Author Archives: steve

True Competitive Advantages

BUSINESS PLANNING SERIES   Last week, we wrote about a common-but-fatal error to avoid when writing your business plan – Invalid Competitive Advantages – stuff that makes you look less-than-competent and turns investors. This week, we will focus on the True Competitive Advantages your plan should show. If you have one of these, investors will probably read your plan. If you have three or four, you may actually get an audience – that would be good.

A True Competitive Advantage can’t be copied and can’t be bought.

Asymmetrical Knowledge aka “Insider Information” – Not the kind we hear about on Wall Street, which is illegal, but rather intelligence about the market need that you know that is unknown to others. For example, you may have worked for a very large company that has made the conscious decision to ignore a market that they feel its too small for them to devote resources to, but that you believe, with solid justification, can be built into a $100 million a year company. (I am sure that I do not need to caution you to behave ethically and legally in the use of this information.) In business, having knowledge that is uniquely-available to you is a True Competitive Advantage. Blog Head PlanningAn Obsessive-Compulsive Attitude about The One Thing – I’m not talking about washing your hands every 3 minutes or straightening the chairs around the conference table whenever you enter the room. I mean figuring out what you can do better than everyone else, something that matters, and obsessing on ALWAYS doing that One Thing better than ANYONE, including your closest competitor, YOURSELF. For example, Google became the behemoth it is today by focusing on Search – being faster, better, more accurate and relevant than anyone else, and then making it faster and better and more accurate and more relevant again and again and again. By the time their competitors came close to copying their stuff, they were already on to the next iteration. Most of their competitors – who started out before them – are long gone (can you say Alta Vista? Lycos? Excite? Do you even recall who they were?). Google’s search page was NEVER the prettiest. It still looks about the same as in 1998. In fact, it was years before Google returned anything beyond a text-based response.  They waited until they could return a page with graphics just as fast as their text-based earlier versions. Faster, better, more accurate, more relevant, rinse, repeat. An OCA is a True Competitive Advantage. Personal Authority – Become known as the Industry Expert – the Go-To Person for anyone interested in your area of expertise which, of course, is the basis for your company (see above, Asymmetrical Knowledge). Attend meetings and conferences related to your intended business area. Make noise i.e. ask questions and start discussions. Take controversial positions. One “trick” I have used effectively works like this: Attend a relatively large conference with a panel discussion covering something relevant to you business; during the Q&A, pick one of the panelists and ask a question that contradicts his position – if he says “it’s white,” you say “my experience shows that many times it is black.” (Does not matter if you are right – just matters that your position is conceivable.); A little active banter back-and-forth (courteous, of course); thank them for their answer and ask them (in front of the audience) for some time “after this session.” Two things will happen: 1) Your target will commit to giving you a few moments of his time during which you will have the opportunity to learn and, with any luck, form a lasting relationship; and 2) Others in the audience who were afraid to ask a question or to take the same position as you will seek you out for your expertise i.e seek to bask in your Personal Authority. Your reputation as an expert will flourish. A Dream Team – Has your team done something like this before? Have they served the target market and hence understand the pitfalls in addition to the needs? If they haven’t, then are their other credentials strong? The team is a prime focus for investors – find a way to present each team member in the best possible (but factual) light. You want your investors to understand that your team is up to the task and understands exactly what needs to happen and when. One caveat – avoid being seen as over-confident “know-it-alls.” Existing Customers – An absolutely True Competitive Advantage. Having paying customers, even if it is for a pre-beta version, is priceless! Especially if these are significant customers in your target market. This validates your business plan and relieves investor anxiety. The less-nervous the investor, the more-likely they are to invest. I hope this is helpful. In our next entry in this series, we will talk about Fatal Error #2 “No one ever said they’d buy it.” Please feel free to add your $0.02 to this discussion. (See “Personal Authority,” above.) – Steve Hogan        

5 Blogs to Add to Your RSS Feed

Staying current with the newest trends and latest news is crucial to developing and maintaining innovation within your company. For this reason and for your own personal development, we recommend making time in your day for daily reading. Some people can suffice with 30 minutes while others can allocate a couple hours. It is important to be efficient with whatever time block you are willing to allot for daily reading.

With a whopping 181 million blogs, daily reading can become a daunting task! In addition to the usuals such as is GigaOm, Wired, TechCrunch, Technorati, PandoDaily and not to mention Guy Kawasaki’s blog “How to change the world.” How is it possible to filter all the noise?

Below are five blogs we read which provide the best and most succinct content. And without further ado, our top five blogs.

Church of the Customer

With the authors being management consultants, this blog is a gold mine for case studies. Through examples of business successes and failures, entrepreneurs can learn from other’s mistakes.

Venture Hacks

Ever heard of Angel List? Well you can thank these guys for that! The authors of this blog are avid startup advisors, former entrepreneurs and current investors. Needless to say they know what they are talking about. Venture Hacks offers how-to guides on the basics. They are a great destination for guest posts by influential entrepreneurs and VCs.

PandoDaily

Pando Daily is the site-of-record for everything Silicon Valley. As one of the leading stars of the tech blogging space, it’s a mandatory daily read.

