Wednesday, December 28, 2011

CEC Startup Meeting

The CEO of the startup I am working with and I recently met with the Chicagoland Entrepreneurial Center (CEC ) to tell them more about our business and the people we have connected with in the community. When we told them we are looking to raise money soon and mentioned the amount we thought we needed in order to last us through another six months, the feedback we received actually encouraged us to think more about a 12 month runway for the amount we were looking to raise. For angel rounds, you typically want to be raising enough funds to last you for the next 9 to 12 months and for your Series A you should be looking at a runway of 15 to 18 months.

We were also told to strongly consider raising convertible debt since the terms can often be very entrepreneur friendly and most of the angel groups in the area are willing to do convertible debt deals. The key to meeting and working with a lot of the angel groups is to find internal ambassadors within the group to champion your deal. Also, it’s important to realize that each angel group is unlikely to do the whole deal themselves and they will often syndicate it with some of the VC firms who also do seed stage investing.
It’s also important to keep in mind that when you decide you want to raise money through angels and VCs, you want to make sure that your deal is not out in the market unfunded for too long (i.e. 3-4 months) because then investors get suspicious or worried about why nobody else was interested in investing or doing the deal.
One of the biggest pieces of advice that we learned from this initial meeting is that as you’re getting ready to reach out to the investor community, start to put together an online depository of all the information that the investors may ask for such as customer testimonials, good articles about your industry or target customers, your financial model, etc. Those of you familiar with investment banking and private equity know that this is very similar to a data room for your startup so that your potential investors can easily and quickly start their due diligence on your company. Getting this online data room organized in advance can really inspire additional confidence in your company.
For the upcoming year, we learned that the CEC has approximately 120 classes that they are planning for the exclusive group of pre-screened startups. We were just added to the mailing list, so we are looking forward to attending a few of the sessions on marketing, pitching, putting together the business plan and financial projections. Another great advantage of the CEC is that they help bring serial entrepreneurs, early stage investors, and C-level executives in as speakers, advisors and mentors to their group of startups, so this should hopefully be another great resource.

Friday, December 23, 2011

The Beginning of Advising Startups

Earlier this year I started advising startups during my free time and in the evenings after work. I started this after I was initially interested in learning more about the tech and early-stage healthcare scene in Chicago. I began by attending a few meetup events, tech pitches and startup accelerator events, where I met several very talented and passionate entrepreneurs that often had terrific ideas but were going after new businesses on their own and I noticed they could really benefit from the help of an outside, objective perspective. I expressed interest in helping out anyway I could and often kept in touch in the event they ever needed anything.

Now I enjoy providing feedback and guidance on business plans, pitches, financial projections, and introducing promising start-ups to investors and the VC community. I’m always on the lookout for new startups to work with and advise, so if you’re in the initial stages of starting your own company or building on your idea, feel free to reach out and we can discuss it further.

Thursday, December 22, 2011

What exactly do angels look for?

Below are some specific characteristics that the angel investors at the panel event had mentioned they look for:

-          Unique technology or technology that is patentable or a trade secret (i.e. something that doesn’t need to make it solely on marketing)
-          Good people who know how to work in capital-strained environments and can do a lot with very little resources
-          Entrepreneurs who are flexible and know how to fail early or “pivot” their business model if they need to
-          Demonstrate that you really know your industry and business
-          Having a history of other early ventures can be a huge benefit. Even if the prior companies weren’t a success, showing that you learned from your mistakes and knowing how to not make them again is a big advantage.
-          Market validation and customers who are willing to pay for your idea/product
-          Angels are often looking for pre-money valuations that are less than $3mm and they expect the entrepreneur to come in with an idea about the valuation of their company. Although in the end, the angel investor will just end up comparing your company to other deals they have seen and the growth/risk profile of those companies. Typical investments for angels have pre-money valuations between $1.5mm and $4mm and this has remained pretty consistent over the years. Valuation does end up being a negotiation, but don’t try to come into the meeting talking about DCF and public comps because it’s often less relevant for seed stage investing
-          Remember that angels are not necessarily investing in your product or your management team. They are investing in your company’s future cash flows.
 So before you get too caught up about making sure you have an amazing business plan or marketing materials, aim to have a minimum viable product that proves your idea or product is the most important product/service for a specific customer.
Also, remember that angel investing should be a two-way street. You should be doing your own due diligence on your potential investors just as much as they are doing their diligence on you and your company. The benefits of accessing experienced angel investors is that you’ll have smart money backing you and you’ll have access to a much larger investor network.

Wednesday, December 21, 2011

Positioning Your Company for Securing Capital

The following factors can help increase your chances of success in securing capital for your early stage venture:

  1. Aim to bootstrap or self-fund/partner fund for as long as you can until you reach key milestones
  2. Build your product first and be sure to get customer validation. Very few ideas that are just brainstormed on the back of a napkin get funding these days.
  3. Be sure to have a strong management team and advisory network. Consider getting well-respected or well-known advisors and have them invest a bit in the company to show they also have skin in the game and believe in your idea.
  4. Try to stage your capital raises to be around the same time or right after key milestones.
  5. Look into grants and government funding whenever possible.
  6. Raise capital whenever you have the opportunity to and aim to have at least 18 months of cash to last you through the capital raise process
  7. Continue to always leverage and expand your network. Referrals are much more likely to get you a meeting with investors. Also, be sure to follow up and be aggressive with the people you meet. With each new contact, try to get five new names from them for additional people you should meet.

