Smart Startup Guide
The New Improved and Expanded Edition
of the Smart Startup Guide
is Finally Out
This is
definitely not your father's startup manual.
210 pages!
How I Learned to Stop
Waiting for Investors and Start Building Companies
Are you
starting to get
frustrated by the
Venture Capital Catch 22TM?
What
is the venture capital catch-22? Well, startups need venture
capital to start, but venture capitalists and angel investors only fund
companies which
already have traction (i.e., sales). This is one big reason why
no one is
funding you.
Part
1: The Bad News
Before
Embarking on a
Campaign to Raise Venture Capital Funding, You Should Look at Yourself
Objectively and Honestly to Determine if You Even Qualify. Most
People Don't Stop to Do This.
Since
the vast
majority of venture capital hunters don't
qualify, you will, in most cases, end
up wasting 6 to
12 months of your life writing a business plan which will never
be read and doing "dog & pony" shows for audiences who are at best
only mildly curious or at worst engaged in "brainsucking" you for
ideas.
Who
Qualifies for Venture
Capital Today?
Venture capitalists,
like winning horse track gamblers,
bet
on the jockey not on the horse.
Industry
"stars" qualify
for venture capital. This means someone who has already taken a
start-up
from zero to 50 million in sales or better. So if you're counted
amongst the
stars in your industry, you stand a good chance of attracting venture
capital provided your current deal has the following elements:
* at
least 2 other senior executives with experience
in building wildly successful companies,
* a
proprietary technology in a sector currently
considered hot by the venture capital industry,
* a
top-notch technical team,
* a
target market at least one billion dollars in
size,
* a
minimum of one year of rising sales to blue
chip customers.
It
you don't meet the
above criteria venture capital funding won't happen.
If
your name is not
synonymous in the minds of
financiers with huge, almost obscene, profits, your plan will be
accepted politely but never actually read beyond the "team" section.
If
you haven't made big
money for investors and don't have any close
relatives running venture capital firms, you should read on.
The
Three Dirty Little
Secrets About Raising Outside Capital
Let
me share with you
three secrets about raising capital which almost
no one else will.
*
First, chasing outside capital is by far the most unpleasant and
drawn-out ordeal
experienced by entrepreneurs. It always seems to take forever.
(For this reason, veteran entrepreneurs try to avoid raising outside
capital at all costs.)
*
Second, based on the fact that your typical early
stage venture capital firm invests in only one company out of every 500
business plans it reviews, your odds
of succeeding are only 1:500. (If you are pursuing angel
investors your odds improve to maybe 1:200, although no one knows the
numbers for certain.)
*
Third, in about
50% of instances where an early stage company actually
succeeds
in raising venture capital, the
founder is fired within the first year and kisses most of
his
or her
stock good-bye. Even the Wall Street
Journal pointed this out in
a
article by Barnaby Federer from 09/30/02:
"If you ask a VC what value they
add, and you get
them after a few
drinks, they'll say, 'We replace the CEO' ",
he said. And that, he
indicated, does not vary
with the economic
climate.
So
your odds of being a
successful venture capital-backed founder/CEO are actually only
1:1000.
* Realist:
"With those long odds I need to have a Plan B for launching my company."
* Dreamer:
"Yes, those are very long odds but they apply to the other 499 guys,
not to me."
The
Smart Startup Guide covers
two dozen other reasons why no sane entrepreneur accepts venture
capital other than as a last resort doomsday response.
The Funding Problem
Here's
what typically
happens when a company needs to chase outside
capital in order to commence or expand operations. After about 6
months one of three things occurs:
1.
The lucky 1 in 500
finds investors.
2.
Most die on the vine.
In many cases, the wannabe entrepreneur simply abandons the
project and moves on to something else. (As the joke goes, "That's why
God created 'jobs' ".)
3. A
savvy and tenacious
tiny minority of entrepreneurs finally gets
mad at having wasted so much time. Then it begins to figure out a
creative way around the funding problem by focusing on creating
cashflow with the resources and opportunities at hand, instead of
continuing the futile quest for outside capital.
Necessity
truly is the Mother of Invention.
America's
Fastest Growing
Industry?
