Posted on December 19, 2018 @ 09:05:00 AM by Paul Meagher
In my last blog Business Asset Accumulation I discussed the importance of business asset accumulation to starting and growing a business. In today's blog I want to dive a little deeper into what a business asset is from an accounting point of view and an investment point of view.
Assets are sometimes defined as resources or things of value that are owned by a company. Some examples of assets which are obvious and will be reported on a company's balance sheet include: cash, accounts receivable, inventory, investments, land, buildings, and equipment.
One of the exercises that you typically engage in when creating a business plan is taking an inventory of all the business assets you currently own. If they are personal assets and will not be used in the business then they shouldn't be considered an asset for the purposes of your business plan. We can refine our thinking about assets by using the standard accounting categories to classify the type of asset the business owns. Does the identified asset fall into the cash, accounts receivable, inventory, investments, land, buildings, or equipment category of asset?
A business asset is a piece of property or equipment purchased exclusively or primarily for business use. There are many different categories of assets including current and non-current, short-term and long-term, operating and capitalized, and tangible and intangible. Business assets are itemized and valued on the balance sheet, which can be found in the company's annual report. Business assets are listed on the balance sheet at historical cost and not market value.
For the purposes of accounting we have a common way to breakdown assets (i.e., cash, accounts receivable, inventory, investments, land, buildings, and equipment). For the purposes of investing we have another common way we might want to breakdown assets (i.e., current and non-current, short-term and long-term, operating and capitalized, and tangible and intangible).
The Investopedia article claims:
The management of business assets is arguably one of the most important jobs of company management.
In summary, this blog delved a bit deeper into the topic of what an asset is. Accountants and investors have some common distinctions they use to further classify the asset into a particular class of assets. When you are creating a business plan and you are thinking about what types of assets the business has going forward, you might use these distinctions to help remind you of the different types of assets that businesses often report.
One last distinction I would make is between potential and proven assets. Startups may acquire business assets with the idea of eventually using those assets in the startup business. Until those assets are tested for the intended purpose they are only potential assets. An example would be a water dispenser I purchased many months ago thinking I might use it to transfer wine from carboys into bottles (or another carboy). Recently I needed to bottle some wild blueberry wine that was already filtered and decided I would try using it to bottle the wine. It worked good for the first few bottles and then my concern became whether it could actually transfer the full carboy on a single charge (it has a USB plug to recharge the battery). It did and it only took around 20 minutes to recharge. I was pleasantly surprised at how well this gadget worked. It now goes into the "proven asset" category and I would feel comfortable purchasing a few more of these proven assets (just ordered 2 more) for my mini-winery startup.
Posted on December 13, 2018 @ 11:13:00 AM by Paul Meagher
One way to start a business is to begin accumulating the assets you will need to start that business. Those looking to get into farming, for example, might accumulate a tractor, some old farming equipment and any good cheap acreage they can get their hands on.
When we use the term "startup" we might think there is a specific point in time when that startup was conceived or launched. Sometimes a
startup is what happens after an extended period of business asset accumulation.
If you wanted to someday start a hair salon, and you have the storage space, you might spend alot of your spare time searching for deals on
a building, chairs, mirrors, lights, and products that you might eventually need to "start" that business. You are arguably starting the business already if you are accumulating the assets you will need to start it, but it may not feel like that. We expect some official opening to happen to make the startup seem real.
If you accumulate alot of useful assets prior to starting a company, that can help you get the further funding you might need to ditch your
current job and start your new business. Business asset accumulation demonstrates seriousness, it reduces your launch cost, it can help secure the investment (reduce investor risk) and it means less of your operating income will need to be used to pay down debt that you might have incurred if you didn't accumulate these business assets.
There are many ways to start a business. Asset accumulation is an often used approach. Probably more important in situations where goods and services are physically produced and/or sold. Business assets, however, can include intangibles such as patents, copyrights, team composition, letters of intent, permits and useful know how.
Hobbies can often be turned into businesses because of asset accumulation. My photography hobby resulted in me purchasing more photography assets to get better at my hobby. There are many more assets I could be purchasing if I thought I might ever want to turn this into a paying gig. Some of these asset purchases might come over time without an explicit intention to make money from my hobby; nevertheless, these accumulated assets bring me closer to being able to offer a paying service to people and would involve fewer startup costs to fully launch.
Asset accumulation also signals to investors that you have "skin in the game". Investors like to see that an entrepreneur has sufficient confidence in their venture that they have invested some of their own capital into getting it started. Not just time, but actual money.
Posted on December 1, 2018 @ 03:27:00 PM by Paul Meagher
Yesterday I picked up a couple of thin books on creating business plans. I am hoping this will motivate me and remind me of of the elements to include in my farm business plan. I intend to do most of the plan write up in December. I think December is a great month for business planning as January 1, 2019 is a natural choice to start implementing a business plan. December often marks the end of of fiscal year for tax reporting purposes and you can be starting to figure out what you earned and spent in the last year and use that to help in your planning.
The plan that I am developing with my wife will map out what we will do in the next 3 years to establish an estate winery operation on our farm (where wine is produced and sold on the farm). We have been gearing up for this by planting grape vines for the last few years, but to date we haven't created a formal business plan for how we expect this venture to unfold in the next 3 years.
Often you will need to create a business plan to obtain financing as the funder needs some idea of what you hope to accomplish, when, how much it will cost, how you will promote it, and what you expect to earn as profit. In our case, we need to formulate a business plan as part of a winery registration process. Funding and registrations are popular reasons for needing a business plan.
One element of a farm business plan that you might not see included in other types of plans is a section labelled "Holistic Context". Here the decision makers agree on a set of statements about values and constraints that they need or wish to operate under. Stating your holistic context explicitly can serve to setup valuable constraints on how the rest of your business plan will be formulated. Holistic context statements help to ensure that your plan is realistic with respect to values and the constraints of capital, time, machinery, etc... that the partners have to dedicate to the venture.
If traveling each year, for example, is really important to the partners, and this is included as one of your holistic context statements, then that constraint makes it harder to raise animals that might require 24 hour care 365 days a year. The farm owners state their holistic context so that they don't run into conflict in their business planning and how they run the operation. I wouldn't necessarily include an holistic context section in a business plan that I would be presenting for funding, but in the context of a registration process I think it makes more sense to do.
You can learn about how to formulate Holistic Context statements in
How To Write A Holistic Context: A Step By Step Guide. Ridgedale Permaculture provides an example of a well fleshed out set of Holistic Context statements (scroll down the page to view them). To be honest, I wasn't very by-the-book in coming up with my holistic context statements. I viewed the excise of coming up with some holistic context statements as a useful way of identifying constraints on how the business plan should be put together; otherwise, it is too open ended and only guided by what is good for the business. That can lead to an unrealistic plan for the owners if it doesn't match their holistic context.
The purpose of this blog is to remind entrepreneurs that December is often a good month to write business plans that go into effect
January 1, 2019. I also wanted to share with you the idea of starting the business planning process by formulating Holistic Context statements. These statements can serve to make writing the rest of your business plan easier because they provide useful constraints on your overall business planning and your write up. If your plan only makes sense relative to your Holistic Context statements, then it might be useful to include it as a section of your business plan.
Posted on April 5, 2018 @ 05:06:00 PM by Paul Meagher
I'm getting ready to go out in the blustery cold wind to do some grape vine pruning for an hour or so. Sometimes I wonder why I do it? The question presupposes that we should live our lives in perpetual comfort instead of challenging ourselves against sometimes unpleasant circumstances.
The title of this blog was inspired by an essay in George Monbiot's book of essays called How Did We Get Into This Mess? (2016). The essay is called "Addicted To Comfort" and here is a sample of the impressive protest writing on display in that essay (and the book in general):
Had our ancestors been asked to predict what would happen in an age of widespread prosperity in which most religious and cultural prescriptions had lost their power, how many would have guessed that our favourite activities would not be fiery political meetings, masked orgies, philosophical debates, hunting wild boar or surfing monstrous waves but shopping and watching other people pretending to enjoy themselves? How many would have foreseen a national conversation - in public and in private - that revolves around the three R's: renovation, recipes and resorts? How many would have guessed that people possessed of unimaginable wealth and leisure and liberty would spend their time shopping for onion goggles and wheatgrass juicers? Man was born free, and he is everywhere in chain stores. ~ p. 25
To experience the fullness of life, it is necessary to get out of your comfort zone. I expect that once I start pruning I will realize that it is not such a bad thing to be doing. I will, however, pull on longjohns to add confort. I am not a masochist.
Ben Falk echoed this sentiment in his excellent recent video on maple surgaring. Ben Falk turns philosophical in this section of the video and ends with the admonition to "Stay vigorous, don't make things too easy".
I think entrepreneurship and private investing are also exercises in getting outside of comfort zones. These snippets are useful reminders of that.
Posted on December 7, 2016 @ 11:57:00 AM by Paul Meagher
An entrepreneur must wear many hats to survive and thrive. The job description of an entrepreneur includes many different roles and interactions which can be appreciated by examining a diagram of a real estate developer's roles and interactions.
The difficulty of successful entrepreneurship might be explained by the challenge of successfully navigating all the roles and interactions that are required. A decision needs to be made as to whether the founder(s) alone can manage all the required roles and interactions or whether they need to put in place a team to manage the complexity. The time required to negotiate all these roles and interactions sometimes means that projects don't unfold as quickly as you might want, but it might be as fast as should be expected given all the hats that need to be juggled.
A diagram like this helps to remind us that being an entrepreneur isn't a simple job description, it stands for a host of challenging roles and interactions.
I found this particular slide illustrating the speed of execution of one startup, XFIRE, interesting:
Once the money was committed, this startup was ready to get things rolling quickly. There was obviously some planning that preceded the speed of this execution. When things weren't moving ahead investment-wise, they were still moving ahead in terms of getting things mapped out and ready for the money.
The main tautological argument for why speed is critical to economic success is that you can grow faster if you execute faster.
Posted on September 29, 2016 @ 07:59:00 AM by Paul Meagher
In my last blog I discussed the beginnings of my garage mini-winery project. I consider this to be, in part, an exercise in appropriate technology so in today's blog I want to discuss the idea of appropriate technology in relation to starting a business.
... an ideological movement (and its manifestations) encompassing technological choice and application that is small-scale, decentralized, labor-intensive, energy-efficient, environmentally sound, and locally autonomous. It was originally articulated as intermediate technology by the economist Dr. Ernst Friedrich "Fritz" Schumacher in his work Small is Beautiful. Both Schumacher and many modern-day proponents of appropriate technology also emphasize the technology as people-centered.
There was a time when most wine was made using appropriate technology. It didn't cost you alot of money for a wine press and you could legally sell or barter your wine product. When I look at some wineries now I marvel at the large stainless steel variable-capacity fermentation tanks and the rows of oak barrels used to age the red wines. One of the steel tanks probably costs around $20,000 a unit and each oak barrel can set you back $1000. Considering that you don't make any money for a few years when you are putting in a vineyard, to then have to shell out the massive amounts of money for the winery equipment makes the prospect of becoming a profitable vineyard/winery operation a longer term goal than I would like.
I used to think that I would have to go into significant debt to get my winery operation started but reading a book by Sheridan Warrick (2nd Edition, 2015) helped to convince me that I could produce quality wine in my garage using cheap wine making equipment you can find in a local wine store (which I already have from making kit wines).
The stainless steel fermentation tanks are not a requirement for making wine and don't necessarily produce a higher quality wine than you can in a garage with plastic and glass carboys, but they are nice when you have lots of grapes to process. I'm not in that situation now so what is appropriate for me is quite different than what is appropriate for a more established winery. I could shell out lots of money for a mechanical wine press but my own wine press, while not as efficient, can still effectively extract wine out of my grape harvest. Next week my wine press will be powder-coated around the collection tray so the pressed grape juice is not in contact with any rust/oxidized metal.
It is easy to have equipment envy when you are starting any business. You see all the images of supposedly successful people with their expensive equipment and you think you have to have the same equipment. Resist the urge because it is often a business fault to lose your leanness too early in the startup game. If you buy expensive equipment you don't have the benefits of being lean anymore and your future actions are more cash constrained and determined. You should be trying to define what the appropriate technology is for your current situation, not what the appropriate technology is for a more established business that can afford the shinier new equipment.
Another meaning of appropriate technology is that it can be appropriated by most people without having to spend a lot of money. The concept finds wide usage in developing economies where western technologies are either too expensive, not locally maintainable, or not sustainable. If you find yourself in a situation buying equipment that is too expensive or not maintainable by you then you should be asking yourself if you can find a technology that is more appropriate to a lean startup that will still get the job done. Perhaps you have to trade more manual effort for the automation and motors that might be used in the higher-end equipment. That is a tradeoff we should be expecting and making when starting a business as that is often the nature of appropriate technology (see definition above).
One more reason to focus on appropriate technology for your startup is because it is generally a good idea to start small. In Permaculture, we don't put in an acre garden unless we know how to manage a much smaller garden first. Gardeners make the mistake of going too big too fast all the time, myself included. The concept of "appropriate technology" can help put the brakes on a similar mistake that startups make when selecting technology for their business.
Posted on September 21, 2016 @ 03:55:00 PM by Paul Meagher
I recently picked up a short book called Wine Faults (2010) that also contains some lessons for thinking about startups and business in general.
The book discusses a litany of flaws and faults that can occur when making wine. A flaw occurs when your particular style of wine does not live up the expectations of that particular style of wine. A chardonannay that lacks any fruity character might be considered a flaw for that particular style of wine. A fault on the other hand makes the wine mostly undrinkable. Faults include letting your wine oxidize, wine that is too acidic or not acidic enough, cork taint, unfinished fermentation, too much residue in your wine, etc... The book discusses ways to detect these flaws and faults and measures you might take to prevent or correct these flaws.
Flaws can arise at any point in the process of making wine:
How you grow your vines.
When you harvest them (e.g, wet versus dry weather, hot versus cool temperatures, etc...).
Post-harvest handling of your grapes.
How you press your grapes.
How you manage your must at the beginning of fermentation (e.g., kill wild yeasts, yeast selection, cleanliness, etc..).
How you manage your must during fermentation (e.g., punch down frequency, temperature control, measuring fermentation progress, etc...).
How you cellar your wine.
If you don't have any major screw ups, or if you are able to appropriately remediate any screw ups, then the end result is often a good and drinkable bottle of wine. Indeed, one common way vinters think about wine making is that their goal is not to create a superior wine but rather to produce a wine without any obvious faults or flaws.
It might be useful to think about launching a startup or running a business in a similar way. You may be tempted to think that your job is to create a highly successful and disruptive enterprise when in fact you might be more successful if you focused more on the negative goal of not screwing up too bad. Like wine, there are are host of flaws and faults that businesses can exhibit some of which can be fatal to its success. A bad business structure, a bad partner or employee hire in the early days, inadequate cash flow, no insurance against catastrophic loss (e.g., health or legal problems), not running a lean operation, poor or inadequate tax planning, poor business planning, inadequate venture capital, poor market research, etc... Less fatal issues, called flaws, occur when we run a particular type of business (e.g., car dealership) but don't do some of the things that businesses of that type do to be successful (e.g., offer financing). This may not kill the business but it will make your line of business less successful than businesses of the same type. Business flaws are industry specific whereas business faults are industry-agnostic issues that businesses in general have to overcome to be successful.
There is the view out there that you should expect to make lots of mistakes when starting or running a business or defining what features your product or service should have. That is true but it is also true that some mistakes can be faults that sink your business. You can be so fixated upon producing a great business (or a great wine) that you make rookie mistakes when it comes to running your business (or making wine). You don't measure or address seemingly minor issues that can potentially be fatal to your business (or wine).
Some of the "little things" can make a big difference in the end and can't simply be blown off as "mistakes".
So one lesson we might take from successful wine making is that it is often a matter of looking out for and addressing common flaws and faults that often happens to wine. Sometimes you can end up with a superior wine simply because you watched out for and addressed all the potential flaws and faults that could have ruined your wine. Likewise, a highly successful business can happen by taking care of the boring fundamentals rather than actively striving to create a great business. Success can be the result of not making too many major screw ups or quickly detecting a screw up and fixing it before it becomes a big problem. So the lesson from wine making is that a focus on not screwing up can produce a good wine and that the lack of a faults and flaws is a pre-requistite to producing a great wine. Sometimes a great wine happens without striving to produce a great wine. It is the absense of faults and flaws, not the presence of something.
Business has a Yin (what you strive for) and a Yang (what you avoid) side. Today's blog is about the Yang side of business and wine making. Cheers!
