Lessons I Learned Today 6/12/09 – Up and Down the Elevator Speech

This is a digest and recap of highlights, quotes, and comments from articles and discussions posted on this date on the Applied Entrepreneurship, LinkedIn group site.

 

*Running Your Own Shop by Dr. Earl R. Smith II

“I want to run my own shop – be my own boss – be in command of my own destiny. I don’t want to report to anybody – be beholden to anybody – or controlled by anybody. As captain of my own ship, I can make the decisions – take the actions – and suffer the consequences without asking permission.”

“No one runs their own shop – no one is their own boss – no one is control of their own destiny. Business is a collaborative team sport – the team that works most closely and effectively together regularly buries the lone riders and dysfunctional gaggles.”

“Business is a team sport that requires all team members to have a strong inclination to collaborate, communicate, learn, teach, evolve and contribute.”

 

*Social Strategy for Exciting (and Boring) Brands by Josh Bernoff

“There are two kinds of brands in the world. There are brands people like to talk about, and brands they don’t.”

“The key with boring brands is to get people talking about their problems, since they won’t talk about your brand. In advertising, you can force messages on people watching other things. In a social context, this fails miserably.”

“Applications that talk about customers problems create “borrowed relevance,” since you generate talk they care about, then make yourself a part of it. American Express (credit cards are boring, face it) created the Members’ Project, a contest to choose deserving charities, since it realized that charity would generate more passion than credit cards. And in perhaps the most dramatic example, Procter & Gamble knew girls wouldn’t talk about tampons, but would talk about music, cliques, and school, so it created beinggirl.com as a vehicle to deliver (very quietly) the occasional feminine care products message.”

“Regardless of whether your brand is talkable or boring, as you launch these social applications, you’ll generate something very valuable – people who care about your brand, or at least the problems it solves.”

“If your brand is talkable, your social efforts will surface the brand enthusiasts who have the most influence. If it’s boring, your social applications will help you find your rare but valuable brand enthusiasts, or even generate a few. Pay attention to these people. Because as advertising clutter rises and word of mouth becomes more important, they’re about to become some of your most important corporate assets.”

 

*Social Networking Explodes and The Law Will Follow by Eric Sinrod

“Social networking is not a passing fancy; indeed, the time spent by Americans on social networking sites is increasing dramatically.  And, of course, where people go, the law will follow.”

“According to a recent report from Nielsen Online, the time that Americans spend on social networking sites is up a staggering 83% from just one year ago.”

“Unfortunately, it is a fact of life that where people congregate, some disputes ultimately emerge.  Social networking interactions therefore will not be free of friction and conflict.”

“As social networking increases, we probably will see a rise in lawsuits related to social networking communications and exchanges.”

“Inevitably, we will see lawsuits where people allege that they have been defamed by false information about them posted on social networking pages.  There also are bound to be lawsuits concerning alleged invasion of privacy having to do with the posting of revealing photos and videos without consent. ”

“In addition, lawsuits alleging the improper revelation of trade secrets and intellectual property on social networking pages could come out of the woodwork.  And, we very well may see cases in which there are allegations of harassment, intimidation and hate speech on social networking pages.”

 

*Just Verb It? A Legal Perspective on Using Brands As Verbs by Steve Baird

There is a growing interest and, quite frankly, a dogged persistence among branding professionals to select brand names that have the ability and potential to be “verbed.”

“The International Trademark Association offers these guidelines on proper trademark use to trademark owners and those in the media: ‘NEVER use a trademark as a verb. Trademarks are products or services, never actions.’ INTA provides this example: ‘You are NOT rollerblading, but in-line skating with Rollerblade in-line skates.’ It also offers this test: ‘A good test for correct usage of a trademark is to remove the trademark from the sentence and see if the sentence (generic) still makes sense. If it does not then you are potentially using the mark as the descriptive term or as a verb and not as an adjective followed by a noun as you should.’ Why? To prevent brand names and trademarks from becoming generic names and part of the public domain for anyone to freely use, even competitors.”

“The challenge for trademark types and trademark owners is that many marketers are not listening to these cautious admonitions. As a consequence, trademark types will need to be increasingly more and more creative in their approach to mitigate the risk of the brand not only going to marketing heaven, but dying an sudden death immediately thereafter.”

