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How many do start-ups on this forum?

howard_two

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How many do start-ups on this forum? I mean exclusively start-ups in order to gain cash and wealth?

What do you mean fanocks? Do you mean how many are starting up a business here?
If this is the case, Count me in.
 

HenkHolland

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I've started to do that late last year and am now working on the third start-up.
Although it is my aim to cooperate with others for handling the day to day operations (which I did in the first two cases), the third start-up on which I'm working now will be fully on my own shoulders as to the operational activities.

The required investments for these start-ups were relatively low (max. $ 25k each) and by teaming up with others I expect to be able to build a portfolio of five start-ups within one year from starting up the first one. So, hopefully by October of this tear I'll have 5 up and running.
 

australianinvestor

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I've got one start-up which is almost 1.5 years old which I am selling (exit strategy completed :) and one which is about 6 months old. These are my main investment vehicles at the moment, although bonds, stocks and commercial notes also play a part.

Is there a follow-up question you'd like to ask?
 
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HenkHolland

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What is your exit criterion?
Is it when you reach the possibility of making an X % return on your investment or is it when you get bored of the business?

For the time being I decided that I won't exit from one of the start-ups if the value of my shares in that specific start-up aren't worth at least $ 100k. Of course, hopefully they'll be worth much more by the time I actually get out, but I want to make sure that I don't exit too soon.
 

HenkHolland

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How many do start-ups on this forum? I mean exclusively start-ups in order to gain cash and wealth?

Hello Fanocks, since I know from your posts that start-ups are your fastlane vehicles, it would be nice if you could share some information about your start-up experience, business models and exit criteria. Thanks
 

HenkHolland

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Ryan do you specialize? E.g. do you only start e-commerce businesses?

Although it was not the case for my first two start-ups the third start-up which is in the pre-launch stage now involves a patentable (and in the meantime patent pending) product.

The anticipated fourth start-up will also be centered around a patented invention and from now on I plan to specialize in start-ups based on patented products and/or technologies.
 

Russ H

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Hi Fanocks,

Perhaps you could further define "Start ups".

For instance:

When you say "start up", can it be:

-Something (anything) existing that you take and change?

-Is there a market (at all), or are you creating a new product/service that has never existed before?

-Are you doing this alone, or can you employ others? What about partners?

-Is your funding totally from yourself, or can you obtain it elsewhere?

And perhaps the biggest question:

Here are examples of two businesses:

1. Web business scaled so that it can be sold for at least $1M? (exit strategy: Build and sell)

2. "S" type business that generates, say, $500-3000/mo but requires constant (albiet small time) attention (exit strategy: Yields semi-passive revenue, replaces a "J.O.B.", worth very little to re-sell)

Are both/either 1 & 2 considered start ups to you?


And lastly, are your "start ups" for generation of capital (requiring lots of work, but profitable when sold), or do they focus on generating passive income for the owner (and are not intended to be sold).

You also mention the word "exclusive"-- so, again, to clarify: Are you asking for input from people who do start-ups exclusively, or are you asking for feedback from people who do start-ups as a part of their overall wealth strategy, and "exclusively" pertains to one of the defining questions above?

Thanks, :)

-Russ H.
 

fanocks2003

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What do you mean fanocks? Do you mean how many are starting up a business here?
If this is the case, Count me in.

Exactly, how many on this forum start businesses from scratch with no prior history and make these companies profitable? Developing already existing businesses are not defined as start-ups even if they are small. Because they existed before you took over so to speak. They have a history (even if that history might be with red numbers).
 
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fanocks2003

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What is your exit criterion?
Is it when you reach the possibility of making an X % return on your investment or is it when you get bored of the business?

For the time being I decided that I won't exit from one of the start-ups if the value of my shares in that specific start-up aren't worth at least $ 100k. Of course, hopefully they'll be worth much more by the time I actually get out, but I want to make sure that I don't exit too soon.

I usually have two different exit strategies. Mostly part exits, really. When I have proven my business concept (have sold and have had repeat sales and when I have a proven business team managing the company for me) I usually look for a investor who would like to buy a small part of my business (usually benief 5%) for as much cash as possible. The main goal in that first exit is the cash payment. I usually take that cash payment and tax on it and then put in the bank to earn interest income for me. The second bi effect is of course a higher valuation of the company. But that value is only on paper and can't be used for anything else but bragging with (also, it can be a problem to recieve a high valuation early on for reasons I think you can figure out. Look at Facebook. But it is also bad to sell larger parts of the company early on as well, also for obvious reasons unless you sell shares with no voting rights).

The next 1 or more exits happens as the company has value to deliver to strategic partners or investors with dividents in mind. For example if you have a website with a lot of unique and well defined members, then you could very well do what Facebook did. Sell a small percentage of your company for a big lumpsum and in return give exclusive rights to the banner ad marketing on the website. The more value you can find and the better you are at negotiating a big sum for a small portion of your company the more you will be worth and you will probably get more money in your pocket to. With Facebook, the money went to the company and not to the 24 year old founder. In my case, I usually sell my shares so that I recieve the cash. But if the company need the money more than I do then I will issue shares, of course.

I exit in several stages in short.

