The idea of crowd funding is all over the internet. But in reality, it is a lot of hype. The Jobs Act that passed in 2012 had a lot of bold initiative intending to make it easier for entrepreneurs to raise capital by making private investments available to the masses, rather than the sophisticated wealthy investors.
Well intentioned advocates, missed the point. Not be able to attract the “average joe” to an investment wasn’t the thing making it hard to raise capital, it was the invisible wall created by FINRA, through their unbridled power provided the SEC, that prohibited access to the wealthy and sophisticated investors. The JOBS Act and the Crowd Funding lobbyists missed the point.
Fortunately, the SEC might actually get it.
So although entrepreneurs still CANNOT sell equity in their company through online portals, television ads, direct mail, and social media (they can take donations and sell over valued stuff), the SEC is making movement toward eliminating the two biggest REAL inhibitors to raising capital and enabling entrepreneurs to bypass the wealth managers and financial managers that have been the gate keepers to the sophisticated and accredited investors.
1. General Solicitation
2. Prior Relationship
With the removal of these two restrictions, entreprneurs will be able to raise capital through REG D and REG A offerings to accredited investors and find those investors through any means of outreach they can manage and afford. The burden of validating the investment doesn’t reside on the posting service, or the company, but on the investor that completes the investor questionnaire and certifies they are accredited or sophisticated enough to know they are making a risky investment.
This was the topic of the podcast http://tobtr.com/s/4387055.
And the host, Compassionate Capitalist, Karen Rands, also covers what companies can do to prepare for raising capital under this new programs when it is available later this year.
A lot has been written about forming good management teams to grow a business so that it can thrive and provide a legacy to the community and to the founders’ families. Some entrepreneurs find that they get married, start a business, or one has started a business and marries someone in the business, or as the business grew, the spouse joined the business. However it happened, they may wake up one day and find that there is a conflict. There is a disconnect in the business relationship or in the marriage, or it is hard to tell which, but the conflict is impacting both.
If it was simply a dispute or difference in opinion on process or strategy in the business, usually it can be worked out through discussion, and the conflict and resolution are left at the office. But, when that same partner comes home with you, sits at the dinner table with you, and joins you in bed later, sometimes it is difficult to leave that conflict and resolution at the office….and visa versa.
Karen Rands recently covered this topic during the Compassionate Capitalist Radio show, with her interview with Sylvia Lafair, founder of Creative Energy Options (CEO). An expert in this area, Sylvia and Karen explored the unique dynamics when you have a spouse as a partner.
The challenges a husband and wife business team face over time as their marriage dynamics change and their business evolves are unique. Communication is key. Understanding each others strengths and weaknesses and how those change as the roles within a marriage and a work environment change are critical. Married couples have invested not only into their own lives, often times their children’s lives but also into a business that is their livelihood and so there is more to lose when one is failing and has a potential to impact the other. Listen to learn more about the tips for managing to this unique dynamic:
Black carbon plays a much bigger role in global warming than many scientists previously thought. Black Carbon is produced as a by product from the CO2 that is emitted when any thing is burned. Black Carbon has an environmental impact 40,000 X the toxicity of CO2.
When there is one environmental factor that has potential to impede sustainability across the board for all business and community, there is a profound economic impact as a result. On one hand, it’s existence hurts the economy. Yet, when there is an innovation to the way of doing things that has a positive action because it no longer produces the same amount of the bad Black Carbon, and that can be measured, a financial value can be placed on that. Likewise, innovation that produces the opposite effect in that it removes bad carbon from the atmosphere and that can be measured, then a financial value can be placed on that. When there is true financial reward for changing the way energy is produced – removing Black Carbon from the process, the environmental impact can be arrested.
When something can be measured and valued, it becomes the subject of trade and finance – an economy. That is New Carbon Economics, and we are the threshold of profound shifts and potentially the start of the bubble Karen and Ian talked about nearly 4 years ago in 2009.
Even the non-political, non-scientific publication The Rolling Stones put energy and resources into understanding what Black Carbon means to our economy, our health, our viability as a free society- from our myopic American perspective to the real impact that is being felt world wide:
Listen to the Latest Broadcast – Why this now will get the attention of the markets across the globe – how value is being placed on it – the money that is available - the growth of the free market, and how entrepreneurs can find out if the qualify for this type of value add to their business model.
