Entrepreneurialist Culture
Student Questions
Heather’s Entrepreneurialist Culture Questions:
1. a) Should starting entrepreneurs have a backup source of income while in business? b) Are they more
prone to be successful if they have a full time job
and do business in their spare time or are they more
successful when they devote all of their time to their
business?
Answer: There is generally a much higher level of success when you 'practice without a net'. Like the thought that you will hang in the morning, it tends to concentrate the mind on the problems and issues at hand. You are either in the boat or on shore but not both.
2. How do you know when it’s time to quit / dissolve a business?
Answer: Zombie Companies
3. a) Is it common for entrepreneurs to pick a
business unrelated to their area of studies? b)What is
the success rate of entrepreneurs in business in their
area of study as opposed to those who are not?
Answer: Yes, it is very common for entrepreneurs to choose different fields. Architects become graphic artists, engineers own hockey teams, ...
The failure rate is very high with startups; perhaps as high as four of five within five years. Many of your skills are transferable from one business to another. However, every business has its 'hidden' keys to success. Every business looks easier and more profitable from the outside than it really is. Until you learn these levers to success, which takes time, you will not have the success you think you deserve.
(For a company like Digital Guard, these levers include things like: a) balancing franchise or agent operations with company owned and operated territories; b) not using equity to fund equipment purchases (using instead off balance sheet lease financing); c) postponing till tomorrow costs that you don't need to incur today (and yet still be able to implement the b. plan); d) charging franchises and agencies for the cost plus an admin. fee for equipment leasing.)
Asokan's Entrepreneurialist Culture Questions:
1.a) What are the pitfalls of borrowing money? b) What precautions must be
taken in order to protect your business assets and income when seeking
funding?
Answer: You have to pay it back. Banks and others have a fetish about getting their money back. The lender usually has a lot of control and reporting requirements.
Protect your personal assets where possible.
2. What are the main considerations of incorporating a business versus a
sole proprietorship business (1st business)?
Answer: Incorporation means limited liability. Proprietorship or partnership implies unlimited personbal liability both joint and several. Long term, the most stable form of ownership has proven to be the corporation- cities are incorporated, charities are incorporated, even co-ops are incorporated (as non share capital corporations). Corporations have stood the test of time with companies like the Hudson Bay Company in its fourth Century. Partnerships, limited partnerships, trusts, proprietorships, investment trusts have for the most part turned out to be of lesser durability.
Incorporation costs about $800 in Ontario if you have a lawyer do it but web based self incorporations are gaining in popularity (and are much less expensive).
Limited liability has been gradually been whittled away- today, in Ontario, corporate directors can be held personally liable for environmental contamination and statutory obligations such as GST, PST, PAT and income source deductions. You must be able to show due diligence to be exempt from claims of this type. Directors' insurance is alos available.
Degradation of limited liability is a negative for entrepreneurs. Because failure rates are so high, imagine what would happen to the economy if failed entrepreneurs were still put in debtors' prison or flogged publically or executed? How many startups would come forth in this scenario?
3. What type of people and what kind of businesses are today’s Venture
Capitalists looking for?
Answer: Tech, tech, tech- networks, backbone, telecom. Business plans with real cashflow, real customers, real needs and a b. model that promises profits.
Catherine's Entrepreneurialist Culture Questions:
1) What are the key determinants of loan acceptance decisions for SME's? Is it largely based on cash flows? If so what other sources of financing are available for firms with low cash flows? To what extent should the firm rely on debt as opposed to equity,capital?
Answer: Most entrepreneurs don't understand this- that equity is much more expensive than debt. The entrepreneur is looking for 100% returns per annum on his or her personal investment. VCs want 30 to 40% p.a.
Bank debt is 6.5% to 9.5% today (March 2001).
Lease financing is 14 to 25% p.a.
Debenture financing (a combination of a debt instrument with equity conversion priveleges) is somewhere between 12 and 30% p.a.
Equity has one huge advantage, however. It is a lot more patient (usually) than debt.
SME bank lending is really a misnomer- it is actually personal lending. They don't really care about your cashflow projections. So you will need: a) an up-to-date personal B/S including any residential real estate you own; b) receivable list; c) fixed assets; d) inventory; e) commercial real estate holdings (if any).
2) How do you know what Venture Capital firm is best suited for your company? How can you effectively do due diligence on Venture Capital firms?