I need to say that valuation is a bi-effect of value exchange. I am sure you know this though. The better you are at seeing value the more money you can make from start-ups. It can be very lucrative. It is not just the creative process of coming up with a new business idea, but also see how I can leverage that idea (that proven concept) to the hilt.
 

fanocks2003

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Hello Fanocks, since I know from your posts that start-ups are your fastlane vehicles, it would be nice if you could share some information about your start-up experience, business models and exit criteria. Thanks

I am actually writing on my own SUCCESS STORY right now. I will post it as soon as I am comfortable with what it portraits.
 

fanocks2003

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Hi Fanocks,

Perhaps you could further define "Start ups".

For instance:

When you say "start up", can it be:

-Something (anything) existing that you take and change?


-Is there a market (at all), or are you creating a new product/service that has never existed before?

-Are you doing this alone, or can you employ others? What about partners?

-Is your funding totally from yourself, or can you obtain it elsewhere?

And perhaps the biggest question:

Here are examples of two businesses:

1. Web business scaled so that it can be sold for at least $1M? (exit strategy: Build and sell)

2. "S" type business that generates, say, $500-3000/mo but requires constant (albiet small time) attention (exit strategy: Yields semi-passive revenue, replaces a "J.O.B.", worth very little to re-sell)

Are both/either 1 & 2 considered start ups to you?


And lastly, are your "start ups" for generation of capital (requiring lots of work, but profitable when sold), or do they focus on generating passive income for the owner (and are not intended to be sold).

You also mention the word "exclusive"-- so, again, to clarify: Are you asking for input from people who do start-ups exclusively, or are you asking for feedback from people who do start-ups as a part of their overall wealth strategy, and "exclusively" pertains to one of the defining questions above?

Thanks, :)

-Russ H.

-Something (anything) existing that you take and change?

No, it has to be from scratch. Existing businesses that are changed are more in the Mergers & Acquisitions realm.

-Is there a market (at all), or are you creating a new product/service that has never existed before?

I am creating a company from scratch. It may be a company that is built on something that already do exist though (you may create a company that is very much similar to other companies that is already in existence). It is not required to be something revolutionary. Just built from scratch.

-Are you doing this alone, or can you employ others? What about partners?

In the beginning you are always alone, but within a month or two (sometimes it takes longer time) I usually have a CEO to manage the company according to my guidelines. I try to always position myself as the Chairman as soon as possible. Because I am not a manager. I am not suited as such. Instead I "direct" the CEO.

I usually bring on money partners. When I do end up doing my "part exits" I usually sell of small parts of my company, 1-5% per new owner. And when I do sell I usually sell expensively and when I sell I always try to find a strategic value for another company that are not in direct competition with me. The reason I choose to sell to a strategic partner is because strategic partners pay more than investors with a set ROI in mind. In the case with Facebook, Microsoft is a strategic partner too Facebook. Wall Street can't understand the 300 something P/E number, because they see it from an ROI point of view as for Microsoft the investment was a way of fending of Google from owning the exclusive banner marketing rights on Facebook (as I have come to understand it after reading many articles about the subject). It was a very important call for Mr Ballmer to entice Facebook too chose Microsoft instead of Google. Microsofts strategic goals (one of many) is to use these social networking places to Microsofts advantage. Marketing wise.

So Mr Zuckerberg was in the right place at the right time you might say. The same goes with start-up entrepreneurs who are able to find the same value in their own creations and leverage that to the hilt. That value is not always related to pure cash. Cash is one way of enticing investments, but not the only tool available in the toolbox.

-Is your funding totally from yourself, or can you obtain it elsewhere?

Others money, but the fun part is: You can start a company with very little money from your own pocket. One strategy to do this is by proving the concept before investing your fortune in the start-up company. What I mean is, it is better to find customers willing to sign a purchase agreement or sign up as a member before creating the actual plattform, product or service. But the agreements only come in effect if and when you can deliver. But the promise is worth money on the balance sheet. And that value is then used against the investment value the investors brings to the table. This strategy requires more legwork than actual cash payments from the founders side. And that is a good thing if you have little cash to bring to the table yourself.

Also, if you have all these purchase agreements, you have already proven the concept to the investors. It is really hard for a sane investor to argue against 100's of customer purchase agreements (receivables as they are called). The way you can prove the brand is by having the same customer sign up for 12 months of service or more than 1 deliverance of the same product etc. In this way you have proven the business concept and the brand promise. The third step is proving the business team (the CEO more or less). If you find a CEO who has a good reputation you are almost set to get financing from an investor. There is very little to argue against, really.

And here we come to the great part. Say it will cost you $1 Million to finance 12 months of operations and you have receivables worth a total of $10 Million. Post value in such a situation would be $11 Million. Where by the investors would hold 9% of the company and you would hold the remaining 91%. Shares you are free to trade with (value exchange as I mentioned above).

It comes down to how you structure the financing and when you bring own financing from investors. But I do encourage you to get other peoples money to finance the company start-up. Why shouldn't you?

1. Web business scaled so that it can be sold for at least $1M? (exit strategy: Build and sell)

2. "S" type business that generates, say, $500-3000/mo but requires constant (albiet small time) attention (exit strategy: Yields semi-passive revenue, replaces a "J.O.B.", worth very little to re-sell)

Are both/either 1 & 2 considered start ups to you?

If both of them is started from scratch with no prior history of operations, then they would be considered a start-up. Otherwise no.

And lastly, are your "start ups" for generation of capital (requiring lots of work, but profitable when sold), or do they focus on generating passive income for the owner (and are not intended to be sold).