So what does this mean to an entrepreneurial endeavor?
The measure of the value of the company isn’t just the intellectual value; or the value of your assets – contracts, inventory, equipment; or what is on your balance sheet. Now entrepreneurs potentially have another value that can be sold or held as an asset value – that is the measure of how you impact the environment with emissions that replace bad carbon, or because of innovation that produces the same thing without the creation of black carbon. When an entrepreneur can measure how much their process accomplishes the same thing without the black carbon, and there fore a reduction in black carbon…that becomes and asset, a something of value that can be sold
Plain and simple.
Never miss out on great tips and insights for growing and building big companies – join us on RUN WITH BIG DOGS
Instead of the big stick, making CO2 and production of Black Carbon criminal, the creation of a financial reward will go far to changing the behavior of big business and bring the innovation to the market that has been long needed. And with ANSI clearly on board to impartially set the financial standard for the value of these credits, the market will be freely trading and little chance of fraud exists. Sustainability is a big issue for the long term economic growth. Providing incentives to make real change on how things are manufactured, energy is produced, and goods are distributed will go a long way toward insuring sustainability.
Understanding the value of your Intellectual Property… whether it something you use in a product today or something that you think might have value in another product or market – how do you figure that out? This post and the associated podcast is dedicated to maximizing the worth of your Intellectual Property – as it relates to your internal use, your competitive position in the market place, and your company’s value to the investors.
Barry Brager, Founder and Managing Partner of Perception Partners joins us to share his expert knowledge. Perception Partners is a Global advisory firm that helps companies and investors understand, quantify and maximize the value derived from innovation and intellectual property. They enable their client to increase revenues and profits with by getting the Story Behind the Story™ in R&D, IP and M&A.
Barry is recognized as a leader in the IP industry. In 2009, 2010 and again in 2011, Barry was named one of the world’s Leading IP Strategists in the global IAM250, published by IAM Magazine. Barry holds three patents himself and others pending related to the use of mobile phones a remote control devices. Barry is a frequent speaker on IP strategy, valuation and the links between patent intelligence and competitive advantage.
We welcome Barry to the show to share with our entrepreneur and investor audience 3 key aspects of IP protection and valuation market place:
What should smaller/mid size businesses be doing to improve their IP strategy in the coming year?
First thing is to Google it…. Don’t waste time doing something that has already been done, but you can look a little harder to figure out a different way to do it; And
www.google.com/patents - for US searches, friendly search compared to US patent office
www.espacenet.com – global patent research, can translate.
How can entrepreneurs benefit from the trend of “open innovation?”
This is where people partner and collaborate with patent owners or IP innovators to bring products to market, commercialize the IP, or sell their IP to be developed to a larger company that is trying to bring that type of innovation to market to solve a problem they have identified.
R&D departments at universities, SBIR, hospital research and government (DOD, DOE & DOT) are a source for IP technologies for collaboration and commercialization.
What advice would you give to those seeking to monetize their patent portfolios in the near future?
Get a description of who would use it and why, create the story, and who needs to hear the story.
To learn more about Barry Brager and Perception Partners, and sign up for their free newsletter, visit their website at:
What is a Compassionate Capitalist – besides something we need more of?
A compassionate capitalist is someone who invests Time, Resources, Knowledge and Money into entrepreneurial endeavors to bring innovation to the market, to create jobs and to create wealth for the founders and investors. It is the ultimate trickle down economic recovery plan. Because, if you invest in building up companies that can thrive in the new economy, then jobs will follow, and income from those employed will be spent in the marketplace and those old traditional companies producing goods and services will also gain economic stability and keep employees and maybe even expand with purchase of equipment or the addition of employees.
As the final radio show for 2012, and with the pending “fiscal cliff”, continuing FUD about our economic recovery, and never ending speculation and finger pointing on whose fault is that we are are in this economic bad dream, I decided to drop back to my roots as a micro-economist and venture out with my own assessment and forecast for the fiscal cliff, the nature of raising capital in a crowd funded and heavily regulated world, and general overall trends that show the “big government” isn’t so big and bad after-all.
Below you will find the link to the radio show podcast, reference links for my data, and then back ground narrative for the short radio show.
