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Connecting the dots: mergers of early-stage startups

Reprinted from OnStartups. Original article here.

By Ken Smith

The explosion of co-working space has created an parallel explosion of would-be entrepreneurs. This is good for both the nation and innovation economy. But as any seasoned entrepreneur or investor will tell you, if you have a good idea for a business, it’s very likely that 100 other people have the same or very similar idea. And if you have a great idea perhaps 1,000 people are working on the same idea too. Lower cost office space (coworking, innovation center, etc.), cloud hosted everything, WYSIWYG tools and rapid prototyping applications, easy access to global networks of potential users and customers – well, let’s just say it’s a lot easier and cheaper to get a product concept to market today than it has ever been.

Those same seasoned entrepreneurs and investors will also agree that the key to entrepreneurship is not having the best idea, it’s execution. I have been involved in more than a dozen startups and reviewed plans or advised dozens more. Often times when I see two teams going after a very similar market opportunity I look at the founders and can easily envision a great combined team. One start up has been founded by a marketing professional with ten years experience in a major consumer technology company, another by a tech whiz with a newly minted Masters from MIT, and a third by a born saleswoman who already built a small network of beta testers for her nascent product. But each continue to struggle to reach the critical mass or momentum required to break away from the pack because they are often working alone. Once the CEO hat goes on, it’s hard to take it off, especially willingly. Yet many an entrepreneur would do their fledgling company and their wallet good if they pooled resources with another entrepreneur – money, talent, and especially time – rather than seeing another startup operating in the same space as competitive.

Pooling technical resources can deliver a product with a more complete feature-set because of the different perspectives brought to the design and development process by team members with a slightly different but equally valid view point. Pooling capital can mean delivering a more complete product, or if minimal viable product (MVP) is attainable without additional capital then money can be focused on capturing beta testers and/or early users. Pooling talent increases your chances of attracting outside investors and shows with action that all team members are professionals dedicated to making the company successful rather than being CEO of their own startup. And pooling time means that by dividing up critical tasks and responsibilities more gets done faster and with less effort because team members can focus what time they have on doing what they do best.

If all of the potential merger partners are very early stage, especially if no company has any market traction or revenue, the best approach to a merger is a simple equitable split – 50/50, 25×4, etc. If one person gets greedy, arguing their contribution holds greater value than the rest, then you don’t want them for a partner now or at any stage – championships are rarely won by a single player. If one company has revenue and the other potential partners do not, then some small concession should be made for the entity bringing in the most important resource to continued success.

At the end of the day, the best early mergers are teams of professionals who have all seen the same market opportunity and have dedicated this segment of their careers to it. As you sit at your desk in a co-working space or innovation center and engage with other clever people at the coffee shop, consider the notion of joining forces, talk about it openly – you may find a willing partner, a kindred spirit, and greater success than working alone.

Insights on MENA’s e-commerce space [video]: Elie Habib of Riyada Enterprise Development

Reprinted from Wamda. Original article here.

At our June CoE E-Commerce event, Elie Habib, Lebanon Country Manager for Riyada Enterprise Development, discusses the biggest pitfalls for startups looking for investment and what types of startup pitches he likes to see.

He explains that the MENA e-commerce space is filling up very quickly and new startups need to find a truly unique niche to be able to scale.

Some of the major startup pitfalls he has seen include not having a good team; one that is qualified, passionate, and has the capacity to innovate, create, and execute their idea. He explains that startups always underestimate how much money they will need and overestimate how well they will deliver. Habib adds that logistics and distribution are also a major hurdle which many young startups forget to consider accurately.

What he looks for in a startup presentation depends on the amount of the investment, but both an adequate product demonstration and a good handle on financials are key components of any pitch to investors.

Infographic: What are your chances of angel investment?

Reprinted from Angel Investment Network.  See original article here.

Effective culture is simply clarity amplified

Reprinted from Escape from Cubicle Nation.  See original article here.

Photo credit: Robert Fogarty

Today I am thrilled to share a guest post from my dear friend and mentor John Jantsch, founder of Duct Tape Marketing. John is a marketing consultant, speaker and author.  John has been instrumental in shaping my small business education, but more importantly, he has modeled the type of clarity, integrity and leadership that I strive for in my own life.

The ideas in this post are drawn from his most recent work – The Commitment Engine – Making Work Worth It.  Find out more about it here: www.makingworkworthit.com

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Forecasting revenues key to successful launch

Reprinted from The Entrepreneurial Mind.  See original article here.

By Dr. Jeff Cornwall, Director of the Center for Entrepreneurship at Belmont University

The late, legendary Silicon Valley attorney Craig Johnson used to say, “The leading cause of failure of start-ups is death, and death happens when you run out of money.”