Tuesday, December 20, 2011

Current Angel Investing Landscape

The current early stage funding landscape is much more competitive than it has been in the past. These days there are now more startups, but less money available and a lot of seed capital has started to drift towards larger deals. Since the credit markets dried up over the past two years, small business lending has significantly declined each year since 2008.

Investing in early-stage companies has generally favored later stage companies. The Chicago early-stage investing community is still relatively young. This is because over 70% of VC’s invest in MA and CA and in 2010 only 7% of venture capital has been invested in the Midwest.
There are currently around 330 angel groups in the U.S. and Canada and approximately 260,000 active angels. In the last year, there was over $20bn invested by angels in 61,900 companies with an average angel deal size of $300,000 (although it can vary from $10,000-$2mm). The interesting fact is that VC’s have invested approximately the same aggregate amount ($23 billion), but in a smaller number of deals (1,012 companies for an average of $22mm per company).

The angel investing landscape has gotten tougher, but I’m going to provide some advice in the next two posts about how to best position your company to successfully receive angel funding.

Monday, December 19, 2011

Who are angel investors?

An interesting fact that I recently discovered is that the term angel investor actually came about through those individuals who first helped fund and invest in plays on Broadway, who were then called “angels.”

I like to define angel investors as both mentors and advisors to early-stage companies. They are often successful executives, experienced entrepreneurs, and high net-worth individuals (defined by the SEC as accredited investors with annual incomes over $200,000). Angels have a passion for early-staged ventures and often want to be engaged and involved with the companies whenever they can. When they listen to pitches or meet new startups they are usually constantly thinking about how they can help make the company better.
When looking for angel investors, aim to find those who have a strong expertise in your industry, who are passionate, who are willing to mentor you and your company, and who have a large extended network of other angels or connections with the VC community.

Angels like to typically invest within an organized group. Angel groups often have around 20 members and meet every month or so to listen to pitches from entrepreneurs for the opportunity to decide whether or not they would be willing to invest in the company. The whole angel investing process can typically take 3 months from the initial contact with the company since there is a pre-screening, screening process, investment committee meeting, diligence and then the structuring of the deal. Most angel groups will aim to wrap up a deal eight weeks after agreeing to invest at their investment committee. Some angel groups may also have presenting fees, which can vary from a few hundred dollars to thousands of dollars. The groups charge fees either to help manage overhead costs or to make sure that the entrepreneurs presenting are serious about raising angel capital.

Sunday, December 18, 2011

Angel Investing – The Inside Scoop

This past week, I attended another EFactor event that consisted of two keynote speakers who talked about angel investing and then it was followed by a panel discussion with five angel investors from all the major angel groups in Chicago. For the next few posts, I’m going to recap what I learned from the event and focus on what it means to be an angel investor, what the current angel funding landscape is like and what angel investors are typically looking for when deciding whether to make an investment.
Also, a good article about how to pitch to angel investors was published in the WSJ a few days ago that I would recommend reading especially if you are looking to reach out to angels for funding anytime soon – Chasing the New Angel Investors.

I also really enjoyed Joanne Wilson’s perspective on angels investing in women-led businesses in a recent Q&A.  When asked to provide advice for angels or VCs looking to invest in women-driven startups she said, “There are meetups all over the city every single night. Eventually, you meet people and hear what's going on. It's a very open, embracing industry. There's a lot out there and there are a lot of bloggers writing about what's going on and about new businesses. If you can't find women-led businesses, then you're not reading the right things and you're not looking in the right spots. I would love to see more people who have created wealth for themselves and their families take a chunk of their change and invest in women-led companies. It would be better for the economy. And, again, better for women. By the way, it's not always about women — companies should be mixed. Women bring something to the table and so do men. It's about the best ideas.”

I completely agree with Joanne Wilson (who by the way is the wife of VC Fred Wilson) and I’ve found the entrepreneurship community here in Chicago very welcoming and easy to get involved in through meetup groups, networking, and helpful seminars.

