Part 2 from my first “CEOs Dinner…”

After the banker spoke, they had a local Venture Capitalist come spend 20-30 minutes giving some tips for anyone looking to raise money through VCs. He gave one tip that I’ve actually heard before as well and that makes a TON of sense.

Anyone who’s getting ready to go raise a “VC round” whether it be round A, B or even later will first develop a list of the firms you are going to prospect. By nature, you probably have a list of VCs that are your “top list” or the ones you really hope you’ll find.

Do yourself a favor - put those ones away for a bit, contrary to what your gutt may say - DON’T pitch them first.

Find the ones on your list that you are “OK” - nothing special and you wouldn’t be too heart-broken if they turned you down. Pitch THEM first.

Basically, it’s batting practice. You’ll need to refine your pitch, you’ll see what the common objections are and you’ll get much better at it.

Save the real goods for the VCs you really want. If you pitch the good ones first, you’ll screw it up (potentially). Also, it can’t hurt you to walk into the good ones with other VCs already interested - just knowing that gives you a TON of credibility.

So, think of pitching VCs in reverse order - save the best for last.

Popularity: 32% [?]

Part 2 from my first “CEOs Dinner…”

One of the active angel investors there shared MANY stats with us, one of the stats he shared was the following:

“80% of venture capitalists invest within 100 miles of where they are…”

This does not surprise me and it can a major impact on you. If you’re sitting in Wyoming, trying to build a “web savy” business and need to raise money…you’re likely going to find investors in the Silicon Valley area.

So, start thinking - are you willing to MOVE to get the money? Venture capitalists know a certain area, they also feel they can have better hands-on control - convincing them to invest far away is an un-likely task.

Popularity: 31% [?]

I was recently nominated to join a local, fairly exclusive, “CEOs Club” where we meet once a month for dinner and have guest speakers from all around the “business building” spectrum.

Late last week was their second meeting (the first I attended) this year, I had no idea what to expect but was pleasently surprised.

The structure is that we all get there about an hour before dinner and stand around networking. After that we grab dinner and sit down to eat. As we’re eating, the guest speakers start presenting on the topic of the day - the presentations are about 1 - 1.5 hours.

The networking was obviously one of my favorite parts of the meeting - I got a chance to hear about some amazing companies and great ideas.

The actual “training” session was OK, I’d give it a 6 on a 1-10 scale, but I did learn a few things that I will blog over the next couple of days.

Here’s something I learned - Part 1 of a series I’ll do over the next few posts…

=======

Getting Bank Loans - Displaying TANGIBLE Value In The Intangible…

There was a veteran banker presenting and she mentioned something that I think is important for everyone to know. She said that many times banks prefer to back companies that have a lot of “physical” assets like equipment, etc…

This is because that equipment serves as “collateral” to the loan. However, this is a big issue for “internet” and many “technology” companies who’s biggest physical assets are a few computers.

In a situation like that, it truly is hard to get a bank line of credit. A tip she gave…

1. If you’re profitable - TELL THEM THAT. She said to make it very clear if you’re cash flow positive, they like that.

2. If you own “digital” assets - For example if you have a customer list, lead list, etc… These are still valuable things that the bank could sell if need be.

So if you have an internet business, don’t despair - you CAN still get a line of credit from a bank. It’ll just be harder and you’ll have to apply to more banks to find the right “understanding” banker.

Popularity: 37% [?]

The next time a company wants you to sign an NDA, think twice before you jump on.

An NDA stands for “Non-Disclosure Agreement” which wikipedia defines as: “is a legal contract between at least two parties that outlines confidential materials or knowledge the parties wish to share with one another for certain purposes, but wish to restrict from generalized use.”

Typically a company will want this signed with key clients, distributors, partners, etc…so they can protect anything they share during business.

From your own perspective, an NDA can be great, it helps protect (legally) anything you tell someone. However, the reverse side, if you sign a MUTUAL NDA, that means you too, could be liable for what you learn about the other company.

