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Archive for April, 2009

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Lessons From Business Plan Competitions or: What Being A Loser Can Teach.

Thursday, April 30th, 2009

Business plan competitions don’t get enough credit. The common perception is that they’re like playing the lottery—there’s one winner, thousands of losers, and a lot of luck involved. While it’s actually a pretty spot-on analogy, that also happens to be what getting funding in real life is like. So why’s that a bad thing? As it turns out, the naysayers are also missing something else—business plan competitions trump playing the ponies on another count too. That’s because the losers actually get something: smart advice. Take the University of Washington business plan competition that happened this week. One of the competition’s judges, Gregory T. Huang of business-tech website Xconomy, recently blogged about three things he picked up at the competition. While they’re rather straightforward tips, it’s clear that some number of the business plans at the competition didn’t hit the mark. So we’ve swiped them from his blog and listed them below. Consider these freebies—you didn’t even have to go to the trouble of competing to score them:

1) Focus on one thing. We’ve said it before, and we’ll say it again, don’t try to do too much right off the bat. It makes you look scattered, which is an immediate red flag for investors. “Do what you do better than anyone else, but don’t try to do it all.”

2) Cut to the chase. “What is your company doing that’s special? How is it different from your competitors?” Get it out there right away.

3) Work on what you’re passionate about. “Every successful startup has a story about why it does what it does. That story should ring true with the founders’ backgrounds and expertise. Investors (and customers) can tell right away if a company representative is going through the motions.”

Has anyone else learned anything from a business plan competition?

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Pirates Need A Business Plan Too.

Thursday, April 30th, 2009

This has the potential of being a banner day on businessplan.com. This morning we got in a post about business plans and swine flu and now, even better, we’ve got one on pirates!

[Almost] unbelievably, National Public Radio ran a segment this morning called “Behind The Business Plan of Pirates Inc.” and suddenly it’s become a lot clearer to us why Somali pirates are willing to risk death and the ire of entire nations to hijack foreign boats. It’s insanely lucrative. And the business plan thing isn’t a joke, either:

“A piracy operation begins, as with any other start-up business, with venture capital,” J. Peter Pham from James Madison University tells NPR. He adds that “piracy financiers are usually ethnic Somali businessmen who live outside the country and who typically call a relative in Somalia and suggest they launch a piracy business. The investor will offer $250,000 or more in seed money, while the relative goes shopping…Once the supplies and employees are ready, the piracy start-up is ready to launch. ”

Pirates! They’re just like us!

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Do You Want Start-Up Money From The Man?

Thursday, April 30th, 2009

“The recent stimulus package should be used to provide government backed loans and equity investments to follow VC funding. So far, this blend of public and private capital has generated a reasonably positive response. And if the government were to match some percentage of VC investments in growing businesses, this stimulus funding would unleash a near instant and significant level of investment, spending and jobs,” writes Larry Harding, the president of High Street Partners, in a guest post on VentureBeat today.

Stimulus funding for start-ups? And for those that have already received VC no less? What do you think?

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Tools You Can Use: Naming Tips.

Thursday, April 30th, 2009

Naming a start-up business isn’t easy. Unless you’re co-opting your own last name, or something realllly clever came to you in a dream one night, chances are you’ve struggled with that task. It stands to reason. There’s been all sorts of ill-fated names in the start-up business, and for every Google that flourishes and becomes part of the common vernacular, there’s an I’minlikewithyou that ends up changing their name because the original one sucked. Given that, there’s a lot of pressure on entrepreneurs these days to come up with a catchy name for their business. And even if you’re not starting a global tech business, or a clean tech company, you still want a memorable name for your business that’s easy to brand and that will resonate with customers.

One of the first places to start with the task is to determine whether you want to make up a name (a road fraught with all sorts of challenges—see I’minlikewithyou) or whether you want to use an existing words or phrase (which has its own challenges). Here’s where this useful tip sheet from HP’s Small Business Marketing Guide comes in: it lists the pros and cons of each side, and helps you narrow down which direction you should go. We’ve swiped some of the most useful points from the article and listed them below.

Descriptive Name

Pros:

1) Inexpensive to convey what business you are in. “With a name like Smith’s Towing, for instance, people will know exactly what your company does based on the name alone.”

2) Easier to get found in the search engines. It’s common sense: “If your business name is Toledo Plumbing, you already have a natural advantage for getting found when someone searches for Toledo plumbing companies.”

Cons:

1) Descriptive names may seem unexciting. It goes without saying—Susan’s Car Wash isn’t that most titillating name.

Unique (aka made-up) Name

Pros:

1) “Made-up words set your brand apart – Think of some of the Web 2.0 business names: YouTube, TechCrunch, Squidoo, Gizmodo.”

2) Easier to trademark and get a matching domain name. “Many descriptive dot-com domain names are long gone…”

3) “Flexible enough for strategic business changes – If your business is named Mary’s Bakery, but later on you decide to open a deli or develop a line of mail order gift baskets, you may find your name is too limiting. Whereas, something like Toodleberry’s does not limit you to a single line of business.” (ed note: This example also inadvertently illustrates why made-up names can be…bad. Toodleberry’s? Ouch.)

