Seven Investors To Avoid
Martin Zwilling, 12.08.09, 5:04 PM ET

In a tough economy, all capital is created equal, right?

Wrong. Even in a credit-starved environment like this one, the source of your money matters. A lot.

When it comes to courting angel investors–well-heeled individuals looking to put some of their stash in promising young companies that could yield juicy returns–entrepreneurs should take great care. Some angels can be a mild nuisance, others downright conniving and unscrupulous.

Here are seven types of fallen angels to avoid.

Suit Slingers. These nettlesome types look for any excuse to take you to court. Rather than try to help your company grow, instead they try to make money through intimidation, threats and lawsuits. They know you don’t the resources to fight them and most likely will cave to their demands.

In Depth: Nine Money-Raising Mistakes

Top Tips: Six Ways to Raise Cash–Now

Smart Guys. Successful business people who become angels often have a prodigious sense of superiority. They tend to be overbearing, negative people hypercritical of every decision you make. Their money may spend, but don’t let them intimidate you into bad decisions.

Control Freaks. This kind of angel starts out looking like your new best friend. Don’t be fooled. As soon as you hit a pothole, he’ll trigger a “gotcha” clause in your agreement that gives him more ownership and operational control of your company. Only your Board can save you here.

Hand Holders. The tutorial investor is not after control, but he wants to guide you on every niggling issue. What feels like benevolent mentoring before he writes the check becomes a painful nuisance soon after. Unless you have an overabundance of time and patience, keep your distance.

Has-Beens. These angels take to wing with every perturbation in the economy. Typical profile: former high-fliers with a liquidity problem. They are still at the country club every day, but now are running up a tab. They will meet with you, ask a thousand questions, but never get around to closing a deal.

Numb Skulls. Wealth is not synonymous with business savvy. You can spot a dumb angel by listening to the questions they ask. The more superficial the questions, the less value (and more potential harm) they will bring to your organization. (That goes for financial journalists too.) One caveat: Numb-skull angels may have important and much smarter friends, so don’t disregard them entirely.

Brokers In Drag. Deal brokers posing as angels (they may be lawyers or accountants by trade) have little intent to invest in your company. Their goal: to get you to pay them to introduce you to actual investors. Brokers may be worth their fees, but don’t mistake them for angels.

General rule of thumb for avoiding fallen angels: Eschew investments from private individuals and focus on credible, professional angel-investing organizations. Even then, do your own due diligence: Ask what other companies they’ve invested in and talk to the chief executives of those outfits to get their feedback. Finally, make sure your lawyer–not the investor–writes the initial investment document or term sheet. This should be a standard document and not negotiated on a one-on-one basis. Beware requests for last-minute clauses that could come back to haunt you.

Yes, money’s tight. But choosing the wrong angel could put you on the flight path to perdition.

Martin Zwilling is the founder and chief executive officer of Startup Professionals, a company that provides products and services to start-up founders and small business owners. Check out his daily blog at http://blog.startupprofessionals.com or contact him directly at marty@startupprofessionals.com.

Bookmark It

Hide Sites

By: The New York Times/ Jennifer Walzer

I recently lost a longtime client, who was also a dear friend and valuable mentor, to prostate cancer. He was 52 years old and left behind his wife and two children. The other day I learned that another good friend was found to have skin cancer that had progressed to the point where he had to have glands removed. He was so busy running his company, he didn’t notice the moles that had started to look different. My friend is only 38 years old.

Like many entrepreneurs, I’m often too busy to breathe. I try not to put work ahead of friends or family, but I often end up with little time to take care of myself. When I started my business, I was in great shape from years of dance and regular exercise. As my business flourished, however, working out was replaced by simply working. And let’s not even think about the decline of my eating habits and sleep schedule. My business became my life.

After watching my close friends battle health issues and after dealing with a few of my own, I’m starting to look at things differently.

First, I realized that by not getting any exercise and not watching what I was eating, I was sapping myself of the energy I need to run my business. If you are like me (and I know I’m not alone here) you will get that energy artificially from coffee, Red Bull, sugar, candy or any other weapon of choice (my personal favorite is sugary gum and licorice along with hazelnut coffees and caramel apple ciders from Starbucks).