I start companies in order to sell shares expensively. But I also, mainly, start a company because I want to bring something to the society. Bring in an improvement to the society so to speak. But I can say that I am not focused on living on dividents or a salary from the business. That is not my aim. My aim is to sell shares and put it into my savings account so that I can live of the interest every year. True passive income. The new owners will bit by bit own the company I founded and bring it to further success.

You also mention the word "exclusive"-- so, again, to clarify: Are you asking for input from people who do start-ups exclusively, or are you asking for feedback from people who do start-ups as a part of their overall wealth strategy, and "exclusively" pertains to one of the defining questions above?

I was just interested in knowing how many on this forum who do start-ups exclusively. Making their wealth primarily from starting companies from scratch. Feedback is always nice. My aim was to see who start companies up from scratch and then discuss a little bit further with those people. It is always nice to read about how others do their start-ups.
 

fanocks2003

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I'd love to hear more detail around a few of the businesses you've "exited"...

The scenarios you give above don't necessarily jive with my experiences (except in a few small cases, like Facebook, Craigslist, etc). So, I'd love to understand the motivations and agreements around the investors/companies that allowed you to exit your business...perhaps you can post the details around two or three of the companies you've sold...


As I mentioned above, I am working on and refining my own SUCCESS STORY at this moment.

Where can I find your SUCCESS STORY?
 

howard_two

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Unfortunately, I don't have a "fastlane" success story yet. Working on it, and you can follow part of it here...

My slowlane success story is not very interesting...I came to Silicon Valley about 10 years ago, worked hard, moved up the management chain at some great companies (DirecTV, Microsoft, eBay), and luckily made a little bit of money in the recent tech boom. In other words, right place at the right time...

I've done some angel investing, am friends with a bunch of VC's and entrepreneurs in the Valley, and started one company that would have likely been very successful had Google not applied for the same patent we did, only 6 months earlier (lesson: don't put all our eggs in one technology basket). So I have some experience and a good network, but no notable stories that I haven't already shared on this forum. I guess you could say that I've been on the cusp of the fastlane for several years, and have never made the leap, despite a couple good opportunities.

I've recently made the leap, and I'm trying to make my future success story much more interesting (and repeatable)... :)

JScott, the experience and knowledge you gained by living in one of the worldly centers of entrepreneurship, besides starting your own company is priceless. It's better than an MBA from Harvard or the Wharton Business school. Congratulations. :eusa_clap:
 
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ryanpal

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Ryan do you specialize? E.g. do you only start e-commerce businesses?

Although it was not the case for my first two start-ups the third start-up which is in the pre-launch stage now involves a patentable (and in the meantime patent pending) product.

The anticipated fourth start-up will also be centered around a patented invention and from now on I plan to specialize in start-ups based on patented products and/or technologies.

my original route was preforeclosures. i just started my first online business which deals with preforeclosures. having a computer background i decided to go this route. it wasn't planned from the beginning...it more or less chose me you could say.

at any rate, this is my first and i .. just did it? or emmm doing it? ....give me some more time so i can say i've "done it?". got a little carried away there :smxB:

ryan
 

fanocks2003

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Unfortunately, I don't have a "fastlane" success story yet. Working on it, and you can follow part of it here...

My slowlane success story is not very interesting...I came to Silicon Valley about 10 years ago, worked hard, moved up the management chain at some great companies (DirecTV, Microsoft, eBay), and luckily made a little bit of money in the recent tech boom. In other words, right place at the right time...

I've done some angel investing, am friends with a bunch of VC's and entrepreneurs in the Valley, and started one company that would have likely been very successful had Google not applied for the same patent we did, only 6 months earlier (lesson: don't put all our eggs in one technology basket). So I have some experience and a good network, but no notable stories that I haven't already shared on this forum. I guess you could say that I've been on the cusp of the fastlane for several years, and have never made the leap, despite a couple good opportunities.

I've recently made the leap, and I'm trying to make my future success story much more interesting (and repeatable)... :)

Just read your May 15th 2008 post. Congrats I need to say:).
 

howard_two

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-Are you doing this alone, or can you employ others? What about partners?

In the beginning you are always alone, but within a month or two (sometimes it takes longer time) I usually have a CEO to manage the company according to my guidelines. I try to always position myself as the Chairman as soon as possible. Because I am not a manager. I am not suited as such. Instead I "direct" the CEO.

Hi fanocks, the more I read this thread, the more I like it. :thankyousign:

I'd like to ask you some questions since you seem pretty knowleadgeable in start-ups. Could you explain a little how you go about gathering the managerial team? You wrote that usually within a month or two you have a CEO to manage your company. How do you go about hiring them? And if one is just starting out, how can they afford a C-level pay? What other techniques you use to convince a CEO, a COO or a CFO to join your team? And more importantly, how do you find such skillful people?

I usually bring on money partners. When I do end up doing my "part exits" I usually sell of small parts of my company, 1-5% per new owner. And when I do sell I usually sell expensively and when I sell I always try to find a strategic value for another company that are not in direct competition with me. The reason I choose to sell to a strategic partner is because strategic partners pay more than investors with a set ROI in mind.

How long does it usually take you to reach this level? This seems like an exit strategy for when the business is already up and running. Is this what you were trying to entice when you wrote this? I believe Facebook did not get any cash infusion from Microsoft till after almost three years from starting up and having such a viral success with the College communities.

