Planning Startup Stories

Some Suggestions for Family Business

by Tim Berry on May 15, 2012

I’ve done business with my wife, daughter, son-in-law, and various mixtures of those. Of course the classic advice on this is not to mix business with family.

But people do. I read somewhere that 62 percent of the gross national product of the Western world is produced by family businesses.

Furthermore, I don’t believe (much) in general rules or best practices.

But here are some suggestions that might help you manage the mix between family and business relationships.

Beware of the crossover. The cause of most family business problems is the crossover between different relationships. You don’t mix boss and subordinate relationships with parent-child or siblings or husband-wife. People who are successful working with family separate the roles so you don’t get into family behavior when you’re talking about business. You have business discussions and personal life, and never the twain shall meet. That’s really hard to do, but it’s also vital.
Use physical location to help. Make a rule not to talk about business at home and not to talk about home and kids and relationship problems at the place of business.
Use physical presence to help. Don’t talk about business in front of the kids. Or the parents.
Recognize communication triggers. Often what started as business discussion is suddenly husband-wife or sibling-sibling or parent-child, stop. Call time out. Have a signal. Adopt a safe word. We spend years in patterned habitual behavior based on the family relationship so stopping it for business is hard. We have to work on it.
Don’t forget to acknowledge the advantages of family business. You are working with people you know and trust who care about the same things you do. You share the problems. You share the rewards.
Don’t pretend it’s all arms length and objective. Family factors influence decisions. It’s naive and distracting to pretend they don’t. Try to be aware of how and when they do and manage the long-term objectives accordingly.
Never stop learning.

My wife and I didn’t intend to build a family business. I was on my own consulting and building products and she was (still is) my advisor and confidante. We grew older and our children grew up. People who were once preteens spending Saturday mornings putting sticky labels on plastic software disks grew up and became interested in the business. We never pushed them to, but never tried to avoid it either.

We did employ a family business counselor for several years. Her name was Bonnie Brown Hartley and she was good for us. We met once a month for a session she ran. At one point that was me and my wife and a son, and later our son left but we had two daughters and their husbands involved. The family meetings were a useful format.

The best thing Bonnie did for us was insist on a written family business code of conduct. I won’t pretend we never broke it, but it was a good idea.

(image: bigstockphoto.com)

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Is Venture Capital Gone Forever

by Tim Berry on May 14, 2012

I completely agree with Steve King of Small Business Labs, in Is the Venture Capital Industry Broken? He says:

The news here isn’t that the VC industry is broken. This has been actively discussed for years. The news is who’s saying it’s broken.

Which is, in the flap this month, the Kauffman Foundation.

The Kauffman Foundation has long been a close friend of the VC industry. In addition to investing many millions of dollars with VCs, Kauffman’s mission of supporting entrepreneurs and high growth companies has resulted in them closely collaborating with the VC industry.

The foundation recently published We Have Met the Enemy and He is Us, a blistering critique of venture capital and its role in startups.

Here’s the problem in one simple business line chart (why I like business charts). It shows how the rate of return on venture capital looked great during the first big Internet boom. It’s not a pretty picture.

On the other hand, those low points in the last few years aren’t uncommon, are they? How is your industry doing since the great recession? The chart shows pretty much what Steve summarizes as follows:

Kauffman has many reasons why the industry is broken. But the quick summary is the industry simply hasn’t performed well. Only 38% of the funds Kauffman invested in over the last couple of decades beat public market small cap indexes. This is primary due to the expensive fees VC firms charge.

So does this mean hard times for startups? I doubt it. I see is a shift towards smaller seed rounds and more angel investment as a web and software technology have reduced the capital needed by the average high-end web startup to get from nowhere to proof of concept and validation. In an oversimplified general sense, what took $2.5 million in 1998 takes probably $250,000 today.

Business comes in cycles. Suppose the huge camelback hump in returns in the late 1990s (the boom) were a temporary aberration. The hard times afterwards (the crash) are probably a temporary aberration too.

Steve recommends this story in GigaOm and this one by Fred Wilson of AVC for further reflections on the Kauffman findings.

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3 Essential Truths About Startups and Investment

by Tim Berry on May 11, 2012

Today I’m answering, with this post, a lot of similar questions I get often in email, where somebody is asking me how to get connected to or hooked up with or recommended properly for angel investment. Here are some unpleasant and unpopular facts about startups and investment.