And the leading cause of running out of money in a start-up is poor financial forecasting.

At the core of unrealistic forecasts is the undying optimism of most entrepreneurs.  Their “what could possibly go wrong?” attitude leads to many forecasting disasters.  My father used to say that when he looked at investing in an entrepreneurial venture he would always double the start-up costs and triple the time it takes to get to breakeven.

My rule of thumb is a bit different.  I believe that being overly optimistic leads to entrepreneurs making fatal mistakes in estimating revenues, which is at the heart of most forecasting errors.  So, my approach when reviewing a business is plan is to cut revenue forecasts in half.

Here are the four most common revenue foresting mistakes I see:

1) Assuming an “instant on” button for a new business.  Most business plans I read show significant revenues from the beginning of the business, sometimes even for the very first month that they open their doors.  The reality is that it takes time to build a customer base for any business.  That is why an entrepreneur should have at least six months personal living expenses available to make it through the startup in addition to the money the new business needs.

2) The magic of the hockey stick.  A common pattern in business plans is to show a relatively slow initial start to revenues, and then assume some that unexplained breakthrough will occur that leads to a sudden and dramatic increase in sales.  When you graph this type of revenue forecast it looks just like a hockey stick.  The reality is that such sudden growth is just not that common and usually results from specific actions.

3) Assuming enough sales to make the business model look successful.  In this mistake entrepreneurs forecast their expenses and then they plug in enough revenues to make the business become profitable.  When I press these entrepreneurs, their explanation of revenues is “well, these are the revenues I need to make the business work.”  The truth is that the market will not give you the sales you need, it will only give you the sales you earn through a well-executed business model.

4) The marketing plan tells a different story than revenue forecasts.  The marketing plan should specifically explain what you are going to do to achieve the revenues you forecast.  Why will customers want what you are selling?  Who are these customers?  How are you going to communicate to them about your business?  The marketing plan should explain in words the numbers shown in the revenue forecast.  Most plans just do not make this connection.

To avoid running out of cash before your business model has time to work requires an accurate assessment of how much money you will really need to get the business off the ground. While knowing your costs is important, accurately forecasting your revenues is critical.

It is so sad to see a business model that has real potential fail simply because the entrepreneur was unrealistic about how much money it would take to get to the point of success.

Top 20 most-watched TED talks of all time

Reprinted from wamda.  See original article here.

By Glen Dalakian

Today we highlight the most popular TED Talks to date, announced by TED in late August.

Whether you think watching TED Talks during the workday is a distraction or an education, how can you not be captivated and mesmerized by such notable talks as Sir Ken Robinson’s dryly humorous discussion about why today’s schools kill creativity? Or brain expert Jill Bolte Taylor’s vivid recollection of experiencing a stroke, conscious and in a state of euphoria as she experienced her own brain shutting down?

As TechCrunch mentioned, notables such as Steve Jobs, Stephen Hawking, and Tony Robbins delve into diverse topics from accepting death and using it as motivation, to why humans do what we do, to exploring questions of the expansive universe. Among other bold and taboo topics, these Top 20 TED Talks blow the lid off our personal limits and urge creativity, limitless potential, and collaborative growth. TED has compiled the most-watched TED Talks since their availability online 6 years ago, including on TED.com, YouTube, iTunes, Hulu, and more.

Check out the list below and let us know which one has the most impact in your life. You’re allowed to say all of them.

  1. Sir Ken Robinson says schools kill creativity (2006): 13,409,417 views
  2. Jill Bolte Taylor‘s stroke of insight (2008): 10,409,851
  3. Pranav Mistry on the thrilling potential of SixthSense (2009): 9,223,263
  4. David Gallo‘s underwater astonishments (2007): 7,879,541
  5. Pattie Maes and Pranav Mistry demo SixthSense (2009): 7,467,580
  6. Tony Robbins asks Why we do what we do (2006): 6,879,488
  7. Simon Sinek on how great leaders inspire action (2010): 6,050,294
  8. Steve Jobs on how to live before you die (2005): 5,444,022
  9. Hans Rosling shows the best stats you’ve ever seen (2006): 4,966,643
  10. Brene Brown talks about the power of vulnerability (2010): 4,763,038
  11. Daniel Pink on the surprising science of motivation (2009): 4,706,241
  12. Arthur Benjamin does mathemagic (2005): 4,658,425
  13. Elizabeth Gilbert on nurturing your genius (2009): 4,538,037
  14. Dan Gilbert asks: Why are we happy? (2004): 4,269,082
  15. Stephen Hawking asks big questions about the universe (2008): 4,153,105
  16. Jeff Han demos his breakthrough multi-touchscreen (2006): 3,891,251
  17. Johnny Lee shows Wii Remote hacks for educators (2008): 3,869,417
  18. Keith Barry does brain magic (2004): 3,847,893
  19. Mary Roach 10 things you didn’t know about orgasm (2009): 3,810,630
  20. Vijay Kumar demos robots that fly like birds (2012): 3,535,340

To check out the 2011 list, click here.

