Hieu Blog

Forget the ABCs you learned in grade school. This entrepreneurial alphabet has the terms you need to know to help your new business succeed.

ngel investor: It’s easy to believe in angels when you find one who’ll open his checkbook to finance your business. Angel investors typically fork over their own dough to help smaller companies get started. They often invest in companies that are too small or risky for venture capitalists to take seriously. Some angels take an equity stake, while others simply want their money back plus interest once the business takes off.

usiness plan: Want to woo investors, or simply keep your business on course? You must have a good business plan. It doesn’t have to be lengthy, but it does have to define your idea, map out business operations and predict potential. Oh, and it needs to clearly show much moola you’ll need to get your business going and keep it growing.

affeine: Whether it’s a supersize cup of joe or a stash of energy drinks, a little bit of caffeine can help you get through those long 50-, 60- or 70-hour work weeks.

ebt: While bootstrapping is admirable, don’t rule out debt financing, says finance expert Bob Low, author of Accounting and Finance for Small Business Made Easy. “Sometimes [borrowing is] the best way to get the money you need to grow.” That may mean borrowing against assets or simply floating expenses on a line of credit. Just watch that your debt load doesn’t get too heavy for your cash flow and profit margins to carry.

quipment: Efficiency is essential, so don’t skimp on equipment, especially if it will save you and your staff time or money. Read trade journals to keep up on innovations that may help one person do the work of two–without having to put a cot in the back office.

inancial statements: Read them. Learn them. Live them. If you’re not reviewing your financial statements on a regular basis, says Low, you’re likely missing important information about your company’s performance.

rowth: Growing too fast can be hazardous to your business health, says small-business consultant Carol Frank, author of Do As I Say, Not As I Did! Gaining Wisdom in Business Through the Mistakes of Highly Successful People. Growth for growth’s sake isn’t very smart. You need to make sure you have the financing that growth requires and that your foundation is in place so you can accommodate that growth. That’s the time to make your business bigger.

uman capital: This is a fancy way of saying “employees,” but it’s a good idea to start thinking of the people you employ as real assets. Seek out the best and invest in them.

deas: From creative marketing to innovative new products, you need great ideas in order to be successful. Be ready to capture them when they emerge, whether by keeping a small recorder in your car or having a water-soluble marker available to write them on your bathroom wall. After all, don’t most people get their best ideas in the shower?

oint venture: If two heads are better than one, two companies must be unstoppable, right? Sometimes. Alex Hiam, a small-business consultant and author of Marketing Kit for Dummies, estimates that 1 in 5 joint ventures works out. “The kinds of partnerships that work best are those where the companies are at a different level in the distribution channel,” Hiam says. For instance, a manufacturer and a distributor would share the profits of a product they jointly get into the marketplace.

nowledge: Knowledge is power, especially when it comes to your business. You need to do your homework by researching your market category and the opportunity it holds, as well as finding out as much as you can about starting a business in general. Industry associations, trade publications, government websites like census.gov and sba.gov, and even your local library can all provide important information to get you started on the right foot.

enders: Going in on bended knee won’t work. What lenders really want to see is your ability to repay the money you borrow. So work on polishing up that credit rating–both business and personal–and come in with solid sales and cash-flow projections backed by industry research.

arketing: Sometimes, promoting products and services seems like an easy place to cut back, but that’s the worst idea, says Frank. “Out of sight is out of mind. The last thing you want is to be out of your customer’s mind when you’re trying to find new business.” Instead, look for low-cost methods, such as e-mail marketing, contacting your best customers with special offers and seeking out publicity opportunities.

ame: What’s in a name? Perhaps a cease-and-desist letter. Before you slap your business or product name on expensive stationery, packaging and marketing materials, check out whether it’s been trademarked by going to the U.S. Patent and Trademark Office website, uspto.gov, as well as conducting an internet search and consulting your attorney.

perations: Be a smooth operator by setting up solid business practices. Be clear about your business hours, policies and procedures, and communicate them well so that both customers and employees know what to expect.