Suffice it to say…. economic downturns don’t start over night and happen in the instant… any economic cycle has a beginning and an ending that isn’t clearly defined because they happen over time. And in EVERY economic cycle, good and bad, bear and bull, people make money and people lose money. The money doesn’t go away, it changes hands. Value on paper isn’t money, it is just a number that may or may not reflect the actual value. If you sell something, a property, a stock, a company, at a value greater than it’s actual worth, then you are lucky and the person that bought it is a sucker or simply ill-informed and naive.
We have to lose our sense if entitlement and idea that we are not connected. Everything is connected. It’s like the scene in It’s a Wonderful Life, when George is about to go on his honeymoon and there is a run on the bank. He jumps the counter and every one is panicked. They want their money. Mary says we have $2000…the money he had saved all his life to take the trip with. And he says, so how much do you need to get by for a week until the bank opens up. And one crotchity old guy says $297, all of it. And George tries to explain…..aw come on, your $297 isn’t sitting in the safe it’s in Tom’s house and Bob’s house…. It is what helps us to build these homes and start those businesses, so they can pay it back and it can be “reused” to do more. …..
If the government can’t generate revenues to pay for the things it needs to pay to keep our country humming….from lack of revenue from property taxes to pay for school budgets, to income taxes because there are less incomes to pay for the military…then everyone and everything has to adjust…. budgets are cut, benefits and jobs go away and tax revenues are found somewhere else, whether it is a new tax or a repealed tax. It is just what has to happen. A new foundation to build from is layed.
Pepperdine University Market Report Q3:http://bschool.pepperdine.edu/appliedresearch/research/pcmsurvey/content/Pepp_Q3.pdf
Stock Market Trends over time – Bear and Bull, cycles and seasons: http://www.tradingonlinemarkets.com/Articles/Trend_Following_Strategies/History_of_Stock_Market_Cycles.htm
Analysis of employment increases and type, by Intuit Corp:
(please note, this is an editorial opinion. Effort has been made to base it on factual evidence as provide in the links above. All claims of malfeasence are an opinion and we hope that those in authority are aware and are investigating to take appropriate action)
The UGLY – How we got here.
Our government, specifically politicians that have little to no business or finance experience, need to get out of the business of setting and changing policies that have potential wide reaching impact because some vocal greed driven group wants to see a law or policy changed. Their unanimous vote to modernize the financial systems in 2000 which completely deregulated all financial derivatives and removed any financial oversight in the use of those products as futures commodity, directly led to the collapse of our financial systems in 2007.
Similarly to the Dot.Com Bomb, then family funds, corporate funds, and individual investors all jumped on the VC band wagon to invest in early stage pre-revenue companies, not because there was merit in their business model, but because they believed they could create the market for the stock in public arena. When the value of the stock couldn’t sustain because there was no secondary market, it collapsed. Likewise, home loans were made using the loop holes intended to “help” first time home owners buy homes taking advantage of low interest rates that had a future increased value, based on an inflated price of the home because demand was artificially up and the mortgage lenders made more money on a higher value of a home, AND the biggy, they knew they could sell that paper on the back end. What they didn’t realize is that the institutions buying the paper were using money from sources that didn’t need to be tracked who was hedging their bets with a series of stop gaps that required the institution to pay off the value of the note if the future derivative value dipped. Which of course it would because nothing can go up in value forever. It was now unregulated, and with no oversight, the buying and selling was unfettered. It created an artificial ramp up availability of fictional capital that was provided as mortgages and construction loans and then sold as derivatives, with future insurance policies purchased by anonymous investors that hedged against default.
In other words, offshore investment houses purchased insurance policies against default on the derivative notes they purchased, and when the markets began to fluctuate, they “called” the policies triggering the collapse of first financial house, Lehman Brothers and ultimately setting off the first wave of panic that triggered the political panic and bail out.
