Mark Cuban's 12 Rules For Startups

Mark Cuban's 12 Rules for Startups

BY Mark Cuban

Image credit: ABC

Anyone who has started a business has his or her own rules and guidelines, so I thought I would add to the memo with my own. My "rules" below aren't just for those founding the companies, but for those who are considering going to work for them, as well.

1. Don't start a company unless it's an obsession and something you love.
2. If you have an exit strategy, it's not an obsession.
3. Hire people who you think will love working there.
4. Sales Cure All. Know how your company will make money and how you will actually make sales.
5. Know your core competencies and focus on being great at them. Pay up for people in your core competencies. Get the best. Outside the core competencies, hire people that fit your culture but aren't as expensive to pay. 
6. An espresso machine? Are you kidding me? Coffee is for closers. Sodas are free. Lunch is a chance to get out of the office and talk. There are 24 hours in a day, and if people like their jobs, they will find ways to use as much of it as possible to do their jobs.

Click to enlarge
infographic (+)

 

 

7. No offices. Open offices keep everyone in tune with what is going on and keep the energy up. If an employee is about privacy, show him or her how to use the lock on the bathroom. There is nothing private in a startup. This is also a good way to keep from hiring executives who cannot operate successfully in a startup. My biggest fear was always hiring someone who wanted to build an empire. If the person demands to fly first class or to bring over a personal secretary, run away. If an exec won't go on sales calls, run away. They are empire builders and will pollute your company.

8. As far as technology, go with what you know. That is always the most inexpensive way. If you know Apple, use it. If you know Vista, ask yourself why, then use it. It's a startup so there are just a few employees. Let people use what they know. 

9. Keep the organization flat. If you have managers reporting to managers in a startup, you will fail. Once you get beyond startup, if you have managers reporting to managers, you will create politics.

10. Never buy swag. A sure sign of failure for a startup is when someone sends me logo-embroidered polo shirts. If your people are at shows and in public, it's okay to buy for your own employees, but if you really think people are going to wear your branded polo when they're out and about, you are mistaken and have no idea how to spend your money.

11. Never hire a PR firm. A public relations firm will call or email people in the publications you already read, on the shows you already watch and at the websites you already surf.

Those people publish their emails. Whenever you consume any information related to your field, get the email of the person publishing it and send them a message introducing yourself and the company. Their job is to find new stuff. They will welcome hearing from the founder instead of some PR flack. Once you establish communication with that person, make yourself available to answer their questions about the industry and be a source for them. If you are smart, they will use you. 

12. Make the job fun for employees. Keep a pulse on the stress levels and accomplishments of your people and reward them. My first company, MicroSolutions, when we had a record sales month, or someone did something special, I would walk around handing out $100 bills to salespeople. At Broadcast.com and MicroSolutions, we had a company shot. The Kamikaze. We would take people to a bar every now and then and buy one or ten for everyone. At MicroSolutions, more often than not we had vendors cover the tab. Vendors always love a good party.

Mark Cuban

A serial entrepreneur, Mark Cuban is co-founder and chairman of Denver-based independent cable network HDNet and owner of the Dallas Mavericks basketball team. He is also an active investor and regularly appears on ABC's reality series, Shark Tank.

Why Every Entrepreneur Should Have a Mentor

"Being an entrepreneur isn't an easy job," says Andres Teran, cofounder of Toplist, a social shopping recommendation startup. "There are moments that you have nothing and feel like things are never going to getting better."

Teran is referring to the days before his company's vital pivot point, when he and his team had dedicated their lives to creating a site they loved with features they themselves would want.

"Toplist, before being an app, was a website where people shuffled around cool products curated by their own interests," says Teran. "We worked hard to develop this cool site with great features that showed amazing products. After we launched the site, though, we noticed people didn't use all the great features we had built for them. They weren't engaging with the amazing content we had curated for them. Worst of all, they weren't coming back to use our service."

At that point, his team set out to raise capital for what they had built, hoping to secure enough money for marketing, hires and anything else it might take to help the concept catch on. But, with low user numbers, the Internet odds were stacked against them and time was running out. No one fronted the cash. 

"We were just about to let everything go and end the project when we landed a meeting with the CEO of a micro-credit company that had just gone public in Mexico to see if he wanted to be involved as an angel investor in our company," says Teran. 

It was the only lead they had, and soon, he would become the first investor. But not in the company's current state. First, there were essential pivots to be made, honest realizations to be had and hard-earned advice to be taken. The Toplist team needed an outside perspective and some guidance to find their way.

"On that day, he made us realize two things," says Teran. "One, the product we had been working so hard on did not work for the users; we thought it would, but it didn't. Two, not everything was a complete failure: We had learned a lot about how to build products that people could be engaged with, we learned about working together as a team. We had learned from our mistakes actually."

What was supposed to be a pitch meeting turned out to be a crucial pivot point for Toplist — one that wouldn't have happened without the right guidance and advice. Teran's team took the feedback seriously, made the necessary changes and their luck started to change. The company's new and influential mentor had saved just saved them from near failure.

"Before we left his office, he said that if we changed our project into something more attractive he would definitely invest," says Teran. "Sometimes you need someone else to honestly point out what is wrong. We were amazed by his good will. 