===

I get opportunities or requests almost weekly from others who we talk business with to sign an NDA. The “old me” would just sign them so the conversation could move on, however, not the “new me.” What changed?

I realized that by blindly signing NDAs with companies who are in my industry (but who’s business I don’t completely understand), I may be creating serious liability for my company. Simple situation…

What if that company happens to be working on something that you’re working on?

Sure, an NDA is not the same thing as a “Non-compete” - but if 2 months later, you too launch the “same” service, what’s going to stop that company from suing you anyways saying that you used privileged information post NDA to “steal” their ideas.

So my #1 reason for thinking twice about NDAs is that even if there is a small chance that our businesses will cross, I’m putting my company at serious liability (even if I don’t really “steal” anything and was working on it all along). Next time someone wants an NDA, just be sure you are not going to enter their space.

And, as a good sales person, try to learn the MOST you can without the NDA. Using this, just in the last month, I’ve refused to sign two different NDAs and in retrospect, I’m very glad that I did.

Popularity: 13% [?]

We’re in a very interesting place right now in our company that I never expected to be in so suddenly…EVERYONE seems to want to work for us. And, I don’t just mean “jo schmos” - I’m talking VPs and Directors of the largest companies in our industry.

It all started about third quarter last year when our current VP of Marketing contacted us herself for a position in our company. It took a brief break and then recently, it’s picked up again (in a big way).

Just yesterday, I had a 90 minute chat with a Director from the largest company in our industry who is willing to jump through some major hoops just to work for us; the biggest of which is that she’s agreeing to take a 60% cut in salary! In place of a guaranteed high salary, she wants an incentive plan (profit-sharing and/or stock options). Of course this is MUSIC to a start-up’s ears.

Just 2 weeks before this, I had one of the MOST respected and sought after public figures in our industry contact me herself and ask for a potential job (we’re still waiting to see what happens at her company, if she decides to leave or not).

I love the attention, but it’s almost spooky.

It was less than 3 years ago that I went to my first industry trade show and sat there watching these very same people present on stage in awe…just the THOUGHT that they may let me even speak to them (so I could pitch them) would excite me. And today, less than three years later, I may be their “boss?”

Life in business can be surreal if you really think about it.

But, now here’s the dilemma - LISTEN UP - you may very well face this in your business (sooner than you think).

The “position” which this person I spoke with yesterday is applying for is not really “there” in our company right now. The way our small fast growing company hires right now is on the idea that each person will “create their own salary.” That means that by their addition we’ll be able to launch something that we may not have been able to launch otherwise.

So, if we hire someone and pay them $7,000 a month - they should be able to self-create at least that much in revenue to cover their own salary…

The current person would be applying for a position that may not “monetize” until fourth quarter this year or even later. So, until then, even though we’re getting her at a steep “discount” - we’d have to pay her salary out of our pocket and that would put a hold on cash that may be used for other things.

BUT…

She’s a true win, highly connected in the industry and the “cultural fit” is perfect. Furthermore, she truly believes in the things we’re working on.

This is definitely one of those “once in a lifetime” opportunities. If I don’t act on her right away, she’ll surely find something else and it will be VERY hard to get her later (if not impossible or at least very expensive). However, at the same time, would it be wise to put a hold on cash that may be better spent on other more immediately needed areas?

Usually I tell you what I’ve decided, but let’s do something different today - why don’t YOU tell me what YOU would do? - Leave your reply in a comment below.

Popularity: 20% [?]

As you know I just recently returned from visiting our technical team and I first-hand experienced a “snippet” of the tug-of-war that can take place between sales teams and technical teams. Our guys are very understanding, so nothing big - but there were definitely jokes going around that showed that at times if they could ring our necks, they probably would.

