So you want to launch a business...

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?

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.

Are you headed for burnout?

"Laughter and tears are both responses to frustration and exhaustion. I myself prefer to laugh, since there is less cleaning up to do afterward."

     - Kurt Vonnegut

A startup business is a great place to get worn out.  If you find yourself in that sad state, here's some great advice from Tara Rodden Robinson.  It appears she was running low on MOXIE, but caught herself in time.

Looking back, there were warning signs.

* Going through the motions.

* Heard it all before.

* Stale. All my ideas were past their expiration dates.

* Attention span on empty.

Don’t let this happen to you. If you see these signs, then stop, drop, and roll.

Stop: running around only fans the flames that are burning you out.

Drop: out of sight, out of mind, out of your routine, out of your daily normal.

Roll: in the grass, in the sunshine, in the ease of an unplanned, spontaneous day.

Thanks, Tara!  Every so often we all need permission to crash productively.

@nametagscott goes for the throat!

Three Tweets from @nametagscott...

LET ME SUGGEST THIS: If your idea is your passion, but doesn’t have a viable market, you lose.

LET ME SUGGEST THIS: If your idea is intrinsically appealing, but something you suck at, you lose.

LET ME SUGGEST THIS: If your idea is sellable, but something you would hate doing for thirteen hours a day, you lose.

If you're an entrepreneur, or might-be entrepreneur, or wanna-be entrepreneur, and you haven't stumbled on @nametagscott, you're missing a great chance to be profitably uncomfortable.

Scott Ginsberg tries his best, and usually succeeds, to jolt people out of their warm, fuzzy places, and to enable them to take a fresh view of reality.  He's a little bit crazy, but that's what makes him memorable.  And he knows he's a little bit crazy.  That's what makes him effective.

A while back I posted about mental mildew, its effects, and some ways to combat it.  Where mental mildew is concerned, Scott and others of his ilk, are full strength Lysol.

So why did I pick these particular bon mots from among Scott's 3,569 tweets to date?  To be honest, they first caught my eye because they were all tweeted together, and had a nice symmetry of construction.  They were well-constructed from a presentation and persuasion standpoint.  (I said Scott was a little bit crazy.  I didn't say he hadn't mastered his craft.)  Once they had caught my eye, however, I noticed that they validated my own assertions for entrepreneurs.  That was flattering to old Jim Flowers, believe me.

Validated how, you ask?  Here's how. 

Scott, the Mentor, tweeted a set of three go-for-the-throat assertions that landed squarely on Market, Magic, and Moxie.  Yep!  Every successful startup involves a real market, not one the entrepreneur dreams up.  And the new company has to execute in a magical manner that sets it apart from the crowd.  And the founder give everything to the venture.  He has to outwork his competition.

Thanks, Scott.

There really isn't that much new stuff in the world of business.  But there can always be new ways of expressing the ancient truths.  And those new ways can provide moments of high insight to people who have been lulled to sleep by the old words and phrases.

Four ways to make sure your startup flops

"Fail fast.  Fail cheap.  Live to fight another day."

- Anonymous

Well, these four tips, if you follow them carefully, can almost guarantee that your startup business will fail.  Fast and cheap are always relative.

• Come late to the party.  It's scheduled for 8.  8:30 or 8:45 should be no problem.  You have plenty of time to wash the car before you get cleaned up.

You've probably managed to arrive late for a party at some time in your life.  I have.  What was it like?  See if this sounds familiar.

First, nobody notices that you have arrived.  The host is no longer hovering by the door to greet you.  All the timely guests have formed closed groups and are engaged in earnest conversation.  The best hors d' oeuvres are gone.  And everyone is at least one drink ahead of you. 

Palm Pre was late to the smartphone party.  Need I say more?

• Copy the most successful competitor.  It's the music that sells, not the band.  I have hundreds of CDs by bands I've never seen in person.

See if this is who you want to be.  I just grabbed it off the web.

"Almost Famous is one of the best cover bands around today. That's a bold statement, but it's exactly what you'll be saying after you experience one of their shows. With a completely fired-up & kickass stage show, Almost Famous combines pure hedonistic rock & roll debauchery with some of the most talented musicians in the NY Metro Area...the majority of whom have been signed to major labels or recorded & toured with major acts around the globe."

