Broken Chair

I frequently use a metaphor of a chair when I advise entrepreneurs. I compare the viability of a company with a four-legged chair. If any of the four legs is missing, perhaps you can keep sitting on the chair for a while, but when you lose balance you fall. When two legs of the chair are broken, then a fall is sure!

What are the four legs of the viability of a company?

THE FIRST LEG OF THE CHAIR: TECHNICAL VIABILITY

This is about entrepreneurs or their teams who dominate the production process. The means of production and the appropriate technology should be available, and entrepreneurs should be able to own it. As a conclusion the company should be able to produce something that works.

The technical viability leg is usually the first thing that entrepreneurs achieve, because entrepreneurs normally start a business on something that they control and that they have knowledge in. However, this is not the case for some entrepreneurs and their business projects start limping from lack of technical viability.

An entrepreneur wanted to develop and to sell an innovative tool for household recycling. Continue Reading…

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Chasing the Dream

Some business projects require exorbitant figures of funding in proportion to the entrepreneur capital. These projects are out of your reach, unless your father is a millionaire or you’re a genius. This idea seems obvious, but some entrepreneurs love their idea so much that they do not see it that way.

I remember an entrepreneur presenting his project in a forum of investors. He needed three million euros, because he needed to set up a manufacturing plant. Continue Reading…

“The last person [needed in a company] is the HR person. They’re the destroyer of companies.” Don Valentine

Interview of Tom Perkins and Don Valentine. Both venture capitalists founded two of the first VC firms in USA in 1972. Perkins founded Kleiner Perkins Caufield & Byers (KPCB), which invested in more than 500 companies in their fledgling stages, including AOL, Amazon, Citrix, Genentech y Google. Valentine Sequoia Capital, which then invested in Apple, Atari, Cisco, Youtube and others startups.

I want to ask forgiveness from my brother and all my HR friends for publishing this. I don’t completely agree with it, but the explanation the interviewee’s gives is very interesting. Valentine and Perkins were interviewed by TechCrunch Disrupt SF the 11th of September 2013. I have extracted the most interesting portions of this interview.

What kind of ideas did they liked most to invest in? What kind of entrepreneurs did they deal with?

Perkins explains that he invested “in the idea because bad people don’t have good ideas. I’d look at the back pages to see if the numbers were big, and then if they were I’d look at the front pages to see what the business was.” Continue Reading…

Dr_Martens,_black,_old

It is said that a startup has two options: raising funding or bootstrapping. Bootstrapping is in reference to the famous saying “pull yourself up by your bootstraps”. Bootstrapping in business means starting a business with the very little capital that entrepreneurs have, managing their companies with a lot of creativity instead of money.

Nowadays, it is a pity that bootstrapping is not a choice for many entrepreneurs, but the only option they have, due to the difficulty to raise money. Continue Reading…

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fff. Photo by Filipe Ferreira on Flickr used under a Creative Commons licence

A couple of years ago I attended a conference where I was struck by something that Honorio Ros, founder of the startup Laexperiencia.com, said, “being from a big family helped me as an entrepreneur”. He explained that thanks to his large extended family, he had convinced some of them to invest in his startup. He was sure that without the economic support from his family, he would not have been able to launch his startup.

The way Honorio received financing is known as the three F’s (or FFF), family, friends and fools. Continue Reading…

businessangels

Entrepreneur and business angel

In the beginning of the XX Century an angel was a wealthy person, who provided money for Broadway theatrical productions. The term angel began to be used in the USA in 1976 after a university publication reutilized it in reference to investors who supported entrepreneurs. Since then the term in the USA is angel investor, while in Europe we called them business angels.

These investors are essential in the financing of thousands of companies in the USA. In 2012 each of the 268,160 angel investors invested an average of $85.435 in a total of 67,030 companies. (35% of them startups). A total of 23,000 million dollars! The average angel deal size was $341,800 and the average equity received was 12.7%. Source: unh.edu

These dizzying figures don’t have anything in common with those in other countries Continue Reading…

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Marco Polo, first entrepreneur who raised venture capital

Marco Polo, the Venetian merchant, who arrived to China in the thirteenth century, was one of the first entrepreneurs who got venture capital. He convinced several wealthy Venetians to finance his commercial expedition to Asia. Marco Polo promised that he would share his profits of this risky venture with them. These funders were a kind of precursors of the current venture capital, which main characteristics I describe below in a simplified form: Continue Reading…