This
problem of capital
scarcity for early stage companies is so
prevalent that you may have begun to notice that there are literally
thousands of people in the business of "helping" entrepreneurs raise
money. At least that's what they lead you to believe. They
have
taken their cue from the Gold Rush when the truly crafty
business-people made money not from prospecting but by selling
shovels to the prospectors. Likewise, today's money-raising
services have found a low risk means to separate the cash-starved
entrepreneur from any money he or she may have left. They do so in many
ways:
* Matching Services:
We'll match your project with one of our many accredited angel
investors. Call now! Operators are standing by! Just $199 to register.
* Business Plan
Services: We'll write a business plan for you which will attract
funding. Only $999.
* Finders:
I can help you raise money for a fee…and, by the way, I require a
retainer up-front.
* Money-Raising
Bootcamps: Attend our weekend bootcamp for $1,195, and you'll
discover that it's not what you know but who you know that counts when
it comes to raising money.
My
two personal favorites
are:
* Online Business
Plan Repositories: Post your b-plan on our site for 6 months.
Only $59.
* Venture Capital
Directories: VC's are waiting to fund you! For just $49 you can
buy our CD directory with 12,952,734 venture capital firms listed on
it. (How these can sell in the age of Internet search engines is beyond
me. PT Barnum was correct about a sucker being "born every minute".)
In a nutshell, most of
these middle-man services don't work in 99% of
instances. This is also why they won't tell you the Three Dirty Little
Secrets of Raising Capital.
Lesson: put very little
faith in these services and never pay up-front
fees.
The Rodney Dangerfields of
Entrepreneurship
Pretend for a moment that
you are a venture capitalist or angel
investor. Two founders visit you about separate deals. You ask
them
each what progress they have made in the 3 or 6 months that they have
been working on their respective projects.
* One
entrepreneur answers that he has been able to
finish his business plan as well as find a means to generate cashflow
which is being used to move the main project further
along. Now he needs more money to fully capitalize on this developing
opportunity.
* The
other entrepreneur can only point to the
"great" business plan he's polished to perfection over the past 6
months and the "great" opportunity lying before him.
Which entrepreneur would
you be more impressed by if you were the
investor? Back in the 1990s, I took a 4 year sabbatical
from
entrepreneurship to run a small business investment fund, so let me
share my opinion. The former has shown that he is a doer; the latter
has provided nothing in the way of evidence that he can create
cashflow--any cashflow.
If you are not a
recognized star when knocking on investor's doors,
you'll quickly start to feel as if you "can't get no respect".
Lesson: cashflow wins far
more respect from investors than the "great"
business plan. If you are not an industry star you can
begin to
build your credibility up by finding a means of creating cashflow in
your industry.
* Realist:
"I need to prove myself first as an entrepreneur, then people will give
me money."
* Dreamer:
"People need to give me money first, then I'll prove myself as an
entrepreneur."
Dreamers as usual have it
backwards.
Real Entrepreneurship is
About Cashflow Creation
It's all about positive
cashflow. If you can make it
happen, you get
respect and investors to fund you so that you can make even more.
At some point in the
mid-1990s real entrepreneurship became subverted
into merely writing
a business plan, developing a Powerpoint presentation, scripting an
"elevator pitch", and then pestering skeptical strangers
for money. With the entrepreneurial bar thus lowered almost to
the ground, seemingly everyone declared themselves an "entrepreneur"
and
tried to hop aboard the dotcom express.
However, real
entrepreneurship is
not about these things at all. It's about making cashflow
happen now.
Never forget that.
Repeat three times daily
until the delusion goes away:
With
cashflow I'm a somebody; without it I'm a nobody.
With
cashflow I'm a somebody; without it I'm a nobody.
With
cashflow I'm a somebody; without it I'm a nobody.
Fact: Successful
entrepreneurs invest the same level of time and energy
into creating cashflow during the first year that wannabes invest in
polishing their business plans and offering them to complete strangers.
Let's Summarize the First
Half
Lesson 1: Money goes to
entrepreneurs with proven track records as
money makers for their backers.
Lesson 2: The other 499
capital chasers typically end up just wasting 6
to 12 months of time and effort on a capital raising campaign doomed
from the very start.
What's the range of
reaction to this harsh reality?
