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Dear Michael, I am 17 years old and I have started my website themultilife.com 2 month ago. It has 5000 members right now and I actually believe in it's idea. Do you think my idea is good enough to work on it? What do you think should be my next move? Shall I search for investors? (If yes, How?). How do you think I can make it known to the world. How do you think I can get it known to the world?
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Good for you for starting a business so young. I would suggest you take advantage of that angle of your story and get as much press as possible on what you are doing. That will get more people to your site and more sign ups. That will then generate more interest and hopefully some investor interest. Investors won’t really be interested until you can show 100’s of thousands of clients. Keep plugging away though.
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Can I just modify another websites TOS or should I hire a lawyer to make one?
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TOS’s are pretty standard. I would find a couple of co’s in your space and mash together a TOS for your site. Try to find an example in your legal jurisdiction. Try not to blatantly plagiarize or you can get into trouble. You might have a lawyer take a quick look at your final draft if you have one willing to help you on the cheap.
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Is there a standard expectation of return? (For example: 3x times what an investor puts in within 12 months or something)
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Most institutions need a 5-10X return within 5 years to meet their IRR requirements. Angels can wait longer and expect less – say 4-5X in 7 years. Rough guide.
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I am putting together a financial services group in my city, how many accountants would I need?
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Is this a riddle? What kind of financial services? How big is this intended to be? Internationally focused or domestic. It’s an impossible question to answer, unfortunately.
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Naming an idea? What steps and processes did you look at to get the name you have today?
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We came up with a short list of 5 names – I took them all home to my wife – who shot them all down and offered up CommunityLend. I liked it and so did the team and the name was born.
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What was your biggest mistake in business?
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I think it would depend on which business you were speaking about. While I do seem to make some of the same mistakes repeatedly, I often surprise myself with my ability to discover new mistakes to make. I’ll pick my current company, CommunityLend, to answer your question. I think the biggest mistake I’ve made with our current business to date was in handing over a key part of our business success to the wrong team member too early. It cost us dearly in time and expense and what I thought was originally a good decision to save me time, ended up costing me twice as much time to fix when it blew up. Beware short cuts.
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When reinvesting profits back into the small business, 1) what's a good bank to use to allow the money to sit and earn interest, and 2) what would be relatively good to invest in?
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Are you kidding me? Interest from a bank? Profits from a small business sitting? Really? Listen, if your small business is spinning off free cash and your don’t have a set of shareholders asking for dividends or pref payouts, good on you. You are the king of the world at the moment. If it was me, I would be thinking about how I could get that cash to work growing the business. Hiring more sales people, creating a bonus structure for increased productivity, expansion, etc. That’s me though. If you just want the cash to grow, keep it as far away as possible from a bank and speak with a credible financial adviser
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Dear Michael, The point is how to get to those press. Where should I find reporters? You answered my question as follows: Good for you for starting a business so young. I would suggest you take advantage of that angle of your story and get as much press as possible on what you are doing. That will get more people to your site and more sign ups...
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Every media outlet has a website with a listing of their journalists. Pick up the press you would like to get some attention in (and I meant that figuratively and metphorically) and select the journalists you think would best fit your market. Then put together a pitch for them that is about your age and product and the narrative around getting this started and off the ground. Show it to a girl and see if she says “awww .. that’s such a nice story”. That’s what you want to hear. Then send it to 30 journalists and follow up with all of them in a week if you don’t hear back. Good luck.
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Every marketplace business model faces a similar chicken and egg dilemma in terms of matching two parties. What was CommunityLend's strategy in terms of going after lenders or borrowers first (or did you look for both simultaneously)? As for regulation, did you need to get registered as an SEC broker/dealer? Why or why not?
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Two questions here which I’ll answer in reverse order. On regulation, yes, we spent about 2 years registering the company with the OSC and creating a regulatory platform to allow us launch P2P lending in Canada. On the first question of the chicken and the egg – we have had to be very creative in finding a solution to this challenge quickly with very little marketing budget. We’re doing it by focusing on origination partnerships which can be turned on and off, and on institutional capital partnerships which can scale. We’re not there yet but we are getting closer.
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I am about to launch a website that has a database of Fitness Experts on it that the public can search through. I want it to have a monthly fee for clients to join. Is it easy to set this up as I know that setting up a Direct Debit in real life (as opposed to on the internet) requires a signature? If so.. how do I go about it?
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I think your best bet would be to use Paypal. Once you get enough subscribers your can go to a direct debit (which does require a signature, yes). That way you get going quickly and then add more sophistication when you can afford it.
