So you want to launch a business...

Who owns your website?

This could happen to you!

After several years of increasing activity on his website, Dave decided to move it from a local hosting company to the "cloud."  He didn't want to take a chance on downtime disrupting the lucrative online arm of his import business.

He made all the necessary arrangements with one of the big cloud hosts and then instructed his local host to transfer everything.  Then the hammer fell.  "No problem," they said, "as long as you pay us $100,000 for the copyrights to the site."  "Wait," replied Dave.  "I paid you to develop that site.  It's mine."  "Yes, you paid for the development, but not for the copyright."

Mad scrambling followed to no avail, and very shortly Dave heard his lawyer say these fateful words.  "The work you paid for does not fall under any of the "work for hire" provisions that automatically transfer copyright.  Your contract with the developer/hosting company does not contain any transfer of ownership language.  They are correct.  Since there is no separate licensing agreement that signs the work over to you, they own the copyright."

Dave had to pay up.

How might your business be damaged if somebody else "owned" your website?

If your contract with your web developer is missing one short, but very important, paragraph, you probably do not own the copyright.  I checked this out with The Creekmore Law Firm PC.  They confirmed this hidden business risk.

You might want to check with your attorney, too.  And you might want to read your web development deal document.

And never forget - everybody is your friend until there is real money involved.

Bet the jockey, not the horse. Or not.

Way back in 1999, the Fast Company Consultant Debunking Unit did a MythBusters job on the old saying, "bet the jockey, not the horse."  Here's an excerpt...

"At the 1998 Fall Meet -- 24 days of races at Churchill Downs -- Hall of Fame jockey Pat Day raced 163 horses and won 43 times, winning 26.3% of his races. Jockey Calvin Borel raced 184 horses, and won 35 times, posting a 19% winning percentage. If you were betting on the jockey, you'd bet on Day. But, says Asher, if you had placed $2 to win on every horse that Day rode, you would have lost money -- $40.80, to be exact. And if you had placed $2 to win on every horse that Borel rode, you would have come out ahead -- by $58.80. That's because the odds reflect the quality of the horses. So much for betting on the jockey."

What does that mean with regard to early stage investing today?  Should investors really bet on the management team rather than the business proposition?  In practice, do they really follow the "bet the jockey" rule of thumb?

Studies of angel investing behaviors generally indicate that the entrepreneur and the management team are dominant factors in decisions to invest, or not.  A Richard Sudek study, published in the Journal of Small Business Strategy, names as the number one consideration "the passion and commitment of the entrepreneur."  Omigosh, that's MOXIE.  Second comes trustworthiness of the founder.  Third comes the remainder of the management team.

So, if you're going to the race track, bet the horse.  But if you're involved in startup businesses, either as an entrepreneur or as an investor, the common wisdom remains "bet the jockey."

Why?

My own opinion is that investors bet the jockey because they are well aware that nothing goes according to plan.  More often than not, the business proposition must be altered to respond to fresh knowledge coming from the marketplace.  The horse itself must be changed.  Yes, the entrepreneurial jockeys have to change horses in midstream.  This understanding of the startup world argues in favor of passionate, fully committed leadership, surrounded by a competent, experienced team.  A group like that can catch, train, and ride whichever horse best suits the racing conditions.

Start with MOXIE!

Does anybody like Donald Trump?

Never confuse success with achievement.  Achievement is earned.  Success is merely the convergence of favorable circumstances.

I have never met either Donald Trump or Warren Buffett personally.  I have, however, met their public personae; and I think those are worth a few paragraphs of comparison for any aspiring entrepreneur in the process of tuning up a vision that is worth a few years of total dedication.

Here's what Wikipedia has to say about "the Donald."  Donald John Trump (born June 14, 1946) is an American business magnate, socialite, author and television personality.

And here's their reference to Warren Buffett. Warren Edward Buffett (born August 30, 1930) is an American investor, industrialist, and philanthropist.

The difference is clearly evident to even the most casual reader. And I think it's safe to say that very few of us would recognize Warren Buffett if we met him on the street.

Interestingly enough, both men had businessmen for fathers.  And both attended the Wharton School.  Trump flamboyantly parlayed his $200 million share of his father's fortune into much larger holdings.  By contrast, Buffett acquired his own investment "grub stake" from a variety of personal entrepreneurial ventures before he finished college, and turned it into one of the world's largest fortunes.

