Category Archives: Innovation

Funding Your Startup

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There are many ways to fund your startup, from your personal checking account to an infusion of cash from a venture capital group. Here’s a look at the pros and cons of a variety of funding options for startups.

Friends and Family

A lot of companies got started with seed money from friends and family. But there are a few problems here, both personal and legal.

Investor Paul Graham points out:

“The advantage of raising money from friends and family is that they’re easy to find. You already know them. There are three main disadvantages: you mix together your business and personal life; they will probably not be as well connected as angels or venture firms; and they may not be accredited investors, which could complicate your life later. 

The SEC (Securities Exchange Commission) defines an ‘accredited investor’ as someone with over a million dollars in liquid assets or an income of over $200,000 a year… A startup’s life will be more complicated, legally, if any of the investors aren’t accredited.”

Graham adds another good reason not to ask friends or family for money. “It wasn’t because they weren’t accredited investors that I didn’t ask my parents for seed money, though,” he says. “The reason I didn’t take money from my parents was that I didn’t want them to lose it.”

To borrow money from friends and family legally and successfully, treat the loan like any other. Get the terms in writing and pay interest. As an example, two online services that provide these services are LendFriend and LendingKarma.

Use Your Own Money

“If you believe in your ability to make a business succeed, you should be able to put your own wealth behind your beliefs,” notes Forbes contributing writer Luke Landes. “It’s risky to put your own financial well-being on the line, but how could you expect your family, friends, or a bank to have faith in your ability and invest in your goals if you’re unwilling to invest in yourself?”

You’ll need to learn the basics of frugality if you’re bootstrapping. There is a significant difference between frugally building a business and frugality in your personal experiences. “Frugality at home saves on expenditures. Frugality in business protects cash flow,” advises Katie McCaskey, owner of a neighborhood grocery.

Microfinance

Sometimes you only need a small bridge between your personal cash and operating capital. One of the best places to look for money is through a local microlender who specializes in small loans. Many communities have this lending capacity and the terms are more favorable than those offered by the banks or online lending clubs. Find one near you through the Opportunity Finance Network.

Crowdfunding

This is a relatively new way to get investors that employ the Internet to pool the resources of individuals to finance an initiative. The Hongkiat.com staff writer Alvaris Falcon explains:

“The concept is simple — you post your project to a large group of site users, or ‘potential investors,’ and they will fund your project with money if they are interested in the project. You can start a crowdfunding exercise for free as you will only be charged when your project has raised some funds or the full amount. There’s nothing to lose and this is great for publicity.”

Three popular crowdfunding sites include Kickstarter, Indiegogo, and RocketHub. Again, a willingness to display you’ve put in your own money as part of the venture will increase the likelihood others will make a “gift” investment.

Crowdlending

Crowdlending is similar to crowdfunding, but with one critical key difference: Unlike crowdfunding — which offers “gifts” of cash in exchange for future perks — crowdlending is an actual loan that must be repaid with interest.

It works like this: You apply for a loan at a crowdlending website. You supply details about the loan and your credit history. Member lenders of the crowdlending site review your application. Loans can be funded by a group of other very small investors, ranging from three to 300 (or more) people.

Interest rates are determined by your credit worthiness as well how the money will be used. For example, you may pay more for a loan to consolidate other debt than you would for a loan on a piece of equipment that could be liquidated, if necessary, to repay the group of lenders.

One example of the sites that specialize in crowdlending is Prosper. 

Small Business Loan

Another way to get needed capital is through a small business loan. Forbes contributor Tanya Prive points out:

“The SBA (Small Business Association) is dedicated to representing small business in the Federal Government. Tireless advocates for the little guy, they are a great resource for anyone starting out in the business world, offering information, advice, and potentially even funds. [...] While they do not offer the loans themselves, the SBA is a key facilitator in the process. Utilize their website as a resource for finding the right avenue for you and your business.”

Small business loans must generally be backed by collateral such as a home, vehicle, or other redeemable asset. For small amounts of money or for those without hard assets a microloan is a better option.

Angel Investors/Venture Capitalists

Beyond the initial startup phase more established businesses are better positioned to attract venture financing. That is because these businesses have a demonstrable track record of selling or making a product, and, critically, demonstrable profitability.

