Tag Archives: Founder

How Do You Fund an Early Stage Venture? Four Suggestions

Situation: An early stage venture which focuses on a humanitarian mission needs funding. The founder is more interested in providing a peer-driven platform and service than in producing profits. She envisions most of the funding coming from donations rather than investors, at least near term.  How do you fund an early stage venture?

Advice from the CEOs:

  • Given that the venture is focused on building a peer-driven software platform, it is possible that it may be of significant value if the venture was to be sold for its technology or audience. Facebook and similar platforms could have a distinct interest as the venture attracts a significant audience. Is this a potential conflict with the original vision? The answer to this question will impact funding choices going forward.
  • There are several resources available to assist in fund raising:
    • Look for local groups that assist with fund raising.
    • The Foundation Center (www.foundationcenter.org) specializes in helping organizations to secure funding for non-profit ventures from foundations. They have online facilities as well as locations in New York, Boston, San Francisco and other major cities. They also provide training in raising funds from foundations.
  • Us the founder’s network to find people with an interest and contacts in fundraising.
  • Connect with local churches and synagogues which also excel in fund raising. The congregations may be smaller than the mega-churches, but the members are often very connected. Because of the humanitarian nature of the new venture, churches and synagogues may be natural partners.

Should You Sell or Buy Another Company? Six Thoughts

Situation: A founder CEO is faced with two options – either selling his company or buying a complimentary company. The acquisition would fulfill his dream as CEO, but he is concerned both about the synergy between the two entities and his ability to manage the combined company. Should he sell, or buy the other company?

Advice from the CEOs:

  • Given these concerns approach the purchase opportunity skeptically. Be more prepared to say no than yes.
  • In evaluating his ability to run a larger operation, the CEO should objectively assess his own abilities.
    • A good CEO is not a Superman. A good CEO creates a viable business model and vision and hires a good team to bring that model to reality.
    • Consider past accomplishments. In an industry where nobody makes money the CEO has created a business model that is sustainable, highly profitable, and technically superior. The only thing lacking is size in terms of revenue.
    • The new opportunity – on the right terms – can launch the company from dominance in a niche to dominance in a significantly larger industry.
  • Assess the new opportunity both as a technical and cultural match. If there is a good cultural match:
    • Fewer things must go right to add value.
    • The purchase provides a channel to a larger market.
    • The acquisition will rapidly speed company growth.
    • The biggest concern will be the time to manage both entities.
  • The most important factor will be the chemistry between the two company teams. If the chemistry is good, the combination offers reasonable assurance that the two teams will complement each other.
  • Look at the purchase as an opportunity to build a win-win with enduring value.
  • In considering outside investors to support the acquisition, be cautious about financial partners and the conditions behind each financing option.

How Do You Transition from Doer to Leader? Four Suggestions

Situation: The Founding CEO of a professional services company has always been deeply involved as a service provider and rainmaker in addition to his role as CEO. As the company has grown he sees the need to spend more time as leader of the company instead of being a doer. What can be done to facilitate this transition, and what expectations need to be created? How do you transition from doer to leader?

Advice from the CEOs:

  • Another CEO removed himself from day to day business development activity by bringing in a new rainmaker. These were the adjustments made to facilitate the process.
    • During the first year he worked with the new individual in a team or partnership role.
    • Compensation was results-based. Discussion of equity consideration was deferred until the individual proved herself.
    • The CEO moved himself out of the individual contributor role except as needed to support the new rainmaker’s efforts.
    • All of this was accompanied with clear communication to clients: “this adjustment will provide better service to you; here’s my number if you need help.”
    • Rainmakers are a different personality type. To be most effective, they must be able to say “my team.” Allowing this will ease the transition and improve the relationship.
  • Create teams to deliver solutions that have traditionally been provided by the founder.
    • Identify skill sets behind the roles that are being delegated.
    • Build an organization that will fill these roles.
    • Participate in team meetings, but as an advisor rather than as principal decision-maker.
    • Adapt role and behavior in phases to ease the pressure of the change on both the CEO and the team.
  • How does the CEO manage his own expectations as well as those of the company as he makes this transition?
    • Delegation initially takes more time and effort than doing the work yourself. Be patient and let the investment pay off.
  • Larry E. Greiner of USC was an expert on the study of organizational crisis in growth. Per Greiner’s model, the company is currently at stage one – moving from principal and founder to initial delegator. It may be a useful to study this model.