And a few of the lesser known angel blogs:

Angel Blog

This is yet another a daily stop for angel investors. The blog covers a wide variety of topics and often links to other blog posts. All in all, Angel Blog is an excellent resource.

LinkedIn Today

And saving the best for last: LinkedIn Today. One of your best bets is LinkedIn Today. Take the time to customize your LinkedIn Today and it will provide some of the best content around that is relevant to you.

What do you think of our list? Are there any blogs that you think we should add?

Happy reading!

-Nikki Griggs, Business and Marketing Associate

Deeper Analysis: South Korea’s Booming Startup Scene

The Wall Street Journal recently posted an article on South Korea’s startup scene. While the U.S. startup scene is experiencing a slowdown, South Korea is one place that is experiencing significant growth. The number of funds raised in the U.S. has declined 34% from last year.  In contrast, South Korean venture capital firms are experiencing an increase. The number of Korean startups has nearly doubled to 28,193 in 2012 from just 15,401 in 2008.

South Korea Flag

What does this mean? While the article points to youth unemployment near the end, we wonder otherwise. Does the slight decrease in U.S. venture capital funds and the rapid increase of South Korean venture capital funds indicate a drop in innovation in the U.S.? Or is it possible that this is related to consumer confidence? It could very well be a combination of the two. In South Korea, we see consumer confidence at a level of 104 and trending upward in South Korea, consumer confidence in the U.S. is trending downward at 78.  Not to mention all unending cover stories of innovation in America nearing its end.

Clearly there are other factors that make up South Korea’s current success that may have more impact that South Korea’s success itself.

Does South Korea’s startup boom have bigger implications that we think? What other attributes do you think affect South Korea’s startup scene?

-Steve Hogan, Managing Partner, Tech-Rx

 

Avoid these common-but-fatal errors when writing your business plan

BUSINESS PLANNING SERIES   We see a lot of business plans, both here at Tech-Rx and in our alternate lives as angel investors, entrepreneurs and executives.  Over the next few weeks, we will touch on some fatal errors that we frequently see and that will almost certainly cause a potential investor to deep-six you plan, and the actions you can take to avoid these errors. Avoid what we call “Invalid Competitive Advantages.”  The bottom line – it’s not an advantage if anyone claims the same advantage.  Here are some of the more-popular red – or should I say black-flag “advantages” — Blog Head Planning1: We have Feature “XYZ” — Sure you do, but only until someone copies it. If it is really cool or useful, the competition WILL copy it.  Even worse, if it doesn’t work, your competitors will make fun of you. 2: We have the Most Features — No one wants more features, they just want the right ones.  Look no further than Microsoft Word.  The 2003 had lots of features that are never or very-rarely used by very few writers.  I suspect that many features have NEVER been used by anyone!  Yet, Microsoft, in its infinite wisdom, added more useless features in its 2010 and 2013 releases.  Just to compound the error, they completely revamped the menu structure (i.e. Added Feature “XYZ” – See above) in a way that is to this day almost universally-hated – hated so much that a cottage industry of plug-ins that restores (most of) the old menu structure has sprung up.  Critical mass is probably reached when everyone has 80% of the desired features. 3:  We are better at SEO and Social Media — Would it surprise you that well over 80% of early-stage company founders believe that they are “better” than everyone else at SEO and social media?  Just like in Lake Wobegon where “all of the children are above average.”  The truth is that SEO rules evolve as Google and others strive to deliver relevant results to their users.  It’s a losing game.  Just do the basics to make sure that they can find your website and understand what you are about. 4:  We work hard! We’re lean! — You better work hard and be lean.  After all, you are a three-person team working 80-hour weeks for probably zero pay.   What are you going to do when Google decides to take 10 people, give them a $10 million budget, have them work 40-hour weeks, paying them above-market rates? 5: We’re passionate!!! — I sure hope so.  Otherwise, why are you doing this? 6: We’re cheaper. — Sure you are – until Google builds the same thing and gives it away for free. (See #4 above.) What can be learned from all of this?  — 1: Simplify your product scope. — You will never have enough features and your product will never be perfect.  Feature-rich products take too much time and money to build, and they usually turn out to be slugs! 2: Anything worth being copied will be copied. — Plan on being copied and make it a part of your plan.  Answer these questions:  What if some big company copies your idea and builds the same product after you go live? What are you doing now knowing that some big company will copy your idea? What are you going to do when some smart hot-shot startup copies your idea, gets $10M from XYZ-VC and is featured a half-dozen times on TechCrunch? What are you going to do when there are four totally-free open source competitors? What are you going to do when employee #2 takes your code, marketing plan and customer list and starts selling your stuff worldwide for 1/10 the price?

 The Moral – – The only True Competitive Advantage is that which cannot be copied and cannot be bought.

Next time we will talk about True Competitve Advantages that you may not realize you have.