While venture capitalists bring much needed capital in, the downside of angel investors or venture capital is that they usually want part ownership. As Entrepreneur contributing writer Vanessa Richardson points out, “If you give equity to investors, you’ll always have to answer to others.”

This can include, but is not limited to, giving investors or their family members vanity job positions. You give up more negotiating power — and more ownership — with every speculative venture capitalist dollar accepted and invested.

Go to the Bank (or Credit Union)

Then there’s the time-honored tradition of going to the bank to get a loan. The Wall Street Journal writer Emily Maltby writes:

“Some 39% of business owners with less than $5 million in annual revenues said a bank loan would be the best way to raise capital [...] according to a [2012] survey of 2,851 owners of small businesses conducted by Pepperdine University.”

While this may be a tried-and-true fundraising method, don’t neglect to investigate options at your local community bank or credit union. These institutions often offer better rates than big bank conglomerates and help keep dollars local to your community, too. Bankers will expect to be paid back, but you won’t have to compromise your company’s vision or direction as you might have to when you accept venture capital.

Finally, consider this: Where there’s a will, there’s way. Just because you don’t have all the financial resources you need right now doesn’t mean it should stop you. Just get started. With time, and proof of progress, the money will appear. Good luck!

Featured images:

David Soyka has covered business topics for The New York Times, Industry Today, and many other renowned publications. David is currently a freelance journalist covering small business advice for Vistaprint, a leading provider of personalized checks and other custom marketing products for small businesses across the globe.

Top ten advantages of a Tesla Roadster vs conventional cars

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Update: see below the lovely black Tesla I captured just a few weeks ago on my visit to the offices of Expedia in Victoria, to talk about social media strategy and credit reports.

I had the great privilege of test driving a Tesla Roadster today with the help of Gian. Of course it does 60 mph in 3.7 seconds – check out the full official Tesla Roadster spec here. We chatted through some of the benefits, and afterwards I made a quick note of the top ten benefits from the test drive in typical ‘user-generated content’ fashion.

My quick and dirty top ten

1. The car is 88% efficient compared to 16% for a conventional petrol driven car. It charges itself as it drives when you take your foot off the accelerator.
2. The cell structured battery means you never have probs with recharging reducing the life of the battery.
3. You don’t have the problem with a conventional sports car of having to change gears to find the power torque – its a smooth flow of power to the driver.
4. There is no exhaust pipe to catch on speed bumps.
5. It’s made of highly resilient carbon fibre so it doesn’t dent or rust in the way a conventional car shell does.
6. The drive transmission, exhaust, etc does wear out like a conventional petrol engine motor can do.

7. It is expected that as the Tesla battery design is further improved, you will have the choice of 40% more power, or more boot space…
8. You can use the car for business. For promotion. For demonstrating corporate responsibility. For keeping a more charming profile on the street! And that means it’s tax deductible.
9. The success of Tesla is helping bring electric powered transport to the mass market by demonstrating its power and practicality. Electric motor powered fire engines came to mind for some strange reason?
10. It would take a heck of a long time (9 months) to run down the battery with no charge;-)

What I think I forgot to mention is that using the brakes actually charges the battery. Luckily Jeremy Clark didn’t forget, in this Top Gear test drive from a couple of years ago.

Cost/Benefits

So while a Roadster cost a little over £87K it’s good vfm when you calculate i all its benefits vs a conventional car’s. What’s more there is a corporate leasing option too – while Tesla don’t advertise this as available for the UK as yet I’m sure that’s worth discussing with Gian.

Tesla Roadster in Victoria

Bond, James Bond

While I am not a motor journalist (though there is a pic of me driving an ex-Russian tank from my pre-internet days as a newspaper reporter) I have written professional product reviews for eBay’s Shopping.com as their UK head of community; but this has got to be the product that tops them all. I hope the makers of the 23rd 007 movie ‘Skyfall’ agree, and seriously consider using the car in the next 007 film.

PS: I see my most famous college alumni Sam Mendes is directing, which is super neat. Maybe he would enjoy test driving a Tesla too?

How useful is the Community Manifesto for organisations?

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Included below is the Community Manifesto created recently at SXSW, but how useful is it for your organisation? For example, how well does it support emerging new forms of community management, such as ‘employee advocacy‘?

