Dr. Earl R. Smith II

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13 Responses to “Alice in Wonderland Visions of Reality?”
1.
July 8th, 2007 at 11:32 am e
Marc Aniballi: If you read through here, you will find many instances of people looking for funding for their neural hiccups. I have spoken with many of them, and your symptom seems rather endemic to one degree or another.
I’ve been asked about funding software development of a portal idea where the idea guy had no clue how a website is assembled or what is entailed. When I suggested he do a little research and that few investors will look at an idea without a prototype (in the web space), he dropped off the radar!
2.
July 8th, 2007 at 11:33 am e
Howard Berkowitz: In my younger days, I was called the sort of programmer to whom you gave the specifications, then locked in a room. You would then throw a haunch of raw zebra meat over the door several times a day, and then wait for a knock. When the knock came, I would hand out near perfect code, but, even though I started as a tech editor, mutter “Document? If it was hard to write, it should be hard to understand.”
Some years went by, and I was making an internal proposal to have a project funded. This happened to be a very advanced seminar in a company in the network training business. I had worked with my boss, in two companies, for quite some years, so I was quite concerned when he turned dead white and started rubbing his eyes.
“Karl, are you OK?”
“Yes. I’m just in shock. I know you give excellent technical presentation. This, however, was the first time I have heard you make a presentation totally about business case matters, and make perfect sense.”
My office delivered the seminar several times, with the best gross margin of any of our offerings, until top management found out. Since I was the only person that could give the seminar, they cancelled it, because their business model was that all instructors should be interchangeable. Further, the model held, in the height of the dot-com boom, that if they infinitely expanded their capacity to give standardized Cisco courses, the market would infinitely expand to fill seats. They neither needed to advertise (Cisco had a web page with locations of the trainings) nor differentiate their staff nor have unique courses.
The surviving Learning Partners all advertise heavily, or have consulting carefully integrated with training, or offer unique or individualized services.
There is a lesson here for companies that want to survive, and might be concerned with other than short term profitability. When your industry is in a boom and cash flow is good, THAT is the time to reinvest in product development and strategic marketing. I’ve worked for other companies that saw things being very profitable, cut back on development and marketing, and then, when the economy shifted, found truth in TS Eliot’s words:
“This is the way the world ends
This is the way the world ends
This is the way the world ends
Not with a bang but a whimper.”
3.
July 8th, 2007 at 11:34 am e
Sheilah Etheridge: I think far too many people actually believe they are the only person to actually have an idea. They begin the search for funding long before they have developed the idea and are ready to implement it. Many have not even checked to see if someone else has already approached this line of thought.
I see many people here oon the site saying I have an idea and need funding. These same people cannot even expalin the idea much less develop a business plan. That is not true of all of them. But many simply have the idea.
Seek out some investors and I am fairly sure they can keep you occupied for years to come.
4.
July 8th, 2007 at 11:34 am e
Kevin Johansen: Early in my Internet days I came across the phrase ‘morphic resonance’. What it meant in the context of the article I found it in was that similar people w/ similar problems and similar resources would come up with similar solutions.
At the time, I was building my dot com and was *very* concerned about other service providers in my space, even though they were operating within different businesss models than I was. Upon reading this article my focus changed to worrying about a mythical group of folks somewhere on the other side of the planet that had come up w/ a simular solution to mine. *THEY* would be my real competition, and so I then set about building a better team to compete with them within our business model when they arrived.
They never did.
However, my focus on building a better team paid off well. Though our competition had become nameless, it didn’t mean that we stopped competing. When we stopped competing to see who had the better ideas, what was left was who had the most customers and who could keep them best. So through this process we quit focusing on our competition and started focusing on our customers needs. That’s what drove implimentation. Prior to that we were routinely wasting our time brainstorming solutions to problems created for us by new initiatives of our percieved competitors, and as a consequence, the ink never dried on our business plan. What a waste!
Since then, my routine advice to new entrepreneurs is to go find a customer. Without one, you don’t have a business. And if you can find one, keep them, and go find another. Nothing else matters.
Success is much more dependent on execution than inspiration. (I think Einstein had it as 99% more…)
And if you’re looking for a statistical breakout of what works in business development, you might want to check out the Benchmark Survey @ the Entrepreneurial Standards Forum. Though it’s relatively new, it’s helped hundreds of entrepreneurs improve their focus on delivering results for their customers, and also hundreds of investors make better informed decisions about what they’re investing in.
5.
July 8th, 2007 at 11:35 am e
Phil Parkinson: I have seen too many of these instances in my day as I have prepared business plans while doing my MBA and did part time consulting work evaluating business plans for banks. My friends and I have even come up with a few of our own ideas over beers but knew we could not make them work based on resources like money and time, etc… Getting the idea is usually the easy part, all one really has to do is identify an opportunity. However, turning the idea to a reality is one of the toughest things to accomplish. That is why 9 out of 10 businesses do not survive their first year of operation.
6.
July 8th, 2007 at 11:35 am e
Bonnie Moonchild: My friend is a business planner and a technical writer. She is also a poet and visual artist and has a high tolerance for ambiguity BUT the company that hired her to write a users manual but wouldn’t tell her what the software did was just too much for her. They kept saying “Write something as if you knew what the software might do…” It took her several months to figure out that they knew her last customer had been Microsoft and they were hoping she’d accidentally give them a clue as to what Microsoft was planning. She quit.
7.