Next, regular checkups. There have been times when I felt I couldn’t afford two hours out of my day to see a doctor. I’ve canceled many appointments over the years because I felt I needed to go to that client meeting (and then it would take me months to get the doctor visit back on the calendar). Now I realize that I can’t afford NOT to go to those appointments.

Finally, I’m trying to listen to my body. As hard as it is, I know that when I’m feeling sick or run down, I need to try to rest for a day. If something persists, hurts, looks weird, or just doesn’t feel right, get it checked out. I know that sounds obvious, but so often we let things go. Now, I think about my friend who has skin cancer.

I turned 36 on Sept. 11, and I’ll be getting married in less than two months. I want to have the energy to continue running Backup My Info! for years to come. My fiancé, Brad, and I have started getting up together at 5:30 in the morning to go on our “workout dates.” I’ve started running and even participated in a few road races in Central Park. The difference in my energy level and the way that I feel has been incredible. Now, I’m only slightly tired from getting up early to run.

My team is in on it, too. One of my engineers has lost almost 50 pounds. Now, we try to make smart choices when we order our lunches or buy snacks to keep in the office. Not only does everyone look great, I have noticed that they are getting sick less often and are more enthusiastic and energetic.

Having my own business has some great perks but it’s also about making sacrifices. I just know that my health can’t be one of those sacrifices anymore.

Jennifer Walzer is founder and chief executive of Backup My Info!, which is based in New York. You can also follow her on Twitter: @BackupMyIn

Bookmark It

Hide Sites

By: Andy Liu

Have you been itching to leave your company for the past five years?  Do you have an idea that you’ve been passionate about but too lazy or chicken to get started?  Do you have a business now that is struggling to grow?  Have you been watching the late night commercials on how to get rich quick and maybe even bought a system or two?  Do you lack the confidence or knowledge to take the leap of faith and start your own dream company?  Then, you’ve come to the right place!  InspiredStartup will help you start and grow your company to as big as you can dream.

My name is Andy Liu and I’m the writer of InspiredStartup.  This is not about how to get rich quick nor is it an academic exercise in how to build a company.  This site is for people who dream and execute.  We’ll talk about how to start a business and how to grow it to the next level.  We’ll learn how to do hand-to-hand combat daily to build successful businesses together without the MBA mumbo-jumbo.  I want to see you succeed and to share your experiences here.  I want to learn from you.

My Story

As a kid, I learned the basics of entrepreneurship in my parents basement.  As soon as I would learn of guests coming over, I would find stuff around the house and put it up for sale.  I think my folks and the guests found it amusing, but I found out it wildly profitable since I never paid a cent and I made a lot of profit, it was fun and I was hooked!

At the age of 15, I started working at Godfather’s pizza.  I think that everyone should work at a restaurant at least once in their life – what an eye-opening experience as I learned about the good, bad, and ugly of running a restaurant business through the eyes of a cashier and pizza maker.  I think in one summer, I consumed on average a large pizza each day.  Those were the good ol’ days of being able to consume without worry of mushrooming…

Due to a variety of personal and family reasons, I started working full-time for AT&T at the age of 16 in the summer and then continued working for a variety of large companies including Boeing, Keane, Active Voice and other places including a failed startup while getting my bachelor’s in Electrical Engineering.   I learned quickly that I didn’t enjoy the engineering lifestyle and naively, I thought I learned enough from those experiences to jump into my first “real” startup with investors at the age of 23 while going to school for my MBA.  Nothing ever came real easy, but we were able to work hard hours to build a great, profitable company in 5 years and eventually sell the company.   

Beyond my professional pursuits, I am just as passionate about using entrepreneurship to solve the problem of extreme poverty (defined as those who make less than $2/day).   After traveling and volunteering in developing countries as often as I can, I’ve been moved by our personal responsibility to human dignity and bridging the inequality between the rich and the extreme poor.  I’ve partnered with other tech folks to build a technology center for an impoverished community in Central America.  We have a teacher and social worker on staff and have graduated several students and committed to a 5-year plan.  It’s been a total blast to see real progress and awe-inspiring to see students embrace entrepreneurship in their own pursuits and dreams.  I’m looking forward to sharing more inspirational stories here.  I also want to hear about your passions and thoughts in this area as I think we can as entrepreneurs change the world.          

