You know you want one next Memorial Day

One of my recent projects, along with three great friends, has been developing a portable draft beer delivery system targeted to tailgaters and campers called PortaBeer (@PortaBeer). Beginning as a giddy conversation while camping with the guys last July, the project has taken on a life of its own. In the 11 months since we first came up with the idea, we’ve been able to haul in two awards (3rd Place, University of Pittburgh’s Big Idea Competition and 3rd place in the PCKIZ Business Idea Challenge for Point Park University), secure some engineering assistance, finance the R&D effort, develop a couple of quality strategic relationships and begin to see the results of all of our hard work. Not only that, we’ve founded a company where beer qualifies as a legitimate R&D expense.

In any case, as a result of the Pitt Big Idea Competition win, I was fortunate enough to talk about our product on The American Entrepreneur radio (AM 1360 in Pittsburgh) yesterday, guest hosted by Dave Wilke of Wilke and Associates.

Here’s the audio:

Nothing like talking about a little beer heading into a Fourth of July weekend. On that note, enjoy, be safe and have fun!

Learn from This Guy.
He understands people
better than you do.

Steve Blank is a damn good entrepreneur. He writes a very interesting blog and seems to be a great guy. He also points out a common entrepreneurial challenge in a recent post that I’ll paraphrase — a lot of engineers start companies, and those founders often really suck at the relationship part of building a business.

I’m a salesman at heart (you build these skills when the Cub Scouts force you to sell popcorn door-to-door when you’re 9 years old), but early on in my career, I sucked at the relationship part too. I’d try to impress people with whiz-bang knowledge, not realizing that I had to build rapport before I could get someone to be interested in my ideas. It’s actually a classic marketing mistake — If they like you, they’ll likely buy from you.

Then I hit drinking age.

I was so impressed by bartenders who could control a room and engage people they didn’t know, especially the folks who weren’t regulars. I realized they had something about them, some sort of skill that I just didn’t have. Maybe because there was alcohol involved, or maybe it was because a lot of people just wanted to have a good time and not worry about whatever crappy stuff they were dealing with in their own lives. Regardless, a good bartender could get anyone going.

So, I watched how they worked and figured a few things out. For those of us where the rapport stuff doesn’t come naturally, here’s the overused bulleted list in a blog:

• It’s all about the customer — Bartenders make the customer the center of attention. They ask where you live, what you do, how your day was. They greet you with some generic-but-informal name (buddy, chief, whatever). You’re the most important person to them at that moment, and it feels awesome.
• They’re warm — There’s nothing like being in the presence of someone who’s genuinely warm and welcoming. EVERYONE wants to be Norm from Cheers, because it feels good to be known. The masters make you feel like that, even if you’ve never been there.
• They give valuable freebies — There’s nothing that can make you feel special like a beer on the house. To add a little drama, a great bartender will use a glass or some other token as a reminder that you’re due when you finished your last drink. It’s like there’s a little unspoken communication between you two, and that builds a hell of a lot of goodwill.
• They bring people together — They can’t be in two places at once and there are a lot of other people that have to be served. A great bartender makes connections between people so that the attention isn’t always on them. It’s a little bit of sleight of hand, and you never know the difference. Plus, you never know who you’re going to meet.
• They know how to have fun — It’s all about feeling good, and great bartenders focus on having fun. They’re not talking about the technical aspects of making a perfect margarita or the new electronic system that only lets them pour exactly 16oz pints. They just make you feel relaxed and at ease.
• They remember the details — If you’re there more than once, they remember your name and what you do. They bring it up the next time they see you. They ask about the kids or what the daily grind is as a (enter your title here). You know that they paid attention.
• They know how to get your money – Maybe it’s just some great conversation or the extra beer, but you feel compelled to leave a few bucks more for the great bartender. You feel like they deserve it. And you do it voluntarily.

