DealHorizon - the faster, easier way to create and share business plans

Jon Samsel, CEO of Heardable (disclaimer: I'm a co-founder) sent around some good news yesterday - after just ten months of operation, we've gone from a zero base to more than 50,000 uniques a month, for a total of 250,000 views.

The chart is rising like a rocket. Pretty impressive for a boot-strapped startup - and exactly on the path we set ourselves. Compete.com (incidentally the supplier of half of the above stats) hit this exact same mark at exactly the same time, on its way to becoming an industry standard analytics tool. We're determined to do the same thing - for the same result.

Closer to home, I checked out the stats for DealHorizon.com and last month was pretty remarkable for us as well - almost 17,000 unique visitors tried out our collaborative business planning tools, read our blogs, and used our Business Plan Generator (the most popular free tool was the Executive Summary Generator, but our free Sales Projections tool is growing fast in popularity also.)

That's us in blue - not bad! We've already passed Pitchbook.com, and we're almost tied with MasterPlans.com. I expect at this rate, our traffic will surpass MasterPlans.com and AngelSoft.net by the end of this quarter.

If you're one of our recent visitors, thank you!

Watching what is being decided and reported in the United States right now is frustrating on several levels - the most fundamental level being, I want the country to get back on its feet, and quickly.

It remains the largest driver of growth in the world. Too many American friends are suffering, and, it would appear, they are suffering needlessly - because of a distinct lack of strategic partnering between the States and the Feds, and a lack of focus on core data when it comes to the media.

First of all, the core data used by politicians to make decisions and left-wing media pundits to make their points is almost universally wrong (the unemployment rate in the US did not just dip below 10% - it is closer to 16.6% if you go by the "U6" rate - which counts those who have simply given up, plus those forced to take a part-time job instead of the full-time job they need.

Brett Arends of the WSJ provides a great argument about this in the piece he published on June 29th in MarketWatch.com, entitled the "Three Biggest Lies About the US Economy".

Second of all, the spin on the right is out of control. Francine and I don't have a television at home (by choice), which creates all sorts of confusion when we encounter one, in an airport terminal or a friend's house.

Why? Because when you don't have a TV, you tend to assimilate news from a wide array of sources, and assume everyone else is getting the core data too. When we make contact with Fox News in JFK, or CNN in ATL, it is like suddenly arriving on a different place or time.

Neither has it right - and in Hollywood fashion, the commentary increasingly has less to do with facts and more to do with fireworks (Fox is fun to watch - you have to admit). Most of it is pure Aristotelian Drama. But what am I telling you that you didn't already know? Back to the blog...

I saw a piece today from Robert Reich, former Labor Secretary, and one economist that I seriously wish had stayed in government. His analysis, entitled "Slouching Towards a Double-Dip or a Lousy Recovery at Best", provides a rational view on what is going on at a macro level. One of the paragraphs in his argument in particular caught my eye (and is the main reason I'm writing this post):

"The states are running an anti-stimulus program (raising taxes, cutting services, laying off teachers, firefighters, police and other employees) that's now bigger than the federal stimulus program."

Now there's a statement. If it's true, and I suspect it is, that statement should be being debated night and day by the media and politicians - a) because it's true: dial up the daily news in almost any county in the nation and you'll see evidence of what Reich is saying (massive layoffs that the county administartors are having to do to keep the wheels on), and; b) because the effect of this is nauseating bad on consumers - you're asking taxpayers to pay more taxes federally, while watching their neighbors get fired - neighbors who are also their customers/employers/homeowner association members.

Part of Brett Arends' article speaks of how the US government is working within its historical bounds, relative to the amount government spending makes up of the economy (25% under Obama, 23.5% under Reagan), and historical debt levels relative to GDP (materially unchanged for almost fifty years). Corporate profits in Q1 were the highest in forty years. Banks are stuffed with cash. Interest rates remain nominal.

So what is the looming crisis? The looming crisis is that the central government doesn't seem to be cognizant of the fact that we consumers spend >60% of our paychecks locally, not federally. Any stimulus plan that is met by a larger reduction in state services is counter-productive - see point (b) above.

Time for a governor's conference? Some core-data-driven media reactions? Some sanity? Certainly time to pay attention to the core data - including data that shows the efforts of the Feds are being canceled out by the poverty of the States.

Don't agree? Log in and post a reply - a healthy rebuttal to this argument would be most welcome!

One of my daily activities is checking house prices in Florida. Because right now, you can buy a lot of home for not a lot of cash.

Okay, let's cut the BS - I also look at it because the drama is such that you can't cover your eyes. Things have fallen too far. Check it out - here is a sample of a suburb taken at random. The green bits don't have any homes on them to sell - or else you'd find a few more Zillow icons there:

That's a typical neighborhood in Florida. Actually, I'm being kind. If you took a Zillow snapshot of a city on the west coast of Florida - a region that was already facing significant economic troubles prior to the BP oil spill - you may not see any free space at all.

When I looked at Miami last week, on the advice of William Fisher, an old friend who lived in Coconut Grove for several years, it was almost impossible to find a house on SoBe that wasn't for sale. Closer to where I live now, prices locally in Palm Beach Gardens have dipped (if "dip" is the right word) from a median of almost $400k to a median of almost $200k - and are staying put.

Another friend of mine recently bought an extremely nice house in West Palm Beach (we were just there for his one year old's birthday party) for $365k that was previously purchased for over $800k. There's a house just down the street that will go for almost half what the owner paid for it - and happily so.

If you're looking for data, the Case-Shiller index is the place to go. According to noted economist Robert Shiller, prices of homes (no one calls them "houses" anymore, because calling them that detracts from their perceived value) are still 36% above Shiller's benchmark 2000 value.

If you're looking for information on homes in Florida, or any of the other "sand states", check out zillow.com or trulia.com - and wait a few months. I don't think these prices are going up anytime soon - there were 21 sales last month in Palm Beach Gardens against 1750 available properties. That's a lot of burn-off that needs to happen.

The founder of a company I'm an adviser to recently asked me for tips on creating a PowerPoint presentation for his upcoming investor roadshow. He asked me to send him a copy of the best deck I've ever seen.

Wow. I've seen some really excellent presentations, but the best ever? His question let me on a search through my hard drive, my phone book, and the web - on a quest for the best investor presentation format.

Over the next few days, I'll be publishing the finalists - starting today with the "classic" plan format recommended by Sequoia Capital. Note: watch the video at the bottom of the page in conjunction with the slideshow above, and you'll get a great replay of Jim Goetz's presentation to Stanford students.

Sequoia Capital "Ten Slide" Format

There aren't many VCs that are as successful, well-resourced, and broadly-focused (i.e. across multiple industries) as Sequoia Capital. Here's their published list of what should go into your ten-slide deck (you should check out their excellent "Elements of Sustainable Companies" recommendations as well):

1. Company Purpose

• Define the company/business in a single declarative sentence (Important Note: Sequoia partner Jim Goetz says that only about 1 in every 15 entrepreneurs they see are able to do this successfully)

2. Problem

• Describe the pain of the customer (or the customer’s customer).
• Outline how the customer addresses the issue today.

3. Solution

• Demonstrate your company’s value proposition to make the customer’s life better.
• Show where your product physically sits.
• Provide use cases.

4. Why Now?

• Set-up the historical evolution of your category.
• Define recent trends that make your solution possible.

5. Market Size

• Identify/profile the customer you cater to.
• Calculate the TAM [Total Available Market] (top down), SAM [Served Available Market] (bottoms up) and SOM [Share of Market].

6. Competition

• List competitors
• List competitive advantages

7. Product

• Product line-up (form factor, functionality, features, architecture, intellectual property).
• Development roadmap.

8. Business Model

• Revenue model
• Pricing
• Average account size and/or lifetime value
• Sales & distribution model
• Customer/pipeline list

9. Team

• Founders & Management
• Board of Directors/Board of Advisors

10. Financials

• P&L
• Balance sheet
• Cash flow
• Cap table
• The deal

Pros: It's all in here. I love the focus that "a single declarative sentence" enforces. The business model elements in Slide 8 are nicely thought-out ("lifetime value" is something some entrepreneurs don't even consider - why would someone stop using my product?)

