Working Backwards

New entrepreneurs seeking funding from angel investors often appear surprised by the multitude of considerations and requirements they must satisfy to get funded. If they can keep both the big picture and the details in perspective, the puzzle is not so difficult to solve.

Working backwards from the investors' requirements and preferences one can create a proposal that will "sell" provided that all the underlying reasoning, projections and plan are supported and convincing. Conversely, if you cannot make a credible case that your venture meets the investors' criteria time may be better spent seeking other forms of financing.

You can navigate the roadmap below opening  and closing various branches to look into the details and reasoning behind them, or hide them to stay focused on specific HOW and WHY of various aspects of the problem.

I am experimenting with this method of communication. It allows you to switch between details and summary views.  Your comments would be greatly appreciated. Is this method effective for you or not? In either case why? Thanks Email me

Working Backwards

Killing Your Startup

The post below should be required reading for any entrepreneurship class or prospective entrepreneur.  I've lived it this more than once but did not write it so poignantly about the experience. Anyone who starts "up" is more likely to end here than on top of the mountain simply because there are fewer black swans than we think and we can know only post facto.  The reality is even more grim, because after the difficult and seemingly heroic decision and the catharsis of thank-yous, the drudgery of closing takes months of endurance, one day at a time without the excitement of a dream in the making. It is not for everyone.


Some crazy dreamers have it in their DNA to do it more than once, learn from the experience, try again until they succeed (my bet is that Lucas Rayala is one of them). When they do they will value their success the more knowing how rare it is, but the pain he feels is very real nonetheless.
A note for students: in this shutdown, in the ashes, there may be the seed of  the phoenix's rebirth - If you go to the original post below and read the comments, you'll see that there is one entrepreneur, a stranger, that sees the value of Lucas' dream and efforts.  He offers to discuss collaboration to try and keep Lucas' dream alive. Always keep dreaming, the night is darkest just before the dawn starts.

Killing Your Startup on a Thursday Night

Lucas Rayala (Founder of Altsie)

This is what you do when you close down your startup: you call Rackspace and cancel the Windows SQL server plan. You email SendGrid and give them notice on your Silver SMTP Service Package. You close down your Wells Fargo Business Checking account and your Paypal Merchant account. Glamorous stuff. Harder than that: you email your cofounders and tell them you’re jumping into the deadpool. Your fingers will hover over the keyboard for a long time as you decide what to say. Because now shit is getting real.

Entrepreneurship, Not for Everyone, Salesmanship Is for Everyone

It may be because of where and with whom I hang out, but these days Entrepreneurship seems to be the magic word of the day. Policy makers and economists tell us that with more of it the country will be more competitive, jobs will be created, we will stand up to China, we'll fix the national debt, we'll have a credible national medical insurance, etc. If only we had a Steve Jobs at every corner, the American Dream will be assured. It is all true, but it does not follow that it is true for all.

The message to high school and college grads these days seems to be: it's easy, be an entrepreneur, be a Jobs, or a Zuckerberg, or a Gates,  have an idea and make it a Google. All true and as possible like winning Olympic medals, entering the NBA, winning the lottery, but let's be honest with the youngsters who struggle with figuring out how make a living for their future.  The odds of all of that are pretty low and it takes much more than an idea.

To keep the discussion short, I developed the roadmap below as a way to look at the principles and the details of what I think is in play. As in some of my other posts, I try to synthesize the issues and the logical relationships to be considered to reach a clearer understanding.  The objective is to not waste energy in impossible quests (see "Working Backwards" and "Angelcalc" for when not to bother seeking funding from angel investors, or "Should I Get a Patent?", etc.)

This roadmap, as in other cases has no absolute answers or recommended solutions, only considerations to be explored and used in seeking a best answer for oneself (notice ONEself not ALLself). 

One, and only one of many conclusions, is that a temperament for risk-taking is mandatory for entrepreneurship. Salesmanship on the other hand is a skill fundamental to entrepreneurship, BUT also applicable to all other activities in human activity and commerce.

So, the question for which unfortunately I have no answer is: Why salesmanship is not a primary skill taught at all high schools, colleges and graduate schools?  Why as a society we leave it to Xerox, IBM, Proctor & Gamble and similar companies or to multi-level marketing companies to impart that training with a planned and focused process?  The Introduction to Dale Carnegie 's How to Make Friends and Influence People pointed out that tragic circumstance decades ago.  Why are we still at the same point?
Why is it so hard to find a high school or college grad with even only a cursory idea of how to sell an honest product to a respected customer that has a need?
Perhaps it is time for some bright entrepreneur to design and roll out an effective online sales training program for all those recent grads that are not finding the job they trained for or the countless unemployed displaced by technological change.