And here’s some real community managers at the event talking about what it is to be a community manager:

Orange Different Business

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Having been on a lean start-up weekend for budding entrepreneurs, I know how tough it can be to get a great business idea off the ground. I’ve also gained some good experience working with entrepreneurs as a consultant, from online gaming start-up ‘Name That Place’ to a China-based surgical planning software company, to know it’s easier said than done. In thinking through the many issues around getting an idea to product stage and then into the marketplace – from validating the idea with customers, through to seeking investment, each stage requires time and effort. So it’s welcome news that mobile company Orange has launched the Win Your Business competition to give you the chance to follow in their footsteps.

Of course, the business-savvy folks at Orange aren’t just handing out investment cash, (but then money isn’t the key to start-up success). What they are doing is making sure you have the necessary support, advice and investment to get you started on the road to success – and change your life forever!

The competition panel of judges includes some of the UK’s most successful business leaders - Spencer McHugh and Martin Stiven of Everything Everywhere, the name of the combined Orange and T-Mobile business. Nigel Jones, head of one of the UK’s biggest integrated advertising agencies, Publicis Group UK. And Steve Neal, Partner at One of the UK’s top 20 firms of accountants Kingston Smith LLP. So why not tell them about your innovative new idea and you could become the UK’s next different business? They’re looking for a different idea, different approaches, clear strategies – something that is worth funding. The prize is worth up to £200,000 and includes not just investment capital, but legal advice, business planning advice, mentoring, and marketing consultancy.

To speed things up I’ve added the entry guide for you below, or access it online here (pdf). Then once you’ve registered and completed the application using the guide, you need to submit it by 31 March.

idea

What is your different business idea? As a guide, describe your idea in 100 words:

  • What is it that you propose to do?
  • What is your vision?
  • Is your idea innovative? How does it differ from what has been done before?

marketing plan

Take the judges through your topline marketing plan — this is how you’ll bring your strategy to action. As a guide, try to do this in 500 words:

  • Evidence of your market research
  • An understanding of what are your competitors doing
  • What is your vision?
  • Identify your target market — who is it for?
  • Lead times
  • Any regulatory restrictions
  • Marketing penetration strategy

financial plan

Take us through your financial plan — have you identified the level of business financing you will need to grow? As a guide, try to do this in 400 words:

  • Balance Sheet
  • Cash Flow Analysis
  • Profit and Loss Analysis
  • Break-even Analysis
  • Personnel Expense Forecast

why different?

Tell us why your idea is exciting, different and innovative and why it should be considered for the prize. As a guide, try to do this in 200 words:

  • This doesn’t mean the product or idea has to be completely brand new – it may be a different approach to an existing idea or concept

operational plan

Tell us how your business will run and how you plan to get your products/service to market. As a guide, try and do this in 400 words:

  • Who is doing what?
  • What are the day to day activities?
  • How will the suppliers and vendors be used?
  • Who are the suppliers?
  • What are the labour requirements?
  • What are the sources of raw materials?

So that’s pretty much it. Just a reminder that the deadline for submissions is 31 March. So get involved, and share this opportunity with your friends.

 

Sponsored Post

 

Please don’t let engineers take charge of the product

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And here’s why, from Douglas Edwards, Google’s brand manager from 1999 to 2005, who’s just written a book about his experience which he relates in this extract from an interview with FastCompany.

I mean, don’t engineers realize that most people run on different ‘software’ than code? And that this human software has its own inherent logic, which is different from the the logic of code?

“User interface was one realm where the communications team and the engineering team met each other halfway. Can you give an example of how you humanized Google?

“Here’s an example: the automated spellchecker. So Google had the capability of detecting if someone’s typed query was likely misspelled.

“The engineers said, ‘Great, if somebody misspells something, we should automatically correct it, do the correct search, and then tell them that they misspelled it, so they know we fixed it.’ The problem was, people don’t generally like to be told they made a mistake.

“The engineers insisted it was essential to tell the user they were wrong, so we launched with wording to that effect. But I knew from a marketing perspective that people would find that abrasive. And people were upset.

“They were pissed off that their search engine was correcting them–especially if they hadn’t made a mistake, if they were searching for a proper name that happened to be unique. Finally we changed it to softer phrasing. [Currently, Google says, “Showing results for...” and then the corrected query.]