Cons: I personally think there are too many slides in this deck. I've presented using decks that follow this structure, and the problem with providing separate "Solution" and "Product" sections is you end up asking questions about the product in the earlier part of the presentation, so things get repetitive - and can easily stray offtrack. If I were in a room full of Sequoia partners, I would want to get a conversation going ASAP - this deck feels like it would take up the entire time.

Suggestions: If I decided to utilize this format, I would reverse the order of slides 4 and 5 - and talk about market size first, then why it's the right time for this product. If you're up for making wholesale changes, I would suggest you just go with slides 1, 2, 3, 5, 4, 8 (inc 10) - and keep the competitive analysis (6) and product architecture (7) for the appendix.

Learnings: Jim Goetz took some Stanford students through the whole process above - the video is only 17 minutes and well worth watching.

One of my partner investors in Heardable sent me along a link to a deck the other day from the Jordan Edmiston Group, Inc. (JEGI) that presents an extremely thorough picture of the user interest generation (social media) and user interest mining (online advertising) industries.

To give you some flavor of its findings, here's one - during one of the worst years in business ever, new media not only grew, but blew past its traditional rivals. According to the JEGI deck, during 2009, for the first time ever, consumer marketer spend on direct, promotional and digital marketing exceeded total ad spending in traditional measured media.

That is simply an astounding statement. My memory is still good enough to recall those old orange forecast booklets from Jupiter Research - I don't recall any of Jupiter's highly-paid analysts predicting in 2000 that the bulk of consumer adspend would be online by the end of 2009.

Page 18 shows a waterfall analysis that indicates data providers are getting 15% of the pie ($0.75 out of every $5.00 in sold CPM) - which is great news for Heardable and its competitors. I'll leave the slide that shows the EV (Enterprise Value) differential between BurstMedia and InterClick as a surprise.

If you're in any way involved in new media, check out this deck. If you're an owner in the right position in the value chain, it will bring a rosy glow to your cheek.

I just had a meeting with a buddy and he got mad at me because he felt that he'd crossed a threshold in terms of what his technology could achieve and, for whatever reason, I wasn't buying it (enough). It didn't help that the entire conversation was verbal.

Thinking back on the dialog with the benefit of a couple of hours (and a couple of Pinots), I think I'm just at a point in my life now where... I don't need to hear a bunch of words. I just want to see some cool stuff working.

Show me the demo.

Seriously. I really identified with something Fred Wilson said on his blog yesterday. His blog was about how when you're meeting with a VC, you should try and boil down what you want to say to six slides.

Within an hour of his post, there were like 173 comments on avc.com about whether six was the right number. Then in the middle of the argument, he said, look, if you can demo your idea over the Internet, I don't need six slides - in fact I don't need any slides. Just...

Show me the demo.

I guess that's where I'm at. You reach a point where the words form mountains and it becomes really difficult to get around them or over them to the place where the milk and honey is. Which is why it is so refreshing to be able to sit back and watch when someone comes in and slices through all the BS - and demonstrates something that is focused, valuable, fun - and reliable.

There's lots o folks out there that recommend you don't ever do a live demo - because you are risking your chance at getting funding. What a bunch of hooey. I suggest if you're serious about what you're doing and at least halfway competent, you should take this advice and shred it - by doing the best damn demo anyone has seen in ages.

Believe me, that will stand out from the pack.

While some basic budgeting is necessary for all corporations, I'm strongly of the opinion that the wrong kind of budgeting can seriously hamper growth, prevent the kind of returns needed by venture capital investors, and set a company on a path to at best, mediocrity, at worst, oblivion.

"If you're not failing every now and again, it's a sign you're not doing anything very innovative" - Woody Allen

Imagine for a moment you've just cleared a new drug through the FDA and insituted a profit-sharing/bonus scheme for all employees that is tied to the two most common outputs of a budget: sales revenue and EBITDA. Best case scenario for the employees is, the sales guys hit the revenue targets, and the operating guys control their costs. Everyone gets 100% of their bonus. Makes sense, right?

Sure - but unfortunately, this is not the best case for the company, or its shareholders. The best case for the company is that the sales guys hit their targets out of the park, and the operating guys still get their bonuses, despite all that new gear they had to buy and those new consultants they had to hire to support the massively higher sales number.

Operating guys hate it when sales guys threaten their bonuses. Sales guys hate it when the operating guys refuse to support them. The larger the company, the more solid the processes put in place to prevent these two teams from colliding. This isn't good for the owners. Could it be that budgets are to blame?

Venture-backed companies are supposed to be about high growth and the kind of performance that comes from too much Red Bull, nights out with your customers, and an insatiable desire to pick up the phone and sell. Yet how many budgets encourage that kind of behavior? Very few.

The sad thing is, there are plenty of successful analogies of a non-budgeted approach to achievment. These approaches don't ignore goals, they embrace them.

Takes sports teams, for example. Can you ever imagine a top-line sports coach saying to his players "okay gang, listen up - we're going to expend 1,500 calories each during this half of the game and stop once we have eighteen points on the board"? So why do we ask CEOs to do exactly this? Why not ask them instead to stretch a little?

The other problem with budgets is that they can easily give the illusion of control - while providing nothing of the sort. Take out the last budget someone handed you. Sure, the "actuals vs. budget" totals might match, but how many of the individual data points below match what was anticipated during the budgeting process, and how many of them occured by pure chance?

And how much were the totals influenced by a need to catch up to the goal? Which leads to the inevitable and much more important question of: How much could have the goal posts been moved back, if the budget had been based on maximum possible return, instead of a "most likely" mid-range data set?

This is not just an issue for startups - this is an issue that Fortune 500 companies wrestle with as well. Back in the years when Jack Welch was everyone's favorite CEO (i.e. before Steve Jobs inherited the title), Welch pretty-much single-handedly invented the Stretch - the concept that instead of budgeting, your should set "Stretch" goals and go after them with all your might.

According to Jefferey Krames and "The Lexicon of Leadership", Welch hated budgets. As Krames states, Welch operated more like a coach:

"He [Welch] preferred asking employees,“How good can you be?” and felt that Stretch targets rather than traditional budgets helped promote more boundaryless performance."

"How good can you be?" - that is an excellent starting out question for first-time - and even mature CEOs. I suspect many CEOs are not being asked that often enough by their coaches, directors, mentors, and investors.

Instead, they are asked :what's your budgeted goals", and end up settling a pat on the back for "achieving the budget" when they could be setting the world on fire.

Heardable's appointment of Jon Samsel as their new CEO counts as today's "Deal of the Day". There are very few guys out there that know what Jon knows about digital marketing, and fewer still that understand the interface between brands, the web, and the value of the new media relative to traditional media.

Heardable, which measures online brand optimization, is, speaking from the unvarnished point of view of a co-founder and angel investor, the perfect home for the man.

You could see this coming a while ago. Back in the day (actually, twenty years ago), when the rest of us were hanging out in LA trying to get our hands on a cell phone that weighed less than three pounds, Samsel was busy authoring a book about multi-media and a little thing called the World Wide Web.

I believe this was 1993, or thereabouts. We watched on, hoping that whatever "the web" was, it wouldn't bring him down when it proved to be but a passing trend.

Happily, that didn't happen. And since those heady days in Los Angeles, Samsel has moved on to work with a large number of big brands, both as a web marketing consultant (first at Apple, where he helped develop their worldwide developer network, then later at Cognitative, based in San Francisco, where he worked for Oracle, Cisco, Sun, to name but a few of their clients).

Later still, he moved to the C-Level offices, becoming founder and entrepreneur of RoadLoans.com, a company that later became an integral part of Ford's online strategy. Then at Countrywide, Samsel went on to perfect his talent at growing online businesses, something he continued to do after the merger, at Bank of America.

