ideas

It is so refreshing to be able to have the time to write something. I’ve been working on a few guest posts which haven’t materialized to help keep the content flowing, but NOPE. So my first post back in the saddle is really a set of reflections around being pitched a bunch business plans over the last couple of months.

The last couple of weeks I’ve been just crazy busy with work, but I’ve also been pitched several technology projects to participate in from a labor perspective or to throw a little cash at. After sitting in these sessions, I have 5 things to consider when pitching a business plan. I’ve been pitched more projects in the last 6 weeks than in the last 6 years – just a little weird, since I’m having a crazy fun time in my newest role which puts me back into a formal marketing gig, which I just got rolled into in the last 10 days. Same company, but just a great team of professionals which makes it easy to be excited about.

So while I may not have the level of experience of a REAL VC person, I’ve looked at 20-30 NewCo plans and gone down the path on 3. Ultimately I didn’t join 1 at the final decision point (still in business doing break even at $20M in a mature market – ouch) and am silently sitting back watching another product gain momentum in the market place (faster please). Oh yeah, the other one was solely my idea which just flamed and got nowhere, but I am making $35 a month on Google ads now. I’ve also seen probably another 50 pitches from other folks trying to get their business sold or bridged to another place, so while not an expert – I do think I can provide a couple ideas which might help you if you are pitching something for funding, disposition or just to get someone involved.

Expense to Revenue Ratio

Business plans are fun things to build, I’ve built many on cocktail napkins which never go anywhere, since good ideas are a dime a dozen and I’m far more creative than I am actionable. Some ideas however do merit the next leval of effort and it is effort. Research, positioning and prioritizing who, what and when.

From cycle from idea to funding is no trivial task, but some folks just don’t think it out all the way. Many authors put together business plans or pitches which are 95% technology and expense. In all fairness, most of the folks which have pitched me in the last couple of months, the general idea was for me to build the revenue plan, but it is a little difficult to offset the private jet and 47 floor office in the heart of Buckhead when the core solution is “all about Social Media and community”.

From my perspective it’s fairly straight forward: start small, give equity for expertise and get to a prototype as soon as possible. I’ve seen some really good paper prototypes, but they are really hard to demo and even more difficult to get funded.

The first expense to consider is equity – real and sweat. I know it is YOUR idea and YOU should keep ALL of it, but 100% equity in a project with zero funding is zero and if you need other skills, greed isn’t a good thing. You may need to build a team to do the work. Walk before you run, do some work before you start asking for real $$.

Steal a page from Paul’s approach at Source Juice – be a tortoise and take some time to figure things out and test the idea, not sexy, but smart.

Location, Location, Location

You have to go somewhere to pitch someone, so it is important to think about where you should do it.

So I’ve been pitched at my home, at the person’s house who is pitching and various other places from Starbucks (don’t show up early and drink 3 venti’s) to the neighborhood bistro. I actually like the home pitch, not at mine – theirs. Not only because it means I don’t need to clean, cook or apologize for my crazy dogs, but because it has a practical side – getting to know the person, if you don’t really already.

Going to someone’s house provides some REAL insight into who they are. What kind of style they may or may not have, are they practical or extravagant. Are they tolerant of clutter or some other insight which you can’t get without going to their house. For example, Mickey Mouse posters framed in the living room or their collection of Star Wars action figures can certainly tell you something about the chance a person has a commercial bone in their body. “I keep them in the box so they retain their value”

Staging the event at your house, also gives you more control of the evening. A well prepared meal and orchestrated evening can certainly help make an impression and hosting at your home is the easiest to script. You can also do a group pitch better when not in public. There are other equally interesting/valid places to do it as well, but you need to think about every aspect of how a given location will work.

Dinner and drinks out in a neutral location is probably the best approach for all interested parties, personal preferences aside. Just think of your audience, for example the local Irish pub isn’t a good idea, either is the over the top steakhouse if you are approaching your credit limit. I absolutely love a good steak, but when the person pitching goes to pay has their credit card declined for a $600 meal, it is a big red flag for cash management skills. Also, if you are paranoid that someone might steal your GREAT idea it’s not a good idea to go out and then expect the person you are pitching to speak in hushed tones, especially if you have a some less than well thought out parts of the plan.

