Making Money in a Down Economy

The phrase "this is when the rich get richer and the poor get poorer" is only as true as each investor makes it. It is true that having enough money to continue making investments has an impact, but it is all relative.

All of us know someone who lost 40%+ of their net worth over the last year, the question is have they done anything to recover that loss?

As an example let's say you lost 40% of $1 million when the market tanked. When the Dow was at 6500 you could have bought into quite a few stocks that were down but were key to the recovery of the U.S., in other words, if they failed things would have gotten a lot worse. These investments, AIG and CITI for example, would have provided an average of ~550% return within the first 90 days after the stock market bottomed out. If you would have taken ~15% of your remaining net worth and invested that money in these two stocks you would have recovered the 40% you lost and been up. It may seem like this sounds easier then it really is... you know hindsight is 20/20, but at the end of the day managing your money is up to you. Trusting a low level number cruncher or customer support rep at some money management firm is not going to get you your money back... no offense to them but these are the same people who recommended or were invested in Madoff.

Anyone can make money in an up or down economy. To be successful with any investment you have to be willing to do the following;

1. Put some money at risk, no matter how small. Too often we get caught up in the thought that we need to look for an investment that can provide a 300-400% increase on a minimum of $50,000 or it isn't worth the time. I will use a baseball analogy here, if you hit a bunch of singles you will score runs. Grand slam or strike out is not a smart way to invest money. Start somewhere and realize that you won't get rich overnight but in time you will build real wealth and your money will be working for you.
2. Spend the time to understand where you can get the best return for your money. Don't just blindly trust anyone with your money. The great thing here is that with the internet and many talk shows you can hear what the true investment experts think are good investments and why. You can follow their advice for a while and overtime you will learn what to look for.
3. Pay attention. Managing your money is an ongoing commitment. You can't set it and forget it. Once you set up an account with one of the online trading platforms you can track your investment performance and set sell maximums and minimums... which leads into the final step.
4. Stop making excuses... Start today! There are so many great tools out there to track your investments and minimize losses. TDAmeritrade, eTrade, Schwab... You can get started with any one of these sites in a couple of days and with less than $100.

4 ways to get automatically rejected by an angel investor

This is a republishing of a post by Jason Cohen but I found it so well written I wanted to pass it along....

-----------------------------------------

There are lots of good articles out there about pitching, and surely everyone who pitches me has read some of them. Still though, a few problems appear over and over again. If you’ve ever had to sort through resumes and cover letters, you’ve seen this effect: People tend to have the same misconceptions and therefore make the same mistakes. What follows are four problems I see all the time, each of which makes me roll my eyes and sometimes even terminate the conversation early.

Be dismissive of the competition.

Let me guess what your feature-comparison chart looks like: You have all the checkmarks, they have few. Even when your competitor has a checkmark too, your implementation is still better. There’s nothing they have that you don’t. Oh, and they’re more expensive too.

When I see this chart, all I know is: It’s a lie.

The point of “competitive analysis” isn’t to say: “I’m better than everyone else.” Rather, it’s to define your niche in the market and explain how you own that niche better than everyone else. Need to be further humbled? Here are some things not in your little feature-comparison chart:

• Those competitors probably have more customers than you.
• Those competitors probably have more revenue than you.
• Your potential customers have possibly heard of one of these competitors but almost certainly never heard of you.
• Those competitors are already ahead of you in discovering, defining and attacking the market.
• People rarely buy on the basis of “most features.”

So what should you do instead?

• Define the segment of the market that’s being underserved. Part of this is admitting what part of the market is being well served, and who is serving it.
• Admitting where your competitors are strong earns you the credibility to point out where they are weak.
• Explain how there’s a portion of the market being missed rather than having to displace a product. Once you have your own niche you can talk about creeping into another niche.
• Explain how having fewer features or different features makes for a product that’s more exciting or versatile or more relatable or usable or viral.
• Give testimonials of people being “fed up with” the competitor and how they’ll run into your arms.
• Explain how it’s not possible for competitors to compete on your terms. Maybe the competitor’s business model uses channel sales, so by using a direct model you can compete on price. Or perhaps the competitor has $30m paid-in-capital so they must roll the dice on big market plays while you can be smaller and safer. It’s also possible the competitor maintains a “big company” image to land enterprise sales, so they cannot copy your folksy small-business cool persona. Give concrete examples.

Have five-year projections.

