links for 2011-02-14

  • Pioneering products and trendy clothing fashions usually carry higher profit margins than older versions. To sell innovative items, appeal to distinctive purchase triggers. Venturesome innovators say, "I want the latest features, even if all the problems with the item haven’t been worked out yet." Show venturesome innovators the most surprising things about the product. Based on research at Iowa State University, consumer behavior experts estimate that, across all sorts of product categories, about 3 percent of shoppers are venturesome innovators. Some product types will attract greater numbers of venturesome innovators, so you’ll want to assess what the percentage distribution is for your business.
  • Go grab an office that’s the same size as the ones you make your middle managers inhabit. Take one that’s smack dab in the middle of the real world and start mixing with the masses. If you could do one thing to gain instant credibility, respect, admiration, and an overwhelming inclination to follow you, this might just be it.
    (tags: hr leadership)
  • It's easy to dislike angel and venture capitalist investors. For entrepreneurs looking to raise capital for their start-up businesses, these early-stage investors can be awfully hard to find, and when you do find them, it's even tougher to get investment dollars out of them. But, think again: angels and venture capitalists (VCs) are taking on serious risk. New ventures frequently have little or no sales; the founders may have only the faintest real-life management experience, and the business plan may be based on nothing more than a concept or a simple prototype. There are good reasons why VCs are tight with their investment dollars. (For more check out The Essentials Of Cash Flow.)
  • Most emerging businesses, particularly in the technology sector, require a substantial amount of capital to fund basic development work on a proposed product. Once basic development work is complete, additional capital is needed to test the product in market conditions and adapt its functionality to developing customer needs, before the emerging business can commence regular business operations. Often a patent application needs to be prepared and filed. The capital that is used for these purposes is typically referred to as "seed capital."
  • Over the last 40 years the U.S. has evolved an entrepreneurial ecosystem with two of the most unlikely partners—venture capital investors and technology entrepreneurs. This alliance has led to an explosion of technology innovation, scalable startups and job creation. Tied at the hip, VC’s and entrepreneurs take large risks together. VC’s invest in startups with minimal tangible assets and no certainty about the product’s viability, market size or customer adoption. Entrepreneurs face all that, and add one more risk to their list: the bad board member.
  • When a VC raises a closed end fund she secures commitments from LPs to fund her investments up to a certain limit (in aggregate the fund size) and over a fixed period of time, known as the investment period.  Typically the investment period is five or seven years.  It is expected that the VC will fully commit the fund during the investment period, which means that that the investments made plus expected follow-on investments will add up to the the total fund size.  It is expected that it will take longer than the five or seven years to exit all the investments and an additional period for realisations is added to the end of the investment period – typically two to three years – giving a total fund life of 7-10 years.
    (tags: vc finance)
  • What distinguishes great entrepreneurs? Discussions of entrepreneurial psychology typically focus on creativity, tolerance for risk, and the desire for achievement—enviable traits that, unfortunately, are not very teachable. So Saras Sarasvathy, a professor at the University of Virginia's Darden School of Business, set out to determine how expert entrepreneurs think, with the goal of transferring that knowledge to aspiring founders. While still a graduate student at Carnegie Mellon, Sarasvathy—with the guidance of her thesis supervisor, the Nobel laureate Herbert Simon—embarked on an audacious project: to eavesdrop on the thinking of the country's most successful entrepreneurs as they grappled with business problems. She required that her subjects have at least 15 years of entrepreneurial experience, have started multiple companies—both successes and failures—and have taken at least one company public.
  • The growing authority of blogs makes them a worthwhile marketing investment for companies — especially for small businesses lacking the funds and manpower to create large-scale traditional marketing campaigns. Small-business owners are leading industry experts in their own right, and that’s a huge advantage, said Mike Volpe, vice president of marketing at HubSpot, during his seminar at the 2011 Blogging Success Summit. A company blog not only drives huge numbers of traffic toward your website, but it also solidifies your place as a thought leader in the industry. With strong original content, people will see you as an authority figure while your company becomes a trusted brand.
  • Forecasting start-up revenue is not easy. I write with a few thoughts on how best to handle the need to present financial forecasts vs. the uncertainty inherent in any model. In general, two forecasting methods exist. The first, tops down, seeks to identify an addressable market and revenue becomes a function of market share. The second, bottoms up, is often best captured by detailed assumptions regarding how to get to revenue. For example, I am partial to the productive sales rep model: W# of sales reps * X rep maturity ramp * Y quota per rep * Z productivity per rep.
  • Reversing a two-year decline and fueled by consumer Internet deals, venture capital investment rose 11% in 2010 but remained well below the level of 2007, before the global financial crisis. Dow Jones VentureSource U.S.-based venture-backed companies raised $26.25 billion last year versus $23.56 billion in 2009, according to Dow Jones VentureSource. In 2007, the total was $33.94 billion, the highest since the tech bubble deflated a decade ago. But the increase came in a year when venture capital fund raising declined, dropping 14% to $11.6 billion, the lowest level since 2003, according to Dow Jones LP Source. Although some of the equity investments in venture companies comes from corporations and private equity firms, the slow pace of fund raising will limit venture investment, which some people predict will improve returns.

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