And now they're almost famous.  I'll bet they're almost rich, too.

And don't forget the all the rich Elvis impersonators.

• Don't sweat the details.   Attorneys and accountants are always crying wolf, just to grab some big fees.  Charge ahead.  You can always clean up any small messes later.  Right?

OOPS! 

"BlackBerry maker Research in Motion agreed to pay $612.5 million to patent holding company NTP to settle a long-running dispute that had threatened to shut down the popular wireless e-mail service for its 3 million users." Their PR team tried to spin that as a reasonable licensing fee.  Um hm.

And there was Enron, etc, etc.

• Don't try very hard.  After all, the libraries are full of biographies of famous people who became incredibly successful by dabbling in things on a part-time basis.

Yeah, right.

OK, I'll re-state the obvious, just in case. 

• Find a Market you can enter early, so you can ride the growth wave.

• Create some Magic that sets you apart from the ho-hum competition.

• Enlist a good batch of Mentors who can point out all the possible not-so-obvious pitfalls.

• And bring along enough Moxie to see you through the tough times that always come.

A taste of MOXIE

MOXIE - the soft drink of true entrepreneurs.

Here's the story of MOXIE - as told and demonstrated by the "MOXIE man" in Lisbon Falls, Maine.

You may want to try it yourself. It's available online at www.buymoxie.com .

Who gets a piece of the action?

Question from a reader: Four friends helped me put together a prototype of a new product I dreamed up.  If I start a company, should they all get stock?

You are not alone.  I hear this question, in one form or another, quite regularly. 

Equity is forever - or at least until you sell the company.  And it is typically reserved for people or institutions that are active in the business, as long-term, strategic participants or financial risk takers. 

Cash, on the other hand, is the universally recommended medium for acquiring commodity products and services that are not strategic to the business.  Bestowing equity on any entity in lieu of cash payment amounts to paying forever for products or services that may not even remain relevant a short time into the future.

The following questions may help you with your deliberations.

Will your friends be key employees in your new company?  Or did they simply provide some free labor for you when you had no money to pay anyone?

Did one or more of them contribute a significant idea that improved your product?  Or did they merely help you execute your ideas?

Have you already led them to believe that they have earned some ownership share in your invention?

Since you have four friends involved, I am tempted to guess that you may have one or two who might be considered strategic, and others who are not.  As tough as this may seem, now is the time to bite the bullet and make such distinctions clear.  It will take some Moxie; but it's absolutely the correct thing to do.  Here's why.

Any equity given to non-strategic players clearly devalues the equity of the true strategic participants, including you, both financially and psychologically.  Consider this line of thinking: "I did a mountain of inventing and weeks of work for my shares.  All he did was turn a few screws one Saturday afternoon."

Minority shareholders have the right to inspect the books of the corporation.  That means that they constitute a potential leak of sensitive information to non-shareholder employees, competitors, suppliers, or others.  They can also formally object to compensation plans that may seem to unreasonably favor owner-executives.

Minority owners can create difficulties with important shareholder actions downstream, particularly equity financing and re-structuring for merger or acquisition.  Laws vary from state to state, but there are potentially annoying anti-oppression provisions in force almost everywhere.

So - when in doubt, pay cash.  And when there is potential mis-understanding, clear it up quickly.

Honest critics - priceless!!

"People ask for criticism, but they only want praise."

W. Somerset Maugham

In an earlier post, I suggested the possibility that the idiots might be right - that those who disagree with you and me could, in fact, have valid points.  And I am convinced  that most people do not want to hear my opinion, and they certainly do not want my advice.  So, given (at least I believe this) that opinion and advice are held in low esteem, it would seem logical to focus on pure, sweet information.  Information is neutral, by definition, right?

Information: the sky is blue.

Opinion: blue skies are beautiful.

Advice: you should go outside and see that beautiful blue sky.

What if I really am wrong, dead wrong?  I know that sounds totally implausible.  But if I routinely reject opinion and advice, how will I know I am wrong, and adjust my plans accordingly? 