 

*Understanding Equity Capital

“Equity capital or financing is money raised by a business in exchange for a share of ownership in the company. Ownership is represented by owning shares of stock outright or having the right to convert other financial instruments into stock of that private company. Two key sources of equity capital for new and emerging businesses are angel investors and venture capital firms.”

“Debt Capital: Debt capital is represented by funds borrowed by a business that must be repaid over a period of time, usually with interest. Debt financing can be either short-term, with full repayment due in less than one year, or long-term, with repayment due over a period greater than one year. The lender does not gain an ownership interest in the business and debt obligations are typically limited to repaying the loan with interest. Loans are often secured by some or all of the assets of the company.”

“Equity Capital: Equity capital is represented by funds that are raised by a business, in exchange for a share of ownership in the company. Equity financing allows a business to obtain funds without incurring debt, or without having to repay a specific amount of money at a particular time.”

“”Business “angels” are high net worth individual investors who seek high returns through private investments in start-up companies. They seek companies with high growth potentials, strong management teams, and solid business plans to aid the angels in assessing the company’s value. They often co-invest with trusted friends and business associates. In these situations, there is usually one influential lead investor (“archangel”) whose judgment is trusted by the rest of the group of angels.”

“Venture capital provides businesses a financial cushion. However, equity providers have the last call against the company’s assets. In view of this lower priority and the usual lack of a current pay requirement, equity providers require a higher rate of return/return on investment (ROI) than lenders receive.”

 

*Angel Investing – The ‘Elevator Speech’ Antidote by Dr. Earl R. Smith II

“Listening to the delivery of an elevator speech is the single most distracting event in an investor’s journey. It is to that point in time – the equivalent of ‘love at first sight’ – that most of the subsequent failures can be traced. An elevator speech is an advertising undertaking. It is an attempt to draw in a potential investor and get them interested in providing funding for a venture. It the starkest terms, it is a money trap.”

“Investors have lost more money because they failed to critically evaluate and aggressively test key underlying assumptions than for any other reason. This single misstep is by far the biggest ‘deal killer’ in the process.”

In this article, the author recommends a series of questions to ask an investor when reviewing a potential investment.

 

*Financial Strategies – Some Basic Rules by Dr. Earl R. Smith II

“The CEOs principal contribution to the process is to make sure that the correct financing strategies are in place and well focused. As CEO, you should make sure that the strategies deployed meet, at minimum, five basic criteria. First, are the financings that are being pursued adequate to the needs of the company? Second, are the right financial instruments being used? Third, are the right sources being approached? Fourth, how does each individual financing strategy fit into the overall capital structure of the company? And fifth, can the company afford the financing … is it really a good idea?”

“Don’t fund research by selling equity in your company. If you are spending money to sell what you ‘hope to have,’ your potential customers will generally treat you as a ‘might become.’ If part of the pressure on your financial resources is because you are spending unwisely, financing an error in judgment is a very costly undertaking.”

“Venture Capitalists are, for the most part, highly professional people who are having to search harder and harder for good investment opportunities. While you are chasing them and getting turned down, they are spending significant portions of their days looking for good investment opportunities. So, as hungry as they are to invest, what should it tell you if three or four of them have turned you down? Just exactly what part of ‘no’ are you having trouble understanding?”

“Make sure that you are turning over every stone in the pasture. Don’t let your ego or limited understanding of the options limit your company. Get in touch with experts in the field and really pick their brains. Make sure that you are looking down every alley and then pick the most efficient of the options.”

Here are five options to start with:

  • Friends, Family and Fools
  • SBIR, STTR & Other Grants
  • Universities and Research Centers
  • Your Customers
  • Strategic Partners

 

*Blocking Social Networking Sites in the Workplace by Eric Sinrod

“An analysis of data submitted by thousands of Barracuda Web Filter customers demonstrates that as many as 50.2% of businesses using these filters are setting up barriers to MySpace and/or Facebook.”

“According to the Barracuda survey, the chief concern is fear of viruses or spyware (cited by 70% of respondents), with potential drain on employee productivity as the second greatest worry (cited by 52% of respondents).”

