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Exit Strategies and the American Dream

Filed in archive Entrepreneurship , Venture Capital by Greg Cruey on June 28, 2010

Do you really need an angel investor?
© Brooke Anderson


Why do people start their own business? If you've been to business school you know the answer (at least you know what the answer is supposed to be): to create a platform for raising capital, so that you can get the money to expand your startup business and then sell it to a bigger business.

If, on the other hand, you never went to business school (and you still subscribe to the vision of life illustrated in Little House on the Prairie, or Leave it to Beaver, or Mayberry RFD) you might think that people start their own business so that they can be independent (be their own boss), live life the way they want, reap the rewards of their own labor, and enjoy life.

Vivek Wadhwa recently took a look at those two opposing views of entrepreneurship. Wadhwa says that more and more investors are looking at the slow-and-steady path of building a business without looking for angel investors or venture capital funding - a lifestyle business that lets them enjoy their business for a while before the investors take it over.

The article is an inspiring look at what we used to call the American Dream...

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The First Time You Hire...

Filed in archive Entrepreneurship by Greg Cruey on June 23, 2010

The First Time You Hire...
© bradleygee


Hiring employees is already a minefield of sorts. How do you verify what they put on their resumes? How do you get them to adopt the company values and culture instead of reshaping the company values and culture? How do you get them to stay with you over the long haul instead of just using you to build a little experience before moving on to one of your competitors?

As hard as hiring can be, it's even hard when you haven't done it before. And with the economy slowly beginning to pick up, there are a lot of small businesses starting up. They're hiring their very first employees.

Young Entrepreneur has a good reference piece on some of the things you need to do as a start up the very first time you hire. They're simple things, like get an Employer Tax Identification Number (EIN) and register for unemployment insurance tax. As simple as they are, they can become painful issues if you overlook them.

The piece is a good checklist to hang on to.

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Does Money Motivate Employees?

Filed in archive Entrepreneurship by Greg Cruey on June 18, 2010

Does money really motivate your employees? It depends...

Entrepreneur Corner used this video today from RSA Animate on Drive: the surprising truth about what motivates us. But I've seen it two or three other places now. And it's pretty thought provoking.

As an entrepreneur you just have to be concerned with the issue of what will make your workers be the most productive. RSA's video looks at basic research on the topic. The conclusion is that money is a powerful motivator if the work is the sort of manual, repetitive, brainless stuff that gets done on many assembly lines.

Let's say the job is tying knots in a piece of rope. If you tell an employee that they have to tie 100 knots an hour to keep their job (which pays six bucks an hour) they'll tie 100 knots an hour. If you tell them that you'll bump their pay up to $6.50 an hour if they average 125 knots an hour each day, you'll get 125 knots an hour. Up it to $7 an hour for 160 knots an hour and most of your employees will perform to that level. And so it continues, out to the edge of human capability.

But it the task is more cognitive (as opposed to the sort of manual, repetitive, brainless stuff in the last paragraph), offering extra pay for performance makes the quality of work actually go down. (Does that explain why it's a bad idea to give mortgage bankers bonuses for being "more productive?") Sure, money's still an issue (unless you pay enough for it to not be an issue); but there are more powerful motivators for this kind of work.

Watch the video...

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Crowdfunding: The Future of Venture Capital?

Filed in archive Venture Capital by Greg Cruey on June 6, 2010

Kevin Lawton has a fascinating and insightful look at the future of the venture capital industry online at the moment. I've embedded his slides below.

Let me summarize Lawton's train of thought. For years the VC industry has been about those few exception business ("outliers") with innovation, marketable ideas. Find one, and your famous. Then you can start your own VC firm. But the chances of finding two such startups in one lifetime are slim indeed. And once you start your own VC firm you probably hang out with people that make finding such a startup (the next Apple or Microsoft) slim indeed.

Enter the concept of crowdfunding - an adaptation of crowdsourcing, where Internet users contribute to a project online. Lawton reckons that crowdfunding could me the new model for VC funding. Lawton points to GrowVC as a model. He basically advocates replacing the traditional VC model with the "Wisdom of the Crowd."

Is it the future of VC? Time will tell...

The New Face Of Venture Capital, Part 2

View more presentations from trendcaller.

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The Venture Capital Relationship

Filed in archive Venture Capital by Greg Cruey on May 29, 2010

The Venture Capital Relationship
© e Mill

If your idea of venture capital funding includes anything like a loan application, your idea of VC funding is based on a misconception. In the words of Nat Goldhaber, Venture Capital funding is more like a relationship than a transaction. And the paperwork? That's more like a dating profile you're building than a loan application.

That cuts both ways. As Nat points out, when you take venture capital money you may as well think of it as marrying your investor. Like marriage, you are entering into a long term partnership. It may not be completely permanent, but it's as close as it gets in the business world.

Would you want your daughter to marry the first guy that came along, just because he'd be willing to have her? It's easy to think of VC companies as rich old men and startups as desperate women. That doesn't make for much of a marriage. Think about that...

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