 years old, right out of college and living in New York’s East Village, I declined too many invites to count to events, parties and dance clubs. Some friendships faded over time because I was completely preoccupied with writing show scripts and responding to business emails until the wee hours of the morning. As is typical of the entrepreneurial mindset, I put everything on hold for the good of the company.

At first, the show was an incredible success. In fact, we were so popular we could barely keep up with the media inquiries and find the time to shoot our daily videos. Profiled in The New York Times and on CBS Evening News, among many other outlets, and emailed daily by interested investors and potential collaborators, it seemed clear we were on a rocket ship destined for greatness.

Unfortunately, the skyrocketing success of the business was met with the equally speedy downhill slide of our relationship. The partnership became increasingly rocky as we planned to move the show to California. The move was delayed for months, to the point where I found myself subletting a series of New York apartments as I waited for my partner to feel comfortable.

In the end, he never did.

Finally I was given an ultimatum — stay in NYC or you’re off the show. To my amazement, I realized I was being treated as an employee rather than a partner. Since we had only my quick one-page document for an operating agreement, there was nothing I could legally do.

Moral of the story: no matter how nice the guy or gal you’re going into business with seems, you always need a lawyer. I was naive to believe that talk and a self-created contract would hold up in court. That’s because I never imagined I’d need to go to court — why should I? My partner was a nice guy.

My first entrepreneurial pursuit was chock full of some of the highest highs and lowest lows I’ve ever experienced. Yet even with all the heartbreak of this first endeavor, I’m still at it, reaching for more highs with one significant difference: in the two companies I’ve co-founded since co-creating that first one, I have protected myself by hiring a good attorney. Yes, lawyers can be pricey, but it is money well spent. When everyone knows there is a legally binding document signed before the venture starts, expectations are plain and clear to all parties from the get-go. If not, there might be some funny business or eventual rewriting of history.

Have your legal counsel make certain everyone is on the same page, because believe you me, that’s the only place you want to be.

Amanda Congdon is a California based on-camera personality, new media pioneer and healthy food entrepreneur. She has produced and hosted many web and mobile TV projects; her show, AC on ABC, made Amanda the first video blogger for a major network, ABC News. She is currently Co-founder and Director of Operations at Vegan Mario’s™ Organic Kitchen.

11 Founders offer advice on getting a job with a startup.

Startup Tips: Building Perseverance From Ken Oboh Co-Founder Of Remix.com

Startups, like fragile seedlings, need to be in the right environment to flourish. It takes drive and doggedness to see any idea through to success, and persistence is often the only thing separating those who succeed from those who fail.

That’s why one of the most vitally important aspects of starting a new business is being in an entrepreneur-friendly environment. Although many people think of capital, labor, or experience as the most challenging aspects of starting a new business, finding people to provide advice, support, contacts, and resources can be just as difficult.

It’s much easier to keep pushing toward a goal if you have a community of people who understand and encourage you. Being an entrepreneur takes more drive and guts than most people can comprehend, so surrounding yourself with like-minded people can help you succeed.

Find Your Motivation and Drive

Anyone who wants to pursue an extraordinary goal — from professional golfing to creating a company — must have an extraordinary level of motivation to succeed.

In my experience, discouraged entrepreneurs who are unable to overcome negativity are often those who do not have a deep passion for the area of business they’re in, or who lack the sheer desperation of not wanting to fail. As with losing weight or giving up smoking, being persistent enough to see a goal through to fruition requires strong motivation.

If you’re building a startup, be sure it’s something you’re interested in; invest yourself in your startup’s success. Successful entrepreneurs would often rather die than give up — an attitude that will help you push past criticism and other obstacles.

Seek Out the Right People

Unless you live in Silicon Valley, you’ve probably been the target of negativity from people who don’t believe in your idea. Dedicating your life to a business idea requires single-mindedness and dedication, which is hard for people who aren’t entrepreneurs to understand. Normal people fear the risk, hard work, and intense commitment required to succeed in business, which leads them to try to dampen the aspiring entrepreneur’s enthusiasm.

All that negative energy can be disheartening, and it will ultimately work against you. Persistence is the key to success. If you’re living in an environment without a network of people with similar interests, you may be shooting your startup in the foot.

When my business partner and I first decided to pursue our own business ideas, most people didn’t understand what we were doing. They constantly tried to steer us toward more conventional jobs. We began meeting weekly with a group of six entrepreneurial-minded friends to study and share ideas. After two years, Chris and I eventually hit upon a business idea that began generating revenue for us. In retrospect, those meetings were the most important factor that contributed to our success.

Be your own best friend when it comes to encouragement. Surround yourself with people who will help you work toward your goals and inspire you to persevere.