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Once you have a business concept , what is the best way to share it with influencers/ potential partners? How do you avoid having it stolen? Or is this not a priority in the early stages (You mentioned that if the value of the idea is keeping it secret, then the idea is not that good)? If someone does take your idea and beat syou to market, is this okay because you can still apply your idea in a way that better solves a problem?
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My suggestion would be that if you have a business concept that you think it great – then start working on it and tell as many folks as possible that you think can help you. Be smart about what you say (ie don’t give away the secret sauce) and register and TM everything that needs to be protected. If someone else has your idea and is working on it already – you want to flush them out, look for a way to work together or bail early on the idea if you can’t get market traction. The only way to get to the bottom of that is by spreading the good word.
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How do you diff founders vs founding team members during the beginning of a start up? Everyone acts the same and contributes a ton.
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It’s easy if people put in dough. Develop a pref share structure which anyone who puts dough in gets some of and then a common program for everyone based on current commitment. If there is no dough there is still sweat equity and time in the trenches. If everyone started at the same time and everyone is contributing the same and there is no dough, then there shouldn’t be any material differentiation.
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What are some tips for managing cash flow at the beginning of your startup. For example, you borrow money to pay a development team and it takes them a couple of months to build your concept. Of course, once you are finally up and running the first months can be lean revenue wise. How do you strike that balance?
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Good question and a hard question. Your best bet is to convince everyone you deal with of the future value of your company and to take all or some of their required payment in the currency of your stock options. That will mean less cash out the door now while you build towards that value. Alternatively – try to structure deals with very minimal amounts up front and more tied to success. also beg, borrow and steal people wherever you can. I’ll be contrarian and argue that a super early stage company doesn’t need rock star employees as much as they need cheap doers of things to get moving. Rock stars don’t come cheap (in salaries and options) so wait as long as possible before hiring them.
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What are key strategies, plans, elements and facts to consider when for a startup website?
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Everything should relate back to what your specific goals are as a company. Are you an ecommerce site? Are you a media site? Are you a puppy lovers social network? Once you figure that out, then you’ll have some sense of what your “measurable objectives” should be for the site. (xx thousands of dog enthusiasts discussing puppy things by yy date, for example). Then build a site which best aligns against those measurable objectives. This is where all hell will break loose but it’s also where the value is in what you are building. Good luck.
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Looking for sources of "micro-angel" funding (~$100K) for a food start-up. Any suggestions?
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None in my network but I would suggest finding folks who made a bunch of money in that sector and then getting a meeting with at least one of them. You’ll get great feedback on your likelihood of success and also might get an investment as a result.
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With a business model that requires third party merchants as well as users to purchase their products, how would you tackle the chicken and egg problem of not having enough users to convince great merchants to be featured, and not enough great merchants to attract consumers?
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Chicken and egg issues haunt most consumer facing start ups. The strategies I’ve seen work the best are partnerships with a party which already has one of the problems solved. So for example, applications built inside of Facebook can leverage the social graphs and awareness distribution channels already in place. On the other side, maybe just one merchant wants to white label your solution for their own customers and takes a vested interest in pushing distribution. Good luck.
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What are the best resources for first time founders?
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Personally – persistence, tenacity and beers on Friday to keep it all in perspective.
Professionally – other start-up oriented community content creators (like this one and TechCrunch, and VentureLink, etc.) are helpful in keeping you focused and motivated and giving you a place to get substantive answers.
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Some say a lot of innovations nowadays are of personal/private gains only and contribute very little to the overall growth of the economy, do you agree with this?
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Hmmm …. interesting question for a Friday afternoon and I’m not sure I have enough data to answer it. Let’s look at Twitter for instance. You could argue that it’s an innovation entirely about the personal, but I think you could also argue that they are growing into a very important technology advancement in PR/Marketing tactics, customer engagement and workforce communication, which would all contribute to the economy in a meaningful way.
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What do the experts think about the "new" direction and focused approach Sprouter has taken with its website?
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I think their focus is admirable. In the early days of being a start up if you try to be too much too fast, you are bound to miss opportunities. Answers seems to be one of the most used and most “essential” part of their services so it made a lot of sense focus there and build services around it. That’s just my 2 cents though as the “experts” don’t have any kind of sub-committee or anything.
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When a budding entrepreneur first starts out they generally have a bunch of ideas that they think are decent. On your experience, is there ever really a "wow moment"? Like most business hopefuls I find myself waiting for that moment and I fear doing nothing in lieu of it.