Is your funding totally from yourself, or can you obtain it elsewhere? Others money

Can you expand a little on this if you may? Thanks.


but the fun part is: You can start a company with very little money from your own pocket. One strategy to do this is by proving the concept before investing your fortune in the start-up company. What I mean is, it is better to find customers willing to sign a purchase agreement or sign up as a member before creating the actual plattform, product or service. But the agreements only come in effect if and when you can deliver. But the promise is worth money on the balance sheet. And that value is then used against the investment value the investors brings to the table. This strategy requires more legwork than actual cash payments from the founders side. And that is a good thing if you have little cash to bring to the table yourself.

This is great advice. I have a question however, this seems to work if you have a tangible product such as a widget or a service that you can provide locally. I don't see how this strategy would have worked for a service such as Facebook to use your example? This may not work for social networking services? What about Amazon.com? Can anyone think of further ways to finance Internet ventures that look like the examples we used above?


The third step is proving the business team (the CEO more or less). If you find a CEO who has a good reputation you are almost set to get financing from an investor. There is very little to argue against, really.

Again any advice regarding this issue is appreciated and on how to structure financing as you explained below?

And here we come to the great part. Say it will cost you $1 Million to finance 12 months of operations and you have receivables worth a total of $10 Million. Post value in such a situation would be $11 Million. Where by the investors would hold 9% of the company and you would hold the remaining 91%. Shares you are free to trade with (value exchange as I mentioned above).

It comes down to how you structure the financing and when you bring own financing from investors. But I do encourage you to get other peoples money to finance the company start-up. Why shouldn't you?


1. Web business scaled so that it can be sold for at least $1M? (exit strategy: Build and sell)

2. "S" type business that generates, say, $500-3000/mo but requires constant (albiet small time) attention (exit strategy: Yields semi-passive revenue, replaces a "J.O.B.", worth very little to re-sell)

I guess the difference between the top two would be # 1 is a business system where employees can pilot the website.
#2 would be where the owner-founder does all the work 24/7 from programming to talking to customers etc... An example would be a blog. In this instance the blogger is the business. Any one cares to add something to this?


I start companies in order to sell shares expensively. But I also, mainly, start a company because I want to bring something to the society. Bring in an improvement to the society so to speak. But I can say that I am not focused on living on dividents or a salary from the business. That is not my aim. My aim is to sell shares and put it into my savings account so that I can live of the interest every year. True passive income. The new owners will bit by bit own the company I founded and bring it to further success.

That is my friend the definition of the ultimate investor. The most advanced level of all investors. This is the Michael Dell, Bill Gates, Anita Roddick etc...


I was just interested in knowing how many on this forum who do start-ups exclusively. Making their wealth primarily from starting companies from scratch. Feedback is always nice. My aim was to see who start companies up from scratch and then discuss a little bit further with those people. It is always nice to read about how others do their start-ups.

I think your object has been accomplished.
 
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prodij

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I have a web/ecommerce development and internet marketing start-up. It's boot-strapped and the goal is to grow the company for cashflow and as a tool to start/grow other IT enabled businesses.

There is a growing market in the states just like everywhere else in the world. I am currently looking for sales people to operate with commission.

If you are interested or know someone who would be interested, contact me at (email address deleted)
 

howard_two

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I have a web/ecommerce development and internet marketing start-up. It's boot-strapped and the goal is to grow the company for cashflow and as a tool to start/grow other IT enabled businesses.
There is a growing market in the states just like everywhere else in the world. I am currently looking for sales people to operate with commission. If you are interested or know someone who would be interested, contact me at (email address deleted)

James, most of us here are business owners or investors. We're not S-quadrant operators. Monster.com allows people to post jobs to thousands and thousands of job seekers. NOONE here is looking for a job. If they are, I believe they are in the wrong site.

A sales Job may only be fastlane if one is looking to develop their interpersonal and sales skills. That plan will only work if the company they join offers a great sales training program and a forgiving compensation plan (not only commission-based). Xerox, IBM, Procter & Gamble and many others offer a great sales program by the way.
Otherwise, welcome to the boards.
 

Russ H

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James (prodij) is pretty close to being banned for spammy self promotion.

He clearly does not know how low the tolerance here is for that kind of cr*p.

Let's see if he stops trying to sell us stuff and cleans up his act.

If not, he's on his way to the

VILLAGE OF THE BANNED! :)

-Russ H.
 
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fanocks2003

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I'd like to ask you some questions since you seem pretty knowleadgeable in start-ups. Could you explain a little how you go about gathering the managerial team? You wrote that usually within a month or two you have a CEO to manage your company. How do you go about hiring them? And if one is just starting out, how can they afford a C-level pay? What other techniques you use to convince a CEO, a COO or a CFO to join your team? And more importantly, how do you find such skillful people?

I focus on finding the CEO only. The CEO then finds the rest of the team to delegate tasks to. There are also many ways to go about it. You can go to an executive recruiting firm (they are expensive consultants. Have a big bank account ready). Then there is the normal route of finding people through normal recruiting places online. And then there is (the best part as I see it) recruiting through business associates.

But the main thing I use when choosing a CEO is the Wealth Dynamic test (this is not any form of marketing). This test need to show that the CEO is a "Supporter" profile. And the CEO need to have a business degree as well (of course). That's it. The rest is all about personal chemistry (as in all kinds of cooperation).

Skillfull people are those that have both technical skills and a passion for that kind of occupation. You need to have both in order to be a talent as I see it. My personal view.