July 8th, 2007 at 11:35 am e
Steve Rabin CPA: “The New Business Road Test, What entrepreneurs and executives should do before writing a business plan”, by John W. Mullins, is a must read for what you are trying to do. I have some personal stories but you’d have to buy me at least a few drinks before I’d share any of them here.
8.
July 8th, 2007 at 11:36 am e
Timo Ruohomäki: This is actually quite sad. A venture capitalist who is willing to throw an idea to a waste bin because of the form of business plan or lack of team must be lucky, because the luck is the only thing that will ever help him to make money.
The whole idea of raising money is to get resources that are needed to build the team. It is very possible that an engineer or scientist doesn’t know anything about business plans or maybe even doesn’t know how to fill out the tax forms, but if he has an Idea he should be listened to.
This is actually a big issue in hectic businesses where the product development cycles should be months instead of years. Do we really want to waste time be telling someone to find out an English teacher and graphical designer to help with the charts or should we do some business instead?
One good example of additional data often requested is the market estimates and the charts that support the estimates. The funny thing is the team might already have a sales professional who knows the market. He knows how many potential customers there are, what is the size of an average deal and how often do they buy stuff. Now it doesn’t require much mathematical skills to define the market size from that.
The problem is that doesn’t look good in the business plan. There should be ‘references’, from a well-known market research company. In the past 10 years I’ve made my companies to purchase many of them and only one thing is common: they are mostly just plain rubbish. The person who today analyzes the size of cellular phone content market may next week estimate how much diapers are consumed in Mid-West. Still that sort of market study would easily cost 5000-7500$. A team that is looking for a 25k funding to finish the demo is sent back and made to spent 5k on a piece of paper that doesn’t add any value on the business itself.
It is sad that for so many VCs it is the form that matters, not the essence.
9.
July 8th, 2007 at 11:36 am e
Michael Davis: Actually I’ve dealt with many aspiring entrepreneurs in the past who were completely clueless.
Two examples are (I use the term entrepreneur loosely):
1) An entrepreneur with a business plan (involving a type of floating hotel) which detailed out expected returns to investors. All he needed was the money (sound familiar). To make matters worse, this entrepreneur compared his proposed venture’s return on investment with that of the typical return of the S&P 500.
2) Another entrepreneur (who actually talked with Sequoia a year prior) was adamant that all he needed was the money (smart or dumb money – he didn’t care) to fund his venture. He was upset about venture capitalists wanting him to prove his business model by gaining real customers. In fact, he was on the verge of getting his first real customer and said to me (in a livid tone) that once I get customers – I don’t need venture capitalists!
10.
July 8th, 2007 at 11:37 am e
Robert Dolezal: What is described as half-baked ideas or amateurish presentations are in fact works-in-process. Insufficient feedback has occurred to inform the presenter that their idea for a business venture is really just a feature of such a venture, an impossibility due to market conditions/competition, a technological challenge, bad in timing, etc. The presenter is enthused at the concept and may or may not have had to put rubber to road and make the two meet.
On the other hand–my hand–a well-thought-through business venture is no guarantee of success either. It may not fit the funding institution’s objectives, timing, whims of interest, or–in the worst cases–hit them at a time when they were rushed, overwhelmed, and didn’t get it during the 2-second glance.
Drawing on my experience in publishing, books like “Love Story” and “The Hunt for Red October” racked up more than 100 rejection notices before they were perceived to be the unbelievable best sellers that they turned out to be. Publishers rely on the 2-6-2 rule–two out of ten books are great best sellers, 6 are middle-of-the-road and don’t make much money–and two are dogs that lose badly. The two pay the way of the other 8.
By contrast, I’ve heard from multiple sources that VCs work on a 1-6-3 rule. Perhaps they should examine their screening process and pick up that other winner they currently are missing–using the book publishers acquisition model as an example. It would double their funds’ return.
11.
July 8th, 2007 at 11:37 am e
Mark Amtower: During the dot-bomb era, I was advising a guy who had a truly great web site concept. He approached me because of my industry contacts, and I got him in to pitch a major VC group. We had rehearsed the presentation so I was pretty confident….until he started talking. Seems he had rehearsed a different routine with a sycophant admin on the way over. The admin convinced him that he was not presnting himself in the 10 minute pitch. So instead of presenting the concept, he presented his “what I gave up speech” full of “me’s” and “I’s” – you’d have thought Toby Keith was there taking notes for his hit “I Wanna Talk About Me”.
We parted ways shortly after that.
we had one more meeting a few months later, and he had the audacity to ask em to introduce him to some other finance folks. I replied that “I would not introduce you to dead people.”
For some reason, he has not called again.
12.
July 8th, 2007 at 11:38 am e
Marilyn Schaffer: I had a client who asked me to introduce them to Omnicom (NYSE) in hopes of being acquired. I was able to secure a meeting with the CFO who flew from New York to Toronto, three times to meet with this company. Each meeting, my client described their business differently. Omnicom bailed and my client ($60M in revenue) ultimately claimed bankruptcy.
13.
July 8th, 2007 at 11:38 am e
Randy Riddle: As someone that has talked with potential investors about an idea, I’ll note that what’s sometimes needed is advice on implementation of the idea. Individuals who come up with new business ideas may know a great deal about the specific industry area or technology their idea is coming from, but really don’t know anything or very little about business plans or project management and need to be properly guided. If they do know something about business management and project planning, what they may be looking for – even if they don’t express it – is more information from potential investors about whether the idea is “sexy” enough to peak interest, where to focus the idea, or some validation they’re on the right track.