Building a web of support is even easier now with online networking sites like Facebook and LinkedIn. Here are three tips to help you build a network online:

1. Join the conversation.

Become an active participant in online groups formed by like-minded entrepreneurs around subjects that you are interested in or passionate about. Get engaged in the conversation: Ask questions, learn from other members, and share your perspective.

2. Initiate community.

Set up your own groups or forums and invite people you’ve met through similar groups to join. This will increase the strength of your relationships and your connection to an online community in your field.

3. Do your research.

Look for people who’ve been successful in your area of interest to find potential mentors, either directly or indirectly. Most people are happy to be contacted by fellow entrepreneurs for their advice and expertise — especially if you’ve already established yourself as an up-and-coming person in the field by connecting to online communities.

Startups need to be surrounded by people who understand what they’re trying to do and who can offer emotional, moral, technical, and even financial support. Seeking out help is one way to encourage a persistent mindset in yourself. In the meantime, be aware of what’s motivating you and consciously work to build the perseverance you’ll need to succeed.

Ken Oboh is the co-founder of REMIX.com and UMIX.com, two revolutionary music sites that give users the power to be their own DJs. Ken is a serial entrepreneur in the entertainment industry.

Now read I know we want venture capital but what is it?

11 Tips For Increasing Customer Loyalty

Now that your product is launched, tested, iterated and you’re getting customers, how do you keep them? Our friends at the YEC asked 11 entrepreneurs, founders and experts “What’s your best tip for increasing customer loyalty?

Always Over Deliver

“First and foremost, meet the needs of the customer, then take it up a notch and over deliver. Whether you provide deliverables ahead of schedule, throw in bonuses or surprise and delight with cool new features, continue to give more.”

– Kelly Azevedo | Founder, She’s Got Systems

Ridiculously Good Customer Service

“To quote a recent customer email, “I really appreciate your thoughtful and professional response. I don’t get that a lot from customer service. Usually, it’s scripted nonsense that makes it seem like I’ve done something wrong. You’ve single-handedly improved my perception tenfold. Someone there ought to give you a pay raise.””

– Matt Mickiewicz | Co-Founder, Flippa and 99designs

Treat ‘Em As You’d Want to Be Treated

“Empower your employees to help customers the way they would want to be helped. Ditch scripts and “company policy” in favor of dialogue and intuitive problem solving. Customers want to be treated like human beings, not sales figures.”

– Vanessa Nornberg | President, Metal Mafia

Try Genuine Transparency

“If you screw up, be willing to openly acknowledge it and take responsibility for it. Always be real with people, and cut out the “robot act.” Show a genuine desire to improve, even if you’re already doing a good or great job in servicing them. Customers really appreciate that sort of interaction, especially when you show you understand them and actually give a darn.”

– Matthew Ackerson | Founder, Saber Blast

Love Them and Thank Them

“As Gary Vaynerchuk says in his book The Thank You Economy, you need to “shock and awe” your best customers. This means actually giving a crap and rewarding them for no particular reason with thoughtful gifts. I agree 100 percent. Are you telling me the best you can do is an automated Happy Birthday email?”

– Patrick Curtis | Chief Monkey and Founder, WallStreetOasis.com

Customer Loyalty Works Both Ways

“If you want customers to be loyal to you, don’t forget to be loyal to them. Focus on your core, die-hard clients. The fringe customers will come and go, but your core will stick with you through the good times and bad. Keep those customers happy at all cost. Customers reward loyalty with loyalty.”

– Nick Friedman | President, College Hunks Hauling Junk and College Hunks Moving

Build a Broader Relationship With Clients

“If the only times you talk to a customer is when you’re getting paid or providing support, you won’t exactly be their favorite person. Creating a broader connection makes you someone that they’ll want to seek out. Something small, like forwarding a relevant article, can be enough to create a positive association, but keep your eyes out for bigger opportunities.”

– Thursday Bram | Consultant, Hyper Modern Consulting

Sincerity, Seriously

“Customer loyalty is, in my opinion, built and substantiated with honesty. But more than honesty, it’s really about sincerity. Clients or customers want to look into your eyes and know that you don’t just mean what you say, but you are what you say. They know that everything you do and say is a part of who you are. Because of that, they know they can trust you, and that keeps them loyal.”

– Steven Le Vine | CEO/President, grapevine pr

Send the Message Clearly

“How much would it mean to you if the founder or president of one of your vendors called you up on the phone to ask you how your business was doing, and if there was any more that they could provide for you? Don’t say you care, show you do. Pick up the phone and make it personal.”

– Benjamin Leis | Founder, Sweat EquiTees

Reward the Remaining Ones

“Make your customers feel special by rewarding them for their loyalty. A thank-you gift, access to an exclusive event, a special offer, they all go a long way. And now, there are many services that can help without requiring a major capital investment. For instance, at Merchex, we’re working with dozens of luxury merchants to identify their best customers and effortlessly reward them.”

