Showing posts with label Start-up. Show all posts
Showing posts with label Start-up. Show all posts

The Three (or Four) Musketeers ...

  1. Successful early-stage venture management teams are often comprised of the "Three Musketeers": the General Manager (President), the Product/Operations Manager (VP), and the Marketing/Sales Manager (VP).
  2. More than three people leading the venture and the communication channels start to become too complex. 
  3. Less than three leading managers and the workload starts to become too intense. If there is a Fourth Musketeer, it could be a Financial Manager (VP?)
  4. The General Manager concentrates on the cash flow, keeping the venture profitable, and stimulating growth.
  5. The Product/Operations Manager is primarily internally focused on creating solutions that are better than the competition.
  6. The Marketing/Sales Manager is primarily externally focused on solving customer problems.
  7. The team is a cohesive entity focused on what is best for the venture and its customers ... one for all, all for one.
  8. Successful management teams are comprised on individuals who are competent, have complementary skills, and collaborative styles.
  9. Together the team is purposeful, passionate, and persistent.
  10. Together the team is focused on earning a profit solving customer problems better than the competition.

LLC Operating Agreement Checklist

An operating agreement is the legal foundation document describing an LLC (limited liability company) ... this document serves the same function for an LLC as corporate bylaws serve for a corporation. Following is a checklist of items to be considered ...

1. Under what state law will the LLC be formed?
2. What is the name of the LLC?
3. Has the name been checked with the Secretary of State?
4. What is the purpose of the LLC?
5. What is the term of the LLC?
6. Is the LLC member managed or manager managed?
7. Who is the manager if manager managed?
8. Who is the agent for service of process?
9. Is the manager a limited liability entity?

1. What is the initial capital contribution of the managing member?
2. What is the initial capital contribution of the other members?
3. Will members be required to make additional contributions if necessary?
4. What happens if a member fails to make a required capital contribution?
5. What approvals are required to add new members?
6. Are members allowed to withdraw their capital contributions? If so, under what
7. Is a member entitled to interest on his or her capital contributions?
8. Does any member have any priority on distributions over any other members?

1. How are distributions to be divided among the members?
2. How are tax allocations made?
3. When are distributions to be made?
4. Will there be special distributions required to be made to at least pay for tax on each member’s pro rate income from the LLC?

1. How broad are the management powers of the manager?
2. What limitations are there on the powers of the manager?
3. If there is more than one manager, what actions require the consent of all of the managers?
4. Is the manager obligated to devote any particular amount of time to LLC matters?
5. Is the manager and its affiliates free to engage in other activities?
6. Is there any limit on the manager’s right to form other entities?
7. Will the manager be broadly protected from liability?
8. Will the manager be indemnified for acts taken on behalf of the LLC?
9. Under what circumstances might the manager be liable to the members for acts or omissions?
10. What specific duties does the manager have?
11. Will the LLC have officers?

1. What fees is the manager entitled to?
2. What reimbursements is the manager entitled to?
3. Is the manager entitled to incentive compensation or a carried interest?

1. What books and records are to be maintained by the LLC?
2. What access rights will the members have to books and records?
3. What reports will the members be required to receive?
4. Who will be the tax matters partner?

1. What voting rights will the members have?
2. What major actions can the manager take without other members’ approval?

1. Where will meetings be held?
2. How can meetings be called?
3. What notices for meetings must be given?
4. What quorum is necessary for meetings?
5. Can actions be taken by written consent of the members?

1. Do the members have the right to assign their interest in distributions?
2. What rights does an assignee of a member’s interest get?
3. In what situations will assignment be prohibited?
4. What are the procedures for substitution of members?
5. What happens on the death, incompetency or bankruptcy of a member?
6. Is there a right of first offer or first refusal on transfers of interests?

1. Under what circumstances can the manager voluntarily withdraw as the manager of the LLC?
2. What are the events that will result in the manager ceasing to be the manager of the LLC?
3. Under what circumstances can the members remove the manager?
4. What happens to the manager’s interest when it has ceased to be the manager?