Do You Need To Rely on Venture Capital Funding? Three Questions

Interview with Charles Bellavia, CEO, ElectraDrive

Situation: High tech entrepreneurs frequently see venture capital funding as a quick route to enabling their ventures. However VC funding is highly variable by tech sector and company cash needs, and few companies are ever funded. Do you need to rely on VC funding and what are the alternatives?

Advice from Charles Bellavia:

  • The first question to ask is what you want from VCs. In the past they brought both contacts and funding. Now, generally, they just bring funding. So ask three questions.
  • Can you fund the company out of your own pocket?
    • Far more companies are funded by founders, friends and families than by VCs. However self-funding demands conditions.
    • Cofounders should have alternate income sources so that they can operate without salaries for periods of time.
    • Watch the life stages of start-up cofounders. Avoid joining a start-up when your kids need your attention, especially during their teen years. Can you forgo regular income if you are paying for college? If an annual 2-week summer vacation is important, don’t join a start-up.
  •  What is the minimum funding needed for the company?
    • What funding do you need just to prove your technology and generate cash?
    • Focus is key. People will suggest variations. You have to know your path and whether variations will help or distract.
    • Stay with your core idea and think in terms of product generations. Build fitting variations into future plans if they will delay initial launch.
  •  How do you keep project workers motivated?
    • Plan for turnover. Know who is key to the project, and where you need back-ups.
    • Start-up life is all consuming. When the picture on the wall is crooked, everyone jumps to straighten it out.
    • Have fun and make it fun. This needn’t be expensive, like parking lot pot-luck barbeques with a CD deck and music.
    • Be generous with simple, low cost recognition. Acknowledge employees for who they are and where they came from. This is especially important when you have diverse employees and builds camaraderie. One company has pot luck lunches and employees are asked to bring their national dish; the food is wonderful and helps employees to appreciate one another.

You can contact Charles Bellavia at cfb@electradrive.net

Key Words: Funding, Venture Capital, VC, Bootstrap, Self-fund, Friends, Family, Income, Salary, Founder, Life Stage, Focus, Core, Iteration, Turnover, Fun, Recognition

How Do You Fire a Founder? Three Suggestions

Situation: A founder of a company also heads business development. This person had no prior experience in business development, and no other skills to offer the business. Over the last two years he has generated only a fraction of his salary in new or additional business. The CEO has concluded that it is time to hire a business development professional; however, the Board is reluctant to act. What are the steps that you would take to let a founder go?

Advice from the CEOs:

  • Because the individual in question is an owner, the situation is delicate. Staff relationships are involved as well as morale. Therefore, it is essential that you create a convincing case for replacing the individual and show that this is the best for the business. Don’t rush the process. However, once you’ve built a solid case for what needs to be done, act expeditiously.
  • Start by evaluating and documenting what the individual is doing to develop new business.
    • Count customer connects per day. Set a baseline expectation and measure against this.
    • Look at the pipeline. Historically what does your new business funnel look like – contacts, presentations, evaluations, closes. How does this individual’s pipeline stack up?
    • What are his business advancement and close ratios? How do these compare with industry standards?
  • For the individual: Demonstrate that his performance is penalizing his own return as an owner. Create a spreadsheet that shows:
    • The current situation, and his return as a shareholder from current results, versus
    • Hiring two effective business development people, and how this could change his return.
    • Show the individual a graceful way out – one that works for him.
  • For the Board: if the current direction is negative, create a model that shows your current direction and the break even implications. Present this analysis to the Board to show that the company needs a change.

Key Words: Business Development, Founder, Principal, Experience, Performance, Replace, Document, Pipeline, Return, Model, Trend