Since his early days in LA, Jon has mentored students as an adjunct writing instructor at UCLA and UC Irvine where he has taught courses in multimedia, fiction and non-fiction writing. His book, ‘Dead Ahead: The Web Dilemma and the New Rules of Business,’ co-authored with Laurie Windham, predicted many of the changes the Internet has had on businesses and organizational processes.

I'm excited to be back working with Jon and I look forward to seeing what direction he decides to take Heardable in. We're already riding a wave of solid growth (from just 50 users in November, we're now up to over 25,000 unique visitors a month - a pretty amazing number, on par with the early days of Compete - and growing fast.)

For those of you that haven't taken Heardable for a test drive, please go and plug your brand/domain into the tool at Heardable.com and see where you rank. Want to know where you stand in a given NAICS category? We just launched that too - but you'll need to sign up to peek at that.

Congrats Jon and good luck - here's to your/our success.

If the entertainment media is driving you to despair with images of today's fathers as a bunch of lying, cheating, irrelevant (when it comes to parenting) no-goods, take heart - the same sentiment was present over 100 years ago, and was the driving force behind the creation of Father's Day by Spokane resident, Sonora Smart.

The inspiration is said to date back to a church service in 1908 in Spokane WA*, during which a priest rounded applauded mothers and critized fathers for their drunken lazy and non-caring natures - without a word of appreciation.

Ms. Smart, the child of a hard-working single father who doted on his kids, was ticked off. Why, she thought, should mothers get all the credit?

After the service, Ms. Smart had a word with the priest about the exclusion. Unsatisfied with the answer she received, she approached the Spokane YMCA with a request - that they help her establish a "Father's Day" in honor of her father, and others.

"I liked everything you said about motherhood," Sonora told the priest. "However, don't you think fathers deserve a place in the sun, too?"

The Spokane YMCA agreed and the first Father's Day was dutifully held eighteen months later - on Smart Senior's birthday (June 5th). According to reports at the time, fathers in church were given red roses, and people whose fathers were deceased wore white roses.

What happened next, with respect to Father's Day, is almost unbelievable, given today's emphasis on capitalism and market forces: Congress refused to recognize or ratify Father's Day, because of concern that it might lead to "commercialization" of the event (Wikipedia).

It took Ms. Smart until 1956 to get both houses of Congress to recogize Father's Day, and another sixteen years to get a sitting President to agree with Congress (Nixon may have been a bad dude on many levels, but give him this - he was the President that, in addition to opening up China, finally recognized that dads deserve some recognition too).

As luck would have it, Sonora Smart was around to see this happen and even gave an interview, from which several of the facts of this story were derived. She lived to the grand old age of 96, and is buried in Spokane - they are lucky to have her.

My own father's day was celebrated this year with a day about as nice as could be - a lazy morning playing, followed by brunch at the best hotel in town with Francine and JJ (and cards!), best wishes from Jordan in Tacoma, a drive home (with massively over-stuffed bellies), and a swim.

On behalf of fathers everywhere, thank you, Sonora.

*Note: Have visited Spokane, and am aware of its role in ski lift and tramway innovation. Have seen the square-wheeled tractor. But in my view, Father's Day ranks supreme as Spokane's neatest invention - and Sonora Dodd (nee Smart), it's most successful inventor.

Over the past twenty years, the folks behind this site have helped a number of entrepreneurs and startup companies raise tens of millions of dollars from venture investors. We've worked both sides of the table, as investors, and as struggling entrepreneurs.

We're about to share with you some highly-effective ways to create and distribute a business plan online. Most of the tools we're about to share have been used before to successfully raise venture capital - and some of our newer tools make it much faster and easier that ever before to do difficult, time-consuming tasks, such as creating multi-year financial projections, and a super-tight executive summary.

Want to know more about the process? We'll also be sharing some secrets, such as the best day *not* to contact a VC (Monday - partner meeting day), what VC's really think about your "conservative" projections (you're a wild-eyed optimist), and how much time to devote to presenting your pitch in a meeting (not more than 30%).

Hopefully, after reading this article, you'll learn some highly-effective ways to create and distribute your business plan, and have a better idea of the process. Not every tip in here is going to find agreement with every investor - there are exceptions to every rule - but that said, we've followed the advice here and successfully raised tens of millions of dollars in venture capital. Let's get started.

Tip 1. Stop Dreaming

Ideas are cheap. As an entrepreneur, your job is not to just dream up a new technology, product, service, or solution, but to build a business around the people that find your invention valuable. For this to happen, you need to roll up your sleeves and build a tangible expression of your idea - i.e. a working prototype that people can experience - then come up with a plan that will allow you to add the essential things required to build and maintain a business - branding, infrastructure, staff, a support team, a product and technology development team, marketing and distribution channels - and capital.

Add perspiration - The French mathematician Henri Poincare was once famously quoted as saying "the creative process moves through three stages - saturation, incubation, inspiration". Albert Einstein later quipped that Poincare had forgotten the fourth, most important stage - "perspiration". We think this story may provide a clue as to why "Einstein" is, today, a household name.

Tip 2. Create a Corporation

When an investor is approached by an entrepreneur, they assume they are being sold equity in a corporation. If you haven't incorporated yet, do so - today, it can cost less than $100 to set up a company, and often takes less than a day. Make sure you seek advice re the best structure from your accountant or other financial advisors - when it comes to investment, some business structures, such as an LLP partnership, may hamper investment efforts. Learn more at CorporateCreations.com.

Choosing a jurisdiction - many years ago, we tried to get funding from US investors for a startup based outside the US. Big mistake! Investors weren't interested in investing in our offshore-based startup. We quickly moved the company to Delaware, a state that offers considerable advantages to startups that incorporate there, and closed our deal.

Tip 3. Accrue Your Expenses

Many entrepreneurs spend considerable amounts of their own money getting to the post-prototype stage - but fail to formally keep track of these expenses. We strongly suggest you record every expense related to your new venture - doing so shows that you understand how to run a business, gives you a useful bargaining chip in the form of your accrued investment, and creates a company better-prepared for investor due diligence.

Fun accounting fact - "bookkeeping" is the only word in the English language that contains three double letters, back-to-back. On that subject, if you don't have bookkeeping software yet, we recommend Quickbooks. We recently used it for a startup that went from zero to several million a year in revenue. It didn't miss a beat.

Tip 4. Satisfy the Needs of Others

Compare your startup to other businesses and ask yourself if what you're doing has the power to satisfy the needs of others. It doesn't matter if you're also enjoying using your technology - many companies, such as Microsoft and Google, started out as personal curiosities. The important thing is that your business satisfy an extra-personal need - one that preferably a lot of other people have!

It's called a "hobby" for a reason - just because you found programming it fun doesn't automatically mean that people will find your product/service/solution valuable too. To be successful, you need to to focus on meeting the needs of an identifiable, preferrably large, group of humans. Which brings us to...

Tip 5. Identify the Problem You Solve

Google organizes information so you don't have to. Amazon can track down any book (or product) on Earth. eBay and Craigslist can help you clear (or fill) your garage. Venture capitalists principally invest in innovations like these - inventions that have the potential to generate an exponential growth in value, by solving a problem that a large number of people have. To that end, VCs typically prefer to invest in technologies that:

• Create a useful, easily-adopted standard (Microsoft/Intel, Apple, Adobe, Twitter)
• Increase the efficiency of a material or process (Synthetic Genomics)
• Multiply the benefits of subscribing to a platform (Apple, Facebook, SalesForce)
• Redirect profits to a new, more-efficient network (Amazon, eBay, Google, Zillow), or
• Solve a health issue faced by a large segment of the population (Novartis, Roche)

Thoughts to ponder - what problem does your solution uniquely solve? Try coming up with different ways of saying "The problem we uniquely solve is..." until you're convinced that: a) your solution is indeed unique, and b) your target customer is so well-defined you can name three people who'll buy your solution. You'll then be ready to...