Posted on June 14, 2016 @ 08:39:00 AM by Paul Meagher
To call someone a "serial entrepreneur" is often considered a badge of honor. That entrepreneur can bring a
set of entrepreneur skills to new ventures and make them successful. At least that is the implicit theory.
But is it true?
The are lots of high profile cases of entrepreneurs who have had multiple successful ventures and coverage of
such stories probably leads to the belief that serial entrepreneurship is quite common. One thing to note
about these examples is that the entrepreneurship in question often involves going through the cycle from
startup to business angel, meaning the entrepreneur owns/manages a business that is successful and cashes
out during an exit and with that capital is able to invest/start a new business. Starting a business with
little capital is quite different that starting a business with a trunk of cash to begin with. Can we
really consider the second venture a startup when it may not be cash-constrained in the same way the first
We might look at the opposite situation to study serial entrepreneurship, namely, the case where an entrepreneur
fails in their fist startup venture but uses the lessons learned to succeed in their next startup venture.
This case is often not used in studies of serial entrepreneurship because a serial entrepreneur is supposed
to move from success to success; however, studying entrepreneurship in this way can be problematic because
the cash position of the entrepreneur is different accross the two startup episodes and it becomes difficult
to disentangle the reasons for success in the second case: transfer of entrepreneurial skills to the next
venture or transfer of cash/resources from the first venture to the next venture.
There are two other reasons to be critical of the serial entrepreneur concept. Often it is simply not the
case that entrepreneurial skills will help to ensure success in a second venture. The domain knowledge
required to succeed in the second venture may easily outstrip the value of the acquired entrepreneurial
skills in ensuring success in the second venture. In my own experience, any success I have had in my
web businesses venture does not provide enough transferrable skills to ensure that I will succeed in my
farming venture. The knowledge and physical requirements are very different. I'm sure there is some
carryover of an entrepreneurial skillset, but the value of that skillset seems minor in comparison to the
value of knowing how to grow plants, animals, soil, manage equipment, do farm accounting, market farm
I suppose the jump from one business venture to another is often not as extreme as going from a web business
to farming so the chances of success might be higher for serial entrepreneurs venturing in a nearby or
reachable domian within an industry. Serial entrepreneurship may be more likely to succeed in such cases.
If so, our notion of serial entrepreneurship should accord less valor to the entrepreneur as they are not
really stretching into new industries and might be viewed as applying the same domain knowledge to a slightly
different venture. That is difficult enough and I don't want to disparage this notion of serial
entrepreur too much, but it would be useful to see some correlational analysis that looks at the relationship
between successful startup ventures to see if they tend to be in the same industry or not. There probably
are such studies but I haven't spent alot of time googling the question
The final critique I want to make about serial entrepreneurship is that it implies that business venturing
is a matter of "crushing it" in a few years and moving onto a new venture for another few years and "crushing
it" again. The notion of grit doesn't figure in this view very much. The notion of Grit according to
Angela Duckworth involves the twin components of
passion and perserverence. Often to achieve greatness in any domain requires that we persevere over the long term in attaining skills/knowledge/achievements.
Either Angela is wrong when it comes to entrepreneurship, and she very well could be, or the notion of
serial entrepreneurship is deficient in that it suggests that much can be attained without alot of
perseverance, or at least less perservence than is required to become an accomplished musician, athelete,
chess player, etc...
The purpose of this blog is encourage more critical thinking around the notion of "Serial Entrepreneurship". The popular press often treats the notion as unproblematic and not comprised of lots of potentially different subcases. The academic literature is more critical and has to make some of the distinctions I have raised to study it and explain it. For the record I do think that there are serial entrepreneurs out there and I have respect for their achievements, but I don't think the idea of "serial entrepreneur" is necessarily a useful explanatory tool for explaining success accross ventures. Maybe it is not so much the skills acquired in the first venture that explains success in the second venture, but the cash position and domain specific knowledge that explains the bulk of why the second venture is successful. That would make serial entrepreneurship a little less amazing but provide more realistic explanations for why a person is able to achieve success accross multiple ventures.
One last point to leave you with. The data on entrepreneurs who have attempted to start two businesses that they own/manage does not point to a high correlation between success in one venture and the next venture. You may want to google this number and explore the correlation for yourself as there is not alot of agreement
on the exact degree of correlation and I don't want to suggest a number. If the notion of a "serial entrepreneur" is to explain anything one would think there should be a high correlation between the success in one venture and success in a subsequent venture? If not, does the concept of a serial entrepreneur really explain much?
Posted on May 31, 2016 @ 06:58:00 AM by Paul Meagher
Isaac Newton was one of the greatist physicists ever. He also spent alot time engaged in alchemy, the attempt to turn a "base metal" into a "noble metal", particulary gold. He never had much success
in this venture and one wonders how he reconciled his hard-nosed physics and mathematics with his alchemical pursuits.
Lately I've been engaged in a form of alchemy that involves the conversion of old-rotted fence posts into functional and aesthetically pleasing hugelbed content and structure.
Hugelkultur is a type of raised bed popularized by the premier Austrian permaculturist
Sepp Holzer. It generally consists of digging a trench and laying down large woody material followed by smaller woody material followed by non-woody material (e.g., hay in various states of decay) and finally the escavated soil mixed and topped with some compost. There are different ways to construct a hugelkultur bed and the version that we implemented was derived from Jenni Blackmore's book Permaculture: Abundant Living On Less Than An Acre (2015). I highly recommend this book for its self-deprecating humor, writing quality, and her ability to find simple and easy designs for building permaculture structures like hugelbeds, spiral gardens, etc...
This is what the hugelbed looked like as we began building it. Notice the rotted logs used for both the side supports and as humic content in a trench just below the sides of the hugelbed.
One way to look at certain forms of entrepreneurship is as a form of alchemy, a transmutation of base elements to noble elements. In modern lingo we might call this "adding value". Isaac Newton may have been pursuing an entrepreneurial quest when he tried to convert base metals into gold and his failure is perhaps a caution that even the greatest minds can fail to add value. On the other hand, we can be quite successful at times and the three hugelbeds we constructed from the old fences we tore down involved converting something I would have considered waste into something that will help grow veggies, herbs and strawberries well into the future. A common slogan in permaculture is that the "problem is the solution" and in this case the problem of old rotted wood was the solution to finding content and structure for my hugelbeds. Adding value may not simply be about making something good even better, it can also be about turning a problem into the solution to a different problem. There is alot of alchemical thinking involved.
Why do you need Grit? Why does acquiring expert level performance require 10,000 hours? There are lots of answers to this question but one that appeals to me lately as a result of reading Kenneth Hammond's books is the idea that learning under conditions of uncertaintly is very difficult and requires alot of time and grit to achieve mastery. Our understanding of the world is mediated by multiple fallible indicators and knowing which indicators we need to attend to and how much weight to assign each indicator is sometime it might take a lifetime to master. If we perform action A (plant potatoes in hay) on one occasion and achieve great results (lots of potatoes) and then do it the next year and get very poor results, then you have to start modifying and complicating your understanding of hay as a growing medium for potatoes.
One way to frame why grit and 10,000 hours of practice are used to explain high-level performance is because what we are are awash in multiple fallible indicators that may simply require alot of persistence and practice to make sense of. If this is true, then perhaps we might not need so much grit and so many hours to achieve mastery if we know that our task is to make sense of multiple fallible indicators as they relate to, say, selling a product or investing in a stock. We need to put ourselves in a situation and mindframe that allows identify the indicators and assign the appropriates weights in our judgement and decision making.
If Grit is so important to achieving success it begs the question of why it is so important? One answer that I like is that it is important because achieving success requires mastery of the multiple fallible indicators associated with the domain we work within. There is no magic bullet to learning under conditions of uncertaintly. Success perhaps goes to those who don't get frustrated by this slow learning process. Maybe we can get by with a little less grit and a little less practice if we explicitly acknowledge and use Kenneth Hammond's multiple fallible indicators strategy (a.k.a the "correspondence strategy") for dealing with uncertaintly.
The concepts of risk and uncertainty are central to the current definition of a startup and what it means to be an entrepreneur. Risk and uncertainty, however, are not the same. If you have no basis in prior experience or logic to measure the degree of uncertainty involved in a situation, then you can't assign a level of risk to it. Insurance companies and banks deal with uncertainty in the form of risk whereas startups and entrepreneurs often deal with unquantifiable uncertainty. The distinction between risk and uncertainty gives us a way to think about how entrepreneurial companies might evolve over time from uncertainty-based ventures to risk-based ventures and possibly back to uncertainty-based ventures if they decide to reinvent themselves. Here is a passage from Professor Leyden's article that discusses the relevance of the distinction:
Although the entrepreneurship literature has increasingly come to accept Knight's view that entrepreneurial action takes place under conditions of uncertainty, that view is far from universal. For those who take the view that the entrepreneur lives in a world of (quantifiable) risk, it may be reasonable to think of entrepreneurial opportunities as objective phenomenon waiting to be discovered, albeit with risk. But under an uncertainty-based view, entrepreneurs do not so much discover profit opportunities as create them. As Alvarez and Barney note, such creativity is the result of the entrepreneurs' own organizing efforts in the face of uncertainty. However, because the condition of uncertainty may change over time, the bases for organizing entrepreneurial firms are also likely to change. As a result, entrepreneurial (that is, uncertainty-based) firms over time may be transformed into non-entrepreneurial (that is, risk-based) firms once the probability distribution of outcomes associated with uncertain exchanges is learned through experience. Based on this reasoning, Schumpeter's notion of creative destruction can be thought of as including not just the replacement of older firms by newer firms, but also the transformation of entrepreneurial firms into non-entrepreneurial firms over time. Such transformations, which Schumpeter saw as common, imply a continual need for new (or reinvented) firms that, through their decision to be entrepreneurial, enter willingly into a world of uncertainty and creativity. ~ p 72
The valuation of a startup may also be based upon whether its prospects are completely uncertain or whether it has received enough feedback that it can start to quantify some of its operational uncertainty. For example, when a startup first starts to market its products there may be no clear relationship between its marketing efforts and the number of new customers that effort produces. After awhile, however, it might start to see that certain types of marketing produces better results than other types of marketing. Once it can start to quantify some marketing relationships (even if the relationship still has alot of variability) it can leverage that risk information with investors to potentially achieve a higher valuation. Investors are generally more comfortable dealing with risk than uncertainty and may be inclined to agree with higher valuations when there is less uncertainty involved.
Part of what hooked me into reading the book is an epiphany he had that I can relate to - the realization that you are useless.
The jobless wandering and the maker longing were a powerful mixture in the days and weeks after being laid off. The more I thought about it, the more I realized how tragically specialized I had become. I was extremely well prepared for a job that no longer existed, without the fundamental skills I could repurpose elsewhere. I seemed to be far away from being able to build, fix, or create anything of tangible value - any real, physical thing. My so-called skills - emails, social media, and blogging - were hollow substitutes. Now, after hurtling in and out of a digital career, I felt as though I were missing a critical piece of my humanity. ~ p. 8
The realization of my own uselessness came when I was helping a friend for a few days with the building of his house. One guy on the job was frustrated with my lack of ability to measure, cut and carry out directions. Life in university and in front of a computer had not prepared me well for the building trades. I've since taken steps to remedy my lack of practical skills but I've still got a long way to go.
The urge to be a maker is, for some people, based on the realization of being useless and wanting to take steps to acquire what they perceive to be useful skills. In the case of David Lang he eventually got involved in a project to develop an underwater rover vehicle so that they could find out if a treasure was buried in a cave at the bottom of a deep well. A treasure was rumored to be hidden in the well because the pirates apparently went into the cave with gold but didn't leave with it and no one has found it yet.
One of the storylines in the book is how he came to acquire the range of skills required to contribute to an underwater robot project in a fairly short amount of time. By hearing about his story and how he was able to acquire the practical technical skills he needed you can get a better sense of how to become a maker yourself. The book discusses the maker culture, the internet resources that makers use, and the maker mentality. If you have heard about makers and wondered what it was all about this is a good book to get you up to speed. It might be a good book for a high school student who likes to tinker with electronics or someone who wants to run with the geeks and build cool stuff.
To become a maker you have to be dedicated to learning alot of technical skills so that you can practice making competently. The book goes into some detail on the types of skills that makers acquire and how they acquire them. In contrast to Maker books that deal with just the technical aspects of making, this book provides you with an unabashedly personal journey into becoming a maker. This makes it easy to read.
In some ways becoming a maker is about engaging in a lifelong learning quest to become more skilled in practical and technical crafts. While Making has become associated with working with microcontrollers, harvesting electronics from old appliances, and hacking various electronic devices it is more general than that. Taking ownership over fixing your own vehicle, building or renovating your home, or growing your own food are all examples of skills a maker might want to master as well and it might define your particular brand of making.
The maker culture is a vibrant and growing culture and this is a good book for gaining some insight into the types of characters who engage in it, their motivations, the resources they use, the importance of engaging with the maker community and how it is evolving. It is an inspiring read and might inspire you to take up the cause of becoming a maker yourself.
Posted on November 25, 2015 @ 08:09:00 AM by Paul Meagher
Floods and Diaper Waste. These are two examples of big problems.
Floods are a big problem because in many areas of the world as much as 80% of property insurance payouts are for flood damage of one sort
or another (which can include sewage backup as an instance). If you can provide a solution that would reduce the amount of flood
damage payouts, you might have a large and lucrative business. The problem of flooding is predicted to get worse with climate change, especially in coastal areas.
Another big problem is diapers. Most go straight to the landfill and can occupy up to 20% of the waste stream. Some see
baby poop as a source of high quality nutrients and see big opportunities for handling diapers differently than just land filling them. Maybe we can use them to grow trees? The problem is the solution.
One way to approach starting a business would be to examine the big problems of society and structure your business around
finding a solution or part of the solution to one of these problems. It wouldn't matter whether you have a background in theater,
engineering, or business - you would begin the process of starting a business by looking at where the big opportunities lie and
then you would proceed to build a business around the most promising opportunity.
Generally we don't start a business with pure opportunism as our objective. We often start from the capabilities we have
and formulate the opportunity we want to address based on those capabilities. If we are a theater major, we don't think
about starting a construction company even though that might be where the big opportunity lies. Maybe a theater major
has some good skills for being the head of a construction company. Stranger things have happened.
Our capabilities are generally regarded as good things but sometimes they limit us in terms of seeing where the big opportunities lie. Things only become opportunities if they appear reachable from our current set of capabilities.
What if startups ignored their capabilities and focused initially on identifying where the big opportunities exist and
then enlisted people with the capabilities required to address the best opportunity. Begin your startup in a state of pure opportunism
looking for the best industries and niches to be in and then build a business to occupy a growing niche in that opportunity
Some theories of what makes a company successful talk about capabilities as being central. That might be true post-startup,
but pre-startup perhaps you might do best to throw capabilities out the window and focus on where the best opportunities are.
It could be that focusing too much on aligning your startup with your current capabilities means that you won't be addressing
where the significant opportunities actually lie.
It is probably unrealistic to think that a startup will ignore their capabilities completely when they come up with a business idea. When it comes to raising investor money for your idea, however, we might see the advantages more clearly of being opportunistic in picking a business idea to pursue. Money wants to go where the big opportunities are, not just where your capabilities may lie.
Investors will not usually invest in a company that only has an idea. Eventually you have to add capabilities if you want to be taken seriously and raise funds. Also, the better the capabilities the lower the risk of the venture. I do not want to downplay the importance of capabilities. I do, however, want to highlight a couple of downsides of capabilities; that they can limit our vision as to where bigger opportunities might be, especially in the initial stages of identifying a market the startup should address. Second, you can be very capable at running a business but capability alone does not determine level of success; that is probably more determined by your share of the market, how much it is growing, and how lucrative it is. These are factors you should look for when starting a business, not just what you can do with your current capabilities. We should get outside of our capability comfort zone when figuring out what business idea is worth investing a good chunk of our life into pursuing.
Posted on November 4, 2015 @ 12:12:00 PM by Paul Meagher
This year I decided it was time to figure out if I could apply for a mini-winery license. To get that license I need at least 2 acres of grape vines in production. I felt that perhaps next year I might be at that point so I called a local agronomist who agreed to come out and measure acreage by walking the perimeter of the vineyard plots and using a GPS-based app that would calculate acreage. The acreage came to 1.85 acres. Bummer. That means I have to plant some more and probably wait for them to grow for 2 years before I can apply for the license.
