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September 2010

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What Are Entrepreneurs’ Biggest Obstacles to Getting Funded?

Obtaining funding is one of the biggest obstacles to starting a new business. If it takes money to make money, how does one ever begin? No matter how resourceful you are, there is no denying the need for at least some money to develop a product or service for the first few customers. Sadly, securing startup financing is rarely an easy task. Entrepreneurs soon learn that their “great idea” might impress friends or family, but getting people to bank on you with cold, hard cash is more difficult.

Here are some of the biggest obstacles to getting funded:

No Track Record

Another common mistake is seeking funding on the premise that once you get funded, you can finally, at long last, actually get to work.

As Ireland writes, “at some point in the mid-1990s real entrepreneurship became subverted into merely writing a business plan, developing a Powerpoint presentation, scripting an “elevator pitch”, and then pestering skeptical strangers for money.” This, again, is not the way to get funded.

The kind of company investors want to fund is one which is already generating cash flow (or at least demand) from real customers, and simply needs money to grow. Conversely, if all you have to offer is a polished business plan and “the best of intentions”, investors will tend to assume that you are not worth their time.

No Credentials

While a business plan alone is no guarantee of funding, lack of a business plan virtually guarantees that you won’t get funded. The reason is that no one wants to put money into an open-ended “project” without structure or a profit strategy. Unless the investor you have in mind is incredibly unsophisticated, they will want to know:

  • How much money you need
  • Why you need exactly that much
  • What you plan to do with it
  • How (and when) this will produce a profit

Merely telling the investor what you “might” be able to do with the money makes them believe that you do not have a real plan in place and that perhaps investing in your business would be a poor choice. Instead, try to quantify your goals with numbers, dates, targets and the overall strategy that ties everything together.

Insufficient Personnel

If you are seeking venture capital funding, sole proprietorships, partnerships or LLC’s will not do. The problem with these corporate structures is that they do not lend themselves to clear-cut divisions of ownership. With an S Corporation or C Corporation, an investor can put money into the business and immediately claim a set number of shares or percentage of the company.

Therefore, if you are dead set on obtaining outside capital, consider re-incorporating as one of these “investor-friendly” entities first.

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Grasshopper Group: Where Are We This Week?

BizTechDay NYC 2010

Friday September 24, 2010

This Friday, the Grasshopper Buzz team & Chargify will be taking over New York City for BizTechDay NYC 2010.

What is BizTechDay?

According to the website, it’s “…an intensive one-day experience where entrepreneurs meet to inspire and be inspired by each other.” but in reality it’s much more than that.

BizTechDay brings together some of the best business minds and puts them in one place for a day. Ten 30-minute sessions given by thought leaders including Seth Godin, Peter Shankman & Scott Heiferman are broken up by 5-minute demos of new products, including Chargify.

Look for Michael Klett of Chargify presenting a great demo of our recurring billing product and answering any questions people may have.

The buzz team will also be there live tweeting so be sure to follow @GrasshopperBuzz and @SRBullis (BizTechDay hashtag #BTD).

BarCamp Tampa Bay 2010

Saturday September 25th – Sunday September 26

Nothing follows a full day at a conference like an unconference!

What is BarCamp?

BarCamp Tampa Bay, is an “unconference, which means that there are presentations throughout the day but they are done by willing attendees instead of pre-planned speakers.” It’s a great place to network, speak if you want to speak and just hang out with other entrepreneurs & business folks.

Grasshopper Group is sponsoring the “half-time” party that will be taking place Saturday night at the New World Brewery. Be sure to come hang out, have a few drinks,  grab some food and have a good time with the rest of the BarCampers.

The buzz team will also be there so be sure to stop and say hello!

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Entrepreneur Spotlight: Brian Wong

We were recently able to steal a few minutes with Brian Wong, a young entrepreneur who at the age of 19 already has more experience and knowledge than many who are years his senior. But it’s his infectious drive to create and produce that we’re most excited about sharing with you.