– Michael Tolkin | CEO, Merchant Exchange

Keep Their Best Interest in Mind

“I believe the best way to increase loyalty is to only offer people what they truly want and need. If someone isn’t the right fit for my company or they no longer need the services, I tell them. Coming from a place of total authenticity not only turns clients into raving fans, but also wins the hearts of people who are amazed you didn’t try to pressure them into a sale.”

– Elizabeth Saunders | Founder & CEO, Real Life E®

The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, the YEC recently launched #StartupLab, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses via live video chats, an expert content library and email lessons.

11 Founders give advice on getting a job with a startup.

Startup Act 3.0 Aims to Open Borders for Entrepreneurs

Some pieces of legislation refuse to die. For a third time, lawmakers introduced a bill that would create visas for foreign entrepreneurs looking to start a business in the United States. The Startup Act 3.0 is a bipartisan bill that would grant entrepreneurs who employ at least two full-time employees or raise investments up to $100,000 an additional three years to grow, with the possibility for permanent status, according to Mashable.com

Democrats and Republicans don’t agree on much at the moment, but the Startup Act 3.0 has support on both sides of the aisle. Even President Obama has voiced his support for these “entrepreneurial visas.” Obama noticed that bright foreign students are studying at American Universities, but don’t have the opportunity to continue toward the American Dream. “Once they earn that diploma, there’s a good chance they’ll have to leave our country,” Obama said.

Not every bill gets three strikes. But the Startup Act 3.0 could be the next step toward economic recovery and social reform.

Potential Impact

The beauty of new businesses isn’t just the jobs or innovation. It’s also the secondary consequences. Foreign entrepreneurs, B2B businesses and consumers all stand to gain from the Startup Act 3.0. Obviously, foreign born entrepreneurs gain access to launch business in the United States. While many will argue that the U.S. is becoming a less and less fertile place to start a business, it still boasts the largest economy in the world, according to Economywatch.com. As startups launch, they strengthen B2B businesses through partnerships. A startup usually can’t facilitate credit card transactions on its own, but a company like Capital Processing Network offers expertise and support. The result? Both businesses become stronger. From the consumer’s perspective, there’s no downside to new startups. Competition means lower prices, higher quality and increased innovation. Considering the vast positives and potential for more job opportunities, it’s no wonder the Startup Act has come back to life.

Visas and Immigration

Part of the reason the Startup Act has needed three renditions is because it dives into a currently unsettled territory: immigration. According to Huffingtonpost.com, previous renditions of the bill failed to pass because of their controversial nature. Immigration is no less controversial, but once again, entrepreneurial visas are on the table. During his recent State of the Union address, President Obama called for a comprehensive immigration reform bill in “the next few months.” It remains to be seen whether this comprehensive reform will interfere with the Startup Act 3.0.

Inside the Bill

According to a press release from Virginia Senator Mark Warner, one of the bill’s sponsors, the Startup Act 3.0 includes provisions beyond creating new visas. Additional provisions include:

A mandate that grants U.S.-educated foreign students who graduate with a master’s or Ph.D. in science, technology, engineering or mathematics a green card and allows them to stay in the United States
Research and development credits for startups less than five years old
Elimination of per-country caps for employment-based visas
A mandate that makes permanent the extension of capital gains taxes on the sale of startup stock held for at least five years

These provisions reveal that the Startup Act 3.0 packs a punch. Perceived by some as a small piece of immigration reform, lawmakers hope 3.0 will jumpstart the economy.

Did you see these 48 startup stories from SXSW?

Bob La Loggia Founder Of Appointment-Plus Reveals 5 Things That Set Real Entrepreneurs Apart

Last month Free Lunch Fridays kicked off their monthly seminar series with Bob La Loggia the founder and CEO of Appointment-Plus. His startup is exactly what you would think it is by the name, an appointment scheduling software, however during his keynote he didn’t talk about appointment scheduling as much as what makes entrepreneurs different, what sets them apart.

Free Lunch Friday is also exactly what it says, an organization that supports startups by providing great content and education and of course nourishment (the lunch part). We first met the Free Lunch Friday team at SXSW where of course they fed us lunch on a Friday.

Free Lunch Friday is holding monthly seminars with experienced founders and entrepreneurs on a variety of topics.

Here are the 5 things that set entrepreneurs apart:

1. Marketing. It’s essential to define and narrow your target market, correctly position the product or service in front of the customer, and differentiate your business from the competition.

2. Sales. Characteristics of a successful sales focus include: influence factors, which build credibility; authority, such as blogging about a select industry or speaking at a conference; and social proof, such as customer testimonials and referrals. Having a basic sales flow in place is also essential.