Tip: If the person you are pitching has to pay for the meal and you have actually sold them to get into the gig, they should get an extra 7%. I’ll actually pick up the check on a good idea in hopes of an extra 5%.

.5% of Huge Market

I’ve seen some interesting market analysis over the last couple of months, some good – some not so good. The first warning sign of bad market sizing and opportunity analysisi is “All we need is 1 half of 1 percent and we are like gabillionaires”. I know it worked for the clapper and the George Foreman grill, but not really the correct way to look at a technology play.

Market definition and segmentation is one of the most important things to look at when looking to be seen as credible by an investor or expertise provider. The other mistake on market analysis which seems to keep popping up is the assertion that “there are NO competitors, so there is no way to fail”. No matter how cool your slides, you still need to work on a solution which addresses a need and not all needs require a solution/product. If there is no competition, it just might mean that there is no market or there is a substituion which address the need because the pain just isn’t big enough. There is also the outside chance that the idea guy or gal hasn’t used this thing called Google to find the competition. Nothing is more uncomfortable than explaining that there are 3 other BIG companies doing what was asserted to have NO competition. Oh how an iPhone and a Google search can quickly change the mood from jovial/optimistic Manhattans and martinis to esspresso and “the check please”.

Happy Thought: It takes more muscles/effort to frown than to smile, so turn that frown upside down and get into your office bright and early to code for the man.

Social Media isn’t a Business

I’ve been lucky enough to see 4 different community pitches in the last couple of months. “Twitter for Business” or “Facebook for Corporate Intranets” or insert some other inane concept based on reasonably visible brand for a highly specialized user class which would require an ad spend which is astronomic to get anywhere. I’m at the point in social media business plans where the energy industry is with alternative fuels. It’s not like there aren’t a lot of alternatives/opportunity – just hard to make an alternative profitable.

Perhaps I’ve missed a good one along the way because I’m just a little cynical and protective of my time and money, but with Jive, Sharepoint and other collaboration tools for inside the enterprise social media behind the firewall is a bad idea. Social media outside is a good idea, but who really wants to join another community or use an unproven platform? Oh how I wish I was a consultant…. seven slides on conversation and quotes from books only geeks have read, positioned as though it was revolutionary thought. Trust me, listening to the customer isn’t revolutionary — it’s what we call good business.

Their isn’t a social media market per se, it is a channel for communication – a placement option or a platform for a expertise. Or as many see it, a platform for espousing their would be expertise. I wish more experts would be willing to put their resumes online as part of their about page, instead of letting me know how many cats they have. Or if you could provide a ROI model for the projects you have completed with references which didn’t count users or post, but showed reduced spend or increased revenue.

Leave Your Politics At Home

So my most recent pitch on Friday was with a couple of staunch repubilcan’s I had known for a while, so I worn my Obama T-Shirt to have a little fun. Little did I know it would goof up the whole evening, apparently Buckhead has some fairly vocal folks who have no respect for a person’s dinner or ongoing conversation.

My wardrobe selection was more of a sanity check on my part for the folks I was meeting with, but it did goof up the tempo of the night thanks to an over abundance of SEC graduates. Problem was, we kept getting interrupted by folks who just didn’t like my shirt. Weird, but it validated the idea we were working which effectively was about extending access to information and providing an egalitarian approach to localize political content which, at least seemed to gain more traction as we interacted with an uninformed populus. Perhaps our core assumption that people WANT to know is flawed. I know completely vague, but have to be – NDA’s are what they are.

The night was a great nonetheless, we just didn’t get to where we want to be. We all paid for our own way and just brainstormed over beers, wings and Golden Tee what might be the right next step on the idea.

Grain of Salt Please

At the end of the day just take a little time to plan out your outreach and funding strategy is all I’m saying. It is not a enough to be a technologist or to have a good idea. Business plans have to provide a RETURN, not just make you feel like an expert or a genius.

In the end, whatever works for you is the best approach to take. If you aren’t comfortable with revenue, feel best in a Pub or just want to get your idea out – do what you have to do and be prepared for brutal feedback and requests for equity which you don’t have on the table. If you are looking for dollars, you need to think equal or minority equity.

Just remember to think about your audience and try to overcome your passion and enthusiasm with facts. It’s called a business plan for a reason and it’s just business.