Here is the bottomline to the fights between these two teams:

The sales team is the one that is out there voicing the capabilities of what they are selling and also committing to certain deadlines. But once they sell whatever they promised, they pass it along to the technical team - it’s the techincal team that actually needs to BUILD and implement the promise.

To top it off, many times if the promise is not fulfilled, it’s the technical team that is blamed, not really the sales team (since it’s just their job to bring IN the business).

Also, by the nature of the beast, a sales team will pretty much say anything to a client typically to get the sale I mean, think about it, they have a quota to meet, a reputation to keep and an ego to inflate.

I’ve personally seen three areas where I see most of the “disagreements” take place…

1. Deadlines

We personally don’t seem to really have this problem, we have “super coders!” However, in companies where the sales team promises merchandise or some custom-tailored software, this is likely a regular problem.

If the sales person has to promise a late delivery, he/she will lose the sale. If he/she promises an early delivery, then they risk irritating the fulfillment personnel. Personally, I think the sales guy just says “screw it, let me get the money, i’ll handle the technical guys later.”

2. Unfulfilled Projects

Now, THIS one our technical team has tons of experience with me being the guilty party - they won’t admit it, but I know they’ve wanted to slap me a few times. Basically what happens here is that the management/sales/product team comes up with an idea and asks the technical team to evaluate it and as always, they say “this is urgent, do it right away…”

The technical team may slave day and night to get the discussions done and a full report ready by which time the management may have already decided to “nix” the project - meaning, not follow-through with it.

Obviously this would upset anyone, if you were just told that you have to stay up forever working on a project scope and a few days later told “Oh, sorry, we decided not to do it, thanks anyways…” I can definitely understand their issue there.

The only thing is that this will never change…especially in a start-up - things change, ideas come and go, just the nature of the beast.

3. Project Creep

This one makes me laugh because we just got done poking fun at this in the office, “project creep” is when you build a system based on well thought-out requirements and feature sets. HOWEVER, as the project starts, it keeps growing.

You think of new features, more things to add and so on.

This not only delays the launch of the project but can drive the developers crazy because many of the things you ask for may require a LOT of programming which would have been that much easier had you mentioned it from the start.

Any work around this? Not really…

Again, this will happen in a start-up. This will especially happen if you are launching a new and unique concept. You have no idea how the market will react to it.

Not only will you add/delete features during the actual development, but you’ll add/delete features constantly even after the launch of it.

But it certainly CAN help to spend just a few days extra (or even weeks) PLANNING it out in the beginning…the less project creep the better. But, I don’t think there is ANY project done in history that did not suffer from the creep.

I’m sure there are many other areas where these two teams fight with each other, but thoese are three main ones I’ve seen.

What can you do? Nothing really…just take the technical team out for a beer here and there and send them some chocolates!

Maybe do some better planning and keep them involved in your sales process to some degree - if they feel involved, then it would be a team decision that everyone has responsibility over.

Popularity: 19% [?]

As you know I’ve had a few meetings as of recent with members of our team whom I had never met before. One of the meetings was with our designer, we spent an entire day in the office - honestly, most of it we just goofed off.

There was not a single thing we discussed regarding business that we could not have just as easily done via the net, but as you remember, “business talk” was not the point of the meeting. The point was to meet face to face and get to know each other better…in that case, mission accomplished

The meeting with the designer turned out to be exactly what I had expected it to, an entrepreneurial session with tons of great ideas. He has actually created some very interesting technology that backs a very smart business that he gave us a live demo of. And as good of a sales person as he is, he may have just sold the office here on using it

In the end, it was a great meeting, tons of fun and we all got to know each other better.

===

My next meeting I had to actually fly out. The manager of that office I have met before, however, I had never visited the office. This meeting went amazingly well. We only spent little time in the office itself, but still had adequate time to meet all the team members and get a chance to see what they were working on.

On a personal level, I got to do some great sight-seeing there and just overall had a blast (I did get a bit sick though - have been pushing pretty hard with all the travel).