I blame this result on the fact that I haven't pursued this wine making venture with full commercial intent. I was just happy that my vines were growing and guesstimated that I had around 2 acres in the ground. If
I was operating with full commercial intent I wouldn't leave such critical matters to guesswork. I should have been measuring what I had planted and making sure that my last major planting 2 years ago was sufficient
to get me over the 2 acres that is required.
The same lack of commercial intent applies to renting out vacation accommodations at the farm. I didn't create any signage or branding and put in a lackluster marketing effort with Trip Advisor and AirBnB. I still got some rentals but it was definitely not at the level it could have been if I operated with full commercial intent.
In my defense the farm property was purchased with the idea of eventually retiring there so I didn't feel like I had to operate it with full commercial intent. This is common in alot of farming where most farm owners earn their main income from their jobs and not their farm property. However, this does not excuse the measurement screw up or mediocre performance on renting accommodations. If you expect to get results you have to operate with full commercial intent.
Sam Altman, founder of Y-Combinator, observed that many of the companies that go through their incubator program do well while they are there. The companies grow and there seems to be momentum, however, once they leave many of them flatline or lose momentum. He called this the Post-YC Slump. I call it operating without full commercial intent.
The peer environment is certainly a big factor in driving Y-Combinator startups to do well while in the incubator and the lack of it when they leave is one reason cited for the slump. Another major factor that Sam cites is engaging in more "fake work" when they leave the program.
In general, startups get distracted by fake work. Fake work is both easier and more fun than real work for many founders. Two particularly bad cases are raising money and getting personal press; we’ve seen many promising founders fall in love with one or (usually) both of these, which nearly always ends badly. But the list of fake work is long.
I tell founders to consider how directly a task relates to growing. Obviously, building and selling are the best. Things like hiring are also very high on the list—you will need to hire to sustain your growth rate at some point. Interviewing lots of lawyers has got to be near the bottom...
So how can startups avoid this slump? Work on real work. Stay focused on building a product your users love and hitting your growth targets. Try to have a board and peers who will make you hold yourself accountable—don’t lose the urgency that you developed... Keep sending updates on your traction to your investors and anyone else who will read them...Make the mistake of focusing too much on what matters most, not too little, and relentlessly protect your time from everything else. Don’t ever let yourself feel like you’ve won before you have. I still don’t think the Airbnb founders feel like they’ve won. You have to keep up a high level of intensity for many, many years.
I doubt that I can run my vineyard and vacation accomodations businesses with this level of intensity because there is not enough time in the day for me to do so. What time I do have, however, should involve more commercial intent than I've mustered to date. The Post-YC slump illustrates that operating with full commercial intent is not easy and that we tend to revert to doing things that appear to be productive but are really different forms of fake work. You would think that businesses are always operating with full commercial intent but often they are not, they are coasting or busy with fake work. For me the first step is recognizing the ways in ways in which I am failing to operate these lines of business with full commercial intent and prioritizing the work of fixing these issues (e.g., monitor acreage, install signage, setup official home-based winery area, line up a vineyard/accomodations worker for next season, etc..). The level of commercial intent has to be jacked up more than it has been to date if I want to get better financial returns for my effort. It won't just happen and fake work won't get me there.
Posted on October 25, 2015 @ 10:20:00 AM by Paul Meagher
Andrew Ng is a researcher, teacher and entrepreneur to keep an eye on. He is still under 40 and has had some major accomplishments
in academics and business.
Most people are probably familiar with Andrew as a teacher as his online Machine Learning course
is one of the most heavily enrolled courses at Coursera, a company he co-founded thanks in part to the popularity of this course.
The next session of his Standford Machine Learning course is coming up soon (Nov 2) so you can experience for yourself his dazzling ability to make the technically sophisticated ideas and algorithms of machine learning understandable to the masses.
One of the main lessons I took away from this article was the importance of a regular reading habit. What do you do with all of your money when you achieve success? Well you might just keep doing what you've always done, satisfying a reading habit as much as you can so you can keep your brain working well and thinking up new ideas. It appears as though reading is one of Andrew's greatest pleasures in life and the time that he can set aside on a saturday afternoon for reading research articles is what he ascribes much of his success in and enjoyment of life to.
I should also point out another successful entrepreneur who has a serious reading habit. Check out Bill Gates' list of books and the reviews he has
written on many of them at the Books section of his website. He has a nice selection
of books to look over if you are looking for ideas on books you might want to read.
Sam Altman, CEO at Y-Combinator, did a recent question and answer session
and at the end you can find a list of books he recommends reading.
I'll end this blog by suggesting that there is a big gaping hole in the research on entrepreneurship and its relationship to habitual reading. We are all aware of people who apparently don't read much and are successful, but how true is this in general? Conversely, if you do read alot perhaps there is a point at which you are reading too much or too randomly for it to lead to financial success. The importance of reading depends on what it is you are doing with your life and the role that reading plays in determining success. We have anecdotal evidence that some very successful entrepreneurs are habitual readers (see above). If I find some good empirical research on the relationship between reading and financial/life success that is worth discussing it will be the subject of a future blog.
There are also relationships to explore between reading and investing success. Investors obviously need to read alot of different types of documents and evaluate them. What types of cognitive processes take place in the mind of successful investors versus a new investor when reading the same set of documents? What types of reading exploration does the successful investor do compared to the novice investor? How much time does an investor spend reading different types of documents in any given week? Maybe there is research on these topics and if I find some that too might be the subject of a future blog. I have come accross research suggesting investors spend very little time screening out proposals but I have not explored this any deeper than the infographic stage.
Posted on October 15, 2015 @ 08:07:00 AM by Paul Meagher
Imagine getting ready for garbage day by sorting your garbage into one of 15 possible garbage categories.
There would be the usual categories of organics, glass, and paper, but within paper, we might have a separate
category for books. We might also have a category for wood waste, a category for broken kitchen appliances,
a category for broken or unused furniture items, and so on. If you get creative I'm sure you can come
up with your own list of 15 categories of garbage.
So each family puts out their garbage presorted into 15 garbage types and then what?
If the garbage is presorted at the household at this level of specificity, then you are creating a (free?) resource for local entrepreneurs
who might want to come by and pick it up as part of local recycling-based enterprises.
This idea for waste management was espoused by Bill Mollison, co-founder of Permaculture, in his 1983 lectures.
He suggested that waste streams from cities was one of their most valuable outputs and elaborated upon
the details of better garbage presorting and the local enterprises that could flow from it. Styrofoam, for example, is a waste stream that many municipalities don't know what to do with but could be a wastestream that a local entrepreneur could find a use for if they have enough quantity.
Many appliances can be fixed easily, polished, and put back into the market. Old doors and furniture
might be scraped down and repainted and become servicable again. Organics have lots of uses for local growers and
bioenergy production. Books can be used for a bookstore enterprise or compressed into biomass bricks. The categories
of waste we set aside would help to dictate the types of recycling-based enterprises we could support through our
In my own experience, one of the most successful local enterprises is the Community Workshop where people drop off their unwanted household items and the mentally challenged sort them and put them out on shelfs and hangers for locals to purchase again. The workshop employs many people and is one of the busiest places in town as many people are addicted to checking it out regularly and some are professionally scouting out treasures they can resell
for more. We all have some form of recycling system in our communities but I think there is a next level of innovation that is possible in the recycling industry and the number of livelihoods it could support.
Many "zero waste" cities have innovative ideas for waste management that might already align with this permaculture approach.
Posted on September 16, 2015 @ 12:56:00 AM by Paul Meagher
It was a steady mix of rain and overcast conditions yesterday. I did not feel motivated to work in the vineyard so I pulled on some chest waders and went to explore the nearest major river system to my farm. I want to understand the local watershed better.
My expedition to follow the path of the river further took me, in my truck, past a field that I was familiar with having visited it before. I thought the weedy and shrubby field might have some interesting plants in it. When I explored further I noticed there was a very large amount of blueberries growing there in patches here and there but fairly regularly throughout the field.
I returned to my house, picked up my blueberry rake, a bucket, and a styrofoam cooler. I returned to the field. I harvested ten large zip lock bags in 2.5 hrs. I cleaned half of them so far. We are set for morning smoothies for awhile!
It is hard to predict what types of yeilds exploration will bring. The blueberry yeild was only one yeild I obtained from my exploration activity.
I also found the closest swimming hole to the farm and a series of excellent fishing holes close by along the river. The stretch of river is sufficiently interesting that I made a mental note to spend an afternoon there with a coleman stove to cook up some trout.
Exploration may seem like a waste of time but the yields can be many: it can lead to a chance discovery, it can answer questions, and it can help to add data points to your mental models of the local physical or business environment so you can ask better questions. It can also be fun.
Posted on June 30, 2015 @ 08:51:00 PM by Paul Meagher
I spent an enjoyable evening in our garden working on the fence. I installed a fence last year but the wires around the fence got quite loose
so I wanted to tighten them. I tried a number of techniques and, in the end, needed to use them all to get the fence tighter. I installed some
braces higher up on the fence posts to keep them from pulling in when the wires are tensioned. I put a stick in the wire, twisted it around, and made a loop to tighten individual strands. I broke the wire quite a few times so it is not a great technique but can work if you are very careful. Finally, I cut some alders growing beside the road and weaved them between the 6 strands of wire. I may add more in the future as I harvest them. The alders help stiffen the fence and adds additional deer protection (maybe I'll sharpen some at the top to impale the leaping deer :-).
As I finished working on the fence and garden for the day it occurred to me that I will be able use my home garden as an incubator for skills I can apply on our farm property at a larger scale. I'll be planting out the second half of a main garden at the farm this week. I can apply ideas I learned this evening to edging, mulching, and fencing the larger farm garden seen below (a couple of weeks ago).
A home garden is an excellent incubator for learning the skills you can use on a larger scale if you choose to. You can manage a home garden more intensively and learn what works and what doesn't. You can put up small fences, electrify them if you want, buy a few chickens if your bylaws and situation permits, figure out irrigation systems, figure out fertility management, weeding, pest control, and so on. All useful skills for adding self-reliance and resilience to your home situation and becoming better prepared for growing significantly more food if you have to or want to in the future.
It is better to make mistakes on a smaller scale (suburban lot) before making them on a larger scale in a large garden (e.g, 1/4 acre plot) or field situation. I've gone too big too soon on some plantings of corn, potatoes and barley before I knew whether it would work so I've made this "scaling up too soon" mistake a number of times and hope to make it less often in the future.
We might use this example of home garden as incubator for successful larger scale gardening to think about what a business incubator is or might be. A business incubator should allow you to engage in meaningful activity directly related to a larger scale undertaking but in an environment where mistakes aren't as costly or as likely (e.g., because of mentoring). You can learn how to run a business at a smaller volume so you have a sense of how it should work at a larger volume. Incubators, like gardens, are also where we can experiment with ideas for things to grow, to experiment with ideas for ways to grow stuff faster or more reliably, and to figure out our own personal approach to gardening/business.
Oftentimes an incubator is a place we might have worked until we acquired enough skills to branch out on our own. It could be a place we volunteered at in the hopes of acquiring some skills relevant to a lifestyle we wanted to pursue. It could be a formal business incubator that takes on promising businesses with the hopes of helping them to grow and sharing in their success. It could also be a hobby setup that inspires you enough to keep refining your skills and getting better so you could scale your hobby if you wanted or needed to.
We don't need formal incubators to be successful at starting a business, but we probably need environments where we can learn how to do things at a smaller or less consequential scale before scaling up and trying to managing something we don't have much experience with.
Posted on April 24, 2015 @ 08:32:00 AM by Paul Meagher
Starting a business is not as glamorous as the Dragons Den and Shark Tank would suggest. There is alot of grunt work involved before you get to the stage of producing a new product or service.
I'm currently involved in some grunt work. I am pruning my grape vines before the buds emerge. There
is alot of hand pruning followed by taping the vine to the trellis. It is a cold, wet and windy day.
I have my rain suit on and am getting ready to do another session of pruning.
To call it grunt work is a bit of a misnomer. The pruning I'm doing now determines the fate of the vine for the rest of the summer. It involves alot of rapid fire spatial decision making using several heuristics such as cutting back as much of the bottom growth as I can, cut the tops off after 10-12 buds, create a spur prune instead of a cane prune when I have lots of branches coming off the cane, keep at least two main trunks and sometimes three, cut away canes pointing into the center of the row that might be hard to train, cut the plastic ties off the bottom so I don't constrict this years growth. These are some of my main rules of thumb.
Success in pruning is about getting the grunt work done as efficiently as you can while appreciating the importance of doing it. The same is true in most successful businesses.
Posted on April 21, 2015 @ 10:00:00 PM by Paul Meagher
I'm about halfway through Eric Reis book The Lean Startup (2011). This book helped kick off the Learn Startup movement. It is definitely a book worth
reading. Well written and well organized with lots of useful case studies to explain and justify the lean startup ideas he advocates.
I was a bit surprised that the book appears to be primarily about how scientific methods can be used to create successful startups. For example, he advocates formulating hypothesis on an ongoing basis about which product features appeal to users and how growth will occur and testing these hypothesis using minimum viable products, split testing, cohort analysis, core metrics and other techniques. Eric encourages us to formalize our "big idea" in more detail so that we can test and measure the validity of our underlying product and growth assumptions. It is hard to argue against using scientific methods which makes it hard to argue against many of the techniques he advocates because they arguably lead to "validated learning" better than most other approaches we might use. According to Eric, "validated learning" is the main objective that startups should be seeking. The more validated learning you can do in a short amount of time the greater your chances of success. Adopting his suggestions will not guarantee startup success but it certainly can't hurt to be aware of scientific techniques you might apply to starting and growing a business.
Many of the techniques he proposes are not easily transportable to all industries. Startups in the IT industry are the best fit because it is relatively easy to run numerous online experiments to test ideas and analyze results with a large enough sample size to be statistically meaningful. Eric does not get into the nitty-gritty details of things like qualitative methods, power analysis, effect sizes, significance testing, or Bayesian analysis but issues like this potentially lurk in the background if you decide to run lots of experiments to figure out what works and what doesn't work for your startup. There are lots of books out there that discuss these technical details.
If the book is primarily about applying scientific methods to creating successful startups why did Eric call it the "lean" startup. This is partly historical because the inspiration comes from techniques used in lean manufacturing that Eric is, in part, adapting to managing startups. "Lean" also refers to the objective of making fewer and better mistakes on route to creating a successful startup. If you make fewer mistakes, and mistakes that are revealing about whether you should persevere or pivot, then presumably you don't need as much capital to become successful. Eric also offers up many ideas for how startups can
test product/service ideas cheaply without investing alot of money into development which is another way startups can be lean. I was hoping to discuss some of these cheap ways to test startup ideas but that will have to wait until my next blog.
Posted on March 19, 2015 @ 10:03:00 AM by Paul Meagher
It has never been easier to formally learn about entrepreneurship. There are loads of YouTube videos, online lectures, and websites that you can access for free or for a reasonable fee.
One online learning resource that I like to regularly check out is Coursera. Coursera has a few entrepreneurhsip courses that it now offers on a
regular basis for free or for a fee if you want to get a certificate of completion. They have recently started re-offering three of their core courses. All three have started on March
16 but it is not too late to register now and start doing the coursework.
Develop insights on navigating the innovation process from idea generation to commercialization. Build knowledge on how to create strategies to bring innovations to market. Develop an innovation portfolio and business model canvas for your venture.
Learn how to get your new venture funded. Understand capital structure for new ventures. Develop an understanding of investor pitches.
I would especially recommend the latter course to entrepreneurs as it covers alot of questions you might have about the process of raising funds.
Coursework, however, can only take so you so far. You eventually need to put the books down and try to get your business launched. Informal
education is required as well.
Another place where you can increasingly learn about startup culture is at large Arts Festivals. The South By Southwest (SXSW) Festival is on in Austin TX until the 22nd of March. You can
follow what is happening at SXSW through their live streaming channel ON at http://sxsw.com/on.
Posted on March 4, 2015 @ 01:37:00 AM by Paul Meagher
Where do new businesses come from?
In one version of the story, the founders have an idea or a market opportunity, pursue that idea/opportunity with a lean methodology, and eventually, if they were correct and the market responds, they will be on their way to launching a successful company.
In another version of the story, the entrepreneur starts a side project for whatever reason while continuing with her bread-and-butter work, but that side project
starts to evolve and appear like a bigger opportunity than she initially imagined. Because it is an ongoing side project, some research and development work is ongoing and work is mostly geared at creating a minimum viable product. This happens naturally because it is just a side project and who wants to invest all that time into developing something with too many features that no one will use. The entrepreneur involved in the side project wants to use it and maybe a few people she feels inclined to share the idea with. The idea is shared and the feedback helps the entrepreneur figure out things to add and remove and the feedback gets better. The entrepreneur sees more possibilities in her side project and decides to launch and make it available to a wider audience. The wider audience responds, the entrepreneur devotes more time to her side project, and a new company is born.