3. Support. While the main objective of support departments is to assist customers, support reps also play a role in retention, up-selling/cross-selling and gaining referrals.

4. Finance. Entrepreneurs must have an understanding of financial statements, balance sheets, accounting basics, taxes and cash flow for their businesses to operate profitably.

5. Technology. Given the role technology plays in all businesses, entrepreneurs should have a knowledge of basic database concepts, system language and development lifestyles.

To ensure that none of the above components are ignored, La Loggia suggested his “Geek In A Week” program. This involves dedicating one week to each component and four hours each day during that week focused on that aspect of your business.

Check out the video of Loggia’s talk below:

Source

Check out Appointment-Plus here.

Check out some more startup tips here.

Crowdfunding Creates Great Customer Base

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(image psmag.com)

Drive Revenue, Customer Development Through Crowdfunding

One of the biggest advantages to raising funds through kickstarter is the potentially broad community of backers formed around the fundraising campaign. These backers create an instant base of potential beta testers, early adopters, customers, suppliers, evangelists, and twitter followers (and retweeters).

New and established companies should consider how crowdfunding can be used to generate revenue (as opposed to investment). People who have skin in the game, even a small amount, are much more likely to be loyal customers, give valuable feedback, refer you to new customers, and help the company in countless other ways.

Here are some scenarios that we could see playing out:

1) Growth Stage Startups: A startup like Birchbox with over 100,000 subscribers closes a $25 million Series C financing round. It then allows each of its customers the opportunity to participate in a $1M crowdfunding follow-on round on the same economic terms. Their current customers would be thrilled to have the opportunity to participate in the upside of the Company and, with skin in the game, would be more likely to recommend the product to their friends, give feedback, and help the company. More people would want to become customers in order to be part of the “club.” Also, because this would be a follow-on to a venture backed investment, many of the concerns about fraud are minimized.

2) Local Franchise Businesses: A local business like Vezzo allows everyone within its zip code to participate in a crowdfunding round for purposes of opening a new store. Local investors will become local customers and evangelists and suddenly the pizza stores have hundreds of new local people financially incentivized to promote the new and current pizza stores.

3) Early Stage Startups Requiring Critical Mass: Some businesses (particularly social media) don’t work without a critical mass of users (see facebook, twitter, foursquare, quantia MD, quora, lawpivot, etc.) to create network effects. Even if a company is capable of raising money through the traditional angel or VC route, it may actually prefer to go with a crowdfunding round in order to gain access to this potential early user base. After a successful crowdfunding round, the company would be able to tap into hundreds or thousands of early adopter types with skin in the game, forming the necessary critical mass.

4) Early Stage Startup Customer Development: One of the key tenets of Steve Blank’s customer development principles is to get customer validation prior to going through the expense of creating a product. You would do this through surveys, landing pages, mock screen shots, and letter of intents where potential customers agreed to be early users. Getting a customer to invest in a product before it is created may be the best way to validate the product before it is created and will be a great indicator on whether a customer would buy, or at least try, a product once created.

The feasibility of each of these scenarios is highly dependent on the rules that the SEC ultimately comes down with on what can be contained in a crowdfunding notice and how it may be delivered.

What else? How else could crowdfunding be used to generate revenue?

This post originally appeared on the seedinvest blog one of our great content partners. Check out the whole seedinvest blog here.

5 Tips For Entrepreneurial MBAs From TroopID’s Blake Hall

For entrepreneurs, business school presents a unique set of choices and opportunities that can drastically alter a founder’s chance of success — for better or worse.

I founded Troop ID while I was an MBA candidate at Harvard Business School in February of 2010. And while today we employ 17 people and sign up nearly 1,000 new members daily, our path to success would have been much swifter had I leveraged the resources at my fingertips while in business school.

Here are 5 of my top lessons — many of them learned the hard way — for other MBAs considering entrepreneurship:

1. Research vesting carefully.

If you have a co-founder, then you will inevitably face a choice about how to split ownership of the company. Initially, this will seem simple: 50/50. But what happens when your co-founder – comparing his ramen noodle diet to the average starting salary of your MBA graduating class — decides to take a high-paying corporate job several months later and wants to remain an equal owner?

That happened to me, and I felt physically ill for almost two months until we sorted it out. Fortunately, smart investors won’t invest in companies until non-full time founders sell back their shares, and, ultimately, that reality allowed me to resolve the situation. But the confrontation cost me precious time and it ruined my personal relationship with a classmate I had once trusted. Looking back, I could have gone down the hall to see Noam Wasserman, a professor at Harvard who literally wrote the book on optimal ownership structures for Founding Teams. I still kick myself over that missed opportunity.

