Thursday, December 29, 2016

Lessons Learned Seeking Funding - Be realistic about the value of your company.

  Overvaluing your startup can be a deal killer.  Here's why.  At some point, most startups need to determine a value for their endeavor in order to raise money.  There is real potential -- even an incentive -- for company owners to inflate this value.  The logic goes something like this:

We need $500,000 from an investor.  If our company is worth $1 million then the investor will wind up owning 50% of the company, so let's jack up the value to $5 million so the investor only gets 10%.  

Investors will be on the lookout for it, they will spot it, they will test it, and if the owners can't prove up the valuation to the investor's satisfaction then the deal will probably be off and any potential relationship will be over.  The company would then have two problems:  1] they still need to raise money, and 2] they now have to explain to the next investor prospect why the previous prospect balked.

This is the wrong approach.  Don't use it.

Tuesday, December 27, 2016

Lessons Learned Seeking Funding - In the early days, don't rely on just one or two investors for all your capital.

  Here's why.  Sooner or later, lots of deals need more money than their management originally thought.  In those situations, it is much easier for all involved to raise that additional cash from, say, six to ten investors than it is from just one or two.  If you have just a couple of investors, and they turn you down for more money, then you have to 1] go to newer investors, who will know you are in a tight spot, and 2] figure out how you're going to dilute the ownership of the investor(s) already in the deal.  It won't be fun.

Wednesday, December 21, 2016

Lessons Learned Seeking Funding - Whoever does the talking needs to have skin in the game

  Why?  Because potential investors want to build relationships with fellow travelers -- people who will be there through thick and thin to make the deal work.  This person does not have to be the lead investor, but they need to have significant cash at risk.  Note that it needs to be cash at risk.  A consulting fee does not count, even if it is subject to some successful outcome.  Further, that cash needs to be at risk on the same terms as the prospective investor's cash.  Otherwise, potential investors will probably conclude that this person they are building a relationship with may never be seen again.  That would be a mistake.

Monday, December 19, 2016

Lessons Learned Seeking Funding -- Ventures need a "lead" investor

  The "lead" investor is somebody who has invested in similar deals before and has been successful.  They know the industry(-ies), the players, the rules, etc.; they have credibility and do most of the talking in meetings with potential future investors when the company is ready to ramp up.  The lead investor does not necessarily have to be the first person to invest in a venture, nor do they have to be the biggest investor in the deal, but their investment should be substantial and it should be long-term.  Obviously, it helps if the lead investor knows -- or, perhaps, develops meaningful relationships with -- VCs or other candidates for subsequent investment.

Thursday, December 15, 2016

Lessons Learned Seeking Funding -- New investors will not reimburse previous expenses

  Investors who join a venture that is already established want their money to be used on projects and/or operations that occur after they make their investment.  This is especially true of professional, truly arms-length investors (not friends or family).  They do not want their money to be used to pay old bills.  It is important for the initial investors in a venture to be aware of this; the money they put into the deal will not be returned or reimbursed to them by subsequent investors.  In other words, their money could be in for a very long time.

An exception to this would be when a subsequent investor buys out an investor that bought in to a deal earlier.  However, it is unlikely that that would happen without a deep discount.

Thursday, December 8, 2016

Lessons Learned Seeking Funding -- The right number of people to meet with prospective investors

  Generally, if you're seeking funding you want the right number of people from your side attending meetings with investors (or donors), especially exploratory meetings.  My preference is to have one or two key people, three tops.  More than that can be a problem.  Here's why.

  1. Especially in the early stages, a relationship is being built and trust is being established.  Having excess people in the room can distract from that goal.
  2. You want all parties to leave meetings feeling as though something significant has been accomplished -- the ball has been moved downfield.  Having too many people with too many different agendas, lines of questioning, approaches to the problem, etc., can clog the conversation and prevent that from happening.
  3. The simple fact that one side brought many more people to the meeting than the other can become the most memorable aspect of a meeting, distracting from the point.
  4. Too many people in the room, especially on the side of those seeking funding, can come across as weak.  Why did so many people come?  Is there a lack of trust?  A lack of shared belief in other peoples' abilities?  Is somebody afraid they're going to be left out?  Is somebody desperate?
While I have seen the above happen on several occasions, there can be exceptions.  In situations where there are multiple kinds of expertise involved you may need several in the room.  Or you may want to create a feeling of superiority over the other side to drive home a point.  In those case, definitely bring all the people you need.  Otherwise, limit the number of participants to just the people needed to build and improve the relationship.