1. Under what circumstances will the LLC be dissolved?
2. Under what circumstances can the LLC continue notwithstanding a technical dissolution?
3. How are distributions to be made on liquidation of the LLC?

1. Which amendments to the Operating Agreement can be effected solely by the manager, without the consent of the members?
2. How are other amendments to the Operating Agreement to be effected?
3. When will amendments to the LLC’s Certificate of Organization have to be made?
4. What power of attorney is granted to the manager?
5. Is there an arbitration clause that governs any disputes among the members?
6. Are the members liable in circumstances other than for their capital contributions?
7. What competitive activities may the members engage in?

[Thank you, Small Business Kit]

How to Start a New Venture

Go on a DXpedition ...

The Desire Phase ...
Determine why you (and your teammates) want to start a new venture

The Discover Phase ...
Form initial core entrepreneurial team
Identify problems or opportunities

The Define Phase ...
Screen problems or opportunities
Define the value proposition

The Design Phase ...
Generate potential solutions
Create a business venture hypothesis
Design a business venture plan

The Deploy Phase ...
Acquire needed resources
Launch the venture

The Develop Phase ...
Test, validate, and refine the venture hypothesis
Develop and iterate the venture based on real customer experiences

Ten Legal-Issue Mistakes That Entrepreneurs Make

  1. Failing to incorporate early enough.
  2. Issuing founder shares without vesting.
  3. Hiring a lawyer not experienced in dealing with entrepreneurs and venture capitalists.
  4. Failing to make a timely Section 83(b) election.
  5. Negotiating venture capital financing based solely on the valuation.
  6. Waiting to consider international intellectual property protection.
  7. Disclosing inventions without a nondisclosure agreement, or before the patent application is filed.
  8. Starting a business while employed by a potential competitor, or hiring employees without first checking their agreements with the current employer and their knowledge of trade secrets.
  9. Promising more in the business plan than can be delivered and failing to comply with state and federal securities laws.
  10. Thinking any legal problems can be solved later.
[Thank you, Connie Bagley]


