CI? Yes, competitive intelligence.

In today’s rapidly changing marketplace it is pivotal that any new start up keep an eye on the competition. What are they doing that we’re not, what’s their value proposition compared to ours, who is their target customer, who is ours? These along with many other questions are what you should be asking yourself and always keeping those questions in the back of your head, and apply your answers to the core of your competitive strategy.

Having a great idea and bringing it to market is not enough these days, and unless you’re a first mover in a completely new market, chances are you will have competition, and chances are that competition will be as well if not better prepared than you.

So how do you protect your business and track what their developments as compared to your own efforts?

The good news is, that you’re probably already taking some of the more important steps in CI gathering by simply reading industry news and following your competitors blog/twitter/facebooks etc… and subscribing to the relevant rss feeds. If not, then it’s definitely time to start. No better tool exists to build basic CI knowledge than to focus on the public information that is already out there.

But why would you want to involve yourself in basic CI gathering? And what can a young company get from actively disseminating the data that comes from CI?

The first and possibly the most important benefit of CI, is that as a young company it allows you to become more agile than your competition. Company agility is the ability to deploy rapid changes to your business model, and should a competitor with more resources enter the same space as you, having this CI will allow you to act by changing your value proposition, sales model or anything that will allow your startup to regain that competitive advantage.

However aside from agility, CI allows your startup to define certain market spaces which can allow you to establish a presence before your competitors, this along with Scenario Analysis can provide you with the tools to make the necessary decisions that can ensure a higher success rate in the face of stringent competition.

CI will undoubtedly also aid you in identifying root problems within your own startup, and is a great tool to compare your own organization to those within the same market space. However it’s important not to get caught up in becoming overly analytical of one’s own practices, instead use CI as a gauge of your activities to those of others.

Start there and you should be good to go regarding non formal CI. Remember as a startup, resources are scarce and should be applied as to create the most value to your organization, but basic CI gathering should be engrained in how you run your business.

If you want to know more on CI and how to apply it to your business, be sure to check out our resource page which we’ve updated with additional books to add to your entrepreneurial reading list / library.

Here are just a few ways to completely and utterly dig your startup into the ground, as such read them, and do what you can to avoid them.

1. Have a poorly defined value proposition. Having a poorly defined value proposition will cause you headache after headache when looking at and presenting your business model. You have to know who you are targeting, what you’re offering and why they would want to use your product or service. Who is your customer?

2. Setting unrealistic objectives in your development and deployment pipeline. No matter what you think you will not underpin the world in a year, you will not have income of €20.000.000 in year one, and you will be greatly disappointed.

3. Focusing on the bottom line instead of on the service / product you offer your customers. Your customers are your lifeblood, if they are unhappy your bottom line will suffer, if they are happy, they’ll be repeat buyers, and even help market your product. Simple as that.

4. Involving yourself and your business in ethically questionable practices. Unsavory marketing practices, overly creative accounting are just some of the things that will in the end ruin your business, don’t do them.

5. Developing a product without adequately deploying resources to market it effectively. Sure, you may have a product that could cure cancer, end world hunger, and fly humans to the moon, but if no one knows about it, no one will use it. Market it, and market it effectively.

6. Going on a spending spree. Meaning, poor cash management. You may have €250.000 that you received in the form of F3 (Friends Family Fools) Capital and you think it’s great so you pay a premium for services that could otherwise be outsourced, delivered in a more cost effective way, and get everyone a brand new Mac Pro to write e-mails on. Not a good idea.

7. Launching too early or too late. Timing is everything, think about the market, the economy, the sector you’re in, where is it now, where will it be in 3 months, 6, a ear or two. You don’t have to change the world today, and launching today may lead to failure.

8. Flying solo. Think you can do everything yourself? You can’t. Involve others. Even if you’ve decided to start alone, bring in friends, talk to your network, and see if people will help you out. You don’t have to give them an equity stake in the beginning see how you work together. If you work well, ask them if they’d like to come on board.

9. Forgetting about scalability. Good ideas scale well, milti million ideas scale at their core. How big can your product realistically get? Who is your customer, and how can fast can you grow without compromising service.

