VCs Still Sourced for Small Business Startups

There was talk that the JOBS Act would move small business startups away from venture capitalists and toward crowdsourcing options. It appears it’s not an either/or situation but both/and.

Funding Stats Regarding Small Business Startups

From a survey done by national law firm Dorsey & Whitney (originally done in 2010 and recently updated), we learn that:

  • 36% of small business startups in major metropolitan areas did a round of funding (29% prior in 2010)
  • 30% of CEOs expect to raise between $1M to $5M (23% prior)
  • 15% used business incubators (9% prior)
  • CEOs strongly preferred to seek funding from established relationships (i.e. not crowdsourcing)

Another Crowdsourced Option For Small Business Startups

While I mentioned crowdsourced consulting in an earlier post, it seems we have another similar company.

GenCrowd is also provides crowdsourced outsourcing for small business startups. It’s unclear from their website whether they’re familiar with their competitors or what their USP might be over them.

They have a similar story from the previously mentioned AskYourUsers.com.

“The volume of work that startups have to do, atleast initially – from idea brainstorming and validation, brand naming, tagline and slogan generation, logo design, web design and development, content and copywriting, all the way down to website and usability testing, SEO and marketing, analytics research, customer service, and a whole bunch of other issues – can take a real toll on people and businesses alike,” said Barun Rath, founder of GenCrowd.

“Going through the steps, GenCrowd was conceptualized from these issues that we personally faced when starting a business – we were looking for resources to provide us with different ideas and perspectives on different aspects regarding the business we were working on at the time. And so, the idea behind GenCrowd was formed – an online marketplace allowing people to crowdsource ideas, content, and feedback for their business needs.”

GenCrowd seems different in that it allows “blind” listings which means you can solicit feedback without any of the experts being able to see each others’ solutions. Of course it’s hard to beat AYU’s ties with LinkedIn – whatever that benefit might be.

Sources:

Startup CEOs Crave Venture Capital, Not Crowdsourcing

GenCrowd Leverages “The Wisdom of Crowds” to Help People Get Ideas, Content, and Feedback for Their Business Needs

Crowdsourced Consulting Small Business Ideas

Clive Thompson: Why Veteran Visionaries Will Save the World

Comments:

It seems to go without saying that we prefer working with people we know when that’s an option. But to extrapolate that to the conclusion that crowdsourcing isn’t gaining traction does small business startups a disservice. It’s zero sum thinking.

Before, venture capitalists were the main game in town. You may have got funding based on your relationships with them. Of course you had to have a solid idea too. But the relationship needed to be there.

With crowdsourcing, a whole new source of funding is opening up to the market. People without prior VC relationships will now have options where they can prove their idea and expertise.

Small Business Startups Demographics

Of course there’s the debate about preferred startup CEO ages. If anyone does a demographic study on that, I’d like to know. One I saw said the average age of startup CEOs from 1995-2005 was 39 but that older professionals start different kinds of companies than younger ones.

Clearly the older ones are going to be the ones more likely to seek funding and in all likelihood, the younger ones be more inclined to pursue crowdsourcing for small business startups.

Selling Baby Boomers’ Small Businesses

Small business or health care?

Most people are aware of the impact of baby boomers on the health care system. If you’re looking for stable employment, it hard to do better than working in health care as the baby boomer generation needs more and more care.

Another implication most people aren’t aware of is the boomers small business market. Yes, we realize they’re looking to retire in the next few years but most don’t realize that means the ones that own small businesses that they operate may be looking to sell.

In fact that’s what we’re see happening now already.

More Small Business For Sale, Lower Prices

Bizbuysell.com is a site that lists small businesses for sale. They report that while selling activity has increased to 2008 levels, prices have fallen 3.2% in the last quarter:

“Business owners are continuing to adjust their pricing in order to expedite a sale,” said Mike Handelsman, group general manager of BizBuySell.com. “While some may still be holding out for an economic recovery, many more are trying to exit at acceptable prices, even if it means settling for a lower number than they originally expected.”

Small Business Selling Tips

If you are a small business owner looking to sell, the WSJ has some tips for you based on common mistakes. Most of them are to do the opposite of the mistake.

Mistake: The business is dependent on you.

Mistake: Not planning for tax implications of the sale.

Mistake: Not getting a realistic appraisal.

Mistake: Only looking at the bottom line of an offer.

Mistake: Not hiring experienced professionals to handle the deal.

Mistake: Not being prepared for the emotional consequences of selling the small business.

Sources:

Sales of small businesses rise as prices decline

Ready to Sell Your Business and Retire?