Ten Entrepreneurship Myths

  1. It takes a lot of money to finance a new business. Not true. The typical start-up only requires about $25,000 to get going. The successful entrepreneurs who don’t believe the myth design their businesses to work with little cash. They borrow instead of paying for things. They rent instead of buy. And they turn fixed costs into variable costs by, say, paying people commissions instead of salaries.
  2. Venture capitalists are a good place to go for start-up money. Not unless you start a computer or biotech company. Computer hardware and software, semiconductors, communication, and biotechnology account for 81 percent of all venture capital dollars, and seventy-two percent of the companies that got VC money over the past fifteen or so years. VCs only fund about 3,000 companies per year and only about one quarter of those companies are in the seed or start-up stage. In fact, the odds that a start-up company will get VC money are about one in 4,000. That’s worse than the odds that you will die from a fall in the shower.
  3. Most business angels are rich. If rich means being an accredited investor –a person with a net worth of more than $1 million or an annual income of $200,000 per year if single and $300,000 if married – then the answer is “no.” Almost three quarters of the people who provide capital to fund the start-ups of other people who are not friends, neighbors, co-workers, or family don’t meet SEC accreditation requirements. In fact, thirty-two percent have a household income of $40,000 per year or less and seventeen percent have a negative net worth.
  4. Start-ups can’t be financed with debt. Actually, debt is more common than equity. According to the Federal Reserve’s Survey of Small Business Finances, fifty-three percent of the financing of companies that are two years old or younger comes from debt and only forty-seven percent comes from equity. So a lot of entrepreneurs out there are using debt rather than equity to fund their companies.
  5. Banks don’t lend money to start-ups. This is another myth. Again, the Federal Reserve data shows that banks account for sixteen percent of all the financing provided to companies that are two years old or younger. While sixteen percent might not seem that high, it is three percent higher than the amount of money provided by the next highest source – trade creditors – and is higher than a bunch of other sources that everyone talks about going to: friends and family, business angels, venture capitalists, strategic investors, and government agencies.
  6. Most entrepreneurs start businesses in attractive industries. Sadly, the opposite is true. Most entrepreneurs head right for the worst industries for start-ups. The correlation between the number of entrepreneurs starting businesses in an industry and the number of companies failing in the industry is 0.77. That means that most entrepreneurs are picking industries in which they are most likely to fail.
  7. The growth of a start-up depends more on an entrepreneur’s talent than on the business he chooses. Sorry to deflate some egos here, but the industry you choose to start your company has a huge effect on the odds that it will grow. Over the past twenty years or so, about 4.2 percent of all start-ups in the computer and office equipment industry made the Inc 500 list of the fastest growing private companies in the U.S. 0.005 percent of start-ups in the hotel and motel industry and 0.007 percent of start-up eating and drinking establishments made the Inc. 500. That means the odds that you will make the Inc 500 are 840 times higher if you start a computer company than if you start a hotel or motel. There is nothing anyone has discovered about the effects of entrepreneurial talent that has a similar magnitude effect on the growth of new businesses.
  8. Most entrepreneurs are successful financially. Sorry, this is another myth. Entrepreneurship creates a lot of wealth, but it is very unevenly distributed. The typical profit of an owner-managed business is $39,000 per year. Only the top ten percent of entrepreneurs earn more money than employees. And the typical entrepreneur earns less money than he otherwise would have earned working for someone else.
  9. Many start-ups achieve the sales growth projections that equity investors are looking for. Not even close. Of the 590,000 or so new businesses with at least one employee founded in this country every year, data from the U.S. Census shows that less than 200 reach the $100 million in sales in six years that venture capitalists talk about looking for. About 500 firms reach the $50 million in sales that the sophisticated angels, like the ones at Tech Coast Angels and the Band of Angels talk about. In fact, only about 9,500 companies reach $5 million in sales in that amount of time.
  10. Starting a business is easy. Actually it isn’t, and most people who begin the process of starting a company fail to get one up and running. Seven years after beginning the process of starting a business, only one-third of people have a new company with positive cash flow greater than the salary and expenses of the owner for more than three consecutive months.
[Thank you, Scott Shane]

How to Mentor a New Business Venture Development Team

Successful business ventures continually introduce new product, service, process, and positioning innovations; they keep improving internal and external transformation methodologies; and they continually monitor goal and objective achievements. New venture development teams are wise to model their venture plan on these core concepts.

Following are some excerpts from a workshop I presented at the University of New Mexcio ...

The primary mission of a new business venture development team is to create an organization that will earn a profit solving customer problems with something new and better than the competition. While this recipe for success seems straightforward, it is not so easy to execute. Experienced mentors can help a venture development team effectively and efficiently move their venture concept through the research, ideation, test, and planning stages to resourcing, launch, stability, sustainability, and growth. There are a variety of proven business venture development tools that can be used to mitigate risks and optimize the probability of new venture success. Based on experience with some 200 internal corporate ventures, spin-off companies, independent start-ups, and over a thousand graduate and undergraduate entrepreneurship students, this paper outlines several of the more useful tools the author has developed and used for mentoring new business venture development teams.


Creating a viable business plan with the appropriate depth and detail is a fundamental undertaking of a venture development team. Successful business ventures continually introduce new product, service, process, and positioning innovations; they keep improving internal and external transformation methodologies; and they continually monitor goal and objective achievements. New venture development teams are wise to model their venture plan on these core concepts. The tools in this paper were designed to improve the outcomes of the business venture planning process.

