September 3, 2008

Eating the Fries First

I don’t share well with others.  It’s something that I had to learn over time…A LOT of time.  Growing up in Iowa, I was the oldest of six (unless you count Miguel who was a foreign exchange student from Spain who brought the total to seven).  Growing up in such a large family definately has its advantages but it has some cons too.  Dinner time for example, was a true test of the strong and fit.  If you didn’t like what was served, no one was going to look longingly at you and ponder if something else could be fixed.  If you didn’t like it, you didn’t eat.  And if you LIKED what was served, it was a race to pound it down because seconds were only reserved for the people who finished first.

A few years ago my wife (who was the baby of her family and had just one older brother…whoah) noticed that I always ate my fries first and asked me why.  It took me awhile to figure out why, and then I remembered.  In my family if we went out for dinner we would usually be alotted a hamburger for each of us and then communal fries to share.  If you ate your sandwhich first, there would rarely be any fries left at the end.  But if you ate the fries first, you still had a full sandwhich in the hand.  It was a clever ploy that worked, but it took years and years of experience before it was perfected.  Once my other brothers and sisters figured out what I was doing, my scheme failed and I got about as many fries as the next guy.

As a Capitalist society we have been programed to eat the fries first.  Phrases like ‘Survival of the fittest’, the ‘early bird gets the worm’, or ‘I gotta get mine before you get yours’ dominate the business vernacular.  The problem with this mindset is that it creates a win-loss scenario and a negative environment where you kill or be killed.  However a quiet Revolution has been slowly building over the last decade and businesses who were once fierce rivals have started to lay down their battle axes and work together.

The most recent of these was a joint venture that was announced last month between Chrysler and Nissan.  Once bitter rivals, these two monster corporations are joining hands to produce and sell cars…TOGETHER!  This kind of cooperation was unheard of years ago, particularly any kind of agreement between a Japanese and American manufacturer.  However, both companies realize the strength in the other and the opportunity of cooperation.

The bottom line is that companies who choose to find companions versus competitors are going to be in a power position to grow.  The old models of market share and market domination are diminishing as markets continue to shrink in a world wide economy.  Corporations that will truely flourish in the 21st century will be those who seek opportunity across multiple industries and with multiple partners.  These businesses have learned to use their strengths which allow other companies to leverage theirs.  So reflect on your own business.  Are there opportunities to work with your competitors?  Are there joint ventures that could give you a strategic advantage over the rest of the field?  Having the courage to seek new opportunities in this growing Revolution just might give you the edge you need to beat the rest of the field!

*Joel Nielsen is a Venture Consultant with Funding Universe.  Commentsbe sent to jnielsen@fundinguniverse.com




Create it, then Raise it

As a funding consultant I often see a harmful trend among aspiring entrepreneurs, namely; the desire to raise money for their business without even attempting to create their business.  Big Problem

I would like to offer a path to would be entrepreneurs that though seemingly difficult will actually make their trek to business success much easier than the alternative.

1.  As all businesses provide either products or services, make sure that product or service exists before you attempt to raise money.  This is especially applicable in the case of software or immaterial technologies.  If you do some research you will find that the majority of companies that are at the top of this industry, had development complete and at least several thousand customers before they raised money.  You should do the same.

2.  One of the primary reasons for going into business is to create monetary value.  If this is truly the case then it is probably a good idea to do some of this before you go looking for other peoples money.  Granted this may take time and a lot of sweat and tears, but it usually provides a better living than soliciting funds for ideas.

3.  With a product and some revenue you are probably in a good position to raise money.  At this point you probably also have a few years of experience under your belt.  This may surprise you coming from a person that makes a living trying to help people secure equity funding, but at this point your best bet if you are looking to grow your business is to acquire some debt.  Why, you may ask.  Answer, because why would you want to give up ownership in your business if you don’t have to.

4.  Here comes the part you have all been waiting for.  Sure, in some cases, about 10% to be more precise, entrepreneurs will want and need to raise some equity funds.  When this is the case make sure you do your homework.  You will want a friend and advisor not just a money hungry partner.  If you do it right, you could be the next Google.  Just remember that it’s not for everyone so keep it real.