Grasshopper: Give us a little background. How did you first get interested and excited about entrepreneurship?

Brian Wong: Honestly I didn’t even really know entrepreneurship was a formal thing or category to be in when I actually started to do it. I’m a designer by trade. I started designing when I was 11 years old with a pirated version of Photoshop and I began making wallpapers and little websites.

Then I realized I could start selling my services and make a little cash to buy Gameboys. I’ve been designing very actively since I was young. It’s a hobby in a way – I’m a very aesthetically driven guy, very visual. So, that time was a key part of my growth and development.

So, what happened was, I decided to go to business school. When I finished high school everyone was bum-rushing sciences and the arts, and wanted to be in a traditional type of learning structure. But in my case, I hadn’t learned anything about business or economics before, so I thought I would try that. I was one of only a few people in my accelerated program to go into business school.

While I was in school I learned about marketing and I very quickly realized that marketing and design have very strong connections and overlap with each other, and that kind of gave me that background. At that point I started to use both those skills to develop something and I realized I could start making companies. I started my first company in 2006. That was a web design firm called Aer Marketing. We were servicing clients and building websites, etc. and that worked out well enough to give me the cash to get through school.

So around that time, Twitter had become really hot and the API was recently out there. I saw that there was a huge database of free information, aka the Twitter API, so I decided to utilize that to build something – and it grew out of my passion for design and business. Also, my father owns his own accounting firm and he proved to me that you don’t really need to join a company, but that you can start something and make something very significant out of it – being your own man so to speak. So that’s kind of how I pushed forward to make these things happen during the periods of my life where I was either confused about what I was going to do, or unsure of how I could make something out of it.

Grasshopper: You are the brains behind @followformation and Rocketkick. Can you tell us a little about these ventures and how these companies were born?

BW: Really, Followformation came along when Oprah had joined Twitter. I remember thinking that there would be a huge influx of mom’s that would join Twitter just because Oprah told them to, but they would have no clue about one of the biggest things: who to follow. So that was the problem I wanted to tackle.

I realized there was a lot of information online about the top people on Twitter and the types of Tweeter’s they are, like if are they a celebrity, an athlete, etc. I figured I would make a tool that automates the process. Followformation is an automated way to pre-populate your following list with people that you’re guaranteed to be interested in because they relate to the topics you’re interested in.

Rocketkick kind of spun out as an iPhone app development shop. It really didn’t last too long. Again, this was my foresight and I didn’t really realize it was going to be this hot. But this was around the time that app stores starting becoming really viable and people started make money on the apps they made.

I thought that we should start to service some companies and build apps for them. We actually ended up not doing any client work in Rocketkick, but we ended launching three of our own apps. Out of our own shop we launched the To-do list app, the Nexus Clock app and the followformation iPhone app. These three got pumped out in less than a few months when Rocketkick was still active.

This was sort of us building an infrastructure to be able to service big-ticket, brand-related clients. But we realized that having our own IP and building our own stuff would be more worthwhile. That’s what a lot of app development houses end up being right now because the ideas and the infrastructure you can build and types of apps and change you can make is so powerful. What’s the appeal of doing it for a big money when you can actually own the app and earn money off it yourself?

Grasshopper: As a 19 year old entrepreneur, what do you feel are the biggest challenges and also benefits of being so young?

BW: I love how you mentioned challenges first. In my mind I think of things in the form of enablers rather than obstacles. So for me, challenges actually become enablers; they become things that help me push forward.

Sometimes people view the fact that I’m immature or I don’t know enough about life as being a bad thing. I actually think that’s a really good thing, and it’s what I usually promote when I speak on youth entrepreneurship. I believe that when you have no knowledge of the boundaries that exist, you’re able to think big; you’re able to be truly, genuinely audacious. That kind of audacity doesn’t come from being jaded or being experienced, it comes from being completely unaware of what lies ahead of you in terms of boundaries.