2. Find a mentor.

MBAs are uniquely positioned to find a mentor who is invested in their success. While I would steer clear of pure academic types, there are usually plenty of successful entrepreneurs on faculty. If you develop a personal relationship with a successful entrepreneur who trusts you and is passionate about your venture, then you will have gained the most valuable asset of all: someone who can open doors for you within their trusted network. Since most MBAs are first-time CEOs or founders, sophisticated angel investors will often require that a person they trust sit on the board of the company.

My mentor, Kelly Perdew, helped me navigate multiple pitfalls that could have killed our business; he kept our chins up when the breaks went the wrong way; and he kept our eye on the ball when they started to go right. Kelly provided introductions to most of our current angels and he walked me through the financing process. He’s the single best thing to happen to me and my company.

3. Understand the commitment.

An MBA provides a safety valve that many other entrepreneurs don’t enjoy — a terrible thing for entrepreneurs, because it means that you can waltz out of your company at any point in time and land in a safe, high-paying job. I had a full-time offer from a top management consulting firm that paralyzed me the first few months after I finished business school.

Until I declined that opportunity, I couldn’t make the tough decisions about the best geographic location for the company, I wasn’t fully bought into my own vision and, most importantly, I couldn’t hire talented people or ask them to leave their jobs because that would be unethical. Only when I fully committed to making my company successful did I feel free.

I waited far too long to make this decision and I allowed my Facebook feed – filled with my classmates’ vacations and ski trips – to influence my thinking. After declining the job offer, the next year was even worse. I was lonely. My credit cards maxed out. But I never quit because I was passionate about the problem that I was solving.

4. Focus on your product, relentlessly.

Before we even had a product, I had built a sharp-looking Excel business model that projected a meteoric rise to success. I cringe now when I write about it because, while I understood financial modeling, I understood virtually nothing about building a company. Because I had business training, I thought that my job was to go out and build a sales and marketing plan and to develop relationships with other businesses. I pursued these activities at the expense of the product — the core of the business.

After a few months and a harsh (but much-needed) conversation with one of our seed investors, I stopped doing everything else until we nailed our product and validated our assumptions with small cohorts of customers.

Today, focusing on product first is a personal mantra. It’s also incredibly rewarding because it allows for a level of creativity and self-actualization absent in most other functions. MBAs are well-suited to leverage their business training to provide analytical rigor to validate customer assumptions based upon customer behavior with product features.

In the meantime, I’ve learned not to waste money selling and marketing a product that doesn’t solve a real problem.

5. Pitch everyone.

The biggest advantage of being an MBA is that you have access to virtually everyone you need to poke holes in your idea: faculty, lawyers, angel investors, VCs, corporate executives, classmates, and potential customers. Pitch everyone you meet while you are in business school, and soak in the feedback. After a few weeks, you’ll notice that the critiques you receive are clustered around perceived weak points in your business model or flaws with your product idea.

If you can gather the data to answer each one of those critiques, then people will start writing checks to you — and they will leave their jobs to come work for you.

America needs more talented leaders to choose entrepreneurship. Our best and brightest have the most impact when they build new products that solve meaningful problems and give people jobs. We don’t need more bankers and consultants. If you decide to go this route, I wish you the best of luck!

Blake Hall is the Founder and CEO of Troop ID, a digital authentication engine capable of verifying military affiliation online. An Airborne-Ranger qualified officer, Blake led a battalion reconnaissance platoon in Iraq for fifteen months during 2006 – 2007. He has written for The Washington Post, Foreign Policy, The Huffington Post and Vanderbilt Magazine. Thanks to The Economist, he is also the first Google result for the phrase “muscly entrepreneur.”

Check out more on TroopID at nibletz.com The Voice Of Startups Everywhere Else.

11 Founders Offer Advice On Getting A Job With A Startup

Startups are what are fueling the new economy. The bulk of job creation is coming from companies that are less than five years old, and startups are becoming more and more attractive. A lot of college students are finding the startup culture more attractive than traditional corporate America. These 11 founders offer tips to getting that post college job with a tech startup.

Become a Regular at Tech Meetups

“As with any industry, networking like hell is the name of the game. If you become a regular at tech meetups in your area, you’ll make the types of friends who can get you through the door at those startups you’ve had your eye on.”

– Steph Auteri | career coach, writer, and editor, Word Nerd Pro

Don’t Ask for Permission

“If you want to land an internship or a full-time job with a startup in your area, pick out the top ones that interest you and give yourself permission to start adding value for them. Literally. Don’t ask for their permission to start, just begin by creating something (e.g. a competitive research report, a SWOT analysis, or by finding bugs on their website). Showing initiative gets results.”