Proven Industry Star:
"Who cares?! Vinod just left a v-mail saying Kleiner is pumping $10
million into our "A" Round. I'm outta here!"
Dreamer: "I know
the odds are against us. But wait till you see our business plan. It's
gonna be grrrreat!"
Future Industry Star:
"We need to by-pass this chump's game altogether for now and get some
traction first. "
Part
2: The Good News
I
believe in...mastering the best that other people have figured out,
[rather than] sitting down and trying to dream it up yourself.
Charlie Munger,
Warren Buffet's partner in
Berkshire Hathaway
The Solution
There is no
one guaranteed solution to the funding
problem which all entrepreneurs face. What is the solution,
however, is having several dozen successful strategies for
creating cash, or its equivalent, in order to be able to get your
company out of the starting blocks.
This is precisely what The
Guide offers you. Dozens and dozens of financing
strategies and tactics used by fast growth startups to launch.
If we look at the
companies which qualify for those annual lists of the
fastest growing companies, we see that over 95% were unfunded at
start-up beyond a nominal injection of the entrepreneur's own money (in
most cases, less than $10k). Most didn't even have a business plan. Why
did this minority of unfunded entrepreneurs succeed while most
start-ups seeking capital die on the vine or morph into something
completely different—that is, something more do-able after
6 months?
To answer this question,
let me use an analogy. Think
of entrepreneurs
as being a bit like chefs. Some
chefs are very rigid in their
style
requiring that a specific list of ingredients be delivered to them
before they can begin cooking. This rigidity is fine so long as you are
not too hungry and can wait for the required ingredients to arrive.
However, if you are hungry now and lack the cash to buy more groceries,
you will need to be flexible and work with what you have.
Other chefs, the more
flexible and entrepreneurial ones, will not wait
for someone else to deliver a bag of groceries to them, but will
instead immediately begin to search the pantry, refrigerator, and
vegetable garden for what's available. They then use the items at hand
to create a feast.
* Realist:
"I need to come up with at least 3 different ways to get this show off
the ground."
* Dreamer:
"It's preposterous to even suggest that this venture can be launched in
any other way than the one outlined in my business plan. My plan shows
the only way it can be down."
It's been said that true
entrepreneurs are the artists of the business
world. They create new businesses and products seemingly out of
nothing. It's awe inspiring to watch a true entrepreneur
formulate an
idea and then begin making it happen within hours rather than sitting
around for months writing business plans and pestering strangers for
money.
In a nutshell, the
successful cash-strapped entrepreneur designs a
transitional business model for the launch, which can be described as
“Heads I win; tails I lose very little.” Once their concept has some
degree of traction, they can then choose to talk to venture capitalists
from a bargaining position of strength.
Once you have cashflow
life becomes much simpler. Cashflow not only
enables you to pay your bills but it places your company into the
“stream of opportunities” that established businesses enjoy. Cashflow
also earns you respect and gives you the ability to say, "No thanks!",
to those notoriously outrageous offers made by venture capitalists and
private investors.
Why Does It Work?
The Guide's Smart Start-up
Model distills the lessons of America's most
successful start-up companies for you to use in your venture.
You can
use the model as a screen to evaluate your current strategy for
viability. If it doesn't pass the test, you can use the model to
deconstruct it and formulate a stronger new strategy.
The Guide contains dozens of strategies
and tactics used by
successful entrepreneurs to both launch without outside capital
and
retain control of their companies. It shares "war stories" which
illustrate how entrepreneurs think and react to circumstances which
would force most others to give up and look for a job.
The Guide is the next best
thing to sitting down in person with a group
of Inc 500 Fastest Growing Companies founders and having them
share their secrets with you.
Some people need to learn
the hard way, while others don't have the
time to do it this way and prefer to learn from the mistakes of others.
I belong to the latter group. Why should I make the same rookie
mistakes as others, when I could instead learn from those who did it
the
right way before me?
How did you get to be
so smart about startups ?
It all comes down to three
things: experience, experience, and more experience. I have
personally launched six companies over the past 20 years. In
addition, I have acted as an advisor or consultant to hundreds of other
entrepreneurs over that time. Finally, although not an academic, I
enjoy researching what makes startups successful and then teaching the
lessons to others through the Guide or in live classes.