Comments:

One small business idea is clearly then to be any sort of professional who can assist a small business owner with the sale of their business. Alternately, now and in the near future will probably be a great time to acquire a cash flowing small business.

Flexible Small Business Ideas

It turns out the traditional paradigm of developing a business plan and a product over a few years is becoming obsolete in favor of more flexible small business ideas. The Wall Street Journal recently reported on the idea of pivoting.

The Pivot: Flexible Small Business Ideas

Source: Chris Kirkman via Wikipedia

For more technology and especially web based businesses, the most important component to their product development is customer demand.

For many, the exact recipe consumers will respond to can’t be determined ahead of time.

A number of companies including Groupon, Twitter and Instagram all started out as something else. In the course of initial customer feedback, they changed their product offering to what they’ve become today.

The Next Generation of Flexible Small Business Ideas:

Generally speaking, there is an expectation among venture capitalists that people in their 20s and 30s are better at these flexible small business ideas than their Baby Boomer counterparts.

Investors say the founders who made left turns are generally more experienced—and less fearful of failure—than past generations of tech entrepreneurs. The founders who change products and markets between one and three times raise more money than those who don’t, according to Startup Genome Compass of San Francisco, which tracks more than 13,000 Internet start-ups. In fact, they raised roughly 2½ times more capital than founders who changed products and markets either four or more times or not at all, its research says.

There’s also a graphic comparing companies that pivoted versus those that have persevered.

Source:

‘Pivoting’ Pays Off for Tech Entrepreneurs

Comments:

When Are Flexible Small Business Ideas Needed?

The graphic shows that there are successful companies that stuck with what they originally set out to do as well as those that needed more flexible small business ideas.

If you’re in a business that can change and adapt easily according to customer demand, then you should. Staying flexible within your mission is essential for long term viability.

Of course that doesn’t mean to chase ten rabbits all at once. Each of the companies mentioned only pursued one idea at a time. It was only when one idea was shown not to be effective enough that another one was adopted.

Jim Collins talked about this concept in a longer term strategy version in his book, Good to Great. He talked about how the most important thing was to get the right people on the bus and then figure out where the bus was going.

Regardless of your current business model, a strategy that includes flexible small business ideas has merit and ought to be considered.

A Low Cost Way to Improve your Small Business Brand

Most small business owners know that sustainability is a concern to many consumers and can affect your small business brand.

While no business is going to claim not to be sustainable, it helps if you can point to actual things you are doing in this area.

The Small Business Brand as USP

Being “green” isn’t going to be a complete USP for most companies these days. But if you are in one of the few remaining industries that doesn’t concern itself with sustainability, then it might help.

Faced with two seemingly otherwise equal choices, most consumers will choose the small business brand that appears more sustainable.

Simple Small Business Brand Options

One easy and low cost way to make your small business brand more sustainable is to switch to green energy. Fortunately, these days you can buy sustainably sourced energy from many power companies. That’s much easier than trying to install solar cells or wind turbines.

Then you can tell your customers, employees and anyone else likely to care that your business is helping to save the planet and so on, increasing your small business brand.

In most cases, green energy isn’t going to cost much more than conventional. In fact, it might be one of the most inexpensive small business brand improvements you can do.

Said one retailer:

Yeah, it costs us a little bit extra to do these good things, but I think it helps our bottom line. Employee-retention rates are high and customers are more loyal.

In addition to local press, businesses that reach these sustainability goals may make it on to the EPA’s list of companies that choose renewable power. Official logos are usually good to improve a small business brand.

Source:

Green Power: A Low-Cost Boost to Your Brand and Bottom Line

Comments:

Sustainability can be a tricky subject. Take building supplies for example. You won’t find a product that doesn’t claim to be more sustainable. Concrete is one of the dirtiest, most energy intensive processes out there. But then well laid concrete will last indefinitely. Wood on the other hand, is infinitely renewable but we build with it intending for it to last only 50 years.

Another relevant example is the car battery. Electric and hybrid cars claim sustainability based on extremely low gas mileage. But then if you consider the production cost of manufacturing a hybrid battery and its disposal, it becomes one of the least sustainable vehicles there are.

Sustainability and The Small Business Brand

Those two examples look at sustainability from the cradle-to-cradle paradigm. It’s important to consider the energy it takes to bring a product to market as well as its disposal. Consumers are becoming more aware of such issues even if it doesn’t seem that it would be immediately relevant to your bottom line.

All that’s to say that paying a little bit more for your energy might make sense financially too when it comes to customer satisfaction, employee retention and improving your small business brand.