About Me and Inspired Startup in a Nutshell

I’m a serial entrepreneur and angel investor.  I’m also a die-hard never-say-die Seattle sports fan. I’m now running a web company (BuddyTV.com) and sit on 4 boards as well as 2 non-profits and have invested in 13 companies (including one exit).  I feel very fortunate to have a great partner in my businesses and have been extremely lucky that despite my shortcomings, I’ve seen more successes than failures.  I could talk for hours with entrepreneurs about new ideas and I get energized hearing about other entrepreneurial successes.  We do not exist in a zero-sum world, where someone must fail in order for someone to win, if we can all help each other succeed, we’ll only be better for it!  Remember the saying, a rising tide raises all boats.  InspiredStartup is here to raise the tide for all entrepreneurs (including wanna-bes!).  If I can help you, let me know.

Bookmark It

Hide Sites

By: Seth Godin

The either-or world continues to decay, confronted by a shifting economy and the tools of the net.

It used to be easy to tell if someone was a journalist. Either you were or your weren’t. So giving special privileges to journalists was easy. Parking permits, press badges, first amendment protections… no problem, you’re a journalist. Everyone else? No way.

It used to be easy to tell if someone was an entrepreneur. Either you had a full-time job or you ran a business. So we could treat employees the same (health insurance, no moonlighting) and assume that the few that didn’t have jobs were full-time freelancers or entrepreneurs.

It used to be easy to figure out who did the buying at an organization. The purchasing department did. So we knew who to call on.

Now, of course, it’s all jumbled up. Everyone is a journalist, of course, but just a few do it for a living. Everyone is a freelancer, or, at the very least, always looking for the next gig. Everyone with a credit card can do the purchasing, they just expense it.

Society hates this. It means we need to make up new rules, FTC disclosures, legal principles, safety nets and more.

Marketers love this, because it means change and that means opportunity.

If the only reason you’re only wearing one hat is because you’ve always only worn one hat, that’s not a good reason.

Bookmark It

Hide Sites

By: You tube

Entreprenurs are truly the key to our future and our present…. Check out this incredibly inspiring and creative video. Moments like this inspire us all. Please don´t miss it and I hope you all enjoy.

Bookmark It

Hide Sites

By: A Vc

I’m in London for Seedcamp 2009 and I’ve been spending the day with entrepreneurs and technologists from all over europe. It’s a reminder that the world is full of great entrepreneurs and technologists.

I started my day in a board meeting with one of our companies that was started in Europe. It turns out one of the founders of that company, one that is growing and hiring in the US, cannot get back into the states right now because of a Visa issue.

That is infuriating to me and to the founder in question. His risk taking and the innovations of him and his partners and team members are creating a business in the US and creating jobs and wealth that will largely stay in the US. And he cannot even get into our country right now.

This is nuts. I’ve got an issue with our immigration policies generally, but specifically we should modify our rules around Visas for founders and key team members of startups that are at least partially based in the US, particularly if they have been well financed by angels and VCs.

Fortunately, there is a growing political movement called The Startup Visa movement and there is real momentum behind it. If you are close to your legislators, particularly representatives and senators, please bend their ear on this issue. Though I am not close to the politics around this issue, I suspect this is not a hard issue to get behind politically. Nobody is losing jobs because entrepreneurs around the world are starting companies that are based, at least partially, in the US.

We should make it easy for these people to get back and forth into our country. And with your help, I suspect we will.

Bookmark It

Hide Sites

By: SUE SHELLENBARGER/The Wall Street Journal

By economic yardsticks, Roger the Plumber should be feeling pretty low. Roger Peugeot, owner of the 14-employee Overland Park, Kan., plumbing company that bears his name, is part of a sector hit hard by shrunken credit and slumping sales. He has been forced to reduce staff and is battling new competition from other plumbers fleeing the construction industry.