How long does it usually take you to reach this level? This seems like an exit strategy for when the business is already up and running. Is this what you were trying to entice when you wrote this? I believe Facebook did not get any cash infusion from Microsoft till after almost three years from starting up and having such a viral success with the College communities.

Facebook did recieve smaller investment cash from other capital firms before Microsoft, but it was Microsofts investment that made the company skyrocket in supposed company value.

How long it takes to reach this level depends very much on how fast you can prove your concept, prove your brand and also prove your team. Sometimes it takes a lot of time to get all of these 3 parts proven. And these 3 are also the 3 first parts of a total of 8 steps in building a company. It is at step 5 you usually have the possibility to sell part or your whole company to Traders. This may equal several months or years.
Can you expand a little on this if you may? Thanks.

Please define what I should expand on particularly. Thank you.


This is great advice. I have a question however, this seems to work if you have a tangible product such as a widget or a service that you can provide locally. I don't see how this strategy would have worked for a service such as Facebook to use your example? This may not work for social networking services? What about Amazon.com? Can anyone think of further ways to finance Internet ventures that look like the examples we used above?

It works equally well for a service. But you need to understand that you are not allowed to charge money until you can deliver. As you may know, it can be easily considered fraud etc if you do charge money if you don't deliver. So called "forward selling" where you recieve money where you are supposed to deliver an item. If you can't deliver and you can't deliver the customers money back (because you have spent it on developing the service) then you are toast. Obviously. So please, just sign them up and tell every customer that you will charge them the agreed upon money only if and when you can deliver with certainty. If you can't deliver and if you can't get any investor to fund you (God forbid) then you just tear apart the purchase agreement and tell the customer about it. No one is hurt and no one needs to be prosecuted for fraud. I see that as the best solution possible. You know, every venture isn't going to be the next hit. Many companies actually do go under even before they are up and running. I have had at least 1 company in my life that crashed. I actually owed money to creditors after that venture.


Again any advice regarding this issue is appreciated and on how to structure financing as you explained below?

How to structure financing is a difficult subject to discuss in a thread, because there is many ways of structuring finance. But the main ways of financing a business is:

-Your own money, or your family and friends money. Or customers money.
-Traders money (private placements or IPO's)
-Bankers money (you need to have a "bankable asset" first though or have a good net income personally).
-Funds, insurance companies etc. You usually get these peoples money only after a long business historic. It is very hard convincing these people with a start-up, because these people (my own experience) wants a high degree of certainty that you will succeed.

These are the main ways of getting funding. Before you have proven your concept, brand and team you will only have your own money to play with. Your family and friends money to play with and/or (if this is possible) your customers money to play with. That's it.


I guess the difference between the top two would be # 1 is a business system where employees can pilot the website.
#2 would be where the owner-founder does all the work 24/7 from programming to talking to customers etc... An example would be a blog. In this instance the blogger is the business. Any one cares to add something to this?

Ok, but both are start-ups at least. If they are started from scratch with no prior business history at all.


That is my friend the definition of the ultimate investor. The most advanced level of all investors. This is the Michael Dell, Bill Gates, Anita Roddick etc...

Agree.
 

prodij

New Contributor
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Hello,

First off, I apologize if I offended anyone in this forum with my previous posts. I am obviously new and do need to understand a bit more about this forum. I ask for your generous understanding.
I will keep my eyes on the posts and make more relevant replies. :D
 

Venturer

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One of the things I would look for in a CEO for my start-up is his/her requirement to obtain a stake in the company. I don't trust an "employee CEO" in working towards my exit goals.
 
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fanocks2003

Banned
Mar 31, 2008
1,319
167
Sweden
So, the three things you look for in a CEO are: 1) passing a personality test, 2) having a business degree, and 3) personal chemistry?

Perhaps this has worked for you in the past, but in general, I believe this is a bit (actually, VERY) naive...

Those are absolutly important steps as I see it. You may know something I don't. Thank you for calling me naive. I am honored. It is fun to be called naive, especially as I do actually base my living of starting companies. Are you? I have done this for 5-6 years in a row right now (no employments in between). I would certainly be pretty dead or pretty broke if I where as naive as you say I am:). Neither is correct. Rather the opposite, in fact.

If you want to raise capital, you'll need a CEO who has previous (successful!) experience in the market you're targeting, who has the ability to sell your vision, who has the ability to carry out your growth and/or exit strategy, who has a major network in your space to build the rest of the team, who can speak with the press, who understands your *specific* business model inside and out, etc.

1) Every CEO you hire goes through a personality test and other tests. Normal procedure if you use an executive recruiting firm for example. My test is just one of many.
2) Having a business degree is a good thing, because the CEO you hire will be managing/governing your creation. Your company. Having a business degree would at least give you the understanding that the CEO you hire knows the basic stuff of actually managing a business. The rest is just a question of getting the real time experience.
3) Personal chemistry is so important. So calling that naive is just to alien to me. "Just bring someone experienced on board and you will create this new Microsoft company", that is naive JScott. Just because someone is experienced doesn't make the arrangement a good one. I would rather bring onboard someone unexperienced with an MBA, someone who qualifies as a CEO by the test I am using and who I can actually discuss with (personal chemistry) than I would hiring a "successful" CEO that I absolutly hate and/or mistrust. My method has worked for me, why change methods if they work well? But as always: Different methods for different folks:). What works for me, might not work for you or any else for that matter. That's OK. I don't mind.