Tip 6. Calculate Your Maximum Market Potential

It's important to understand, as precisely as possible, the potential size of your market before putting together your sales projections. Not every business needs to target a massive market like NetFlix or Amazon - indeed, many highly profitable businesses tackle local needs and niche markets.

Key point - make sure you know your maximum potential market before meeting with investors. One excellent tool for doing this is the Google Adwords Keyword Tool. Our test keyword (vitamins) showed that 13,000,000 people entered this term into Google last month - along with an additional 9,000,000 searches for "vitamin". 20 million+ searches a month? That's a lot of market potential!

Tip 7. Demonstrate Your Business Can Scale

Scale is a word you'll hear a lot in VC meetings. What the investor is really asking if they ask you if your business can scale is one of four questions:

• Can you address your maximum potential market? - If your maximum potential market speaks Spanish and your product can't be translated (yeah, it's a dumb example, but stay with us...), then your addressable market (e.g. the market you can actually reach) is obviously much smaller than your maximum potential market. Better that you understand this before your investor meeting!
• Can your business handle an exponential increase in customers? - If you're a life consultant working one-on-one with clients, maybe not - unless you build a process based on what you know and reformat your business as an online forum
• Will your expanded customer base be as satisfied as your current customers are today? - MySpace managed to maintain the "Tom is my friend" relationship with its customers even as the service grew to millions of users
• Can you increase your profit margin as you increase your customer population? - Highly scalable businesses use the size of their customer base to their advantage - think Amazon customer reviews, eBay customer rankings
• Will scaling make your business better? - Many highly scalable businesses have figured out how to use the size of their customer base to their advantage - think Amazon customer reviews, eBay customer rankings, or LinkedIn job listings: the more the base grows, the better the business becomes

Automation rules - to really scale your business, you'd better be ready to automate, batch-process, take calls, and outsource. To show how you intend to do this, it's a good idea to write an Execution Plan that explains precisely what you plan to do - as it happens, we include an Execution Plan within our free (and automated!) Business Planning Tool.

Tip 8. Present a Profitable Business Model

Even "free" products need to be part of a path to revenue. And the easiest path to revenue is to price your products as high as the market will bear. Higher pricing means better margins and higher lifetime value - look for arguments from other markets that support the highest possible price for your solution (e.g. laser surgery costs 50% less than a single pair of glasses - and about the same as a year's worth of contact lenses) - and apply them to your startup.

The importance of pricing high - Once your "high water mark" is established, you can always create lower-cost "competing" brands and position them down-market from your "flagship" solution.

Tip 9. Create a Strong Competitive Defense

Many investors will insist that you show evidence that your solution has been protected prior to making an investment - but such steps can be costly. One approach often used is to include the cost of protection in your use of funds, and explain that one of the methods you will use ot create a return for the investor is to use their capital to better defend the intellectual property you've created.

Protecting Your IP (Intellectual Property) - If your solution involves a new technology, material, or process, you've probably already started down the path of patenting and/or trademarking your solution with the USPTO. If not, you should be prepared to explain how you intend to protect your solution from competitive threats in market.

Tip 10. Build a Strong Team

Many venture capitalists state on their web site that they invest in teams. If you've played team sports, you know why - it usually isn't possible to be an outstanding pitcher and a great batter (if you're from a cricket-loving nation, insert "bowler" and "batsman" here!)

Creating an "A" Team - as a future CEO, you should perhaps take to heart the hiring philosophy of (former Oakland A's manager) Billy Beane - and make sure your team includes cost-effective run-scorers, data-driven managers, uniquely-skilled pitchers, and a recruitment scoring system built on aptitude, not just good looks.

Tip 11. Get Your Family Behind You

Before you head off to meet with investors, you need to successfully pitch the most important partner your business will have - your spouse. If you're married, very likely, the first money into your business will come from them. You need convince them that monthly server bills are more important than dinners out or annual ski trips.

Landing your first investor - it's time to sit down with your partner and take them through your idea, soup to nuts. Make sure you successfully address their conerns - if they "invest", they will be putting a lot on the line. Work on your pitch until your partner thinks your idea has a shot - when that happens, you'll be ready to start building the case for venture investment in your business.

Tip 12. Form a Board of Advisers

Forming a technical board of advisers that meets once a month via Skype is easy. Advisers typically sign on for one to five years, in return for a promise of stock options, and are tapped for their specific expertise (e.g. scientific knowledge), contacts (e.g. a Rolodex of top-tier venture partners), or gravitas (e.g. status as a former government minister, international diplomat, inventor, sports star, celebrity, university dean, or person of similar standing.)

Not just gray hair... - a top-tier board of advisers can lend you and your team credibilty and give investors comfort that you are on the right path, and have access to good advice. Think of it as having your top five phone references together in one place, ready to be interviewed. And use these people - don't just list them on your web site.

Tip 13. Show the Dogs Eating the Dog Food

Yes, it's a bit of a disgusting image - but it's also one of the oldest axioms in seeking venture investment. You need to be able to show that someone values your product or service, and is willing to pay you money, either directly (e.g. via a shopping cart, or licensing deal) or indirectly (e.g. via advertising to your users). A business totally without customers - even beta users - will be a difficult sell to most investors.

When a customer buys your product or service, they are telling the investor that the problem you solve exists, and illustrating what they think of its value. Do this enough times (and with enough variables, such as pricing, positioning, etc), and you'll be able to show your investors a research case based entirely on your own product and customer experience.

Tip 14. Don't Run Out of Humans!

Many inexperienced entrepreneurs believe that customer adoption and exponential growth can occur quickly, and continue indefinitely. However, in most situations, product/service adoption is slow to begin. At the other end of the adoption curve, growth almost always slows as competitors rush in to attack your business and steal your customers. Finally, there is the "lack of humans" problem (with four billion cell phone users now calling, cell phone makers may soon run short of new customers).

The "S Curve" effect - to see the effect of attentuating exponential growth over time, sign up and try our free online business planning tools. The Five Year Sales Projections tool includes a month-by-month attenuation mechanism designed to arrest growth over time and approximate the more likely maturity curve your solution will experience in market.

Tip 15. Follow the "Kawasaki Rule"

Back in 2005, legendary venture investor and industry commentator Guy Kawasaki posted a blog to his site entitled The 10-20-30 Rule in which he made the following recommendation to entrepreneurs - ignore it at your peril:

The Kawasaki Rule: "A PowerPoint presentation should have ten slides, last no more than twenty minutes, and contain no font smaller than thirty points... this rule is applicable for any presentation to reach agreement: for example, raising capital, making a sale, forming a partnership, etc."

Tip 16. Approach the Right Investor

Getting in front of the right decision-maker is important - as is knowing who you're meeting with. All VC partners/decision-makers have different ideas about what consitutes a good investment opportunity - and many have skills and experience that are specific to a particular area. Spend some time before your meeting on Google learning about your investor's past life and track record - you'll find this extremely useful when it comes to tailoring your presentation and providing examples.

Do not - under any circumstances - take a meeting with a VC firm unless you've thoroughly researched the firm and its partners. You might yourself in front of a group that has just invested in your main competitor (this happened to friends of our a few months ago - who, sadly, ignored our advice on this subject!) You might also find yourself pitching an web analytics idea to a bunch of solar energy experts. Do the research!

Tip 17. Presentation is 30% - Conversation is 70%

Imagine the following scenario: someone you've never met walks into your office and asks you for money. What might your reaction be? What kind of things might you want to know about this person before writing them a check? Would you prefer to sit wordlessly through a powerpoint or have a conversation with the person, face to face, about why they need the money?

This is one of most important tips: Keep your presentation (and demo, if you do one) short, so you can allow plenty of time in your meeting for conversation. Not only do your investors need to get to know you, but you need to get to know them, and answer all their questions. You can't do that if your powerpoint runs 59.5 minutes!