So why is Mr. Peugeot so happy? He genuinely likes fixing plumbing messes, for one thing, and despite the worst recession he has seen, “I’m still excited to get up and go to work every day,” he says. He relishes running into people at the local hardware store whom he has helped in the past. And in hard times, he says, his fate is in his own hands, rather than those of a manager. “Even when things get tough, I’m still in control,” he says.

In the broadest, most-comprehensive survey yet of how occupation affects happiness, business owners outrank 10 other occupational groups in overall well-being, based on the landmark survey of 100,826 working adults set for release today. Defined as self-employed store or factory owners, plumbers and so on, business owners surpassed 10 other occupational groups on a composite measure of six criteria of contentment, including emotional and physical health, job satisfaction, healthy behavior, access to basic needs and self-reports of overall life quality.

This puts Roger the Plumber well ahead of movers and shakers typically regarded as the top of the heap in society—professionals such as doctors or lawyers, who ranked second, and executives and managers in corporations or government, who came in third—according to the Gallup-Healthways Well-Being Index, a collaboration between Gallup and Healthways, a Franklin, Tenn., health-management concern. This is despite business owners ranking below those more-prestigious occupations in physical health and access to basic needs, such as health care.

The findings, psychologists say, reflect the importance of being free to choose the work you do and how you do it, the way you manage your time, and the way you respond to adversity. Regardless of occupational field, the survey suggests that seeking out enjoyable work and finding a way to do it on your own terms, with some control over both the process and the outcome, is likely for most people to fuel satisfaction and contentment.

“Despite the recession, it still pays to be your own boss,” says Frank Newport, editor in chief of the Gallup Poll. The survey, adds John Howard, director of the National Institute for Occupational Safety and Health, “reaffirms my view that the more control you have over your work, the happier you are.”

Smaller studies have shown links between certain kinds of stress and particular job roles or employment groups. But the huge size of the Gallup-Healthways project, which conducts 1,000 telephone surveys a day, makes it possible to draw detailed, reliable distinctions among a large number of occupational groups. “I know of no other survey of this size” on the subject, says Humphrey Taylor, chairman of the Harris Poll, a competitor. The 11 occupational categories surveyed also include farmers and sales, clerical, construction, installation and service workers.

Unlikely Winners

Business owners may seem unlikely winners. About half of the nation’s full-time small businesses typically fail within five years of start-up, and the rate has risen in the recession, says William Dennis, a senior research fellow with the National Federation of Independent Business Research Foundation. They are more likely to work extremely long hours than people in any other occupation group, other Gallup research shows.

The findings likely reflect declining quality-of-life in some professions, Dr. Howard says. Rising cost controls in medicine, for example, and mounting pressure to chalk up billable hours in law, have curtailed doctors’ and lawyers’ flexibility to control their work.

“Where professionals may have had greater freedom 20 or 30 years ago, many are now experiencing loss of control, erosion of satisfaction and increased stress,” Dr. Howard says.

At the bottom of the heap, transportation and manufacturing workers scored lowest on well-being. These occupations tend to foster conditions Niosh has identified as contributors to unhealthy stress: lack of control or participation in decision-making, conflicting or unclear job expectations, and hectic tasks with little inherent meaning.

Management and executive jobs have gotten tougher, too, during the period the Gallup-Healthways data were gathered, the first eight months of this year. Beset by cost cuts and layoffs, corporate bosses at all levels now share more of these stress-inducing conditions.

Business owners stand in stark contrast. Even in tough times, “you do your own thinking and no one can tell you you’re wrong,” says Edwin Locke, an industrial psychologist and professor emeritus of leadership and motivation at the Robert H. Smith School of Business at the University of Maryland. “You make your own decisions, and if you’re wrong, reality gives you the feedback,” he says.

Staying in Control

As a business owner, Mr. Peugeot says, “even when things are out of your control, as they are with this economy, you’re still in control of your relationships” with customers. Corporate managers and executives may “sit and wonder if they’re going to be laid off, or get frustrated with the inabilities of management,” he says. “If you’re the owner, you may have to say, ‘I screwed up,’ but it’s a lot better than saying, ‘I didn’t deserve that.’ ”

Other patterns among the self-employed help explain their psychological well-being. Entrepreneurs tend by nature to be optimistic, evidenced in their willingness to strike out on their own, psychologists say. Laura Street, of Pleasanton, Calif., isn’t making a profit in the handmade-jewelry business, Ampersand Designs, which she co-founded last year. But to her, the glass is half full: She says sales are rising, she expects to turn a profit soon, and she loves her work.