Right now, being a young entrepreneur is a sexy thing. In a Techcrunch article about me they placed me beside Matt Mullenweg from WordPress and then of course Mark Zuckerberg from Facebook. So, if someone can identify you early on and they know you’ll make something as big and earth-shattering as Facebook and WordPress, then it’s the sexy thing to pursue.

Being young hasn’t really been that big of a disadvantage – it’s been more about asking how I can make things happen and actually execute. There’s a lot of young entrepreneurs that like to talk a lot. I like talking too, but I’d rather show and prove my ability without actually talking.

When I worked at Digg, the Digg Android app was my project from beginning to end. You would imagine that you would need to be an experienced and seasoned mobile project manager to be able to launch something at that magnitude, but I managed to do it without any significant project management experience. I learned a lot from that experience… more than I ever would have without actually jumping into it head first.

On top of that, with the previous company, with Followformation and the launch of the iPhone app at the same time, those were all examples of execution. For me, I like to prove through action that this is something that’s possible, that when you’re young, even if you don’t have that specific experience, you have the ability to learn things quickly.

So, I’m sprinkling the challenges and advantages together because of what I mentioned earlier, how I don’t really think of it in black and white as challenges and advantages. When we’re young we have the ability to just pick something up and instantly absorb it. When you’re young you can learn a language in a month, but when you’re older it’s so much harder to pick these things up. I try to take full advantage of that.

I’ve seen it in front of my own eyes – a transition over the last couple years in the tech space where now young people can actually make a palpable change and actually shift the world to a better place. That’s compared to before where a lot of the initiatives put out into the youth related circles were about giving away a little prize money because they saw what they were doing as cute. Well it’s not cute anymore! It’s actually guys making multi-billion dollar companies when they’re young because they just don’t see any boundaries.

So in essence that’s kind of what I see as the benefits of being young. And the challenges really aren’t challenges unless you view them as challenges. It’s all about perspective. Young people usually say to themselves, “I’m young. No one is going to take me seriously. I don’t have enough money. No one is going to let me do this. I don’t have enough knowledge.” You can solve all those things yourself.

Grasshopper: How do you think social media has changed the way entrepreneurs promote their ideas or causes – and how have you used it to promote your ventures?

BW: That’s a very interesting question. I think the Internet in general has made it phenomenally easier for anyone to create companies, period. People have expressed very frequently how social media itself was the revolution. I personally believe that the social media element is just a conduit to the revolution that’s blowing up which is youth entrepreneurship.

Social media is an enabler that’s helped us do that. We have this ability in our generation, literally with the click of a mouse, to send a message to thousands of our friends instantly about something, and that is powerful. But, unless at the end of the day you’re creating a message that can be actionable, there’s no reason for it.

With all the new campaigns out there that companies are putting out, people are trying to make change by saying “Hey, vote for me, tweet about this, click on this, etc.” If you think about it, that’s very insignificant and almost sounds like a joke. Tweeting about something or clicking on something does not actually make a change, or at least it’s not the kind of change I want to see. So that’s what I have against people over-utilizing and abusing social media to make it look like they’re actually doing something worthwhile.

So, in my case, what I’ve done is I’ve actually refused to write a blog – and people don’t always understand why I wouldn’t be blogging. I refuse to blog for several reasons. First, I hate to talk about myself all the time. I’ll do it on interviews, but I won’t actually make a blog that formalizes me talking about myself. Second, I think that if I have my presence scattered on different locations, that’s a better way to display my brand – by being lucky enough to have other people talk about me.

Through social media I’ve created a powerful close network of friends that I use new technologies to reach out to. So for now I can DM people on Twitter and make things happen really quickly. That’s how I see it: social media has made it easier and more convenient. But at the same time, having these strong ties, as opposed to weak ties, is still paramount and will become a very important thing that young entrepreneurs need to focus on.

Entrepreneurs need to have a close network they can truly trust, an actionable network where people will actually do things rather than just talk about you all the time. I think the talking follows the actions that have followed your ideas that have been baked and put together and pushed forward. The end result is the talking; that’s the virility and what’s important. The hype and the buzz is important, but it doesn’t make you a successful entrepreneur.