– Matthew Ackerson | Founder, Saber Blast

Be Incredibly Persistent

“The unfortunate truth is that most startups have an unorganized hiring process. Resumes and emails often get lost in the shuffle, and may not resurface when it’s time to make a hiring decision. Be persistent and keep emailing and applying until you get a response, one way or the other. Startups will appreciate your hustle.”

– Bhavin Parikh | CEO, Magoosh Test Prep

Crawl, Walk, Run

“The best way to work your way into a tech startup is to chose a few companies you’re super passionate about, and try to work your way into a job. You can do this by making contact with people at the company and trying to get a part-time job or internship to prove yourself. If they like you, they’re likely to then hire you full-time when they have an opening. It also lets you “try before you buy.””

– Jason Evanish | co-founder, Greenhorn Connect

Score Informational Interviews

“Informational interviews are a great way for students and new grads in any field to get to know professionals who can help point them in the right direction. Find a few people who have already gotten “in” and invite them to coffee to ask them about their experiences. They’ve been there too, so chances are they’ll love to help.”

– Allie Siarto | Partner, Director of Analytics, Loudpixel

Work on an Awesome Project

“Want a startup to sit up an notice you? Prove that you can do great things without needing someone to poke and prod you. Build something cool of your own: a small event, app or some other creative project proves your worth before they even consider hiring you. As an added bonus, you can prove that you have skills that don’t show up anywhere else on your resume.”

– Thursday Bram | Consultant, Hyper Modern Consulting

Be Willing to Start at the Bottom

“Even if you have 20,000 Twitter followers and graduated at the top of your class, be willing to do what it takes. You’ll get more responsibility if you’re willing to learn — it sounds counterintuitive, but it’s true. Be open to learning from people who are outside of your area of focus and interest. Ask to help with projects outside of the scope of responsibility. Show you care!”

– Susan Strayer LaMotte | Founder, exaqueo

Spoons and Windows?

“Startup founders get hundreds of emails per day, so yours will definitely get deleted before they even get to your sentence about you ‘being a hard worker who can add a lot of value’. To get noticed, send them something absolutely ridiculous. In the last year, I’ve done two big deals because I sent CEOs a 4-foot wooden spoon and a real window, based on conversations we’d had in the past.”

– Joe Cassara | Founder / CEO, You Need My Guy

Research and Development

“The easiest way to get a startups attention is to build something amazing. Pick out a tech startup of your choice, find their API docs, and build an awesome product on top of their service. As you’re working on the project, you’ll network with the startups developers — the next time they are looking for a hire, you’ll know their system better than most.”

– Wade Foster | Co-founder, Zapier

Be Open-Minded to the Startup Scene

“Keep an open mind for all different types of startups. You might have your heart set on a startup that focuses on sports, but could find a great job working for a startup involved with medicine.”

– Josh Weiss | Founder and President, Bluegala

Just Start Writing

“If you’re looking to get into the startup world, get yourself noticed by blogging. If you have certain marketable talents and passions, write about them. Then, share the content with as many people as you can. If you’re transparent in your writing by saying you’re hoping to be hired, your words just might land on the desk of an ideal decision-maker.”

– Logan Lenz | Founder / President, Endagon

We’ve got more startup tips for you, here.

Richard Branson: Four Tips For Avoiding Startup Mistakes

Richard Branson,entrepreneur advice,startup,startups,startup tips

photo: fashionindie.com

Sir Richard Branson, the founder of Virgin Atlantic among 100 other companies (mostly successful) has been doling out great entrepreneurial advice over the last 30+ years.

The great staff at KissMetrics have compiled a plethora of great Branson advice. If you’re an entrepreneur chances are you’ve either heard some of Branson’s advice first hand, or second hand from a friend or colleague. Chances are you are already acting on something that’s come from his infinite wisdom and you don’t even realize it.

Below we’ve got four tips for avoiding startup mistakes that everyone could learn from. Before we dive into that though there are a couple other really important lessons you could learn from Sir Richard Branson.

Your First Year is all about surviving.

Although I’m a serial entrepreneur and have had two successful exits neither was easy in the beginning, and nibletz has been even harder. Branson says:

“In a company’s first year, your goal should be simply to survive, and this will likely take everything you’ve got. No matter how tired or afraid you are, you have to figure out how to keep going.”

Always take notes.

We know always be closing and all those other ABC’s but Branson is a die hard when it comes to taking notes. Whenever he is meeting with anyone he is always taking notes. I personally just started taking notes with paper and pen rather than on my iPad. It makes whoever I’m talking with more comfortable and writing things down with a pen actually helps you remember them.

Branson says:

“Anyone who aspires to lead a company must develop a habit of taking notes. I carry a notebook everywhere I go.”

In this article from entrepreneur magazine, Branson shares Four Tips For Avoiding Statup MistakeStay on target – You need to be clear and concise in explaining your idea. Branson says that the shorter the pitch is, the clearer it will be. Don’t plan too many years in advance, and stay on target.