Bank America was actually the biggest culprit in pushing bad mortgages and flipping the paper, while they received perhaps the greatest amount of bail out money in the front door. Yet out the back door they were taking away personal credit regardless of the status of the credit card or credit score, robo-foreclosing on home owners, and directly contributed to the causing the collapse of the small business lending market by calling loans for immediate pay back. Their goal to reduce the liability on their balance sheet, show progress so that the government would continue to think they were moving in the right direction to continue providing bail out capital. They had their greedy fingers in every cookie jar and as a result, their cover up activities directly lead to the collapse of the consumer credit economy as it triggered reduction in credit scores that caused other lenders to take action against those individuals and small business owners that now were perceived to be credit risks. Their robo-foreclosures as one of the biggest mortgage backers and not acquirers had a huge impact on the housing market collapse and the unprecedented bankruptcies in the last 6 years.
The ripple effect hit the stock market and the down-turn uncovered the malfeasance of Madoff and other ponzi schemes. The President and Congress recognized their error in removing all oversight and regulation in 2000, and saw what the banks, led by Bank America, were doing to consumers and small business owners (instead of penalizing them for it, just said stop doing that but you have a couple of years until we really expect you to stop) and the Dodd-Frank Act was passed 2010. As with most things the government does that involves politics and special interest groups—great intentions on paper and in theory, but real life application and implication not so good. Dodd-Frank was intended to protect consumers from treacherous banks and predatory lending, investors from scam investments, return regulatory oversight and accountability to the futures, derivatives and commodities markets.
The BAD- The pain we have been experiencing:
So we wake up from our economic growth orgie from late 90s to about 2005… seems like the trickle down is working, but in reality, since it was built upon a house of cards… a housing and construction market that was inflated and could not sustain, the new jobs that had been created could not sustain. Coupled the collapse in value with the real life impact of losing your home from a robo-foreclosure, every one retrenched–no credit, no spending, do whatever to avoid the seemingly inevitable foreclosure and bankruptcy.
State and Local governments and school systems had become fat and bloated from the increased revenue from property taxes. When it imploded, it took jobs from teachers, government workers, retailers because those people were not only not buying, they were trying not to lose their home. Manufacturers stopped manufacturing – no need for appliances if you don’t have a house to move into, or a new car because you don’t have a job to drive to. Banks went out of business and small businesses suffered (see the Small Business – Housing Meltdown article). The SBA reports there are as many business failings as starting, although bankruptcies have begun to decline. Part of this, that can’t be measured, is how many of those businesses started from an unemployed -solepreneur- starting a business, that then later got a job, so the business is now failed. The WellsFargo report provides a lot of stats that can be interpreted negatively, but if you look into the market at what is happening with your neighbor and the university entrepreneur program….you’ll see signs of optimism.
It is all connected. When the government extends the unemployment benefits because we falsely believe that somehow the economic malaise is the government’s fault and therefore they should support the unemployed because otherwise they would be on the street. Come On… after two years, you find some sort of a job. Or adjust the assessment for benefits based on total household income, not just what the person used to make. I personally know MANY people that are collected over $1500 a month in unemployment benefits while their spouse brings in $70,000 or more a year, and yes they apply for jobs but don’t go get one because they can collect that money tax free and “volunteer”, be a paid at home parent, and take the kids on vacation, on the government’s dime. But guess what…it isn’t the government paying them… sure they are issuing the checks, but it are the business owners out there paying that bill. They pay the government in unemployment taxes who then doles that out to the dead beats who rather sit at home collecting unemployment for two hears than take an hourly wage job or go to school for a new skill. It isn’t the wealthy’s tax breaks that are paying for this entitlement. But the wealthy’s capital gains tax increase could go to building improved roads and infrastructure and better mass transit that would help people get to jobs that aren’t in their neighborhoods and save our environment. It would be an investment that could help our country’s long term health and stability, and something that inevitably needs to be built and paid for.
The stock market is never ending in it’s cycles….bear to bull and back again. I’ll go back to my original premise….The money is all still there… it just changes hands. Someone is selling and someone is buying. A lot of money is on the sidelines in very conservative investments just waiting for a drop so they can grab up the undervalued stocks that have taken a dive, but their actual value is greater than their stock price (on paper) indicates. Best bet for the real “A” type personality investor is to invest in the small early stage company that is already at a real bottom price, because their potential hasn’t been realized and the investor has the greatest potential to influence the growth in the value of that company….a whole lot more than in a public company with thousands of shareholders. Be in control… be a compassionate capitalist!