Only friends and family believe in you and invest in you because you’re you. And that’s if your friends and family do believe in you; that’s not true for everybody. Outside investors, in sharp contrast to friends and family, either believe in your business prospects, your market, and your team, or they don’t invest. They’re doing it to make themselves money. (back story: I get a lot of emails from people asking how they can get investment for their business when they have pretty much nothing to offer investors. The answer is: You can’t.) Or not at all.
About that great idea you have that’s worth $5 billion for which you need $500 million to get started: unless you’re already a startup star, or an oil prince, or family wealth princess, just forget it. Mark Andreesen or Mark Cuban or Paul Allen could maybe get $500 million for a new idea. You can’t. (If it makes you feel better, neither can I). Give it up or scale it down to a $5 million idea that takes $5,000 to get started; or just forget it.
All of you newbies – new to entrepreneurship, no successful startups, no traction — asking how you start your business with no money: Please, get real. Once in a blue moon a foundation or government agency will grant some money, and usually that’s just a low-interest loan, to some proposal that has social and economic value that fits government priorities. We see this in special development zones, some scientific or defense-related research areas, and occasionally with private money committed to social good. But it’s rare. If you aren’t one of those special cases, forget it. And if you are, do your homework, find out what really happens with grants and such.

If you’re still interested in a startup, stop looking for some pie-in-the-sky solution. Get a job in the business area that interests you, and learn the business. Partner up with people who’ve been there already. And do your homework, look up all those web pages full of good advice about startups, including this one, bplans.com, which is full of information about what you can and can’t do. If you’re in the U.S., connect with your local Small Business Development Center, or Women’s Business Center, or Small Business Administration (SBA) office. If not, find the equivalent in your country. Get some real info, and then do the work: do some research, develop a realistic plan, take real steps.

Starting a business isn’t a right. The government doesn’t owe you your startup. You have to make it happen.

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The Mac vs. Windows Rivalry is Dead. Apple Won.

by Tim Berry on May 10, 2012

Whoops. It suddenly occurred to me: the old Mac-Windows rivalry is dead. There goes a bit of industry history.

It used to be fun, back in the old days, when it mattered. If you’re old enough you’ll remember the famous 1984 Macintosh ad. I was generally forgiven by the Mac zealots for my weakness for Windows, but only because I also used Macs and recognized their superiority. My Mac friends treated my sympathy for Windows systems as a forgivable flaw in my character.

I used to tell this modified version of an old joke:

Somebody dies and goes to heaven. On arrival, St. Peter gives him the quick tour of the place. As they go through heaven from place to place, they look at the mall, the school, the park … and they keep seeing a high wall on one side or the other. Finally, the new arrival can’t resist asking: “What’s with the wall?” St. Peter Answers: “That’s where we keep the Mac users. They like to think they’re the only ones here.”

I like Apple. I consulted with Apple from 1982 to 1994. Apple loaned me an Apple II in 1983 and a Macintosh early in 1984. I wrote the first book laid out on an AppleLaserWriter (at least according to me and McGraw-Hill Microtext, the publisher). As a consultant to Apple, I worried as Windows started to effectively imitate the Mac — not that it was as good, but it was good enough to fool a buyer in a store. And it was personally painful to me when the Windows system so dominated business computing, the late 1990s and early 2000s, that we (temporarily) dropped our Mac business plan product. We really had to. By 2000 a Mac product was costing ten times more than Windows to develop, and its market was about ten times less than Windows. Business is business.

By 2004 my computing was all Windows. And at that point my computing was all Windows. It wasn’t torture. Windows worked. I use a computer to get things done, and Windows did. I may have still preferred Mac, but hey, business is business.

And then the Mac came back. We saw them first in airports, the MacBooks, silently gaining strength and visibility. Then there was the iPhone, and more MacBooks. And then the gorgeous new iMacs. I taught an entrepreneurship class at the University of Oregon from 1998 through 2009. In the beginning all my students had Windows laptops. By the end, 80% of them were on Macs.

Once again, being Mac literate is good business. At Palo Alto Software, our LivePlan SaaS app is browser-based, operating system neutral, and developed mostly on Macs. And Mac software, and the Mac software market, are growth markets again. The app store works. Happy ending.

So now I’m almost all Mac again. I have two iMacs at home, a MacBook air, and iPhone and iPad, and I love it. An old friend. Isn’t computing great? And my Windows 7 desktop, in the office at the company, still works just fine too, thanks. It’s not good and evil, just computing.

But don’t tell the Linux geeks.

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Will Success Spoil Ted.com?

by Tim Berry on May 9, 2012

I’ve watched dozens of TED talks online and never seen a bad one.