In the first version, the company is more of a planned undertaking while in the second story the company is more of an evolved side project that may adhere to lean principles by necessity rather than through conscious adoption.
From this observation, one could draw the conclusion that learning a startup methodology is not really necessary to creating a successful company. We've been starting companies for a long time now without any Learn Startup theory and principles. One of the ways we have been doing this is by launching side projects that morph into a main line of business. These side projects operate under a different set of constraints than our main projects, they get done when there is time, there is very little to no budget directed at them, if they get shared with a small circle of people then there is the opportunity to collect feedback and better adapt the product or service and perhaps receive encouragement to share your product or service more widely with people they know, and so on.
I'm involved in a Permaculture side project right now. I have to complete a design project as part of the requirements for my Permaculture Design Certificate so have been mulling over what might be a feasible Permaculture-related side project for awhile now. I'm now in the second iteration of a concept and have shared this new iteration with a close network of people who might participate in my scheme. As part of my project requirement, I am now tasked with explaining how my design adheres to various Permaculture ethical and
design principles. This exercise seems like a rationalization of the actual design process, except that the discovery and justification of some elements of the design were inspired by the directive to include a social permaculture element into my design. My design is also constrained to be in harmony with Permaculture principles although I am only now trying to fully commit these principles to memory.
I have reached the stage in my side project in which I think I may be able to launch a minimum viable product with no cost except some domain names and my time to develop the site. I'll be able to use code I developed in another side project to get something up and running fairly quickly. The 3 other people who I have contacted might agree to use the website for its intended purpose. The side project might achieve launch status within the next month. Spending time on planning instead of coding right way appears to have been a good way to manage my time for this side project. The planning work means I'll waste less time when it gets to the development stage of my side project. In the video below, Colin Ta'eed talks about just doing it and getting the initial version of your side project out there in less than 10 hours. In my own experience, spending time in planning and discussions can also be very productive way to evolve your side project, however, you need to eventually get something out there. If you can forsee issues before you begin, perhaps it is better to spend your time solving those issues than implementing a half-baked idea just to get your side project out there. In my own case, my thinking, planning, and discussions led to me pivoting to a new idea that seems more feasible and realistic to begin with.
The purpose of this blog posting is to highlight the importance of side projects in the process of developing new lines of business. There is no recipe for choosing what side project to work on, they often arise out of ideas and experiences that you are interested in pursuing for an extended period of time. If the ideas and experiences involved in your side project are intrinsically interesting to you, then monetary rewards do not have to be the motivating aspect of your side project. By working on a set of ideas for an extended period of time, and sharing your ideas with others, you may get to the point of launching your side project for the greater benefit of others. Seeing that others want to use your product or service may be the main goal of our side project. If that is achieved, however, then other possibilities open up. If your side project has some traction in your niche then that is a good foundation for seeking investment to further the evolution of your side project. It is not theoretical anymore.
So if someone asks you "How do I become an entrepreneur?" you could advise them to take a class in Lean Startup theory and learn how to pitch and do all the stuff that startups have to learn how to do. You could also ask them if they have any side projects they are working on or are thinking about working on. If they don't, maybe you should tell them that is not a good indicator so far.
I searched on "side projects" on Youtube and found this recent keynote on the topic. The keynote is by a CEO and co-founder of Envato, Colin Ta'eed, and was delivered at a recent Ruby development conference. He reinforces some of what I have suggested and makes the interesting additional observation that involvement in side projects is a good way to learn some of what is required to be a startup.
Posted on February 12, 2015 @ 07:54:00 AM by Paul Meagher
I have just finished reading Peter Thiel's new book Zero to One (co-written with Blake Masters). Peter was cofounder of PayPal, cofounder of Palantir, and a venture capitalist. The book is a recent best-selling business book owing, in part, to Peter's stature in the startup and venture capital community. It is quick and easy to read, interesting throughout, opinionated at times in an Ayn Rand sort of way, and filled with insights on venture capital, the keys to startup success, the Silicon Valley boys club (or the "PayPal Mafia" as he calls them), and his recipes for saving the economy and the planet (will depend on startups with insights into truths that are not commonly accepted).
When I read Peter Thiel I am cautious as Peter's advice is often directed towards providing insight into how the top .01 percent of companies achieve that level of success (see YouTube videos featuring him). He is not interested in companies that make incremental improvements in already established markets (1 to N companies), but rather companies that develop products or services that are sufficiently
ground-breaking that they can monopolize a market (0 to 1 companies). These are the companies that allow venture capitalist to stay in business and make money when most of their other companies under perform. Sometimes I wonder if Peter's advice
is pertinent to the majority of incremental companies that exist. Sort of like thinking that your kid is going to play in the major leagues when their sports career will be much less stellar. The advice in the latter case might focus more on fun, balance, and sportsmanship. Many parents, however, want to hear advice telling them what
it will take for their kid to be a superstar. Peter Thiel's book appears to be more directed towards entrepreneurs that want their startup to be the next PayPal, Facebook, Uber, Spotify, and so on; not those entrepreneurs who want to make an above average income and gradually grow a company.
That being said, I did find that chapter 13, Seeing Green, had a very useful framework for analyzing the keys to startup success that has general applicability. In that chapter, Peter suggests that
companies should address 7 questions to determine how successful they will be (pp. 153-154). These questions are:
The Engineering Question: Can you create breakthough technology instead of incremental improvements?
The Timing Question: Is now the right time to start your particular business?
The Monopoly Question: Are you starting with a big share of a small market?
The People Question: Do you have the right team?
The Distribution Question: Do you have a way to not just create but deliver your product?
The Durability Question: Will your market position be defensible 10 and 20 years into the future?
The Secret Question: Have you identified a unique opportunity that others don't see?
These 7 questions summarize the themes that Peter discusses in more detail in earlier chapters of the book and in chapter 13 he uses them to analyze why cleantech companies in the last decade
imploded (poor answers to most of these questions) and why a company such as Tesla Motors is very successful (good answers to all the questions). For me, chapter 13 was the most useful part of this
book and one that most entrepreneurs would benefit from reading. These are some good questions for startups to ask themselves.
Posted on January 21, 2015 @ 09:23:00 AM by Paul Meagher
Last weekend I participated in a "Startup Weekend" event for the first time. You can find out more about startup weekends and upcoming startup weekends at StartupWeekend.org.
Our particular version of it started on Friday at 4:30 pm and involved around 80 participants, mostly from local universities which included students in business, computer sciences, and agriculture programs. I say agriculture programs because this particular startup weekend had an agricultural bias as it took place on an agriculture campus. We began with networking games so that the people in the room could begin getting familiar with each other. This took place for around 45 minutes. After that there was rapid fire pitching where everyone who wanted to was given a minute to pitch their idea. The quality of the pitches was frankly not that good but some stood out more than others.
As the pitches were going on a title was given to each pitch (by a facilitator) on a large sheet of paper that was eventually taped to the wall. There were several such papers taped to the wall. We were all given three stickers that we could put on the three pitches we deemed the best. The top 8 pitches were asked to pitch again so that people could decide which pitch they wanted to work on over the weekend. I picked a local food startup and worked on that startup idea with 7 others over the weekend. We began working on the startup idea on Friday evening until 9 pm, then from 9 am to 9 pm on Saturday (when the bulk of the work gets done), and finally from 9 am until 2:30 pm on Sunday when we started pitching the 8 startup ideas to judges.
The process can be very intense as groups work to acquire enough conviction in the idea to want to develop business models, financial spreadsheets, customer validation data, powerpoints, websites, and social media accounts for the startup idea. In our case we made very little progress until Saturday afternoon and then in about 10 minutes the pieces started to fall into place as we made a small pivot on the idea. After that it was a matter of working out the details.
During the process various mentors would come into the room and give you their 2 cents on the idea. Teams that were intensely divided on the direction an idea should take began to jell over the weekend.
The final pitch event took place on Sunday at 2:30 pm. We had a panel of 6 judges come in to judge the 8 pitches and select the top 2. The participants at the event had the opportunity to select the 3rd place finisher. The judges were recognized leaders in the local business community so had some credibility in being able to select the best startup ideas.
What impressed me about the final pitches was how far the startup ideas progressed over the weekend from rough ideas to pitches with polished powerpoints, financial analysis, customer validation data, websites, and
more. It is really quite amazing what can be accomplished in the span of a startup weekend.
I'm happy to report that the startup project I worked on won first place. The originator of the idea got to take home $6500 to help start up his business. The credit goes to the team that had a variety of skills that resulted in a startup idea that was deemed the most ready to hit the ground running (other projects were deemed to have too many elements that were outside of the startups near term control so would be delayed in starting up).
I would encourage anyone who hasn't participated in a startup weekend to try it out at least once. A few caveats: The attendees are mostly university students, often taking business degrees or degrees that have some entrepreneurship or "starting lean" elements to it and this event if often promoted as an adjunct to such courses. I would personally like to see more of a mix of ages so there is more business experience in the room but the enthusiasm of youth is a plus. The process is susceptible to block voting as participants come with friends and may choose pitches more on the basis of friendship than merit. Also, one minute is not a long time to pitch your initial idea so it will tend to favor ideas that are simple to express and relate to. Trying to explain a niche opportunity might be difficult with no props and 8 sentences to do so. Finally the process was a bit too indoctrinating in some respects for me in that the lean startup approach might be preached as gospel at these events. I think there are some good ideas in the starting lean philosophy but it scares me when I see students thinking there is a simple recipe to starting a business. The starting lean approach, however, has produced the startup weekend concept and format and should definitely be congratulated for that achievement.
Even though the process is imperfect, I do recommend that you try it out at least once as there is much to learn from the process, the enthusiasm, and the camaraderie that develops over an intense 54 hours. It is an opportunity to experience the power of teamwork as people with a variety of skills and experiences come together to work on a startup idea.
Posted on January 9, 2015 @ 07:49:00 AM by Paul Meagher
In my last blog, Ecological Business Design, I promised more blogs to explore the idea of using ecology to inform business design. One point I should make first is that by "Ecological" I do not mean Green Business Design or Environmentally Friendly Business Design. You can find books that explore energy saving and low-impact business practices, but that is not what I mean when I use the term "Ecological". I use the term ecological to mean that we are designing a business using central concepts, ideas and observations from ecology to help guide us. If you google "Ecological Business Design" you will find that it is used to mean green or environmentally friendly ways to run a business. I'm not using it in this sense, although the outcome of ecological business design might produce that result.
One central concept in ecology that has spilled over into business is the concept of a niche. We have all heard the advice that you have to find your niche in business in order to survive and thrive. In ecology,
the concept of a niche is defined by referencing it to the competitive exclusion principle which Joseph Grinell formulated in 1904 as "Two species of approximately the same food habits are not likely to remain
long evenly balanced in numbers in the same region. One will crowd out the other". This principle was given experimental validation by Russian ecologist Georgy Gause who raised two types of Parameciem micro-organisms in a dish and gave both organisms the same water and nutrients. Eventually only one of type of Parameciem micro-organism remained leading to the conclusion that two species can't simultaneously occupy the the same niche in the same place at the same time. One will be competitively excluded by the other based on factors such
as differential reproduction rates, growth rates, etc...
So when designing a business one of the first things you need to do is make sure you have the potential to occupy a niche, that you won't be competitively excluded by another business focused on the same customers or the same resources as you are who might have a competitive advantage, otherwise you will be competitively excluded from entering that niche.
If you are looking for inspiration on how niches are defined then the best thing you can do is study birds. Theoretical development of the niche concept has been most heavily influenced by studying bird behavior and
a classic study was by Robert MacArthur on different species of warblers in northern forests. MacAurthur observed 5 species of warblers in a plot of white spruce on Mt. Desert Island in Maine. He observed their feeding behavior and recorded what part of the tree they spent their time feeding upon. He found clear differences in which part of the tree the different species of warbler fed from and he used this to explain why competitive exclusion didn't cause one type of warbler to wipe out the others. Each type of warbler feed from a different part of the tree, they partitioned the resource in such a way that there was less potential for a competitive interaction.
The niche concept is important because it helps to define what we mean by competition. We compete because we are trying to occupy the same niche. We avoid competition by creating a niche were there is less overlap in the resources we feed off. When two businesses try to occupy the same niche at the same time is when the need for competition arises which leads to the need to develop competitive abilities to remain in that niche.
The niche concept was formalized by one of the most important theoretical ecologists, G. Evelyn Hutchinson, who talked about n-dimensional niches. Although this involves a bit of math notation, I think it is worth reproducing a bit of his writings on this matter because they have been so influential in formalizing the concept for ecologists.
Consider two independent environmental variables x1 and x2 which can be measured along ordinary rectangular coordinates. Let the limiting values permitting a species, S1 to survive and reproduce be respectively x'1, x''1 for x1 and x'2, x''2 for x2. An area is thus defined, each point of which corresponds to a possible environmental state permitting the species to exist indefinitely. If the variables are independent in their action on the species we may regard this area as the rectangle (x1=x'1, x1=x''1,x2=x'2, x2=x''2)
but failing such independence the area will exist whatever the shape of its sides.
We may now introduce another variable x3 and obtain a volume, and then further variables x4....
xn until all of the ecological factors relative to S1 have been considered. In this way an n-dimensional
hypervolume is defined, every point in which corresponds to a state of the environment which would permit the species
S1 to exist indefinitely. For any species S1, this hypervolume N1 will be called the
fundamental niche of S1. Similarly for a second species S2 the fundamental niche will be a similarly
defined hypervolume N2.
So finding a niche according to Hutchinson involves defining the limits for each of the N environmental factors which would permit your business to exist and making sure that another business does not substantially overlap in the same hypervolume area with respect to those N environmental factors and their limits. If there is overlap your choices are to add a new dimension, adjust the preferred range on one or more of the dimensions, or develop competitive abilities so as to occupy the space better than your competition.
Hutchinson distinguished between the fundamental and realized niche. When designing a business we will often be defining the fundamental niche we would like to exist within, a niche that does not overlap with our competitors perceived fundamental niche. The reality, however, is that there will be some overlap and some interactions with competitors that lead to your realized niche. This could be construed as a warning that your business plan will likely need to be altered in light of overlap and competition so that the niche you might have wanted to occupy is different that the one you will find yourself occupying. This does not mean that the niche concept is useless, but it does help to warn you to expect divergence and perhaps anticipate it a bit better so you can
react better, perhaps by adding another dimension to your niche, occupying a different range on a dimension, or anticipating some of the competitive abilities you might need to develop.
An illustrative example might be opening a crossfit gym. If you are the only crossfit gym in town then you might not consider other types of gyms as competition because you occupy different niches. This is a nice position to be in if the resource base is there to support multiple fitness outlets. Likewise, many startups are potentially free to grow rapidly because they occupy a niche that no other business as currently occupying but for which there is a need. What happens, however, when another crossfit
gym opens up across town motivated perhaps by your success? The niche you envisioned occupying may now need to change to deal with the competition or you may need to develop better competitive abilities or you may not need to adjust your gameplan very much because there is enough resource for two crossfit gyms to exist in the different locations they occupy. It might be useful to do market analysis at this point to determine how many crossfit gyms are able to serve a population of size N in other cities to determine how worried you should be and how you might want to react given the size of your city or resource base.
In ecology, species entering a new territory are often referred to as being 'r-selected' and have fast growth attributes to take over the resource quickly, however, there might come a time when that resource is becoming more scarce and the species that survive need to develop other attributes associated more with efficiency than growth. These successional species are often referred to as being 'K-selected'. This might be another concept to keep in mind when designing your business - the niche might be wide open at first for a startup and you need r-selected attributes to exploit it but you will eventually need to plan for a time when the niche becomes filled with potential competitors and how your business will have to change as a result. Your realized niche can change over time as competitors come in and different sets of business attributes become more important to remain in that niche.
So my objective in today's blog was to begin to demonstate that ecological concepts might be useful in designing a business. One such ecological concept is the concept of a niche. The concept of a niche helps you to reason about your market, about your competitors, and about how you might maneuver your business over time to survive and thrive. The associated concepts of competitive exclusion, n-dimensional niche, fundamental niche, realized niche, resource partitioning, r-selection, K-selection are all potentially useful in designing your business and in managing it over time. If reading business books is not your thing, you can learn more about the niche concept by reading about and observing how different species of birds coexist. Nature, in particular the study of bird behavior, has something to tell us about we might think about and find a niche.