It gets worse.  We are discussing, my entrepreneurial friends, a common, and very serious type of mistake.  None of us, not you, and certainly not I, are nearly as well-informed as we ought to be, or can be.  That is because, as pointed out by Peter Senge and many others, we tend to reject perfectly valid information that does not conform to our preferred vision of the world.  Check out "the ladder of inference" and see for yourself.

Diogenes of Sinope carried a lamp through the streets in the daytime and said he was looking for an honest man.  That may have been a fool's errand, but it was noble and principled.  I say grab a lamp and scour the world for honest critics!  Hunt them down and collect them.  Mount them in your office as trophies.  They are rare and, like all rare things, priceless.

Of course, once we find them, we must, as they say, heed them.  Oops!  That can hurt.  But it only hurts for a little while, I assure you.  And the pain it prevents can be much worse, even deadly.  I routinely urge myself and all my friends to peel away the painful layers of opinion and advice that surround perfectly good information.  Let the critics rail.  Then figure out why they were railing.  Extract the "blue sky" from the pompous admonitions.  They can prevent us from rejecting valid information simply because it is uncomfortable, because it invalidates our business strategy.

So, I ask you, what's worse, a little embarrassment, a temporary comeuppance, or a failed business? 

It takes both Modesty and Moxie to welcome criticism.  Do you have what it takes?

Seven-minute safety net for entrepreneurs

"All you need in this life is ignorance and confidence; then success is sure."

    Mark Twain

I sometimes wonder how far Mark Twain could jam his tongue into his cheek. 

Launching a business from a position of ignorance will not assure success.  That's obvious.  Entrepreneurs clearly have confidence.  It's part of what I call Moxie.  But they absolutely must avoid ignorance.  Duh.

Here's what I like to think Twain might have said, if he had been a business consultant, instead of one of the greatest humorists and social commentators of all time.

Why am I doing this?

"I have come to the conclusion that my subjective account of my motivation is largely mythical on almost all occasions. I don't know why I do things."

    J. B. S. Haldane

"Despite how certainty feels, it is neither a conscious choice nor even a thought process. Certainty and similar states of “knowing what we know” are sensations that feel like thoughts, but arise out of involuntary brain mechanisms that function independently of reason."

    Robert A. Burton

In order to get what I want, I have to know what I want.  Duh!  But I have to admit that on numerous, perhaps countless, occasions I have carefully considered all the options, scientifically selected my wants, and set out to possess them - only to find that I almost immediately take actions that are clearly at cross-purposes with reaching my meticulously selected targets.

Is this a character flaw?  Surely not.  I'm perfect, right?  Good news.  It's not a character flaw - even though I'm far from perfect.  According to Dr. Robert Burton, it's a physiological attribute shared by all humans.  Certainty, says Burton, is really a sensation, like anger.  In his provocative book, ON BEING CERTAIN: Believing You Are Right Even When You're Not, he explores all sorts of interesting and troublesome issues that arise from this phenomenon.

Another angle on this conundrum is offered by Chip and Dan Heath in their new book, Switch.  Shawn Callahan of Anecdote, explains it this way -

When we are making a decision we're often torn between our rational, logical reasons and our emotional, intuitive feelings. Chip and Dan ask us to imagine an Elephant and its Rider (the mahout). The Rider represents the rational and logical. Tell the Rider what to do, provide a good argument and the Rider will do it. The Elephant, on the other hand, represents our emotions, our gut response. The Rider might like to avoid that hamburger and chips but there is very little the Rider can do if the Elephant really wants it (OK, so I'm telling you what happened last night). To complete their analogy they include the Path they are traveling along. If the Rider can direct the Elephant down a well prepared Path then there is a good chance for change.

So, there is a difference between what I think is true and what I feel is true - and at decision time feel generally wins.  In fact, says Burton, the immense power of feel quite regularly makes us certain that our felt opinion is actually fact.  We just think we are thinking.  (At least I think that's what he was thinking when he thought he was writing this stuff.)  There is also a difference between what we think we want and what we really want - like when I think I want to lose weight, but I really want potato chips in large quantities.

When I ask a prospective entrepreneur why she is "doing this," and she says "it's a cool idea," I immediately begin to question her Moxie.  If she says "because it really needs to be done," I start to pay closer attention.  If she says "because I can't not do it," the interchange gets serious.