“I remember arguing at the time, it doesn’t hurt us to take the blame–a search engine doesn’t have feelings. We should always be willing to take the hit, so the user feels better, even if they know they made a mistake.”

This isn’t a trivial issue when you consider how getting it right can impact on strategy & sales, and especially how you build a customer base. Just the other day I had my own small example of this when I sent out a newsletter with a call to action for the first 20 people who left a post on our Facebook Page Wall – in return for a ‘goody’ bag.

In the end 75 people asked for the giveaway. So are the 55 people who left a request simply to have their request be deleted on the grounds that they should have read the instructions, counted the numbers of posts, and not bothered once the list was 20 in total?

“Do not sell, absolute idiot” – An example of eBay seller feedback from 2005; eBay wisely removed the ability for seller’s to leave negative feedback in 2008.

OK, so coming back to Google, how about something really useful like a 73 page PDF on the best thinking and practice regarding customer engagement online? It’s called the rather cultish name ZMOT (zero moment of truth). So please enjoy – google-zmot

I have already extracted  a few golden nuggets which I’d like to share – ’cause sharing as well as competition is good..

(1) Don’t ask the kind of customer survey question like ‘do you use a smartphone to shop online?’ ask the question ‘do you use a smartphone to help you decide what to buy?’

(2) “Yes, people take the time to leave messages online about how much they love Scotch Tape. That’s because the effort is down to zero.” In other words the full range of products, from the very small to the very large, generate user reviews and content.

I call it Sellotape!

(3) Actually, my third point isn’t from Google’s ZMOT but from the recent Lithium webinar ‘LevelUp Your Facebook Strategy’.

When guest contributor Jeremiah Owyang, in highlighting the 8 key criteria for success, focusing on point 4 around ‘Living authentically’ (what the social networking deal is all about) highlights a key point – that rather than merely emulate your customer’s behaviour online – you should aim to:

“Live in the same behaviors that customers and consumers are.”

Makes sense that being on the same wave length as your customers is going to work well for social media, and for the business bottom line. But as the introduction to the webinar plainly stated, customers have changed with social media and mobile technology but by and large business practice has not. It relates in large part to the follow-on criteria, to enable your customers to do it for themselves, to have discussions without relying on your input.

Quality starts at home!

Let’s face it while there are plenty of experts on the subject of business change in the era of social business how many actually confront what’s really holding things back? Letting go of that ‘elephant on the table’ both internally and externally with employees and customers goes to the heart of the matter, where the potential win is huge but the risks are big too. (Check out this post from Christoph Schmaltz on that subject, and how Headshift approaches these complex issues).

This is why for example in a recent discussion ‘ I had with Phil Bush, director of strategic planning at Oracle, on the possibilities for enterprise use of social tools I focused on the key problem in integrating these transformative technologies in with business processes to drive results. And I’m guessing it’s probably what the CEO of Salesforce Marc Benioff was referring to last week at Dreamforce 2011 when he wondered when the first CEO was going to suffer as result of his/her inability to engage using social tools with their customer and employees.

It ain’t easy. But one  tried and tested answer to help employees adapt to new ways of working is the practice of empowerment, which at its simplest as outlined in ‘Empowerment Takes More Than a Minute’ involves three basic principles:

1. Share information with everyone (externally, and internally)
2. Create autonomy through boundaries
3. Replace hierarchical thinking with self-managed teams

OK, sounds that’s one possible answer. But not everyone is convinced, and for good reason – the nature of how knowledge works in a networked world:

“Never mind that there is much rhetoric about the need for leadership at all levels, or about the empowerment and democratization of workers in organization X or Y.  “Performance management, grade levels and compensation have yet to recognize how work gets done in networked environments and in a networked world.”

Despite these objections hope remains so long as there is passion and determination to drive the business forward. Tying the power of consumer and business transformation together using social tools sounds utopian to some, but to others it’s the basis of their disruptive business model, as outlined in the recent Forbes piece ‘Social Power and the Coming Corporate Revolution’. Referring to HearsaySocial‘s internal social tool set it neatly makes that very link:

“Hearsay’s tools presume something elemental in a world of social power: that the empowerment of employees is directly tied to the empowerment of customers—because they will inevitably end up working, maybe even conspiring, together.”