Be realistic about costs – Don’t underestimate the cost that it will take to launch your company. Branson says that JetBlue needed $160 million to launch. Conventional wisdom said that cost was too high and they wouldn’t be able to raise that much capital. But they did and had one of the most successful launches in airline history and turned a profit after only six months.
Hire people you need, not people you like – It’s been said that people would rather work with people they like than people who are competent. Branson says entrepreneurs may want to stay away from working with friends because, if they don’t work out, it will be difficult letting them go.
Know when to say goodbye – Entrepreneurs need to know when to step away from the CEO role. This doesn’t mean turning your back on the business, but realizing you’ll have a new role in the company which will allow you to focus more. It also doesn’t mean that you cannot return to running the company, as Larry Page did at Google.

We highly suggest you check out this Kissmetrics piece on Richard Branson, don’t forget a note pad.

Great startups will learn a lot here. Check it out.

Startup Lessons From The Formspring Shut Down, Or Not!

Formspring, the very popular, anonymous, question and answer site, was supposed to shut down on Sunday March 31st. We went to see where they were in the shut down process and saw the note above. So it looks like it’s possible Formspring could have one last reprieve.

The service has millions of users and billions of questions, asked and answered. It was a great tool to ask anonymous serious questions too, and also became a very abusive tool among younger sets. A young, openly gay, actor in Atlanta said he used to love getting critiques and questions about his local theater performances and some of his tv appearances, but at some point he became inundated with requests for naked pictures, before turning 18.

It was things like that, that made Formspring flirt with safety to the point where some of their staffers stomachs turned.

Anonymity is one of the things that Cap Watkins, a former lead designer for Formspring highlights in this personal blog post.

He recaps his time at Formspring and the wild ride of one of the quickest rising startups in the country. Now sites like Quora, and to a point Cha-Cha (which is rumored to be running out of money), carry the bulk of the question and answer flow.

Watkins shares three things that could have “steered the product to a more successful outcome”.

Watkins shares:

We protected anonymous content to a fault

Formspring’s initial success was, in large part, due to giving our users the ability to ask each other questions anonymously (even without a Formspring account). In under a year, we skyrocketed to our first billion questions answered and showed few signs of slowing down. Yet even as we celebrated these milestones, we were all discussing how anonymity would or wouldn’t play a part in the future of our product. On the one hand, anonymity was a really popular feature (duh). On the other hand, we saw a lot of bad and abusive content come through that channel (double duh). A fact that we wound up being pretty infamous for.

But man was it hard to let go of anonymity as a core feature. We tried workaround after workaround. We prompted for sign-up after asking an anonymous question. We started pushing privacy settings for users into our on-boarding (which they never changed, of course). We started setting up elaborate filters to catch bad or abusive questions and put them behind a “Flagged Questions” link in users’ inboxes.

We spent a lot of time on anonymity. It was our sacred cow. Looking back, we should have spent that time finding ways to gracefully degrade that feature instead of finding ways to keep it alive. When you find yourself constantly giving a feature CPR, you should stop and consider whether or not it’s worth saving (or even possible to save).

Our opaque follow-model shot us in the foot

In a way, this lines up with our stance on anonymity. Following on Formspring was, for years completely anonymous. You couldn’t see who followed you and others couldn’t see that you were following them. This meant that we gave people a microphone and they kind of had to hope people heard what they were saying. And until we eventually launched our Smiles feature (akin to Facebook Likes), there was no way to know that your content was being consumed. We debated this a lot internally and came to the conclusion that the Twitter public-follow model was broken in that it put unnecessary social pressure on users to follow back. We felt we could build social features on top of the content (like Smiles) that let our users receive feedback and let their followers out themselves purposefully.

Formspring eventually allowed public following (not as a default, and after I left), but it was too little too late. My takeaway from this has been to always double check to make sure you’re not designing toward your own biases instead of what’s best for your product and users. Formspring had clearly struck a chord with people aching to share more about themselves with their friends. And instead of making it apparent that they were achieving their goal, we put an artificial barrier in place and prevented them from knowing if Formspring was working for them or not.

We skated toward the hockeystick

The biggest sin of them all from a product perspective, but also the hardest to avoid (and one that I see companies make over and over again).

Our initial graphs at Formspring, as you probably know, all hockeysticked up and to the right. Nearly straight up. That part was totally awesome! We were super popular! We could be the next [insert gigantic company name here]!

Oh wait, the graph has peaked and is starting to slowly (very slowly) trend downward. What do we do? Make big bets, right? Try to recapture that crazy growth!