Two of the four primary ingredients in Moxie are Motivation and Meaning.  In some sense they roughly correspond to the Rider and the Elephant, to the thinking and the feeling.

In my experience, if these two are not both powerful and well-aligned, the start-up is seriously at risk from the outset.  The founder is likely to lose interest and find another, more engaging way to invest energy, time, and money.

So, a really good question for every wannabee business founder is "Why, when I boil it all down, am I really, truly doing this?"

Top Secret Recipe for Moxie

"Make Mine MOXIE."

Ted Williams

According to the Merriam-Webster Online Dictionary, Moxie is ...

Main Entry: mox·ie
Pronunciation: \ˈmäk-sē\
Function: noun
Etymology: from Moxie, a trademark for a soft drink
Date: 1930

1 : energy, pep
2 : courage, determination
3 : know-how

According to Jim Flowers, (that's me) a person who has Moxie "gets things done."

Who wouldn't want energy, pep, courage, determination,and know-how?  Who wouldn't want to get things done?  Nobody, that's who.  Moxie, truth be told, ought to have almost universal appeal.

How then, you ask, might a person come into possession of the aforementioned Moxie?  I desire the attributes.  How do I obtain the essence?

Well, here, as advertised, is the secret recipe.  There are only four principal ingredients: Mind, Muscle, Motive, and Meaning.  (Remember, I am committed to key words that begin with M, like Market, Magic, Mentors, and, of course, Moxie.) 

The word Mind represents the intellectual component of a good batch of Moxie.  Who could argue with the notion that it is valuable to stay sharp, be well-informed on a variety of topics, and keep your wits about you at all times?  Many successful entrepreneurs seem to know not only a lot about a little (their field of expertise) but also a little about a lot.  The ones I have met tend to be voraciously curious.

The word Muscle represents a healthy body, a common trait of accomplished people.  Of course, we have all heard of or met world-class achievers who are not physically robust.  Steven Hawking comes to mind in this regard.  But for most of us, getting healthy and staying that way is a really good idea.  Feeling good makes every task easier.  It even helps with the intellectual part.  Powerful blood flow to the brain is a good thing.

Everybody needs a Motive, or several.  "What's in it for me?" is a valid question.  Energy and pep can come from proper diet and exercise.  Passion, however, feeds off serious aspiration.

At this point you might be tempted to ask, "Isn't that enough?"  Brain power, energy, and a passion for success ought to be enough to "get things done."  Hold on.  Not so fast.  Please read on.

Is there any chance that your Motive is trivial and self-indulgent?  Or does it dovetail nicely into your grander vision of the cosmic future?  Does it square with whatever set of noble principles to which you give allegiance?  Does it have Meaning?  Are you simply greedy?  Or does your business really matter?

The most long-term-successful enterprises (and there are always exceptions) tend to be ones that clearly honor and in some way advance the well-being of the world in which they operate.  The owners do not have to wrestle with ethical misgivings of any sort.  Their business profits are not stolen, they are earned.  And they observe the admonition of Hippocrates, "primum non nocere," above all, do no harm.

That's it.  Mind, Muscle, Motive, and Meaning - together they constitute the essence of Moxie. 

Mix thoroughly.  Apply internally.

Your baby is ugly!

"The great tragedy of Science - the slaying of a beautiful hypothesis by an ugly fact."

Thomas H. Huxley

"In reality, just about all start-ups are ugly in the early days."

Dharmesh Shah

Encouraging entrepreneurs is a tricky business. 

It's a lot like parenting, as condescending as that may seem.  I say this because parents are advised to maintain clarity regarding the difference between the child herself and certain annoying, embarrassing, non-productive, and even anti-social behaviors. The child is not "bad."  The child is "naughty." I love you, sweetie, but that behavior has got to go, period.

The challenge for any parent or adviser is to encourage course changes without damaging the student's Moxie... and also to preserve your relationship at all costs.

For things to change in any real sense, the difficult child must be presented with information that leads her to draw a fresh set of conclusions about the results of behaviors on her own.  