You can get a drink anywhere and great bartenders know this. So, they make up the difference in service and it works. You go back to that place. You have conversations that make you feel good at the end of the night. You tip enough to be surprised by what you left the next morning. In short, you do exactly what you’d love your customers to do. You want them to like you, to refer you, to give you their money voluntarily. You want them to love your level of service and tell people about it. You want them to realize that, even if there might be other solutions out there, you’re bringing a level of game that no one else can match. Perhaps most importantly for any start-up, you want them to like you enough so that when there’s the inevitable hiccup, they’re more forgiving and understanding.

If you really want to understand how to build the relationships you need to succeed, skip the Dale Carnegie books and spend $20 at your local bar. You’ll learn more and have a lot more fun doing it.

As someone who has worked on a project that got an Angel round (and some subsequent cash infusions), I can understand the difficulty in finding that money and, as a result, I’m a bit biased. Looking at the landscape, I believe that there are some very intriguing companies/technologies coming out of our colleges, universities and innovative entrepreneurs, and that should be supported. Obviously, I’m not alone — the Pennsylvania government and local foundations infuse local organizations with capital that is then extended to these companies. However, when those companies have grown out of the alpha stage and to a point where they’re ready to start beta testing in real-world environments, are they the quality deals that attract VC investment? Is Pittsburgh’s risk tolerance unusually low?

My guess is that our VC community isn’t much unlike others around the country. I’d also guess that Pittsburgh has similar state-level resources to other areas and, perhaps a little more. What I don’t think we have is an ecosystem — a critical mass of successful entrepreneurs that have cashed out for several million and immediately feel the responsibility to return the favor to other hungry entrepreneurs.  The cities most often cited as models for the ecosystem — Silicon Valley, Boston, etc. — have earned that reputation honestly, but have taken decades to build that ecosystem. As one local VC said to me, “they weren’t built overnight, and we won’t be either.”

But, I think we’re getting there. There is a lot of energy in this community and, I suspect, additional resources will be devoted to not only supporting these companies, but helping to create that ecosystem that is critically important. I also believe that we need to do a little marketing to the outside world, showing off some of the companies that are making a difference. Would engaging other cities’ communities help facilitate some cash inflow by introducing their financiers to our companies? Would connecting with the diaspora help us to bring some of that money back to Pittsburgh? I think it would.

In the end, almost any money is good money, no matter where it comes from. Would I like to see more low-level risk capital? Of course. But, until we have a critical mass that can support some of these good-to-very-good deals (as opposed to great deals), we’re going to struggle to fund these companies. Should the state take a more active role? How do we get this done in a down economy? And, what are the best way to keep these companies fed in the meantime?

In his speech, he says that you have to persist through the CRAP – Criticism, Rejection, Assholes and Pressure. I hadn’t thought about it in such quite succinct terms, but that’s perfect.

Entrepreneurs have a unique expertise in persisting through the CRAP. Taken individually:

• Criticism — There’s no shortage of criticism. The risk of a selling a new, innovative product as a small company is full of pitfalls and opportunities for people to blow up your idea. I think that’s a great thing … people who tend to take the time to criticize are emotionally invested. Proving them wrong drives many of us to make it all work.
• Rejection — Funders, potential customers, friends, family … you don’t know what rejection is until you try to start your own company.
• Assholes — I don’t think I have enough time to cover all the different types. From the extreme critics, to the egotists, to the folks that have no problem wasting your time, they’re everywhere. Trust your gut and, if you’re not sure, ask around. Most of these folks have a reputation. If you hear from two people in close-knit community that the person is shady, run.
• Pressure — There’s nothing like the shut-off notice from the gas company, or a hungry family, to make you work extra hard to close a sale (or politely call every customer who is even 30 minutes past-due).

I’m going to think of my challenges this week in terms of persistence and in terms of CRAP. How many of them are just one element, or how many are all four? How do I manage those situations when I run into them? Am I as persistent as I should be? How does it change as a follower vs. a leader?

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?