Posted on December 15, 2014 @ 07:43:00 AM by Paul Meagher
In my last blog, Teen Entrepreneurs, I discussed my own approach to trying to foster some entrepreneurship in my son and daughter. In today's blog, I want to offer up a case study of a successful teen entrepreneur, Jonathan Dysinger, so that we might reflect on how he achieved his success. Johnathan Dysinger was 15 when he started work on designing the Quick Cut Greens Harvester which now sells for around $500 and is currently sold out. There is a very bright future ahead for his company, Farmer's Friend, and his first product, the Quick Cut Greens Harvester. Here is the official promotional video for the product.
The first lesson is that teen entrepreneurs are no different than other entrepreneurs insofar as they are interested in solving problems that are deeply meaningful to them. In the case of Johnathan, he spent long hours harvesting greens and was very interested in finding a way to harvest greens more easily. Many teens these days are not as involved in the work of their parents and it is something to consider whether this is an element of developing entrepreneurial capability in your teens.
The second lesson has to do with the discovery and validation of an entrepreneurial project. The idea for this project was suggested by Elliot Coleman who is a highly-respected pioneer in market gardening (Elliot is the gray haired fellow in the video above). While Johnathan may have had the latent desire to solve the problem of harvesting greens more easily based upon his experience, it took the suggestion of a mentor for him to realize that it was a real problem, that it was not being currently solved, and that it would be quite valuable to those who work in the area that he was involved in. So the discovery and validation of entrepreneurial projects for teens does not necessarily originate in the teen and might be best fostered by putting them in contact with a mentor who is involved in the area that they are involved or interested in.
A third lesson has to do with getting support for your idea. In this case, his parents were able to offer support for the initial development of his prototypes. Once the idea reached a more advanced stage, the parents were again able to marshal support for the idea by going through their network to raise additional funds for manufacturing. So the development of teen entrepreneurship is not just a matter of letting the teen go off on their own to design and develop a product or service, the parent will probably need to be involved financially all the way through. It may be a losing proposition for most parents but if they stay involved and provide capital and support at the right times and in the right amounts, then maybe such projects will stand a better chance of being successful. Also, at a certain point, the parent may need to recognize that the idea has reached a level beyond their ability to finance. The parent will need to help raise funds to take the project to another level by tapping into their business network.
Finally, there are some advantages to being a teen entrepreneur. I think society notices a bit more when a teenager makes the leap into entrepreneurship and I think society might be there for them a bit more than they would be for even young adult entrepreneurs. The media picks up on these stories, mentors might be more open and supportive of young entrepreneurs with startup ambitions, and financing might be more available because there is so much potential that, if fostered correctly, could help both the financier and society for a long time to come. Investors want to get in early when they see potential and you can't get in much earlier than supporting a teen in a startup, especially when that teen is surrounded by parents who are also supporting him/her financially and in many other ways.
So these are just a few lessons we might draw from this case study. Another high profile case study of a young entrepreneur
might be Parker Schnabel (pictured below) who is one of the featured miners on the popular TV series Gold Rush Alaska (one of my favorite shows on TV now). I think you see some of the same dynamics playing out if you were to do a case study on Parker (i.e., entrepreneurial ideas originating/validated with his grandfather mentor, ongoing financial support from parents, good media coverage owing to age, relative ease of raising capital because of early potential and family involvement). Parker is more accurately classified as a young adult now but was a teenager when he started up his own mining venture. One challenge that Parker's case illustrates more clearly is the problem of being taken seriously by adults. In Parker's case, I think that his grounded self-confidence and work-ethic are big factors in gaining respect from his seniors and would be important personal attributes for successful teen entrepreneurs to possess as well.
Posted on December 11, 2014 @ 10:28:00 AM by Paul Meagher
My daughter will be finishing high school this year and will be deciding in the new year what university she will be attending in 2015-2016. She is not sure what career she wants to pursue but likes the sciences and will likely enroll in that program. Usually when career discussions come up various ideas are put forth regarding jobs for which there will be future demand. I've contributed to such discussions but increasingly I find myself arguing the case for using university as a springboard to starting a business rather than, or in addition to, finding a job. I suspect that even if your goal is to learn what is required for a job that your prospects of finding a job would be increased by having some experience in trying to start a business. If you have two candidates with equal academic qualifications, but one has also tried to start a business, then I think most employers would consider the entrepreneurial candidate over the career-focused candidate.
I probably should have had some of these discussions before now regarding the entrepreneur career option. Better late than never. My son is in grade 10 so I'll have more opportunity to discuss this option with him and perhaps assist him in starting something while he is still a teenager.
Discussion will only get you so far with teenagers because what is important to them and me are not the same. You can talk about entrepreneurship but if it doesn't jive with their interests and hormones, then your talk goes in one ear and out the other.
So one idea I had yesterday as to how I might get them to think about entrepreneurship was to buy each of them a .com web domain that uses their first and last name as the domain name (e.g,. johnsmith.com). This will be an Xmas gift to them this year. I have web servers for my business that I can host them on so that expense is not there for them. I might put up a Wordpress site on the domain to get them started. It will give me an opportunity to discuss with them why people have personal-brand websites, how they might use their personal-brand website, what branding is, how they might drive traffic to their website, how they can collect payments from their website, etc.... Hopefully I can provide some business/technical support for any ideas they might want to bring to life for their personal-brand website.
When you purchase a personal-brand domain name (also called a vanity domain) for a teenager you save them the effort of coming up with a company name or business idea. That can be worked out later. In the case of my son, he has gotten good enough on the bagpipes that he can probably start offering his bagpiping services at funerals, weddings, reunions, and various other events. A personal-brand website would be a useful tool for him to have if he wants to pursue that option. Incidentally, my wife recently read that bagpipers are in demand because there are so few bagpipers available relative to the number of events for them to potentially play at. We will see.
So one idea for developing entrepreneurial capability in teenagers is to buy them a personal-brand domain name, have discussions about how they might use it and provide them with any support they might need to get some venture started on that website. Xmas is a good excuse to buy your teenager a personal-brand website. The website then becomes an avenue to have discussions with them about using their website in an entrepreneurial way.
Posted on November 28, 2014 @ 06:43:00 AM by Paul Meagher
In my music industry explorations this week I came accross an interesting recent article called Pomplamoose 2014 Tour Profits (or Lack Thereof). In this article, they analyze their income and expenses for a month long tour. They created their
income categories and expense categories and modelled the income and costs associated with each category. This modelling became the basis of their tour budget (and what they measured afterwards):
We built the tour budget ourselves and modeled projected revenue against expenses. Neither of us had experience with financial modeling, so we just did the best we could.
In the end, they reported a $12,000 loss on the tour. Part of this was because they paid the band well, stayed in decent hotels, and incurred many expenses that some bands would argue they would not have incurred. The Pamplamouse duo make revenues through other online channels that generates decent monthly revenue for the company so this may be a case of taking money out of one revenue producing stream to try to get another revenue stream launched better and to grow their existing ones. Whatever the case, I think they have provided some useful insight into what it takes to budget for a tour and the fact that they developed a financial model before jumping into it is noteworthy. It provides a useful template for entrepreneurs who might be unsure as to how to develop a financial model for a project or business cycle.
You can visit the Pamplamouse website to learn more about them and track the feedback and blowback they are getting for publicly reporting their tour financials.
Posted on November 21, 2014 @ 11:35:00 AM by Paul Meagher
I took a trip down to the farm today ostensibly to do some work. That might happen. No rush, nothing is growing and
most of the major winterizing is done.
Another reason to head down to the farm this weekend was so that I could change my mileau and perhaps stimulate my imagination
a bit more. I find that spending time at the farm puts me into a different frame of mind and makes me think differently.
The farm is what exists outside my window right now. The farm is also something that exists in rich detail in my imagination.
Imagination feels like an emotionally invested set of visualized goals that I want to maneuver the farm towards.
A business startup is what you exist in right now. A business startup is also what exists in your imagination.
A business startup is something that both exists and is imagined.
The goal is to "bring imagination into being" as Adrienne Clarkson so succintly put it in the 2014 Massey Lectures.
In Adrienne's 5th lecture (available online at the link) she discusses the power of "as if" thinking to turn imagination into being. She also suggests that "as if" thinking might be similiar to what is colloqually described as "taking it on faith".
I think it is therefore befitting to offer up a music video with the title "Take It on Faith" by Matt Mays. The video is comprised of old National Film Board footage from the 60's.
Posted on October 23, 2014 @ 09:48:00 AM by Paul Meagher
I've been recommending that anyone involved in a startup, especially a software-based startup, should be watching the lectures for the online course, How to Start a Startup, now being offerred by Y-Combinator to students at Standford. I recently had a chance to watch the 4th lecture by Adora Cheung, founder of Homejoy, who discusses ideas and strategies for early startup growth.
What I liked about this video was that she counters the myth that successful startups always add users quickly right out of the gate. Oftentimes early growth has much less ambitious goals and perhaps rightly so because if you are expecting to add large numbers of users every week then a) you might be very disappointed or disillusioned with your early progress, and b) you might be using the wrong marketing techniques to get started.
Adora talks about her goals for starting up as doubling her users every week starting with 1 user in week 1, two users in week 2, 4 users in week 3 and so on. When your growth goals are this modest early on, they seem doable and can be accomplished using low-cost localized techniques to encourage users to join. It gives you a chance to learn what works and what doesn't in your messaging and gives you a chance to personally interact with your users to better understand their motivations and desires and how they are using your product or service.
Some startups hold off on engaging in these modest attempts to gain users because they assume that a startup campaign requires a large infusion of money to get the marketing engine started. That can be a mistake when you are seeking funding because it helps to have at
least a few users on board with some trickling in on a regular basis when you ask for funding for marketing/advertising. At least you have 1) established that your product or service has a real market, 2) learned something about what promotional messaging is best to use, and 3) whether your feature set is viable so that injecting money into marketing/advertising is more likely to be a worthwhile endeavor.
There are other lessons to be learned from Adora's lecture. My main take home, however, was to have modest expectations for early growth. It does not require a large marketing budget initially to get your product or service in the hands of users. Once you get to the stage where you need to start spending money to add larger numbers of users to achieve your growth targets you will have hopefully learned many useful things about how customers think about and use your product or service and this knowledge should help to ensure that advertising dollars are well spent. If your product is sufficiently good, you may not have to spend too much on advertising if you are getting positive word of mouth. I didn't get the sense that Adora was spending too much on advertising but I could be wrong.
Posted on October 1, 2014 @ 07:24:00 AM by Paul Meagher
In todays blog on Learning From Weeds (see part 1, part 2, part 3, part 4) I want to examine a mimicry strategy that is common among weeds that compete with grain crops. The mimicry strategy has been used successfully in business and is facilitated by the internet and globalization.
When talking about the mimicry strategy there are three agents involved - the mimic, the model, and the dupe.
The mimic attempts to confuse the dupe into believing that it is the model. In the case of weeds, a weed
might mimic the appearance of a desired crop plant and thereby dupe the weeder into not weeding it out. Another
common way a weed dupes the weeder is mechanically by producing seeds that are similar in size and
shape to the seeds that the crop plant produces. This makes it difficult to separate the crop seeds from the
weed seeds and chaff during the winnowing process resulting in a situation where the weed seeds are mixed in
with crop seeds which get planted out again in the field.
Mimicry is a common strategy for weeds appearing in grain crops (wheat, rye, corn, rice, barely, oats,
sorghum) which are all domesticated grasses of one type or another. Often a grain crop achieved that status of
being cultivated as a result of mimicry. Rye, for example, became difficult to distinguish by eye and by winnow from wheat and eventually became a cultivated crop in its own right. Cheat grass is a mimic of rye and perhaps with further evolution will become a cultivated crop as well. A similar story can be told for oats which was a mimic of barley and which eventually became a crop in its own right.
It is important to note that the mimic does not completely mimic the model and it is often these small differences that lead to its cultivation as a crop. Rye and oats, for example, can survive in conditions that wheat and barley find challenging so offer good substitutions for these crops under these conditions.
So another lesson that weeds can teach us is the importance of mimicry as a strategy for starting, growing, and maintaining a business. This is an important lesson because often when we discuss entrepreneurship we equate it with pioneering innovation. It is true that innovation can be a very profitable strategy, but it can also be a very risky strategy and oftentimes it is those who copy the product or service, with some new twist, that end up dominating in the marketplace or at least making a home for themselves alongside the pioneer in the marketplace.
Isaac Wanasika and Suzanne L. Conner have written an interesting and useful article called When is Imitation the
Best Strategy? (2011) that delves into some of the nuances of mimicry as a business strategy. The importance of mimicry
as a strategy in biological contexts can be appreciated by reading about all the different forms of mimicry in
the Wikipedia page on Mimicry (see Vavilovian mimicry in particular). Finally, to learn more about mimicry in grain crops, you can read chapter 2 of My Weeds: A Gardener's Botany (1988) by Sara Stein. Chapter 2 is called "Wheat and Tares Sown Together". This is
a biblical reference and refers to ryegrass, aka Tares, being planted alongside Wheat because Tares was a good mimic of Wheat in its early growth habit.
This lecture series gives you an inside view on how the most successful accelerator in the world, Y Combinator (YC), thinks and operates. YC mostly deals with software based tech startups so the lessons are particularly useful for that type of startup.
I am posting the first video lecture below, but encourage you to watch them all as they come out if you want some in-the-trenches insights, by a variety of lecturers from Y Combinator, into How to Start a Startup.
Posted on September 24, 2014 @ 12:39:00 PM by Paul Meagher
In today's contribution to my series on Learning from Weeds (see part 1, part 2, part 3), I want to discuss an invasive weed called Field Bindweed (Convolvulus arvensis L.) and some of its entrepreneurial qualities. Bindweed is a cosmopolitan plant, meaning it can be found abundantly in most areas of the world that are warm and temperate. It is a very difficult weed to get rid off and is the bane of many gardeners existence once it gets
established. It can cause headaches for vegetable farmers if it gets established in vegetable fields as it competes for
space, nutrients, sun, and water with the plants around it. It thrives in the disturbed soil of a vegetable growing patch.
Recently I noticed some bindweed in a row of potatoes I was digging out. I must have gotten it while it was young because
I appear to have been able to pull the small root system it had out of the ground. Good thing, because if I didn't get it all, then the bindweed can grow back from the pieces of severed root left behind (i.e, pieces 2 inches or greater called rhizomes). Many gardeners can unwittingly propagate
bindweed by doing an insufficient removal of the root system when they are weeding it out.
If bindweed was an entrepreneur that entrepreneur would be a very resilient entrepreneur. Just when you think the entrepreneur is down for the count, the bindweed entrepreneur splits apart and forms smaller companies to continue the legacy. If the bindweed entrepreneur loses a big deal (gets mostly weeded out) then it is capable of surviving as several smaller companies until one or more of those companies takes off again.
One lesson that bindweed teaches us is the power of resilience. The ability to take the hits and come back.
Being competitive is important for starting, growing, and sustaining a business, but so is resilience - the ability
to bounce back from a bad event. Bindweed has resilient and competitive properties that explain why it is such a
Addendum: As I researched bindweed more, I realized that the plant I dug up in my potato patch was not field bindweed, it was wild buckwheat (Polygonum convolvulus) instead - a plant that is often mistaken for bindweed because they are from the same Convulvus genus. It is not as serious an invasive threat as bindweed because it is more of an annual than a perennial. The seeds of wild buckwheat were apparently part of our bronze age diet when we were hunter-gatherers. You have to be careful, however, about eating seeds from other members of the Convulvus genus.
Posted on September 17, 2014 @ 07:44:00 AM by Paul Meagher
In today's blog on Learning from Weeds (see part 1, part 2 for previous blogs on the topic) I want to discuss one major explanation for how weeds have spread and evolved over time and see if this explanation contains any ideas we might find useful as part of a business strategy.
One explanation for the existence and distribution of certain weeds around the world is that the plants were moved from an area of the world where they had lots of natural enemies to a new area of the world where those enemies didn't exist, thereby providing them with a competitive advantage over the native plants. We can call this the Exotic Invasion Hypothesis.
Many of the weed species we see in North America were transported from colonizers from England. The dandelion is one example, but there are many others. Some were planted because they thought the plants looked good or provided some medicinal, herbal, food, or other
aspect. Others weeds came in the ballast of ships that discharged in harbours and washed ashore.