Saturday, December 17, 2011

My First Ohours Session

I signed up on the site to chat with a managing director at the Chicagoland Entrepreneurial Center (CEC).  I originally signed up to chat with the MD to learn about her background, how she came into the role and what the CEC does. I came to realize that the CEC is a phenomenal resource for the startup community here in Chicago and their goal is actually very similar to mine when it comes to advising startups. The CEC is a non-profit organization that has been around for about 10 years, providing resources and connections to local tech startups in the area. They have five criteria for the startups they work with:

  1. Tech industry focused
  2. Unique and compelling value proposition in the company’s specific landscape and industry
  3. Growth potential – they like to see reasonable projections of $10m in revenue by years 3-5 in order to help the startups get ready for funding
  4. Market validation – i.e. customers
  5. Strong management team
They also want to understand what the startup needs help with and see if it fits with the resources they have available. They typically have 30 startups that they talk to on a regular basis and develop an informal curriculum to bring in experts on valuation and how to build marketing strategies, etc. The sessions are typically twice a month and not publicized, since they are exclusively for the startups they work with and often 10-15 startup teams will attend each session on a first-come, first-serve basis. After an initial phone call, they like to meet in person with the startup team to do a deeper dive into the business and see where their network may overlap with the company’s own contacts. After our initial phone call, I introduced the startup I am working with to the CEC and we will be sending our teaser/executive summary prior to our in-person session. After the holidays, I’m looking forward to hopefully getting a chance to start attending these bi-weekly informal classes offered by the CEC.

Friday, December 16, 2011

MedHost – A Health Tech Startup’s Story from Inception to Acquisition

The other week I had the opportunity to attend a Chicago Health 2.0 Meetup group event, where I was able to listen and learn from Patty Rioux, who was one of the first few employees at MedHost, a healthcare IT startup that recently got acquired.

It was really interesting to hear how the founder originally came up with the idea for MedHost. Apparently, he regularly went to a TGI Friday’s restaurant and one day he noticed that the restaurant was operating much more smoothly, with less wait time and the hostesses/waitresses were all much more organized. He asked the owner what had changed and he discovered a new software the restaurant was using to track tables and guests as they were coming into the restaurant. The founder of MedHost was a physician and once he learned about this new software, he realized there was a real need for something similar in emergency departments because just like a busy restaurant, a busy ER has limited beds and no idea who or when someone will walk in. Similar to restaurants, emergency rooms make the most money by turning over more beds. That’s when he decided to launch MedHost, an emergency department information system platform.
Patty then went on to discuss five mistakes her startup had made and five things they did really well. All of her suggestions are great advice for any healthcare IT startup so I’ve summarized them below:

Five Mistakes:

  1. Don’t underestimate your sales cycle. MedHost had thought the company’s sales cycle would be 6 months, when in reality it turned out to be more like 9-24 months for a lot of these healthcare facilities, since there are so many people involved in the process. Longer sales cycles can really impact your business and limit your growth projections, so be sure to have a conservative estimate in mind when starting out.
  2. Don’t overestimate the IT systems within hospitals. Through MedHost, Patty realized that trying to install the software and making sure that it fit in with all the hospital systems was a nightmare. These days with cloud computing, a lot of the programs are easier to install and get started, but don’t expect all facilities to be completely electronic already.
  3. She mentioned that as marketers, her startup wanted to look more established and bigger, so they spent a lot of money trying to market that image by printing fancy brochures that nobody ended up reading. Most customers buy from demos, not expensive marketing materials. Many companies within healthcare and other industries now accept that innovation comes from the startup community.
  4.  She reflected on a couple of key hires they missed. For example, it’s pretty important to hire a sales clinician early on to sit in on pitches and help close deals with the salesperson.
  5. Try not to focus on personal decisions that aren’t necessarily best for the company as a whole. The example she provided here was that her startup actually kept three offices open even though it was costly, but the company wanted to accommodate the preferences of the employees. Often the culture of startups is to take care of each other, but try not to do it at a significant cost to the whole company.
Five Strengths:

  1. MedHost used a per patient pricing model, which avoided being lumped in as the hospitals capital expenditures. This allowed the software to be in the healthcare facilities operating budget as opposed to the capital budget since it was billed to the customer monthly. It also represented a great recurring revenue stream, which the VCs love.
  2. They had a very well defined alpha and beta process where they moved from small healthcare systems to larger systems in order to test out the product in a manageable and effective way.
  3. On marketing, they did a great job of focusing on a lot of the influencers instead of decision makers in order to use them to impact sales. So they focused on getting real close to the nurse managers instead of the CIO or CTO level people because at the end of the day the nurses and nurse managers would be using the program and would really fight to have it.  In fact, it turned out that ~80% of the company’s sales were driven by nurse managers. They also interacted with all of the trade organizations in their industry and took advantage of everything they had to offer to market their product.
  4. The company stopped responding to RFP requests because they discovered that if they were not a part of the process before the RFP, then the kill rate for the company was huge and the RFPs were just so painful and time consuming to fill out. Everyone would need to look at the RFP and the applications were typically 150-180 page responses that were a huge drain on resources, when that time could have been much better spent focusing on other relationships.
  5. The best learning experiences for marketers are to sit next to the customers that will actually be using your system and see the issues or changes they want implemented. Often, the most creative and effective improvements come from those experiences where you are sitting next to your customer showing them how to use your product and listening to their concerns. No matter what industry you are in or what type of sales person you have, make sure that they sit down with your customer to really understand their daily pains.