He could have just said, 'No,' and we would have gone on with our failure and him with his success. But he took our side.
 
He could have just said, 'No,' and we would have gone on with our failure and him with his success. But he took our side." 

 

Mentorship has been a hot topic in the startup world for years, with incubator and accelerator programs offering it — among other things — in exchange for stock in founders' ideas. Outside of incubators though, finding a good mentor is challenging. But finding the right mentor is a lesson in luck, persistence and not letting opportunities pass you by. 

 

"We did look for mentorship before we found someone that was right," says Teran, explaining that his company's mentor was discovered by chance. "I think the way to go is talk with people that can give you advice on certain topics and, most important of all, help you to make good decisions. 

 

A big thing, though, is not to obsess about finding mentorship, because you could lose focus on what's really important as an entrepreneur — executing the concept," he says. So how do you stumble upon your own honest and willing mentor without losing sight of your first priority (your company)? 

"Good mentors will be hard to track down, and their time is extremely limited," says Brett Hagler, cofounder of Hucksley, a marketplace for discovering one-of-a-kind brands. "Reach out creatively and always try to take the 'backdoor' approach by getting introduced through a mutual contact. Certain platforms such as LinkedIn allow you to have direct access to your targeted mentors. Always be creative on your specific ask and make it as relevant and direct as possible."

 

Look hard for a mentor and network as much as possible, but don't make finding a mentor your primary focus. Perhaps Sheryl Sandberg said it best in Lean In: you don't need a mentor to excel, "Excel and you will get a mentor."

By Tracey Wallace1 day ago

16 Common Mistakes Young Startups Make

Are you working on a startup? If so, I hate to break it to you, but there's a good chance it will fail. In fact, recent research shows that 75% of startups fail (based on a study of 2,000 startups that received VC funding from 2004 to 2010). Odds are, you won't be a Brin, a Zuckerberg, a Systrom, a Karp or a Fake.

But hard as it may be, don't let that statistic discourage you. Some startups are destined for failure. Perhaps the team is working on a product that really isn't that great or useful. Maybe they're trying to tackle too many problems at once. Or maybe the co-founders have a poisonous relationship that will hinder the company's growth. Maybe they never thought about product-market fit. Whatever your company's "fatal flaw" may be, you can likely avoid it in your own venture if you take some advice from people who've gone through the early startup phase before. Lucky for you, time-strapped entrepreneur, we've gathered some tips from the pros to help you avoid some of the most common, game-ending mistakes committed by young startups. Check out the tips below from founders, CEOs and investors alike.

1. Forgoing Simplicity
"Building a product is like packing a suitcase: Plan out what you think you need. Then remove half." — Jonathan Wegener, Founder, Timehop and ExitStrategy

"Young founders tend to complicate things too much, from structuring partnership agreements, financing, leases, etc. This is not a place to be creative; keep it simple, follow the norms and be transparent so everyone is on the same page." — Jay Levy, Co-Founder, Zelkova Ventures and Uproot Wines 

2. Waiting Too Long to Launch

"The biggest mistake I see is companies waiting too long to release the product. It's easy to let the scope of what you're building get out of hand. But equally importantly most startups build much more than they truly need to, but this is often only realized in hindsight. Whether your product is working or not, looking back it's easy to see that you only really needed to build a small fraction of the stuff you built. Most features/options/buttons/settings/etc. simply aren't crucial to success or failure, and for an early stage startup that means they were wastes of time — you could have done 10x more with that same amount of time and resources." — Jonathan Wegener, Founder, Timehop and ExitStrategy

"Don't underestimate the importance of Minimum Viable Design. Your first product will likely be just a little bit ugly, and that's okay — it's part of getting to market quickly and testing your idea in front of live customers. But don't underestimate the importance of achieving a basic threshold of "this looks good (and reputable)." In my first company, people liked our product but were embarrassed to share it because the design and presentation was so poor. When we launched The Muse, the result was the opposite — nearly 25% of the people who visited our site shared it with someone else via social media!" — Kathryn Minshew, Founder/CEO, The Muse 

3. Hiring Poorly
"Make sure that new hires understand your rate of innovation. You are small and agile, which means you have a high rate of innovation and growth, and with that comes work! Often times, that work eventually goes beyond your job description. At a small company, employees need to wear many hats, and they need to be prepared to wear many hats. If you don't manage this expectation upon hiring, you will be managing employee issues six months down the line. Those issues will eat into your time, and time is money for a new CEO." — Kellee Khalil, Founder/CEO, Lover.ly

"Someone told me recently, 'Any time I'm talking to someone who doesn't work for me already, I'm evaluating if I should try and hire them.' Whether that's someone you want to hire tomorrow or someone you'd like to work with in five years depends on your company, but every entrepreneur should always be recruiting." — Ally Downey, Co-Founder, WeeSpring

"Some entrepreneurs think it’s a luxury to have accounting, finance, or other support functions, but it’s important not to be afraid of spending resources early on for administrative efficiency. If you don't have someone to do that for you, you'll end up spending all your time on things that aren't critical to growing your company." — Matt Salzberg, Founder and CEO, Blue Apron 

