Friday, March 30, 2007

Litmus Test for Entrepreneurial Success

If you were asked by a reporter what are the top 3 or 4 things you look for to decide whether a start-up company will succeed, what would you say?

Compare your answer with that of someone who makes this type of decision and then writes checks to support/acquire those businesses that are likely to grow significantly.

Robert Fox, president of RAF Industries and the namesake of Temple's Fox School of Business, shared some interesting insights at their annual business plan competition luncheon run by Temple's Institute for Entrepreneurship and Innovation.

Bob said that the five things he and his partners look for in a business seeking funding include:
  1. It has to be a great idea. The idea has to be something original, rather than a "me too" or "I'll win on quality and service" model. Zany Brainy wasn't just another toy store -- it defined a new niche, he explained.
  2. The entrepreneur has to be committed to succeeding both short and long term. The founder has to have a clear vision for the company and be abele to accomplish his or her top priorities each day.
  3. The business plan has to be well-researched. Businesses seeking funding need a business plan, and the more details that show a thorough understanding of the customer, market, industry, and operating environment, the more an investor is likely to want to support the company.
  4. The business has to be cash positive. At $1 million, the company has sufficient "capital proof" of concept. As an exception, Bob related how SmartWool went from $400,000 to over $45 million in a few short years.
  5. The entrepreneur has to be a great sales person. When it comes down to it, selling speaks louder than words and someone has to be responsible for brining in orders.
No matter what size business you're growing, this advice can help you build a stronger business.

Thursday, March 22, 2007

Negotiation Tactics for the Talented Entrepreneur

Question: What do you get when an academic entrepreneur incubation center brings in a quartet of the regions most accomplished entrepreneurs and lets them conduct a live, unscripted negotiation scenario for a simulated $200 million biotech deal?

Answer: Highly entertaining education. (Or highly educational entertainment -- take your pick.)

That's the outcome that the Baiada Center for Entrepreneurship in Technology pulled off earlier today at their forum called "Negotiation Tactics for the Talented Entrepreneur."

Using a custom case study as the basis for the negotiation, a team of two sellers (Tony Ibarguen and Charles Robins) represented the company "Catnome LLC" and a team of two buyers (Ian Berg and Mel Baiada) represented the US Pharma pharmaceutical company poised to acquire the start-up. Here are the roles more clearly delineated:
  • Tony served as CEO of Catnome
  • Charles served as Chairman of the Board and as the lead investor in Catnome of the venture firm BVP
  • Mel served as President of the US Pharma division for Veterinary Medicine
  • Ian served as President of the investment banking firm financing the deal for US Pharma

In the scenario presented to about 150 entrepreneurs and business leaders in attendance was that the representatives were to close the deal that day and resolve the final terms of the acquisition. Two events occured since the last meeting that have thrown in a few twists to the deal. One is a lawsuit by a "patent troll" firm. The other is bad press looming from an adverse reaction to the Catnome anti-allergen enzyme therapy for cats that reduced their lifespans by half.

Legal celebrity to the Greater Philadelphia entrepreneur community Steve Goodman of Morgan, Lewis, and Bockius set the stage, moderated, and provided insights and perspective to the event.

It was remarkable to see how all four entrepreneurs competed and collaborated, switched from offense to defense, parried and dodged verbal salvos. Although the content was staged, the interactions provided real insights into how issues are raised, objections neutralized, and agreements tightened at a negotiating table. Each entrepreneur was playing to win for his side, and as Charles pointed out, for the longer term as well because they would be working together in the new company and doing deals with each other later on.

Next week I'll share a list of the key negotiation take-aways from the session. For now, I want to point out how this experiment succeeded for Drexel's Baiada Center and how that might help you build a stronger business, as well.

Mark Loschiavo, director of the Baiada Center, took a risk in employing this format. It hadn't been done before. It wasn't the safe, predictible tried-and-true path of having panelists sit at a table on a stage and share their wisdom and experience about a particular topic. That format works. It meets expectations. It delivers some value.

What Loschiavo did with this Negotiation Tactics seminar was risky -- he really didn't know whether the entrepreneurs would actually complete a deal in the time allocated. Towards the end, the entrepreneurs introduced some creative twists to the negotiation that must have had the organizers scratching their heads wondering where they lost control of the seminar. And it's just that element of uncertainty that kept everyone of us in our chairs until the last minute of the negotiation -- we wanted to see how it turned out. There was unusual drama to the event and it was given time and space to develop that made this event so provocative and so much more valuable than a straigthforward panel discussion.

As an entrepreneur reading this article, you certainly can imagine that a scenario like this takes much more preparation to conduct than a panel discussion. It involved many more people behind the scenes and on stage to make it succeed -- from the management faculty who developed the framework of the simulated negotiation to the moderator to hold the ambitious group together and draw out the lessons learned.

Experiments are worth it. Even if the deal hadn't been made during the seminar, participants would still be talking about the fascinating conversations that took place and the tactics learned.

When you conduct experiments with your business, you learn to how to differentiate, brand, and communicate your competencies far better to your target audience.

Monday, March 12, 2007

Optimizing Your Website

If you want to get a high ranking on search engines you’ve got to be crafty and employ every trick you’ve learned from others’ rule books.

David Lury advises FSB readers in his article “The Tech Skeptic: Head of the Class” to pay the nominal fee for getting a listing on websites such as Yahoo. He suggests designing a website with features that will appeal to search engines such as descriptive explanations of what your company does on the website. Engines will be more likely to pick up these descriptions when people use them in search terms.

Although there is plenty of frustrating inconsistencies with these engines but some of the new ones have improved the quality of returns. Inktomi, a search engine optimizer found on a variety of search engines such as MSN and work with websites to ensure the most relevant content gets listed where it should. Having a search engine on your own website is important for feeding back the data to the larger search engine pool.

By being savvy about how search engines and optimizers work, you can ensure more hits to your website and build a stronger business.