Marco Messina

Thoughts on Carl Schramm's "On Expanding The Entrepreneur Class"

Carl Schramm On Expanding The Entrepreneur Class - Business Insider:

Carl Schramm, the former long-time president of the Kauffman Foundation, isn't satisfied with the state of American entrepreneurship. It's not because people aren't getting into it — it's because they're not being taught correctly.

And it's society's fault, he says.

"The world needs more entrepreneurs: They make innovation real and advance what Brink Lindsey, of the Kauffman Foundation, has called the 'frontier economy,' he wrote in a recent column at Harvard Business Review.

"If their ranks are too thin, it is a failure of society—particularly because the knowledge and skills of a successful entrepreneur can be taught."

Schramm's theory is that leaving the education of entrepreneurs to schoolteachers is "inherently weak." Why? Because their choice of profession shows that they don't take risks — at least not economic ones. Plus, the material taught in college-level courses doesn't fit with what entrepreneurs need to succeed. You don't learn what it really takes the get a business started.

"The need is particularly acute in the United States," he writes. "Much economic success in the rest of the world has occurred through “catch-up growth” that leverages innovations hatched by U.S. entrepreneurs. If America falters in this, its economic advantage withers—and the rest of the world suffers, too."

What do you think about Schramm's theory? Let us know in the comments.

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Interesting argument and I would agree.  We can certainly point the finger at ourselves, the Baby Boom Generation, for not having done the best job, as a whole, of teaching the generation that follows the values many of our parents taught us.

Entrepreneurial success comes from belief, tenacity, hard work not only from creativity and surely not just from an MBA (I have one) that deludes you you are smarter than everyone else.  That training works well for Wall Street trading, or investment banking but it is poor training for testing ideas in the market.

The first step toward entrepreneurship is to go "sell" something to somebody - It is miserably hard work, one's ego is exposed to more rejection than a High School dance, but it is where one finds out what the real world thinks of that brilliant idea or of the shining prototype or that finished product you bet the company on. There you see what the market wants not what you want, and there is no fancy PowerPoint deck to hide behind.  It is you in the market and it is brutal  - no thin skins need applying.

Since the days of Netscape youngsters have been incessantly drilled with the idea that a "brilliant idea" is the key to rapid growth and financial success: a browser, an online auction, a Facebook, an iPod.  The reality is that all those brilliant ideas, first and through their development had to be incessantly "sold" to someone. Concepts have to be sold to partners and family and friends that share the earliest funding burden ; product development plans and ability to scale operations must be sold to seed funders; products have to be sold to consumers; the prospects for explosive growth has to be sold to VCs; the rationale for continued growth must be sold to the public in an IPO, or to a management team in a M&A exit.

Selling seems to be pretty fundamental to a business career and, for that matter, with different settings and nuances, to engineering, scientific and political careers. Yet, how many high schools curricula even mention it let alone teach the basics? How many business schools have specific courses on the subject, let alone curriculum requirements? Teaching "Selling" has been left to few private companies that developed formal training and a sterling reputation for it: Xerox, IBM, P&G, or to sales training consultants occasionally hired by big institutions. The curious and self driven can help themselves to an endless library including Dale Carnegie, Napoleon Hill, Stephen Covey, Zig Ziglar and hundreds more. In the last twenty years multi-level marketing organizations have done perhaps more than anyone to promote and standardize training, at least of techniques appropriate for their products.

In the end effective "selling" depends on the skills of: listening with a genuine interest, rapid organization of what is learned, ability to identify points of consonance dissonance between parties, clear and effective written and verbal communications, valuing honest long term relationship over expedient quick deals, the individual initiative to get into the market and play the game. Creativity alone generates only ideas. Implementation is key and selling is the first step to implementation.  

Unless we can honestly say we have been effective teaching the above skills to the coming generations, Carl Schramm is correct: as a society we have failed at a very achievable task.

Marco Messina

Deep Insight - Daniel Kahneman: Beware the ‘inside view’

How many times do you remember projects, ventures and adventures turning out faster or easier than expected?  Better than expected returns, financial or otherwise, are not uncommon, but easier or faster, next to never.  Why?

Here is Daniel Kahneman's  insight in his words (whole post reported below):

Why the inside view didn’t work   (a book writing project)

This embarrassing episode remains one of the most instructive experiences of my professional life. I had stumbled onto a distinction between two profoundly different approaches to forecasting, which Amos Tversky1 and I later labeled the inside view and the outside view.

The inside view is the one that all of us, including Seymour, spontaneously adopted to assess the future of our project. We focused on our specific circumstances and searched for evidence in our own experiences. We had a sketchy plan: we knew how many chapters we were going to write, and we had an idea of how long it had taken us to write the two that we had already done. The more cautious among us probably added a few months as a margin of error.