4. Not Embracing Agility
"If you sat down and wrote out a pros and cons list comparing your startup to your corporate competitors, you'd probably find the big gorilla's list of advantages more than daunting. But on your side of that chart should be words like 'nimble,' 'flexible,' 'speedy,' and 'free flowing.' Many entrepreneurs seem to approach their startup like they would a quest to win the Super Bowl, with very defined steps leading to a pre-conceived single, solitary end goal. This doesn't really work for a startup. While it's vital to have goals and a clear vision, to survive and thrive you'll have to keep an open mind and stay agile enough to follow the path where it leads." — Jeff Jackel, CEO, BuzzMob 

5. Guarding The "Big Idea"

 

 

"How many entrepreneurs' opening words are about how 'stealth' their project is, followed by a 10-page NDA to hear word one? I was totally guilty of this back in the day. For young entrepreneurs, especially non-technical founders like myself, it feels like our 'big idea' is all we have, and we want to guard it like a defenseless baby. We also want to believe that no one else out there in the world has thought of our little gem, and if they were to catch wind, everyone will pounce! Ha! First, whatever your idea is, rest assured it's been thought of before. Secondly, an idea is by no means a business ... it's everything that comes next that makes a business happen.

Execution. And no one else will execute the way you do. Third, you're going to need help and guidance from people who know more and have been there before, so you better get comfortable sharing your 'big idea.'" — Jeff Jackel, CEO, BuzzMob 

6. Losing Focus
“I think many startups have difficulty finding a focus. As an entrepreneur, there's a lot going on. You have countless decisions to make, and you have to keep moving quickly. Settling on a clear focus — your product, your audience, your strategy — is critical from day one. Of course, as you move forward, you must be willing to adapt. But remember to hold tight to that big idea as you go.” — Alexa von Tobel, Founder & CEO, LearnVest

"One thing I have learned building Grand St. is the value of intense focus. Trying to complete only a few things each week means doing an excellent job on all of them, whereas trying to do the 27 things I want to do usually results in mediocre or incomplete work. The same goes for the product itself — there's a laundry list of features we want to add, but keeping the experience simple and uncluttered makes us really focus on what our users really want." — Amanda Peyton, Co-Founder, Grand St.

"Founders of a young company will come up with hundreds of new ideas every day (I know my co-founders and I do). While most of these ideas are sure to be good ones, we’ve learned that we need to be thoughtful and selective about which to move forward with in order not to overwhelm ourselves and our employees. We all have limited time and resources, which is why we need to focus and prioritize." — Matt Salzberg, Founder and CEO, Blue Apron

"At times we have sat on ideas for months, before testing them and finding out that they are runaway successes. At other times, we have exhausted ourselves trying out 100 different things, when none of them work. I watched a great video with Barbara Corcoran, called "How to get more customers, step 1." What she describes is that many businesses, when they are looking for more customers, will try 100 different things, when they already have one thing that is working. As she puts it, this strategy leads to very few new customers and lots of exhaustion. She recommends that instead, founders look at what has been working and double or triple their efforts there." — Adda Birnir, Co-Founder, Skillcrush 

7. Assuming Virality
"A lot of new founders think, 'If I build it, they will come.' I have news for you: They're not coming and you're not going to 'go viral.' Services don't spontaneously go viral. High virality is almost always the product of early and deliberate product design decisions. Spend some serious time thinking about how and why people are going to discover and share what you're building." — Jeremy Fisher, CEO, Days and Wander 

8. Obsessing Over Funding

 

 

"I think a lot of young startups assume that fundraising is not only a necessary component of running a business but an important marker of success. We spent six months fundraising only to walk away once we had a term sheet in hand because we realized we were making enough money to sustain and grow the business on our own terms. Ultimately that felt like a much bigger marker of success than closing a round. If your business makes money, you may well be better off not fundraising, and in doing so, retain control and ownership of your business. And if your business doesn't make money (or have a solid plan as to how it will), then perhaps there are some bigger issues to tackle before you start pitching investors." — Claire Mazur, Co-Founder, Of a Kind

"Many young entrepreneurs think that raising VC money is a measure of success. There is a lot of money chasing bad ideas. The only thing that matters is building a viable, growing and profitable business." — Brian Garrett, Co-Founder, StyleSaint and Venture Capitalist 

9. Chasing Investors Instead of Befriending Investees
"A common mistake startups make in trying to meet investors is, counterintuitively, focusing too much on networking with actual investors. The best way to get a meeting with a VC is not by incessantly pursuing him or her, but rather by getting an intro from a founder that the VC has already invested in. Befriend funded entrepreneurs. Every VC will tell you that they will take meetings with 100% of the companies that their existing portfolio founders recommend. Don't spend all your energy emailing and LinkedIn-ing VCs; instead, get to know founders who have been funded and win them over because their stamp of approval is one of the most valuable data points for an investor." — Sam Teller, Managing Director, Launchpad LA 

10. Dwelling on Things
"A lot of new founders tend to over-optimize every single decision, which makes it difficult to actually move forward with anything. One of the most important lessons my co-founders and I have learned is that sometimes the best course of action is to make a call and just move forward. As a young company, nothing is ever perfect, but if you believe in an idea or strategy, you just need to move forward and manage the logistics and risks as you go." — Matt Salzberg, Founder and CEO, Blue Apron 