rofit margins: Your profit margin speaks volumes about the health of your company. This ratio of income divided by revenue is a useful tool to compare your company’s profitability with others in your industry.

uick restaurant delivery: When you feel the need to feed–a late-night pizza pick-me-up or sandwiches for a lunchtime staff meeting–it’s a good idea to have the best delivery joints on speed dial.

egulations: Many entrepreneurs are rule-breakers by nature, but ignoring the regulations, licenses and other applicable laws of your business landscape can land you in hot water and cost you big bucks.

ales channels: Gone are the days when products or services were marketed through only one channel. Now, says Hiam, companies can not only look to traditional sales channels but also find sales channels online, through direct selling or alliances with distributors. Says Hiam, “Being innovative and a leader in distribution is the easiest way to become a multimillionaire.”

axes: You know you have to pay them. Find out which ones apply to your business and remit promptly. Don’t mess with the tax man.

nplug: You deserve a break today and one next week and one the week after that. To be most effective in your business, you need to get away from it regularly, says Hiam, or you’ll burn out and stifle creativity. Whether it’s a sunrise yoga class or a midday trip to the museum, find your choice activity and engage on a regular basis.

enture capital: Got the “next big thing”? Venture capitalists today are looking for companies that have the potential to grow big, fast. If you’re poised to burst out on the scene and score big, make a solid case in your business plan and start knocking on venture capitalist doors.

ebsite: You know you need a website–and you know you need one that’s interesting and interactive. Frank says it’s essential to offer something for which visitors will give their e-mail addresses in exchange. That helps you grow your marketing base. White papers, information or even free consultations can get you the contact info you need for a promotional follow-up.

marks the spot: Location, location, location plays a critical role in the success of a retail business, but choosing the right spot can make a difference for any business, says Hiam. Look for places that are hubs for your industry because they’ll likely be rich in the resources, people and infrastructure you need to be successful.

es: From reflecting a positive attitude to being persistent in your pursuit of sales, the word yes is essential in the entrepreneurial vocabulary.

eal: People who are only in business for the money usually crash and burn, Hiam says. To achieve success, you must have true zeal for your business, your products and services, and your customers. “Zeal is a better word than love,” Hiam says, “because it shows the energy you have for the business, too.”

This is an article I found quite interesting and useful. Have a look yourself

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Here’s a summary of the more compelling tips given by several tech industry luminaries — including Facebook’s Mark Zuckerberg, Google’s Gmail creator Paul Buchheit, Sequoia Capital venture capitalist Greg McAdoo — at the Y Combinator Startup School event at Stanford this weekend.

The event attracted more than 650 aspiring entrepreneurs. Mark Coker, a VentureBeat contributing writer, was on hand and here are his notes.

FaceBook’s Mark Zuckerberg: Hire only young technical people

FaceBook’s founder and CEO, 22-year old Mark Zuckerberg, believes his social networking platform will push the world to be a more open place. Without doubt, FaceBook is a true phenomena. According to Zuckerberg, FaceBook has over 20 million registered users, serving 1.5 billion page views daily.

Judging from whispers among the audience, while people love the service and admire his accomplishments, many find Zuckerberg arrogant. A Google search on “mark zuckerberg” and “arrogant” yields about 675 results, but surely, there must be other Mark Zuckerbergs in the world. Or maybe not.

Maybe it’s part of his charm. He’s the cute boy-wonder robo-geek who is either oblivious to how he rubs people, or he doesn’t care because he’s smarter than us.

He stepped on the stage wearing his trademark Adidas sandals (he bought ten pairs before they were discontinued).

“I want to stress the importance of being young and technical,” he stated. If you want to found a successful company, you should only hire young people with technical expertise.

“Young people are just smarter,” he said with a straight face. “Why are most chess masters under 30?” he asked. “I don’t know,” he answered. “Young people just have simpler lives. We may not own a car. We may not have family.” In the absence of those distractions, he says, you can focus on big ideologies. He added, “I only own a mattress.” Later: “Simplicity in life allows you to focus on what’s important.”