“Yes, the economy is bad. But we aren’t coming into a workplace wondering, ‘Are we going to get fired today?’ ” she says. “If you control your destiny, the well-being is something that just comes naturally.”

The freedom business owners have to control their schedules enables them to adhere more closely to their personal priorities, says Amy Neftzger, an organizational psychologist for Healthways. They have the flexibility to “make it to a child’s play, or spend time with family,” she says.

Golfing With the Mayor

Many also have community ties that feed a sense of well-being. James Barnard, chief financial officer of his family’s business, Barnard Manufacturing in St. Johns, Mich., didn’t have a great summer. He and his cousin Gary Barnard, president of the heavy-equipment parts maker, stopped drawing paychecks to help the company through a steep sales drop. They agonized over a decision to lay off dozens of workers, and Gary sat nearly alone in the plant for several weeks, answering phones.

But their company has a good image in the community, and “it’s a big deal to us to keep that going,” James says. He takes part in civic groups and enjoys golfing with the mayor and police chief. Pressed to describe the rewards of running a family business, he says, “It’s pride. Definitely pride.”

Another surprise from the survey: Farmers and other outdoor workers, from farmhands to forestry workers, scored No. 1 among all groups in “emotional health,” as measured mainly by the amount of smiling, laughter, enjoyment and happiness they report experiencing the previous day—despite the fact that farmers ranked near the bottom in access to basic needs.

Steve Swenka, a Tiffin, Iowa, farmer, had just finished mowing two fields of hay when I reached him by phone last week to discuss the poll. The results didn’t surprise him. Farm work, he says, is pretty trying. “When you’re out there in the heat and the dust, sweating, you may feel miserable,” he says. But over time, “you can see the progress, the fruits of your labor.

“And when the day is over and you see the loads of hay stacked, there’s something fulfilling about hard manual labor like that,” he says. “You forget your little troubles, and start to see the bigger picture.”

Bookmark It

Hide Sites

By: Vivek Wadhwa/Business Week

Sue Drakeford’s production company hosts its own pageants and teaches others to gain the confidence and skills to compete

By Vivek Wadhwa

When Sue Drakeford became the first African-American to represent Nebraska at the Miss USA Pageant in 2001, she saw a great business opportunity. She would start a production company that would host its own pageants and teach others like her gain the confidence and skills to compete in the real world. The company would provide an alternative to the “cold-blooded cutthroat world of modeling and beauty pageants” that she endured. So Sue completed her MBA and started her venture—all while working full-time at a regional bank. Her company, Drakeford Productions, is now two years old and employs seven. It doesn’t produce anything (except beauty queens) and isn’t really innovating under the traditional definition of business innovation espoused at business schools.

Is Drakeford an entrepreneur? Management guru Peter Drucker wouldn’t have called her one. He wrote: “Not every new small business is entrepreneurial or represents entrepreneurship,” and more bluntly said: “Entrepreneurs innovate. Innovation is the specific instrument of entrepreneurship.” But Drakeford strongly disagrees. She says: “Yes, I am an entrepreneur. I own my own small business. But more importantly, I constantly think of new ways to make more money”.

For the research report Anatomy of an Entrepreneur, my team and I surveyed 549 successful company founders in high-growth industries to try to better understand the background and motivation of American entrepreneurs. The group we surveyed were clearly the hard-core entrepreneurs who fit within Drucker’s definition. But I was surprised at the debates that ensued online about what constitutes an “entrepreneur.” Many argued that independent business owners were different animals than entrepreneurs. Others, like immigration attorney Murali Bashyam, argued they were one and the same. Both, he wrote, “…create something that didn’t exist before.” In a follow-up e-mail, Bashyam asked if I had passed judgment. He warned: “If you decide that I’m not an entrepreneur, I might decide that the daily stress of growing and running a business, financial risks involved, and all the other headaches that come with creating something out of nothing is just not worth it. Maybe I’ll close up and go work for someone, where I can earn a steady and high salary and go home at 5 p.m.”