Tip 18. Be Yourself

Often, experienced VC partners will ask questions designed to elicit a better understanding of you - the founders of the business. These questions are usually designed to try and understand how you might operate in the presence of a large potential partner - or how you might react in a stressful situation. Be true to yourself and answer every question honestly (except questions related to "final product delivery date" - everyone in the room knows they're about to hear a half-truth when it comes to that!) The important thing is: you're here to build trust. The only way you can do that is to be true to yourself, and honest about your strengths, weaknesses, and beliefs.

"Don't Be Evil" - Google's famous "slogan", composed by (GMail creator) Paul Buchheit and Amit Patel, was originally created to informally guide internal policy - and a statement to the rest of the industry (and a not-so-subtle jab at a then-larger, more-established software company). It got Google a lot of attention, but also some respect as well.

Tip 19. Keep Your Emotions in Check

Not every investor is going to get your story. Robert Persig went to over 450 publishers with his classic "Zen and the Art of Motorcyle Maintenance." JK Rowling was forced to work as a part-time teacher after seeing "Harry Potter" rejected and settling for a measly $4,000 first advance. The key to handling rejection is understanding that often, the words "not interested", "not right", and "not ready" may not actually be criticisms of your business but statements about the investor's business, based on their Investment Criteria.

Investment Criteria: Many investment firms have strict rules about what kinds of businesses they can invest in. Don't take a "no" personally - your business might simply be too "early-stage" (i.e. not yet generating significant revenues), or outside the scope of the combined experience of the partners.

Tip 20. Have a Backup Plan For Everything in Your Meeting

In some cases (such as the Demo show, or Jim Breune's Finnovate conference), your allocated presentation time can be as short as a mere handful of minutes. Do not waste them. Make sure you are still able to present your business - even if the lights go out in the meeting room!

Bring the print-outs - we strongly recommend you take print-outs with you (but not distribute them, as some folks may flip ahead and miss important parts of your presentation) - and put together a canned demo of your technology, if your demo relies on Internet access, so you can quickly revert to it if something goes wrong.

Tip 21. Get The Math Right

We were recently shown a PowerPoint deck in which the balance sheet and income statements did not add up - literally! The entrepreneur showed little concern when we pointed this out, leading us to assume they would treat an investor's capital as unwisely as they treated their financial planning.

With great tools like DealHorizon Startup at your disposal, there is no reason for your financials not to be professional, and dollar-perfect. Take advantage of the models available here, and create a set of financial statements that you can be proud of.

Tip 22. Avoid the Word "Conservative"

VCs understand that many entrepreneurs build their financial projections on a "best-case" scenario - i.e. everything goes right, gets delivered on time, gets into the channel in sufficient quantities, and is supported to a level that generates high customer satisfaction (and higher customer lifetime value.) To an investor, such a scenario is probably overly optmistic. Which is why it is best not to describe such projections as "conservative" - doing so reduces credibility and could actually harm your investment chances.

Don't discount your plan - your job is to present the usage data and research that best supports your arguments, and leave it for the investors to decide if they agree (VCs and angel investors will almost always apply their own models to determine the likelihood of your business reaching your projected goals) - not to present a worst-case, "conservative" scenario.

Tip 23. Hire a Great Law Firm

Calling up your college buddy and asking him to represent you (because you just heard he passed the bar and needs the work) is a bad idea for first-time entrepreneurs. It's quite possible you might save a few bucks today, but unless you buddy knows what he's doing, you could be leaving millions on the table. Hire an experienced law firm.

Lawyers can provide advice and insights far beyond changes in drafting - and many lawyers are also well-connected in the VC community, know the lawyers on the opposing side, and can help you structure a better deal based on the knowledge gained of the particular investor through prior dealings.

Tip 24. Don't Discuss Valuation Terms Unless You Understand Them

We're fans of "Shark Tank" - the TV show in which investors put money into businesses that ordinary people pitch during the show. But few VC investments are structured as a simple percentage ownership (we suspect "Shark Tank" uses this approach because, well, it's a TV show - and a long conversation about how the investor will require a 2x participating liquidation preference might not play well on prime time!)

Without a solid understanding of valuation techniques, liquidation preferences and preference share structures, you can have the best idea in the world and lose 100% of your ownership, simply by making one or more common "first timer" mistakes. Leave valuation discussions to your lawyer, banker, or finder - or talk to folks that have navigated these waters before and bone up beforehand.

Tip 25. Only Use Licensed Finders

We've used finders over the years with varying degrees of success. In some cases, they have provided introductions to strategic investors that would have been tough to get an audience with otherwise. But generally, we avoid using finders unless they are licensed, and operate entirely on a "shared success" basis.

SEC Reg D - rules and regulations regarding finders have been reinterpreted more strictly by US courts in recent years. With few exceptions, any finder who asks for a commission on your fundraising needs to be licensed as a broker-dealer by the SEC. If they disagree with you on this based on a stated exemption, refer them to your law firm.

Tip 26. Request Enough Capital to Last 18 Months

Here's two good reasons why, as entrepreneurs, you should only plan on raising capital a maximum of once every eighteen months.

• Capital raising takes time - if you only raise enough for a few months, some of your key managers could find themselves back in fund-raising mode almost as soon as the first round is closed
• Capital raising involves selling - and in the case of many startups, the CEO is often "product salesperson in chief". Having the CEO take time out to sell equity instead of product is rarely a good thing.

Another good reason - Too little time between rounds can dilute your ownership by not allowing you time to execute your plan - by waiting longer, and giving your team members time to execute, you may get a higher valuation for your next round (assuming you still need capital, of course)

Tip 27. Compare Terms

The "term sheet" contains the basic terms an investor is willing to offer, in abbreviated form, and signifies a semi-official start to negotiations. Though usually non-binding, once issued, term-sheets are usually honored by most VCs and accredited investors. But that doesn't mean you shouldn't try for better terms - either from them, or from a difference capital source.

Looking at Term Sheets online - Wilson Sonsini Goodrich and Rosati, one of the top law firms in Silicon Valley, has created an excellent tool for startup entrepreneurs they call a Term Sheet Generator. Check it out at the Wilson Sonsini web site.

Tip 28. Close The Deal

The reason you're here is because when your father met your mother, at least one of them followed up! Treat your business - your baby - with the same care. Follow up and communicate daily with your investors through the due diligence period and up until the closing. This is the most important set of actions you will take.

Selling equity involves the same skills as selling product - Your approach to selling your equity will provide your investors with a strong indication of how well you will do selling your product, post-investment. Follow up. Provide additional info (including your latest customer sales figures). Be persistant. Don't give up.

Tip 29. Demand More Than Money

Most businesses succeed or fail based on the strength of their pricing, the energy and connections of the sales team, the uniqueness of their solution, the ability of their development teams to stay on schedule, and the ability of their operations staff to implement processes that enable the business to scale. VCs can help you plug strategic gaps in these critical areas and enhance your chances for success.

How VCs can add additional value - VCs can often help by suggesting ideas, vendors and strategies that have worked for other companies in their portfolio, by improving your board-level governance, and by adding folks to your management team on either a temporary or permanent basis. VCs can also be strong advocates for your product or service, via blog posts and/or conference appearances.

Tip 30. The VCs Need You

In one of our recent blogposts entitled Too Much Money, Not Enough Entrepreneurs we came to the conclusion that there is currently more money out there than there are good ideas to soak it up. That said, VCs rarely take chances on badly-formed or incomplete plans. You need a plan that demonstrates you can take their investment and provide a good return on it.

Remember, VC's can only earn money for their LPs (Limited Partners - the "fund of funds" folks that give them money to invest) if they say occassionally say "yes" to a deal. Use the tips and tools available here, and the advice available on the leading VC blogs, and you'll greatly improve your chances of landing that investment.

Tip 31. (Bonus Tip) Use DealHorizon

Yes, you've come to the "shameless plug" part of the page! But we really do think our tools can help you achieve your goals in less time, with less hassle. Sign up using the link at the top right of the page and take the site for a test-drive.

One of the benefits of being involved in several companies is you get to see a lot of individuals in action - managers, entrepreneurs, board members, technical advisors, investors, and customers. My takeaway from watching all this action can be summed up in three words: Shoot the Dinosaur.