A Pirate's mind

Supreme Court Justice Potter famously said of pornography "I know it when when I see it".  After 35 years of serial entrepreneurship I felt "I feel it when I read it" reading Michael Harrigton" Are You A Pirate? -

"... That thrill of your first hire, when you’ve convinced some other crazy soul to join you in your almost certainly doomed project. The high from raising venture capital and starting to see your name mentioned in the press. The excitement of launch and…gulp…customers! and the feeling of truly learning something useful, you’re just not sure what it is, when the company almost inevitably crashes and burns.Now that person is interesting. That person has stories to tell. That person is a man who has been in the arena. There are lots of things that I will probably never experience in this life. Military combat. Being dictator of a small central American country. Dunking a basketball. Being a famous rock star. Or walking on Mars. But one thing I have been, and will always be, is an entrepreneur. And damn it that feels pretty good. Because if I was a lawyer right now, even a rich lawyer, I’d always have wondered if I had what it takes to do something a little more adventurous with my life than work for someone else."

I do not know about the pirate analogy but the profile of the entrepreneur is laid bare in that final description. My first experience in the arena at 27 instantly created an addiction that determined my future. I do think that entrepreneurs at least try to reduce risk any way they can. That may explain why we keep looking fro insights from Steve Blank, Nathan Furr and other brilliant analysts of "pirates and pirate ventures". But I also know that they offer only warning flags along the trail - Watch out for this - Consider that - Do A before B - Avoid C - helpful warnings derived from careful study. 

The risk remains high and either you like it or you don't. For most, the Wagnerian golden ring at the end of the quest, in most cases, will prove to be illusory, what drives is the temperament, foolish most would say, to confront the dragons along the way, often alone or in a small band of fools for the quest as much as for the gold. On that path, the point of no return is the first step. . If Michael's closing summary speeds up your heart, you owe it to yourself to try, at least once, stepping, alone, into the arena. You may never get out and if you do you won't be the same.

Marco Messina

Brand Names and Global Marketing

These two stories made me reflect on the strategic considerations in naming businesses and when taking brands global: 
This French Billionaire Is About To Invade America  and  FRENCH INVASION: Flash Sales Juggernaut Vente Privée Announces Plans To Kill Gilt Groupe. 

One has to presume that the combined marketing staffs of Vente Prive'e and AMEX must have considered how their brand may be pronounced by non French-speaking US consumers.  Or, may be not.  Memories of Chevy entering the Mexican market with the Nova (in Spanish pronounced No Va = Doesn't Go) come to mind - it became a classic of international brand screw-ups cited in international marketing courses.

So let's consider a possibility: Vente, pronounced by a Yank and partly thanks to Starbucks will morph into Venti (itself a confusing term to many Starbucks customers unaware that Venti=20 in Italian, which is the size of the drink - apparently a fork in the road offering a choice between ease for the consumer and marketing mystique was traveled toward the latter). Since Starbucks commands more "brain share", Vente may well evoke images of "large paper cups".

As to Prive'e, since the accented e is not conveniently available on US keyboards, it is inevitable that it will soon be lost to create Privee, in turn most likely to be pronounced Privy by many Americans, evoking visions of toilets.  Is "Large Cup Toilet" the image one would want to attach to one's brand entering a new market? I wonder.

These may all be conjectures, and yet possible outcomes. If you were launching your new startup in a new market, would you prefer avoiding a handicap even even if only a potential one?  If you were the king of global reach (AMEX) would you not have international staff able to recognize the risk of a trap? Or did pride in one's extremely (domestically) successful brand deluded the marketer into believing he can tech French to the locals (traditionally a distinctly unsuccessful effort)?

Stay tuned you may soon hear of VP, VenPri, or some other variation on the theme. 


PS If you are sufficiently opportunistically entrepreneurial to buy all domains with word combinations that could solve the above problem, let me know.  It will make for a nice story on entrepreneurship.


Marco Messina

LUCKY OR SMART? Secrets To An Entrepreneurial Life

A refreshing an honest reflection on: luck, making one's luck and knowing the difference; discovering what we are psychologically fit for and what not; learning to look for luck where we are fit and able to create it. Great lessons in business and self understanding.

LUCKY OR SMART? Secrets To An Entrepreneurial Life

Read the whole series of posts here

Marco Messina

Learning to dance

Ballroom dancing is not an innate skill. Most people have to learn the basic technique that most other dancers are likely to use because it is the shared knowledge that makes possible for two near-strangers to move in step and unison on a dance floor. It often pas to learn it before stepping on the dance floor with a new date, or a new in-law at one's wedding.

The same can be said of learning to deal with investors. It is not an innate skill, although, as in dancing, some have an easier time than others. Learning the skills and preparing the relationships before being in a hurry to close a funding deal is likely to help the entrepreneur find a better match and a smoother dance when the time comes. Like in dancing it goes both ways, investors too can gain by being open to meeting not-yet-ready but up-and-coming entrepreneurs.

The following post says it well. Take a look.

If you can't buy your investor a beer, don't take their money - Sachin's Posterous

Shall we dance?

Marco Messina