Wednesday, December 14, 2011

Making Your Pitch

Before you even get started with fundraising for your business, be sure to have survival plans at all stages in case things are not going well (i.e. a Plan A, B & C). Think about what you will do in the event things don’t happen the way you would expect – are there any other ways you will be able to get out of the business or people you can sell to in case things go terribly wrong?

You should also start thinking of talking to angel investors, as soon as you have “proof of concept.” This means that you should aim to have customers by the time you start approaching angels and hopefully you will even have examples of repeat customers who have great things to say about your product.
When making your pitch or sending materials to angel investors, a nice added bonus that can really help your chances is to include in your Appendix of materials, an email from a customer about your product (i.e. a “love letter”).

Keep in mind that most companies that successfully receive funding from angel investors typically have at least six months of a proven track record that someone will buy their product.
After sending over a teaser or executive summary, some angels will ask for either a business plan or give you an opportunity to pitch the business to them. You will often be given an hour, but try to have no more than 10 slides with crisp, clean bullets.

Be sure to practice your pitch several times in front of people who will tell you the truth. You have to be confident and believe in what you are doing or else investors will sense that you’re being tentative. Aim for confidence, not arrogance, and be sure to look and sound upbeat and excited.
In the first three to five minutes of your pitch, you really have to get to their emotions and get them hooked quickly. Show and tell them that your idea is a disruptive technology that will bring substantial returns for equity investors. Basically, have the first few minutes be a brief summary of the whole presentation, similar to an elevator pitch.

If you go past 30 minutes on just the PowerPoint, your presentation is probably too long because you need to leave enough time to answer all of their questions.  At the end of the presentation, in order to make sure you’re not wasting any more of your time or their time, I would recommend that before you leave, you should ask, “If we can produce what we are saying in this presentation, does this fit your investment criteria?”
Don’t forget to follow-up that evening with a quick email or message saying something along the lines of, “Thank you for your time today. We obviously strongly believe in this idea and would love to have you as an investor with us.”

Tuesday, December 13, 2011

Valuing Your Early-Stage Company

Before you give or sell equity in your business to anyone, you need to determine how much it’s worth. This can be especially difficult if your company has no historical financials or earnings. Below are some of the most common valuation strategies:

  1. Book Value: This form of valuation is practically worthless for startups because it is determined by the value of the assets your business has. For startups, this is often nothing or very little, so I don’t recommend using or even considering book value for early-stage companies.
  2. Market Comparables: For startups, in order to use market comparables, you will need someone to tell you how much they got for their business (unless it’s a public company, in which case all contracts must be disclosed in the financials and filings). When using public trading comparables to value your start-up, just be sure to realize that public companies are valued much higher than private, early-stage companies because they are much more liquid and easy to get in and out of your investment.
  3. Earnings Multiples: Privately held companies can be worth anywhere between 4-7x profits, whereas publicly held companies can often trade in the 10-50x profits (Price-to-Earnings)
  4. Present Value of Future Earnings: For this methodology, you will need your financial projections for at least the next two to three years. Then, you basically take your future earnings and discount them (often based on a discount rate as high as 25-35%+) in order to get the present value of your company. You want to be realistic with your financial projections, but you have to also take into consideration that investors will discount your financial projections either way.
Valuation and determining the financial projections of companies is one of the areas that I've had a lot of experience with, so if you have any questions specific to your company, feel free to follow up.

    Monday, December 12, 2011

    How to Fund Your Idea – Part 2

    The different types of funding can consist of yourself (both your savings and IRA), your friends & family, angel investors, strategic investors, private equity/VC funding, and going public.

    Most people don’t realize that if you really need the financing, you can also invest your 401-k in yourself or your business with a self-directed account without having to pay a penalty. I view this as more of a back-up plan option if all your other options don’t seem to be working and you think you might not even make it to retirement if you don’t do something now to save your business.
    Angel investors have typically made their own money in their own businesses and have a desire to transfer that knowledge to other businesses. Keep in mind that angel investors typically like to run together, so if you’ve found one angel, you’re likely to get seven or eight that would like to tag along with them and each one will invest anywhere from $25,000 to $250,000 each.

    Strategic investors are people or companies that will receive a benefit from your business more than just their investment. For example, both your suppliers and your customers would be considered strategic investors. If you’re looking to potentially do an M&A deal, you will most likely be selling to a strategic investor, and so if they’ve invested in you, then they will be more likely to acquire you down the road. The reason most strategic investors will consider acquiring you is because you’re also selling to their competitors and they want to control your product/service in order to get a leg up.

    Private equity and venture capitalists look for companies that will really make it big and then they help those companies either go public or sell to a strategic or other financial investor later on. They typically expect to get 3x-10x their money back in a five year period and they often expect only one out of five of their investments to really be a home run. Keep in mind that both the private equity and VC industries tend to be a very closed loop of people and they will often be very vocal about your business and ask for board seats.

    Going public is often the ultimate goal for most companies, but it’s actually like creating a second business because there is a lot of added effort going into the process including government reporting, reports to shareholders, reporting to the markets, etc. However, it remains one of the best ways to raise big chunks of money and exit out of your investment.  It can be a very expensive and long process though (expect it to last at least 6 months and cost more than $100,000).