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…

First, pulling together a beginning pro forma is absolutely essential. From a business standpoint, it helps you to figure out whether or not your product idea is viable in the first place. From an investor standpoint, it helps to get a general idea of what the business opportunity is. I’ve seen many entrepreneurs go years before doing rudimentary calculations like this (needless to say, it wasn’t until they took this step that any Angel/VC took them seriously). This is not to say that these projections can take the place of something a CPA can pull together (In Pittsburgh, my personal favorite is Wilke & Associates in Carnegie, who I’ve used several times), but it makes sense to hold off on spending the money until you have a better idea of where your business stands or when a serious investment prospect asks to take this step.

Second, your pro forma projections will constantly change as you get a better idea of costs and revenue potential. It’s not unusual to game out several scenarios with multiple changes given certain factors. The best way to save time is to create an assumptions page where you place most of your data. That way, if you’re changing your numbers, you can adjust them in one cell on one sheet, and the rest of the sheets will automatically update with your new information.

Third, I suggest linear cost structuring (i.e. pick one number and stick with it). In one business plan I saw, an entrepreneur created a rather complicated cost of sale function that curved downward. When I saw this, I asked the entrepreneur if she had perfect foresight to determine what the beginning marketing costs would be, on which the curve was based. She responded that she did not and, in fact, the number was pretty much out of thin air. She changed her projections to something far simpler, which in turn led to fewer questions from her potential financiers.

Finally, do some serious market research before you create a pricing model. While this is good advice in general, a bad  pricing model (Chris Dixon speaks very well to cost/pricing here) can make your top-line revenue unnecessarily low, which will make your business less attractive.

Good luck with your projections and feel free to ask questions or let me know if there are errors in the sheet.

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…

• Business Cards
  • Don’t — Avery “do it yourself” cards from big box retailers or VistaPrint — Printing cards yourself (with their shaggy perforated edges) looks exactly like you did them yourself (read: not a good thing).  VistaPrint cards are equally bad, with their flimsy card stock, stock designs and, if you go the free route, the little ad on the back.
  • Do — Overnightprints.com — While not perfect, OP has incredibly good quality business cards that are printed on heavy stock with extensive options (rounded corners, UV coatings, double-sided printing). Recently, they’ve added a premium quality line, though I’ve recently used their standard quality cards, which met my needs. In addition, their online designer has some quality templates if you’d like to go that route. Cost: $9.95 for 100 single-sided cards.
• Letterhead
  • Don’t — Print on an ink jet printer, use standard 20lb or 24lb paper in a laser printer if doing it yourself, or print in black and white if your logo is in color — Ink jet printers are simply not a quality enough print job to look professional for a business, so this is considered a universal rule. Paper weight has an effect on how a document feels. Finally, a black-and-white version of a logo on business letterhead isn’t acceptable.
  • Do — If doing it yourself, use a color laser printer (don’t print the letterhead first then put the document through again — the ink may smear and you could seriously damage your printer). Otherwise, Overnight Prints works as well. — Laser printers have gotten to the point where print quality is sufficient for a small business, though make sure you purchase a heaver stock or resume paper when printing letterhead-worthy documents. As for OP, again, similar experiences and the same online designer. Cost: For paper, $12 – $30 (150-500 sheets) at an office supply retailer; for OP, $39.95 for 100 sheets.
• Collateral
  • Don’t — Use pre-templated paper stock from an office supply retailer, print on anything lower than 24lb paper, use an ink jet printer or design any graphical elements that are supposed to go to the edge of the page (known as a full-bleed). — Template stock looks very cheesy, and the print quality from a laser printer rarely matches the color (or alignment) of the stock. Lower weight paper simply feels cheap. Finally, printers can’t print to the edge of the paper (brochures that do this are printed on larger paper then cut to size to produce the effect), leaving a white border that looks unprofessional.
  • Do — If doing yourself, use a design that has a white background without a bleed to the edge and make sure to print on heavier paper using a laser printer. Again, Overnight Prints has some high quality brochure printing, but admittedly a bit higher-priced. If you’re using an online printer like OP, take a look at their other options (rack cards, postcard-sized pieces, etc.) and get creative — Collateral is expensive, though printing yourself in this situation might be your best/cheapest option. As for online printing, rack cards, greeting cards and postcards can are a great way to minimize costs (I once made an eight-page booklet using four double-sided postcards and spiral-bound them). This will take some ingenuity, but the results can be fantastic. Cost: Cost of paper and ink to $109.95 four double-sided printing at OP, with many options in-between.
• Web
  • Don’t — Use a free site like Angelfire (yep, it’s still around) or fall for an online equivalent of an internet chop shop.
  • Do –  A couple of things…
    • Buy a domain name — Use a registrar (I use GoDaddy.com) and get your own domain name (yourcompany.com). If your company name isn’t available, do what you can to come up with something that works and is memorable. Also, keep it short. Cost: About $10/year
    • Put up a web site at the domain name — Several tools exist that allow you to put up a cheap web site without it looking cheap. GoDaddy has a service and there are many, many others. If you can’t afford a designer, do this. Cost: $40/year and up.
    • Add Google Analytics — It’s free and enables you to see what type of traffic you’re getting and who can see your site.
• E-mail
  • Don’t — Use free email services such as Hotmail, Gmail,  or Yahoo, or use free email that you might get from your internet service provider (@verizon.net, for instance).
  • Do — Use Google Apps. This free service from Google allows you to create many email accounts at the domain name you purchased (see above). Instead of the cheesy @yahoo.com email, you can use @yourbusiness.com. This gives considerable credibility to your business. In addition, you get all of the suite of cloud computing services Google provides. Cost: Free.