First task: identification. Who is this dinosaur I refer to? The dinosaur is not necessarily the oldest person on your team (he may be the youngest.) The dinsoaur is simply that person on your team that places a drag on your organization by using technology or work practices from a different era (or planet).

• He's the guy that values experience over innovation
• He's the guy that views market disruption as "the wrong road to take"
• He's the guy that buys a video conferencing system when everyone else is on Skype
• He's the guy that thinks every change to your web site should go through a process
• He's the guy that insists on creating his own server farm because the telco's is "unreliable"
• He's the guy that thinks meetings are essential - but speed to market is not
• He's the guy that builds a web store from scratch (rather than renting at Yahoo)
• He's the guy that thinks employees should not work from home
• He's the guy that thinks customers/deals are a pain in the ass
• He's the guy that thinks your call center must be local

How much time and money does the dinosaur cost a startup? Heaps. Hell, I've seen dinosaurs have the same effect on a startup as the proverbial bull in a china shop. I've seen dinosaurs bring down companies that otherwise would have flourished. I've seen dinosaurs drain the life from an entrepreneur's idea by insisting on a three year path to market when a one year path was possible.

Can a dinosaur add value? Yes, but rarely. Possible exceptions are legal and financial advice - and sometimes, human and corporate relationships. Dinosaurs with solid financial and/or legal/deal-making credentials on their resume are worth keeping around.

But operations? Development? Marketing? If you must have a dinosaur at the table, keep them as far away from that stuff as you possibly can - because what a dinosaur (particularly a dinosaur with an MBA) thinks is a solid marketing strategy for today could bankrupt your business without returning your a cent in ROI.

Is there a more humane way of dealing with a dinosaur than shooting it? In my experience, no. The dinosaur resists re-education with the same vigor as a Republican resisting socialized medicine - once a dinosaur, always a dinosaur.

Shoot the dinosaur. Kill it. Don't wait. Your business will thank you for it.

A few years ago, at the Forbes CEO conference in Singapore, I asked Singapore's Prime Minister, Lee Hsien Loong, a question: what lessons could other third world countries take away from Singapore's rise to prominence?

The question came out a little wrong - obviously I was referring to Singapore's historical position (the position referred to in Lee Kuan Yew's memoir "From Third World to First"), not modern Singapore - but after we got past that, he gave an answer that essentially summed up Singapore's success formula: create a self-sustaining economy that supports fair dealing.

This is what Singapore has done from the beginning of its modern era. One of the first moves by singapore's founding father Lee Kuan Yew, was a radical increase in pay for the public sector, a strategy that over the course of five decades has resulted in an almost complete absence of corruption.

In Singapore, government ministers are paid extremely well for two excellent reasons - to ensure that really smart people make it into government, and to remove the need for "additional income". Citizens of other countries that complain about the high salaries of government officials are missing the point - there are benefits to ensuring that your public sector is well-paid.

A second innovation, the creation of an employee and employer-funded Central Provident Fund - a mandated superannuation facility designed to provide support for home ownership and retirement - has resulted in one of the highest home ownership rates in the world, and a self-funded social security system that is the envy of governments everywhere.

A third innovation (possibly the result of the race riots of the sixties) has been the successful mingling of races, religions, and business cultures through a policy of protecting each culture while ensuring that each public housing block or facility does not overly represent one particular group.

Given Singapore's success, it seems strange that more countries have not followed. As I travel, and listen to people from countries such as Argentina, Lebanon, Guatemala and Nigeria, I'm always astounded that more leaders do not seem to be paying attention to Singapore's example.

Singapore, you might say, has the advantage of being a small place. But while that presents an organizing advantage, it presents a huge disadvantage in terms of natural wealth. The path that Singapore has cut has not been easy - but the strategy has created enormous wealth for its people, and one of the best places to live, anywhere in the world.

Why can't/won't other countries do the same for their people?

Several years ago, while I was setting up and building out sales and distribution offices for a satellite company in China, Indonesia and India, I was given a briefing on marketing to these emerging giants of the Asian market by several senior executives from a local (Mumbai-based) ad agency.

Now, you would assume that boiling down the buying habits of three billion people is a difficult task - but these guys managed it with aplomb. Their secret? The cigaratte.

Don't like cigarettes? Think they smell toxic and are generally negative contributors to society when it comes to interpersonal gatherings and world health? So do I. But please read on - because what I learned from this presentation is that not only are cigarettes personally addictive, they have created a retail distribution system that is equalling compelling at every level of the value chain.

Consider the beginnings: when a cigaratte manufacturer ships its cigarattes, a non-perishable good, from America or Europe to Asia, it typically uses containers.

• A container can fit an average of 55,511 cartons of cigarettes
• A case typically fits 60 cartons of cigarettes
• A carton of cigarettes contains 10 packets of cigarettes
• A pack of cigarettes contains on average 20 cigarettes

So at one end, you have multiple containers packed with roughly a million bucks worth of cigarettes (55,511 x $20 (avg retail) = $1,110,220) each. They arrive, and the individual cases are then shipped off to subdistributors, who then split the cases into the first retail expression of the cigarette: the carton. The cartons are then further split into packs of cigarettes by the retailer, vending machine operator, etc.

At this point, however, the story goes an additional step further. While the retail chain typically stops at the point of the packet in the First World, in many countries, the retail chain goes much further - to the level of the single cigarette.

Cigarettes are sold individually at stop lights, small shops, movie theaters, bars, on the beach, to the people who cannot afford a pack, but can afford perhaps one to three cigarettes on an individual basis, and are willing to provide the middleman with a slight mark-up for that convenience.

Herein lies the genius of the cigarette distributors: they have come up with a hugely scalebale model. At the other end of the distribution chain is a massive container ship - at the other is a small retail village store, or teenage vendor weaving in and out of traffic, selling a cigarette.

Almost every entrepreneur knows the "give away the razor, sell the blades" marketing strategy that King Camp Gillette pioneered, but Gillette had some other innovative ideas that have received rather less attention over the years - but may be coming back into vogue.

First, the epiphany. Prior to turning inventor/entrepreneur, Gillette grew up poor after his family's holdings were wiped out by the Great Chicago Fire of 1871.

He moved west and eventually scored a job working as a saleman for Crown Holdings (still around today, but then called the "Crown Cork and Seal Company"), a corporation that sold bottle caps designed to protect the fizziness of newly-invented carbonated drinks.

One day on the job, he noticed that the buyers of these carbonated beverages simply tossed the products he was selling - Crown's cork-lined bottlecaps - onto the ground. The epiphany? People could be convinced to buy something useful, and then throw it away. Thus was born the idea for the disposable product.

Contrary to popular myth, Gillette did not invent the safety razor - that was thought up nearly thirty years prior to the forming of his company - but his did invent the idea of building a profitable business based on the idea of subsidizing the user's investment in the platform (the razor) in order to profit from the sale of a mass-produced plug-in (cheap blades).

His first year wasn't stellar - his books showed sales of just 168 blades in year one - but in year two, sales increased to over 90,000 blades, and by year seven, he was selling 70 million blades a year. Few business plans have ever succeeded so spectacularly.

The rest of the story? Gillette, like many entrepreneurs, was possessed with some ideas that proved, well, slightly less successful than his disposable razor. This, from wikipedia:

Gillette was a Utopian Socialist. He published a book titled The Human Drift (1894), which advocated that all industry should be taken over by a single corporation owned by the public, and that everyone in the US should live in a giant city called Metropolis powered by Niagara Falls*.

According to his obiturary, published in 1932 by the New York Times, despite becoming a multi-millionaire, King Gillette remained committed to his socialist ideals for the rest of his business life. He published a Prospectus for Metropolis in 1910 and offered President Theodore Roosevelt the job of CEO with a starting salary of a million dollars a year - in 1910 dollars. According to the Times, the President turned him down.