The Role of a New Business Development Team Mentor

Experienced mentors can help innovators and entrepreneurs effectively and efficiently move their venture concept through the research, ideation, test, and planning stages to resourcing, launch, stability, sustainability, and growth. The role of a new business venture development team mentor is wide-ranging:

1] Mentor: experienced and trusted adviser (typically an unpaid, voluntary, part-time role)
2] Adviser: an expert willing to share their knowledge and opinions
3] Business Plan Editor: a mentor is best used in an editor role, rather than a writer
4] Voice of the Customer: keeps a light on the customer pain-pleasure spectrum
5] Voice of the Competition: ignoring the competition is never a good strategy, and there is always competition (alternatives, substitutes, replacements)
6] Voice of the Stakeholders: everyone involved with the venture must win
7] Voice of the Team Members: a balanced team is a productive team
8] Domain Expert: teaching from education and experience
9] Soothsayer: foresees the future based on experiences from the past
10] Angel Advocate: supports the team and venture, internally and externally
11] Consultant: professional expert advice (usually compensated to perform specific tasks)
12] Moderator: arbitrator, mediator
13] Coach: helps the team iterate and pivot as needed
14] Board Member, Director (not an ordinary role): helps govern the affairs of an organization
15] Teacher: instructor, guide
16] Innovation Stimulator: innovation is a continuing journey, not a destination
17] Collaborator: partner with the venture team
18] Friend: personal confidante and sounding board
19] Tool Technician: helping the team use the right tool at the right time for the right purpose
20] DXpedition Tour Guide: Discover, Define, Design, Develop, Deploy

The SLATE Mentoring Guideline

The US Small Business Administration SCORE program has a well-refined guideline for business mentoring, using the acronym SLATE:

S] Stop & Suspend Judgment
L] Listen & Learn
A] Assess & Analyze
T] Test Ideas & Teach with Tools
E] Expectations Setting & Encouraging the Dream

As important as what mentors do is what they do not do: they do not make decisions for the team.

Business Venture Development Tools

Focusing on the SLATE "Teach with Tools" element, there are a variety of business development tools that can be used to mitigate risks and optimize the probability of new venture success. (The author has a personal collection of over 400 such tools.) A good mentor can assist the venture development team with selecting and using the most effective tools for the business planning tasks at hand. For example, using proven checklists to assure the venture team addresses key factors in the planning process is a common and productive tool. Some checklists are very detailed and complex, others simple and direct.

The Innovation-Transformation-Achievement (ITA) Checklist Tool

Part of the theme of the Mentoring Institute at UNM 10th Annual Mentoring Conference (Innovation, Transformation, and Achievement) also provides an excellent startup checklist for business venture development:

Innovation] Do the product, service, process, and positioning innovations the venture is introducing to the marketplace match customer needs, wants, and desires?
Transformation] Are the transformation methods the venture will utilize to deliver value to customers effective and efficient?
Achievement] Are the key achievements of the venture (goals and objectives) being tracked such that critical operational methodologies can be continually improved?

Venture Mapping Tool

Simple visual aids, diagrams, flowcharts, graphs, maps et al are also excellent communication tools that help with seeing the "big picture". The Venture Mapping Tool in Figure 1 identifies the key elements that must be addressed by every business venture. There are four categories:

1] The Environment, Markets, and Customers

2] The Transformation Processes including key venture processes (Management, Marketing, Innovation Engineering, Production Operations, Sales, Accounting, and Finance)

3] The Resources available within the venture to power the Transformation Processes (People, Places, Things, Time, and Money)

4] Innovation Activities (Exploration and Ideation, Vision and Mission, Goals and Objectives, Strategies and Tactics, Tasks and Assignments)

Figure 1: The Venture Mapping Tool

The Critical Success Factor (CSF) Venture Mission Tool

There is a common Critical Success Factor (CSF) for every business venture: earn a profit solving customer problems with something new and better than the competition. Business ventures that fail can be readily diagnosed as not adequately addressing one or more of these nine core elements. A common failure mode is the lack of continuous innovation, not creating "something new and better than the competition".

Adopting this CSF as a starter mission statement for a new venture is a very effective tool for focusing the development team on designing strategies and tactics that will be of the greatest value. Figure 2 provides added detail for each of the nine CSF elements.