Trump has made a respectable number of public donations to charities of various sorts.  Buffett has publicly announced that he will leave essentially all of his wealth to charity, and began by making the largest single donation in history, giving over $30 billion to the Bill and Melinda Gates Foundation.

Here's a characteristic quote from Buffett. 

“My luck was accentuated by my living in a market system that sometimes produces distorted results, though overall it serves our country well... I’ve worked in an economy that rewards someone who saves the lives of others on a battlefield with a medal, rewards a great teacher with thank-you notes from parents, but rewards those who can detect the mispricing of securities with sums reaching into the billions. In short, fate’s distribution of long straws is wildly capricious.”

Here's a characteristic quote from Trump.

"You're fired!"

Why do I make this comparison?  In earlier posts I have asserted that it is worthwhile to examine all proposed actions according to some set of "noble principles."  I will repeat my starter set here, for those of you who missed it the first time.

• The fundamental importance of honesty, integrity, and responsibility;
• The inherent worth and dignity of every single person;
• The importance of justice, equity, and compassion in all relationships;
• The enlightening power of a continuing, free, and responsible search for truth and meaning;
• The right and the responsibility of each individual to act in good conscience in moderating behaviors, both personal and corporate;
• Respect for the interdependent web of all existence upon which we all depend for survival.

I would also suggest that it is likewise worthwhile to temper reasonable "me-first" motivating factors with powerful "others-first," capital-M, Meaning, what Michael Ray calls our "highest goal."  According to Guy Kawasaki

 "...making meaning is the most powerful motivator there is."

What do you think?

Angel funding - a stairway to heaven, or someplace else?

A few months ago, as a bootstrapping entrepreneur, Jeffrey was his own boss; and his first and only daily priority was to delight and amaze his clients - at a profit.  Now, as an angel-funded business manager, Jeffrey reports to his brand-new Board of Directors; and his first and only daily priority is to prepare his company for near-term acquisition by some unknown set of new bosses. 

If his company is acquired, Jeffrey will, indeed, enjoy a very nice monetary payday.  He will also enter contractual involuntary servitude for three years or more, because the new owners always want to lock up the key talent as part of the deal.

Jeffrey is satisfied with his situation.  The trade-offs are acceptable.  But not all stories end this way.

 

If you want to fly with the angels, you have to fulfill all the entry requirements for heaven.

Financial angels do not dispense charity.  They invest in early stage, risky businesses with the clear expectation of extraordinary returns.  They mitigate their risk by considering many, many alternatives, selecting only a few.  And they often attempt to limit their risk further by actively participating in the management of their portfolio companies, almost always at the Board level and sometimes beyond.

Do you need angel investment, or just want it?  Are you just trying to reduce your risk by transferring it to others?  Or is there a clear strategic need for a cash infusion?

Once you are sure you need outside funding, be ready for a long grind.  It wasn't easy for Jeffrey to secure his investment.  Locating, attracting, and convincing a double digit number of angels is a grueling process.  And if you succeed in raising the money, your life changes forever - just like Jeffrey.

Once you take a single dollar of somebody else's money, your job is to sell your company, quickly and at a high multiple.  If that quest goes well, and stays on the timeline, you may have a nice ride.  If it does not, ouch!

Startup heaven can be transformed into a much less appealing place almost overnight.

Angel investment arrangements always include covenants that give the investors more and more control in case of missed milestones.  These covenants may all be quite reasonable and equitable, but they are nonetheless painful if they are invoked.  Some good friends of mine were squeezed all the way out of their company by disappointed angels.  That doesn't happen often; but it's not a pleasant experience if you are on the receiving end.

So - angel investment should be strategically important and acceptably risky, not only to the angels, but to you, the bootstrapping entrepreneur.  They might lose their money.  You might lose your company.

How to kiss a giraffe...

"There is no greater act of courage than being the one who kisses first."

                                    - Janeane Garofalo

Note:  The following anecdote is an excerpt from "Guests at the MOXIE Hotel," an unpublished, anonymous, hand-written manuscript found under a pile of ancient National Geographic magazines in a rundown beach cottage on the Oregon coast.  Some researchers believe the manuscript may be the last remaining link to D.B. Cooper.  Others disagree.

Low clouds hung over the beach, and the spray from the wind-tossed breakers carried an uncommon chill.  Hot tea was definitely in order.  Just as I turned to follow my sandy footprints back to the November quiet of the shuttered resort, a dull gray bottle washed in from who-knows-where.  Alone, yet not wanting to seem unreasonably stuffy and aloof, I picked it up, and popped out the customary old and weathered cork.  No genie appeared.  What a shock!