10. Secrets are no fun. Talk, and share your idea with people you trust, friends, family, colleagues, these people are inevitable to the success of your business, you don’t know everything, and collaboration can more often than not fix problems before they arise.

11. Doubting your idea early on. Doubt is natural, you will have ups and downs, this is completely natural, but if you doubt your idea within the first month, or three of your start up career. Chances are you’ll become disheartened quite early on and quit. Save yourself the trouble and thoroughly analyze your concept before taking the plunge.

Good Luck!.

As the case may be, you walk up to any investor and ask whether they prefer idea or team, and as if previously programmed to do so, virtually all will respond “team”.

But clearly it’s ideas that change the shape of enterprise and industry, innovation and movement forward. Sure, one could say this, but unless those ideas are generated within an already functioning business with ample resource to devote to the evolution of this new innovative idea – the team will be the most important part of your new enterprise.

For a moment let’s take a step back from entrepreneurship, and look at your company as a functional unit of a larger organization. You have your project leader, your finance guy, strategist, your engineers (or those individuals that make said innovation come to light), your workflow processes (as hectic as they may be, they’re still there), deadlines, etc…

And while in an entrepreneurial setting these functional roles often if not always overlap, the similarities are more often acute between a new venture team and a business unit.

Why is this important? Because BMW wouldn’t pick just anyone off the street to lead their design, engineering, and marketing of the new 6M coupé’s and for those same reasons neither should you.

The selection of the team to spearhead the launch of your startup should be conducted in a manner which will lead to the formation of a group of individuals with complimentary skill sets in order to compensate for any weak comings of any of the other members of the team.

Or in layman’s terms, if my sales skills are rubbish, there better be someone on the team who can sell a chicken an egg.

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The reason why investors first and foremost look at the team rather than the idea is in actuality fairly simple.

A mediocre idea can have a very good chance of success should it’s business model development, launch strategy, deployment, sales etc… be well thought out and executed, and this unfortunately comes from experience rather than being a visionary. On the other hand, an idea that may change the way we live – isn’t worth very much if you know, or have strong doubts that it won’t even make it to market.

Build good teams, build complimentary teams, and just because someone’s been your friend since you were in kindergarten, doesn’t mean he or he is the right business partner. Enterprise is more often than not logical. Be logical.

Consumer internet is still the hottest US VC investment category, swiftly followed by clean tech and energy

The sector was voted the hottest growth area in the industry with 73.5% of those VCs polled backing it. Cleantech and energy is the second hottest growth area in the venture capital industry, according to more than half of (53.1 per cent) venture capital executives, third place goes to Internet Marketing with 40.8%.

Perhaps the question for those hunting more innovative products and business models at better valuations is whether they should be following this trend? Although it is a positive sign for early stage growth companies whose investors are looking to exit in upcoming fundraising rounds.

Overall, the annual study’s results indicate optimism in the venture capital scene compared to previous years. Over half, 56 per cent, of US venture capital executives are more confident and optimistic about the industry today, compared to a year ago when an overwhelming number of executives felt the industry was ‘broken’.

The survey found executives to be split down the middle when it comes to which geographical region currently represents the area of hottest investment opportunities, with 42 per cent indicating the east coast, namely Boston and New York, and 42 per cent Silicon Valley.

Seventy-one per cent of respondents are not worried about new deals and 72.9 per cent indicate they expect to see a steady deal-flow over the next six months.

When asked to identify which functional trends they were most concerned about, 62 per cent of the executives indicated they were very worried about the uncertain return of exit markets.

The survey also asked how the tax legislation on carried interest will impact the venture business and 46 per cent indicated it will have a major negative impact, while 16 per cent believe a ‘work around’ will be found.

This (second) annual VC survey was undertaken by Polachi Inc, a provider of Access Executive Search, canvassing VC executives across the US of which more than 98% are partners or managing partners.

While there are days of the entrepreneur, various government backed incubators initiatives and some absurdly difficult to find money from the EU, the one thing – and possibly the most important thing that is missing Europe-side, are readily accessible mentors. Those seasoned entrepreneurs who are willing to donate their free time to help the future generations of younger ones who lack that experience which sometimes means the difference between success and failure. Well and to keep them away from the failure.