Answer: VCs publish their preferences. You can acquire a list of VCs- they will tell you the minimums and maximums and the field(s) of preference.
Ask them for client references and talk to them.
3) What are the advantages of changing from a sole proprietorship to a corporation? How do you asses the value of a current company that is a sole proprietorship? What are the costs associated with changing to a corporation and how long does it take?
Answer: A privately held service business is typically valued at .6 to .8 times annual revenues.
A product based privately held company is valued at 3 to 5 times after tax
earnings. Publicly traded companies usually command much higher premiums becuase these holdings are much more liquid.
Al's Entrepreneurialist Culture Questions:
Presentation
How polished should a presentation be? Does a smooth presenter present a better presentation? Is there a direct relationship between a polished presentation and the desired results attained from the presentation? Should the presenter have the latest equipment and the best visual aids to present the company information?
Answer: Make your presentations short and interactive. Ask the audience questions. Be funny (no off colour jokes, though). Invite Q & A. Make eye contact. Don't read your stuff. Prepare and rehearse beforehand, always. Have a cue card key word list in case you get stuck. If you don't know the answer to a question, don't guess. Say that you will have to get back to them with an answer. Twenty minutes should be enough to make even the toughest presentation.
Sometimes if you think you have done a poor job, you may be surprised that a less polished presentation has not hurt your chances. A deal will fall apart no matter what if both sides are not totally committed to it. Even if binding, unconditional agreements have been reached they are not really final. Even after a deal has closed, it can still be unwound in many cases.
Investors
What are investors looking for in a presentation? Should presentations be modified toward certain investors? Should investors receive related company information before the presentation? If an investor asks a question that the presenter does not know the answer to, how should the presenter respond to the answer?
Answer: Investors want: a) a strong management team; b) a strong management team; c) a strong management team. They also want: d) creativity, e) exit strategy (IPO, acquisition, debenture redemption, company share buy-back, ...); f) sensible b. model;
g) strong cashflow; h) early profitability; i) value creation that is or becomes independent of the founder/entrepreneur.
Always modify your presentation for the intended audience; know your audience.
Confidentiality Agreements
How important is it to have confidentiality agreements signed as a new entrepreneur, who does not have a lot of experience and who has developed a new product / service? When someone says during a meeting or when someone is helping with developing the new product / service, mentions that they will keep all relative information confidential, is this enough or should a confidentiality agreements be signed?
Answer: Can be very important. Witness what happened with Disney's Wide World of Sports. All agreements (sales agreements, employment contracts, confidentiality agreements) need to be signed (remember what happened to Jerry McGuire when he didn't sign 'Cush'). Having said that a verbal agreement can be legally enforceable. (See Texaco bankruptcy re. Getty Oil.)
Richard's Entrepreneurialist Culture Questions:
1. What are the advantages and disadvantages of being an intrapreneur vs. being an entrepreneur?
Answer: Intrapreneurs have the backing of a large organization; they have more infrastructure and they are working with a 'net'.
2. What steps should an entrepreneur take in order to protect his/her ideas and business strategy from being "stolen" or implemented first by someone else?
Answer: All ideas are derivative. First mover advantage is often more important than patents. (See for example the early days of calculators- patents typically last for 17 years; competitive advantage in tech often less than a year.) Having said this NDAs, employment contracts, trademarks, copyright, design and utility patents form the basis of your IP and can be an important source of royalty revenue. (Large companies often prefer to fight IP protections than pay royalties.)
3. What can an entrepreneur do to speed up the process of "crossing the chasm"? And since funding is limited, how long should a business remain in the chasm before giving up?
Answer: If you have cashflow and especially positive cashflow, you can hang in a long time. Remember: "ABC"- Always Be Closing. At the Sens, we tell salespeople if you can't get the client to sign for a suite, sell them a sponsorship,, a sign, four season tickets, two season tickets, two half season tickets, two quarter season tickets, a junior fan club membership, a Sens hat or t-shirt. Always come away with something. You can always go back later and try selling them up. Many SMEs take twenty years to reach the takeoff point. It is only in the last ten years that the idea of 28 to 32 year old CEO millionaires and billionaires became more common. For most people though, it is a slog for success for a generation. Zombie Companies
Geoff W.'s Entrepreneurialist Culture Questions:
1) Why is there a fear of entrepreneurial employees at some companies? What is the source of this fear? Should I be afraid of my entrepreneurial employees?