Taking Risks

With the stakes being so high, I set out on a quest to find the truth.

I asked Chad Moutray, chief economist and director of economic research at the Small Business Administration‘s Office of Advocacy for his views. Moutray wrote in an e-mail: “There clearly is a distinction between your run-of-the-mill small business owner and your typical entrepreneur. Both of them, of course, work hard, putting their time, energy, and money into the success of their business. All small business owners are entrepreneurial in some ways, thinking of new ways or processes to do things. But, when we think of entrepreneurs, we normally think of those individuals that bring innovative businesses to fruition, risking everything to start a new venture.”

Moutray is absolutely right: not every small business owner is as ambitious or creative as Drakeford. But is Bashyam not an entrepreneur?

For this answer, I went to the high priests of entrepreneurship at the Kauffman Foundation. And they referred me to one of their sacred texts, a book written for policymakers and academics titled Good Capitalism, Bad Capitalism (good vs. evil?). In it, I found the answer I was looking for. They said that all who take the risk are entrepreneurs, but there are two types of entrepreneurs: “Replicative entrepreneurs,” who constitute the vast majority of small businesses (such as restaurants and dry cleaners), and “innovative entrepreneurs,” the rare few who bring new products/services to market or who pioneer new production methods—such as Wal-Mart (WMT), eBay (EBAY), and Dell(DELL).

Pioneering New Methods

Under the Kauffman definition, Sue would qualify as an “innovative entrepreneur”, because she is developing new services and pioneering new methods. In contrast, Bashyam would be a “replicative entrepreneur” because he is delivering a standardized service in a field that charges primarily by the hour for its time. Bashyam, who is working incredibly hard, could well end up running a huge law firm and be worth many millions—but that doesn’t make him particularly innovative in his business model.

Should more “replicative entrepreneurs” seek to become “innovative entrepreneurs? I certainly believe that is the key to boosting economic growth and creating jobs. And just how does a “replicative” entrepreneur become “innovative”? I turned to Steve King of the blog Small Business Labs. Here’s his advice:

• Stay close to your customers, and constantly look for new ways to add value. Focus on the problems your customers have, not the problems your products solve.

• Network with and learn from others in your industry, but also network with people from other industries. Well known practices in one industry are often innovative in a new industry.

• Experiment often. Try new methods, approaches, business models, and technologies. But keep the experiments small and iterative. Fail quickly and move on when a new idea doesn’t work.

• Most important, be open to new ideas. Embrace and encourage innovation.

The bottom line is that anyone can be an entrepreneur. But not anyone can be an “innovative entrepreneur.” To become an “innovative entrepreneur” you need to stop trying to be the best at a replicative model and to make your own model. I can’t promise that any amount of work will turn Bashyam into a beauty queen, but he may be able to discover some new business opportunities which turns his firm into the Amazon.com (AMZN) of the legal business.

Wadhwa is senior research associate at the Labor & Worklife Program at Harvard Law School and executive in residence at Duke University. He is an entrepreneur who founded two technology companies. His research can be found at www.globalizationresearch.com. Follow him on Twitter “@vwadhwa”.

Bookmark It

Hide Sites

By: Seth Godin

Business Development is a mysterious title for a little discussed function or department in most larger companies. It’s also a great way for an entrepreneur or small business to have fun, create value and make money.

Good business development allows businesses to profit by doing something that is tangential to their core mission. Sometimes the profit is so good, it becomes part of their core mission, other times it supports the brand and sometimes it just makes money. And often it’s a little guy who can be flexible enough to make things happen.

Examples:

• Starbucks licenses their name to a maker of ice cream and generates millions in royalties.
• A rack jobber like Handleman does a deal with a mass marketer like K Mart. K Mart gives them room in the store to sell records and gets a cut, Handleman does all the work.
• AOL buys AIM instant messaging software and integrates it into their service.
• Years ago, I licensed the rights to Isaac Asimov’s Robot novels from a business development person at his publisher and turned the books into a VCR murder mystery game which I licensed to a business development person at Kodak, a company that was experimenting with becoming a publisher. (Isaac made more from this project than he did from many of his books).
• Best Buy offers extended warranties on appliances you buy. They don’t provide the warranty, of course, a business development person did a deal with an insurance/service company to do it and they share the profit.
• The Princeton Review built a huge test prep business, but only by licensing their brand to a series of books which did the lion’s share of their marketing for them.