Cons:

1) See all of the advantages of a descriptive name above. A made-up name doesn’t necessarily convey what your business does, and you also run the risk of sounding, well, ridiculous.

For the entire list of tips, as well as some other useful information about business naming, click here.

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Mid-Week Mini-Poll: Swine Flu Business Plans Tasteless, or Smart?

Thursday, April 30th, 2009

Entrepreneurs are always looking for new business opportunities—but are there some ideas that simply cross the line? We ask because of the slew of swine flu-related start-ups that have suddenly flooded the market. There’s swine flu t-shirts, viral swine-flu video games, and “designer” swine flu masks. Some advertising agencies are even floating the concept of guerilla marketing campaigns where brand names would be emblazoned on surgical masks intended to protect people from contracting the virus (well, maybe).

Not surprisingly, some of these start-ups are actually doing pretty well, according to TechCrunch: the Swine Fighter game got more than 150,000 hits in under 24 hours, and made the front page of Digg. Not to mention that the t-shirts, ad campaigns, and surgicial masks are all getting plenty of media and blog play.

In light of all these swine flu-related business plans that have cropped up, we thought we’d hold a mid-week mini-poll on the topic. Are swine-flu related start-ups completely tasteless and just wrong, or are they simply an example of savvy entrepreneurship? Tell us what you think by clicking to vote in the survey below or by sharing your thoughts in the comment section below.

poll by twiigs.com

swineflu

(Image via TechCrunch)

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Geithner: One Of The Beautiful People.

Wednesday, April 29th, 2009

Aside from that whole Swine Flu thing, and the rabble over it being Obama’s 100th day in office, it’s been kind of a slow news day, which is why we offer you this: Tim Geithner is featured as one of People’s “100 Most Beautiful People” in this month’s magazine.

We ask that you judge for yourself:

geithnerbeauty

Saucy.

Update (4/30/09): Geithner’s brother apparently works at People, reports Gawker, so yeah, total inside job.

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More Money: Airplane Turbines, Eye Devices, and Open Source.

Wednesday, April 29th, 2009

-Alethia Biotherapeutics, a start-up that works on creating therapeutic antibodies, secured $2.2 million in venture capital funding this week. Alethia says this round of funding will help them complete clinical studies that will help them finally bring their products to market.

-Orange County-based start-up ESP Corporation announced that they received $30 million in venture funding late last week, according to the Orange County Register. This was the second round of outside investment for the company, who makes software that helps companies reduce energy costs, as well as monitor their energy and carbon expenditures. They say they’ll use the money to purchase other firms and to continue developing new software products.

-Eucalyptus Systems, a start-up that supports open source for companies that want to develop their own cloud computing infrastructure, nailed $5.5 million this week, according to VentureBeat. The start-up says its platform has been downloaded more than 14,000 times since it’s launch last year.

-Visiogen, a start-up that makes eye devices, raised $40 million in funding this week, reports the Orange County Business Journal. The company’s main product is Synchrony, “a replacement lens for cataracts and people who have trouble seeing up close.” Visiogen says they’ll use this fresh round of investment to continue their global expansion. The company has raised a total of $80.5 million to date.

-Human resources software start-up Workday revealed this week that they landed $75 million in series E venture funding, reports ZDNet. It is one of the largest venture capital investments of the year.

-ETV Motors secured $12 million for its long-range hybrid engines this week, according to VentureBeat. The start-up makes what are effectively mini airplane turbines, which charge the batteries in plug-in hybrid cars more quickly and efficiently. This new round of investment for ETV will reportedly be given out in increments, as the company reaches various benchmarks and goals.

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PR PSA: How Not To Write A Press Release.

Wednesday, April 29th, 2009

If you’re like most entrepreneurs starting a business, your operation is likely a one-man show. You not only write the checks, you make the sales, answer the phones, and maybe even clean up at the end of the night. Chances are you’re probably also responsible for your start-up’s public relations too. That’s where things can get tricky. While writing a solid business plan is one thing, crafting press releases that actually get the job done is entirely another. The biggest problem with most press releases we’ve seen is that they’re either 1) irrelevant to anything the publication would write about, 2) poorly written, 3) nonsensical, or 4) overly self-promotional to the point of parody. But few come close to this—the Mother of all crappy press releases, which we spotted today over at Gawker. While it obviously takes a certain type of person to come up with something this unbelievably inane (and we doubt any of you have that in you), it’s still a spot-on example of everything that’s wrong most press releases all balled up into one. Gawker breaks it down step-by-step (which is the only way to tackle this monstrous thing), and we’ve done the same, but with our own commentary:

Press release sez: “The news reports coming out of Mexico City are downright scary this week, as more than 100 deaths in the country are being investigated as possibly tied to the swine influenza virus outbreak that’s gripping North America. Reports of the illness in Mexico come at a tough time for the country’s tourism industry, which is already reeling with negative publicity about drug cartel fueled violence. But renowned Life Stylist Blair French (www.blairfrench.com), a New Yorker who has lived in the beautiful and charming town of San Miguel de Allende-about three hours north of Mexico City – for two years, says it’s time to take a “siesta” on the negativity and turn it into a “fiesta” for a lifestyle you can’t find anywhere else.”