When I look at weeds this time of year in abandoned hayfields, the three dominant weeds are New York Aster, White Heath Aster and Goldenrod. I am struck both by how dominant their presence is in the hayfield but also how beatiful they look. They would look as great in a flowerbed as any plant you might buy in a store; indeed, I recently say a yard that had several native plant gardens that looked very nice. He threw in a couple of exotics to add more color and shape variety.
So what can we learn from how weeds spread that we might apply to starting, growing, and sustaining a business?
The spread of weeds suggests that a company might only be able to spread so far in its native territory owing to the strength of local competition. It might be able to grow further if it can find an environment where it has fewer local competitors. To grow in this manner you need to be able to do a competitive analysis of your local environment and then look at other environments to see if fewer of these competitive elements are present in the environment you want to expand into. Such an analysis works best if you are considering several potential locations to expand into because then you can pick the location that has the
fewest competitive elements in it.
Hawaii has hardly any native vegetation left. It was an island cut off from the rest of the world and in that environment some slow growing non-aggressive plants
were allowed to thrive. When foreigners started to travel more freely to Hawaii,
the plants they took with them, either by intention or not, had little local
competition for the resources the island provided. As a business, your situation is
either like Hawaii pre-colonialization and there is room to expland locally by competing
with slow growing non-aggessive local competition, or you are looking for a
Hawaii-type business environment that it might be easier to expand into.
The Exotic Invasion Hypothesis is one of the more important explanations for how weeds
startup, grow, and sustain themselves over time. There are other explanations that we
might look into in another blog as they suggest other strategies and conceptualizations
of weed/business dynamics.
Posted on September 15, 2014 @ 07:41:00 AM by Paul Meagher
In my last blog on Learning From Weeds: Part 1, I announced my intention to explore whether the study of weeds might
be useful in providing insights into how to start, grow, and sustain a business. I also began examining how we might
go about defining what a weed is and suggested that any attempt at a scientific defination would have to take into
account our own biases and interests in categorizing one type of vegations as good, and another type as bad, or a weed.
One appoach to defining what a weed is involves enumerating the properties that the "ideal" weed exhibits. The ideal
weed is a super weed that has all of the invasive powers that a weed might possess. If an actual weed possessed all these
powers, then that would be a very difficult weed to compete against or get rid off. So weeds can be judged as more or
less weedy in proportion to how many of these weedy properties they possess.
So what are the properties of an "ideal" weed. This is the point at which I need to introduce another reference I am
using to understand weed dynamics. One of the best academic treatments on weeds is The Ecology of Weeds and InvasivePlants (2007, 3rd Edition) by Steven Radosovish, Jodie Holt, and Claudio Ghersa.
I'm making my way slowly through this academic text. It is a slow process to read for awhile and then stop and think about how thes ideas might relate to starting, growing, and sustaining a business. Sometimes the connections are easy to come up with, sometimes it is frustrating and the connections seem a bit forced. Luckily, what I am learning about weeds from this book is very interesting and agronomically useful to know so that is helping to keep this project moving ahead.
An important paper cited in this book is by H.G Baker who wrote an academic article in 1974 called "The evolution of weeds". Here he came up list called the Ideal Characteristics of Weeds. It is reproduced below:
Germination requirments fulfilled in many environments.
Discontinuous germination (internally controlled) and great longevity of seed.
Rapid growth through vegetative phase to flowering.
Continuous seed production for as long as growing conditions permit.
Self-compatibility but not complete autogamy or opomixis.
Cross-pollination, when it comes, by unspecialized visitors or wind.
Very high seed output in favorable environmental circumstances.
Production fo some seed in a wide range of environmental conditions; tolerance and plasticity.
Adaptations for short-distance dispersal and long-distance dispersal.
If perrenial, vigorous vegetative reproduction or regeneration from fragments.
If perrenial, brittleness, so as not to be drown from the ground easily.
Ability to complete interspecifically by special means (rosettes, choking growth, allelochemicals).
So the game here is to look for business analogues for each of the terms used here.
For example, "Germination requirements fullfilled in many environments" might mean that the establishment and growth of a business depends upon how many niches the business can sell their product or service into. If the product or service only has a small market that it can serve, then that business can only get so big. So when examining the growth potential of a business, you might judge that potential by how big
a market the product or service and appeal to (germination requirements fullfilled in many environments). This may not be an earth shattering insight, but it might suggest that weeds and businesses are sufficiently similiar in their dynamics that one model system (Model 1 = Weeds) might be mapped onto another model system (Model 2 = Business). This facilitates inductive reasoning about the mapped to system (Model 2 = Business).
The second characteristic of an Ideal weed is "Discontinuous germination (internally controlled) and great longevity of seed". This refers to the concept of a "seed bank" that weeds produce around themselves and further afield by wind or pollination. The seedbank allows a field to be plowed year after year with no evidence of the weed, only to have it appear on the n+1 year when you did not plow. The seed lays dormant in the seedbank until conditions are right for it to emerge again. So what is the analogue of a seedbank in business? Perhaps it is the idea that, if you want to grow like a weed, you always have deals in the pipeline, some of which are for todays needs and requirements, and some of which are for the future growth of the company. These seeds of future growth might serve to sustain your business in the future, or, if you maintain a constant number of deals over time the future deals should overlap with current deals and lead to company growth during that time period when your future deals mature.
Would you agree that these weeds are starting to look pretty clever? It is not just a fluke that they appear on your lawn. Behind the curtain there are clever strategies and adaptations that are causing them to appear
on your lawn. Likewise, to start, grow, and sustain a business we need to have some clever strategies and adaptations similiar to those that a weed posesses.
The third characteristic of an ideal weed is "Rapid growth, through vegetative phase to flowering". So a weed progresses through several stages as it emerges from the dirt as a small green plant to the stage when it is, say, 4 feet tall and putting out large clusters of seed and pollen bearing inflorescences (in late summer). The "vegetative" stage consists of the period when the green plant does not have colorful flowers on it. It can also include the stages when the flowers are
developing but the seed is not mature so the full inflorescence is not in display. So a business that is experiencing rapid vegetative growth is experiencing rapid development prior to the point at which they announce their intentions to launch; in other words, they put on their full inflorescence display. If you don't have rapid development during this
period you often fail because your burn rate can only sustain a short period of time. So, to achieve maximal growth potential you need to go from startup to finished product in a short period of time and then have a nice showy display that attracts alot of pollinators or interest more generally.
I could go down this list of ideal characteristics of weeds and make up more stories about how the strategies that weeds use might be interpreted in a business context, but this blog is too long already so I will leave that as an exercise for you to think about and for me to potentially address in a future blog.
In conclusion, weeds are complex and sophisticated in how they operate. If we show some respect for their complexity and sophistication then we might open ourselves up to learning from weeds. One concrete way to learn from weeds it to take the list of ideal weed characteristics provided and, once you understand how these claims work in the weed
world, ask yourself how that understanding might translate into how to start, grow, or sustain a business. The ideal characteristics of weeds, though not referring to any specific weed, are neverthess useful when it comes to thinking about weed dynamics, and, by extension, how successful businesses might work.
Posted on September 12, 2014 @ 08:36:00 AM by Paul Meagher
In a previous video blog series on the Joys of Hand Weeding (Part 1, Part 2, and Part 3) I enumerated the various joys that might be experienced while hand weeding. The video blog series arose because
I had a 5 day hand weeding job to do in my startup vineyard and reflecting on the process made it more physically and intellectually enjoyable.
Since then I have become fascinated with learning more about weeds - their names, their life cycles, their reproductive strategies, their uses, and so on. I find myself more interested in what is growing
in a ditch than in people's carefully manicured gardens and lawns; more interested in what grows wild along the fence lines, the river banks, the edges of hay fields, lawns, and gardens.
Lately I've been trying to make some of this observation, research, and thinking relevant to the concept of entrepreneurship and that will be the point of this series of blogs on learning from weeds.
Perhaps the most popular metaphor that is used for thinking about entrepreneurship is war. Many people use The Art of War as a bible for thinking about how entrepreneurs and startups should conduct themselves in the arena of business. No doubt there are many insights that can be learned by thinking about business in terms of a war metaphor, but it should be recognized that it is a metaphor and that there
might be other metaphors that can offer us different insights into how to start, grow, and sustain a business.
I am generally of the view that "nature" is also a rich source of metaphors we might use to guide our thinking about how to design a business or a product and what strategies we might use to start, grow, and sustain a business. I am not the first to realize this. Indeed, the the field of biomimicry is premised on the idea that we can apply our learning about nature to the design of new and innovate products. The Wikipedia page on Biomimetics provides a sample of some new products that have been inspired by a careful study of nature:
Aircraft wing design and flight techniques inspired by birds and bats
Climbing robots, boots and tape mimicking geckos feet and their ability for adhesive reversal
Nanotechnology surfaces that recreate properties of shark skin
Treads on tires inspired by the toe pads of tree frogs
Self-sharpening teeth found on many animals, copied to make better cutting tools
Protein folding used to control material formation for self-assembled functional nanostructures
The light refracting properties of butterfly wings are harnessed to provide improved digital displays and everlasting colour
Better ceramics by copying the properties of seashells
Polar bear fur inspired thermal collectors and clothing
Mimicking the arrangement of leaves on a plant for better solar power collection
Studying the light refractive properties of the moth's eye to produce less reflective solar panels
Self-healing materials, polymers and composite materials capable of mending cracks
In Denton Ford's book, Darwinian Agriculture (2012), he asks the innocent question "Where does nature's wisdom lie?". So if we want to use nature to learn about, or provide some new insights into, entrepreneurship then what part of nature should we be looking at? Denton argues that evolution does not optimize at the ecosystem level but rather at the species level (nature "selects" at the species level) so the lessons are more likely to be found by studying individual species rather than complete ecologies. I confess to looking for possible business insights at the ecosystem level and probably will continue to do so, but agree that nature's wisdom might be located more at the species level, the level of particular types of animals and plants, like weeds.
So as entrepreneurs wanting to use nature to learn more about starting, growing, and sustaining a business, where does nature's wisdom lie? The answer that I aim to explore is that the study of weeds might provide some insights into how to start, grow, and sustain a business. I have performed some basic searching on the topic of "startups as weeds" and came up with very few results. The main result is Tim MacDougall's blog
Startups ARE like weeds. Weeds are good. Here he cites a passage from The Lean Enterprise:
Fred Wilson, founder of Union Square Ventures, says he likes to invest in startups that ‘grow like weeds.’ Why? A weed doesn’t need carefully prepared soil, regular watering, or full sunlight. It busts open its seed, sends down roots, and pushes upward without the need for a controlled environment. Likewise, ventures built according to lean startup principles don’t require the certainty of ideal conditions to thrive. They thrive in conditions of extreme uncertainty – the very conditions that bring the highest returns on investment
I encourage you to read the full blog for a few other observations about how startups are like weeds.
While I think these are some interesting observations, the blog uses a fairly superficial understanding of weeds to generate some insights into entrepreneurship. If we really want to use weeds as a starting point for where nature's wisdom lies vis a vis startups, then I think we should get into the nuts and bolts of how weeds actually work to see if there is more insight to be had by having a more sophisticated knowledge of what a weed is and how it works.
Towards that end I have done a literature search on some of the best books that examine weeds in more detail. I'll be sharing
some of these references and ideas with you in the coming blogs. I'll finish this blog by citing one of the books that
I'm currently reading called, appropriately enough, Weeds (2010), by Richard Mabey.
The very concept of what a weed is is deeply problematic. It is probably impossible to define what they are using a botanical or ecological definition. We might have more success if we look at a behavioral quality that they have in common:
Weeds thrive in the company of humans. They aren't parasites, because they can exist without us,
but we are their natural ecological partners, the species alongside which they do best. They relish
the things we do to the soil: clearing forests, digging, farming, dumping nutrient-rich rubbish. They flourish in
arable fields, battlefields, parking lots, herbaceous borders. They exploit our transport systems, our cooking
adventures, our obsession with packaging. Above all they use us when we stir the world up, disrupt its settled
patterns. (Weeds, p. 12)
So just as Pogo famously said "We have met the enemy and he is us", we can also say "We have met the weed and he is us".
The existence and concept of a weed does not exist without us. To drive this point home, here is one more
delightful passage from Maybe's book:
The development of cultivation was perhaps the single most crucial event in forming our modern notions of nature.
From that point on the natural world could be divided into two conceptually different camps: those organisms
contained, managed and bred for the benefit of humans, and those which are 'wild', continuing to live in their own
territories on, more or less, their own terms. Weeds occur when this tidy compartmentalization breaks down. The
wild gatecrashes our civilized domains, and the domesticated escapes and runs riot. Weeds vividly demonstrate that
natural life - the course of evolution itself - refuses to be constrained by our cultural concepts. In so doing
they make us look closely at the very idea of a divided creation. (Weeds, p. 21)
So where does nature's wisdom lie for the entrepreneur? If the answer is "weeds" then the "divided creation" that is assumed in the question needs to be examined. The wisdom of weeds is a story that is as much about us as it is about nature per se. That weeds thrive in the company of humans is perhaps more reason to regard them as capable of telling us something useful about starting, growing, and sustaining a business.
Until next week, have fun observing and pondering what entrepreneurial wisdom lies in weeds around you.
Posted on August 21, 2014 @ 08:39:00 AM by Paul Meagher
Wilson Sonsini Goodrich & Rosati is a legal advisor to technology, life sciences, and other growth enterprises worldwide. On their website, they have a term sheet generator that they describe as follows:
This tool will generate a venture financing term sheet based on your responses to an online questionnaire. It also has an informational component, with basic tutorials and annotations on financing terms. This term sheet generator is a modified version of a tool that we use internally, which comprises one part of a suite of document automation tools that we use to generate start-up and venture-financing-related documents.
Term sheets are are important document in the fund raising process so it is useful to step through their questionaire to 1) learn some of the terminology used, and 2) see what some of the main decision points are in coming up with your own term sheet.
Posted on August 14, 2014 @ 03:24:00 PM by Paul Meagher
Richard Louv has written a couple of popular and influential books in which he argues that we need to spend more time reconnecting with nature because of all the positive benefits it yields for kids growing up, mental health and happiness, physical health, the development of intellectual and practical intelligence, and many other reasons that are cataloged in his books. The need to reconnect is becoming more imperative as we get more caught up in our virtual worlds and always being "connected" with "friends" instead of with nature.
Enter the "Nature Smart Entrepreneur" ready to seize the opportunity to help kids and adults reconnect with nature to receive the benefits that come with it. According to Richard Louv, "there's a whole new category of green jobs coming. These careers and avocations will help children and adults become happier, healthier and smarter, by truly greening where people live, work, learn and play". The "greening" that Richard is talking about isn't just making your house or appliances more efficient, it is arguably more about creating a natural and built environment that fosters a better connection with nature. These are green jobs that involve revitalizing people by making their homes, work environments, learning areas, and play areas include more interaction with nature. Richard refers to the entrepreneurs supplying these services as "Nature Smart Entrepreneurs".
Restorative employee health and productivity specialist.
Nature-smart residential builder.
Nature-smart yard and garden specialist.
Outside-In decorator, who will bring the outside in.
Health care provider who prescribes nature.
Green exercise trainer.
It is interesting to think about whether you would want to invest your money in any of these nature smart opportunities. These are new types of services so it is hard to gauge demand or pricing, however, their newness also means potential opportunity because the markets are new and open to a nature smart entrepreneur who might grow the market.
I'll end this blog with two questions that still puzzle me about the Nature Smart Entrepreneur concept. First, what is the Nature Smart Entrepreneur smart about? Second, how did they come to acquire their Nature Smarts? I suspect that answers to these questions are discussed in Richard Louv's latest book, The Nature Principle (2012), but I will enjoy pondering my own answers to these question on my nature walk this evening.
Posted on August 1, 2014 @ 08:41:00 PM by Paul Meagher
After my last blog, Frustration is Good: Part 1, I had the opportunity to discuss some of what I was learning about frustration with an entrepreneur/friend who has become fairly successful (2 million fund raise) but would not
want to admit it for fear of jinxing things. He experienced over 5 years of frustration trying to get his company off the ground, came very close to company bankruptcy, but discovered an opportunity related to what he was trying to achieve, and capitalized on that opportunity which put everything back on track again. Now he is experiencing
new frustrations associated with dealing with difficult people, not having enough time to enjoy the summer, and not
feeling like he is working for himself. It seems life is never without its frustrations, we often just trade
one set of frustrations for another. He is, however, much happier living with his current set of frustrations, than the
frustrations that came when his company was teetering on the brink.