BUT the Compassionate Capitalist approach to economic growth leads to GOOD companies with valid innovation that solves a problem in the market and has a strategy to build a sustainable company gets funding and resources. The economic growth is real and can be built upon for long term economic gain.
So why hasn’t that happened….. Main reason – access to capital.
Banks, even though they had TAFL and the SBA trying to get them to lend, couldn’t because of the toxic assets on their books and the new regulations of Dodd-Frank removing all flexibility to lend on merit rather than pure asset/debt ratio and credit score (remember the trigger in the avalanche of credit scores plummeting because of Bank of America’s credit practices).
Investors that had potential to be “angel investors” retrenched because of the turmoil they saw in their own relationships with their financial managers. One of the unexpected ripple effects of Dodd-Frank that has had a profound negative impact on investor fear and faith was the change to FINRA. To help with oversight, FINRA was moved from a self regulating industry membership organization to be the sanctioned police, judge & jury against all broker dealers, replacing NASD, to audit and assess penalties according to an arbitrary assessment of risk in an investor’s portfolio, regardless of the desires of the individual investor to make an investment or the validity of an investor complaint based on simply buyers remorse. In FINRA’s perspective, the investor is not responsible for their bad investment decisions, only the broker dealer, and as are results, thousands of small independently owned retail broker dealers shuttered their doors, tired of the endless audits, sanctions, and fines. Investors are solicited through online internet out reach, much like a class action suit, to issue a complaint if they have lost money in their portfolio, which of course they did when the economy collapsed. FINRA would respond to the complaint, audit the broker looking at that situation and any other accounts and determine if the Broker had placed the investor(s) in risky investments, then sanction them and fine them. Brokers had no recourse when a fine was levied. FINRA’s only source of income were fines from the Brokers. Since this shift in power, FINRA’s staff has doubled in size….like a hungry rabid dog, it must feed to grow and sustain, but doesn’t realize it is eating it’s tail. The Investors that were happy with their broker, wake up one day to hear that their account needs to be moved and likely to one of the big institutional brokers.
The ripple effect of this was that small businesses found it even more difficult to raise capital. Not only were the investors scared silly – their broker and financial planners vanished with their assets being handed over to UBS, Morgan Stanley or some other large house – doom and gloom in the market – the banks calling their loans even though they were in good standing – now there wasn’t the usual source for access to capital through REG D offerings because the average broker would never entertain putting investors into that risky investment if even a public stock or a REIT or any traditional asset class could suddenly become “risky because it lost money”. Instead of making it easier to raise the capital that early stage companies needed to create jobs, bring innovation to the market, and jump start the economy, the government had made it harder and at the worst time to do just that.
Adding salt to this wound is the action, or better inaction, many states were taking to not renew the angel investor tax credits that had been such a trigger and incentive for billions of private money being invested in to early stage companies. With the reduction in revenues from reduced payroll taxes, property taxes, and sales taxes, state governments couldn’t see how to afford tax credits for the wealthy just to make investments in private companies.
Enter the prospect of CrowdFunding. So the government in their infinite wisdom, more likely succumbing to special interest groups, passed the JOBS Act of 2012, with great intentions to help small businesses create jobs. They believe that by opening up the doors for “unsophisticated investors” to get into the early stage investment, rather than making it easier for sophisticated and accredited investors with excess wealth to invest, is a sound strategy to help start up and early stage companies bring their innovation to market. Yet the broker dealers have the skills and means to evaluate a deal, research it to ensure validity, but they are shut out of the process, removing the one group of people that should be involved in the vetting and due diligence process to protect the investor. It is a flawed solution to a real problem in the market. There are plenty of investors that have the means and desire to invest in early stage companies as an asset class– they call it “owning a piece of a company before it goes public” -buying wholesale before the retail value is set. They don’t know how to find the deal or evaluate them because their financial adviser won’t help them for fear of using their license or being fined. They may not be a techie so can’t naturally navigate to most of the angel groups. They aren’t on social media, they don’t visit kickstarter to look for deals… the are the solution, but crowd funding as it is advertised isn’t the solution to reach them. There is hope here, but for the SEC to get it right, they must reach beyond politicians and lawyers, to the small business owners, to the investors, the incubators, and get their input, hear their challenges, understand their motivations.
