But Wait… There HAS to Be More

Written on October 28th, 2009 | Short URL: http://abcjr.me/1n

It was reported today (via PopCity) that eighteen Pittsburgh companies raised $78.27 million in venture capital in the third quarter of 2009. This is obviously very good and echoes what my hunch was in my post about the feelings of optimism at AlphaLab’s Demo Day. The more money we can get across the continuum, the better, especially in the very early- to early-stage funding categories.

However, this is only part of the story. If you look at the PricewaterhouseCoopers (my spell check believes this word should be ‘slaughterhouses’, by the way) MoneyTree report (the source of the VC funding data point), you’ll find that a lot of critical investment money isn’t included in their research, including angel investment (see the criteria summary here). Obviously, the report is invaluable in allowing us to track what kind of investment activity is happening across the country, but I feel like there are some gaping holes in really being able to assess how much entrepreneurial funding activity is happening in a given area.

I suppose this is because it is very difficult to track this type of investment. For instance, a business plan project on which I worked will likely be funded within the next three weeks at about $50,000 (obviously a very early-stage investment). The individuals involved aren’t what I would consider part of the “entrepreneurial community” in the region, so no one will know about it. This also goes for another project on which I worked, which secured $500,000 in its first round; there were no trumpets sounded or press releases written, yet the company opened the offices in the heart of Pittsburgh with six new jobs within city limits.

Is the nature of angel investment such that tracking it just doesn’t work? Are angels usually uncomfortable having their investments publicly discussed? Or do many people in the realm simply not care about having this type of investment counted? While there are good arguments to be made that Pittsburgh needs more risk capital than it has available, I believe the picture has to be better than even what the PWC report says.

So, how do we keep better track of this information? How do we make it easier to brag about Pittsburgh’s entrepreneurial community?

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Great Presentation on Social Media Measurment

Written on October 27th, 2009 | Short URL: http://abcjr.me/1o

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Dunbar’s Number vs. Ambient Awareness

Written on October 27th, 2009 | Short URL: http://abcjr.me/1q

In February 2005, I was in the dining room of a friend’s house anxiously awaiting the last few seconds of the game clock to expire before I could celebrate my first Steelers Super Bowl. As soon as Coach Cowher lifted his arms in celebration, the fifty or so people gathered at the house party started to yell, cheer, hug and, in some instances, cry. While this didn’t surprise me much – as a faithful member of Steelers nation, I’ve shed a few tears myself – I was taken by the number of text messages I received from friends all over the country, many of whom I had barely spoken to since last time the Steelers were in the Super Bowl (1996). For about twenty minutes, my phone constantly buzzed with ‘Congrats’ messages. I was embarrassed by the number of replies that I sent that said, “Thanks! Who is this?”

This story came to mind when I happened upon a post by Seth Godin (thanks @paulfuriga), who had written about Dunbar’s number, a theoretical mental limit (150) to the number of people that can maintain a cohesive unit. Using the theory to reinforce his concept of tribes, he says the following:

Some people online are trying to flout Dunbar’s number, to become connected and actual friends with tens of thousands of people at once. And guess what? It doesn’t scale. You might be able to stretch to 200 or 400, but no, you can’t effectively engage at a tribal level with a thousand people. You get the politician’s glassy-eyed gaze or the celebrity’s empty stare. And then the nature of the relationship is changed.

As a result, he seems to suggest (but never says) that social media can’t really build a tribe because you/your company/your brand have to be pretty special to take the place of a friend/family member/colleague in someone’s life.

I thought about how this contradicted the concept of ambient awareness, a concept to which I was introduced in a New York Times Magazine article titled Brave New World of Digital Intimacy. The author, Clive Thompson, says:

But where their sociality had truly exploded was in their “weak ties” — loose acquaintances, people they knew less well. It might be someone they met at a conference, or someone from high school who recently “friended” them on Facebook, or somebody from last year’s holiday party. In their pre-Internet lives, these sorts of acquaintances would have quickly faded from their attention. But when one of these far-flung people suddenly posts a personal note to your feed, it is essentially a reminder that they exist. I have noticed this effect myself. In the last few months, dozens of old work colleagues I knew from 10 years ago in Toronto have friended me on Facebook, such that I’m now suddenly reading their stray comments and updates and falling into oblique, funny conversations with them. My overall Dunbar number is thus 301: Facebook (254) + Twitter (47), double what it would be without technology. Yet only 20 are family or people I’d consider close friends. The rest are weak ties — maintained via technology.