As for where to find these people, in my experience (both the one company I started and all the friends/colleagues who have started companies) this is literally one of the most difficult parts. Certainly, when the company gets even a little bit successful (any substantial revenue, any press, any major funding, etc), semi-qualified potential CEOs would be pounding down your door.

Yes, hiring the right people are never easy. I would say it is the most difficult part of starting a successful company. And for the CEO pounding on the door. I guess they can pound on. Always fun to be the number one choice..hehe. I only bring people onboard if they qualify (See the 3 steps above). Also, the fun part is: you always get assistance when you don't need it anymore. It goes for financing, the right people etc. Never fails..hehe. I still find it interesting. It is a phenomon, really.

But, until you get a little bit of growth, it's very hard to find someone who is qualified and willing to take the job. The problem is that there is a paradox here: successful CEOs often look for successful companies. Qualified CEOs got that way by being successful and in the process, likely made a lot of money. Therefore, they can be very choosy in what they do, and for you to entice them to your company, you need to prove that your company will be a stepping stone in their career, but because their career probably exceeded the scale of your company, that's a hard sell.

JScott, if you can prove the concept and the brand promise you will absolutly find someone who will come onboard as the CEO. Of course, it will take some time finding the right one though. Also, please don't chase those successful CEO's. They are not always the golden fish. They are also high maintenance. I mean, small time CEO's in Sweden cost at least (and this is the absolute minimum wage) 100.000 SEK a month. And then I haven't calculated in bonuses and everything else a small and high maintenance CEO's might want for his time and effort. Keep it small, guys. The ego part can come when the company can afford it. This part about getting the best CEO on board is like the people who want to keep up with the Joneses. The exact same mentality. You can actually find very talented fresh MBA students who is both talented as managers and who you can form to your liking ("groom"). People you can get for a fraction of the price of a high ticket CEO. It is something you learn as you go. Microsoft do this all the time when it comes to programmers and other tech people. They know there is smart people to find in the universities for a smaller price.

So it basically boils down to finding a potential CEO who believes enough in your company that they are willing to bet their career on it, because sometimes they are.

Well, cold sales is not something I do JScott. If you need to convince people to manage your company then why do you bother convincing them in the first place? I wouldn't sink that low at all. I put an ad up and then let people show me why I should hire them. It is really that simple. I don't have time or interest, sweet talking people. Either they love my business or they aren't. That in itself is a good test of the CEO prospect. I never run after CEO's, the same goes with the ladies. I am not a dog who follows the master. I am the Creator remember, I give the CEO something to make more money on. They should be pleased that I even offer them a chance of managing anything I create, really. I mean, this world are filled with CEO's who are looking for a company to manage and become wealthy on. The demand is not limited, capitalism at it's best.

I know it sounds terrible, but I really do see my company as a value (a gift rather) to the CEO who I ultimately hire.

In my experience (and again, this is Silicon Valley, which may not be typical), many CEOs are found through VC connections. Company founders network with VCs who have lists of people that "are looking" for potential next ventures. If the VC sees a fit, he'll make an introduction.

But, from what I've seen, this can be a long, difficult process (if done right)...

Finding a CEO is not easy. That goes for all employments, no matter if we discuss something as simple as a dishwasher. What I do when hiring people (and that goes with sales as well) is that I try to position myself in a top negotiating position. That means, I advertise. People come to me. Either I can help or I can't. Asking people to do something for me very often mean I have to give up power. I don't like that at all. In a hiring situation (especially of a CEO) you really want to be the guy with the upper hand. Because otherwise the CEO will really push you around. And that is not a question about "if" he will, it is a question about "when" he will start. I am suprised that you guys in the Silicon Valley do not seem to use this approach.
 

howard_two

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This is becoming a terrific discussion. Thank you guys.

First, let me thank both Fanocks and JScott for their great advice. They both bring different perspective to this question.

Second, I’d like to tell you Fanocks that JScott did not call you naïve. As I am reading, he was referring to the process of selecting the CEO naïve because as it seems it won’t work in the Silicon Valley VC World. That process is more of a traditional way of selecting a CEO.

When John F Kennedy called for sending a man to the Moon by the end of the decade, many called his idea absurd and outright stupid, yet no one called JFK stupid. To be a president you’ve got to have a lot going for you. As it turns out, we did put a man on the moon and the idea was a brilliant one.

Now to get back to our subject, it seems to me that hiring a CEO is a very difficult process and may require launching the start up to a level that is attractive to VCs and CEOs altogether. It will require a lot of preliminary work to be done and a market to be groomed for the company and its services.

Another question here, when business plans and VCs talk about the team behind the company, what do they mean? Are they more interested in the Founders? Or do these founders need to gather a team? Would you recommend hiring bookkeepers, accountants, maybe lawyers to be on the team? And if yes how do you go about that and what requirements would you look for in these professionals?

I read somewhere before that if you cannot hire someone ask them to be on your advisory board. How would that work? And what incentive would you offer them?

Keep the discussion going,:hurray:

Howard :smx6:
 

fanocks2003

Banned
Mar 31, 2008
1,319
167
Sweden
This is becoming a terrific discussion. Thank you guys.

First, let me thank both Fanocks and JScott for their great advice. They both bring different perspective to this question.