In the U.S., that is SCORE or known by its longer name the Senior Corps of Retied Executives who typically council America’s small businesses, and set them on the road to success and profitability. On average retired individuals who have a passion for entrepreneurship and years upon years of experience in setting up companies. More so, this is probably the most prevalent of all U.S. entrepreneurship initiatives – and is non-for-profit.

On the other hand, Europe has what sometimes seems like countless initiatives dedicated to helping the entrepreneur. Information sessions, workshops conducted in conference halls, packets, subsidized space, financial assistance, etc… etc… etc… and best of all they are all typically backed by taxpayer money.

But the rub is that there is no necessity to subsidize businesses, in fact subsidized companies will be more likely to fail due to the preconceived conception that access to capital is easier to acquire, or simply that to gain that capital one needs to adhere to a set of absurd government guidelines.

What the business needs is contacts, clients and a strategy on how to acquire them – this capital does not provide, nor do information sessions on why it’s great to be an entrepreneur or institutions whose “vision” is to help the entrepreneur focusing more on their own prevalence in any geographic area.

There’s just too much mess out there, too many signals, not enough simple guidance and “proper & effective” entrepreneurial education. Academia is great and teaching people how to be entrepreneurs is fantastic, but there are no better ways to learn that to just do it.

For all the people in the EU, SCORE is accessible form outside the U.S. and the information in there, i.e. business toolbox can be helpful to non business oriented entrepreneurs, and even some business oriented ones.

I recently came across a commentary that goes along the lines of VCs know what to do with engineers but engineers don’t know how to deal with VCs. As with all good lists, and entrepreneurs like making lists, it centres around recurring issues for the inventor when dealing with a VC. Issues that are worth refreshing in this author’s opinion:

VC’s don’t sign non disclosure agreements – it affords them protection if they like your ideas, but they want to fund someone else to do them. How do you legislate against that when they have all the financial muscle and contatcts? The answer is it is not just about NDAs and patents but core competencies and brand, so approach with caution.

VC’s are sheep – they will either all fund something or none of them will, so if you have an idea that’s too new and too different you may struggle to find funding. Too right! It’s not just about self promotion, you have to promote your sector and hang a big sign over the exit..

VC’s aren’t technical – they dismiss what they don’t understand, your novel ideas, and they focus on what they know, usually irrelevant marketing terms or growth predictions. If your idea’s too new and different for the expert to understand then you may not get funding. BUT isn’t there much more to achieving commercial growth than building a great product? Have you considered treating your VC as your target customer? Maybe engineers should run the world but they don’t – Deepwater Horizon anyone?

VC’s don’t take risks – VC’s have a reputation as risk takers – they are not. They collect money from rich people to build investment funds. The rich investors take some risk, though their risk is spread across the fund’s investment and is often a tax benefit. Are they solely interested in making blockbusters and sequels? They certainly have a formula and like to stick with it, this is why you need to know A LOT about your investors and choose them carefully. You wouldn’t sell a Ferrarri in a Wal-mart, place your investment just as you place your product and pray you can find some like-minded people with influence and some discretion over the capital in play.

Venture funds are big – If your idea needs a lot of money, then you have a better chance of getting money than an idea that promises the same rate of return for much lower investment. This is because it’s easier for the VC to manage fewer big investments than many smaller ones. True, but most are transparent on deal size, the important thing isn’t how much your company is worth or how much you can spend, but that you spend it well and with purpose.

VCs collude – They price fix by discussing among themselves funding and pricing for candidate start-ups. They will probably between them only fund between two or three companies in an industry – this limits competition and makes success of the few more likely. Absolutely, they hate competition to fund good ideas and the worst thing is they are spoilt, so spoilt they invest next to nothing in enhancing dealflow, how many sponsor or educate & participate in conferences freely? Are they trying to innovate or harvest ideas?

With thanks to Nick Tredennick, Brian Shimamoto and Alan Barrell. To be continued…

design should never compromise functionality, nor should functionality ever compromise design

Design is something that start ups tend to miss, forget about, or pay little attention to, and this is especially true for those with an engineering background.