– Steve Hogan

Tech-Rx Founders Make a Splash at Founders Space Roundtable

Our very own Tech-Rx partners, Philip Engelhardt and Bob McDonald will be speaking at tomorrow’s Founders Space Roundtable on positioning your startup to investors. Founders Space Roundtable is a monthly meeting where founders get together to share knowledge, solve problems and make connections.
bob_mcdonald
Bob
Philip
Philip
Specifically, Philip and Bob will be presenting on how to gain traction with investors and what types of business models investors are attracted to. In addition to sharing what type of returns investors expect to see on their investments, Philip and Bob will also be speaking on a score of “How to” questions startups are always looking to answer.   These are examples of the types of “How to” questions that the panel will address:
  • How to ask for investment based on goals.
  • How to position your team as the ideal match for solving the problem.
  • How to prepare a credible financial scenario.
  • How to spot and correct weaknesses in your business plan.
  • How to manage the look and feel of your startup for success.
Tomorrow’s Founders Space Roundtable will be held Wednesday, May 29, 2013 from 6:00 PM to 8:00 PM (PDT). Here is the address to the event. SomaCentral 1 Market Street Steuart Tower, Fifth Floor San Francisco, CA 94105 Philip and Bob will be presenting alongside Peter Craddock of Shoreline Venture Management. The pair is thrilled to be speaking at tomorrow’s event and jointly hope founders will walk away from the session with a more solid understanding of investor relations.  For more information about the event, click here. Otherwise, we hope to see you there! -Nikki Griggs, Business and Marketing Associate, Tech-Rx

Don't be TOO anxious to take the money

Interesting categorization of the less-than-desirable types of investors from Marty Zwilling. While most angel investors are pure-of-heart, there are some that do not have the entrepreneurs best interests in mind.
Marty Zwilling
Marty Zwilling
8 Reasons All Angel Investor Money May Not Be Equal Do you know anyone who falls into one of these categories or, worse yet, have you been involved with someone like this? Share your experiences. -Steve Hogan

When Founders lose interest in their startups!

Here’s one perspective on mindset. EVERY entrepreneur, especially the first-timer, has dark days. When Founders lose interest in their startups!.Bored It’s what you do when the dark days outnumber the bright days that matters. It’s easy to begin to believe that you are not the right person to be leading your venture. Perhaps not! However, you were the right person to start the venture and that is the biggest step. I would add this to the advice in the article: Seek the help of others who have been in your shoes. You will learn that you are not alone in your feelings. If you doubt your leadership ability, ask the advice of others — not just your friends, but those who will cast a critical eye. Perhaps an adjustment to your management team is needed. There are hundreds, perhaps hundreds of thousands, of company founders who were CEOS, but found others to lead their company and became Chief Visionary or took some other position in the organization where they continued to add value. Those wise company founders were almost always richer (both financially and mentally) for having turned over the reins to someone who can take the company to the next level. Your thoughts? -Steve Hogan

Elon Musk to gov't: Here's that $500M I owe you

The Silicon Valley Business Journal had this interesting article  — Elon Musk to gov’t: Here’s that $500M I owe you – Silicon Valley Business Journal.Tesla Logo I won’t editorialize about the wisdom of the government’s green energy “investment” decisions, 85% of which went to large companies fully-able to fund their own development, but rather would prefer to congratulate Elon and his team for coming as far as they have in a relatively short time.  Well done! – Steve Hogan  

5 Forgotten Technologies

Remember that long-gone product that you made your life better? We all have a special memory book of those products that have come and gone out of our lives like an ex-BFF. Well chances are that if the product was cool enough for you to remember then it probably wasn’t the technology that lead to its demise. It is more likely that the downfall of the company was due to inexperienced management, poor product/market fit or some other reason that was completely avoidable.   Either way, it is a darn shame! When a technology fades, innovation is disrupted. This is a loss to society.

We don’t do this in our personal lives.  Why do we allow this to happen in business?  When you are in the process of building a house, for example, and during this you find that the bedroom windows are not designed to open, and you being a fresh-air fiend will never be able to sleep in that room, you don’t simply stop work, walk away and abandon the house. You change the plan to include windows that open and move forward with construction.  This is obvious.  Why then, do we not make the same types of adjustments to the business plan with our start-ups?

Below are five technologies – some probably “before their time” – that died an early death, but might have been saved if Tech-Rx had been there to help.

  1. Sonific was a streaming music widget that enabled users to embed free, licensed music onto their blogs and social network profile pages that didn’t necessarily support or offer music widgets. Was going completely offline necessary? Or was another revenue model possible for Sonific to pursue?

  2. MyKinda was as an Eastern European country-specific blog network that covered business, politics, culture, lifestyle, science and technology in local languages and English. MyKinda kinda crashed but was it avoidable? Was the marketing plan solid enough to attract advertisers?

  3. Dodgeball.com was a social networking company before social networking was cool. Sure, it was aquired by Google but was Google the right fit? Didn’t Google lead Dodgeball.com to their death?

  4. LetsBuyIt.com was one of the first online group buying services. Although they are coming back as a completely different creature, with the right pivot they could have preceeded Groupon!

  5. Sixdegrees.com was another dying social networking site prior to the Facebook days. What held them back? Could the right strategic partnership allowed them to live a bit longer?

Do you remember any of these technologies? Can you think of any more?  Add your favorites to the list.

-Steve Hogan, Managing Partner, Tech-Rx