I have a couple answers.

1. ‘The hard ones.”
2. “The ones that hire me.”
3. “The start-ups with boatloads of cash, a brilliant new market-defining, game-changing idea or technology that will go public almost instantaneously.”

Occaisionally I can get a laugh with the first two. I’m still working on the the third.

I have played a role in over 100 start-ups; new ventures, skunk works, new markets for existing products. The ones that have succeeded famously have been few and seem to be the result of alchemy and good timing as much as anything that would make it into Good to Great.  Most of them have had some success and then plateau, for reasons that I will document in a forthcoming tome.

The failures and near-failures have the most colorful stories and, as I will present here, follow a set of patterns that have become very familiar.

I ask all my clients to consume a few important books on how to build a successful organization. I insist on a familiarity of Good to Great, for it’s concepts, level-headed definition of success, and because the terms that it presents give a very economical way to guide people to making the right choice.

A number of the other books I suggest are listed in my Nearly-Free MBA list.

The books that has been missing for me has been the book about disaster.  There are books about particular business errors; poor judgments, trusting the wrong people, greed, loss of focus, etc. but I wanted one that offered a number of red flags near the cliffs; a shorthand for naming and backing away from well-known disasters and missteps; a way of seeing through the fog of terror and exhaustion that often accompanies the early stages and, quite frankly, has taken the sanity and livelihood of many entrepreneurs.

While my hope is to amass this writing into a a single, portable piece of writing, it will begin life here as a series of posts where I invite your input and comments.

I believe in entrepreneurship in an almost religious way. I consider it the most highly evolved expression of capitalism, requiring both bravery and wisdom for it to come out well. It is, and has always been, the engine of our economy, of our livelihood as a nation, so I am seeking an opportunity to not only particiapte individually, but to provide support and encouragement to others.

I will reference the judeo-christian framework of the seven deadly sins, both for its catchiness and because these are areas of deadly importance, neglected at your own peril.  Too many perfectly plausible start-ups have died at the hands of their founding team because they crossed over into a place where there was no clarity and the lowest parts of human nature kicked in.

The stories in this collection are meant to make the danger zones more recognizable even when nothing else is familiar.

Capitalism is a completely sustainable and efficient system if certain orders and rules are maintained. Specifically:

1. The information to make informed economic decisions must be available to all decision makers. That means you and I can easily determine whether some transaction makes sense for us.
2. Treasure must follow value. That means that the more value you create, the more resources you have.

Regulations have tried to safeguard these principles, but, as the banking crisis has illustrated, a global, complex economy makes policing much more difficult. But regulation shouldn’t be about puritanical right and wrong, but about applying the constraints that keep the economic engine growing at a sustainable rate – maintaining the bonds between value and money.

My family comes from Quakers, so I tend to seek out the simple truths. In the long run, nothing that anyone can do creates value at the rate that we saw the economy rise over the last decade.  If you look at the economic cycle from this perspective, all of the crashes were predictable. Regulation policy should really constantly be looking at the top ten places where money is being made and slow it down – not to punish success but to maintain an environment where success is sustainable and where there is some economic justice – where value and treasure move together. Ultimately, windfall profits always suggest an inefficiency in the economic feedback system and pure arbitrage should be minimized as it puts real value creation at risk.

Who is spending and who is hurting?

A poll on LinkedIn asking about business spending patterns shows a wide range of responses to how much the economic downturn is effecting spending patterns (self-reported) of businesses.  At last look, 100% of those in large enterprises reported that the economy had no effect on their spending, while 76% of those in small businesses report that they are scaling back or operating on necessities.

I hate to be grumpy about this, but I have to make these two points:

1. An awful lot of money was pumped into the economy – guess where it went. Large enterprise, though it is easy to write just one large check rather than thousands of small ones, do not represent either most of the spending or most of the jobs in the economy.
2. The small businesses are the ones that innovate, create substantial new value, and are most at risk of failure.