Answer: Greed and fear. Fear they will lose their jobs or a promotion or stock options. Greed that they will lose their jobs or a promotion or stock options.
Entrepreneurial employees are a huge plus if you can make them feel a part of the team and keep them motivated by work challenges, social interaction, community recognition and money. If you don't, say hello to your new competitor.
2) Should an entrepreneur "pay their dues" working as an employee in a non-intrapreneurial role? How soon is too soon to start out on your own?
Answer: Probably worhtwhile for two to three years. (See example of the Bureau of Management Consulting, Supply and Services, Canada and the 'Nuclear Ice Breaker'. Also the story of 25 years of post project reviews is relevant here- and the Subway Franchisee outcome.) But it can be a trap too- you can get too accustomed to a regular pay check and taking direction.
Entrepreneurs are ready at any age. There is less ageism (at least against younger persons) now than at any time in history. US and Canada are unique in allowing upward mobility; Europe and Asia much less so. FINISH YOUR EDUCATION FIRST- AT LEAST UNDERGRAD.
3) How do you build and maintain credibility as an entrepreneur? How do you deal with pressures to get a "regular job" when you are in the early stages of a new enterprise?
Answer: Honesty. Truth/smart truth. Maple Leaf Gardens was built by Conn Smythe during the depression with scip. Workers were told in advance that this is how they would get paid.
4) How do you keep your other skills honed when starting your own company
takes every waking hour you have?
Answer: Tough luck. You either fit it in or wait for later in your career. (You should always be learning though.)
Other (non-culture) question:
5) What are the top 5 networking opportunities in Ottawa?
Answer: A. The Corel Centre (the last Thursday of every month a tech networking group meets.) B. The Corel Centre (Cruise the concourses before, during and after Sens games.) C. Board of Trade functions. D. Ottawa Centre for Research and Innovation functions. E. OBJ/CHEO/Cancer Society/United Way Fundraisers and Special Events. F. Ottawa Home Show, Computer Show, GS, VenCap and other Trade Shows. G. Professional Associations (Engineering, Architecture, ...). H. Kiwanis and other service clubs. I. Volunteerism (eg., Barbara McInnes and the OCF). J. Golf Clubs. K. Personal Networking- the six degrees of separation.
Darcy's Entrepreneurialist Culture Questions:
What are ways to solve irreconcilable differences between partners?
Answer: a) Don't have any partners (yes to investors, yes to employees, no to partners). b) Talk. Talk. Talk. Jaw. Jaw. Jaw. Everyone today says I am going to talk to my lawyer. Lawyers like a fight- that's the only time they get paid. You should be able to resolve things yourselves unless you have someone who irrationally wants to burn down the house with eveyone in it. c) Talk and prepare for a fight- North Korean strategy. North Vietnamese strategy- exhaust your opponent. Outlast them. Starve them for information. d) Mediation. e) Litigation.
What information should/should not be in a presentation to potential investors?
Answer: You can and should talk about the opportunity but not about specific financial projections that show and calculate an investor's potential return. The OSC has many rules that need to be followed for seed capital exemptions, sophisticated investors and public prospectuses.
What are the signs that a business maybe unrecoverable, and how do you deal with a death march?
Answer: Zombie Companies
Kate's Entrepreneurialist Culture Questions:
1) Why go public?What are some alternatives to an IPO? What are the some costs involved with IPO's?
Answer: Public valuations are much higher as a rule. Access to capital both debt and equity is better (more of it and lower costs of both).
Legal fees- $80,000 min. Accounting fees: $40,000 min. Brokerage fee: 8 to 12 % of money raised. Road show: Tens of thousands for travel costs. Senior Employees: one full year of super concentrated effort. Investor Relations and PR: You will need staff and consulting help here. Quarterly Reporting and Scrutiny: You will need a major overhaul to your aqccounting and regulatory compliance systems.
2) What is it that VC's are looking for in a business when they invest? What are some alternatives for SME's if VC's are not available?
Answer: The alternative is bootstrap financing- angel investors, suppliers, vendors, future clients, lease and asset backed financing, factoring receivables, collect early and pay late, trading activities (buy low, sell high), lotteries, credit cards, government SBLs, margin trading, selling short in the markets, gambling.
3) How much of a role do banks play in financing small to medium sized enterprises? How do bankers make their decisions, what criteria is followed?