Before I left, the manager of that office asked me to make an “inspirational speech” to the group - this 100% caught me off guard! It’s not that I’m not used to public speaking, but all of a sudden to be put on the spot and asked to “motivate the group so they never leave the company” - that’s quite a bit of pressure!

I did fight it a bit, but in the end, I realized that if you think about it - motivating and inspiring your team is pretty much one of the main roles of a CEO. So, I took it as a personal challenge and sprang in-front of everyone.

I think I did OK, definitely have some areas I need to work on. Our CTO was with us and he made some great suggestions afterwards of what to say the next time I need to do this…I’ll write a full review tomorrow of how to make inspirational “CEO” level speeches tomorrow…

For now, I have yet again proven to myself that “face to face” relationships are critical.

Popularity: 12% [?]

Ok, time for me to rant now because there is one thing I see entrepreneurs and business owners do that is just out-right stupid.

Naming the company after themselves.

There are times when this fits and other times when it’s just out-right idiotic. Here is a bottom-line rule to follow, if you ever want to be able to SELL your company, don’t brand your name (or you better be ready to get sold with the company).

Also, if you’re branding your name to the general consumer public, you want to stick to a name that will not likely change. It’s much harder to re-brand a name when there are millions of people that know it, rather than when only a few clients know it (or a smaller market knows it).

Here is an example of when it’s ok to brand your own name:

A legal or accounting practice where your name is what people really look for. In a case like this, it’s un-likely that you’ll sell. You’ll probably “merge” and add more names to your name. Or even if you did sell, it would only require you to alert your clients. There would be little branding

Here is an example of when it doesn’t make sense and it makes me want to slap someone:

A company that sells computers called “Daniel K. Smith Computers” - what the hell is that? First of all, it’s a stupid name. Second of all, it’s going to be hard as hell to sell that to another company unless you agree to go with it - the consumers are used to YOU and that’s what they want to find when they walk into a store.

If you really do want to brand your name, go with just the last name like “Smith Computers” - that can still be neutral.

When deciding the name you want to throw your branding power behind, just think about one question:

“Do you want to sell this company one day?”

If you do, then please, don’t brand yourself or your name - brand the company.

====

On a seperate note, many times you have a neutral company name, but you still choose to brand yourself. You’re always in the store, you sign every e-mail to customers from yourself, you make all the public appearances, etc…

This is a bad idea - it centralizes the company around YOU too much and it makes it hard to delegate work and not have your hands in everything. If the company grows with your hand in everything, your life is going to suck and the business will eventually suffer.

Here is an example of how it should work:

All your customer e-mails, have your “support director” sign off.
All your marketing matters, have your VP of Marketing sign off.
All your financial matters, have your CFO sign off.
All your HR matters, have that department head sign off.

The only time I think a CEO should be specifically signing his/her name should be on MAJOR matters, investor related matters or any major announcements to the industry.

I work very hard to hide myself as much as possible so that I can be considered ‘despensable” when it comes time to sell. I didn’t always do this, as of now the company still has my name linked to it, but I’ve started working hard to disconnect and it seems to be working.

When I sell this company, I don’t want to go with it (not for long at least). The less the company needs me to run properly, the easier it is to sell the company without my neck attached to it.

The next time you sign-off on something public, think twice if it’s really your name that should show up there.     

Popularity: 12% [?]

Thanks to technology, we can do business across the world and always feel 100% connected. Video conference calls, computer sharing technology for presentations, inexpensive international calling, even GTalk & Skype which can connect you for free…

As helpful as these technologies are, I believe they are doing some damage in the world of business as well. How?

They’re helping eliminate the most important element of human interaction - a “face to face” relationship.

Nothing, not even free video conferencing, can replace the value of a physical hand-shake, a beer or a good smile.

As you know, I’m currently traveling internationally to my secret “bat cave” location where we have an entire development team, customer support team and now even a team doing all of our U.I. design.