So much for my challenges as an adviser to entrepreneurs.  Here's one for you Mr. Entrepreneur. 

Please ask yourself, regularly and honestly, "Is my baby ugly?"  Have I dreamed myself a Market opportunity instead of actually finding one?  Does my response to the perceived Market need really constitute Magic?  Or is it just a me-too?  Which of my fundamental assumptions carries the lowest confidence factor?  What simple tweak in my plan would gain me the most leverage?

Every swan, said Hans Christian Andersen, begins as an ugly duckling.  And Dharmesh Shah counsels,

Accept That Your Baby Is Ugly:  Just like most parents think they have beautiful babies, most entrepreneurs think they have beautiful start-ups.  In reality, just about all start-ups are ugly in the early days.  Don’t spend time trying to explain to others why your start-up baby is beautiful.  It’s not.  Instead, spend energy explaining why your baby is going to grow up  into something that’s beautiful. 

So, if you're feeling adventuresome and self-confident, try something new today.  Re-visit every one of your key assumptions about market size, end-user needs, competitive behavior, advertising effectiveness, contracting systems, manufacturing quality control, raw material costs, and so on.  Assume that at least part of your baby could benefit from some plastic surgery.

Ask yourself: how much of my plan's beauty is in only the eye of this beholder - me?

Is it blood? Or just ink?

"Projections are bullshit."

Jason Fried

I've become a fan of Scott Ginsberg, otherwise known as "NameTagScott."  He blogs on a variety of topics, but one of his recurring themes is honesty.  In a recent post, Scott said this...

My definition of writing is as follows:

“Slice open a vein and bleed your truth all over the page.”

KEY WORDS: Vein, blood and truth.

As opposed to “brain, ink and bullshit.”

Suppose we apply that thinking to entrepreneurial elevator speeches, pitches, and business plans.  I preach about the Four Fundamental Factors test for the probable outcome of a start-up notion.  Market - great!  Magic - spell-binding!  Mentors - plenty!  MOXIE - hmmm.  

Thanks, Scott!  I will now be asking myself: Am I hearing or reading "vein, blood, and truth?"  Or is it "brain, ink, and bullshit?"

I'm pretty darned sure that with enough MOXIE a prospective entrepreneur can find a way to fix a modestly flawed start-up plan.  But a bullshit artist will never, never find the MOXIE to make even a well conceived, well written plan really work.  Too many things change along the way.  Too many obstacles arise in the real world of entrepreneurship.  It's just too hard.

Serious success demands some bleeding, I think.  Or is it blood, sweat, and tears?  (The quotation, by the way, is really "...blood, tears, toil, and sweat."  Thank you, Teddy Roosevelt.)

Brain, ink, and bullshit won't cut it.  Remember that - whether you are writing a business plan, or reading one.

Thank you, Scott.

The Century of the Entrepreneur

"You can carve this in stone: the 21st century is the Century of the Entrepreneur. And the world is a better place as a result!"

Jim Blasingame

A few years back Jim Blasingame declared that we were entering the "century of the entrepreneur."  He listed four principal factors contributing to his conclusion: rapid advances in technology; an expanding view of market risk as exciting; a cultural shift in the definition of an appropriate work venue, with home now included; and broader public understanding of the power of equity participation.

Now, only ten years into the new century, we find ourselves in the midst of global turmoil.  Equity markets are undergoing major re-structuring.  Traditional weather patterns are now unreliable, disrupted by climate shift; and famine lurks.  Political and religious unrest abounds,including organized terrorism.  Piracy is most definitely back.  Yikes!

Was Blasingame wrong?

No, he was absolutely correct; but I'd like to offer a handful of of amendments to his list of entrepreneurship accelerators to be considered.

Technology shifts clearly stay at the head of the class.  Some specifics, however, are worthy of note.  In the industrial 20th century the ability to communicate globally began at near zero, but ended at universally available at almost no cost.  A business necessity that once demanded large corporations with economies of scale is now available to you and me, from any location.  And, on top of that, modest quantities of just about any product can now be economically transported around the globe in hours or days.