This entrepreneur was able to achieve what he achieved because he persevered through the many frustrations he encountered along the way. The frustrations he experienced along the way were also learning
experiences that hardened him up, educated him about the perils of taking government money (e.g., they control spending often on their own economic development personnel), and taught him how the real game of raising private money is played. He was not a young man naive about the world when he learned these lessons. He had already had a successful career as a pharmaceutical representative when he decided he couldn't take it anymore, and started a business with a
friend and partner who also left his job as a pharmaceutical representative. The world never stops frustrating you as long
as you keep pushing the envelope.
It is very difficult to judge when the frustration you feel is telling you that you should give up versus try again or try a different route to your goal. It is unlikely, however, that you will achieve anything of significance without a considerable amount of frustration along the way. If you were fortunate and everything came easy, then how much would you have learned and do you think that you could repeat your success again? How satisfying do you think your success would be? Probably not as satisfying as if you achieved your goals by overcoming some frustrations along the way.
So in addition to helping us come to grips with reality, frustration is also generally a prerequisite to achieving a significant goal in life, and it can also heighten the satisfaction you feel when that goal is finally attained.
The mindful approach to frustration is to recognize that frustration is the price we pay to learn how the world works, to achieve big goals, and to feel a greater sense of satisfaction when we achieve our goals. The tricky part, however, is that frustration can also be a signal that the idea or business has no legs and perhaps we should try something else. My feeling is that the entrepreneur has a bit more persistence than most in the face of severe frustration, perhaps because the set of frustrations associated with owning and running a business are preferred
over the set of frustrations associated with working for someone else.
I'll end this discussion on why frustration is good by pointing out one more reason it is good: because it is often the source of innovation and business ideas. There are some who accept the frustrations of life as givens, others who see them as unacceptable and come up with innovative solutions to avoid them. The story behind many successful
products and services begins with frustration that an entrepreneur experiences when trying to do something and seeing a way to avoid or lessen the frustration.
I hope I have made a good case for viewing frustration in a more positive light. For the record, I don't think all frustration is good or positive, but for entrepreneurs in particular, I think we need to be very mindful about our frustrations, where they are coming from, whether they might be useful, whether they suggest an opportunity, what our reactions should be, and whether our present set of frustrations is better than other frustrations we might envision ourselves having if we were to do something different.
Posted on July 30, 2014 @ 10:03:00 AM by Paul Meagher
In my previous blog, Wishing Well, I briefly touched on the relationship between wishing and entrepreneurship.
In this blog and the next, I want to examine the role of frustration in entrepreneurship where
frustration can be defined as the flip side of wishing that occurs when you engage in action to fulfill a wish
but you are thwarted in your efforts. The emotion that generally accompanies this situation is frustration.
Frustration is good. Without it, we wouldn't 1) come to grips with reality, 2) achieve wishes of any significance,
or 3) experience heightened satisfaction with life. There are quite a few blog postings on the frustrations that
are common or unique to entrepreneurs, but I'm not aware of "frustration and entrepreneurship" actually being studied
much in any academic way. It might be interesting, for example, to see how successful entrepreneurs vs 1st year
university students deal with a frustration task (e.g., unsolvable anagrams task) to see if entrepreneurs persist longer or
react differently (e.g., more or less anger, ascription of cause to internal or external factors, etc..).
As far as I know, we don't know the answer to such basic questions regarding how successful entrepreneurs deal with and process
One surprising place we might find some insight into the role and operation of frustration is in psychoanalysis.
A book that examines this in some detail is a book by psychoanalyst
Adam Phillips titled Missing Out: In Praise of the Unlived Life (2012). The ensuing set of blogs on frustration
and entrepreneurship will draw upon insights from this book. The book itself elicits a large range of reader reactions from positive to negative. The negative reaction's appear to come from the frustration that he does not offer solutions to life's frustrations, instead mostly literary and psychoanalytic analysis of the nuances of frustration. I'm not offering solutions either, just discussion that might stimulate some deeper thinking on the topic of frustration and entrepreneurship. The title of this blog, Frustration is Good, suggests something that appears not to be true - and it might not be - but it serves the purpose of stimulating some thought on the role and purpose of frustration.
In this blog, I want to address the claim that without frustration we cannot come to grips with reality. This is a basic principle of psychoanalysis and the primary text to consult is Freud's Formulations on the Two Principles of Psychic
Functioning (1911). In Freud's analysis, as a child grows up it needs to distinguish between the fantasy world it lives
in and reality, and the key experience that puts the child in touch with reality is frustration:
whatever was thought of (wished for) was simply hallucinated, as still happens every night with our dream-thoughts. It was
due only to the failure of the anticipated satisfaction, the disillusionment, as it were, that this attempt at satisfaction
by means of hallucination was abandoned. Instead, the psychic apparatus had to resolve to form an idea of the real circumstances
in the outside world and to endeavor actually to change them. With this, a new principle of psychic activity was initiated; now ideas were formed no longer of what was pleasant, but of what was real, even if this
happened to be unpleasant. This inception of the reality principle proved to be a momentous step.
Lets take this out of the early development context and think about the role of frustration in later life. Here Adam Phillips has some wonderful prose to describe the critical role of frustration in later life.
We need to bear with, to know about, our frustrations not simply to secure our satisfactions but to sustain our
sense of reality. In the psychoanalytic story, if we don't feel frustration we don't need reality; if we don't feel frustration we don't discover whether we have the wherewithal to deal with reality. People become real to us by frustrating us; if they don't frustrate us they are merely figures of fantasy. The story says something like: if other people frustrate
us the right amount, they become real to us, that is, people with whom we can exchange something; if they frustrate us too much,
they become too real, that is, persecutory, people we have to do harm to; if they frustrate us too little, they become idealized, imaginary characters, the people of our wishes, if they frustrate us too much, they become demonized, the people of our nightmares. And these, we might say are two ways of murdering the world: making it impotent or making
it unreal. If this was quantifiable we would say that the good life proposed by psychoanalysis is one in which there is
just the right amount of frustration. (p. 29-30)
The process of raising funds can be a frustrating process for an entrepreneur. The investor is not the cardboard character
you might have imagined him or her to be. They are real people with certain demands that might appear to be designed to frustrate you in your wishes, but might also help bring you closer to fund raising reality and the accomodations you must make to eventually realize your goals.
My goal in this blog and the next is not to claim that a psychoanalytic interpretation of frustration is correct; it is to dabble for awhile in some of this literature for possible insights into the relationship between frustration and entrepreneurship. What I will claim is that it is worth spending some time reflecting upon the role of frustration in entrepreneurship because if we can become more mindful of the positive role of frustration, perhaps we can work with it to become more successful as entrepreneurs.
Posted on July 28, 2014 @ 12:39:00 PM by Paul Meagher
Welcome to my favorite wishing well. Click the play button and make a wish.
When I encountered this well on a walk in the park this morning, I couldn't immediately summon a wish that I wanted
fulfilled. It seemed a bit silly and perhaps I wasn't trying too hard. I did eventually come up with a wish for peace
in the Ukraine but that seemed like a politically correct thing to wish for and not truly a wish that stirred from
deep inside me. As I continued my walk I wondered whether I would wish to win a lottery if I was the type of person
that bought lottery tickets. I wondered if I was taking this wishing well thing too serious and whether it was just
meant to be an object of amusement and that I should treat it as such.
In a different part of the park I encountered a wishing well-shaped object that seemed like it had a more serious purpose.
It was a holy well. It is bolted shut probably to prevent children from falling into it.
So I start wondering whether holy wells and wishing wells might be related some how? Perhaps a wishing well originally contained holy water to make sure your wishes/prayers got though to god better? The water in the wishing well shown above is spring fed, clean and drinkable so is about as holy as I need it to annoint my wishes.
Is there any use for wishing wells? Would it be useful to visit a wishing well on regular occasions to cast out new wishes or revisit and reaffirm old wishes?
Many businesses start out as wishes to make money doing something that an entrepreneur enjoys doing. As the business
morphs into reality we may forget that it started out as a wish. As the business was starting up it seemed more like a
wish than a reality but once reality started to support the wish, you stop talking in terms of wishes and instead talked
in proper business terms about goals set and achieved and plans realized.
An investor will not invest in pure wishes, but a wish that drives the accomplishment of several milestones, that is a different story. The wish is strong in the entrepreneur. It is not a wish that fizzles out at the first encounter with hardship on the path towards its realization.
One wish that motivates me this year is that my grape vines will produce good quality grapes that I can use to make a good quantity of wine with. I have weeded, trellised, and pruned some of my grapes for three years now and these three year old grapes look like they might finally produce enough juice to start making wine with. Many factors could derail that plan between now and a harvest date in early October. If someone asks me if I grow grapes, all I can say is I'm trying, I'm hoping, and I'm wishing. If I manage to produce some wine, then perhaps I'll start talking in the language of goals and plans instead of hopes and wishes.
So what do you really wish for? Click the play button and make a wish.
Posted on June 16, 2014 @ 09:25:00 AM by Paul Meagher
Lately I've noticed that many of the books I'm interested in reading are being published by Chelsea Green Publishing so I decided to investigate their site to learn more about the company. The company's motto is "The Politics and Practice of Sustainable Living" and it expresses very well the niche they serve. They appear to have found a profitable niche both because the topic area has been gaining in popularity for a long time now and because the titles they publish have a good lifespan. They have many 20 year old books that still sell well because the politics and practices of sustainable living apparently don't change as rapidly as they do in other topic areas.
When you are a book publisher you can potentially publish books that serve a wide variety of interests. Indeed, in the early days
before Chelsea Green Publishing had found its niche, it published books in other topic areas such as Art. Eventually, they found their
audience and here is how co-founders Margo and Ian Baldwin describe the process of finding their niche to an interviewer:
Ian: We had, I would say, extremely good editorial judgment, and we published quality books, so we built a brand name of a quality publisher that was interested primarily in non-fiction, but what we didn't have was a sense of who are audience was - you've got to pick out your audience and you've got to be extremely precise. So we had difficult times. We had to keep going back and attempting to raise money - but never enough money.
Margo: We were trying to be eclectic, but it became clear that in order to survive you had to be a niche. We were already headed in that direction. Eliot Coleman was an early author of ours, and the organic gardening movement. The other thing we realized was that you really needed to have a backlist of books that sell year after year. That just takes plain old time to build up. That can't be fiction, or temporary non-fiction.
Interview: You need books that people are going to go back to because the information is going to be as good 20 years from now as it is today.
These days Chelsea Green Publishing is one of the few independent book publishers that is profitable. As the sustainability movement gains
momentum, they find themselves in the enviable position of having many of the key books in all the key areas of sustainability. They are
selling 3 to 4 times as many Elliot Colement The New Organic Grower books today as they did in the early days of its release. Finding the right niche not only lets you survive, it can make you thrive.
Chelsea Green Publishing offers a nice case study in the importance and process of finding a business niche. It is also important to note that niches can grow in size over time so getting involved early in a growing niche can be very profitable. Chelsea Green had the vision and tenacity to see that the niche would grow in size and are reaping the benefits of their ongoing editorial judgement within a fairly well defined niche (i.e., Books > Non-Fiction > Politics and Practice of Sustainable Living).
Margo Baldwin is the president of Chelsea Green Publishing. There are not many videos of her on YouTube. Here is one from 2 years ago that gives you a sense of who Margo is and a few of the titles they publish within a niche defined as the "politics and practice of sustainable living".
Posted on June 9, 2014 @ 11:35:00 AM by Paul Meagher
I'm 3 chapters into a book called The Market Gardener (2014) by Jean-Martin Fortier that describes in detail how he is able to generate $140,000 in revenue from vegetables produced on 1.5 acres of land. He is a farmer from Quebec, an hour outside of Montreal, and he uses french intensive methods to grow enough vegetable crops on 1.5 acres of land to feed 200 families (via CSA Shares), supply local eating establishments, and sell at farmers markets. His system of farming not only encompasses sophisticated small scale intensive food production methods, but also addresses how to manage input and production costs so that they are very low (principally because he has no role for a four wheeled tractor and
associated attachments in his farming system), and how to manage cashflow effectively using a Community Shared Agriculture
model that provides financing early in the season when he has to purchase most of his inputs and equipment. Other methods of
direct selling (to eating establishments, farmers markets) means he is taking most the potential income from his food production
efforts, and not losing over half to food distributors and retailers.
The concept of "Market" and "Gardener" encompasses both the production aspect of food production (the Gardener) and the
economical aspect of food production (the Market). When you can put the two together effectively, you have the basis
for a successful food-production enterprise. What is useful about "The Market Gardener" is that it doesn't just focus on the food production aspect of farming as many farming books do, but also addresses how to significantly reduce startup and ongoing costs, and how to market and sell food in a way that maintains cashflow and produces good profits in an industry ("Farming") that has not been very profitable as of late (e.g., most farmers have to work off farm to sustain themselves and the farm).
The book offers lots of practical advice for farm startups that might also contain useful ideas about how to manage startups in other industries (e.g., keep startup costs low, keep ongoing costs low, find as many direct markets as you can, buy labor saving equipment as early as possible, beware that going big may be less profitable, finance operations through
multiple direct sales channels, time income with expenses to maintain cashflow, etc...).
I'll end this blog with the idea that it might be useful to refer to a startup in a more verbose manner as a "Market Startup" by analogy with "Market Gardener". The "Market" prefix is meant to signify that the startup is producing something for a market and not just producing something for the sake of producing it or producing it for oneself. A market startup has identified direct sales channels, has minimized startup and ongoing costs as much as possible, has found a way to make more money using fewer resources, has created a branded product that keeps customers paying year after year (CSA clients), etc... All businesses produce a consumable of some sort, for a market gardener the consumable is literally consumable, for a market startup, the consumable is metaphorically consumable. Perhaps similar principles apply for keeping the customer fed and happy.
The Market Gardener book was originally published in French as Le Jardinier-Maraîcher (2013), did very well as a French language gardening book, and was translated into English through financing from a crowd-funding campaign. You can read the book in either French or English.
Here is some creative market gardening that is trending on YouTube. Thirty seconds into the video it gets interesting.
Posted on February 14, 2014 @ 11:53:00 AM by Paul Meagher
If you google the topic of "investment pitching" you can find lots of articles and resources dedicated to providing advice on the best way to pitch your idea to investors. It occurred to me, however, that we may be reinventing the wheel as there is plenty of literature and discussion already on the topic of Rhetoric which, to me, encompasses "investment pitching" as one specific area of practice - albeit with some unique audience features that deserve specific attention.
Rhetoric is the art of discourse, an art that aims to improve the capability of writers or speakers that attempt to inform, persuade, or motivate particular audiences in specific situations. As a subject of formal study and a productive civic practice, rhetoric has played a central role in the Western tradition. Its best known definition comes from Aristotle, who considers it a counterpart of both logic and politics, and calls it "the faculty of observing in any given case the available means of persuasion." Rhetorics typically provide heuristics for understanding, discovering, and developing arguments for particular situations, such as Aristotle's three persuasive audience appeals, logos, pathos, and ethos. The five canons of rhetoric, which trace the traditional tasks in designing a persuasive speech, were first codified in classical Rome: invention, arrangement, style, memory, and delivery. Along with grammar and logic, rhetoric is one of the three ancient arts of discourse.
So, are those who are skilled in the art of investment pitching skilled in the arts of rhetoric? Is the study of rhetoric that you might encounter in english composition and philosophy classes potentially useful when it comes to effectively pitching an idea to investors? I would argue that, yes, the liberal arts study of rhetoric is potentially very practical and useful in this regard. There is still some negative sentiment directed at the study of rhetoric that originated in the days of Plato and his criticism of the Sophists - that they were not seeking truth, just to persuade people to their often fallacious viewpoints through clever rhetorical devices. I think we should get over Plato's criticism and recognize rhetoric as one of those skills that seems to be in higher demand these days, especially in the world of entrepreneurship and private investing.
So how can we hone our rhetorical skills to improve our investment pitching success? One modern-day Sophist who appears to have a literary appreciation of the art of pitching is Oren Klaff. He has begun offering a set of internet YouTube videos on the topic of investment pitching that I intend to watch this weekend. So far, I've watched his first two videos and came away with a few useful ideas about constructing effective investment pitches. The idea that pitches should have the property of "narrative transport" is one such useful idea which suggests that Oren has a literary sensibility that informs his capitalist persona. The Triggerman Videos are largely unedited, low budget, and off-the-cuff set of videos on investment pitching which so far have contained a few rhetorical nuggets that make them worth watching. Here are the first two videos from Episode 1 in the Triggerman series so you can judge for yourself:
Posted on February 5, 2014 @ 12:45:00 PM by Paul Meagher
I just had an interesting conversation with a client of mine who started up a company 6 years ago and is starting to gain serious traction. He just finished raising a million dollars in the New Year to buy the ownership and rights to a medical device and is $200,000 short of a second million dollar fund raise for operational capital.