You don’t see business development from the outside, particularly all the potential deals that fail along the way. Many companies, though, spend millions of dollars a year looking for deals and then discovering that they pay off many times over. Others, particularly smaller competitors, are so focused on their core business that it never occurs to them to consider partnerships, licensing, publishing, acquisition and other arrangements that might change everything. Harley Davidson probably makes more money on business development than they make on motorcycles.

The thing that makes business development fascinating is that the best deals have never been done before. There’s no template, no cookie cutter grind it out approach to making it work. This is why most organizations are so astonishingly bad at it. They don’t have the confidence to make decisions or believe they have the ability to make mistakes.

Think about the Apple Nike partnership on making a device that integrates your iPod with your sneakers. This took years and cost millions of dollars to develop. Most companies would just flee, giving up long before a deal was done and a product was shipped.

Here are some tactical tips on how to do business development better:

1. Process first, ideas second. If you’re going to be bringing new partners and new ideas into your organization, you need a process to do it. Professionals don’t, “know it when I see it.” Instead, professionals think about the abilities of their company and strategies necessary to bring ideas in, refine them and launch them. Great business development people don’t waste time in endless meetings with random vendors or hassle about tiny details up front. Instead, they have an agenda and a project manager’s understanding of what it means to get things done. They don’t keep the process a secret, either. They share it with anyone who wants to know. Someone needs to say, “here’s how we do things around here,” and then they have to tell the truth.
2. Who decides? Because every great business development project is different, it’s incredibly easy to get stuck on who can say yes (of course, everyone can say no). Professional business development people intentionally limit the number of people who are allowed to weigh in and are clear to themselves and their potential partners about exactly who can (and must) give the go ahead. Don’t bother starting a business development deal unless you know in advance who must say yes.
3. Courtship, negotiation and marriage. Every deal has three parts, and keeping them straight is essential. During the courtship phase, you win when you are respectful, diligent, enthusiastic, engaging, outgoing, and relentless in your search to make a connection. Do your homework, research people’s backgrounds, learn about their kids, visit them–don’t make them visit you. Look people in the eye, ask hard but engaging questions, you know the drill. Basically, treat people as you’d like to be treated, because the people you most want to work with have a choice, and they may just not pick you. Hint: if you skip the courtship part, the other two stages probably won’t come up.
4. Buyer and seller. If you’ve ever pitched a product or service to a business, you know how soul-deadening it can be. The buyer works hard to make it clear that she’s doing you a favor, and you need every dog and every pony available at all times (and you better be the cheapest). But business development doesn’t have this dichotomy. Both sides are buying, both sides are selling, right? So talented business development people never act like jaded buyers, arms folded, demanding this and that. Instead, from the start, they seek out partners.
5. Enthusiasm is underrated. Business development people are exploring the unknown. That means that there’s more than cash on the table, there’s bravery and initiative and excitement. The best business development people I’ve ever worked with are able to capture the energy in the room and amplify it. They’ll build on the ideas being presented, not make them smaller.
6. Close the open door. I regularly hear from readers who are frustrated because a big company wasn’t willing to hear a great idea they mailed in. Here’s the thing: there isn’t a shortage of ideas. There’s a shortage of execution. That means that successful business development teams look for proven partners and organizations with momentum. A key part of that is the decision to say no early and quickly and respectfully to people who don’t meet that threshold.
7. Call the lawyers later. A business development deal that never happens is one that’s sure to cause no problems. While the legal clarity you need is important, there’s plenty of data that shows that ten page NDA agreements and onerous contracts early in the process don’t protect you, they merely waste your time and energy.
8. Cast a wider net. The Allen and Co. annual gathering is a dumb place to choose a merger partner. Limiting the number of potential partners to people you’ve met at a trade show is also silly. Business development (when it works) creates huge value for both sides, so better to be proactive in searching out and soliciting the organizations that can make a difference. Here’s a simple way to widen your net: start a blog and go to conferences to speak. Describe your successful business development projects to date and let the world know you’re looking for more of them. How many amazing partnerships could the Apple store launch? How many great books could Starbucks highlight? Not only don’t they do this, they hide. Don’t hide.
9. Talk to the receptionist. This is huge, and so important. When a great partner shows up at your doorstep, do you know? Here’s a test: call your organization (pretending to be from some respected organization), describe a business development opportunity and ask who can help. If you’re not immediately transferred to your office, you’ve failed, right? Make it easy for the right people to know that you’re the right guy.
10. Hire better. How do you decide who to put in this job? I’d argue that glibness and charisma aren’t as important as strategic thinking, project management and humility.
11. Structure deals with the expectation of success. The only real reason to do business development deals is because when they work they’re so powerful. Andrew Tobias put his name on a piece of software that ended up earning him millions of dollars. It’s easy to get hung up on all the bad things that could happen, but keep your focus on how the world looks when you get it right.
12. End well. Most of the time, even good business development deals fall down before the end of the negotiation process. If a deal doesn’t come together, say so. Acknowledge what went wrong, thank the other party and end well. If it does come together, track the integration and stay involved enough to learn from what works and what doesn’t. I’m still waiting to hear from people who said they’d get back to me “tomorrow” fifteen years ago, but I’m losing hope… Ending well not only teaches you how to do better next time, but it keeps doors open for when you need to come back to someone who you should have done a deal with in the first place.