He said it’s important to hire mostly coders, even in the marketing department, so if they want to change something on the web site all they have to do is log into the back-end and change copy on the fly.

The value of having coders on staff, he elaborated, is that technology is highly leveraged. “You can create an app once and people can continue to use it.”

Zuckerberg stressed the importance of rapid application development and iterations. FaceBook ships new code every night, he says.

Several more times during the talk, he spoke of how an important part of his job was thinking about philosophies.

Someone in the audience asked how Zuckerberg balances the whole work and family thing. He answered that he works all the time, and besides, he said, his girlfriend is still in school at Harvard so he’s apparently not distracted by her too much. “But now she’s moving out here so we’ll see,” he added. Presumably, this the same girlfriend Zuckerberg was with when he reportedly shut off his cell phone, delaying acquisition talks with Yahoo for a week.

Paul Buchheit: Gmail’s creator shares startup advice

As Google’s 23rd employee, Paul Buchheit was the creator and mastermind behind Gmail, arguably one of Web 2.0’s first killer apps.

His advice to entrepreneurs was to redefine their measures of success. While financial reward is nice, aspiring entrepreneurs should first and foremost seek out risk-taking opportunities where they can learn. He said startups allow employees to take on projects for which they have no qualifications. He referenced his own multi-year assignment to Gmail as a perfect example.

Buchheit, no longer employed by Google, encouraged entrepreneurs to innovate where tech giants like Google are afraid to. He cited the enormous success of YouTube. Even though YouTube launched after Google Video, he said Google Video was a bad product because Google was politically afraid to offend its media partners.

Paul Graham Asks: What’s stopping you from starting a startup?

Paul Graham made his fortune selling his ecommerce platform Viaweb to Yahoo for $49 million in 1998.

More recently, he has become something of a 21st century messiah for tech company founders. His numerous essays about tech startup strategy, along with his work as a founding partner of Y Combinator, have allowed him to influence a new post-bubble generation of software programmers. Some entrepreneurs are said to listen to recorded copies of his speeches over and over again in an attempt to internalize his gift.

Over the last few years, Graham has encountered a few prospective founders who were unwilling to accept his teachings.

His Startup School presentation answered those objections (VentureBeat has paraphrased):

Concern: Am I too young?
Answer: Don’t worry.

Concern: I’m too inexperienced.
Answer: Do it anyway.

Concern: I’m not sure I’m smart enough.
Answer: If you’re smart enough to worry about that, you’re smart enough to start a successful startup.

Concern: I appreciate the predictability of a regular job.
Answer: Envision yourself as a medieval serf who will till the same soil for the rest of your life. Mind numbing, right?

PayPal Founder Max Levchin: Imagine him as a 15-year old girl

Max Levchin was a co-founder of PayPal, which was acquired by eBay for $1.5 billion in 2002. Today, he’s founder and CEO of Slide.com, a service that reaches 50 million people per day with its hosted images and slideshows.

Levchin offered attendees a crash course in product management. Product management, he says, is 85% user interface and 15% channeling the user.

For user interface, Levchin told the audience to measure how their visitors interact with the sites. Slide.com tracks mouse clicks, mouse overs, abandonment rates, the funnel, and more. Levchin and his team mine the data for intelligence that helps guide future iterations of the site.

For channeling the user, Levchin says founders must step inside the minds of their target customers. In Levchin’s case, he says he must imagine himself as a 15-year-old girl with attention deficit disorder who’s looking for digital bling to dress up her MySpace or Zanga web page, while at the same time she’s chewing gum, talking on the phone, instant messaging with five friends, listening to music, and twirling her fingers through her hair.

Levchin cautioned his techie audience to keep their customers in mind and not go overboard with technology for technology’s sake. He pointed to the early social networking site, Friendster, which lost critical momentum when it ran into scaling problems because of a “cool” feature that calculated friend trees, and caused page load times of up to a minute. MySpace.com, by contrast, was successful because it cared less about technology and more about the user experience.