Sounds like it’s time for action..@stuartgh

Connecting Facebook status updates and fighter pilot tactics

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Really liked the link made in the fourth programme of the BBC’s The Virual Revolution between Norbert Wiener’s feedback loop for anti-aircraft gunners in WWII (ie breaking down the division between people and systems, to allow gunner’s to hit their airborne targets) and the radical impact of the status updates within Facebook (and the likes of Twitter…) on driving the internet revolution.

So here’s my question. What would happen if you applied fighter pilot military strategist John Boyd‘s concept of “the decision cycle or OODA Loop, the process by which an entity (either an individual or an organization) reacts to an event. According to this idea, the key to victory is to be able to create situations wherein one can make appropriate decisions more quickly than one’s opponent” (see wikipedia page) to understanding of how *we* interact online?

I wonder if anyone’s applied this to produce an effective counter-cyber warfare strategy, as I can see the ‘fit’ from a theoretical point of view? [pause while *we*make a quick check..] oh yeah, see here for example as part of the University of Washington’s resource page on cyberwarfare.

More practically perhaps I wonder what would the OODA loop mean in explaining differing peoples’ actions online in the context of the BBC programme’s ‘Web Behaviour Test’ experiment?

Of course on a more practical social media level I have already blogged recently, thanks to HP Labs paper, on the value of creating good feedback loops with your top contributors:

This paper demonstrates that submitters who stop receiving attention tend to stop contributing, while prolific contributors attract an ever increasing number of followers and their attention in a feedback loop.

We demonstrate that this mechanism leads to the observed power law in the number of contributions per user and support our assertions by an analysis of hundreds of millions of contributions to top content sharing websites Digg.com and Youtube.com.

Download:  Feedback loops of attention in peer production (PDF; 0.5 mb).

Comparing US patent search engines

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I quickly put together this short animoto-video showing the beta Google Patents, US Patent and Trademark Office (USPTO) and new Xyggy patent search engines, entry page followed by advanced search page. How do they compare in your view, focusing on US granted patents from 1976 onwards?

You should notice a difference with the Xyggy engine. Why? It runs an item search which it claims provides substantial advantages and additional information over text search.  Also, the makers say that with multiple items in the query, Xyggy discovers what they have in common to return better results.

Xyggy Patent is live

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Xyggy patent search

News from Xyggy – their patent search service is now live. Forget keywords, this is about item searches.

Strikes me this would be of interest in the medical imaging world. So I tried ‘MRI’ as the item search. Then selected the top of the list return. Usefully the search engine then delivers a list of similar patents, as Xyggy’s Dinesh Vadhia explains:

Imagine you want to find similar patents for a given patent. Now you can with Xyggy Patent. What’s more, you can query with multiple patents (selected by patent number or title) and Xyggy will find all similar patents in ranked order. Go ahead and try it (and its free).

Patent Baristas wrote about Xyggy here and the IPKat said this.

What Sir Tim Berners-Lee said to me

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I don’t know what Sir Tim Berners-Lee said to everyone else but what he said to me at a talk at the IEE last night was [in no particular order]:

1. That there should be more women in technology; and he mocked the mature nature of engineers, while noting that women can be their own worst enemies.

2. That getting round patent laws and keeping the web royalty free was difficult.

3. That his www proposal went out on a memo round CERN in March 1989, and then again in May 1990, with a subject line which indicated the duplication. And that his boss had scribbled on the proposal ‘exciting but vague’.

4. That wikis are actually in one sense a return to the early days of the day by their ‘read-write’ nature. And that blogs are great but there was a danger they may end up as poor quality information.

5. That Google and the like know a lot about us.

6. That he had started on the web work when CERN bought a couple of ‘NeXT’ machines just for the heck of checking them out.

7. That the term ‘URL’ is fine but ‘URI’ is better.

8. That if he had to do the invention of the www again he’d drop ‘//’ and reverse ‘co.uk’ to ‘uk.co’ as the correct hierarchy.

9. That mobile technology, whatever the benefits of voice recognition, still means you’re talking to a computer (gettit? no, oh well) through a small screen but if you could mount the viewer on a pair of sun glasses might be fun.

10. That you should never trust physicists to write software.

11. There’s a xml parser error on harvard site.

12. And that there is basically too much UGC on the web.