We say: Huh? While starting off with a news hook to get a journalist’s attention is usually a good idea (journalists love topical relevancy—it’s called a news peg), none of this makes sense. Refer back to reason three (above) that most press releases suck.

Press release sez: “The multi-faceted dynamo attests that despite the health scare and reports on the drug cartels, Mexico is 99.9 percent safer for Americans than living in the U.S. She believes the media has used these news items to fashion a misleading portrayal of Mexico as a third world country.
“The government has taken measures in preventing the further spread of the Swine Flu by administering antiviral drugs to the population,” she says. “I’m sure that Mexico will overcome this and is fully aware of what needs to be done to protect its citizens.”

We say: The media’s stirred this whole thing up! Wait – isn’t this press release going to the media? Whoops. Secondly, don’t ever, ever, EVER call yourself a “multi-faceted dynamo” or anything else that’s going to prompt people to start looking for evidence to the contrary. This gets to that “overly self-promotional to the point of parody” thing we were talking about. Also, none of this makes any sense. And it’s poorly written.

Press release sez: “French, who in her business blends all aspects of a person’s life together – health, fitness, food, fashion, entertainment and decor – helps create a lifestyle for someone that is uniquely one’s own. She also does catering and event planning and loves to learn about other countries and cultures.
Corroborating French’s optimism is Dr. Julio Frenk, the former Mexican national health minister and new dean of the Harvard School of Public Health. Explaining that Mexico had built up substantial supplies of antiviral medication, he believes the outbreak will be brought under control because of the integrated network of specialists in the U.S., Canada and the WHO.”

We say: You have to give someone credit who’s managed to somehow connect “health, fitness, food, fashion, entertainment and decor” with swine flu. And then you have to laugh at them. Long and hard.

Anyone have questions on how not to write a press release? We think it’s now pretty clear.

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It’s A Business Buyer’s Market.

Wednesday, April 29th, 2009

Here’s something you should know if you’re considering purchasing an existing business: it’s a buyer’s market out there. While we’re suspicious of the guy who’s trying to sell his appliance business in Independence, Missouri for a mere $1 (and the Wall Street Journal isn’t?), there still seem to be plenty of legit deals out there. The price paid for businesses dropped dramatically last quarter, reports CNNMoney, citing data from BizBuySell.com, a site that connects business sellers with buyers:

“The median sale price [for a business] dropped 17% for those transactions facilitated by the Web site, to $165,500. (The median asking price was $250,000.)”

Caveat emptor, though. If you purchase a start-up these days, you should know that you’re in for an uphill battle. Even with an established business, this market has proven to be a formidable challenge. So it’s worth thoroughly vetting any business you’re considering purchasing before actually going through with it. Take that $1 business, for instance. A good deal on its face could be anything but. That $1 purchase gets expensive when you realize you have to take over the owners $3,330/month lease, as well as what’s probably a slew of other expenses and costs. At a minimum, you should find out why the owner’s dumping the business, what the financials look like, and what costs you’ll be incurring. Perhaps we’re exercising an abundance of caution, but then so should you when buying a business. If you’re smart about it, however, there appear to be some sweet deals.

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Why You Shouldn’t Lie About Being A Navy Seal.

Wednesday, April 29th, 2009

Entrepreneurs, we’ve cautioned you about all sorts of things when it comes to pitching venture capitalists or meeting with lenders. Don’t send them overly rosy projections. Avoid long-winded, rambling pitch emails. Never show up with a business plan that’s longer than War and Peace, or that reads like Ulysses. But here’s a new one even on us: “don’t pretend you’re a Navy Seal.” No, we didn’t pull this one from some wacko Internet blog, it’s straight from the pages of Business Week. We don’t want to mince their words, so here it is, straight from the horse’s mouth:

“Now here’s an interesting tip that came from last week’s NYC Entrepreneur week: If you’re trying to impress a venture capitalist, don’t pretend you’re a Navy SEAL.

Amish Jani, managing director at FirstMark Capital, says he sees THAT one all the time, usually when entrepreneurs are trying to snare attention via email pitches – and in most cases, it’s not true. (We suspected that entrepreneurs exaggerate revenue forecasts, but- pretending buffness?). Seriously, VCs will verify those claims of special-operations military service (and anything else that seems unlikely), so don’t make stuff up, he said.”

Really, he sees that “all the time?” Maybe it’s just us, but it never occurred to us that anyone who actually had a business plan worth reading would try to snag a VC’s attention by making up outrageous lies. Then again, in this age of outrageous liars (see: Bernie Madoff, and now Danny Pang, among others), maybe it’s something worth repeating. While we’d never suspect that any of you, readers, would tell a VC that you’re a grand archduke of Worcester who attended Yale, Harvard, Columbia, AND U. Penn, maybe you know someone who would. In which we case, we’d like you to pass the message along to them: don’t lie about your background. You will get caught, you will be made a pariah, and you will absolutely not get the funding you require.

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