As a final word of product development advice, Levchin encouraged founders to think about the Bible’s seven deadly sins - especially greed, sloth, envy, pride and gluttony. These characteristics, he said, describe many of the primal motivations for users.

Ali and Hadi Partovi: Brotherly super duo provide tips

For those who say lightning never strikes twice, they haven’t met the Partovi twins. Ali founded LinkExchage, which was acquired in 1998 by Microsoft for $250 million. Hadi founded TellMe, recently acquired by Microsoft for a rumored $800 million. The brothers now jointly run the music discovery service iLike, and its popular independent music web site, GarageBand.

The Partovi brothers’ presentation focused on the do’s and don’ts of startup success.

They said the best businesses are easily scalable, so that a doubling of revenues won’t require a doubling of expenses.

Founders should create naturally viral businesses, like the invitation automation service eVite.com, in which one user’s use of the service causes others to use it.

The sites should also exhibit network effects, so as the number of customers increases, the overall value to all customers increases.

The brothers encouraged founders to listen closely to their customers, and cited online shoe seller Zappos.com, as a strong example of a company which cares about customer experience. Zappos requires all new employees, even senior executives, to man customer service phones for at least four weeks as part of their training.

The brothers warned founders to maintain a razor sharp focus on their company’s primary purpose. Ideas are a dime a dozen, they said. Founders should pick one thing and do it well. They cited eBay’s acquisition of Skype as an endeavor that could spread the company too thin, and distract it from its main auction business.

They said companies must make hiring a top priority, and should cultivate and protect their company culture. Perhaps just as important, founders should learn to quickly fire bad hires, because a single bad hire can poison morale.

Lotus Founder Mitch Kapor: Don’t forget culture and diversity

Over his 30+ year career, Mitch Kapor has shown an uncanny knack for identifying disruptive waves of technology innovation early.

He created Lotus Development, one of the first spreadsheet companies. He was an early investor in UUNet, one of the first Internet service providers, as well as in Real Networks and Linden Lab, operator of Second Life.

Kapor also stressed the importance of creating a great company culture. He said founders set the culture, and it’s important to understand every action or inaction of the founders sends a message to employees. Hire great people, embrace diversity and resist trying to fit every employee into the same cookie-cutter mold, he said.

Kapor, who once worked at Valley VC firm, Accel Partners, advised entrepreneurs to tread cautiously with venture capitalists, and to understand where their interests are aligned and where they diverge.

Venture funds typically invest in a portfolio of 30 companies. They expect one or two big winners to supply the majority of the portfolio’s returns. Kapor says this can lead VCs to pressure their portfolio companies to go for the home run and risk striking out completely, when more sensible logic might dictate swinging for a single or a double instead.

Sequoia Capital’s Greg McAdoo: What VCs want in a start-up

Sequoia Capital is one of Silicon Valley’s oldest and most respected venture firms, investing in 550 companies, including Google, Yahoo, and Cisco.

McAdoo stressed the importance of clarity of purpose. Founders should articulate their vision for the company in a single sentence. When Cisco approached Sequoia, for example, they didn’t say, “We build routers.” Instead, they said, “Cisco Systems networks networks.”

McAdoo underscored the importance of the founders understanding their audience. He said good founders also exhibit intellectual honesty about the strengths and limitations of their technology, their management team and their competitors.

McAdoo said it’s impossible for a single company to create major waves of technology disruption, but stressed founders’ businesses should be built to ride the waves. Founders should also identify the trajectories of other trends that will impact the business, whether technology or political (such as likely changes to copyright law).

McAdoo says Sequoia prefers to invest in companies whose target customers have their “hair on fire,” meaning they’re desperate for an immediate solution, and don’t care if the fire hose comes in red or purple.

Asked if Sequoia funds companies outside of major tech regions, such as the Midwest, McAdoo said yes, but the firm prefers its funded companies locate in either Silicon Valley or Boston’s 128 corridor. Hiring is easier in the tech hot spots, and the support ecosystems are better adapted to meet the unique needs of tech startups.