BUT THEN ... a quiet, gentle voice reached out to me, tempting, tempting.  "You have one month and three choices," it said.  "If you kiss a puppy, full on the lips, your bank account will be instantly enriched by $100."

Nice, I thought, but no big deal.  Not very tough, but not much payoff, either.

The voice-from-the-bottle went on. "Or - you may choose to kiss a mule, full on the lips, and your bank account will be enriched by $1,000."

This was getting interesting.  Mules do have some prodigious choppers, being herbivores and all; but I figured could probably get the job done without any permanent damage to my hauntingly average good looks.

"Or," my mysterious friend continued, "you may choose to kiss a giraffe, full on the lips, and have your bank account enriched by $1,000,000."

Whoa!  A million bucks.  But kiss a giraffe?  How was I going to pull that off?  First, I'd have to find a giraffe.  Then... whatever.

Leaving the bottle on the sand, I turned my back on the mist-muted sunset and headed for a warmer place and a hot cup of tea.

Back at the all-but-empty cafe, I sipped my tea and considered my options.  Hmmm.  I could be hallucinating.  I should probably forget the whole thing, mention it to no one, and get on with life.  Of course, the puppy deal would be an easy $100, and nobody would notice.  But why bother?  Chump change.  The mule stunt would be tough to hide.  If anybody asked why I thought it was a good idea to kiss a mule, I obviously couldn't say a talking bottle told me it was worth $1,000.

But, for a million dollars, I ought to be able to come up with a good story.  On the other hand, getting access to a giraffe, finding a way to get to kissing height, enticing the giraffe to cooperate, and so on, would definitely cost some time, and possibly some serious money - all before I got my million.  I'd be risking some raised eyebrows and a not a few bucks.  My boss might even think I had gone around the bend, and give me a 100% chance to work somewhere else. 

My teacup was empty.  My mind was made up.  I walked out of the cafe and headed for my car.  As I turned the key to unlock the door, the dull gray bottle rattled across the pavement and, almost expectantly, came to rest against my left foot.  If this was a hallucination, it was a good one.  I sucked in a full tank of cold, salty air, and dutifully urged the cork to freedom.

"Have you chosen?"

"Yes," I said. "I'll take the giraffe."

"I thought you would."  Silence.  I sensed just a hint of a sigh, and perhaps a chuckle.  Then I heard, with painful clarity, the unbearable truth.  "The three option deal was just a test.  I have no way to put money in your bank account.  Besides, anyone in his right mind knows that talking bottles only appear in fairy tales and hallucinations." 

"Go find a lonely, untamed, very large, unusual market that really wants a kiss, and lay a big juicy one right on its lips.  Create a startup business that matters to somebody besides you.  The million dollars will follow in due course - perhaps."

"But you said..."

"Yes, you're right," said the talking bottle.  "I quite arbitrarily changed the deal; but sometimes life just isn't fair.  It's dangerous to forget that.  And don't forget this either..."

"If making a million bucks was easy, anybody could do it."

~***~

Artists, Salesmen, and Heroes

"An artist is a dreamer consenting to dream of the actual world."

George Santayana

"Artists must be sacrificed to their art. Like bees, they must put their lives into the sting they give."

Ralph Waldo Emerson

"In the modern world of business, it is useless to be a creative original thinker unless you can also sell what you create."

David M. Ogilvy

"The speed of the boss is the speed of the team."

Lee Iacocca

What an amazing challenge it is to be an entrepreneur!!  And what a privilege!!

True entrepreneurs do it all.  They imagine it, bet their egos and their fortunes on it, build it, and sell it.  They create alone, for their own intellectual and spiritual delight.  Then they inspire teams to achieve the full realization of their inventions.  And then they set to work on and for others, to transfer the value of their creations to the needy but ignorant marketplaces.  And quite often they fail.

Entrepreneurship is not for the faint of heart.  It is not for those who relish peace and contentment.  And it is most certainly not for those who lack the courage of their convictions. 

Startup businesses are for those who would, like Tennyson's Ulysses, gather a team of staunch comrades and seek the ultimate adventure, by choosing to "sail beyond the sunset, beyond the baths of the western stars... strong in will to strive, to seek, to find, and not to yield."

If you are part artist, part salesman, and part hero, then there may be a startup in your future.  And you will definitely be off on a great adventure.