Small Business Ideas for Going Mobile

Almost everyone by now knows that the economy is going mobile. Not just a particular segment of the economy – the entire economy. Think Internet sized bigness.

For those who want to be hands on in going mobile but don’t want to start programming from scratch, we have this announcement:

RunRev Offers Free Small Business Academy on Going Mobile

Yes, that’s right, a free course on how to build your own apps. The course on going mobile runs through the month of May (2012) and requires a signup.

The course includes daily short videos on different topics related to using RunRev’s platform – LiveCode – in going mobile.

“We’re delighted to build on the success of our hugely popular Game Academy,” said Kevin Miller, CEO of RunRev. “With our new business-oriented course, we’re unlocking the potential of entrepreneurs and developers by giving them the tools to create custom apps and take their businesses to new levels. Today, every business can benefit from connecting with customers on mobile devices, and LiveCode is a great entry point for those new to development who want to create apps for iOS, Android, Mac, PC and even Linux. The Small Business App Academy will show you how in visual, engaging and easy steps.”

Going Mobile Options

If you’re wondering if there’s a catch – well, sort of. If you have no intention of using LiveCode to build your own apps, then this might only be halfway interesting to you.

If you compare it to hiring a developer to create you a custom app and then maintain it for you, you might just come out ahead going mobile this way.

Even if not, the course is sure to provide a number of pointers to keep in mind while building apps so at the very least, you’ll be a more informed consumer when it comes to hiring someone to build your app.

Going Mobile Course Topics

Some of the topics to be covered include:

  • Database and cloud access
  • Data manipulation
  • Monetization
  • Working with rich media
  • Creating user interfaces
  • Deployment to devices
  • Push notifications

If you don’t know what most of those things are, that’s okay. No doubt there will be lost of visuals and examples. It is a feature list after all and the training will probably cover the benefits of those features too.

Regarding RunRev, they were also listed as one of the top cross platform development tools for going mobile.

Sources:

Free Course Teaches Entrepreneurs and Small Businesses How to Create Mobile Apps in New RunRev Small Business Academy

Cross-Platform Developer Tools 2012

LiveCode Academy for Small Businesses

Comments:

As I’ve said before, going mobile – like any other tactic – needs to support your overall strategy and mission. Many apps are nothing more than an exact replica of company’s website. Having your website be mobile friendly may or may not help in the long run. That would depend on how you’re using your website now.

For many small business owners – especially the less tech savvy, learning to create an app might not be for you. It’s another question though whether any app is right for your business. It could help gain new customers with the right level of special offers and interaction.

Like all other marketing tactics, going mobile should be weighed on a ROI basis rather than just because it’s the next big thing.

Starting as an Entrepreneur

Starting as an Entrepreneur

There were a couple of articles today on starting as an entrepreneur. One was geared toward showing investors the entrepreneur is committed. The other was on ways NOT to start as an entrepreneur.

Both are useful as self examination tools even if you’re not currently starting a business. If you have an existing business, you can consider whether you still have what it takes to make it as an entrepreneur.

Showing Commitment as an Entrepreneur

Since investors at the beginning of a venture are betting on the small business idea rather than an established system, they want to know the idea is fully supported by the person who came up with it.

These are some ways investors judge someone to be fully committed to his idea. Even if you’re not looking for venture capital, this is a good way to examine yourself to see if you’re giving it enough to really get things going and grow your small business.

  • All or nothing – not halfway or as one of many efforts
  • Sacrifices – going with less especially to get the ball rolling
  • Hidden motivations – they want to see you have other reasons to make it work such as family obligations or wanting to make your first big mark on the world
  • Skin in the game – you have something vested in a good outcome
  • Characteristics – you can function as Gerber’s 3 types – technician, manager and entrepreneur
  • Patience – you’re willing to reinvest and work toward long term growth
  • Equity hoarders – you’re willing to save money to expand the business rather than put it all back out to investors
  • Determination – see quote below:
One has to admire entrepreneurs who are willing to have 10 or 20 rejections for every lead they receive. Nothing creates more entrepreneurial believability than a passionate belief in an opportunity. That does not necessarily mean the venture is a good investment, but I would much rather back entrepreneurs who are willing to spend years on an opportunity, and show genuine resilience, rather than those who give up after a few setbacks. The ability to recover from failure, in a country that, sadly, has little tolerance for honest entrepreneurial failure, is especially impressive.