Here are a few other tips and tricks:

• Overnight Prints ALWAYS has coupon codes available for various print products, which can significantly reduce the cost of your printing (free business cards, free shipping, 50% off, etc.). Do a quick Google search to find these deals and make sure to opt-in to their emails, which feature very good deals.
• GoDaddy also has coupon codes, usually knocking off a couple of bucks off the domain name. It’s not a major deal, but as entrepreneurs know, every dollar counts.
• Avoid using print-and-stick labels — they really do not look very good.
• Do NOT use Comic Sans — Many companies attempt to make their company look more “human” by using Comic Sans in their collateral. From a graphic design perspective, there is never a reason to use the font. Stick to the basics (Arial, Times New Roman, etc.) if you don’t have any specific design skills.
• Hire a designer — This will put you over the $100 mark, but it would be worth it to you to have someone do the design for your company. Freelancers can sometimes be inexpensive. However, allow them to guide you through the process using your parameters — they’re doing the design and often understand the process better than you.

I’m not suggesting that the above bare bones scenario is ideal but, with some extra effort on your part, you’ll be able to create a presence that, at minimum, won’t hurt you. Nothing can replace hiring a talented designer at market rates to lead your identity development and printing, but these tips and tricks can get you through the launch of your company in the short term.

http://marriottschool.byu.edu/cet/startingout/test.cfm

While I’m not surprised by my overall score (37, which puts me two over the line for an entrepreneur), I was surprised by the scoring of a couple of the questions. For instance:

Entrepreneurs are not especially enthusiastic about participating in group activities in school. If you enjoyed group activities—clubs, team sports, double dates—subtract one. If not, add one.

I was pretty active in clubs and organizations in school (band, football, theater, and spending time with different cliques), which I would expect to breed the type of leadership skills that help foster an entrepreneurial mindset. Another:

Do you believe being an entrepreneur is risky? If yes, subtract two. If no, add two.

This really confuses me — doesn’t everyone consider being an entrepreneur risky? I obviously believe that it’s a risk worth taking, but I’m still surprised by the scoring on the question.

Has anyone else taken this survey before? What are your thoughts?

AlphaLab Logo

Instead of a summary of each company (Alan Veeck ( @aveeck ) at Meakem Becker Venture Capital and author of Pittsburgh Ventures blog did a fantastic live blog roundup of the companies here), I’d like to toss out some gut reactions to the companies, presentations and the feel of the environment overall.