I started researching a
"better way" to launch and grow a company over
its first year after doing my very first venture capital deal in
1987. It was akin to being mugged in a dark alley. There
truly
had to be a better way. So I began paying attention to what other
entrepreneurs were doing. Quickly I
noticed something peculiar about entrepreneurs in start-up mode.
They can be broken down
into two distinct groups
* The
vast majority consists of dreamers who take
the
naive approach to business in that they spend a few months at first
writing a business plan. Once it's polished and ready for circulation,
they begin to look for investors, and look, and look, and look, ad
infinitum.
* The
tiny minority announces its intentions to go
after a given market opportunity, and is seemingly magically, in
business a month later without raising a dime of outside money.
Sometimes they choose to take VC funding later--on their own terms--and
just as often they choose to avoid it completely.
This second group has
always fascinated me. Just what was their magic
start-up formula? Some of its members end up on the annual lists
of
America's fastest growing companies. Many turn into far more viable
companies than their VC funded competitors according to Jim Collins of
Built to Last fame.
The Value Proposition to
You
Reading The Smart Startup
Guide is akin to spending a week with the
founders of successful fast growth companies. Imagine
being able
to pick their brains and learn how they formulated their strategies for
fast start-up and growth.
Just think how much this
knowledge would be worth to you. On average, it
will help you to save 6 or more
months of your life from being wasted going
down dead ends in a futile pursuit of outside capital.
Would this knowledge be
worth $500 to you? At the very least, if you
are truly serious and not just a dreamer as most people are. It could
even be worth $5000 to you. Or much more.
Some people need to make
their own mistakes and learn the hard way. Others can't
afford to waste time and money and prefer to
learn as much as possible from others who succeeded before them.
The
Guide is for this latter group.
Executive Decision Time
Think of the Smart
Startup Guide as an entrepreneurial
insurance policy
which will ensure that you don't waste the next 6 to 12 months of your
life. So ask yourself:
How much are the
next six months of my life worth?
Can I afford to waste them on what may turn out to be a dead end
startup strategy?
In a Nutshell
To recap, the benefits of
this manual for your business are:
* It
will teach you to think like a savvy veteran
entrepreneur who focusses on cashflow creation rather than on begging
for money from strangers.
* It
can drastically
reduce the amount of capital
needed to launch.
* It
can help a company begin to generate
cashflow before any
funding
occurs.
* In
some cases, it can eliminate
altogether the
need for outside capital.
Discovering and using any
of the lessons contained in the Guide will
set you as much as a year ahead of other start-ups.
Cashflow = Respect from
Investors
And if you are still
committed to raising outside capital because you
positively absolutely need a huge sum of capital to build that new
state-of-the-art atomic-powered widget factory, you will still benefit
from the Guide because:
* Cashflow--any
cashflow--earns respect from
investors, lenders, customers, suppliers, and even your Aunt
Mabel. Cashflow attracts equity capital from investors.
*
Cashflow will place you in a stronger
bargaining
position with potential investors since it will allow you to
walk away
from a bad deal. Pre-deal cashflow equals power. Power for you.
*
Cashflow will give your company a higher
valuation
which in turn will allow you to hold onto more of your equity if a deal
is done.
If you are truly
committed to building your business then do everything
you can today to achieve this goal.
If you're a realist you
will try the Guide. Dreamers will continue to
believe that other entrepreneurs don't have anything to teach them and
that it's all about writing that "great" business plan which will
miraculously convince people to throw money at an unknown.
Don't
kid yourself.
So ask yourself, in 3
months from now do I want to:
*
still be polishing my business plan and chasing
investors with nothing to show for my efforts, or
* do I
want to have an operating company with
positive cashflow?
The decision is yours. (If you
decide not to invest in the
Guide at this time, please bookmark this page for later reference.)
"If
you think education is expensive,
try ignorance."
Derek Bok, the former President of
Harvard University
_____________________________________________________________
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_____________________________________________________________
Testimonials
Almost 10,000 copies sold since 1996!
