What do investors invest in?

While dropping into Startup Camp in Melbourne last week I started chatting with Jonathon from Melbourne Angel Investors. I asked him just one question:

What is more important in their investments, the team or the concept / product?

His reply was a simple one and here it is:

We’d invest in an A Grade team with a B Grade product, but we wouldn’t invest in an A Grade product with a B Grade team.

Startup blog agrees. Though I did here that he was pretty ‘anti-tech’ as far as their investments go…

But the first piece of advice is worth adhearing  to. Above all things build an A Grade team, be an A Grade entrepreneur.

And so again we hear that the people in your startup are way more important than the secret sauce. It is without irony that A Grade teams more often than not find A Grade ideas too.

Small Companies vs Big Companies

If I could give one piece of advice for anyone who has reently escaped their cubicle of the large corporate scene to start up it would be this:

Do the opposite of whatever large companies do.

…and be quicker than they are.

if your startup is in the same industry you worked in…

Do the opposite of what you ‘were told to do’ within your large company.

To beat them you must focus on momentum. We most not do what they do, we must not compete on their level.

To gain momentum, we simply cannot behave the way they do.

The Best Social Networking tools

We often wonder which are the best social networking tools to promote our business. In many ways it’s all and none.

There’s no shortage from which we can shoose from a business perspective: My space, Facebook, Bebo, Youtube, Blogging, Twitter, Live streaming TV, Ranking sites like Technorati, delicious and Stumbleupon, Virtual world spaces like second life.

The list is endless. In fact wikipedia lists the most notable (well over 100) here.

The best ones to engage and use aren’t those necessarily with the most people, the most features or the most anything. The best ones to use are those which you use properly. The way in which they were intended. There’s no point having your brand or startup on any of them – unless you engage the crowd in the conversation ‘they want to have”.

What does this mean?

It means be there often – turn up, and talk.

It means listen to them – it’s their place not ours.

It means share the information people want to have shared in ‘that’ forum.

It means, give first to them, and expect nothing back.

It means learn from their wisdom.

It means show your personaility and have an opinion.

It means create value to them, whatever value means in that forum.

It means be part of a dialogue, not a monologue.

In real terms all these tools are, is a personification of yourself, startup or brand. Don’t engage in behavior you wouldn’t engage in while in the real world. We mustn’t act like an Amway Sales Agents on line. If it’s bad form in the real world, it’s bad form in the on-line world.

If we just put our brand on all of these spaces and don’t get involved – it’s a waste of time for all parties involved. We are much better off embracing one or two forums and using them often and consistently. Going there, isn’t the same as being there. They are not shortcuts to brand fame. In fact, they take longer, but can be of greater value.

Given that the web is a conversation – we must embrace it and have manners. If we’re patient it’s worth the effort.

UGC & Crowd Sourcing – Beware the Homer mobile

There is plenty of buzz around UGC (User Generated Content), Crowd Sourcing and Mass Customization at the moment. And the truth is I am a sucker for it. I embrace it, love it and really believe it is an economic revolution. In fact many of the new features we’ve implemented on rentoid have been at the suggestions of our members…. but there is a downside.

We need to be aware that not every consumer knows what they are talking about, and not every idea we get from the crowd happens to be a good one. The crowd can get it wrong occasionally. Yep – there are people out there with ideas that just might send you broke if implemented.

If we are building a forum for people to create & share their own stuff on like Youtube or Etsy – that’s when it’s a cool idea to let the crowd take over. That’s when it’s cool to build the forum and get the hell out of the way. But when it comes to them designing and creating products for others – we need to keep our heads. In fact if there is one piece of advice startup blog can give is know which business you are in:

A) Are you building a forum for them to connect on?

or

B) Are you building a product for them – with their input?

If you are doing the latter – that’s when you need to be wary of the Homer mobile.

Instead, what we need to do when we want the crowds input is look to our “lead user group”. The lead user group is our base of fans who are knowledgeable, expert, style leaders or simply influential. These are the people we need to listen to when UGC is part of the mix, but not the whole story.

Trophy Ideas

Trophy Ideas shouldn’t be your first attempt at a start up.

Definition: Highly original and ‘expensive’ business concept which could change the behaviour of consumers, business or the world and make you rich in the process.

Trophy ideas are typically capital intensive and have long lead times to get up. They usually involve external capital. They’re often the domain of inventors. The reason that trophy ideas are onerous is that they don’t succeed very often and they take up the two most valuable tools we have, time and money, and lots of it. Sometimes people dedicate large portions of their life to trophy ideas. But we only ever here about the successful ones. An example might be the Dyson vacuum.

Here’s some startup blog advice if you want to go for a trophy idea. Do it after you’ve had some smaller successes first. Do it when you already have passive cash flow from another startup, business or investments. We should all pursue things that are worth doing, the trick is knowing the right time to chase them.

Simple maths

“…I would have, but I’m not very good at maths”. How many times have we heard that?  I love quadratic equations and differential calculus as much as the next guy…

Good news bulletin: Simple Maths rules the business world.

If you’re familiar with the following symbols you’ve got all the number skills you need.

+         –           x          /           %         <          >

You only need grade school math. But, you’ve got to be quick with your numbers, know which ones matter, understand industry averages and which ratio’s to look for – top of mind. The most important of all these symbols is %.

Everything that matters is represented as a percentage:

Gross margins

Net margins

Rates of interest

Return on investment

Price earnings ratios

Growth rates

Quick ratios

Debt to equity

Get to know your key financial indicators. Simple tools used on the share market are your best friend even for a small start up. Fundamental analysis is always based on ratio analysis.

Your company will only ever be what it earns and remember these two things that entrepreneurs often forget:

– Revenue must exceed expenditure

– The crocodile always gets the biggest piece!

12 seconds

I really like the idea of ‘small’ – Making the macro, micro. 12 secondsTV does it: www.12seconds.tv

As far as marketing insights are concerned it proves that categories don’t converge – but split.

We recently used it for rentoid to kill a few birds with one stone:

  • Rewards passionate fans with a bit of fame,
  • Create an important dialogue
  • Generate some ‘realworld’ market research to boot.

The cool thing is that we’ll publish what people think about rentoid good and bad – so then we have to act on any mooted improvements. Check it by clicking here:

So in the spirit of involvement – I’d love to get a 12 seconds.tv spot from the startupblog crew – ‘yes that means you’ with any piece of business / entrepreneurship or life advice you feel approporiate.

Put your 12 seconds link in the comments and I’ll put it up as it’s own post with a link to your blog / startup / business or whatever.

Get on it.