How NOT to Start as an Entrepreneur

Another article goes into the wrong ways to do it:

  • Don’t start a business in a field you’re unfamiliar with
  • Don’t try to start it entirely on your own (find professionals, partners and mentors)
  • Not adapting to the changing market
  • Being afraid to make mistakes (that’s one of the best ways to learn)
  • Being risk adverse (you’re probably not if you’re starting your own business)
  • Don’t give up if you run short on cash

Sources:

What makes a real entrepreneur believable?

6 Ways NOT to Launch Your Small Business

Comments:

While it’s entirely possible to start a business without going all in, putting it all on the line is what people want to see if they’re going to give you money to do it. They want the best opportunity for success.

In truth though, many small businesses are started by individuals with their own money part-time. That’s part of what makes business great – there are lots of ways to get it right.

What you can’t do is start without a clear idea of how you’ll connect with and provide value to your customers. Without a way to provide value or make a sale, it doesn’t matter if you have 100 people working on it full time. But then that’s probably the first rule of being an entrepreneur and you probably already know that.

Keeping Small Business Ideas Fresh

Keeping Small Business Ideas Fresh

There was an article today on bringing the spark back to your small business ideas.

Small Business Ideas versus Burnout

The first point was to clarify that we’re not talking about burnout. Getting bored or tired of your own small business ideas is a sure way to see the business be stuck at lukewarm and eventually fail. If that’s the case, then you need to reconsider why you got into business in the first place.

If it’s lack of clarity about the small business ideas themselves, then the advice was to reconnect with the unique selling proposition (or form one if it hadn’t already been defined). If you can’t answer why people should do business with you, then your customers probably can’t either and might find someone that can.

A solid USP means that you do something better or different than your competitors. And for the most part, that shouldn’t be as a low cost provider unless you like getting squashed by Wal-Mart or Amazon.

Your business’ branding is all about what existing and prospective customers think when they see or hear about your company. It comes from a number of things: your products and services, your physical presence, advertising, packaging, online appearance, reputation, logo and company name.

There were also a number of small business ideas given on various USPs including excellent customer service, serial innovation, and specialization.

More Small Business Ideas on Keeping It Fresh

Perhaps not coincidentally, the Small Business Administration is offering a webinar this week on keeping small business ideas fresh. It’s Thursday, April 26th, 2012 at 1pm ET. If you’ve missed it by the time you read this, they’ll probably have other webinars that might interest you.

Sources:

Ways to bring a little spark back into the business

SBA’s April Web Chat to Focus on Keeping Business Ideas Fresh

Comments:

The Unique Selling Proposition is arguably the most important factor for small business ideas. Once that’s worked out, everything else flows from there. A clear, strong USP would preclude ever needing to keep it fresh.

Customers would become raving fans and that’s exciting in itself. A USP may not seem as sexy as say, getting mobile devices and apps rolled out, but in the end, without a USP you’d find there weren’t clear small business ideas to communicate in the social media sphere anyway.

Crowdsourced Consulting Small Business Ideas

More Crowdsourced Small Business Ideas

Askyourusers.com is a new crowdsourced solution among small business ideas. It’s a new twist on crowdsourcing that can help facilitate the market research process on a smaller budget.

Prior to this small business idea, market research has been conducted by in-person focus groups, recruiting from Craigslist and formal surveys.

“Micro-Consulting” For Small Business Ideas

Now, entrepreneurs will be able to get “micro-consultations” for their small business ideas. They will be 15 minutes duration for about $22 on average. It’s a quick way to vet small business ideas.

Small Business Ideas Marketing Research

Per their website, other uses are usability testing, professional advice, general advice or small business idea validation. They initially plan to find users through LinkedIn.

Said founder Amelia Dunne:

But after a month of development, we were still trying to validate the idea in order to feel comfortable spending our time and money building the prototype,” she says. “The validation process was time consuming, expensive and we weren’t finding the right people to talk with or getting objective feedback. AskYourUsers.com is the tool we wished we could use – but it didn’t exist. We determined that the value in it made AskYourUsers.com worth developing even if only for our own use. Quickly, it made clear business sense as well. We were surprised to learn how inefficiently other startups were conducting their market research, holding focus groups and learning about their customers’ needs/interests.

Sources:

New Crowdsourcing Launch: AskYourUsers.com Uses LinkedIn To Help You Find People For Microconsulting Projects

AskYourUsers.com

Comments:

Small business ideas that help owners do what they need to do more efficiently at a lower cost will always be welcome innovations. The sweet spot is creating enough value while keeping that value sufficiently uncomplicated.

Most small business owners aren’t going to be doing market research very often so the interface needs to be simple enough that they don’t have to relearn a system every time they need something.

From the look of the website, AskYourUsers.com seems to have accomplished the simple interface and made a valuable addition to small business ideas.

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