The Smart Startup teaches
you how to get your venture off the ground with little or no outside
money. It does so by revealing the financing strategies used by
entrepreneurial greats when investors weren't available. Ironically,
while the Guide tries to dissuade you from using outside money, the
application of its strategies will actually make your venture all the
more
attractive to venture capitalists and angel investors. Wil
Schroter, Founder GoBigNetwork .com
This manual is worth 100X its price. The Smart
Startup Guide is the entrepreneurial equivalent of Navy SEAL
training. Stop wasting time on dead-end strategies.
Ric Raynsford, Vancouver
You can pinch
pennies and try to
get all this information for free as I did at first. It maybe do-able,
but will take you years to learn just 1/3 of the high level
entrepreneurial strategies and tactics contained in this document. Or
you can smarten up, invest in a copy, and instantly turbo-charge your
startup. I've purchased other courses selling for 3 times as much and
did not find them anywhere near as helpful. Ted
Fierstein
This is how MBA finance and Entrepreneurship courses
should be taught. The manual teaches you how successful entrepreneurs
like Bezos fine-tune their business model to whittle down the funds
needed while at the same time maximizing their odds of succeeding.
Geoff Reilly, San Jose
After successfully building a company from startup in 1995 to $3mm+ in
sales and a successful acquisition in 2000, I then (against my better
judgment) spent the next few years trying the standard "create
business plan, get funded" approach to startup.
Unfortunately, the quote on the home page sums up the result of my
experience "Entrepreneurship is not about wasting 6 to 12 months of
your life walking around with business plan and begging bowl in hand.
It's about creating cashflow quickly. Positive cashflow." The "write
business plan / beg for money" approach wasted 2 years of my life.
When I finally stopped wasting time pitching "great ideas" to VC's and
other potential investors, and went back to basics and built cashflow
(like the book recommends), I got back into the entrepreneurial zone
and began to build a highly successful company (currently top 1% of the
web).
I strongly recommend this book to any entrepreneur considering starting
their first venture (or 2nd, or 3rd, as a refresher). It helped me
better internalize the lessons learned from wasting time on business
plans and funding meetings; and got me fired up again about being a
real entrepreneur.
Anon
Most first time capital seekers pay the 'Dumb Tax'
also known as learning the hard way. This book has the best collection
of strategies for avoiding paying it ever put together.
MW, Vancouver, WA
This financing manual offers the entrepreneur a smorgasbord of creative
real world financing techniques to launch and grow almost any type of
business. Some will find a few of them controversial. But get over it,
folks, all will work.
Too bad they don't teach you these in Business School.
John Anderson, Seattle
An Entrepreneur's Must Read! Practical, trustworthy, real, encouraging
are a few of the words that come to my mind after reading this manual.
You will get a lot out of this. A Harvard MBA in 220 pages: business
models, finance, and creativity all bundled together to help you
achieve cashflow now instead of wasting time chasing venture capital.
Robert Carmody, CEO
You've got a bright idea. An idea that you think maybe, just maybe,
could become a brilliant business. But what next? The Guide is the
answer. It takes you through all the crucial stages between those first
notes on a napkin to a business that is sound, lasting and profitable.
It tells you what the other books don't - the lessons that most people
have to learn by bitter experience; the tricks of the trade that all
entrepreneurs wish somebody had told them before they set out.
AL, Seattle
This is a highly organized, well researched, and pragmatic approach to
starting a company based on the real world process of starting and
funding a new enterprise. The author does a really great job of
defining the key elements for building a successful business with
minimal investment. For once, here is a book that actually tells you
the secret recipe from taking an idea, and turning it into a successful
business. Everyone who knows the author and his success as a Seattle
entrepreneur will tell you that the manual is full of substance.
T Dunton, CEO
Having been exposed to innumerable articles and books on start-ups and
capital raising, I expected this manual to be more of the same.
Instead, it enters new territory, by identifying the 'right moves' made
by successful entrepreneurs...often unwittingly, and so provides those
who follow them with a chance to get their start-up formula right. Its
strength is in allowing entrepreneurs to learn from the most cutting
edge research on entrepreneurship today.
RB, San Francisco
Still
Not Convinced That You Need This Insurance Policy?
If you need to hear the
above message from an actual venture capitalist, read this article
by Tim Oren on why so few are able to attract outside funding.
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