Why it only takes one billion dollar company to build an ecosystem

Reprinted from wamda.  See original article here.

By Abdullah Alshalabi

Fred Wilson (the most famous VC in the world) wrote last May about the Darwinian Evolution of Startup Hubs:

If you study Silicon Valley, what you see is something that looks like a forest where trees grow tall, produce seeds that drop and start new trees, and eventually the older trees mature and stop growing or worse, die of disease and rot, but the new trees grow up even taller and stronger.

In my mental model of Silicon Valley, the first “tree” was Fairchild Semiconductor (founded in 1957) which begat Intel (founded 1968) which begat Apple (1976) and Oracle (1977), which begat Sun… thenTwitter (2006) and Zynga (2007), which begat Square (2010), Dropbox (2008), and many more.

The theory states that to start a startup ecosystem in a city or a country you’ll only need 1 big successful startup. This successful startup will create a lot of wealth for co-founders, early employees and early investors. It will also produce highly skilled people that will eventually quit their jobs and start their own startups and raise money from the same investors of the previous successful startup. Furthermore, this $1 billion company will give hope to everyone. Smart people will quit their jobs and start their own startups. Moreover, it will make it much easier for entrepreneurs to raise money and recruit the smartest talents. That’s what happened in Silicon Valley, in Jordan with Maktoob(acquired by Yahoo) and will hopefully proceed in Dubai with Gonabit (acquired by LivingSocial).

So to get the wheel moving in any given ecosystem, we just need one single successful startup. Do you understand what does that means? That means that the whole country should all work together to create this next $1 billion dollar company. The government, the parliament, investors, entrepreneurs and universities should stop whatever they are doing and refocus in this single goal. Chile gets this right, they created Startup Chile to establish a Startup Ecosystem with this statement “To create a $1 billion company, and globalize the Chilean entrepreneurship culture.” They didn’t say “several $1 billion companies,” because they know it only takes one single company to make the magic happen. I previously wrote some analysis about the Chilean experience that you can find here.

There is an overlap between creating a Startup Ecosystem and a billion dollar company. They both require; investors, skilled labor, softer government policies and experienced mentors.  But, answering the question of “How to create the next billon dollar company?” is much easier than “How to establish a Startup Ecosystem?” We might have 4 or 5 examples of successful ecosystems, yet we have hundreds of successful startups created during the last 10 years.

A short answer to the question “How to create $1b company?” is to invest more in crazy and risky ideas with solid teams. Most billion dollar companies created during the last 10 years started as crazy ideas with a decent team. To name a few: Facebook, Twitter, Airbnb, Dropbox, Instagram, Kickstarter, eBay, Paypal, etc. I’m not saying that we should not establish a startup ecosystem; I’m just saying that focusing in creating the next billion dollar company will help us reallocate our resources to get their faster.

Governments are struggling to create a startup ecosystem. They want to push the youth to start their own businesses to create more jobs and sustain the economy. They create funds that supports small businesses with billions of dollars in capital. However, when you go and ask for funding, they will tell you that your idea is crazy and it will never work.

Moreover, when you read their requirements you’ll find something like: a business plan, a 5 year financial projection and other nonsense requirements. How can I know my revenue for the next five years if I don’t know how much I’m going to make next week?! I understand that governments want to make safe bets because they are not allowed to take on too much risk. But, that’s exactly the opposite of what we need right now- we need to make more riskier bets.

In short, I believe that each country and government should focus its resources on building the next billion dollar company. The process reaching this goal will involve building a solid startup ecosystem and a successful company that will lead the way and inspire all future entrepreneurs.

Social media myths worth debunking

Reprinted from Small Business Trends.  See original article here.

By Lisa Barone

unicorn

Sometimes when we don’t understand the true potential of something, we tell ourselves it doesn’t matter. And then we come up with all sorts of reasons as to why it doesn’t matter to justify our in action. I’m not saying you would ever do this, but others do. Below are some myths I’ve heard about social media that I think need some debunking. Because, really, we’re all smarter than that.

Tell me if you’ve heard this one…

Myth 1: Social Media Is A Fad

Ah, yes, the old fad myth! The notion that eventually we will Facebook and tweet ourselves sick and no one will be interested in these sites anymore. And that may be true. There may come a time when Twitter and Facebook are no longer. But even if the social media sites we are using today die, the behavior is here to stay.