    Another option to consider would be a reverse merger, where you would team up with a company that has been public a long time, but the business has been shut down, and it has decided to still keep the filing process going. In a reverse merger, one company acts as the shell corporation and your company aims to absorb the shell and reverse the name of the company (i.e. it’s a “reverse” merger because your company takes over the business and name). The reason most companies might not operate anymore but continue to file is because they know that the shell has value and it’s beneficial to other companies because it saves time and money when doing an IPO.

    Sunday, December 11, 2011

    Funding (My favorite topic…) – Part 1

    90% of startups don’t make it because they are underfunded.  And 75% of businesses are funded just from the entrepreneur’s own savings, retirement funds or borrowing capacity. Most startups don’t have a great understanding of all the funding options that are available to them, so that's why I think it's actually one of the most important topics to become well informed about. There are two (or really three) main types of funding:

    (1)    equity – selling a portion of your company
    a.       common stock – all shareholders are treated the same
    b.      preferred stock – shareholders get special treatment (potentially more voting power) and get an additional interest rate paid to them
    (2)    debt
    (3)    hybrid of debt and equity – convertible debt

    It’s important to understand the advantages and disadvantages of your funding options before you choose one over the other.
    For equity, the main advantage is that you share the risk with your shareholders. However, the disadvantage is that you will also be sharing your profits. You will also have other owners (who might be a pain to deal with or very helpful) and they will have their own opinions and need to be informed about your business. The other thing to keep in mind is that it is 5x easier to raise money from your current investors/shareholders, so be sure to treat them as well as you treat your customers.

    There are also several types of debt: personal debt, home equity line, credit cards, etc. Entrepreneurs can choose to borrow money based on their own credit worthiness, but it’s often better if you can get a commercial loan on the business itself. If you choose to take a loan on your personal guarantee, the bank can come after you and everything you own. For commercial loans, most banks will generally give you the loan for your business if you have collateral or assets that can act as a guarantee.
    Many banks will choose to loan to startups and small businesses because 2/3 of America is actually employed by small businesses, so the Small Business Association will often write a check to the bank for 75% of the loan if you’re unable to pay the bank back. These loans often tend to have reasonable interest rates as well.

    The main thing to remember about funding is to get the money long before you actually need it. If you wait until you really need it, then most people can smell and see the desperation, so the rates and terms won’t be nearly as good.
    Convertible debt has become very popular with investors, but it’s often the entrepreneurs last choice for funding, since it’s usually tipped in favor of the investor. The investors are able to get the benefits of both debt and equity since creditors are higher on the food chain and they get paid first. They also get steady interest and if your company makes it big, then they can convert to equity and you will have to share the profits with them as well. If convertible debt is the only way you can get money from your investors, then you will most likely take it either way. The conversion price of the debt will often be the valuation of your business, so you will need to decide how much your business is worth and you will want that conversion price to be as high as possible. Be sure to keep a look out for the post that is coming up on how to determine the value your business.

    Saturday, December 10, 2011

    How to Get Your First Customers

    When you’re ready to start thinking about selling to your customers, remember that people buy from emotion, and then justify their purchases with logic. So the easiest way to sell your product is to get your customers excited about your idea and clearly show the benefits and features. Most customers will want and look for the benefits of your product, while the features are mostly there just for comfort.

    And once you do get your first customer, remember that it’s five times easier to sell something to an existing customer than finding a new one, so be sure to take very good care of your customers once you have their loyalty.
    How do you make your customers happy enough to stick around with you? You need to exceed their expectations and always treat them well. Remember that if you only receive one complaint, it probably means there were at least nine others who were dissatisfied but didn’t go through the effort to complain. This is because typically only one out of ten dissatisfied customers will actually complain if they are unhappy, so that doesn’t necessarily mean you’re doing a fantastic job if you only have a few complaints. Your goal should be to have no complaints and even have your customers so satisfied with your product that they are either willing to invest in your company or market it to their peers.

    Thursday, December 8, 2011

    Breaking Down the Business Plan

    Some people might think that a business plan isn’t really necessary for startups or that they are just a waste of time, but I would argue that a business plan can actually save you a lot of time and money because it will make you think about whether your idea will really work and if it can become a stable (and standalone) business. It’s really a selling document in order to sell your idea not only to your funders, but also yourself. You need to convince yourself that the idea is actually worth pursuing.

    The business plan is the roadmap for your business. There are a lot of great templates that are available, (and often they are free of charge) so be sure to take advantage of those examples. One program that was recommended to me recently is Grow Think, which will break down the business plan process for you so that all you need to do is answer a few questions and then it will auto-generate your business plan based on your responses and order them in the correct sections. It can even help create your financial projections for you once you answer questions about the pricing and growth trajectory.
    I would also recommend having a few scenarios for your financial projections – at the very least think about the worst case and conservative case. It’s also important to realize that most people who read or look at your business plan will know that your projections are probably inflated, so be sure to take that into consideration when creating your assumptions.
    The executive summary is the most important part of your business plan. It should be no more than a two page recap of everything in your business plan. The executive summary will often might be the only part that is read by the people you distribute your business plan to, so be sure to include the following sections in your executive summary: overview, product/service (discuss both the benefits and features), marketing, company history & management, and financials.