The GOOD: Where we will go from here and there are sunshine and rainbows ahead!
So that is my Malaise… the doom and gloom. I am optimistic about 2013 and beyond, regardless of what happens with the fiscal cliff for four basic reasons:
1. For the most part, the economy has been reset. This is our new normal. Jobs are opening up, people are buying…not with credit as much as with cash. All indicators are showing that we are back to where we were before…in the economic stability of the 1999 to 2002 time frame. (see the Small Business Quarterly Bulletin)
2. The SEC will continue to wrangle with how to protect the “little” investors in the crowdfunding world and the checks and balances they put in place will ultimately create a bureaucracy of self regulation and expense associated with raising that type of capital and the IRS will start taxing the non equity based “donations” being made on crowd funding sites that will even the playing field. But in the mean time, they will open up the door for regular broker dealers to publicly solicit to potential investors about a deal, and the investors that are accustomed to working with a broker dealer will appreciate the due diligence made available for them to make a wise investment decision. Removing the antiquated restrictions on REG D capital raises against public solicitation and prior relationship with the investor will be the single greatest change for entrepreneurs seeking to raise capital from high net worth individuals.
3. With the decline of Broker Dealers comes the increase in RIA – Registered Investment Advisers. People licensed to advise investors whose compensation is a flat rate, not a commission based on the size of the portfolio or the investments made. Their only purpose is to help the investor make investments according to their short term and long term goals. They are not regulated by FINRA.
4. Rise in incubators and jump start programs for entrepreneurs… they participate in a multi-week program that brings mentors and sometimes money to them to get their business strategy on track, innovation to the market which leads to what we need…Jobs, income, wealth.
5. Lenders are looking for places to place their money. Maybe not the traditional banks, but with the new programs from the Government encouraging the private sector to get involved by offering to secure the investments/loans made by Early Stage Investmen Funds, as part of the SPB Small Business Investment Company program. These small investment funds are backed by the SBA to invest/lend to early stage companies. Alternative Lenders are actively looking to place their money, also from private investor sources in loans secured against Purchase Orders and Contracts, and the always finance ready – Receivables. There is capital out there… just looking for a home.
The stage is set for a resurgence. It won’t come fast, but it will be steady. We many need one more reset-correction by letting some of the entitlements pass and some of the inflated government programs get trimmed… all elements of the “fiscal cliff” concern. But that will be temporary. Money is like a river of water… it won’t stay bottled up or log jammed if it can find a crevice or crack to get out, it will if it means it can flow free to grow and replicate.
Please take a moment and join me in the FIGHT… Come Run with the BIG Dogs. Let’s join together to build strong sustainable and profitable companies.
One thing most start up entrepreneurs have in common….they have no money. The have a great, million dollar idea, but don’t have the knowledge, resources or experience to launch the company, build a team, take a product to market, attract capital, and reach the end goal of successfully creating wealth for themselves and their investors. Many entrepreneurs can learn most of the fundamentals when the enter into a university that has an “entrepreneurship” program as part of their business school. But if you can’t or don’t want to spend 2-3 years and hundreds of thousands of dollars going to college to be an entrepreneur…And you don’t have thousands to spend on consultants to help you and guide you….what is an inspired entrepreneur to do?
Us the 1-10-100 plan. Below is a 10 minute video broken into two part that provides a high level overview of the 1-10-100 plan. Below that is a link to the hour long podcast on the topic that was recently recorded from the Compassionate Capitalist Radio show. The basic idea behind the 1-10-100 plan is if you are serious about learning how to successfully launch and build a multi-million dollar business, and really don’t have any money to invest in your success, you can at a minimum do this:
1 Year
10 hours a week
$100 budget a month
Commit to a year of having the discipline to spend 10 hours a week reading, watching educational videos and webinars, and attending seminars and networking events. Budget $100 a month to pay for some of the educational materials and to attend events or join specific organizations. In the videos and podcast, Karen Rands goes through a step by step process of where to find free content and where to find useful seminars and meetings to participate in. She also covers how to budget the $100 a month and the 10 hours a week to accomplish a specific goal. At the end of the year, you will have gained the knowledge necessary to know what needs to be done, confidence to meet with investors and gain their confidence, and the skills to build a quality team that will help you execute your fully developed business plan.