Second, I’d like to tell you Fanocks that JScott did not call you naïve. As I am reading, he was referring to the process of selecting the CEO naïve because as it seems it won’t work in the Silicon Valley VC World. That process is more of a traditional way of selecting a CEO.

Ideas and ego are very much linked together so it is very hard not to take it personally. I am pretty certain JScott finds my criticism of his ideas personally offensive also. Just human behaviour. After being in the game for a while you get a pride in what you do.

When John F Kennedy called for sending a man to the Moon by the end of the decade, many called his idea absurd and outright stupid, yet no one called JFK stupid. To be a president you’ve got to have a lot going for you. As it turns out, we did put a man on the moon and the idea was a brilliant one.

Good example, if his idea was absurd and my idea was naive, then I guess I will be the winner in the discussion by default..hehe. I would bet that JFK took peoples arrogant behaviour personally too. Show me a man who doesn't take criticism personally and I will show you a strange man. I have never ever met one and I am pretty certain I never will either. Part of the human behaviour.

Now to get back to our subject, it seems to me that hiring a CEO is a very difficult process and may require launching the start up to a level that is attractive to VCs and CEOs altogether. It will require a lot of preliminary work to be done and a market to be groomed for the company and its services.

It is a difficult process, but it is equally hard hiring a man who are there to wash your floor too. Everyone of these recruitings requires a lot of work.

Another question here, when business plans and VCs talk about the team behind the company, what do they mean? Are they more interested in the Founders? Or do these founders need to gather a team? Would you recommend hiring bookkeepers, accountants, maybe lawyers to be on the team? And if yes how do you go about that and what requirements would you look for in these professionals?

I can tell you what I mean (I can't talk for VC's). The businessplan is a changing document. It details how the company is going to make money, what it's vision is and who will actually make this big success happen, the team.

The team is the most important part of the business plan. As JScott do mention, you want a CEO on there that can make things happen. But that doesn't necessarily mean a high ticket CEO. That may absolutly come later on, but not in the beginning when you are still in a state where you can't throw money around you at will.

All the other people in the company is up to the CEO to hire. CPA is something the founder will need to find on his own before hiring the CEO. That is done in the beginning when forming the company. As mentioned, I am not a manager type. I create companies that others manage (because they do it better than I do).

I read somewhere before that if you cannot hire someone ask them to be on your advisory board. How would that work? And what incentive would you offer them?

An advisory board is a board that advises you in certain topics you aren't good at yourself. Advisory boards is often used before you can actually employ them on the board. Experts more or less advising you in topics you aren't that well educated in yourself.

Incentive? Well ask them. Best policy. That way you know what they want and then you can see if you can find a middle path between what they want and what you want. Negotiation at it's best.
 
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fanocks2003

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Mar 31, 2008
1,319
167
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Fanocks - For someone who claims to be so direct and not take things personally, I think you're taking this a little too personally...

I absolutely didn't mean to attack you, and I what I said was that this approach may very well work for you, but *
in general* it is naive to think this is the way it works (at least in my experience). Perhaps I'm naive, but I've been close to companies that have never gotten off the ground (including my own) to companies that have had multi-billion dollar liquidity events.

It is equally naive thinking a high ticket CEO will solve your problems just because everyone wants him onboard their companies. That makes the guy well liked, but does that make him qualified? For example take Arnold Schwarzenegger who is now Governor in California (correct me if I am wrong). Why did he win? Because he was the best man for the job? I would say: no. Gray Davis would certainly beat him at that field. So what was it then? Simple, Arnold was more well liked and more well known than Gray Davis because of the movies he had made. You may wonder why I bring this up, well a Governor is like a CEO, a leader figure, a shepherd. Arnold won because he was popular, but many people would certainly attest that he is not the best man for the Governor position. The same goes for well liked Wall Street or Silicon Valley CEO's. They are well liked, but how good are they when the problems appear?

I have started companies that never took of the ground, too. One actually crashed. And that were companies I lost money on. Not a company I worked for, only. Big difference. The employee go back to unemployment, the entrepreneur is positioned in a dire financial situation most of the time. Very hard to compare those two people.

I also need to say that it is part of the star-up scene that many companies fail. I am pretty certain many start-up companies with high ticket CEO's also failed. I am pretty certain all of you can find something like that when searching on Google. In the end, it is really the customers who make you succeed or fail, not the CEO in itself. The CEO sometimes know less than the rest of the employees do. Jack Welch even attest to that. The CEO is, really, the shepherd.

No, I haven't started a successful company myself. And I'm completely upfront with that. I've started one company, and I've gone so far as to post my business plan for that company on this forum for others to use and learn from. I don't need to brag (and don't have much to brag about in terms of starting businesses), and have nothing to hide.

But, I've seen enough successful companies started by friends/colleagues that I recognize a recipe for success and a recipe for failure. And what I recognized in your criteria for a CEO didn't match what I've seen as a recipe for success.

A successfull company is successfull because there is a market demand for the companies products/services, JScott. Not because the CEO is nice looking and can speak good words that makes him popular. The cash still, in the end of the day, come from customers.

JScott, the more you need to pay your well liked CEO, the more paying customers you need to break-even. Or let's take another turn on the same thing: in order to break-even you need to raise your win marginal on every product and service sold. That's it. Salaries is, as you may know, one of the biggest expense posts on the balance sheet.

That said, it's very, very possible that I'm wrong, and you're right. I'd love to get more specific detail around the companies you've started and the CEOs you've hired so that I can be comfortable that the information you are giving is actually valid (as opposed to just academic).