Answer: They use a scoring machine. You might as well be talking to a robot. It is really personal lending masquerading as commercial lending. Canadian Banks would probably do zero SME lending if they could- running ATMs and investing customer money in government T-bills with zero reserve requirements and zero risk is like having a perpetual motion cash machine.
Alex's Entrepreneurialist Culture Questions:
1. We hear many people say: do not go into business with friends. Would it make sense to start a business with good friends, who share and understand the idea and are ready to follow? From your experience, what are some important considerations before making a commitment of that sort?
Answer: Employees, yes. Investors, yes. Friends who are employees or investors or both can work very well ("The Brockville Mafia"). Partners- NO.
2. What are the criteria you use to hire people that are your first employees? What is the best way to find balance between informality of the relationship within your team and authority?
Answer: a) good heart, b) education, c) inexperience (so you can train them yourself), d) good work and personal habits, e) ability to work in teams. People want more informality. They also want to have input and be consulted- you need to get people to buy in today. The old Command and Control system is unworkable in flat networked, peer driven team based organizations.
3.If debt financing is chosen to finance the implementation of the idea, should the creditors be concerned with the exit strategy? Is it possible not to specify the exit strategy if long term expansion of the project is planned? Would it be a mistake not to plan specific exit strategy until the project is implemented and operational?
Answer: Yes. They always want to know how and when they will get repaid. Always give it some thought- how will investors, partners (if you have them), lenders, debenture holders, etc. exit?
Jeff's Entrepreneurialist Culture Questions:
1. Previously, you mentioned of the difficultly of getting the New York
construction moving due to "delays." As an entrepreneur, you really don't
want to have to deal with kind of "under the table" issues, since it can land
you in a lot of hot water. Which leads me to my question: Who was involved
(i.e. general groups)? How widespread is this problem (in NY only, Canadian
cities, other American cities, only one dept, only one person, etc). What
other ways can you deal with the situation should it arise?
Answer: Two Councillors in the east end of Ottawa ask for consulting fees for their spouses before approving a project. Each 'vote' costs $5,000.
Say: "No." Never give in to blackmail: a) it's illegal, b) it's unethical, c) they will continue to blackmail you.
ps. the project was approved two years later after one of the councillors is defeated.
2. Legal Costs: When operating a small business, you may get sued by
somebody else, or feel that the only way to get a particular contract settled
is though some legal pressure. (Preferably you would want this to happen
only as a last resort.) Also, when defending a patent, or copy-write
infringement, it is up to the copy-write/patent owner to take the offender to
court. Therefore, your small business might have to defend its IP though
legal means (possibly against people with significantly deeper pockets).
However, lawyers can be very, very expensive. If we have a guerrilla
marketing dept., can we have a guerrilla legal dept. (besides small-claims
court)? Do you have any recommendations on how to use the legal system
cheaply while being attacked, or needing to attack another larger
organization? Or is the legal system just something to avoid and out of
reach of the very small entrepreneur?
Answer: Represent yourself, at least initially. Meet with opponents to talk, talk, talk on a without prejudice basis. Take a witness with you. Make notes afterward of what you said.
Guerrilla legal team is a) respresenting yourself, b) in the US engaging lawyers on a contingency fee basis, c) in Canada you bluff.
Avoid litigation at all costs- very risky, very costly, harmful to your reputation. (Example of employee fired for assault who successfully sued for wrongful dismissal.) Sometimes legal action is your only alternative because the other side wants you 'dead' (examples include jealous spouses, irrational partners, governments who use taxpayer money to fund unlimited litigation, fraudsters, ...)
3. What skills did you obtain from your civil engineering degree that you
felt made you a better entrepreneur? What skills did you not get from that
degree that you really need to be a successful entrepreneur? How would you
recommend that someone in a similar situation obtain these missing skills?
Answer: a) hard work and good work habits, b) scientific method, c) organization skills, d) ability to deduce the way the world works and develop mental map of the way the world works, e) discipline, f) focus.
What I did not get: a) ability to compartmentalise, b) did not realise how important it was to get the b. model right, c) have more good ideas than time, d) lack of patience, e) accounting, f) bootstrap marketing and financing, g) calculating IRRs, h) inability to do more than one thing at a time, i) linear thinking (needed to work hard to develop second and thrid order thinking ability).