And so we tried. The first big project we worked on was a Formspring button that sites could embed at the end of blog posts or other content. We had millions of users, so we figured it wasn’t a stretch to imagine they browsed other web sites and would gladly click a Formspring button at the end of a post (which asked “What did you think?” and allowed them to post a response to their Formspring page). This was just as the Facebook Share and Twitter “Tweet This” buttons were appearing, so we figured it made perfect sense to follow who we viewed as our closest competitors at the time.

We literally spent months on that system. We had to make sure our servers could handle a potentially huge influx of traffic (we based our estimations on our main site’s traffic, which was honestly insane), had to design and implement the feature, make sure the implementation was easy for publishers, make deals with publishers, etc. We bet huge. On someone else’s (Facebook and Twitter’s) plan.

Continue reading at Cap Watkins blog

A note form Formspring founder Ade Olonoh on the Formspring web page on Sunday March 31, 2013 indicates that they may have a hail mary deal in the works. Stay tuned for more.

Lucas Rayala, founder of Altsie, shared this when his startup failed gracefully

I Know We Want Venture Capital But What Is It?

You may be shocked at the amount of startup founders and entrepreneurs that are too afraid to ask the question in the headline, “I know we want venture capital, but what is it”.

Well almost three years ago Silicon Valley Bank did a round table discussion led by Michael Hanewich, the East Coast Head Of Life Sciences/Venture Capital for Silicon Valley Bank.

The panelists were:

Bryan Roberts, Ph.D. — Partner with Venrock, a leading venture capital firm
Judith Elsea — Co-Founder and Managing Director of Weathergage Capital, a fund-of-funds and limited partner in venture capital investing
John Mendlein, Ph.D. — Chairman of Fate Therapeutics, an emerging company backed by venture funding.

In a six part video series they explain exactly what venture capital is, where it comes from, how it gets to entrepreneurs and how an entrepreneur can benefit, not only from the funding but from a long term commitment as well.

Roberts explains the venture capital process early on. Venture capital firms raise funds every 3 or 4 years from limited partners. Limited partners can come in a variety of forms. Wealthy families, foundation partners, insurance companies, funds of funds and other can be partners in VC firms. Now keep in mind we’re talking about Venture Capital here, not an “angel” round which is something totally different.

Partners in a venture capital firm have a “very long horizon” on dollars. They want to make money,but are fine, and perhaps better off, doing it over a long period of time.

Now, granted, this video series was produced three years ago before super exits like Instagram. However, Instagram is the exception, not the rule.

The purpose of the VC dollars is to get a company’s product developed and to market, and eventually to liquidity. Venture capitalists will then make money on their initial investment commonly through the company going public or a merger or acquisition of some sort. In rare instances the venture capitalists can make their money back through the company generating revenue.

Here’s the first video in the series:

See the rest of the video series here.

4 Startup CoFounders You Don’t Want

Back in October we had a great guest post from Mike Moyer the author of “Slicing Pie: Funding Your Company Without Funds”. In that guest post Moyer talks about how to divide equity in a startup, fair and square. If you haven’t read it, it’s definitely worth the read.

Co-founder contribution is one of the biggest things that co-founders argue about when they are distributing equity. I’ve been down this road three different times and have learned some pretty important lessons along the way. My co-founder at nibletz.com, Nick Tippmann, compliments me and the business in ways that will hopefully make nibeltz succeed far beyond our wildest dreams.

Every startup isn’t so fortunate. Many startups and cofounders find that other people on their team fit into one of these four categories, at least in their first time around. Scott Annan at startupplays.com did a great job of summarizing them:

The Disappearing Cheerleader
Initially excited and enthusiastic about how your solution will change the world, they start missing meetings, not following up on things they said they’d do, are slower responding to emails. They’re on the to the next shiny object, and things get awkward.

The “All In If It Works Out”
Cautious from the beginning, you get the impression that this character is hedging her bets… Putting in enough time to be part of the team if it takes off, but keeping that day job, not changing their Linkedin Profile, or forgetting to mention your new super-awesome project at the latest meetup.

The Big Talker
This is the uber-connected person who can open any door with their massive contact list. But once you need their help, the contacts aren’t so quick to help, or aren’t as strong as you were led to believe. Or, worse, excuses are made why you’re not really “ready” for intros yet – and you get the feeling you’ll never be “ready” enough.

Allergic to Work
Despite an epic startup weekend, life gets in the way of getting stuff done.

It happens. And if you’ve ever started a company, it’s probably happened to you. Next is the awkward conversation “that-should-have-happened-a-long-time-ago” and ensuing equity renegotiation that at worst can kill your startup – and at best dilute your company unnecessarily.

Check out the rest of Annan’s post here, as well as Mike Moyer’s video on the “Dynamic Equity Split”

Fair and Square how to divide equity in a startup.