Is Social Media Now a New Buzzword to Entrepreneurs?

For some time, I have been writing and ranting about how Social Media/Networking tools are making their way into small and medium businesses. Well, it seems that more early stage companies are incorporating these concepts into their startups. You would think I would be happy about that; something I predicted coming true. Truth is I think it’s great, but the bad news is that many of these entrepreneurs really don’t know what this means and a few, like one I saw yesterday, must have been told to just add the words “Social Media” to their investors presentation and then claim that they are like Facebook or LinkedIn including creating completely ridiculous exit valuation predictions.

I did see a second company yesterday who is looking to brand and grow their busienss using a combination of on-line and social media tools in lieu of attempting to raise lots of funding for a major consumer marketing campaign. A real new tools versus old school thinking, and just the formula in these times when cash/funding is hard to come by.

So, if you are putting together your plan for a new startup and someone suggests that you somehow use the words “social media” or “social networking” and not necessarily incorporate these into your web presence, you are going to be caught and fast. More importantly, if an investor thinks you are trying to pull a fast one on them, they dismiss you immediately. You need to understand, we have all seen numerous social media/networking companies over the last few years. So, we are pretty familiar with these concepts.

My recommendation, for what it’s worth, embrace these tools and aggressively add them to your business and use them to work on your growth.

Don’t Blow it by Being Sloppy

On Friday, we saw a number of presentations by companies looking for startup funding. I found it hard to believe the number of companies that provided fact sheets with mistakes in the financial projections. How stupid can you be! All the work it takes to get to a point where you are finally ready to present your opportunity to a group that might just have what you need most, financing, and your being sloppy stops you dead in your tracks.

I don’t know how many times I have told entrepreneurs that investors, especially active ones, look for a reason to say NO, not Yes. Finding sloppy mistakes in presentations or other documentation is just that reason. There is no excuse for this.

You would think of sending an important customer a new product without making sure it is squeaky clean and in perfect order. Well a prospective investor is your most important customer when you are trying to raise money, and  making sure that every thing is in perfect order is critical. You don’t get many second changes.

My Grandfather used to say “Measure twice and cut once”. Entrepreneurs need to remember and practice this. It’s one thing to find out that an investor just isn’t interested in your type of product or service. You hate to hear NO but it is a little easier to take if the investor just isn’t interested. It is completely different when you find out that investors discounted your opportunity because you were sloppy.

A Good Time To Start a Company?

I spent Thursday and Friday in Palm Desert at an Angel Capital Conference and Forum.  With the economy the way it is and companies shutting down or downsizing, there are more people who are thinking about starting a business. One of the questions that entrepreneurs had was, “is this a good time to start a business?” A number of people think it is. There are plenty of examples of bad economies being a catalyst for starting businesses.

In my opinion, the motivation may be here, but there are a number of things that will make it difficult. First, is funding. In the past, entrepreneurs had a few options that probably aren’t available to the average person. If you needed up to about $50K, you could open up four or five credit cards with $10K limits and max them out. Credit card companies are being significantly more restrictive. So that avenue is probably not open for the time being.

Many businesses were started using Home Equity Loans, but with home values plummeting and lenders being more restrictive, this is probably not a viable option.

So, this leaves us with using funds from an IRA or Retirement Account. Well, with the markets crashing, these accounts have lost significant values.

Banks aren’t back to lending yet. So, we are left with the Government. Let’s hope the stimulus package and the $700M earmarked for Small Business will have provisions for early stage startups.

I don’t believe that the entrepreneurial spirit has died, and people will find ways of getting their businesses started. It will just be harder.

What I Have to Say Is More Important than What You Want to Hear!

I had an interesting conversation with a startup entrepreneur this afternoon. He presented to our team earlier this week and was looking for some feedback. Now, like many entrepreneurs, this is his first experience with starting his own business and looking for outside financing. He had no idea of the funding process and what investors look for in companies.

However, the thing I found most amusing was when I told him that the best way to start a presentation was with a well constructed elevator pitch that gives an overview of the business and opportunity. So starting off with a story about how they came up with the idea while traveling across Europe doesn’t help. In fact it get the investor to “NO” fast.

He told me that he was given a sheet of recommendations for his presentation and starting off with an elevator pitch was at the top of this list. Now here is the punch line, he decided that doing the presentation that way would interfere with the way he wanted to present it, so he disregarded the recommendations.

Now can you imagine, presenting the opportinity in the way an investor wants to hear it is not as important as making sure he could tell his story his way!!!? We had gotten to a point in the conversation where he felt comfortable enough to admit it.

I think his presentation will improve after our talk. I think he gets that he is the salesman and the investor is his customer and like any good salesman, he needs to understand and address the customer’s needs.

Podcast with Gail Kantor, CEO ejamming

The other day I did a blog post about ejamming and how cool I thought it was. Well this afternoon I got to do a Podcast with Gail Kantor, the CEO, and talk about the company, where they are going and what she is looking to do in her current capital raise.

We decided to ejamming to record the cast. Very easy once you get it up and running. Not very difficult, but not the usual plug-n-play applications we’ve become familiar with. For example, you need a certain device driver and certain capabilities from you sound card. So I had to look around a bit and discovered it had everything I needed.

For doing one-on-one interviews, it’s a little overkill, but, if you wanted to do a conversation involving 3 or more people, this is the system to use. They use .wav files, which are quite large but will soon be supporting .mp3 format.

For any of you musicians or wannabe’s, they are still in beta and you can use the service for free. Even if they weren’t, the planned fees are miniscule considering the value you get.

I really enjoyed talking with Gail and hope you have 30 minutes to listen to her. I think we will be hearing a lot more about ejamming in the future.

Thanks for the great interview Gail.

One Big Tip for Startups

On April 25th, I attended the California Tech 100 Showcase in Irvine. I was invited since I am a Venture Partner with California Capital Partners and we were a sponsor of the event. With four partners from our team sitting on panels, I got to watch two panels and sit on one so I was able to see about 20 company presentations.

It drives me a little crazy to see companies spend so much time on the products and technologies, throw it all together into a power point presentation and then not spend very much time on their sales and distribution strategies and tactics. An investor is listening for reasons to say no and not hearing a clear description of how the company intends to sell their products and services that ties to the overall financial plans they present, is just such a reason.

It also doesn’t help to have half of your proposed capital going for Marketing and Sales while you don’t have those management seats filled. How do you know you need that much? If you have identified the people and they have helped you with your capital requirements and uses of funds, then say so. Otherwise, it seems like you are shooting in the dark.

Obviously, you need products to sell but they usually don’t sell themselves. Be smart, think through your distribution strategy, get some help from some resources who understand the area and then then present a cohesive picture of how your products and/or services will get to customers. Give us one less reason to say NO.