He pitched his project to numerous investors during the 6 months before his first million dollar fund raise. He put in many 20 hour days. He had the full amount raised just before xmas but a half-million fell through during the xmas/new year period when an investor had his check book out ready to sign over the money but dropped the bomb that he wanted control of the company (chairman of the board and powers to appoint other board members). He walked away from the deal because he did not go through all the effort to raise money to have the company taken away from him. He was able to find other investors shortly after he nervously walked away from that investor.
One of his take away lessons was that the first million was the hardest to raise. This was in part because it was a learning process to raise the money and he has become more effective at closing deals, sourcing the right investors, and filtering out investors who claimed they were interested but were dragging out the due diligence process too long.
After raising his first million it became easier to raise the second million in part because he established credibility and expertise from the first fund raise and in part because of the traction that the first fund raise created. What he learned from his first fund raise was to spend less time trying to get investors on board by not participating in a protracted due diligence process. If the process takes longer than a month then he politely tells them he has a fund raising schedule he is trying to meet and to contact him when they are ready to move forward. He is trying to reduce the amount of time he spends in sending ever more information to satisfy reluctant investors. He also requests promissory notes from interested investors to get faster commitments so he can move things forward and build momentum for getting the next investor on board. This is not the same struggling entrepreneur I knew a year ago - he is now a well-oiled fund raising machine.
It has been a long process to get his company to the stage where it has traction and can raise money in a more nimble fashion. There were many roadblocks that almost sunk his company before he could get to the stage he is at now, and his company is still not generating much revenue, but things are starting to look very promising and the expertise he has gained in raising funds can be translated into raising funds for other related projects that may require funding. We discussed working together in the future when his second round of funding is complete and he moves into the operational phase of his company's growth plans.
When developing a fund raising plan, you should account for your level of fund raising expertise and whether you have the expertise to close the full amount in one fund raise. Success in a smaller fund raise may lay the groundwork for increased velocity in raising funds for a second or third round. The road to raising funds is not without its stumbling blocks and near death experiences, but sometimes persistence pays off and you accumulate skills you never knew you had until you realize that raising money has gotten a lot easier because of the deal making, investor sourcing, and investor filtering expertise you have may have acquired from the fund raising school of hard knocks.
Posted on October 1, 2013 @ 06:22:00 AM by Paul Meagher
I'm a big fan of Permaculture.
Lately I've been taking a free online course on Permaculture design. I recently watched some lectures that dealt with the ecological topic of "succession". The teacher, Larry Korn, describes succession as the ecological process that takes place after soil is disturbed. Soil can be disturbed by plowing, tilling, tree harvesting, fire, etc... Succession refers to pioneer plant species that initially take over and how they are eventually replaced by other plant species.
Larry makes the observation that many gardeners do not realize that they are dealing with early stage successional growth patterns when they till up the ground and try to plant something new. They wonder why there are so many weeds and eventually many come to see themselves as having a "black thumb" - the opposite of having a "green thumb". If these gardeners step back and appreciate that they are in an early stage successional growth situation, they might appreciate that "weeds" are pioneer species in this context and that they might eventually disappear once the soil gets what it needs from these plants. Provided you don't keep re-disturbing your soil, these weeds will eventually be replaced by other types of plants that can survive in the conditioned soil, that is, soil with the right tilth, the right balance of nutrients, and with a thriving microbial soil community.
Starting up a business is like planting into newly disturbed soil. There is alot of weeding that needs to be done to get the plants that you want to grow to grow. There is alot of "pivoting" that needs to be done to deal with weeds that are threatening your plants or to deal with plants that have been wiped out and soil that might be in need of replanting. For permaculturists, the key to success is to have a successional planting strategy that respects nature's successional laws. A successional planting strategy consists of planting food and money-making annual plants while at the same time planting longer-term trees and shrubs that will ultimately yield more food in the form of fruit and require less weeding to maintain if done properly. Initially, planting these trees and shrubs will not make you any money but eventually they'll be providing you with the bulk of your food and income and offer a more sustainable basis for your business going forward.
If you follow through on a successional planting strategy eventually you will have an edible forest garden consisting of a mix of trees, shrubs, and vegetables.
What I want to leave you with is something to meditate upon that might be useful in terms of thinking about the bigger picture on how to grow your business. Namely, how can you grow your business with a successional growth strategy that balances what you need today to provide income and necessities, with a longer term view towards developing a business that consists of many lines-of-business each working in harmony with each other?
Posted on August 15, 2013 @ 07:59:00 AM by Paul Meagher
There are a few theories out there that try to explain successful entrepreneurship. Currently, the best candidate explanation is called the "Lean Startup" theory. It has many useful things to say about how to adapt a service to a market base in a reliable and cost-effective manner.
Universities looking to offer courses on entrepreneurship now use Lean Startup Theory as part of the foundational framework for their curriculum. It has some traction.
It is a difficult task to try to explain why some entrepreneurs are successful while others are not. The very definition of what an entrepreneur is fuzzy. Are small business owners entrepreneurs?
Or, is that title reserved only for those are trying to bring an innovative product to market? Is the mother who sells Avon on the side an entrepreneur? What about farmers tending to their crops
and animals? Or those who fish the oceans? An actor looking for gigs? In my view, entrepreneurship pervades all of these activities and a theory of entrepreneurship should explain why some mothers,
farmers, fishers, and actors are more financially successful than others. While being "lean" may be part of the explanation, I conjecture that a factor that has more explanatory weight is how many lines-of-business they have established and are in the process of realistically establishing.
My theory on successful entrepreneurship can be most easily understood using a farming business as an example. Farmer Joe and Farmer Sally both own farms of equal size and capacity to raise
crops and animals. It turns out, however, that Farmer Sally is more successful than Farmer Joe as measured by the amount of profit generated at the end of the year. How might we explain the
If we examine Joe's operation, we might observe that he is raising beef cattle and spends most of his time doing all the chores required to raise his animals. Some years Joe does well and other years not so well, much depends on the price of beef when he is ready to sell. Sally also has some animals, some hens and sheep, and also vegetable gardens, an orchard, and rents out rooms in her house as a bed and breakfast. Sally has not placed all of her eggs in one basket. Instead she has
diversified into several lines of business which generate separate streams of income (e.g., sells eggs, lamb, vegetables, apples, and rooms). Her cashflow is also more regular than Joe's. Sally is not making millions of dollars but she is making a comfortable living, is
not worrying about how to pay her bills, and has saved money to buy plants and equipment for a new line of business for next year (growing blueberries). Sally is growing her business each year by adding a new line of business each year. Some years, one of her lines of business
might do better (room rentals) than another one (pests damage to crops) but overall they compensate for each other because they are fairly separate lines of business.
It is easy to see that having multiple profitable lines-of-business can explain why Sally is more successful than Joe. At the very least, we could use the lines-of-business theory to explain why some farmers
are more successful than other farmers - they have more than one line of business, they have chosen lines of business that can compensate each other, they have chosen profitable lines of business, they are investing in new lines-of-business each year, and they are able to manage all of these lines-of-business without a marital, health or stress breakdown.
So does this line-of-business theory explain why some entrepreneurs are successful? It would suggest that they are successful because they have more than one profitable line-of-business, that they have used one line-of-business to bootstrap another line-of-business, that their focus is always divided between expanding existing lines-of-business while also exploring and investing in new lines-of-business. This theory, if true, would have some explanatory force in explaining differential success of entrepreneurs and also offers some suggestions as to what to look for when trying to explain entrepreneur success (define, count, and measure each line of business and see if there is a difference among entrepreneurs that correlates with profit level). It also explains why some mothers, farmers, and actors are more entrepreneurial than others - it has to do with wanting to setup new lines of business (another stream of income). This theory says that successful entrepreneurs do not just do one thing well, they do multiple things well and are always engaged in finding and establishing profitable new lines-of-business.
Posted on March 25, 2013 @ 09:03:00 AM by Paul Meagher
This weekend, I finished watching the last two seasons of the reality tv show Full Throttle Saloon. It was addictive to watch.
The show provides lots of lessons for entrepreneurs. Lessons about marketing, promotion, decision making, managing employees, security, risk taking, and branding.
Mike Ballard is the owner of the Full Throttle Saloon, advertised as the biggest biker bar in the world. Mike was active in pitching the idea for a reality TV show focused on the 10 day season that he opens the Full Throttle Saloon for business. The season coincides with a huge biker rally to Stugis, South Dakota. During this time around 300,000 people
pass through the gates (most of them bikers, but also locals). He offers a carnival atmosphere combined with musical events, food venues, branded clothing and drinks, accommodations, and a dizzying number of bars. The brand is about freedom, the outlaw lifestyle, and taking it to the next level.
Mike Ballard is teamed up with Jesse James Dupree (lead singer of Jackyl) and Angie. Each of Mike's partners brings impressive marketing savvy and interpersonal skills to the table. They are different in many ways but there is a chemistry and common vision that makes them work very effectively together.
It is interesting to see how the Full Throttle brand has grown over the last two years. It is poised to expand into other parts of the US and I expect it to grow rapidly over the next year. This is entrepreneurship at its finest and the show provides us all with a glimpse of what it takes to manage a high growth business. There are many lessons in marketing, promotion, and the power of branding for entrepreneurs to learn from watching this show.
Mike Ballard is a strong leader. His leadership comes from his business ethics, his attention to the financials of his business, his appreciation for other viewpoints, his listening ability, his approachability, his rapid and decisive decision making, his calculated risk taking, and his passion to grow his business by reinvesting and taking on new challenges. There is lots of learn about managing a high-growth business from watching how Mike runs his business.
Can't wait for the next season to see where the Full Throttle brand goes next.
Posted on February 5, 2013 @ 05:44:00 AM by Paul Meagher
If you have built your business from the ground up, you may be reluctant to give up ownership of that company to a private
investor. If you do give up ownership, you may be reluctant to give up enough ownership to encourage investor involvement.
Many of these issues are avoided if your business plan includes room for investors to get involved in the formative stages
of your company. This does not mean that you seek investors before you have reached significant milestones or achieved
some traction in the marketplace, but it does mean that there is a plan in place to have investors involved at critical
stages in your companies growth so that you can accelerate or ensure growth.
Instead of a business plan oriented around the idea that I will own and run company x, your business plan might be oriented
around the idea that you will eventually have co-investors and co-directors in your company so that you can reach your
goals for growth in the best way possible. Growth planning is easier if it includes room for co-investors and you make plans to use the equity you have built up to get funding for your company at a critical stage
in your companies' growth.
A plan for investors may be one in which your first set of milestones are specifically designed to get an investor on-board rather than to achieve early profits. It may be designed to get your future customers using your product and helping you to evolve it rather than getting them to pay to use a beta product or service. Your plan may be to get an investor involved when you are ready to exit a beta stage and are ready to scale and/or market your product or service.
So the moral is that giving up a piece of your company is not so painful if you have planned for it. This is very different than running out of money and feeling torn about giving up a piece of your baby to an investor to keep it running.
Self-employment is often considered as an indicator of entrepreneurship. However, not all self-employed individuals
innovate or intend to innovate, nor do they grow or intend to grow their business (Hurst and Pugsley, 2010). Thus,
not all self-employed are "entrepreneurs".
Under this definition, Statistics Canada considers farmers, doctors, lawyers, baby-sitters, paper-carriers, garage
owners, contractors, store owners, dentists, and many others to be self-employed business owners rather than
entrepreneurs per se.
According to Brandon Kennington, the difference between an entrepreneur and a self-employed business owner comes
down to mindset:
Take an example: an Interior Designer, an Architect, Lawyer, or even a Doctor. All could own their own
business, large or small, but if the business depends on the talent of the business owner to be there
and perform the work, then the person is just self-employed....
Observe a day at your work. Are you building the business or are you running the business? If you find that you are
running the business, don’t be surprised if you still are working the same "job" after 20 years and ready to
retire with nothing to show for it. If you are simply running the business, your business is your "job", with
no fringe benefits paid for by someone else.
Brandon suggests the difference comes down to the entrepreneur coming to work each day trying to figure out how to automate parts of their business so they can grow their business. I'm not convinced that this is the critical mindset difference, but business automation broadly construed to mean "not doing it myself anymore" is an important aspect of growing a business.
So, are you an entrepreneur or a self-employed business owner? Do you view innovation as a critical aspect of your business? Do you want to grow your business through innovation or are you happy running a business and earning a comfortable income from it based largely on your own skills and work-ethic?
Posted on January 14, 2013 @ 07:55:00 AM by Paul Meagher
The term "angel" in "angel investing" suggests that the angel investor will, in addition to providing money, also provide guidance; that they will take you under their wing and mentor you towards success. I do not want to dispute the fact that angel investors, because of their success in business, can offer entrepreneurs much useful advice; however, I do want to suggest that entrepreneurs shouldn't necessarily be seeking investment in the hopes of being mentored by an investor. Your business idea should be able to stand on it's own merits and your business investor is primarily interested in infusing some capital into
your business because they see it as a good investment opportunity.
The idea of being mentored arguably applies more to learning how to do a job well rather than being an entrepreneur. There is no formula
on how to be a successful entrepreneur and thus no mentor that can tell you how to succeed. There are people who can give you
advice along the way, but for the most part it is up to you to achieve the goals you have set out for yourself. Waiting for
someone to tell you how to succeed in your business is a misplaced hope and probably dooms you to failure if you keep doubting your own plans and ability to execute on them.
The major news on the internet over the weekend concerned the suicide of the brilliant social and internet activist, Aaron Swartz (one
of the co-founders of Reddit). Aaron started to make waves among the internet intelligentsia when he was 14 and committed suicide when
he was 26. Cory Doctorow wrote a heartfelt statement on his death
RIP, Aaron Swartz. Cory made the following relevant observation:
Aaron had powerful, deeply felt ideals, but he was also always an impressionable young man, someone who often found himself moved by
new passions. He always seemed somehow in search of mentors, and none of those mentors ever seemed to match the impossible standards
he held them (and himself) to.
This was cause for real pain and distress for Aaron, and it was the root of his really unfortunate pattern of making high-profile, public denunciations of his friends and mentors.
As an entrepreneur, you might ask yourself what you are looking for in a mentor and whether those expectations are realistic. It
is arguably better to be skeptical about the value of mentorship and put more faith in your own skills and abilities to blaze your own
way in business. Your success or failure as an entrepreneur are your own responsability and cannot ultimately be blamed on the bad advice of a mentor.
Posted on December 31, 2012 @ 09:12:00 AM by Paul Meagher
Winter is bearing down hard on me today. It is a blizzard outside and I'm finding it challenging to try to get anything done around
the farm today. I'm closing it down until early spring. Draining the water from the lines, fixing a door sweep that was letting in excessive
amounts of snow, adding lock bolts to the doors, and inspecting where snow is drifting and how the buildings are responding to the high
winds. Inland winds hit fairly hard yesterday (Noreaster), now the oceans winds are showing whose boss (Southwester). High force winds
are drifting snow over the lane on this grassy ridge top farm. I'll have to get the tractor out to plow myself out of here so I can
head back to my Truro home when the driving is safe to do so. The power went out around 2 pm last night but was on when I awoke. It
cycled twice today and if it fails, then my plans to drain the water will fail because I need a compressor to blow any remaining
water out of the lines.
All of this makes me wonder about entrepreneuring up north and how the winter season affects entrepreneurship.
The snow plowing industry kicks into gear and employs alot of entrepreneurs. Lots of winter sports and winter getaways generate winter revenue for entrepreneurs.
Entrepreneuring up north involves some costs that entrepreneurs in warmer climates do not have to pay for - winter tires, vehicle
aging from road salts, snow days, freeze ups, access maintenance via plowing, cold weather clothing, etc... These might be viewed as
productivity zappers relative to warm-climate competitors who do not face these business liabilities. Sometimes this is true (raising
beef in Brazil is easier than in Canada), sometimes our warm climate entrepreneurs have their own list of productivity zappers.
Oil industry workers, loggers, lineman, and many other Canadians work outside in the most extreme weather conditions. Another large
group of Canadians retreat into their offices and bear down to get the winter work done. They feel less distracted, less on-the-road, now
that outside conditions are less inviting. Time to bare down and work. The Black Berry 10 is supposed to launch at the end of Jan 2013 perhaps because the pre and post launch is during the winter season when Canadian tech workers like to work the hardest in the office.
Cold-climate influences and defines the character of Canadian entrepreneurship.