    Wednesday, December 7, 2011

    Will my idea work and how should I market it?

    Before you decide to go and quit your job for your startup, I would recommend trying out your business part time if you’re able to instead of going all in at once, so that you don’t risk more than you can lose. Then be sure to TEST, TEST, and TEST your idea. (Be sure to check out one of my favorite books for more information about this: Lean Startup.) Large corporations will often use focus groups where the company will pay its target customers to try out its products or ideas. Instead of reaching out to your friends and family who love you and will probably not tell you the truth if your product doesn’t work or isn’t a great idea, you should be reaching out to strangers. A good suggestion to help you get a real response from people you talk to is to try telling them that your “livelihood depends on them telling you the truth,” so that they don’t feel bad about potentially hurting your feelings.

    Another great idea for some free marketing to spread the word about your idea is to consider finding out if there are any trade magazines or blogs in your industry or sub-sector. These magazines and websites will often have a section on new trends or products and they typically don’t charge anything to be portrayed in that section of the magazine, especially if you go through all the effort to write the article yourself, include pictures, and sign a release form for them to go ahead and publish it. After reaching out to the magazine or blog with the article, be sure to follow up within two days with a phone call and say you’re looking to publish the article in their trade magazine or website in order to see if it will reach your target customers before you decide whether you want to advertise through them. This almost guarantees that they won’t charge you anything because it’s as if you’re trying out the magazine or website before agreeing to buy advertisements (even if that's not your original plan).  You can also consider writing your own press releases when you get new customers (be sure to get permission to include this potential form of advertising in your contracts with new customers) and you can display it on your website or include the press releases on these industry websites and magazines.

    Tuesday, December 6, 2011

    Setting Up Your Business

    First of all, when you’re choosing a new name for your company, be sure to pick a name that actually conveys a message about what you do. It’s a lot easier to market yourself and spread the word if people can understand what the company does through the name.

    When it comes to logistically and legally setting up your company, you most likely don’t need an attorney in the beginning. There are plenty of websites such as Legal Zoom and Company Corporation that will help you select the type of business and help you fill out the forms, all for as little as $300 (vs. the thousands of dollars you would pay if you choose to go to a lawyer).  
    You will then have to decide between a sole proprietorship and a corporation. Basically for a sole proprietorship, you’re in business immediately and the only thing you have to do differently is when you file your taxes, you will need to fill out the schedule C to disclose your business income and expenses. The reason most people choose not to go with a sole proprietorship is because of the personal liability – if you get sued, people can and will go after everything you own.

    If you choose to create a corporation, then you will have a liability shield. There are sub-chapter corporations, which have the tax advantage of sole proprietorship (where losses can be deducted) and there are C corporations (which are larger corporations that have double taxation, so at both the corporate and individual level). There is also something called a limited liability corporation where instead of shareholders, your investors are members of the company (i.e. private equity firms are usually LLC’s). Be sure to understand all the pros and cons of the different types of companies you can set up and take advantage of the websites that can help you fill out all the legal forms to get started.

    Monday, December 5, 2011

    Picking a Business

    The biggest obstacle about starting your company is that “you don’t know what you don’t know.” The best way to pick a business to start is by really understanding and knowing your gifts and talents.

    How do you know what you’re good at? That should actually be pretty easy because in most cases it’s something you love to do. For myself, I love doing deals, meeting people, learning about businesses and helping people. After you ask around and take the time to self-reflect on your strengths and what you enjoy doing, try brainstorming what kinds of businesses do well with those talents.
    So to recap, the best way to pick a business is to focus on your talents, write the list down and see what opportunities/businesses come up that use or need those talents.  Good luck!

    Sunday, December 4, 2011

    EFactor Seminar with Professor Jim Solomon

    This weekend I was invited to attend an EFactor seminar with entrepreneur coach, Jim Solomon. A lot of what was covered in the seminar was pretty familiar, but I do enjoy reviewing this type of info about starting your own business. I thought it would be helpful to provide an overview of a few of the topics that were covered over the next few days, so I'll break up the information in a few different posts: how to pick a business, how to set it up, funding, business plans, valuation, etc.

    He seemed to have a very interesting background and has been able to sell three of his companies, so he has also done very well for himself. You can also learn more about him on his website here:

    Saturday, December 3, 2011

    Startup Devils

    This past Wednesday, I attended an event that was started by a new group here in Chicago called Startup Devils. It was founded by two Fuqua alums as a way to get the Duke University entrepreneurial community in Chicago together. They actually host 8-10 startup events in Chicago each year, so I decided to sign up for their newsletter and this was the first event that I was able to go to. The organizers of the event invited two entrepreneurs in the Life Sciences space who had discovered and marketed new drug therapies.  The event consisted of a panel where each of the entrepreneurs discussed their experiences in the life sciences industry. I actually found it very interesting, since my background is focused more in the healthcare space.