Healthcare socialism would benefit small business substantially. Bail-out socialism helps only those at the top.

Harvard Business Review offered a special issue on Sales in 2006 (Vol 84, Issue 7/8) that included a number of articles that offers a number of quick reads that should at least help you purge whatever negative image you might have of sales and begin replacing it with an appropriate understanding of where it fits operationally across the life-cycle of an enterprise and as am integral part of the Sales and Marketing continuum.

Psychologist and Anthropologist G. Clotaire Rapaille is interviewed in a piece that presents a concise discription of the sales person archetype as Happy Loser, someone as motivated by the hunt as the kill.  Usually entrepreneurs need to develop rejection coping skills, but they don’t enjoy rejection. Sales people love it…according to Clotaire anyway.

For entrepreneurs, I suggest you learn a few solid basics:

1. Focus on zebras – Even though your business plan says you are targeting a huge market, chances are your initial offerings will only really appeal to a small portion of the market in a particular place in their life-cycle (there are lots of horses, but you only want the zebras). In marketing, we might develop a persona of the most likely customer so that the sales team can ask just a few qualifying questions to can help determine if they are talking to the right people at the right time.  Remember each sales activity has a cost and spend your budget wisely. You’ll still face rejection for reasons you may not understand, but you can optimize your closure rate and minimize your funnel by maintaining focus.
2. Mostly listen – The shape of your products and services and the way they are priced should evolve with your understanding of the customer. Listening to the way customers think about your product, what their expectations are, and what created the situation where they are considering your offering are invaluable as market research, engaging as a business development practice, and a time-tested means of closing a sale.
3. Respond – Remember that “time kills all sales.” Respond in a timely fashion – think about the service you expect in a restaurant, except the tips you’ll get as an entrepreneur will likely be in the form of a positive referral.

It would be helpful for you to have an objective sense of where you are on your sales skills. I love the very affordable assessments available from the managment psychologists at Pradco. For $50 you get an assessment of your skills and attitudes and a prescription for improvement.

This is another handy chart form McKinsey. It is very easy to feel like all you can do is cut costs right now, but the truth is, this is a great time to go after new customers if you have some resources.

I spend a lot of time with clients outlining the space between how they define their products and how their customers define their products.  Sometimes this has to do with real or perceived benefits. Sometimes this has to do with where the edges of the product are – the arc of the product experience. Sometimes this has to do with the transaction.

I recently gave away some advice to a potential client that is an excellent case study in this.

This client sells to a particularly downtrodden market (lots of those right now). They have a product offering that is very successful at driving efficiency – real, realizable savings – 150% ROI within the first 18 month. The problem is in initial purchase. There is a significant up-front cost.

No matter how good the ROI is on something right now, it is very difficult to find extra funds, either from funders or from cash flow.  I suggested  to this would-be client, let’s call them StartUpCo,  that, faced with no sales, they try to close some deals with a pseudo-lease deal that spreads out the risk. Real capital items might be able to be financed by a leasing company, the service costs and profits probably have to be financed by StartUpCo.

I’d probably start by trying to partner with a leasing company and setting up a payment schedule that gets your hard costs off your balance sheet within a quarter or two. I’ve done deals like this myself and included a reward for meeting certain performance criteria. If you can structure it as a percentage of realized savings, clients are usually happy to share the wealth.

For StartUpCo, the product was their software, hardware, and integration service. For the customer, the product was the improved work-flow and cost efficiencies. By including financing in the product, they bridge the gap between the two views, aligning value and cost for the customer.

Packy Hyland, Sr. was a great artist. He passed this week, but leaves behind a body of work that should distinguish him as a truly great entrepreneur. His most easily recognizable creation, Hyland Software, stands as one of very few unqualified success stories in Cleveland of recent.

While Mr. Hyland has achieved the success that most associate with great entrepreneurs – profit and growth – his greatest accomplishments are harder to recognize. I write this to honor those accomplishments so that they not be lost to the data that tends to define history.