Greg's Entrepreneurialist Culture Questions:
When considering starting your own business an individual is taking on risk, personally and financially. Are there any methodologies one could use to help the prospective entrepreneur quantify whether the risk taken on by the new business is greater than their own level of personal risk?
Answer: Young people typically have personal IRRs in the 20 to 30% range. In your 40s it will probably be 12 to15%. In your 70s it will be 5 to 6%. Risk taking is best suited to 20s and 30s. Consoldiation in your 40s and 50s. Disposition in your 60s.
Your return on equity must exceed your personal IRRs by quite a margin or don't even think about doing it.
What is the number one reason for business failure across all SME's?
Answer: Lack of cashflow. (Not undercapitalization as you hear so often.)
It's been suggested that the greater the level of education an individual has, the greater the probability of success they will have in starting a new business. That being said, would an individual be farther ahead by putting off starting up a business in order to attain higher levels of education and professional designations in order to increase credibility and the probability of success.
Answer: What an education allows you to do is to break through limits. Bob Campeau built and lost a huge company with only a grade 9 education. Most entrepreneurs who do not have tertiary education suffer from the loss one way or another.
Nikhil's Entrepreneurialist Culture Questions:
1. Venture Capital Firms and Investors tend to look
towards teams as much as products or passion. A major
component sought after is experience within these
teams. As essentially inexperienced entrepreneurs,
what type of person would be a good first addition to
the team. What characteristics should we look for,
and what are expected from vc's?
Answer: Add people with complementary skills that are at least as proficient as you are, or better. Add some board or advisory board members that have experience but remember in entrepreneurial situations, the 'old' ways are not necessarily the right way to do things.
2. Most funding/vc's in Canada seem to be process
based. This results in very risk-adverse, slow
processes and applications for funding. Does the US
provide more support for entrepreneurs financially?
How does risk and competition factors affect a
decision of that sort?
Answer: Canadian VCs are typically risk averse- they prefer to invest in herds and to have US firms in the lead. Since US VCs tend to have much greater levels of capitalization, they can afford to take more risks.
Everyone seems to fear competition but competition can produce better results. UPS probably makes Fed/ex better; when IBM came into the PC market in 1982, it probably made Apple a better company. When Canderel entered the Ottawa real estate market, it brought the level of professionalism up and when Canderel decided to locate a project next to one of the established players, it tended to increase the overall size of the market in that location. Why is it that all the bruger fry establishments and petrol stations tend to congregate in one area?
3. The government, both provincial and federal,
provide a number of resources and services directed
towards entrepreneurs. Some are free, some cost. Is
there a single stop in which this information can be
accessed and assessed?
Both the Federal and Provincial governments tend to have "one stop" shops for entreprenurs. Other than the SBL program, which is adminstered by private industry (the Banks in Canada) on behalf of the Government of Canada, most government programs are too bureaucratic, too slow and come with too many strings attached and too much public scrutiny and controversy to much use to entrepreneurs.
Robin's Entrepreneurialist Culture Questions:
1) How do you get in the door to make the sales pitch to a large company?
Answer: Start at a lower level and work your way up. Many entrepreneurs believe that you should start with the President and CEO and work down but often this results in lower level managers feeling left out of the loop and can lead to an eventual rejection of your deal. CEOs prefer if their team has already had a chance to buy in and the deal comes prepackaged for their approval. Use the six degrees of separation or simply make a call to the right level- it will get you in the door. If you are solving that person's problem, they will want to see you and you will now have a champion within that company.
2) How do you evaluate the value of a potential business idea?
Answer: The most effective way is to have an accurate map of the way the world works. How do you get that? From experience. For example, understanding more about the way the world works would probably tell the founders of Istari Electronics that making a flying disc that lights up at night is a bad idea. Firstly, it is a novelty item and there isn't really any money in novelty items. For every Trivial Pursuit there hundreds maybe thousands of 'Starflyers'. More fundamentally, this mental map would have told them that people don't want to play with flying discs at night (ankle breaking time).
3) If you have an idea for a business that cannot be protected by
intellectual property laws, how do you keep others from stealing your idea?
Answer: Use NDAs; it gives you some protection. Only deal with honourable people. Get there first- first mover advantage again. As General Patton said at the Battle of the Bulge (WWII): 'He who gets there fastest with the mostest, wins.'
John's Entrepreneurialist Culture Questions:
1. Is it true that VC firms seek to remove the entrepreneur from the head
of the firm as the organizational structure increases in complexity? If
so, is the decision to do so reliant on the level of experience the
entrepreneur has as an executive?