11. Getting Distracted By Feedback
"A startup is not a newly democratic nation state: Not every decision needs to be made by the collective. While we love getting ideas from our team and have seen some stellar product development and user experience decisions generate from brainstorming and having an open office environment, we try not to let everything come to a vote. We hire smart and capable people to come up with an idea and execute it: Not to have to balance the opinions and feedback of everyone, all the time." — Elizabeth Scherle, President & Co-Founder, Influenster

 "You will have a ton of people constantly sharing their feedback and opinions of your business with you. It's easy to get wrapped up in it and want to tweak things immediately. Keep in mind that people will give you feedback based off of their market knowledge and domain experience — it is your job to apply that knowledge to your company without losing sight of your vision." — Allison Beal, Co-Founder & CEO, StyleSaint 

12. Not Having the Right Co-Founder
"Starting a business is a lot like falling in love. At first, we tend to see the business and our partners at their best, full of promise, and can't conceive that they will ever be anything but their best. But as in any relationship, eventually their flaws and their failings are clearly exposed. What I have learned is that we need to do a thorough SWOT analysis not only on the market opportunity, but also on our partners. Some faults we can accommodate, but sometimes our partners' weaknesses in combination with our own constitute a deadly cocktail. A key aspect of our personal due diligence is then is assessing our partners, particularly learning how they react under stress." — Whitney Johnson, Co-Founder, Rose Park Advisors

"Your early partners, co-founders, investors and hires are crucial to get right. While the ideal partner balances you or brings skills to the table you don't have, the most important thing to look for is alignment of values. Do you fundamentally want similar things out of this endeavor? Are you willing to take more or less the same amount of risk? Are you comfortable with your prospective partner's ethics and moral decision-making? I've seen the last one in particular cause a lot of heartbreak in early-stage companies." — Kathryn Minshew, Founder/CEO, The Muse 

13. Trying to Win Over Everyone
"Among the biggest mistakes I made when fundraising early on was trying to turn every nonbeliever into a diehard fan, working to convince everyone who pushed back that they were wrong about Greatist and about the space. What I quickly learned was that it was more productive to find the investors who already believed, who were already my fans, and capitalize on the potential for them to become my biggest champions. I think a lot of new entrepreneurs face situations like this, and the quicker that realization comes, the easier the fundraising process can be." — Derek Flanzraich, Founder & CEO, Greatist 

14. Not Listening to Current (or Future) Customers

 

 

"Every time I sit down with a customer, I learn something. And usually, it's something that has a serious revenue-generating impact on my company. In Running Lean, Ash Maurya says that you know when you have spoken to enough customers when you can start to predict what they will say. I have done dozens of interviews with customers, and it's incredible. There are certain phrases that everyone uses. That stuff is business gold (or platinum). Every time we have been unsure about a product or direction and we have taken the time to talk to users, we have always walked away with the insight we needed to move forward. But keeping up that practice up is hard! Sometimes it feels so much easier just to sit at your desk, banging your head against a wall, trying to figure things out on your own." — Adda Birnir, Co-Founder, Skillcrush

"One of the common mistakes young startups make is developing a product without enough input. As much as you're executing on your vision and keeping things under wraps until launch, engaging potential customers early — even when it's just a twinkle in the eye—- can help put you on the right path. It also helps validate the demand for your product. Others can help provide feedback on your differentiation or competition. The fact of the matter is, as a startup, you're extremely strapped for time and resources. So, it's that much more important to try to get close to the target around product-market fit and iterate from there. At Kiwi Crate, we spent quite a bit of time working with parents and kids to develop our product. Even today, we have kids come into our offices at least once a week to help test what we're doing. It's been invaluable for us." — Sandra Oh Lin, Founder/CEO, Kiwi Crate

"Young startups can fall so deeply in love with their idea, they aren't open to tweeks in the business. If you never get product-market fit, you'll never really have a company (or you'll struggle the whole time)." — Nicole Glaros, Managing Director, Techstars 

15. Jumping to Decisions
"Don't hire someone till you have interviewed at least ten people for that position. Don't fall in love with anything, and stay objective. Get to know potential co-founders quite well before bringing them on to the team. In all the times I've seen companies fall apart due to co-founder issues, it was in young founders who didn't clearly specify roles and expectations and really didn't get to know each other." — Jay Levy, Co-Founder, Zelkova Ventures and Uproot Wines 

16. Not Maintaining Relationships
"Be consistent in your outreach with mentors and other key connectors in your network. Set a schedule for yourself and stick with it, whether it's weekly for your inner circle, quarterly for acquaintances, or somewhere in between. Every time you consider putting off one of those updates, think about the headache of starting off an email with, 'It's been too long since we've caught up!' and the effort it takes to re-build that relationship." — Ally Downey, Co-Founder, WeeSpring

By Lauren Drell

Finance tips for all business sizes and sectors

Rick Spence 

Looking for a bank loan? A $500,000 equity infusion? Or would you like to crowdsource some cash off the Internet? A one-day financial forum staged by Enterprise Toronto last week offered fundraising tips for entrepreneurs of all sizes and sectors.