Engineers tend to think that as long as it’s functional, and works right, it will appeal to the masses, but these engineers forget that the majority of the population are not engineers and in fact just general folk, and if your product targets the masses, one of the best pieces of advice we can offer is DON’T SKIMP ON THE DESIGN.

Remember the Volvo’s from the 80’s and 90’s? Great cars on the inside, but ugly, real ugly. Then comes Ford, buys the car division, redesigns the body and sales go through the roof, the cars, are now not only safe but cool.

Old example? Look at Android and iPhone OS. Android is open, there are no limits on what you can, can’t do, there is no parent company that strictly dictates what you can put on an Android phone, it’s open. Yet the sales are meager in comparison to the iPhone. Why? Well, it’s cool, the design is sleek and well thought out. Apple more so than any other company is known for the quality of its industrial design, and it shows, just look at the bottom line even during this recession. Now look at Compaq. Who?

Are you starting to see the point?

But thing is as a start up you don’t have the resources to splurge on IDEO, or hire some of the best industrial designers in the industry. Problem? Not really.

If you’re by a major metropolitan area chances are there’s a school which exclusively teaches design, or at least has faculty or a programme that deal with it. Your best bet is to contact them, explain what you’re looking for and see if you can’t involve students in a project, or even hire one as an intern. When it comes to design most of these students will be light years ahead of you and your engineers, they’ll be overjoyed at the possibility of getting some real world experience, and best of all, they’ll make your product attractive to the wider community.

A few things to note.

1. Some designers may go overboard and make it the best looking whatever it is, but completely non functional. Stay away from these and ask to see previous projects.

2. As an engineer, you’ll most likely describe what it is the product does in a way that the designer won’t understand. For this we recommend looking over our older post on value propositions and elevator pitches. Good communication is key.

3. Let the designer do what they’re good at, design. You’re there to get the business going, not micro manage.

4. And remember, design should never compromise functionality, nor should functionality ever compromise design.

And if you’re looking for a design school near you – just click here.

Cut and dry, if you can’t tell me what your entrepreneurial project does in a sentence, you’ve got a problem.

I can’t begin to tell you how common a mistake it is among budding entrepreneurs to delve into the mundane details of their projects. It usually starts off like this.

“We at New Mobile Platforms Ltd. have developed a revolutionary platform that will change the way in which people communicate. By utilizing free wifi access across major urban areas we were able to relay signals and triangulate the locations of other individuals using the same application on their mobile devices, thus pinpointing the users location to 2.3m. Other users and subscribers to friend’s devices, can see other users via real time database query’s that are updated on their mobile devices from street to our data centre and their handset every 15 seconds via, GPRS, EDGE and G3 network connections, as well as free Wifi hotspots. If you look at our programming schematic, you will see that etc… etc… etc…”

Long story short, to most investors, individuals, and to the general public you might as well be speaking Ancient Greek. The majority of the population are not engineers, do not know industry jargon, and most importantly are not interested in detailed programming schematics. What it is that they are interested in is how the product will help them in the course of their day to day lives and what need it satisfies, and when dealing with investors, they’d also like to know how it makes money.

So let’s take the above example, and rephrase it into something that can be pitched in an elevator setting.

“We’ve developed a mobile app that lets you know where your friends are on a map. It’s great for trying to meet up with people and can help you navigate unknown areas, find meetings, and the like. We monetize via Mobile Advertising.”

And that’s it. No long elaborate explanations, no technical details, just what we do, what it offers, and how we plan to make money off of it. Now whether or not this idea is a good one, is a different story all together, but being able to summarize what it does in a sentence is the most important part of any elevator pitch. You get your message across clearly, effectively and quickly.

To summarize.

• Stay away from lengthy explanations that can be confusing.
• Cut away all industry jargon.
• Get to the point and keep it simple.
• Say what you do, how it fulfills a need, and how you monetize it.

Once we had the pleasure of listening to a successful entrepreneur give a talk about how he made it, and how some of his friends who also started companies were faring. Long story short we got to talking about two good friends of his who had started companies years ago. One was now a very successful energy mogul, whereas the other one was still trying to get the idea he had all those years back off the ground, kept on funneling resources into it, he was undeniably unforgiving to his idea. How could his idea not work, after all he had thrown so much time money heart passion and soul into it? Simple answer, it just didn’t.