TED stands for Technology, Education, and Design. It started in 1984. Since 1990 it was located in a conference center outside of Monterrey CA. Since 2001 it’s been curated mainly by Chris Anderson.

Most TED conferences were amazing. I’ve never been, but what I’ve seen is a collection of excellent presentations about compelling ideas and information delivered by the best and the brightest in the world. If you’ve been reading this blog you’ve seen TED talks off and on. Since I first discovered the online TED talks at TED.com I’ve been back to that well regularly. And what I’ve found has been consistent highest quality of thought, communication, and, specifically, presentations.

For more than a dozen of my favorites, from previous posts on this blog, use this link.

So far, so good. Can anybody blame TED for wanting to branch out and expand? Not me. TED is now branching out to TEDx talks that are way less exclusive. Look around for TEDx on the web and you’ll see the TEDx talks popping up everywhere. Here’s what TED says about TEDx:

Created in the spirit of TED’s mission, “ideas worth spreading,” the TEDx program is designed to give communities, organizations and individuals the opportunity to stimulate dialogue through TED-like experiences at the local level. TEDx events are fully planned and coordinated independently, on a community-by-community basis.

In theory that’s great, but what if the end result is that TED talk no longer means guarantee of high quality? I hope the TED tradition continues. But here’s the concern I have: Does that mean dilution of quality? A lower bar? More people presenting to more people on more subjects in many more locations?

TED says that 231 TEDx conferences were held last month.

And meanwhile, just to make that a bit more real, this morning I clicked a TEDx link in my email to end up with this disappointing result:

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True Story: A Great Presentation Wins Big

by Tim Berry on May 8, 2012

Do great presentations launch businesses? Not always, perhaps, but sometimes, yes. And in this case, yes. Or maybe it’s just a great business.

I was in Austin TX at the event last Saturday when NuMat Technologies, a startup launched at Northwestern, won the University of Texas’ Venture Labs Investment Competition. I was also at Rice in Houston two weeks earlier when NuMat won the Rice Business Plan Competition.

Both of these victories matter. The Venture Labs competition pits winners of other competitions against each other. It was the first of the big MBA-level business plan competitions when it began in 1984, and bills itself as the SuperBowl of these contest. The Rice version has the highest payoff, more than $1.5 million total prizes, and close to $1 million for the winners. Both of them require at least one MBA student, from any accredited institution, for eligibility. Both of them include startups from Asia, Latin America, and Europe.

I haven’t read the NuMat business plan, but I did see the NuMat pitch, which was sensational. The key was explaining the science just enough to be credible, focusing on the business, and keeping it clear and flowing from point to point. I hope NuMaT will do an online video of that so you can see it.

In the meantime, I’ve embedded a very short YouTube video that explains the science surprisingly well in just about one minute. Clearly, somebody on this team is a good communicator:

If you don’t see that here, you can click this link to see it on YouTube. The quick summary is that it seems poised to change the way gases are stored. Think about those very heavy metal compressed gas tanks like the LNG fuel tanks in LNG-powered vehicle. Think what would happen if the same or more gas could be stored in a new substance that wouldn’t let it leak but wouldn’t require compression. This looks like a real game changer.

Conclusion? Yes: hey NuMat, post your pitch online!

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Disrupt Education … Please!

by Tim Berry on May 7, 2012

I wonder if we as a society are ever going to figure out how technology can disrupt our antiquated systems for educating our children.

Think about what’s happened to information, social interaction, research, and business over the web — not to mention mobile technology — and then think about education. Preschool, K-12, and higher education.

Would anybody disagree that the institutions we depended on as kids are now embattled and crumbling as a result of political and economic factors? Higher ed has had the worst inflation of any industry I can think of over the last two generations. And the K-12 still depends on the old model of the teacher and two or three dozen students in a single classroom.

Innovation, yes, all over the place … but has it really changed anything yet?

And why not? Last week Shelley Palmer‘s email update tipped me off to Harvard and M.I.T. Offer Free Online Courses on YTimes.com, and a new Stanford-related venture called Coursera, a Web portal to distribute a broad array of interactive courses in the humanities, social sciences, physical sciences and engineering.

Also last week I received this in email…

(The innovative minds at TED have brought a new educational video website to the head of the class. Today, TED-Ed launched http://ed.ted.com a site that features TED-Ed’s original K-12 animated videos with accompanying lessons and quizzes. On top of that, the site allows educators to create original lessons for any YouTube video, rendering the video on a new link where teachers can monitor student progress.

And I’ve subscribed to several and offer several courses at udemy.com myself. And by this time we’ve all heard of Kahn Academy, another compilation of online courses.