*Some would argue that we're heading down that road right now in the US - but with a less-costly chief executive (the current salary of a US President is just $569,000, including expenses - the sum offered Teddy Roosevelt is equivalent to $22,738,815 today - you can check my math using The Inflation Calculator.)

Tonight, I'm here to talk about the damage that self-gratification can inflict upon companies, and their customers and shareholders - but also to talk about how some entrepreneurs manage to succeed, despite some potentially damaging flaws.

Let's start by agreeing a few very obvious things:

• All entrepreneurs require start-up capital at some point
• Given the extremely low chances of success, entrepreneurs must hire the very best people
• Entrepreneurs need to create products or services that satisfy the needs of others
• Entrepreneurs need to create pricing and support structures that provide a high perceived value and reduce the risk of purchase
• Entrepreneurs must keep the company moving behind a consistent vision
• Due to the typically high cost of acquiring a customer, which often must be amortized over years, entrepreneurs must retain the customer as long as possible
• Due to the typically high cost of acquiring a new key employee, entrepreneurs must retain their key employees as long as possible
• At the right time, the entrepreneur must sell the company, so the shareholders can receive a return on their investment

Thus agreed, it stands to reason that the following must be true:

• Entrepreneurs that cannot engage with investors will not succeed
• Entrepreneurs that hire on the basis of looks and social skills only will not succeed
• Entrepreneurs that create products that do not satisfy the needs of others will not succeed
• Entrepreneurs that cannot agree price and support conditions with a customer will not succeed
• Entrepreneurs that change direction every fifteen minutes will not succeed
• Entrepreneurs that refuse to maintain a customer relationship over time will not succeed
• Entrepreneurs that fail to reward and retain their best employees will not succeed
• Entrepreneurs that refuse to sell their company at any price will not succeed

And sure enough, we only need scan our memory banks for mere seconds and we can each think of an entrepreneur (or perhaps several) who failed because their interests did not extend to tasks such as doing the legal footwork, bringing in investors, closing deals, coming up with attractive products, pricing structures and customer support plans.

Some of these guys do everything wrong - they treat engagement with people as chore (or a prayer session, with themsleves in the middle of the circle), act like usablity and pricing studies are personally insulting to them, spend company money on self-promotion rather than company promotion, and invite their college buddies, rather than their customers, out onto the golf course.

But some inwardly-focused individuals also create enormous value, either because they succeed in solving a problem for themselves which creates a solution that can then be extended to others, or because they have an intense personal curiosity in an object or idea that has not yet caught the attention of others.

The question is, how can someone who is horrible at engaging with investors, employees and customers, self-possessed beyond belief when it comes to product design, and utterly disinterested in legal agreements, pricing discussions, service level agreements, and the sale of their company, succeed?

Or, put more simply, how can you, the entrepreneur, ensure that the financial impact of your weaknesses doesn't overwhelm the financial impact of your strengths?

How?

Years of studying the significant flaws of myself and others in this area have yielded an observation - there is indeed a proven way that an entrepreneur overly-focused on his own needs or thoughts can succeed:

Hire an experienced, customer-focused, make-sure-the-trains-run-on-time type individual that understands how to turn your rare moments of genius into success, using capital, teamwork, data-gathering, product design and testing, the media, customers, distributors, and the public markets.

Yes, if you can find the right person, it really is that simple. VC's have been doing this systematically for years - hiring the guy I just described. The trick for the entrepreneur placed in this situation is to assist in the process so that a person is found with the capacity to be be respectful of the entrepreneur's gifts and flaws, and also capable of turning the fruits of that curiosity into a successful business.

Whatever you do, if you're an entrepreneur and some of this stuff is ringing bells as a potential problem, stop now. Get help. Don't refuse to deal with your flaws. You know what the result of that will be - it's in the title of this blog.

There are three things they say you should never watch being made: sausages, your siblings, and web sites. Having just completed a two month re-work of DealHorizon, we can concur. But, that said, the task of improving one's web site is getting easier - thanks in part to terrific tools like Google Website Optimizer.

During the rework of this site, we used Google's Website Optimizer a lot - and the results were incredibly useful. GWO works by offering up different versions of web pages to users, and looking at where the users go next.

One of the tests we tried resulted in a 450% difference between the original and the variation (test) page - yes, that's right: more than 4x the number of people clicked through to the new page. It turns out, the original page had a horrible bounce rate that we were unaware of. The new variation showed a huge improvement in the number of folks clicking through to the next page of the tool.

How much was changed between the two pages? Here's the kicker: One image. That's it. That's all that was needed to create a 450% improvement. That, and the ability to track our progress.

If you're a ventue capital provider and you recently invested in a company that does a large amount of its sales online, ask them if they're using GWO, and if they're not, what they *are* using to test different versions of the web site.

Between Pingdom.com and GWO, there is a lot a company to do to inform itself about the customer experience, and improve it. And these two tools just touch the surface of what's available - there are numerous other tools that can provide huge benefits, including a fast-growing brand optimization start-up that I'm an investor in called Heardable.com which provides a holistic overview of how well your brand is positioned online.

Given the stuff that these tools are capable of, it won't be long before we can take "web sites" off the list of things we don't want to watch being created. Which will just leave "your siblings" and "sausages" to deal with...

Many years ago, we tried to get funding from US investors for a start-up based outside the US. Big mistake! Our investors weren't interested in investing in an offshore-based company, and almost walked. We quickly moved the company to Delaware, a state that offers considerable advantages to startups that incorporate there, and closed our deal.

We proved that we were quick learners. Unfortunately, that isn't always the case.

A few months ago, I was forty minutes into hearing the best pitch I'd heard in a long time when the entrepreneur - a financial services guru - dropped a bombshell. They had no intention of creating a corporation around their idea, he said, and would be instead be structuring the company as an offshore partnership "for tax reasons."

What followed was a prolonged silence, followed by several "beeps" as potential investors on the call dropped off the line, leaving only their unasked questions: A partnership? Tax reasons? Do you guys have any idea how venture capital works?

Trying to sell tax minimization to a bunch of guys sitting on ten year fund structures wasn't actually the dumb part - the dumb part was, when you propose a non-standard financing structure, it can become impossible for venture investors to hedge their capital in the usual ways, i.e. by using liquidation preferences, dividends, redemption rights, additional warrants against milestones - or management incentive plans.

These days, liquidation preferences are fairly standard (a "liquidation preference" is an agreement between the VC and the entrepreneur that the VC will take the first bite of cash when the company is sold, multiplied by an agreed multiple, before anyone else gets their share or otherwise "participates".) Likewise, terms such as redemption rights (which allow the VC to force the company to buy back their shares after an agreed period of time, commonly three to five years) are common to many VC investments.

I politely suggested to the folks on the call that they speak to a lawyer, but they said they already had. Turns out the guy was a tax minimization expert who'd never done a VC deal in his life - and was attempting, through these guys, to change the system based on what he thought were good ideas.

Bad idea. Unless you're personally investing in a new incubator or VC fund, or you're Google and you're about to have a riskless IPO, your goal should not be to change how venture capital works, or incorporation documents are written.

Using the standard legal documents and approaches creates numerous legal benefits based on literally decades of case law and is financially the most cash-efficient approach (the last company I incorporated in Delaware cost $129 to incorporate and the incorporation took less than a day).

So, here's my non-legal, practical advice: if you're thinking at some point you may raise money from venture capital providers - and especially before you choose a single proprietorship or partnership structure for your business, talk to a lawyer who has done venture deals before.

They will possibly/probably steer you towards a "C Corp" structure, a structure which allows entrepreneurs to issue multiple classes of stock. You and your team will be issued the "common shares", and the VCs will ask you to create a class of "preferered shares".

Note: These preferred shares often pay interest and are typically redeemable after a period of time (not easy to structure those into a partnership). Preferred share issuances are usually named after the letters of the alphabet, as in "Series A" for the first lot issued, "Series B" for the next, and so on, until the company either goes bust, goes public, or otherwise has no additional need for capital.