    The biggest takeaway I learned from the event was to take advantage of the provisional patent application if you ever get a great idea and don’t want to spend a lot of money to go through the full IP process. For about $40 you can get a provisional patent application that will protect your idea for a year. For most people who are just starting up, this is usually enough time for you to go around and speak to companies and investors who might be interested in your idea.  So if you’re a small business owner and inventor, it’s worth looking into in order to take advantage of it. The other key takeaway was that if you’re looking to sell your business to another company, often times it’s important to consider if your idea or company will become a major product for the acquiror or if it will end up being buried under the company’s other focus areas. For example, think of drugs that are bought by a company like Pfizer vs. Salix. Often the smaller drugs that are purchased by Pfizer don’t get all the attention they need, whereas the drugs might be the major product or focus area for a company like Salix.  So it’s not necessarily always best to sell your company to the biggest strategic company offering to pay the most money for your product or idea because it might end up getting overlooked within the larger company, and instead might take off and become very successful within a smaller player in the industry. 

    Wednesday, November 30, 2011

    November 2011 Technori pitch

    Yesterday Technori hosted its November pitch event with 6 new startups: Grabio, Weatherist, DreamChamps, MentorMob, EditHuddle, and Restaurant Bucket List.

    My quick first impressions of them are as follows:
    Grabio ( – basically Craigslist combined with foursquare. Many people in the audience seemed concern about protecting their privacy when selling things using this app. The app doesn't show your exact location, but shows a pin on a map in your general area. I think the best feature of the app is that it can notify you if you’re ever close to someone selling something on your “wishlist.” ( – claims to be one of the most accurate/probable sources for weather by tracking all the different weather forecasts in your city and using a proprietary calculation to average the most reliable forecasts for: high temperature, low temperature, chance of precipitation, and amount of precipitation. This seems like something I would use, especially if they come out with an iPhone app, since right now it's just web based. Right now, I check every morning, but I’m starting to use to compare and see how close the two sites are with their forecasts. The one big disadvantage is that doesn’t have an hourly forecast, which I care a lot about because during the week I’m usually only outside early in the morning and later in the evening during specific time periods and that’s when I would like to know how cold it will be or if it'll be raining around that time.

    DreamChamps ( – resource for recent grads and young professionals looking to join companies with strong cultures focused on the happiness of their employees. It basically lists companies that meet specific criteria that the founders think are important factors to consider in order to achieve happiness at work. The problem is that so far there are only a few companies listed and not many represented across a variety of industries. However, I did enjoy watching the demo video on their website and I would love to have all my friends find jobs that make them happy instead of settling for a job they don't like. I'm hoping they will be able to expand and spread the word on college campuses, but it will be hard to convince people to consider company culture over salary and compensation.

    MentorMob ( – think Khan Academy, but anyone can create lessons on any topic using any resource on the web. I love teaching myself new things and always have a running list of something new I want to learn how to do. I’ve already started going through the topics on the site and I've saved a few playlists I want to come back to. I can't speak to the quality of the playlists/lessons yet, but hopefully they are pretty reliable and helpful.

    EditHuddle ( – a way for blog readers to point out errors or mistakes to the blog writers. The reader is able to notify the writer of the blog by sending them a message through the application in order to let them know that there might be an error. Even though I’m new to blog writing, I can see this as something that would be really helpful for blogs especially ones with lots of readers and those that aim to be a reliable news source. I’m actually going to look into including EditHuddle on my blog and I've signed up to receive a beta invite. Right now they are mainly on WordPress, but looking to expand to all types of blogs soon.

    Restaurant Bucket List ( – this is a new facebook application that allows you to share the restaurants you want to check out with all your facebook friends, so that you can find out which of your friends also want to go to the same places. Most people I know keep a running list of the restaurants and bars that others recommend, so this app now allows you to share that list and find other friends who would want to go with you. I was really excited about the app after the pitch, but when I went on facebook to check it out, I was actually getting a lot of errors while I was trying to add restaurants to my "list." Granted the app just launched yesterday, it’s still a little frustrating that I’ve been having so many difficulties with it. Hopefully, they fix the bugs and more people I know start using the app, so that I can begin taking advantage of it. 
    I'm already looking forward to the next event during the last week of January! It's worth looking into to see if there are any startup pitch events near you and find out when they take place because these are great opportunities to learn about the latest tech trends and meet innovative and passionate entrepreneurs.

    Intro to Technori Pitches

    I first heard about the Chicago Technori start-up pitch meetings on the Built in Chicago website and I had a chance to go to my first Technori meeting the last week in October. The event consisted of about a half hour to network with entrepreneurs, investors, and others interested in start-ups and then 7 founders presented pitches. Each person had five minutes to talk about their start-up and then another 5 minutes to answer questions. From the October Technori meeting, I thought the most promising start-ups were Utellit and JumpRope.