As I write this, I’m waiting to have a day long “face to face” meeting with our new designer. He also has traveled quite a distance to be here just for the weekend for this meeting.

So, why are we meeting?

- Do I need to be here to review design? Absolutely not.
- Do I need to be here to sign a contract? Certainly not.
- Talk about a future project? Nope.

I’m only here so I can get to know him better and he can do the same. And, in all honesty, he’s a pretty smart and fun person (we share the same zest for entrepreneurship, so I think this meeting will just be a good time).

I’m only here to meet him, to shake his hand and tell him in person how much we really appreciate what he’s doing for us.

What will this do for us?

I’m not sure, I don’t really have any expectations (his work is already kick-butt). But…

Once you meet someone, once you REALLY get to know them, it’s only human nature for both sides to give each other that much more importance.

After our meeting, after we become friends, do you think even a cheaper quote from another designer would “wooo” me away? Heck no.

The other side of the scope, do you think another client would be able to pay the designer a bit more and get higher up on the priority list? Probably not…but I can’t speak for others (however my experience tells me that it would not).

Tomorrow (from the day I write this), I’m jumping on a 1 hour flight to visit another office where we have a team working on our customer support and site maintenance . They’ve been with us for over a year now and I’ve never met the entire team. So, do I really *need* to go? No, I have no doubt the work will continue to be as good as it is if I don’t go.

I’m actually even taking another team member from the current office I am at so that our two teams can themselves develop a relationship.

The moral of this story? I’m sure you are outsourcing some work outside of the country (in today’s market you almost have to). Put some importance on a personal relationship - hop on a plane and go spend some time with the person/team.

It may not pay off in “numbers” directly on your accounting right away, but trust me it will pay off 10 times what it costs in your overall business development.

Another side tip: Make sure to promote relationships intra-team members too. Don’t be selfish and just go yourself, take others.

Build a family, don’t just build work.

Popularity: 11% [?]

Isn’t blogging great? I’m actually on a plane right now (traveling Internationally, yet I just pre-set this post to show up!)

Since we’ve been talking about sales the last couple of days, I thought I’d keep the trend going by discussing “pricing” - obviously a highly influential matter when you’re trying to sell someone.

One of the problems I used to have was that my initial reaction to an objection was to think about reducing the price - as a matter of fact, I would reduce the price sometimes before even talking to the prospect!

What I have learned and you better learn is that price is not always the biggest deal - I’ve found that if you can sell someone at $10,000, you could have sold them at $15,000 (most likely). An objection (most of the time) won’t go away just because you drop the price, you have to get to the root of it using the 3 sales techniques I revealed a couple of days back - listening can really help.

The other problem that seems to happen a lot is what I call the “price war.”

The price war takes place between companies that are fighting for the same customer with similar products. Bottom line, it can get rediculous.

Should you be irrational in your pricing? No, of course you have to price competitively, but there are ways to get a customer rather than price (and they are far more beneficial).

Think about this for a minute… 

Starbucks…you and I both know that you can get coffee TONS cheaper at dozens of places (they are probably much closer to you too), but you still go to Starbucks, why?
* Had Starbucks tried to compete of pricing, they wouldn’t exist today.

Mercedes/BMW - Honestly, half of the features that are “premium,” you never use and you know that when you’re buying the car. There are tons of cars that can perform the same or better and are half the price, then why?

Coke/Pepsi - Are you telling me that just because one is 10 cents cheaper, you’ll buy that one? I doubt it, by now I am positive you have your preference of which one you buy.

Pricing can only take you so far - if your entire business is based on price war, you’re going to go out of business soon. Find something else to hook your customers in, here are some ideas…

- Customer Service (ex/ Nordstrom)
- Quality
- Customer Experience
- Product Variety
- etc…

Think about your business right now and figure out what unique aspect you can focus on.

asdfasdf

asdfasdf

Popularity: 13% [?]