Tuesday, December 6, 2016

Lessons Learned Seeking Funding -- Investors want the right "fit"

  I want to share some things that I learned about raising money.  My hope is that my experience will benefit others else who find themselves in a similar position.  I will have at least five posts on this topic, maybe more.  Here's some background.

I gained this experience working as the chief market researcher for an organization that sought funding to establish its business and fund development of its products.  In addition to market research, I also searched for, set up and participated in meetings with potential investors.  These are the things I wish I had known going in to those meetings.

First, most investors (and donors) want or need a certain "fit" for their money.  The fact that you have a great idea, cause or invention has nothing to do with this.  As such -- and I cannot emphasize this enough -- you cannot take it as a personal rejection if what you're doing doesn't match what they are looking for.  If the fit is not there, then you should not push the point.

What constitutes a good fit?  It varies from investor to investor.  And if you don't know their criteria (which may well be the case) then simply ask.  Criteria may include...

  1. The field of endeavor they prefer,
  2. The investments (or donations) they have already made,
  3. The problem you are trying to solve,
  4. The amount of money you need,
  5. When you want the money,
  6. When they can realistically expect to see a return,
  7. How much of a return they will get, and
  8. Your experience in
    1. The field of endeavor
    2. Managing an operation
    3. Handling other people's money
My inclination for situations where it is not an automatic fit:  Be open about that fact and explore it.  See if there's an opportunity anyway.  If there's no fit, then leave on an up note.  Reasons:  1] Most importantly, it's the right thing to do, and 2] whether they invest or not, you want to make allies, not enemies.

Wednesday, October 5, 2016

Why do women get interrupted more than men?

Yes, it's true.  While the term "manterruption" has sprung up to describe the phenomenon, the fact is that women get interrupted just as often by other women as they do by men.  There are several studies that show this, but none adequately explains why this happens.  Some possibilities that have been mentioned in articles and studies:
  1. The way we're wired...
    1. Men converse competitively, whereas women converse collaboratively.
    2. Women have lower self-esteem than men.
  2. The way our institutions are structured...
    1. With fewer women than men in leadership positions, the power structure favors men over women.
  3. Cultural perceptions...
    1. People do not interrupt leaders, and men are perceived to be better leaders than women.
    2. Women are less supportive of women speakers if they are in a mostly-male audience.
    3. Men who break conversational rules are "assertive," while women are "bitchy."
It's possible -- maybe even probable -- that this phenomenon is created by a group of causes.  Also, knowing the exact cause may not be necessary to solving the problem.  The solution could be as simple as conversational self-awareness and even-handed respect.

Further reading...

Hancock, Adrienne B. and Rubin, Benjamin A., Department of Speech and Hearing Services, The George Washington University, Influence of Communication Partner's Gender on Language, Journal of Language and Social Psychology, , 2014 (accessed via the Texas A&M Medical Sciences Library):

Krupnick, Catherine G., Men and Women in the Classroom, Derek Bok Center for Teaching and Learning, Harvard University, 1985:

Robb, Alice, Why Women Get Interrupted More, -- Even By Other Women,  New Republic, May 14, 2014:

Cameron, Debbie, Why Women Talk, May 23, 2015:

Monday, August 29, 2016

Why not make Dallas' FAIR PARK more bicycle friendly?

I hopped on my bike the other day and rode from White Rock Lake down the Santa Fe Trail towards Fair Park.  After a pleasant ride, the trail delivered me (almost) to Fair Park's front door.  I entered the park through the main gate and headed north to Washington Street.  I then headed east and rode a roughly three-mile loop around the park's inside perimeter.  Three times.  The parking lots are not -- big surprise -- all that interesting.  But the rest of the park is actually very enjoyable.