    I thought Utellit presented an interesting way to keep in touch with friends. I’m always looking for new and better ways to do this – check out some of my favorite start-ups that help you keep track of your contacts and friends: Gist and FellowUp. Utellit aims to bring voice into our social media interactions, by allowing people to leave voice messages on friend’s facebook walls (i.e. instead of writing the usually “Happy Birthday!” on a friend’s wall, Utellit gives you the opportunity to leave a personal voice post instead). It also allows you to send voice text messages. Although, more recently, I’ve started to hear of a few other apps that are trying to bring voice into messaging as well like Voxer Walkie, which aims to turn your phone into a Walkie Talkie. At first I thought this was a great idea, until I started to think more about my own reaction to receiving voicemail. I rarely take the time to listen to my voice messages and instead I choose to either just call the person back and let them know I didn’t get a chance to listen to their message yet, but wanted to check what was going on, or I’ll check my email to see the Google Voice transcription. I signed up for Google Voice last year to get a 312 area code number, and now I love getting my voice messages transcribed (it also makes me laugh to see Google try to transcribe a message when it’s in a different language…). So this made me realize, if I don’t actually take the time to listen to my voicemail, what makes me think that my friends or I will take the time to click on every voice message on my Facebook wall to listen to it? It’s so much easier to just read a message and it's not as meaningful as receiving to an actual phone call from your friend instead. All in all, I thought it was an interesting idea but I questioned how much I would actually use the app.

    The other interesting start-up that I learned about at the October pitch was JumpRope, which allows people at bars and clubs to skip to the front of the line by paying a specific amount of money up front to the venue through the app. A lot of the prices for some of the nicer clubs in Chicago ranged from $20-$30 to cut to the front of the line, which seems a little steep to me. I know females tend to have the advantage of getting into clubs relatively easily, but I can see how this app would be helpful for guys who have a little extra money to spend and don’t want to waste 30 minutes to an hour or more waiting in line. I can also see JumpRope really catching on in a city like New York where the club culture is big and more people like to show off their status by getting into exclusive places or buying bottle service. And for people interested in buying bottle service, they can actually buy the bottle through the app as well. Although I actually think this is a bit of a disadvantage because often times you can cut to the front of the line anyway when you tell the bouncer you’re buying a bottle or some club owners will negotiate on the price of bottles so buying one through the app might not be the best way to go about it. So far, I’ve really only used the app to get a sense of places to go out in Chicago and it's given me an idea of what clubs/bars tend to be more crowded or popular. I don’t actually see myself trying to pay to cut to the front of the line though.

    Overall, I had a really great experience at my first start-up pitch event and I decided that I would try to go to these events more regularly, which is why I decided to go to the November pitch event as well...

    Tuesday, November 29, 2011

    Should Charities Operate Like Businesses?

    For a while now, I’ve been interested in getting involved in non-profits where I believe I can add value and really help improve, develop or expand the organization. When I first moved to Chicago, I didn’t know too much about the non-profits in the area, so I decided to create a profile on Through this website, organizations that were looking for additional help from someone with my skill set and background could reach out with potential opportunities to get involved.

    About a month later, I was fortunate enough to be contacted by the executive director of GlobalYouth for Education & Change. After learning a bit about each others' backgrounds and the goals of the organization, I was very excited about the opportunity to get involved and join the board.  GYEC was founded in 2007, so it’s still a relatively young organization and we tend to view it more as a non-profit start-up because we are facing a lot of the same challenges that young businesses face when they are first starting out. Not only are we looking for sources of funding from high net worth individuals (i.e. angel investors), but we are also reaching out to celebrities, corporations, grants and even the PE/VC community. We also have a fairly large goals and a broad vision, so it’s important for us to prioritize our goals and projects, while really demonstrating measurable accomplishments that can lead to further funding and revenue in order to continue to expand our projects to other countries and expand our reach. Being a board member of GYEC has been a challenging and rewarding experience so far, but I look forward to helping the organization develop its strategic plan and continue to succeed by positively impacting the communities it targets.
    It’s also worth noting that yesterday, the WSJ came out with several articles in the Personal Journal section with interesting perspectives on non-profits that I recommend reading if you’re interested in learning more: “Before You Join ThatBoard…” and “Should Charities Operate Like Businesses?”

    Monday, November 28, 2011

    Initial Thoughts

    After reading and subscribing to more than 200 blogs over the past 6 years, I’ve finally decided to take the initiative and start my own blog about early-stage investing and venture capital, while providing thoughts and updates on my experiences advising start-ups and working with non-profits in Chicago.

    I will also be providing a female perspective on the finance and VC industries. I’m constantly reminded through various articles (the latest ones from this weekend were in The Economist and Miami Herald) about how there are too few female entrepreneurs, executives and investors. By sharing and learning more about current female entrepreneurs and VCs, hopefully we can inspire the next generation of young women to start their own companies, act on their ideas and learn to make successful investments. 

    I’m looking forward to sharing and interacting with other entrepreneurs and investors by exchanging ideas and trends in both the non-profit and start-up communities.