You probably might notice too that a lot of the most successful founders I know have very small followings on Twitter, but they’re close followers – hundreds of followers that actually look at every one of their tweets. That type of strength and connection is worth it compared to someone who has like a million followers but has only 5 people regularly following and replying to their tweets.

Grasshopper: How do you balance work and play – or are they one-in-the-same?

BW: This is my playtime. They are one-in-the-same. I’m so in love with what I do. I couldn’t ask for anything more. I’m blessed to have the opportunity to travel around the world, to speak, to reach out to youth, to have the opportunity to actually see the motivational aspect translate into real action – that’s the thing that I enjoy the most.

Of course I have hobbies, I hang out with friends and I go out to dinner, I do social things. My focus is not just on being productive, but it’s working smartly. I met my friends over in Hawaii at the end of August for a small vacation. But those are the types of things that can only be enabled because when I know I can control my work flow. That’s an advantage of being an entrepreneur: that I know how to arrange my schedule, I know how fast I can work, how efficiently I can work, then I can make things happen that will make my life more fun and enjoyable.

Right now I’m loving ever single second of it. I think the ultimate vacation is actually enjoying “The Ride.” I get warned a lot by a bunch of fellow founders that I need to stop to smell the roses once in a while. For me, it’s all about smelling the roses sometimes, and that’s part of the ultimate enjoyment that I get.

To find more out about Brian, follow him on Twitter, or visit his TechCrunch profile.

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10 Things Entrepreneurs Can Learn from Children

Guest blogger Amir Learner gives us a terrific perspective on how the lessons we learn as children translate into running a business. Find Amir on Twitter or check out his personal blog.

Believe it or not, successful entrepreneurs and young children share quite a few character traits. As a society, we spend a lot of time teaching our children, but how often do we take a step back and see what children can teach us. Below, we explore some childish activities and traits that can really benefit small business owners and entrepreneurs.

1.  Make every penny count

If you remember being introduced to the concept of money as a child you probably also remember how valuable you thought a penny was. You may have saved all of your money in a change jar or piggy bank, and probably counted your change out a few times a week to see how much you had. Many times, this level of financial responsibility can be outgrown.

Small business owners need to be resourceful and conservative with their budgets. To help, here is an Entrepreneur.com post that examines 50 ways to save money in your business. After all, a poor financial decision can sink your business much before you even have a chance at success.

2.  Take risks

Ever notice how eager children are to take risks? Do you have any pictures of some of the ridiculous things you insisted on wearing to school when you were younger? Whether you wanted to be different or wanted to be cool, you probably took some risks as a child that you probably wouldn’t take now.

I’m not saying be irresponsible, but like children, many entrepreneurs are risk takers. Putting time, money and other resources into your small business can be risky for the shear fact that your business may not take off the way you envision it to. Along the way you may be faced with some difficult decisions, but if you make the right one you could be in for some serious success!

3.  Be social

Ever watch kids interact on a playground? It’s amazing. In that world, there is no such thing as being shy. Kids will walk right up to each other and introduce themselves. For some reason, we tend to grow out of this social introduction pattern as we grow older. At events or conferences, people tend to talk to the same people every time and really don’t take full advantage of having a room full of potential resources. You never know what sort of idea, tool, or connection someone can introduce you to.

4.  Be curious

Far too often in society, we begin to accept things as they are as opposed to questioning them. Kids have this sort of natural curiosity, always wanting to learn how something works or even asking why the sky is blue. This curiosity is the road to innovation. Who knows what you might come up with?

5.  Don’t always use things the way they are meant to be used

Sometimes, children will take something conventional, such as a cardboard box (an inductee into the National Toy Hall of Fame) and turn it into something like a spaceship or castle. Do you remember how much fun you had popping all of the bubbles in a bubble wrapped package? With the world at your disposal, can you come up a new use for a specific product and then turn it into a business?