The thought occurred to me that Fair Park should be a destination for recreational cycling.  This would be a great way for people to get familiar with the park.  I can easily see people exploring the lagoon or the art deco paintings along the Esplanade.  It would be a pleasant experience. It would also be a good way for people to connect with Fair Park.

Monday, August 22, 2016

FAIR PARK in Dallas -- Another reason for smaller events

  Another potential benefit of dividing the State Fair of Texas into a series of smaller events is that it would increase the activity level at Fair Park.  Yes, there are occasional school field trips to the Discovery Garden and concerts at Gexa Pavilion, but for most of the year, most of Fair Park is a ghost town.  Translation:  It lacks vitality; nothing's going on, and that becomes the brand.

Texas State Fair - Break it into smaller events?

  Has anybody ever considered breaking up the Texas State Fair into a series of smaller events?  One benefit of this would be that smaller events would require less surface parking.  Occasionally, the Gexa Pavilion has an event that needs lots of parking, but for the most part all those spaces exist mainly to accommodate one three-week event:  The Texas State Fair.  The rest of the year, they're empty.

Tuesday, June 21, 2016

There is no clear correlation between the minimum wage and employment levels.

There's a great deal of debate on the minimum wage.  On the one hand, there is the argument that raising the minimum wage will reduce employment.  On the other hand, there is the argument that people should get a living wage.  Well, below is a table that shows what happened to employment in the 12 months after an increase of the federal minimum wage.  Be aware that this table was used to refute the statement that increasing the minimum wage always resulted in job growth.  In this case, that statement was judged to be mostly false.

Source:  Does raising the minimum wage always result in job growth, by Lauren Carroll,, November 6, 2014.

It's clear from the table that sometimes job growth occurred after raising the minimum wage, and sometimes it didn't.  Upshot:  There is no clear correlation between the minimum wage level and job growth.  Why?  Probably because wage levels are just one of many factors that influence the economy.

Monday, June 6, 2016

Do income statistics tell the whole story of income inequality?

It's pretty well-known that real incomes in the bottom 90% of the U.S. income ladder have only improved modestly since the early 1970s, after having doubled (i.e. increased by 100%) over the 25 years before that.  But is it possible that those statistics do not tell the whole story?  Is it possible that, even though those incomes haven't improved, the quality and caliber of the things that can be bought with them have?  And further, does the improved quality of those goods compensate for the reduced apparent income?

Sunday, May 8, 2016

Idea for a music app

Wouldn't it be cool if there was a music app that would search for songs based on their beat?

Tuesday, April 5, 2016

Things NOT to do at work, #2.

Ever get an email that simpy says "see below," or something similar, and has several more emails attached below?  It's then left up to you to sort through all the previous emails and ferret out the point.    This has multiple glaring pitfalls.  First, it is communication by hint, and that leads to miscommunication.  Second, it devalues the time of the recipient since they have to spend their time figuring out what the sender wants them to glean from the chain of messages.  Third, it's basically rude in that it essentially says the the sender's time is more valuable than the recipient's.

Instead of writing "see below," take the time to tell the recipient what you want to communicate from the email chain, or at least point out the specific passage(s) you want them to focus on.  That will then give them the option of reading through the entire chain at their discretion to find context or other meaning.  And it shows that the sender respects the recipient's time.

Monday, April 4, 2016

Things NOT to do at work, #1

Be prepared to answer the phone, even when you've just started a new job.  Answering questions with things like, 'I don't know; I just started working here' or 'This is my first day, so, um, if you can hold on I'll see if I can find out' are terrible responses, both for you and for your new company.  It's important to realize that when you talk in a professional capacity to other people you are directly influencing your brand and your employer's brand.  When you use the just-started-working-here excuse up front you come across as trying to lower expectations to accommodate a subpar performance.  That's not the direction you want to go.

The direction you want to go is either, 1] anticipate and prepare for questions by doing some research in advance so you will actually know the answer, or 2] simply say something like, "Of course.  Give me a minute and I'll be right back to you," and then move heaven and earth to find out the answer asap.