Tip: If you need a lawyer to help you create your initial documents and corporation, the firm I usually use for this initial work (I use a different firm for later-stage stuff) is Amini, Levin and Fey, based in Los Angeles, phone number +1 818 382 3800. Nice people. Ask for Emily Levin.

As many of you know, I'm involved in several financial services start-ups (you're looking at one of them). And the thing that is most noticeably different about these startups versus other startups I get to see is the superb quality of the financial models and resulting business plans.

Budgeting and financial planning are typically not the strong points of startups - especially those startups comprised of non-financial services technology developers. Too often, the financial model is treated as a necessary evil - an "after-thought" in the venture capital procurement process. On many occassions, it is created backwards - i.e. from an acceptable exit value, or target gross margin, back to present day.

The result is often pretty bad - a buggy model filled with poorly-anticipated (or missing) costs and a lot of sales and net profit numbers leading sharply up and to the right, on into infinity.

But let's not 'tut-tut' and point fingers - the reason for the haste is easy to understand. Though this may be hard for die-hard Excel Jockeys to comprehend, technologists would usually much prefer to be typing curly brackets or holding test-tubes up to the light than creating financial statements (in fact, many of them would choose a poke in the eye with a toothpick over a day working with Excel!)

So how do we improve the quality of the plans that are created and presented, and inject some sanity and checks and balances into the planning process? The first step is to rank the characteristics of the "rapid business plan creation" approach and look for any obvious strengths, by asking:

1. Who prepared the plan?
   
   1. a professional (e.g. CFO/banker)
   2. a non-professional (i.e. technologist)
2. How was the plan prepared?
   
   1. using an business plan template
   2. from scratch
3. Who informed the assumptions?
   
   1. the whole team
   2. only the person writing the plan
4. Does the balance sheet add up?
   
   1. yes
   2. no
5. Does the plan include a cash flow calculated on the basis of changes in working capital?
   
   1. yes
   2. no
6. Do the assumptions include monthly growth of costs in line with sales?
   
   1. yes
   2. no
7. Do the assumptions include a mechanism to "throttle" revenue growth on the basis of an increase in competition, or a decrease in the number of potential customers?
   
   1. yes
   2. no
8. Do the assumptions include a mechanism for handling operating cost increases, either on a target cost-per-employee basis, or revenue per employee?
   
   1. yes
   2. no

If the answer is "A" to these questions, for all quesions, then it's possible the plan reflects a mature approach to planning that is financially sound, correctly timing the costs, allowing for competitive pressures and other mature-stage product cycle pressures, and outputing believable margins.

If the answer is "B", to the above, it's time for either a punt - or a rethink.

One possible approach is to use some of the excellent businesss planning software packages that are out there. On the plus side, they are likely to be significantly less buggy than in-house "from-scratch" financial models, and output professional-looking statements.

However, the drawback to almost all of those offerings is they are typically not web-based and cross-platform, not collaborative, don't allow uploading and sharing of documents, and often require a knowledge of arcane accounting terms.

Another approach is to try the collaborative business planning platform we're building here at DealHorizon. It is truly collaborative - any member of the team can create, access and save plans, and you can easily revert back to different, previous (or future) versions if needed.

Plus, it's dollar-perfect - and contains many of the recommendations we pointed out above, including basic anti-hockeystick/product growth attentuation mechanisms. If you need to work last-minute, this approach should get you most the way to a professional-looking, "8A's" set of financials.

If you lined up most entrepreneurs and asked them what the most essential component of success is, they'd probably answer "a killer product". But from my observations (many of which have involved "killer products"), the single most important factor in a product's success is that product's pricing strategy.

Your pricing strategy determines not only your ability to earn revenue and generate profit, but also your position in the market. And that's not all - if you're selling via the Internet, pricing determines everything from the potential breadth, strength and energy-level of your distributor network, to your ability to provide customer support.

I recently met with a number of distributors to try and determine the best price for a product I'm launching at one of my start-ups. Here's what I learned:

• Marketing affiliates price their offering space by a simple formula
• That formula is: retail price * commission percentage * conversions to sale
• E.g. $100 x 30% x 3 sales a day = $90

I'll let you do the math (you can use the DealHorizon Sales Projections Calculator to run the numbers) - but what I think you'll find is

• Commission percentages are now fairly standard
• Conversions depend in large part of the nature of the audience in front of the offer
• The most important component of the calculation, by far, is price

The reason for this is probably obvious to you - when it comes to signing up an affiliate, that affiliate already has a pretty good idea of their audience and the kind of offers that work. They already have experience in asking for (and getting) commissions that are market-rate. Finally, they know exactly what their offering space (the real estate on their site dedicated to the sale of third party product) is worth.

Let's jump to the conclusion: if your price is much less than the pricing of a product of comparable quality with comparable features that appeals to their audience, guess what? You're out of luck. They will pick the comparable product every time.

You will have no choce then but to watch as sales of your competitor's products rise (along with positive reseller buzz). Before you know it, you're off the reseller radar, behind the eight-ball, and (woe of woes) selling direct to consumer without the support of a marketing network.

So let's talk hard numbers - what makes a good price for a product to be sold on the Internet? My view is that you should not sell anything on the Internet for less than an absolute minimum of $100 per year. Assuming a 25% commission (you do the marketing) to 50% (they do the marketing) kick-back, that leaves you with $50 (worst-case) to fund your operations, including customer support.

Product not worth $100? Consider creation of a premium offering, or if that can't be done, buying in third party products to bundle with your offering and bolster the value - so you can get your price up to a level (preferably $150+) where it becomes very hard for a potential distributor to say "no."

The bottom line: most distributors will not touch a product or service that retails for less than "x" amount - and "x" more often than not is $100 per sale. Ignore this advice at your peril.

Whatever you do, don't base your pricing on "gut feel" or single data points. When I priced my best-selling "Heart of Asia" CD-ROM back in the mid-nineties, I set the sale price at US$595 in a market in which most other sets were selling for $99. My thinking was, this price will establish a sense of value and quality, and the people that own post-production studios will make back this investment in two to three sessions.

I was right - and signed up some tremendous distributors, who sold the product for me for the next ten years - like hot cakes. Some nice reviews and quality samples helped - but our premium pricing strategy - 5x the competition - was key to creating a highly profitable product.

Today, we are launching a new tool that we think some entrepreneurs might find useful.

It enables entrepreneurs to create a five year business plan based on the answers to just a few questions. The time needed to reach a rough draft five year financial plan and Executive Summary is just a few minutes.

One of the potentially most powerful components of the tool is the five year financial plan wizard. Now I don't know about you, but in my early days as a struggling entrepreneur, creating financial projections and operating budgets was a huge challenge for a small team - and often took several weeks or even months.

This tool enables you to examine the fundamental financial strength of your business idea - andthe amount of capital you need to raise -after just a few minutes. The key outputs include:

• Sales Projections (five year)
• Operating Budget (monthly)
• Income Statement (five year)
• Balance Sheet (five year)
• Use of Funds Statement (five year)
• Cash Flow Statement (five year)
• Executive Summary
• Draft Business Plan

In addition to creating PDFs of the Business Plan, Financials and Executive Summary, you can upload attachments - there is a data room attached to each project. The data room enables uploading and sharing of documents, such as spreadsheets or sales materials, or slide decks. It is possible to collaborate online with your team members, save different drafts of the same plan, and share messages.

Right now, the tool uses a single web-based business template that enables you to easily see the effects of different pricing. As we move through the beta, we'll be adding more templates to the engine to better account for different business models, and incorporating your feedback as we go.

To launch the Business Plan Generator, you (and any team members) just need to sign up(very simple - takes just 12 seconds on average), then select "Add Company" from the menu. The steps are pretty clear from there - just select "Create Business Plan".

Our goal is create a highly-efficient system that enables entrepreneurs to present a polished set of financials to potential investors - and we'd like you to please let us know if you think we're on a path to achieving that, or what we still need to do to make this happen.

Please give this tool a try and let us know your feedback.