Answer: Yes. Entrepreneurs are very valuable, indeed indespensible, in the start-up stage. However, being a line executive is very different. As a company matures, there is inevitably a need for more system and process and entrepreneurs are usually not well suited to that type of role. They should be promoted to company Chair or Chief Technology Officer or Chief Strategist or some such role that suits their skill set. If they are disruptive, the entrepreneur must fall on his or her sword and depart the company. People should have the maturity and self knowledge to know when the company has outgrown them.
2. If question 1 is true, what is the real view of the VC from the entrepreneur's perspective? Is it one of a helpful partner? Or of a (perhaps) necessary evil?
Answer: VCs are a necessary evil if the entrepreneur is trying to build a value creating business that: a) will eventually become independent of the Founder's efforts and b) you want to build it in three to seven years instead of 20 to 25 years.
3. What is a realistic expectation for the role to played by the entrepreneur in a VC-backed venture? Is this dependent on the degree of ownership which the VC firm assumes?
Answer: First of all, a VC does not want to own 51% of your business or even 50%. If the VC is a 50/50 partner, then nobody really owns that business and takes responsibility for it. The VC wants the entrepreneur to take the business to bed with him or her every night and on (infrequent) holidays- they want the entrepreneur to take ownership, have a large stake in the outcome and keep his or her nose to the grindstone. VCs want the entrepreneur to: a) bring a burining desire to succeed, b) do the bootstrap stuff (marketing, finance, R&D), c) get the business to the take-off stage (get it across the chasm) and d) get out of the way after that stage.
Martha's Entrepreneurialist Culture Questions:
1. When should a starting entrepreneur consider having a partner for its business? In what situations is it better to be on your own or with a partner?
Answer: Always hire staff with complementary skills. If you can not afford them, get them to work part time for stock options. Try to avoid partnerships.
2. How big can I start? If the main goal is to import something to a country, where can I start? Is it too crazy to start importing right away? For example, if I see a product in a foreign country that I think would work great here in Canada and want to import it, or vice versa, where do I start? Having no previous experience in entrepreneurship, is it crazy to start at such level?
Answer: Most entrepreneurs behave like New York City Cops: Bang! Bang! Bang! "Stop!" Entrepreneurs are usually like the first hang glider pilots in Australia in 1972- they all want to jump off Long Reef (north of Sydney) at 500 feet elevation instead of spending the time in the sand dunes learning to fly at 15 feet.
Larger start-ups usually require more capital and will often put you in a position where you will spend virtually all your time raising capital. Smaller start-ups will, instead, get you operational earlier and use more bootstrap techniques. Both can work and both approaches can fail.
Most first time entrepreneurs start small; they then trade up. Trading is one of the bootstrap techniques that have been used by entreprenurs for millenia to help them get started.
Importing is one of the ways that many entrepreneurs get started.
3. Can I, as an entrepreneur buy a franchise that is foreign owned and is not currently in the region where I want to start the business? Is that up to the franchisor to decide which regions they want to enter or can I make a proposition directly to them and ask for that location?
Answer: You should certainly talk to the Master Franchisor and make them a proposal. Always take the intiative and always agree to take the notes or minutes for the meeting and take responsibility for producing any documentation required or for iniating the next step. He/she who controls the agenda, usually gets what they want.
Franchise rights can be very valuable for the right product as can importing or licensing. In essence, you have created value by harnessing the IP (Intellectual Property) of the franchisor or the manufacturer or the licensor.
Finally, you must know that there are "no rules in a knife fight" (Butch Cassidy and the Sundance Kid). Entrepreneurs make up their own rules (subject, of course, to the rule of law).
4. What is the success rate of entrepreneurs that start ventures abroad?
Answer: Most entrepreneurs start very localised businesses. Managing a local start-up is the most that most people can handle. Running a business with even two geogrphically separate units (even if only Ottawa and Toronto, as in the case of Rentalex, for example) greatly increases the level of complexity. There can only be one of you. The presence of the entrepreneur is very important in the early days of any business. Management by wandering around (MBWA) is still a powerful tool. Gary Bettman, newly appointed Commissioner of the NHL in 1993 centralised NHL operations in one tower in NYC for exactly these reasons.
If you are starting a business abroad this probably means you are living there.