Figure 2: The Critical Success Factor as a Venture Mission Statement Tool

The Three Musketeer Hats Tool

Many successful new startup venture teams consist of three key people (humorously called "The Three Musketeers") working in harmony: the innovator, the entrepreneur, and the manager. The roles may often overlap. Sometimes team members describe their individual roles in terms of the "hat they wear" on a particular day. It is not uncommon for team members to "rotate role hats" from day to day. Figure 3 shows the primary function of each role and their relationship to the mission of the venture.

Figure 3: The Three Musketeer Hats Tool

The Hierarchical Output-Transformation-Input (HOTI™) Chart

Perhaps one of the most useful tools for in-depth business venture planning and development is the Hierarchical Output-Transformation-Input (HOTI™) Chart. It is very helpful for product, service, and process design. It is also particularly good for focusing brainstorming sessions for the creation of most any transformational system, from smartphone apps to cloud-based data storage to logistical operations flow to customer relationship management systems. In summary, the HOTI Chart highlights six system-critical categories: the environment, inputs, process, resources, outputs, and waste.

Figure 4: The HOTI™ Chart

The Venture Communications Network Tool

An application of the HITO Graphic Tool is in the creation of an internal venture communication network, how the functional areas of a business organization interact and share critical information. Figure 5 outlines a somewhat standard every-business-looks-like-this flowchart. Internal communication channels are numbered 1 through 6, communication channels between the organization and its customers are lettered A through E. Each of these network elements can be further detailed in a hierarchical manner using the HITO Graphic Tool.

Figure 5: Business Venture Communications Network Tool

The "alpha" communication channels in Figure 5 are external, between business venture departments and customers:

A] The Innovation Department communicating with customers to determine what customer problems, needs, wants, and desire the venture should address

B] The Marketing Department communicating with customers to promote current venture solutions, product, services, and processes that solve current customer problems, and obtain feedback from customers relating to the performance of the venture in solving their problems

C] The Sales Department obtaining and processing orders from customers, and customer relationship management

D] The Operations Department building and delivering solutions, products, and services to fill customer orders

E] The Finance/Accounting Department collecting payment for the value delivered to customers by the products, services, and processes provided by the venture

The "numeric" communication channels in Figure 5 are internal, the information being shared between departments in a business venture.

1] Marketing and Innovation Development Departments share information about customer problems, needs, wants, and desires, and the benefits, fit, form, function, and features of new products, services, and processes being created in the organization.

2] The Marketing and Sales Departments coordinate information about the benefits, fit, form, function, and features of currently available solutions, products, services, and process that match customer requirements, including the price of the offerings.

3] The Sales Department communicates information about customer orders to the Finance/Accounting Department such that the customer is properly billed when the solutions, products, and services are delivered.

4] The Sales Department communicates information about customer orders to the Operations Department such that the appropriate products and services are delivered to the customer.

5] The Operations Department communicates information about product and service delivery to the customer so the Finance/Accounting Department can accurately bill the customer.

6] The Innovation Department (often called the Engineering Department) provides the Operations Department with bills of material and assembly instructions for creating the solutions, products, and services being sold to customers.

While there are many other useful tools, those outlined in this paper have proven to provide excellent results for a mentoring a new business venture development team.


The primary mission of a new business venture development team is to create an organization that will earn a profit solving customer problems with something new and better than the competition. Experienced mentors can help innovators and entrepreneurs effectively and efficiently move their venture concept through the research, ideation, and planning stages to resourcing, launch, stability, sustainability, and growth. There are a variety of tools that can be used to mitigate risks and optimize the probability of success. A good business development mentor can assist the venture development team with selecting and using the most effective tools for the tasks at hand when creating and implementing a viable business venture plan.


United States Small Business Administration (US SBA), Senior Corps of Retired Executives (SCORE). SLATE mentoring process. Retrieved from

HOTI Chart™ is a trademark of Wencil Research, LLC. Used with permission.