The No. 1 takeaway: Raising capital ain’t easy. On a panel representing the full spectrum of financial resources, the banker, community-fund manager, crowdfunding consultant, angel investor and venture capitalist all agreed that the biggest mistake prospective clients make is thinking the process will be easier than it is. Yes, these funders want to do business with you. But they have terms, standards, qualifications and limits you have to meet, and that will require preparation, analysis and clear thinking on your part.

But here’s the good news: if this process were easy, all your competitors could get funding, too. So be glad that growth capital is available only to people like you, with the smarts, vision and track record to earn it.

As keynote speaker Jacoline Loewen told the more than 100 forum attendees, the growth projections and marketing plans you prepare for funders’ scrutiny represent  essential thinking about your business. Even if you don’t score capital with every meeting, going through this process will strengthen your business and make you that much more attractive to the next lender or investor you meet.

Here are some key takeaways from the sessions I attended:

Keep up! There are new forms of financing coming on stream all the time, to address specific needs or market niches. For instance, this was the first time I had seen a financial panel that included microloans and crowdfunding — two new and very different sources of capital for those who have trouble raising conventional financing.

Can’t get a bank loan for your startup? Ontario’s Trillium Foundation bankrolls a number of community funds that provide low-cost microloans to qualifying entrepreneurs. (In general, you should own 51% of your business, it’s helpful to have taken some business courses, and you must use the loan to expand your business rather than pay off debt.) Panelist Michael Scotland of Toronto’s Access Community Capital Fund said first-time microloans are available for as much as $5,000, at interest rates just 1.5 percentage points above prime. (There’s also a 5% administration fee.) If you pay off your first loan, Access may provide subsequent loans up to $10,000.

Sweating over a business plan to impress your banker? Check first to see if he or she will read it. Alex Ciancio of TD Business Banking noted that most small-business lending decisions are based on your credit-worthiness — not your business plan. Taking good care of your personal credit history is one of the most important things you do to help your business.

Do you have collateral? Many entrepreneurs seeking bank loans are surprised to be offered interest rates three or four points over prime. That’s because most rate-related advertising refers to mortgages or credit lines, where borrowers put up their homes or other assets as security. Ciancio noted that lower-cost business loans are available if you have the collateral to secure them.

Look closer to home. Although no moms or dads were represented on the panel, several participants noted that love money — from family and friends — is often the best first step for entrepreneurs. “It’s usually the cheapest and most flexible money you will ever raise,”  Ciancio said.

Relatives and pals can also get in on crowdfunding. This is where you create a pitch on a crowdfunding website (such as Kickstarter or Indiegogo) asking people to support your business project, usually in return for receiving equivalent value in products or personal services. “This is a good place for family and friends to step up,” noted consultant Christopher Charlesworth of HiveWire. “If your mother won’t invest in you, why would anyone else?”

Crowdfunding capital isn’t free. You have to provide sufficient value to attract supporters (in Canada, crowd-sourced capital is not equity or debt, it’s essentially a donation). You also have to learn how to tell your story, Charlesworth says, because that’s what people invest in. Having amassed a database on North American crowdfunding activity, HiveWire has found the average crowdfunding project raises $7,000.

Tell a compelling story. Venture capital and angel money are for the few companies whose growth trajectory has the potential to give investors a return of 700% to 1,000%, in about five years. Once again, your challenge is getting the story right. VCs and angels receive many more proposals than they can fund, so a compelling Executive Summary is the best way to get their attention.

Again, cash comes with a catch. Several attendees asked why investors need “exits” within five or six years. Why can’t they just stay invested in good companies? Angel investor Gerard Buckley, CEO of Jaguar Capital, noted that “an investment isn’t a marriage, it’s just a relationship.” While several CEOs seemed concerned about their need to sell the company so that venture investors can get their exit, VC Bram Sugarman of OMERS Ventures said founders can stay on if they want. Although if their companies have had anywhere near the success they were hoping for, the founder probably won’t be able to raise enough cash to buy out the investor.
Still, it’s a nice problem to have.

The People You Need Working for Your Start-Up

by Michael Fertik

Almost nowhere else in the world is the tech entrepreneur glamorized as much as in Silicon Valley.

The Valley is rife with smart, incredibly energetic, tremendously talented new entrepreneurs — instead of stars in their eyes, they have successful exits and Zuckerberg-like acclaim in their sights.

Yet 75 percent of startups fail, despite demonstrable ingenuity and an almost superhuman output of hard work.

As a serial tech entrepreneur growing my own company, Reputation.com, I know there are no easy, one-size-fits-all approaches to making your vision come alive and, even more critically, growing and sustaining it. Even with the advice of great mentors — which I was fortunate to have — you can and inevitably will make mistakes.

But as first-time entrepreneurs begin the crucial task of building their teams, here's what they should keep in mind:

Pick the right cofounder. I've said it before but it bears repeating: a good cofounder is vital, especially since cofounder issues are the reason many early startups crash and burn. Like the partners of personal relationships, it helps if your cofounder has strengths that are complementary, not identical, to yours. If you know everything about a particular industry, pick a cofounder who won't have the blinders you do — especially helpful when you consider that much business innovation comes from people who aren't in the field.