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Some people feel a wow moment and some don’t. Usually the first camp are prone to wow’s, I find. I’m not really a wow, kind of guy. More of a “if we grind away hard enough and stay focused on that thing we have a good chance of pulling this off and that would be cool” kind of guy.
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Should I announce publicly that we're trying to raise investment?
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Depends what “public” means. If you are in the business of long term relationships with customers then them knowing you are looking for money may create doubt and work against you. In the right circles though, you should be open about looking for start-up and growth capital.
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I'm working on a business idea in which the main market is voters sick and tired of politicians and their unwanted phone spam (robocalls). What advice do you have for me around finding investors that are interested in the intersection of politics and business? What unique questions should I be prepared to ask in this business category (if any)?
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Hmmm …. that’s a good one. I think generally speaking – any idea which will be compelling to enough people that they would be willing to pay for it, at scale, will be popular with investors, whether they are politically motivated or not. I don’t know about the US landscape but I know that in Canada contact of all types (wanted or unwanted) from political parties is specifically exempt from “do not contact” types of legislation. So my question would be how do you deal with the fact that “lawmakers” are the same folks you are trying to prevent from making unwanted marketing calls?
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I have a start up that is in the online radio space what is the best advice in terms of seeking investment or active partners so we can take it to the next level
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Hmm. Tough question. It would help to know where you are in the world (Canada, US, Mongolia, etc., what stage your business is at (product development, revenue, profitable), and what capital you’ve raised so far (none, angel, seed, etc.). My main suggestion is to do your own research as starting point. Have any of your competitors raised capital, from who, etc. Once investors bet on one horse, they usually won’t bet on a similar one but you can see which investors are LIKE those investors and you can try them. Also, find out why the first investors made the bet that they did and try to look as similar to that criteria as possible. Good luck.
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I am actively looking to invest in/join start-up, early stage enterprise in TO. I am new to this arena (corporate guy) and want to efficiently network. Suggestions?
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Congrats on joining the start-up community – we need all the help, smarts and resources we can get. There are lots of community types of events in most cities. In TO there is: start-up drinks, sproutup, democamp, Third Tuesday, mobile mondays, genYTO etc. Ask Erin or Sarah for suggestions – they are very connected.
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What are some key tasks or redundant project items that all entrepreneurs should consider out-sourcing to a Virtual Assistant? Please describe your experiences with VAs if you have utilized them.
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I’ve never actually heard that term before but it seems descriptive enough. My list of non-essential stuff includes – accounting, HR, list management, office application manager, data hosting.
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How do we get more sales meetings, when the dealer principals are notoriously noted for being "ghosts" and difficult to actually talk to? We've only been able to get 3 in almost two months!
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Look for a potential partner who has cracked the code and has relationships with folks already. Do a deal with them with some upside for making introductions. Life is often about who you know, not necessarily what you know.
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Does it ever make sense to build a social site with no known method of revenue?
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Seems counter intuitive doesn’t it but I have a one word response for you: Twitter.
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How can entrepreneurs avoid being stuck in the "Self-Employed" phase and successfully transition into the "Business Development" phase. Many entrepreneurs become frustrated as they are tied to their business like a job. Therefore, stepping away may equate to loss of income. Only a select few are able to build a business to generate income "outside of business hours".
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Sounds like you might be a one man show type of entrepreneur in which case you are right – it is very hard to be the billable hours and the business development function. Gates once said that every successful business needs someone who can “code” (i.e. create something) and some who can sell (i.e. business development). Sounds like you need a number #2 in order to either free you up to sell or free you up to not sell. Figure out how you can attract someone to take your business to the next level.
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I have a product going into beta but have not incorporated yet. Since I am not going to charge these beta users could I still run into liability issues that might compromise my personal assets? What are the pros/cons?
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It takes an afternoon and $400 to incorporate a business… honestly, what’s the hold up?
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If I'm raising from multiple investors, do they all know how much the other investors are putting in and for how much stake in the company?
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They don’t have to but they might want to. During the raise they have a right to know “who” but not “how much” each investor is putting in. They will all have the same pre-money so the % of the company is easy to figure out. After the raise they have a right to ask for the full list with amounts. I personally like to treat investors like a community and to encourage as much interaction and understanding between them as possible. You need them to help you to be successful.
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What sections need to be included in a business plan?
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There are lots of business plan help kits out there for you to get all the sections right. I would suggest though that you read Guy Kawaski’s Art of the Start and follow his advice on business plans.