There are also some additional, less visible, but quite powerful, changes in the entrepreneurial landscape.  For example, computer-assisted design and manufacturing advances have radically reduced the time and cost of creating new products.   Once again, the scale factors required of 20th century industrial giants have been made available to individuals and small enterprises.  And the internet.  Ah, the internet.  Cheap marketing and advertising resources have never been so accessible.

BUT, the increasing cost of energy for transportation is driving many types of production, once centralized for economies of scale and moved around the world chasing cheap labor, to be re-de-centralized to be nearer to supplies of raw material and/or consumer markets.  (Sorry about the double hyphenation.  It just seems right, but only this once, of course.)  This is particularly evident in emerging trends in food production. Decentralization implies smaller units of production, which translates into the opportunity for entrepreneurial entries into markets formerly dominated by large organizations.  Global distribution of centrally, mass-produced goods (which was essentially a 20th century invention) is already falling out of favor, for straightforward energy cost reasons.

Risk is, of course, as Blasingame pointed out, exciting.  But it's still risk.  However, the recent economic shakeout definitely changed the relative attractiveness of entrepreneurship.  It suddenly became less risky.  What?  Yes.  Those stable, secure jobs in large industrial and financial institutions just aren't as secure as they once seemed.  The relative risk of personal entrepreneurship as compared to traditional employment options has been drastically reduced.  Which is better: being at risk and in the dark; or being at risk and calling the shots?

So, the 21st century entrepreneur can design and produce sophisticated products as quickly and cheaply as a large company, communicate with clients instantly, anywhere, and transport goods in small quantities on a global scale, all at a lower relative personal risk than ever before.

The Market is there.  The ability to perform Magic is more widely available than ever before.  If you have the Moxie, go find some solid Mentors, and give entrepreneurship a try.  Jim Flowers agrees with Jim Blasingame.  This is most definitely the century of the entrepreneur.  And making the world a better place should be a piece of cake.  There's unbelievable room for improvement.

Here's to the crazy ones...

Here's to the crazy ones, the misfits, the rebels, the troublemakers, the round pegs in the square holes... the ones who see things differently -- they're not fond of rules... You can quote them, disagree with them, glorify or vilify them, but the only thing you can't do is ignore them because they change things... they push the human race forward, and while some may see them as the crazy ones, we see genius, because the ones who are crazy enough to think that they can change the world, are the ones who do.

    Steve Jobs

Some people never go crazy. What truly horrible lives they must lead.

    Charles Bukowski

Part of being sane, is being a little bit crazy.

    Janet Long

Do something. If it doesn't work, do something else. No idea is too crazy.

    Jim Hightower

You have to forget about what other people say; when you're supposed to die, when you're supposed to be lovin'. You have to forget about all these things. You have to go on and be crazy. Craziness is like heaven.

    Jimi Hendrix

Some (maybe most) people don't understand MOXIE.  They shake their heads in disbelief when apparently intelligent, clear-thinking people decide to chase entrepreneurial dreams instead of finding good jobs that promise stability and security. 

This presents a special problem for all you start-up founders.  Not only must you identify and overcome all the obvious business challenges, you must also deal with all the skeptics among your friends, family, and the investment community.  All too often they fail to understand that you only look crazy - from their perspective, certainly not from yours. 

Sometimes they're right, though.  So it's not crazy to do one more re-check of the data, one more test of your assumptions.  Make sure you're intelligently audacious, not actually crazy.

Are you attacking a real Market, not one you have imagined?  Do you have some powerful Magic that will attract spell-bound clients?  Have you surrounded yourself with seasoned Mentors who can provide the information and perspective that you lack?

If your business concept can pass the Four Fundamental Factors test, you might even be able to convince the skeptics.  And sometimes the Magic really works.

And that's when Jimi is absolutely right.  "Craziness is like heaven."

Experts Agree. Best MOXIE Posts of 2009.

The polls are closed.  The readers have spoken.

The most popular, and presumably most useful, MOXIE posts from the past year are presented below.

1. How to eat a five hundred pound marshmallow.

The vast gorge that lies between noble intent and significant achievement is, of course, quite real, and widely documented.  Lofty goals are commonplace.  Noteworthy achievement?  Not so much.  And this is particularly true for entrepreneurs and their ambitious startup plans.  (More...)