The author covers Dunbar’s number in the paragraph before, also saying that it is absolutely a limiting factor and that, in his interviews, he found that folks who are using ambient awareness tools to maintain weak ties are still living in that 150-person limit because, as he says, “deep relationships are still predicated on face time, and there are only so many hours in the day for that.”

This is where the Steelers story comes in — you build a brand and, because of the weak tie you build with the consumer, they take the effort to engage you (in my case, tracking my number down on Facebook to send me a text message). They didn’t need to know where I went to college or where I was living or what relationship I happened to be in at the time. All they knew was that I was probably pretty excited about the win and that they’d take the time to acknowledge that fact.

When I was consulting with a collision repair company, the general manager described his marketing challenge like this — you have advertise and market yourself enough for people to be aware of you in the not-so-good event that they need your services. Otherwise, who really wants to think about auto collision repair? As long as people had enough knowledge about the shop tucked in the back of their head, he figured, they would come to him when they needed his service.

Frankly, I think Seth Godin’s invocation of Dunbar’s number (despite what he says in his post, it is not a law), is misguided with respect to social media. No, I don’t think it is easy to develop that tribe  and yes, in order to do so, you have to fill one of those Dunbar circle spots in someone’s awareness. But, I believe social media works because of Dunbar’s theory, not at the expense of it. Those weak ties are exactly what makes it a killer app. No, your company might not be able to build a tribe, but few products can survive by selling to only 150 people. If you’re more worried about establishing a tribe than building awareness, you’re likely to fail. However, if you focus on building valuable ambient awareness (Paul Furiga and his team at @wordwritepr are a great example), you’re able to position yourself when someone has to think about needing your product or service.

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Financial Projections Made Easy (Well, Easier)

Written on October 23rd, 2009 | Short URL: http://abcjr.me/1s

Something that seems to scare most entrepreneurs is figuring out how to do pro forma financial projections. It’s scary stuff — you really don’t know what the costs are going to be, what your sales are or how exactly you’re going to have the cash flow to make payroll even before you start. All you know is that you have a product idea, and maybe costs or the right price point. Beyond that, you’re really not sure.

I’m not a finance wizard, but I’ve pulled several pro forma financials together for various businesses. The long and short of it is, every investor/bank wants to see the same stuff — sales, cost of goods sold, expenses, net profit, etc. It’s not altogether difficult, but the process can be very intimidating.

I have some things that I’ve followed along the way below the fold . However, to get you started, I’ve developed a starter template that I’ve used on several projects (albeit with some significant edits) that you’re free to download (FinancialsTemplate.xls – 118kb). This should help get you started, but realize that it’s only a template and I don’t take responsibility for your final version.

Thoughts and tips are below the fold…

Continue reading the post Financial Projections Made Easy (Well, Easier)

Posted in Entrepreneurship, Funding | Permalink | No Comments |

The $100 Identity Start Up Kit

Written on October 21st, 2009 | Short URL: http://abcjr.me/1p

I don’t need to delve into the importance of a good marketing plan — it’s been said a thousand times by people far more talented than I. However, tactical implementation gets tough on a very limited budget. Folks in startups often believe that people (potential funders, customers, etc.) will look beyond design/collateral because the product/service is so superior, so they decide that creating a professional image is very low on the to-do list. However, the short-term cost savings can severely cost them in terms of funding and sales.

Having worked in a startup environment with very few resources, I was able to create some identity pieces and collateral that looked very professional for not a lot of money. I have incredibly high standards with respect to graphic design and print quality (true story: I will use a magnifying glass to look at how a piece is printed), so I have experimented with many solutions in order to maximize look on a dime (or penny, even). Here are my thoughts and some do’s and don’ts…

Continue reading the post The $100 Identity Start Up Kit

Posted in Design, Entrepreneurship | Permalink | No Comments |

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