“Employers raise bandwidth issues (cited by 36% of respondents) and potential liability issues (cited by 28% of respondents) as additional reasons to put restrictions on Internet access by employees.”

“The challenge for employers going forward is to continue to protect themselves from intrusions such as viruses and spyware, and to keep employee productivity up and potential liability down, all while becoming positioned to utilize the most robust Internet communication tools possible.”

 

*The Lowdown on ARC Loans by Mark Deo

“The Small Business Administration recently released “lender guidelines” for America’s Recovery Capital (ARC) Loan Program. ARC loans will be up to $35,000 and available to established, viable, for-profit small businesses suffering “immediate financial hardship” in order to provide some temporary financial relief so they can keep their doors open and put their cash flow back on track. It is intended for businesses that need short-term help to make their principal and interest payments on existing qualifying debt (including conventional loans, credit card obligations, notes owed to suppliers and utilities).”

“The SBA defines a viable business as “a for-profit business with evidence of profitability or positive cash flow in at least one of the past two years.” Businesses must provide three years of financial statements, cash flow projections based on reasonable growth over two years and demonstrated ability to meet current and future debt obligations, including future repayment of the ARC loan. Also, the borrower must certify that they are currently no more than 60 days past due on any loan paid with an ARC loan and they must have an acceptable business credit score as determined by SBA.”

“The SBA is requiring businesses to show evidence of a “change in the financial condition” such as declining sales, frozen credit lines, difficulty meeting payroll, paying rent or difficulty making loan payments.”

“The loans are 100 percent guaranteed by the SBA and made by existing SBA 7(a) lenders. They have no SBA or lender fees associated with them (unless the lender must secure collateral as part of the loan). The disbursement period (up to six months) is followed by a 12- month deferral period with no repayment of principal. After the deferral period, the borrower pays back only the ARC loan principal over a five-year period. ARC loans are available through SBA-approved lenders as long as funding is available or through Sept. 30, 2010.”

 

What I Think

I think one of the common threads among the articles posted on this date is the force of opposites. In these difficult economic times, angels and venture capitalists are looking hard for worthy causes in which to invest. Likewise, worthy businesses, rebuffed by the banks and other traditional sources of capital, are now searching for an angel or venture capital fund, which is willing to invest in them.

The same sort of dance is going on between social media and businesses. New social media applications are being pumped out by the minute and users are lining up to try them. Businesses are searching for new ways to market themselves and strengthen their brand, but some fear abuse will be the result of employing social medial campaigns, so some many are consequently deploying blocking strategies against the very thing they may be looking for.

The government is attempting to find strategies to stimulate the economy, using programs like the ARC loan program. Troubled businesses, the target audience,  are, however, having a difficult time finding a bank, which seems to even have information on the program let alone a way to make such a loan.

Something is clearly missing. A year or two ago, there seemed to be an attraction factor linking such natural partnerships. What seems to be gone or at least weakened is the glue. Replacing it is the fear factor. Even when natural attractants get in range of each other, instead of being drawn together, they almost seem afraid to get too close.

Fear is natural, given the reports of a horrible economy. Part of the problem, is that the fear feeds upon itself and rumors of doom become a self-fulfilling prophecy. Fear stands between forces which are naturally attracted to each other, preventing them from uniting. Since there is not much sense giving an elevator speech which mimics this fear, let’s all try a little courage and see if we can let those natural attractants already in place, simply slide back toward each other.

 

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If you enjoyed my impression of these articles, why don’t you read them for yourself and see what you and I missed or hit? Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.

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Posted in Applied Entrepreneurship, entrepreneur, Financing a business, Growing a business, Recession strategies, Social networking & media
2 comments on “Lessons I Learned Today 6/12/09 – Up and Down the Elevator Speech
  1. Ray Macy says:

    I’m very enjoyed reading your post, I’d like to join Applied Entrepreneurship, because I want to run my own shop, be my own bos, spend a lot time with my wife and children…and of course I have lot of money.

    • bizlawblog says:

      I hope all of that will come true for you. Glad you enjoyed the post.

      If you would really like to join the group, just click on one of the links in the post and sign up through LinkedIn. I’ll be happy to approve any application from a true entrepreneur.

      Stuart

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