• In monitoring local media, it seems like there has been a lot of funding activity in the region recently, from early stage angel investments to larger acquisitions of Pittsburgh-based startups. That feeling of optimism was present at the event today as well, and from the folks I was able to speak with, there might be more good news coming down the pike.
• It was great to hear about some of the success stories coming out of AlphaLab. One of my personal favorites is a company called The Resumator, led by Don Charlton ( @TheResumator). They’ve gotten some serious press and some seed funding post-AlphaLab, which is helping them to expand their feature set.
• Social is everywhere. Absolutely everywhere. It’s hard not to get sick of hearing about it, but it really doesn’t make it any less important. I’m reminded of when everyone was talking about the internet being game-changer in the late 90′s-to-early-’00s — while it was so annoying to hear, the folks saying it were absolutely right.
• The actual design of the various PowerPoint presentations was pretty good. I know it sounds superficial, but a stylish presentation makes a company look much more “together”. Great job, everyone.
• Loved the presentation by Nick Pinkston, CEO of CloudFab ( @cloudfab). I continue to believe that storytelling and metaphor are the best way to connect with an audience, and I think Nick did a very good job of doing just that. Speaking with him afterward (both about his company and about using his technology to develop some components for a project on which I’m working), it was evident that he sees this as a product customization revolution rather than simply a sourcing opportunity. I love the vision.
• Fooala has developed a site called CollegeBite ( @collegebite), a very cool open ordering platform that enables restaurants to create/expand an online presence using mobile and the web. One of the things I loved about it is that I’ve already used the site! While the presentation was a bit difficult to follow at times, I did find the team to be very, very strong. Finally, they’re classic Gen Yers –  smart, mobile, experienced, passionate, hungry and making a difference. Two of the guys are from Duke, one of whom met one of the CMU founders while in Sydney, Australia. What a story.
• Brian at NavPrescience has a compelling pitch — a software package that is integrated into GPS functionality that learns your driving habits and adjusts routing and point-of-interest suggestions accordingly. One of my favorite lines of the day was Brian’s deadpan delivery of “[GPS] devices are pretty stupid”, referring to the dictionary definition of  “slow to learn and understand”. As a recent owner of a BlackBerry Tour with GPS capability, I’ve found how dead wrong TeleNav can be with even the simplest of directions (he cited that only 35% of GPS routes are actually ‘fastest’, confirming my experience). Brian’s use of a scenario in his presentation (there’s that storytelling again) was very engaging. Things that I disliked are mostly brand-oriented — I’m not a fan of the name (I keep wanting to say NavPresence and the word ‘prescience’ is a bit SATish) and the logo is a rough (use of Verdana, complicated design and the invocation of magic when the system is built on three years of solid R&D at CMU). I know that the company isn’t looking to sell to consumers, but it’s still something that could be improved.

While it’s a tough time for everyone in this economy, I’m really optimistic about the entrepreneurial community here in Pittsburgh. Being named the second-best place to start a small business in the U.S. doesn’t hurt, either. All-in-all, I have to commend AlphaLab Class #3 on a job well done.

http://money.cnn.com/smallbusiness/best_places_launch/2009/snapshot/258.html

Update: For those who don’t want to click through…

Greater Pittsburgh is home to a workforce with hard-won manufacturing skills from the city’s steelmaking past. Need machinists? They’re here — and that’s a draw for small businesses.

The region combines that talent pool with a mix of highly educated students from the University of Pittsburgh, Carnegie-Mellon University and Duquesne University. Those institutions helped make Pittsburgh a leader in robotics, healthcare, and artificial intelligence. Locals cite the city’s culture as one of its biggest selling points: There are tight-knit neighborhoods, many built around eastern European communities that prize a strong work ethic.

Most of the city’s small businesses are family-owned concerns that have morphed to serve new markets. Resources like the Institute for Entrepreneurial Excellence help both startups and generations-old companies get the skills they need. Pittsburgh’s location on major North-South and East-West interstates connects companies with distant markets and suppliers.

State taxes aren’t low, and the recession-fueled tax shortfall hurts: The state may have to take over Pittsburgh’s pension system. But small businesses say the local workforce is resilient, and with valuable, transferrable skills.