The 2012 Local Search Study found that the number of people using social media to look for local business information has increased 67 percent since 2012, bringing it to 15 percent of users. That represents a 3x growth from where it was in 2008.

This is not a fad. It’s a new pattern of behavior as users are using the information they find about your business online to make buying decisions offline. If they can’t find information about your business via social media, you may not even enter their buying decisions.

Myth 2: My Customers Aren’t On Social Media

As of February, 66 percent of online adults were said to be using social media sites. The numbers continue to grow.

As of August:

  • 12% of online adults say they use Pinterest
  • 12% of online adults say they use Instagram
  • 66% of online adults use Facebook
  • 20% use LinkedIn
  • 16% use Twitter

And just last week it was announced there are now one billion users are Facebook.

The numbers show that your customers probably are on social media. If you don’t know where they’re hanging out – ask them. Ask them in person, put an insert in a local mailer, use the “find a friend” feature on many social media sites to see if customer addresses pop up.

Myth 3: My Teenage Daughter Can Run My Social Media Campaign

Did you hear about the social media trouble KitchenAid recently found itself in due to an accidental tweet? These are the things that happen when you’re not careful about what your brand is doing on social media. Just because your daughter or son is constantly on Facebook or Tumblr for personal use doesn’t mean they have the maturity, the insight, or the strategic thinking for business use of social media.

Someone needs to be driving the bus to create a strategy, determine metrics, to understand how to maturely deal with critical customers, etc. If you wouldn’t let someone answer the phones in your business or speak directly to your customers, don’t give them the keys to your social media channels either. It’s the same thing.

Myth 4: Social Media Is Dangerous – People Will Say Bad Things!

I’m not going to lie to you. People might use social media to complain about your business or say things that will be difficult for you to hear. But wouldn’t you rather be on social media tohear what you’re saying than to close your ears and ignore it? I would. Studies have shown that NOT addressing customer complaints does more than hurt your reputation — it actually sends customers to competitors.

According to the Harris Interactive/Right Now Customer Experience Impact Report [PDF]:

  • 89% of consumers began doing business with a competitor following a poor customer experience
  • 50% of consumers give brands a week to respond to a question before they stop doing business with them.

By getting involved in social media, you have the chance to spot these types of situations before they grow out of control and begin to harm your business.

Myth 5: Nobody Cares what I Think

Here’s the thing, if you use social media to simply broadcast information about yourself or your company, you’re probably right. However, if you use it to respond to customer service complaints, to share valuable information, and to make your brand of a hub for your industry, people will care. They’ll actually care very much.

Don’t use social media to constantly talk about yourself. Use it to learn about what your customers want, to improve what you offer them, and to become part of the larger industry. These are the uses that make social media beneficial to SMBs and which attract people to the brand.

Those are some of the most common myths I heard about social media from small business owners. What are some of the things you’re fighting against?

Growing pains for Jordan’s tech entrepreneurs

Reprinted from Wamda. Original article here.

By Knowledge @ Wharton

Jordan has managed to avoid the violence and political upheaval its neighboring countries have experienced with the Arab Spring revolutions. Much of that stability is owed to the rule of King Abdullah II, who still enjoys popular support, but has nudged a slow, steady reform course.

Abdullah has also been a strong proponent for fostering a high tech entrepreneurship culture in the country. It is a policy that has produced dividends, particularly in the information and communications technology (ICT) industry. In just a decade, according to Jordan-based Information and Communications Technology Association (intaj), the ICT sector has come to represent 14% of the country’s GDP.

The country’s industry produced a watershed success for the region — Yahoo’s US$85 million acquisition of Maktoob, an Arabic email service and portal, in 2009. Jordan estimates that over 50% of its startups are now in the ICT field, including telecom, IT, mobile online businesses, and game development. The industry has also attracted foreign investment — roughly US$15 million in foreign direct investment in 2010, according to intaj.

Despite these achievements, ICT entrepreneurs in Jordan face some of the same hurdles for tech startups across the region. According to a recent study of Jordan’s entrepreneurship ecosystem by Fulbright Scholar Jamil Wyne, the country has managed to quickly develop a solid tech infrastructure, but the three main challenges for growth its entrepreneurs contend with include finding the right talent, knowing how to market products, and accessing angel investors.

Wyne notes that the solutions to these issues begin with getting a wider range of Jordanians involved in tech entrepreneurship, and fostering greater industry collaboration. “Finding ways to bring both young and old entrepreneurs into the ecosystem, attracting more female entrepreneurs and identifying mechanisms for fusing ICT with other industries are top priorities,” he writes.

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5 digital tools to boost your brand: infographic

Reprinted from Angel Investment Network.  See original article here.

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