B-school buddies do not a business marriage make. Ah, so you both went to Wharton, did you? Hiring a friend from your MBA program is the business equivalent of saying, "You're hot, I'm hot — let's get married!" And just as the odds are good that union will end in divorce, hiring a person based on the emotional connection of shared experience frequently concludes with a rough exit from the company and a goodbye to that friendship. There are many good hires out there. Take the time and pick someone else.

Your chief technologist should be smart and hungry. Early-stage companies are always, always at the "make it or break it" stage. There is simply no rest for the weary and your technologist will have to shoulder a huge portion of that burden. Without this person, there is no product. You need someone whose intelligence exceeds your own and whose hunger to be the driving force behind bringing a product from concept to creation is overwhelming.

Pick a product perfectionist. You might have a vision. Your technologist can build it. But you need a product person who understands the topography of the market — precisely how your product is going to fit, what will drive demand, how you can iterate to generate and harness excitement. You need that person to be a forecaster, both a realist and a dreamer, who can give you reasonable assurances about the right direction to take the product and company at different points in time. Alternatively, just like finding the right cofounder, pursue a complementary hire (e.g. if you're the dreamer, find a pragmatist).

Don't hire people you don't need. From the very outset and for some considerable time afterward, early startups are quivering on the brink. That's perfectly appropriate. While certain hires are buoyancy later in a company's development, there's no doubt that in the beginning phases, they're ballast you don't need. That's why you usually do not need to hire a general counsel, finance lead or PR person until you hit a more stable patch. Seriously.

Don't over-plan for scale. Just like you'll make plans to ramp up production as appropriate — or map out iterations and product milestones — you'll do the same for massive hiring. One key mistake is planning an IT infrastructure for a million users before you even have one. Remember — the easiest money in the world to raise comes at the end of this phone call: "I'm turning away 90 percent of my orders because my servers can't keep up with demand." Release yourself from feeling the need to hire for scale. Investors will appreciate your careful attention to the bottom line.

 

Michael Fertik

Michael Fertik is a repeat Internet entrepreneur and CEO with experience in technology and law. He founded Reputation.com in 2006. 

7 Marketing Tips for Bootstrapped Startups

Every day we are inundated by brands fighting for our attention; how can you possibly make your startup top of mind? Marketing your startup in today's competitive business economy is undoubtedly difficult, but there are steps you can take to make sure your startup gets a fighting chance at success.

Before you read the following tips, make sure you have a firm grasp on two key things. First, you want to make sure that all of your marketing strategies identify and build upon what makes your business unique in your space — so identify what those characteristics are and keep them in mind as you plot out your tactics. Secondly, identify what the goals of your marketing strategy are: Do you want to gain social followers, convert prospective customers into purchasing customers or merely increase brand awareness? Knowing exactly what you want to gain from your marketing efforts will help you choose the best tactics. So, read on below for seven different tips for marketing your startup. 

1. Focus on Your Target Customer
When you first start marketing your business, it is easy to get overzealous and want to reach out to everyone at once all the time. However, it is important to stay focused on reaching your target customers who are mostly likely to help establish and grow your business.

Rather than trying to attract any potential customer, zero in on a target segment that will help you reach your short-term goals. Maybe this target segment is made up of early adopters, who you think will buy your product quickly — or quite simply, they may be a target audience you know how to reach. Whatever the case, staying focused will help you reach your target customer more efficiently, and it is a better use of your limited resources. 

2. Build Strategic Partnerships
Aligning yourself with an established brand will help your startup gain credibility. Choose a business that you are enthusiastic about — ideally one that has complementary services so that you can refer business to each other. You can always consider implementing a referral fee on both sides, so that there is a monetary incentive on top of the new business partnerships that each of you will bring in. 

3. Engage in Community Outreach
Getting featured in your local news outlets is a great way to gain some brand awareness. Reach out to your local newspaper or radio and tell them about your new business venture, convince them why covering your business is worth their time and energy. Another option is to go back to your university or college, and see if they would be willing to publish your story in their student newspaper or website. Universities love to report on alumni who are doing cool things after graduation, so it never hurts to ask. 

Another way to market your startup through community outreach is by sponsoring local events or competitions. If you're still looking for investors, sponsoring a tech startup competition would garner targeted publicity and investor awareness. Additionally, you could reach out to bloggers and send them a product to review, or hook them up with the service you provide. You should also provide them with a referral link for their review post so you can track your ROI. Lastly, you could offer to write a guest post for their blog — which would establish yourself and your company as thought leaders in your industry. 

Image via iStockphoto, pixelfit 

 

4. Incentivize People to Share

If you want people to talk about your product or service, there's nothing quite like giving them an incentive to do so. Offer an immediate discount for tweeting about your product or service, or ask them to post about it on Facebook. Or, in exchange for "liking" your company — maybe they could receive some additional perk. 

Another way to incentivize your customers is through a contest. Rafflecopter is a great resource to manage giveaways — you can embed the giveaway code anywhere, including your own site, then you can pick a winner at the end. Get creative with how you incentivize your customers, just make sure there is actual value in it for them. 