[Presented at the University of New Mexico 10th Annual Mentoring Conference]


How to Build an Effective Team

  1. Team members should clearly understand what is expected of them, individually and as a group.
  2. Team members should understand their specific role on the team.
  3. Team members should be committed to the success of the team ... all for one, one for all!
  4. Team members should be competent in their individual field of expertise.
  5. The team should be balanced and cover all key areas ... for example, a new business venture team often consists of a general manager, a product/operations manager, a marketing/sales manager, and a finance manager.
  6. Teams members should be of good character and maintain high ethical standards.
  7. The team should have control of their destiny.
  8. Team members should actively communicate on an on-going basis.
  9. Team members should actively coordinate their planning and actions on an on-going basis.
  10. Team members should actively collaborate on an on-going basis.
  11. The team should be engaged in proactive change and innovation.
  12. The team should be responsible for the consequences of its actions.

Their First Home

Sure, they're big and famous now, but take a look at their first "starter" homes!

Venture Plan Outline

  1. Opening, Front Page: Company name, company location, contact information, legal statements (proprietary information, copyright, etc.) ...
  2. Executive Summary: One-page summary of the key elements of the business plan ...
  3. Problem / Opportunity: The problem the venture will solve, the significance of the problem, the opportunity this offers the venture, quality of the opportunity, growth potential ...
  4. Product and/or Service Solution Description: Essential product/service idea, category of product/service, proprietary protection, entry strategies ...
  5. Customers and Target Markets: Target market characteristics, why this market is the best for your venture, market validation research ...
  6. Business Model: How your venture will earn a profit, expected margins, sources of recurring revenue, vision, mission, goals ...
  7. Competitive Advantages: Market focus, value proposition, core competencies, barriers to entry, competitive validation ...
  8. Environment and Context: Industry overview, research results and analysis, major competitors, benchmark ventures, how your venture will position itself to meet the competition, timeliness, regulations ...
  9. Marketing and Sales Strategy: Pricing strategies, distribution model, partnering, promotional strategies ...
  10. Technology Strategies: Technology, product development ...
  11. Operational Strategies: Production methodologies, manpower requirements, equipment requirements, material management, flow diagram of key processes ...
  12. Intellectual Property and Legal Issues and Strategies: Patents, trademarks, trade names, copyrights, trade secrets, operating and other agreements, legal structure ...
  13. Organization: Management team, relevant domain knowledge of the team, commitment, advisers, management to be added, culture, talent ...
  14. Development Plan: Current company status, number of employees, development stage, early revenue, number of customers, relevant historical information, long-term venture goals, growth strategies, timeline ...
  15. Risks and Contingencies: Downside risks and contingency plans, upside risks and expansion plans ...
  16. Financial Plan: Key assumptions, historical financial statements, pro forma statements, return on investment ...
  17. Investment Funds Sought and Use of Proceeds: Total investment funding being sought, use of funds in 4 or 5 general categories, any unusual use of funds ...
  18. Harvest Plan: Return of cash to investors and entrepreneurs; most-likely exit method (IPO, acquisition, ...) ...
  19. Summary: A brief who, what, where, when, why, and how of the venture; vision and mission ...
  20. Appendices and Research: Detailed resumes, research results, product data sheets ...

10 Tips for Launching a New Venture

  1. Don't wait for a revolutionary idea ... it will never happen ... just focus on a simple, exciting, empty space and execute as fast as possible.
  2. Share your idea ... the more you share, the more you get advice and the more you learn ... meet and talk to your competitors.
  3. Build a community ... use blogging and social software to make sure people hear about you.
  4. Listen to your community ... answer questions and build your product with their feedback.
  5. Gather a great team ... select those with very different skills from you ... look for people who are better than you.
  6. Be the first to recognize a problem ... everyone makes mistakes ... address the issue in public, learn about and correct it.
  7. Don't spend time on market research ... rather, launch test versions as early as possible ... keep improving the product in the open.
  8. Don't obsess over spreadsheet business plans ... they are not going to turn out as you predict, in any case.
  9. Don't plan a big marketing effort ... it's much more important and powerful that your community loves the product.
  10. Don't focus on getting rich ... focus on your users ... money is a consequence of success, not a goal.
[Thank you, Loic Le Meur]