Bookmark It

Hide Sites

By: Jeff Bussgang

Even though I graduated from college (gasp) 18 years ago, I still think about the school season as my annual planning cycle rather than the calendar year.  Having three school age kids reinforces this life rhythm.

And so as I was thinking through my personal goals for this coming year, and discussing individual goals with each of my kids (a recently adopted ritual I highly recommend for any parent), this article from The Economist caught my eye.  The article’s subtitle, tells it all:  “Depression may be linked to how willing someone is to give up his [or her] goals.”

The article describes research published in the Journal of Personality and Social Psychology by Carsten Wrosch and Gregory Miller, where teenage girls who had strong “goal adjustment capacities” – the ability to disengage from unattainable goals and reset their attention onto new goals – avoid feeling down and depressed.  In contrast, girls who get stuck on their goals and can’t reset are more susceptible to depression.  The implication is that if you aren’t facile at adjusting your goals, and they’re overly ambitious goals, it can lead to depression.

Applying this research to entrepreneurs is an interesting thought experiment.  As investors, we VCs are always attracted to entrepreneurs who set big, hairy audacious goals (BHAGs).  Who wants to invest in an entrepreneur whose pitch is, “I’m going to make a nice living in a small niche,” as opposed to, “I aspire to achieve world domination”?

Yet are those entrepreneurs more susceptible to depression and defeatism when they’re unable to achieve those outrageous BHAGs?

To reconcile these two views I am reminded of an excellent book I recently read by renowned Stanford psychologist Carol Dweck, called Mindset.  Dweck’s research shows that successful people in business, sports and life have “growth mindsets” rather than “fixed mindsets”.

The “growth mindset” is one in which a person believes that one’s world view is less about ability and more about lifelong learning.  ”Growth mindset” individuals feel they can always learn from experiences (failures and successes) and develop resilience because they’re focused on personal growth rather than achievement tied to rigid objectives.  When a “growth mindset” individual faces adversity, they focus on the learnings and the self-improvement opportunities that come from adversity.

I have seen in my own work that the best entrepreneurs do set BHAGs, sometimes outrageous and unattainable ones (create a $100 million company in 5 years from scratch?  Is that really possible?), and push themselves to achieve excellence.  But the ones that really distinguish themselves are the ones who embrace the “growth mindset”.

They embrace life long learning, no matter how great their achievements, and allow themselves to occasionally hit the reset button and adjust their goals without breaking stride when reality intrudes (such as, say, the greatest financial crisis since the Great Depression) are the ones that can blend the best of both worlds.

What kind of mindset have you seen work best?

Bookmark It

Hide Sites