And when your entrepreneurial idea doesn’t work, the only thing to do is kill it, bury it and move onto the next one. If it doesn’t work, no big deal, the next one will, and if not that one, the one after that, and if not that one…. well… eventually something should hit. But people – they get overly attached to their ideas, they think that the one idea they have and devote resources to will change the world or something here, something there.

Most wont, and the best thing to do is to test it, launch it, if it doesn’t take off. Kill it. Your time is more valuable than the resources you’ll invest into bringing something inherently broken to market.

But how can you identify if your idea is a good idea other than that your friends, and family tell you it is? Follow these simple rules.

1. Does it satisfy a market need?
2. Is it scalable?
3. Who is my market?
4. What are my competitive competencies? Where do I excel?
6. Is my idea really that amazing? If not, it’s no big – more money gets thrown at mediocre ideas with great people than vice versa.

So before jumping into the fire, ask yourselves those few simple questions.

The first paragraph of a report published by the University of Cape Town: General School of Business in 2002 reads as follows.

“South Africa is less entrepreneurial than other developing countries, a fact which could impact negatively on the country’s economic growth and job creation prospects. According to the 2002 Global Entrepreneurship Monitor (GEM), released at the United Nations last week, South Africa is below the average rate of entrepreneurial activity when compared to the 36 other countries taking part in the survey and ranks lowest of all developing countries including Chile, Brazil, Mexico, India, Argentina and Thailand. [i]”

Which poses a very important question. Why is that? And have things changed under Mbeki and Zuma? For the most part, a lot of people would say no, while others hope that the upcoming Wolrd Cup will be the answer to all their problems. We know that this is however not so, and it is necessary to identify and remedy the various problems that plague South Africa’s entrepreneurial climate and provide a clear path for future entrepreneurs to have the environment necessary to actualize their business ideas and to foster development in new enterprise.

PROBLEM RECOGNITION

Charting the Bureaucratic Red Tape – The report “Counting the Cost of Red Tape” – November 2004 identifies the first and by far the most severe of the problems associated with entrepreneurialism in South Africa is just this, red tape. Decentralized regulatory environment, lack of information, and high costs all create a climate that is disadvantageous to the entrepreneur.

A life less Educated – deeper problem rests in the lack of skilled labor. Companies cannot adequately grow if labor requirements for growth are not met, training of individuals is an option, and the South African government has made stipends to foster training within organizations, however, the lack of information regarding these programs, and the risks that entrepreneurs are taking by creating their own businesses coupled with risk associated to the expenditure of time for training has to be taken into consideration as well; here we talk about local based SME’s – if you’re looking at something akin to an international business model, the problems run even deeper, especially considering many well educated South Africans have emigrated abroad diminishing the country’s talent pool.

Show me The Money – While there is plenty of capital in South Africa, the problem rests with acquiring it – aside from X seed funds are far and between – and BA / VC activity heavily lags behind other growing companies.  There are however a few initiatives for Entrepreneurs worth looking into.

The Small Medium Enterprise Development Program (SMEDP) – a cash, tax free, grant for new investment and major expansion project. It is capital investment based and is receivable over a three year period, with a maximum level of R100m for the level of qualifying assets.

A Foreign Investment Grant (FIG) – Coexisting to the SMEDP, the FIG is available to refund relocation costs of plant and equipment shipped to South Africa from abroad.

Skill Support Program (SSP) – a supplement to an approved SMEDP project which provides subsidies to training and personnel development costs. It is provided in conjunction with the South African Department of Labor [ii].

And although they are there, they are also subject to the same problems of red tape.

Where the Roads Have no Names – Infrastructure is key to any economy and more so a growing one. But aside from road and rails, what South Africa needs more than anything is an adequate IT infrastructure. Drastic changes, deregulation, and private investment in the sector are key in facilitating easier access to information by and for potential entrepreneurs; speeds, lowered costs, and widespread access are KSF’s (Key success Factors) to fostering any real business development in the country.

How do we tackle these issues and help foster growth in entrepreneurial activity within South Africa? We’d like to as you, and we’ll have our own answer this coming Monday.