5. Develop Branded Content
This might be more of a long-term strategy, but developing branded content is a phenomenal way to market your startup. If you're working with a small team and you just don't have the manpower to write custom content, then wait a few months until you are a bit more established. Branded content is a great way to align your company with themes that are pertinent to your industry, and if you have something intelligent to add to the dialogue you immediately establish yourself as an expert. 

The important thing to remember with branded content is that it should be non-promotional — don't tout your company's services or business offerings; instead, release an article about once every quarter or so that reflects on issues that your industry is facing with some thoughtful commentary and analysis. Another way to produce branded content is to conduct surveys in your industry and publish the findings that are relevant — the more unique the information is, the more likely it will earn attention.

iStockphoto, pixelfit 

 

6. Leverage Social Media

One of the obvious tactics for marketing your startup is using social media. However, there are right and wrong ways of using social media marketing. You want to make sure that you are posting consistently, and that you are engaging with your customers. You don't want your Twitter and Facebook platforms to just spout off promotional information about your company. Instead, post interesting and shareable information. You want the content you offer to have value — it's crucial to know your audience so you can give them information that is either helpful, interesting — or both. 

You should always consider which platforms make the most sense for your startup. If you can market your product best visually, focus your energies on Instagram or Pinterest. If you offer a service that is best expressed by sharing information, develop a strong Twitter or Facebook presence. With Twitter in mind, be sure to use it to engage B2B as well as B2C. Thank anyone who mentions your business in their articles, and even engage with your competitors from time to time — this puts your brand on the map, and can bolster relationships with people in your industry. 

7. Apply for Business Awards
Whether you've developed a new service to ease the lives of your customers, or you are touting a product unlike anything else in the market — getting the recognition from a local business award will surely increase your brand awareness. No award is too small, because it only means increased press for your company. Winning a local business award will also give your startup more legitimacy.

What marketing strategies have you implemented for your startup? 

By Elisha Hartwig

 

Entrepreneurs: Go as Long as Possible Without Taking Venture Capital

 

Often I get asked the question: when is the right time to take venture capital? My answer is: Never. Unless you absolutely need to take a round, the best way to start a company is by bootstrapping it yourself.

When I founded Shutterstock in 2003, I decided to take a different route than most entrepreneurs. Way too typically, one would put together a business plan and find funding. What most people don’t realize, is that there are plenty of tools out there to start your own company with just a few thousand dollars. If you can figure out how to avoid an angel or venture round, you will have much more control in the long run. This isn’t always possible - but I would recommend trying everything you can to remain independent.

Eventually Shutterstock did a growth private equity round five years in. At this point in the company’s lifecycle, we had much more control than we would have in the venture phase.

What are the advantages to bankrolling and not taking venture capital?

• You will fail faster. It took me 10 tries to get to Shutterstock. Most of my startups never made it off the ground. Being an entrepreneur means being able to pivot quickly, shut down a business that isn’t performing and move on. If you use somebody elses cash, you may be forced to continue even though you know it’s time to move on.
  
  
• Every dollar counts. I was hyper-focused on ROI from the start when I was buying Google Adwords keywords. Since I could feel the money moving out of my own bank account, I was very sensitive to my return on investment. There was no room for error. This efficiency later translated into a complex lifetime value calculation that drove our acquisition model to this day.
  
  
• You will concentrate on profitability from the start. All businesses need to create value at some point to survive. While some companies have had successful exits without profits, they are few and far between. By building profitability into your model from the start, you will be able to start scaling. Self-funding will force profitability thinking at every stage.
  
  
• You will own more of the company later. The earlier you are subjected to dilution, the less of the company you will own in the future. Venture capital rounds often involve loss of control, and a majority of the company to be sold.
  

What are the advantages to taking venture capital?

• I recognize that self funding isn’t an option for everyone. If a large amount of capital is required and not taking on a venture round will be truly detrimental to getting your company off the ground, then by all means do whatever you need to do.
  
  
• Often venture partners provide support with areas that the company is weak in. If you need help hiring, scaling, or operating, often a venture partner can provide this help as part of the deal. If you don’t take capital, you’re on your own.
  

How do I make sure that my startup uses as little capital as possible?

• Use as much open source software as you can. Use MySQL instead of MS-SQL/Oracle. use Linux (and specifically free versions like CentOS instead of Redhat). CPAN alone has over 120,000 perl modules that are already written - so why re-create the wheel?
  
  
• Learn how to code. There are great affordable online learning platforms that can help you learn how to code, create html pages, link up databases, etc. Learn as much as you can because the more you can do yourself, the less you will have to hire.
  
  
• Be every job. It may seem overwhelming, but it’s possible. When I started Shutterstock I was the customer service rep, the website developer, the first photographer. By making sure I gave each role a shot, I knew exactly how what I needed so I didn’t overhire. I wasn’t necessarily good at each job, nor was my expertise even close to each job, but I learned a ton and got to delay some hiring. This culture of lean innovation is still very much alive at Shutterstock and has contributed to much of our growth.
  