Gita's Entrepreneurialist Culture Questions:
What is the best way to locate and meet the people who can answer the
important questions related to the type of business you want to start?
Answer: You can often interview your competitors. You can also talk to their clients, customers and suppliers. You will find that industry associations can be very helpful too.
How important is it to give NDAs to *everyone*?
Answer: It can be exceedingly important (see above).
While becoming an entrepreneur is arguably preferable to having a J.O.B., what percentage of aspiring entrepreneurs actually succeed?
Answer: It is uncertain but they generally succeed in life because: a) they are optimistic, b) they are able to learn from failure, c) they are willing to try, try and try again. Look at the example of Bob Campeau or Paul Reichman, who had some business reverses and restarted their enterprises at 70 plus years of age.
Is it really necessary to have a long term plan for your business? Is it
okay to purposely have a series of short-lived businesses (i.e., following
one trend after another)?
Answer: This is a very good question. Long term these days is three to six months. It seems to be better to have: a) a business model worked out, b) some near term and mid term goals that allow you to gauge your progress and c) only the very shortest of planning horizons (almost certainly not longer than a year).
Other than trading up (buying and selling businesses or opportunities) as a get started strategy, it probably is not practical to have a series of unrelated businesses and be successful. As described above, they are hidden keys to running each and every business that are non obvious to the outsider. If the probability of success in any entrepreneurial situation is one in five then the chances of having two independent successes in a row is one in twenty five and three is one in one hundred and twenty five. Let us see if Mark Andreeson can hit two home runs in a row (Netscape and now LoudCloud). At least he has a common them- building the infrastructure of the net so that these two start-ups are not independent and the calculations shown above would not apply. But if Mark were starting up a dress shop instead, we might agree that his probaility of success would be low.
Martina's Entrepreneurialist Culture Questions:
1-What do Venture Capitalists look for in ideas and business plans?
Answer: See above.
2-How important is a forecasted financial analysis to a venture capitalist?
Answer: Most VCs seem to be from a B.Comm or MBA background so they put a lot of emphasis on running the numbers. Sophisticated spread sheets showing IRRs for each slice of financing (all debt, equity and debenture pieces) that can be sensitivity tested simply are very important even if the underlying assumptions are guesstimates. All such analysis must be annotated carefully and assumptions made explicit. You must include E&OE (Errors and Omissions Excepted) disclaimers and you must obey the rules of each jurisdiction with respect to how much disclosure is required or permitted.
3-How long should one wait before starting to look for VC money?
Answer: In recent years, you needed only a good presentation before doing the dog and pony show for VCs. Today, most VCs want at least one committed customer if not several years of business results. Most VCs have been burned by the dot bomb debacle and are really more interested in what is really mezzanine financing or second stage financing.
4-How do you know whether you should cut your losses or ride out the storm?
Answer: Zombie Companies
Rob's and Jackie's Entrepreneurialist Culture Questions:
1. What are the keys to success for a successful intrapreneur? Do they differ from those of an entrepreneur?
Answer: Not really. Everyone needs to learn to be part of the team. The days of command and control management styles are over. Entrepreneurs that promote themselves to be President and CEO so that they can sit in an office issuing orders will find himself or herself alone with no customers, clients or employees. Intrapreneurs need to be able to pull peers as well as persons one level below and above them into their initiatives; they need leadership skills that are very similar to what most entrepreneurs bring to the table. They probably also need somewhat better political antennae to get their organizations on side. There are unwritten hierarchies in every organization and intrapreneurs need to know how to work within that hierarchy.
2. What criteria is used to decide between the various options for the future of your business? (IPO?, Acquisition?, Diversification?)
Answer: Most businesses even very large businesses do better when they focus on their core competancies. Exceptions like GE and their uber boss, Jack Welch, should probably not be something that most of us try to emulate; maybe, GE is successful because Jack brings unique skills that almost no one else has.
Maximising shareholder value for most companies means selling off or spinning off non core holdings. In real estate, probably the only way to realise full shareholder value is to sell the assets of the company and usually piece by piece or in geographically based bundles. Real estate companies generally have such low public valuations that an IPO makes no sense.
Exit strategies will depend on the multiple that you can acieve with: a) IPOs, b) sale of the company, c) share buyback, d) selling assets, d) recapitalising (increasing the debt levels of) the company and then doing a), b), c) or d).