How many universities are offering online courses? How many of those are simply free to users? How many at very attractive prices?

But what about attendance, homework, kids doing things they don’t want to do, people growing up, validation, certification, leverage, consistency?

My angel investment group is looking in detail at EdCaliber, which offers online tools for K-12 teachers. And I saw two additional education business plans over the last three weeks at business plan competitions at Rice and the University of Texas.

I’m hoping something really changes public education for the better. I haven’t seen it yet.

(Image: bigstockphoto.com)

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Is This Mad Men Then or Silicon Valley Now?

by Tim Berry on May 4, 2012

A lot has happened during my lifetime to give women more and better choices. What you see in the TV drama Mad Men about how hard the business world was for women, back then, is what I remember from those times. So there has been progress.

But damn, let’s not confuse progress towards equality with equality.

Read “Silicon Valley’s Brogrammer Problem” on Mother Jones. It’s good Journalism, not muckraking. You’ll be amazed that this is happening now, and in Silicon Valley. Calendar girls, frat-boy bragging, and general stupidity. But it is. Take my word for it, I know it does.

What? Not in some fictional way back when, but in 2012? Who’s going to believe that?

I am.

I don’t like it. This is bad for all. My suggestions:

Acknowledge that it’s still true.
Speak out against it.
Don’t let it happen in the environments you influence.

What do you think?

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What Kickstarter Means to You — Maybe

by Tim Berry on May 3, 2012

I’ve had several visits to Kickstarter.com in the last week. First because some friends of mine are looking to launch a project there. Second, because I’m getting so interested in crowdfunding. Third, because of the Three Years of Kickstarter Projects infographic on NYTimes.com.

At kickstarter, I saw the Pebble project that’s raised more than $8 million for an epaper watch. It was at $6.6 million when I first saw it last week. This morning it’s at $8.3 million.

While I was at Kickstarter, I preordered my Phonesoap unit there for $39. I saw Phonesoap at the Rice Business Plan Competition two weeks ago. It didn’t win that contest, but it has now won $63K of the best kind of financing, without question, which is sales.

Every entrepreneur has to go look at what’s happened with that project. Take a step back, exhale, and think of this as the best possible kind of financing: prepaid sales. The people who’ve contributed to Kickstarter don’t get a share of ownership. They get future product, not yet built. And they have to fit into one of the standard kickstarter.com categories. You can get that with the NYTimes infographic.

Need I saw more? Go look at it.

So what’s going on at Kickstarter? The best possible financing, sales as pre-sales or pre-order sales. It’s not technically crowdfunding, but it’s better than that, because it doesn’t dilute ownership.

By the way, speaking of crowdfunding, Myventurepad.com this week released a free ebook called The Revolution in Venture Funding, which covers the topic pretty well . Disclosure: I’m one of the authors.

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Is There a Tech Bubble? We’ll Know If It Pops

by Tim Berry on May 2, 2012

Earlier today I posted disruption vs. revenue and the tech bubble on the gust.com blog. I’m suggesting in that post that some special-case web-based startups have to choose between disruption or revenue, because they can’t have both.

That may or may not be true, but I’ve been guilty of suggesting it is to a couple of startup software companies recently. I think both were special cases. They had a real chance to go really big and generate spontaneous buzz based on the product itself. But locking their wares behind pay walls might slow their growth and dampen their success.

That may or may not be true. After the tech crash in 2000, I never thought I’d see that happen again, much less me recommending not covering expenses with revenue. Still, though, there’s Facebook and Twitter and Instagram and, oh my.

Bubble? Las Sunday the NYTimes’ bits blog published Disruptions: With No Revenue, an Illusion of Value. Author Nick Bilton says yes there’s a bubble and tells why he’s sure.

When this next bubble pops — and it will pop — the idea to make no money can finally pop, too. Then investors can start working with companies to build businesses that have long-term financial goals, instead of just building a short-term mystery.

But on the same day Chris Dixon (smart person) asked Is It a Tech Bubble on his blog and answered with some convincing analysis, “no.” And the second comment on that post is Fred Wilson of AVC (another smart person) saying:

[Zynga price] certainly doesn’t seem like a bubble valuation either. I do think there is more money sloshing around the tech/internet/mobile sector now than there has ever been. and that is impacting valuations across the board. The question is if this is temporary or the “new normal”. I guess we will find out.

So I’d like to answer this tech bubble question here, but as I was writing this, on Sunday, those other interesting and contradictory posts, from smart people, kept rolling onto the web. I ended up tweeting my conclusion to this post last Sunday, with the following tweet.