2. Four really useful habits.

I'm pretty darned sure that these four things will take most anybody a long way down the road to achievement and contentment: clarity of vision, commitment to relevant action, adherence to noble principles, and focus.  (More...)

3. Success - Ten Traits Supporting Four Fundamental Factors.

"Success or failure of a new venture is determined very early, on the strength or weakness of only a few fundamental factors, four to be exact.  Those four factors are Moxie, Market, Magic, and Mentors."  (More...)

4. I'm not losing.  I'm learning.

For a scientist, an experiment that does not confirm the hypothesis is not a failure.  It is a useful stepping stone to a fresh hypothesis.  For a musician, a bad review provides clarity on how the performance can be improved.  For an entrepreneur, a rejected product is a clear message about the true needs of the marketplace.  (More...)

5. Secret Revealed!  How to Get What You Want...

One of the most common reasons given for pursuit of entrepreneurship is the need for autonomy, the need to be in charge.  Over and over again, unfortunately, I meet people who have become slaves to the businesses that were supposed to give them freedom.  That's just plain sad.  (More...)

6. The inconvenient truth about competitors.

A sadly pervasive startup mistake is the presumption that a market leader will not react forcefully or cleverly to the entry of a fresh competitor - or that there will not be yet another entrant, complicating the situation even further.  (More...)

Start-up Success - Four Fundamental Factors

I've been hanging around start-ups for a while - roughly forty years and counting.  Over that time the information I've collected has clustered together to convince me of three things. 

1. Success or failure of a new venture is largely determined very early on the strength or weakness of only a few fundamental factors, four, to be exact.

2. Those four factors are Market, Magic, Moxie, and Mentors.  If these are not "right", nothing else really matters.  It's not that a business with some weaknesses in these areas can't survive; but it's highly unlikely that it will flourish.

3. The most important of these factors is Moxie - the energy, conviction, and determination of the founder/entrepreneur, the leader.

There are always noteworthy exceptions to rules of thumb; but the fact that they are noteworthy means that the general rules are reasonably valid.

I test business concepts proposed to me on those Four Fundamental Factors; and I encourage potential entrepreneurs to test themselves in the same manner.  Similar encouragement applies to people considering association with early stage businesses - employees, investors, strategic allies, clients.

And I always, always look first to the fire behind the eyes of the leader.  I always START WITH MOXIE.

You can test your own entrepreneurial ideas against the Four Fundamental Factors by using my simple Four Factors Self-Check.

You can also watch and listen to me talk about all this on YouTube. 

I know who grows my arugula

"Each man takes care that his neighbor shall not cheat him. But a day comes when he begins to care that he does not cheat his neighbor. Then all goes well -- he has changed his market-cart into a chariot of the sun."  

    Ralph Waldo Emerson

Gwynn Hamilton and Robert Webster grow food for my family.  They garden at the Stonecrop Farm in Newport, Virginia, with the faithful assistance of their five-year-old daughter, Zoe. 

We always stop at their booth at the Blacksburg Farmers' Market.  They know our names, remember what we like, and apologize when we arrive late and they have sold out of our favorite, arugula.  But they definitely are not our private gardeners.  It's quite clear even to a casual observer that they genuinely care about all their customers, not just us.  And to reciprocate that caring, by being a friendly and faithful repeat buyer, just comes naturally.

What if each business relationship had that depth, that warmth?  World peace would be within our reach.  I'm sure of it.  Swords would become plowshares, no question.

Every entrepreneur makes a choice as to how to relate to clients.  The seller/buyer interaction is part of each business's Magic formula.  And I am convinced that people prefer to do business with other people, rather than with machines or systems.  There is intrinsic human value in community, even when the individual relationships are digitally enhanced.

It's not easy for a global company to create local relationships.  But it's not impossible.  Wal-Mart is not required to employ smiling greeters.  Rackspace is not required to provide "fanatical support" from pop-up, human "rackers."

So, I offer you this simple strategic consideration for 2010.

As the New Year emerges, fresh life rising from the composted past, I challenge myself, and you as well, to seize the opportunity to beat at least one sword into a plowshare, to change one humble market-cart into a warm and radiant chariot of the sun.