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You said social media wasn't helping you grow your business - what has been the best approach for you in finding new customers?
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Channels, channels and more channels. Find where your target customer lives – and then do deals with those channels to integrate your product/service/offer directly in that channel. For example, we just announced a deal with AutoTrader http://blog.communitylend.com/2010/08/17/communitylend-newsletter-august-2010/ – where we get to match our loan offer with their sales offer. They have 5M uniques on their site in Canada.
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I want to start a mobile food cart. Start up costs are less than 5K. I'm not sure if I should scale my vision up (by launching several carts now instead of later) and thus become more attractive to investors. Part of me LOVES the bootstrap but I want this to be a food cart empire too. Am I impatient for wanting investors? Should I stick to bootstrapping? Help!
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I would suggest both. Start by bootstrapping the first cart and testing the theory. Once you have the model right and can prove it then look to expand quickly on what you know.
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I'm an entrepreneur at heart, though I've never started my own business, I've always wanted too, and hopefully will. I have a lot of ideas I just need the focus and passion for one of them to be my catalyst for creating a business plan. Some of my ideas have already been created or they are a tangent off my idea. Should I start my business plan when there is little or no similarities , which means continue my hunt for the best idea, or similar but different in my own way?
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The best practice for being an entrepreneur is being an entrepreneur, imho. When you are ready for this, there are usually lost of space for new competitors in almost every vertical. Honestly, have you seen how many cereal options there are in this country? Who needs 125 different types of cereal? The key to success against a competitive landscape will likely be found once in that landscape as opposed to from the outside.
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Is there a standard % of company based on the amount being put in on a certain pre-money valuation?
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It really depends what round you are in and how much you are raising. The formula is: amount invested/(pre-money + amount invested) so if you have a pre-money of 5M and you raise 2M then it’s 2/7 = 28.6% of the company for $2M, and your post money is $7M. Try not to give away control (more than 49%) in any round if you can.
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Hi Michael, how much funding is typically required for a peer to peer lending start up? The biz model would be a B-2-B marketplace.
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It’s a hard question to answer. If you are launching one in North America you need a fair amount of dough to get through the regulatory issues (call it at least a million). Then you need to set up a technology platform and a marketing plan to attract both sides to the table (call it another couple of million) and then you need to hire a staff to operate. Financial services marketplaces are not cheap or for the light of heart. The upside is big though, if you can overcome these initial obstacles. Good luck!
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We have a web startup for the creative community. We are 3 partners. 2 holding full time jobs within the industry and 1 pushing this project 51% of the time & not directly inter-wined with industry ins & outs, like the rest of the team. Because of the lack of time from other partners; the web platform is not fully ready for the third partner full involvement. If facing a similar issue like this one, what is the probably of the project ready for growth? And what can you suggest to resolve this?
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I think you should all decide if you are in or out. The business won’t magically become ebay overnight. You have to be all in or get people who are.
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I own my business but want to be part of a bigger one and manage my own at the same time with the help of my good team, any thoughts about it?
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Sure – there are lots of folks who do this so there are plenty of people to speak to about the nuances of how to make this work. The one thing that is important to note though is that it is very unlikely that you will attract outside investment for a company where the principal uses it as a side project – which might not be a problem if the company is break-even already.
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Which business or entrepreneurial books inspired and helped you the most in building your business?
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Guy Kawasaki’s Art of the Start. The Google Story, and The Cluetrain Manifesto are 3 I really liked.
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Are there any secret tricks to finding competitive information? I'd like to benchmark against my competitors but I don't know how long their sales cycles are, how they're pricing etc.
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One of my favorites is to directly or indirectly apply to be a customer of theirs. You will learn a lot about their processes, pricing and people from the way they are with a customer.
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What's the required level of detail in a good financial plan?
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Just enough to show you know how to make money and scale the business but not so much that you hang yourself every month when you miss your early targets. Bottom line is that you are either forecasting on observed results (which is good) or you are making it up based on what you think you can do. In the case of the latter, you have to admit you really have no clue, so the key is to ensure that the logic you are using makes intuitive sense. We will originate customers from this source, which will cost us this much a month, they will use these paid services and that will produce this revenue over time. You get the picture.
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What were your go-to tools or inspirations when you were just planning out your business or just starting out?
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They were people – not tools. I went to speak to a bunch of folks who had successfully started and exited Canadian business and asked them for their thoughts on what we needed to do and what we were up against. There are tons of insanely bright tech entrepreneurs in this country who have it much harder than folks in the valley. It’s humbling and inspiring.
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