Yes, but you are missing one vital point. Neither I or you or anyone on this forum are obligated to show anything. I give advise freely on this forum an instead of questioning it, why not test it. Test if I am wrong. I will be happy to test your thesis on CEO recruitment. Maybe I am wrong, who knows. I like testing things.

You know the best part about my advise? They cost very little do. You don't need to buy my expert tips on tape or on book. Just test what I write. If it doesn't work for you, then you have lost very, very little money. Because everything I have stated cost very little money to do.

I mean proving a concept just cost you guys some leg work. Either there is a demand or there isn't. Cost of money: $0 or a total of $100 perhaps (if you advertise in the local newspaper).

Second, test the brand: See "proving your concept" above. Cost: same cost.

Third: Find a CEO to hire or have one on standby. Cost: Depends on where you advertise it. Different price settings.

The rest is money from investors. The total investment from your side is less than $5000. I mean, I know people that have invested a lot more than that when building their companies. It is also sad too see them fail because it really impacts them financially. In a negative way.

There was actually a program on Dr Phil a while ago about inventors and how they wasted a lot of many, homes and relationships on inventions that didn't even have a ready market demand. There was an expert on that show that said one of the main things you really need to do when making it is proving the market first. Prove your concept. Prove your invention. And the cost was a fraction of what these inventors had invested already.

I'm certainly not saying that you don't have that experience, you just haven't detailed it yet. You mentioned an online poker site (that looked about half finished) and that's it. I'm just waiting to hear about the other ventures that have been successful so that I'm confident that the advice I'm getting is from someone with actual experience.

I wouldn't expect you to take my advice if you didn't believe I had the experience I claim (and if you don't believe it, you
shouldn't be taking my advice). And it doesn't bother me that people want some proof of my experience before they listen to me. I think it's reasonable that I ask the same in return.

You are free to show your colors JScott if you find that needed. Before I will show anything about my companies and/or who I am, I want everyone on this forum to show me who they are. I am pretty certain that will never happen. Why? First of all: this is not a secured forum (other, not so welcomed guests, can easily make life a living hell for thoose with a big need of showing themselfs. Identity theft is a well know concept I hope?). Second of all: How do anyone on this forum know that the other guys presentation of facts isn't fake (don't tell me it is hard to manufacture fake identities online. Because it certainly isn't)?

Either you can test the advise I am giving so kindly or you don't. I am not pressuring anyone to do anything I mention on this forum. But I can tell you this, the best way of checking what someone is saying is actually testing it. And my advise is at least very low cost. I am very proud of that.

I'm certainly not saying that these things aren't important. On the contrary, these things are very important (though I'm not big on personality tests, personally). I'm just not convinced that these things are the only things that are important.

You claimed that these were the only three things that were important to you. Your exact words were:

"But the main thing I use when choosing a CEO is the Wealth Dynamic test (this is not any form of marketing). This test need to show that the CEO is a "Supporter" profile. And the CEO need to have a business degree as well (of course). That's it. The rest is all about personal chemistry (as in all kinds of cooperation)." [emphasis mine]

The personality test was one out of three main things I use when recruiting people, including CEO's. Of course there are a myriad of other small things that do come into play. I just said, these 3 things are the main things in my recruitment process.

This is a discussion about definitions. We can discuss definitions till we get grey haired, JScott.

I stand by my assessment that it's naive (not necessarily that you are) to believe that it only takes these three things to be a successful CEO. I believe it takes these things plus lots, lots more.

Again, this is completely opposite my experience. Any CEO worth his pay has many, many options to choose from, and I've never seen a successful CEO not need some convincing about why they should join a relatively unknown startup company.

Naivitee must be applied to something. In this case it was me. I mean, how else can you define the naivitee in the situation. The idea is originated from me, right? So how can I possibly be excluded from the naivitee discussion?

When it comes to the CEO, I can only tell you all this: JScott are talking about recruiting a CEO that are not in any need of your company or the position you are willing to give him/her. I am talking about aiming at recruiting a CEO that really need a CEO job and would love to help you out. The difference is from what position your coming from.

Just because a CEO aren't employed does not automaticly exclude him/her from being a smart guy or a worthy CEO. That just says, the CEO is not employed at that moment.

Agreed. And it only gets harder when you have that "You're lucky to have me" attitude towards your employees (and your ladies, for that matter)...

Nope, there's enough competition (and self respect) in the Valley that if I (or most of the people I know) would ever walk into an interview with someone who has an attitude like yours (or what you indicate it is in the above paragraph), they'll immediately walk out and never look back.

I'm not looking to argue point-for-point. The best way to argue against what I've said is to just post some details about your experience, your companies, your successes (and even failures)...so that we all have some indication of your past experiences and expertise.

I have never seen any problem with that attitude. I actually create something this CEO can make more money on. It is really a gift, a great value for him to take further up the value chain.

As mentioned before. You aim at CEO's that are not in any need of your company. I am aiming at the other side. The less crowded side.

JScott, show me your colors instead. And then, why not test what I am saying on this forum? I mean, with all due respect, it is very easy to manufacture evidence that supports my cause. And second, I would not in a million years post any personal details on a forum like this because of the risk it means for me personally.

If anyone on this forum find this forum safe, then why aren't your personal names, pictures etc freely distributed and seen on this forum? You already know where I stand on the subject.
 

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