1-10-100 Plan for Entrepreneurs Video Part 1
1-10-100 Plan for Entrepreneurs Video Part 2
OPTIN for free Investor Tips at the box on this site or at LAUNCHfn.com website
Podcast Session on the 1-10-100 Plan for Entrepreneurs seeking to start a business, find angel investors, and build a successful early stage company worth of venture capital. (Apologies for the ad that Blogtalk radio puts in at the start)
Whether a company is a start up, early stage or a mature company, odds are that they will come to a point where the CEO looks into the eye of the storm and realize that a change is needed…a shift in business strategy is needed. To use the popular term, coined initially by Eric Ries in 2009 in Start up Lessons Learned: they pivot. They don’t abandon their vision, but the adjust and shift the direction of their product; their go to market; their target customer; their sales approach; whatever is needed to succeed.
When it comes to start ups….Entrepreneurs will be inspired, have a great idea that they believe will take the market by storm. They pitch it to investors. The have meeting after meeting, yet the investors just stay away. One of two things happen:
1) the entrepreneur blames the investors for “not getting it”
or
2) the entrepreneur pivots. They shift to a model that gets their product in the hands of customers who want it and are willing to pay for it.
“Pivot” – used to describe smart start ups that change direction quickly, but stay grounded in what they’ve learned. They keep one foot in the past and place one foot in a new possible future. Over time, this pivoting may lead them a bit away from their original vision, but not away from the common principles that link each step.
Mature businesses also pivot to maintain or regain a competitive advantage. The two triggers for a mature company to pivot are not much different from the two triggers driving start up and early stage pivots.
1. wise counsel from advisers, mentors, team members that can see the big picture and bring their own unique experience to the company that goes beyond the founder’s to help chart a course that can lead to success in growth in market share and sales.
2. reaction to a skid – decline in market share or decline in revenue due to technical shift or competitive environment.
In this podcast: Karen Rands walks through examples of companies – in start up and mature stages discover when to pivot and get on the right track to stellar results.
So You can’t raise capital, or Customers aren’t buying…. You realize you need to PIVOT. How do you do that?
Martin Zwilling describes 8 types of Pivots for entrepreneurs, CEOs to explore as their way to PIVOT and grow their business and profits. From Jan 2012: A smart business knows 8 ways to pivot
Currently before the U.S. Senate are at least 3 bills proposing to legalize how private companies raise private investor capital through a process called Crowd Funding. A contentious and potentially epic battle is under way…. not just in the hallowed halls of capital hill but between two of the biggest and most visible arms of the federal government that have much to lose or gain depending on how this legislation is approved. Read on to learn more and to get the links to the two podcasts recorded on this topic:
The Players:
The Entrepreneurs: Innovators who struggle to find capital and attract money for their project and are frustrated with the barriers to identify potential investors and the limits on how you can communicate to those investors about their opportunity.
The Investors: Not really in play, generally not showing up for the game or the practice or the signing day. Basically, by and large, they could care less because if they even know about making private investments, and wanted to be in that game, they could find a local pitch event to attend and meet the companies in their area to invest in, they could join Go Big Network, or any number of posting sites already in existence and invest away.
The Politicians: As we approach the BIG GAME election year, they want to be the ones that say they voted favorably for some program that had potential to create jobs. And since most new jobs come from early stage small business, they want to go back to their voters and say they helped change the world for entrepreneurs seeking capital will work, since general consensus is all the money spent trying to get banks to lend and tax breaks to investors to invest haven’t worked. Even Obama has jumped into the fray by expressing his support for the JOBS Act.
The Lobbyists: There really are 3 groups of lobbyists trying to push this legislation through–why because they have the most to gain financially when Crowd Funding is approved. 1) Current Crowd Funding sites like Kickstarter and Indiegogo already have a platform to turn the switch on to enable equity transactions, 2. Posting Sites like Go Big Network that can lift the veil of secrecy between their investor subscribers and their entrepreneurs subscribers and charge bigger fees, and 3. Social media sites like Facebook and Google that can now tap their MILLIONS of eyeballs to introduce entrepreneurs to investors – through ad revenues and posting & transaction processing fees.
The Government: The SBA (Small Business Administration) and the SEC (Securities Exchange Commission