Some entrepreneurs think that when your company needs money, you should buy something, not sell something. Indeed, it can make sense if you can buy something accretively.
3. If you decide to go into a business partnership, what criteria should be used to select the partner in order to ensure the highest possibility of success?
Answer: They should have a good heart and they should have complementary skills. It should also be clear who has control and it should not be 50/50.
4. What place, if any, does ethics have in entrepreneurial endeavours? How far is too far? Can someone unwilling to behave even slightly unethically be a successful entrepreneur?
Answer: This is a very important questions. Never be untruthful. Tell the smart truth at all times. Disclose, disclose, disclose. Never do something that if it landed on the front page of your local newspaper it would embarass you, your family and friends and your company. Protect your reputation. Ethics has a very large role in your success. Unethical persons may gain temporary advantage but they will not last.
Any city no matter how large has a very small number of people and families that control media, business and political opportunities there. If you destroy your credibility you will ultimately destroy your ability to work and live there.
In cities and nation-states that have a break down in law and in the sanctity of contracts and property rights, you have a society that will fail. Long term success in those situations is impossible because it is the rule of the mob or rule of the gun or both that prevails; this means that one ruling hunta will eventually be replaced by another and the allies of one will be out and replaced by the cronies of the new dictator or mayor or govenor.
5. How can an entrepreneur who is just starting out in business motivate his/her staff in order to have them perform at 110% when there really is no reason for loyalty and no guarantee for success?
Answer: Most people are money motivated. If you give people a stake in the outcome (bonuses and stock options based on sales or achieving other targets such as timeliness), they will respond. Other-directed persons will respond to the challenge to do something new; something that has never been done before. They will be motivated by leadership and inspired by the mission. Even money motivated persons can be moved by an eloquent mission statement (see Jerry McGuire).
6. Aside from the obvious venture capital and bank loans, are there any other programs in place (perhaps governmental) to help meet entrepreneurial financing needs?
Answer: Most likely, you will rely on bootstrap financing for your new business: a) angel investors, b) family and employees, c) supplier or vendor financing (30, 60, 90 day terms), d) customer pre-sales, e) factoring, f) fixed asset financing (leasing), g) personal debt, h) credit cards, i) trading activity (trading up the food chain is a typical entrepeneurial strategy- start a business so that you have some 'chips at the poker table' then sell it before the peak of the market is reached and start the (bigger) one you really wanted in the first place- trade up to the Sens and the NHL, for example; always sell 'too soon' and leave something on the table for the purchaser- obviously, the purchaser needs some value otherwise why would they buy it in the first place?), j) strategic partners, k) employees, l) accretive selling (FKZ consulting assignment, for example), m) accretive selling with strategic partner (Ogden, the Sens and the OSHCLP), n) accretive buying (a homebuilder start-up, for example, or the purchase of a division of an (often large) company which division doesn't fit their model anymore. You use the assets of the targeted division to secure the debt you need to buy it in a classic LBO or MBO. Even after paying the debt, you are left with positive earnings, you hope. Accretive buying means that you buy when you are weakest and sell when you are strongest in a counter intuitive way. This is different from 'buy low, sell high', which is counter cyclical in a macro economic sense.) Investors are likely to come from a group that has an interest in your success- strategic partners, suppliers, family, employees, future customers. Find out who benefits and sell them on your start-up. He/she who benefits, pays. He/she who pays, benefits.
25 Steps to Entrepreneurial Success
Arsalan's Entrepreneurialist Culture Questions:
1: What's angel financing all about ? How do you effectively seek it out ? How do you qualify the right angel?
Answer: Angels are usually people in the same geographic area and they can be people in unrelated businesses or walks of life who want to take a flyer on a new venture with some of their investment capital. Most likely though, they will be strategic angels- people who have a vested interest in your success. They can be customers, suppliers, employees, family and friends. In the case of a start-up like Digital Guard they are former customers, current equipment suppliers, insurance agents, insurance brokers and real estate agents.
Angels should have some of the same skill set as your first employees in the sense that they have complementary skills and they are good hearted persons. They should also not be affected if they were to lose all of their invested capital.
2: What percentage of my capital should I spend on marketing? How import is marketing for a dot com services?
Answer: Guerrilla marketing- yes. Mass marketing- no (at least until you are crossing the chasm).
3: If a project requires resources that I do not have (money for the project) but the project is very beneficial, is there anywhere I can turn to (other than banks)?
Answer: as above.