6.  Be dependent on your parents

As a child you believed your parents had all the answers and you probably spent your early years picking their brains apart for every answer on earth. Before you started anything you wanted someone to show you how to do it. This concept of having parents help you start a process as a sort of mentor can be carried over to starting a small business.

Doing a bit of networking and finding someone to teach you the ins and outs of a specific trade will better prepare you to start your own small business!

7.  Ask a LOT of questions

Asking questions with those who you interact with regarding your business is a great way to educate yourself about your specific industry. Having a knowledge base about your industry can greatly improve your chances of running a successful business.

8.  Have fun!

Kids rate activities based on how much fun they can have. When starting a business it is very easy to get lost in some of your tasks and you can forget why you started a business in the first place. It is a good idea to take a step back and reap the fruits of your hard work. Mixing some fun into your work day can be energizing and refreshing. After all, isn’t starting a business all about freedom and having the luxury to pursue your passions?

9.  Live in the present

The nice thing about kids is they are all about the now. Their short attention spans don’t allow them to really hold grudges and they try and get the most out of every day. They always seek instant gratification. If you tell a child you are doing something next week, they will want to do that activity now.

As a small business owner, you control the pace at which you complete tasks or roll out services. You can also decide where you want to allocate your time and resources. Successful entrepreneurs often times don’t wait, but go after certain things. Remember, the early bird gets the worm.

10.  Show and tell

Sharing your product or service can be on the most exciting things you can do as a small business owner. Getting the word out there for your product can be difficult, but once your product is ready, you should show it to the world!

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Join THE QUEST – Everybody’s Doing It

What is it?

From the brilliant minds of Michael Gaiss of Highland Capital Partners and Seth Priebatsch of Boston-based startup Scvngr comes THE QUEST, a high-tech mobile scavenger hunt, raising money for entrepreneur programs in and around Boston.

In its second year, this fundraiser and community-building exercise brings together Boston area entrepreneurial and innovation leaders to collaborate, compete, and celebrate the region as a hub of global innovation. Teams compiled of entrepreneurs, techies, business leaders and other members of academia compete in challenges that require participants to work together by visiting locations based on a series of questions and clues.

THE QUEST kicks off in the Kendall Square neighborhood of Cambridge, MA, at 4:00 PM on Thursday September 23rd.

Why you should get involved

Who doesn’t love helping out the entrepreneurial community? This event is a great way to support the next generation of entrepreneurs, while offering an awesome team-building experience and providing an opportunity to expand your network.

Similar to last year’s event, which yielded approximately 400 participants, all proceeds will help assist not-for-profit and local universities that focus on promoting and advancing entrepreneurship in the region. Last year’s youth-focused entrepreneurial program recipients included, NFTE, TiE Young Entrepreneurs, NECINA YES, Youth CITIES. THE QUEST 2009 also donated proceeds to University-focused entrepreneurial programs including, Emerson (E3), Northeastern, Olin, Suffolk, UMass-Boston.

Can’t find anyone to team up with? No worries. Use hashtag #QUEST10 to connect with others via Twitter. Or, when you sign up for the event, you can register as an individual and organizers will match you up with a team.

Why we got involved

We stumbled upon the site through a Tweet from @BOSWomenPreneur and after about five seconds of reading we realized that practically every organization we’ve ever worked with in the Boston entrepreneurial community is participating.  Needless to say we were quite impressed!

So, after a little research and a motivating phone call with Michael Gaiss, Grasshopper Group couldn’t wait to be involved. Unfortunately, the team will be out of town during the event.  However, we’re so proud of all the participants coming out to support entrepreneurship and our community that we’ve joined the cause as a Brand Sponsor.

Since Grasshopper Group won’t physically be there to participate, we’re offering our support with discounted phone services for those interested in trying Grasshopper and free beta invites to our newest product Spreadable, a word of mouth marketing tool. Stay tuned for more details on the event’s registration page to see how you can get a taste of some of what Grasshopper Group has to offer.

So, are you up for the challenge? Want more info – You can get updates from The QUEST by following them on Twitter at @JoinTHEQUEST.