Packy believed in his son and the power of his ideas, ingenuity, and diligence when no one else did. Even as many economies were being transformed by profit margins and efficiency gains that only software could bring, I know that Cleveland remained committed to more tangible industries. Aside from the struggles that all entrepreneurs face, Hyland had to operate within a culture that was not supportive. What’ s more, he was able to generate trust and enthusiasm, against the odds, and craft a uniquely winning culture in a community where it had few compatriots. In his quiet and friendly way, he was as much a revolutionary as an entrepreneur.

I remember the speech Packy Jr. gave to the entrepreneur’s club at John Carrol where he gave out copies of Rhinoceros Success. It was apparent to me by the dazed and confused expressions in the audience, that Hyland was an important revolution that needed to succeed if Cleveland was to survive, but Packy Jr.’s enthusiasm would have long ago been crushed under the weight of the predominant culture and the realities of company-building if not for the specific gifts of Packy Sr. and his ability to almost trick you into being inspired.

Add to this, that once he was successful, he held no grudges against those who doubted him or the city that made his path that much more difficult to tread. He continued to support and encourage Cleveland’s entrepreneurs in the most gracious and generous of ways long past the point where most of us, myself included, have turned away in frustration.

I will always remember my lunch with Packy, Jay Yoo, and Jay’s father at Larchmere Tavern. Jay and I represented an entrepreneurial dream in crisis of both spirit and cash flow. We were the younger generation and we had made some mistakes. The elders at the table bought lunch, imparted wisdom and wrote checks. I have worked in close proximity to dozens of good ideas and good people in search of that one break that will make all the difference when what is really called for is the calm, confident strides towards tomorrow, both cautious and quick. To date, I have never been in the presence of such honest and boundless love and compassion around a business deal as what Packy brought to the table that day. Everything was as it should be. Mentors providing support, guidance and knowledgeable, forthright encouragement that every dreamer needs to make something of real value. I remain in awe of his unique gifts.

It is a magical blend of passion, goodness, and community that always, always, always, sustains the just and their causes. There is no more powerful or beautiful force in the universe and Packy Hyland was one of it’s great practitioners.

Maestro, you will be missed. We will tell your story well and for as long as we live.

Spend more time finding and selecting people. Learn about what makes someone successful in your organization. Get to the point where you can write it down and revise as needed.

90% of management is in the hire.

Some recommendations from the study include:

• Understand how to fit into a venture capital fund’s business goals. Venture capital funds
  have a fixed life span in which to provide the venture and limited
  partners with a cash return on investment, typically in the form of an
  IPO or acquisition.

• Package ideas in VC-friendly ways.
  Overwhelmingly, investors agreed that universities need to get better
  at gathering, filtering, translating, and packaging new ideas. This
  involves more than simply eliminating “academese” from business plans
  presented to VCs – it means coaching would-be entrepreneurs on how to
  discuss their ideas in compelling business terms, not technological
  jargon.

• Do not consider venture capital funds ATMs. VCs
  are not an endless source of cash for unproven or infeasible
  inventions, nor are they in the business of writing blank checks – they
  expect to be highly involved in their portfolio companies. This is
  especially true of the early or “seed” stage investments that
  characterize the majority of ideas originating in university labs.

• Be ready to make a deal.
  Technology transfer offices must strike a balance, maintaining an
  efficient business-like relationship without sacrificing legal
  protections for the university and its entrepreneurs. What investors
  would like to see from universities is a genuine effort to make the
  deal process as smooth and expedient as possible, including a standardized, transparent deal process.

• Focus on the people: Although
  protectable intellectual property is important, investors are primarily
  interested in the inventors they expect to be involved in the start-up. However, faculty should be cautioned they should not expect to run the company as the CEO.

http://stevens.usc.edu/read_article.php?news_id=424
The difference between good technology, good ideas, and fundable ideas can’t be overstated.

Carbonfund.org offers calculators and a means of purchasing carbon offsets for many common activities.