  
• Use your product as if you were the customer. Not only will you get to know your own product better, but you’ll be doing quality assurance work and testing throughout the process.
  

Bottom line is that it isn’t always possible or practical, but the longer you wait to raise money, the better off you and your business will be.

Posted by:Jon Oringer

When The Going Gets Tough, Here Are 3 Ways To Get Creative And Find Success

This is the story of two men, one oven, and the ingenuity to make it in any economy.

Like so many Americans, Seth Rubin was a victim of the recession of 2009.

He was laid off as a project manager for a construction company as home building plummeted in Denver, Colo. An avid cyclist, he had always dreamed of opening up a coffee and biscuit shop, but the huge upfront investment and the risk was too much for him to pull the trigger.

Unemployed and backed into a financial corner, doing something became less risky than doing nothing. So during a long ride Rubin made a proposition to cycling buddy Mike Miller, owner of the small local chain, Basil Doc’s pizza. Rubin said he wanted to take over one pizza shop for a few hours in the morning, before lunch, when it was closed anyway, and try out his biscuit shop idea. 

“I figured I’d bounce the idea off of Mike, hoping that he’d talk me out of it,” Seth said.

But Mike didn’t talk him out of it. In fact, he offered to keep Seth’s share of the rent low while he was feeling his way through it. Four months later and less than $5,000 later, Seth served his first biscuit as Rise and Shine Biscuit Kitchen and Café. Recession be damned.

With America’s economic recovery inching glacially along, and banks still stingy with loans, starting or expanding a business can be harder than ever.

So here’s three ways to right-size the risk and minimize exposure while maximizing chances for success.

Complimentary peaks and partnerships-- Seth Rubin’s plan worked perfectly. While Seth’s biscuit business was peaking in the morning, Mike’s pizza restaurant waited out the slow period of the day. And when Seth’s business would have naturally waned in the afternoon, Mike was being pummeled by dinner pizza orders. The two realized their businesses had complementary peaks: They were busy at exactly the opposite time. Perhaps more important, their needs were similar. Both needed an oven. They both needed a similar layout to display and then deliver their goods. They both wanted stability for their businesses, but being the sole renter of an oven-equipped store only to have it sit idle for half the day was a serious drawback.

It was a partnership baked in heaven. Within a few months, Rubin was baking at three of four Basil doc’s spots. And he was really cooking.

Can you minimize your risk, like Rubin did? The first place to look is to pool that risk, and find a symbiotic, complementary relationship. If you are Mike Miller in the story above, your first step is to do an inventory of underutilized resources at your company. Do you pay rent for 24 hours per day but only use 14? Do you have a fleet of vehicles that sit in a warehouse? Paying for server space you don’t need? Look for a dance partner to offload that cost.

 Elimination step functions, and the subscription economy-- If you are Seth Rubin in this story, either trying to start or trying to expand, you are facing what economists call a step function--you are facing a large initial investment to move forward at all. It a bit like running out of salt when baking that last batch of cookies. You might need just a pinch, but you have to run out and buy a whole box. Unless you find Mike Miller, who enables you to open a business for $5,000. Mike Miller might be a provider, too, like Zuora, a company that is enabling what’s called the “subscription economy.” Zuora tries to rent everything, so small firms don’t have to buy anything, completely eliminating step functions.

Fail quickly, and cheaply-- On average four out of five startups fail. Most books don’t earn back the author’s advance. Some of this failure can be chalked up to bad execution: Even a great idea can’t survive poor implementation. But precision execution can’t protect against a fatal flaw: A good idea might not be a good business.

If that’s true, the key is to figure out if your next big idea will fail or flourish as quickly as possible. The real disasters are slow failures--areas where you continue to put more time, more money, and more energy into something that just won’t work. The quickest way to the top, to the peak, is often to reach the bottom first. The faster you fail, the faster you can move on to something that will work. Former Google executive Alberto Savoia might have a way to make this happen.

You’ve heard of prototypes. They’re an important part of the development process, used to show investors or others how a product might work without having to manufacture on a large scale.

Prototypes, however, are generally fully operational. That means they can still take years to build. Savoia used the concept of a “pretotype” to move Google forward quickly without the fear of pricey mistakes.

A pretotype could be as simple as a drawing of a website that you imagine is fully functional, or a piece of wood that testers pretend is a new gadget. The advantage is enormous: While a test website might takes weeks to build, a pretotype can be drawn in Photoshop within a few minutes. With pretotyping, you never have to say, “Sorry, it’s not worth experimenting with that idea,” because there are hardly any barriers to entry. Pretotyping involves testing the initial appeal and actual usage of a potential new product by simulating its core experience with the smallest possible investment of time and money.

Making money always requires spending money. But in today’s risky environment, it’s important to spend as little as possible. Finding complimentary peaks, eliminating step functions, and pretotyping are three critical tools. 

Bob Sullivan and Hugh Thompson are entrepreneurial analysts with 40 years of experience between them. Sullivan is an investigative journalist and the best-selling author of Gotcha Capitalism and Stop Getting Ripped Off. He lives in Seattle, Washington. Hugh Thompson is a mathematics and computer science professor and internationally acclaimed speaker. He lives in Los Gatos, California