I don’t care what you’re projecting — seats, customers, revenue, profits, market growth — it’s all crap. That’s right, it’s crap. You made it up, and you know it, and now you’re insulting me by expecting me to believe it.

Oh wait, you say it’s a “conservative estimate?” No, the conservative estimate is that you burn through all your cash in nine months and start taking on consulting gigs to delay a return to a “real job” in corporate America. (Not that I blame you.)

But, really, this is good news! You don’t have to invent crazy models that no one believes. You can focus on useful stuff instead. Like what?

• Show how fast you can get to cash-flow-positive. After that you’re not burning money, and that’s the hardest part of your journey, so address that first. If the rest takes longer, that’s ok.
• Explain how revenue will outstrip expenses as you get customers. That’s something you have more control over, and that makes it clear that as you grow, you have a sustainable, profitable company.
• If you must give projections, at least make a range, and make the distance between max and min widen the further out you go. And maybe stop at two years? If you can’t be profitable within 24 months, either it’s a bad business idea or you need to raise big VC instead of angel money.
• Actually say, “I would show you five-year projections, but we both know those are crap. Let’s talk about how I’m going to make this business profitable.” Just that one sentence alone sets the tone of the conversation.

Gloss over your strategy for customer acquisition.

Here’s the typical slide I see for customer acquisition strategy:

• Google AdSense
• Ads on selected relevant web sites
• Blogger outreach
• Social Media presence (blog, Twitter, Facebook)
• Co-branding
• Partnerships

Yes, these are ways to get customers, but here’s the problem: Every company on Earth tries these things – and most fail anyway. Therefore, this list is uninspiring – and it isn’t enough.

Anything that everyone else does is boring and unconvincing. There’s no competitive advantage. There’s nothing there that makes me more likely to think you will pull this off.

Of course it’s true that to some extent marketing has to be “trial and error,” or better yet “experiment and measure.” And it’s ok to say that, and it ok to list some traditional modes, but this isn’t sufficient.

After all, if all your strategy is “We’ll try stuff until something works,” I have no reason to believe something will ever work!

So here’s what you should do:

• Internalize that your route to getting customers is critical to your success. Admit that to me and yourself — this is one of those things that makes or breaks the entire venture! Spend real time in your pitch on this subject.
• Be specific. Specifics are compelling and paint a picture in my head that I can get behind. Examples:
• Not just “Blogger outreach,” but “We’ve done a few guest-posts on mommy-blogs and given the comments and traffic that seems to be a good outlet for us, so now we’ll expand in that area with more posts, ads, etc.”
• Not just “Facebook presence,” but “We’re using a Facebook application platform that’s been proven to work in such-and-such parallel business and we think we can duplicate the mechanism.”
• Not just “Community outreach,” but “The founders have lined up speaking engagements at these five local groups and we’re hoping that after collecting feedback and testimonials from that we can branch out into neighboring cities.”
• Something creative. If I haven’t heard about this marketing technique before, that’s probably a good thing. At least you’re not just doing what everyone else is, which in this day and age is already an advantage.
• A viral product. If “viralness” isn’t baked into the product itself, you’re already behind. Especially if it’s a web-app. If you can show how the app helps spread itself (i.e. invites, sharing, integrating with social media crap, only works with a friend, affiliate program), that helps me see how X customers leads to X+1 customers.

Do what you think you “should” do instead of what feels right.

There’s a ton of advice on raising money. Don’t take any of that advice just because you read it somewhere.

Yes, including this article! Yes, including this tip too. (Wait a minute…) Seriously, be yourself. Filter all advice through your own lens. Think of this like you’re getting married — if you’re not yourself, not honest, how will you hook up with an investor that gets you, likes you, and believes in your core motivations and values?

Now go out there, tell the truth, be real, and raise some money!

What makes a successful venture investment?

I've spent the last 2 years sitting on the investment side of the venture investment table. What I've found is a real disconnect between domain and business expertise. As hard as I have seen my colleagues try it is impossible for one individual to be a domain expert across all investment areas. Entrepreneurs walk in the door having spent the last 10 years of their life in a specific technology and the last 5 in a specific space and they know their market better then most if not all of their potential financial backers. After the market crash every investment vehicle and strategy has rightfully been questioned from the transparency of FOF holdings to the process for identifying early stage venture investments. So what makes the venture community so different?... The relationship with the business. Investing at such an early stage provides an opportunity to help shape and grow a business. The challenge, or should I say hurdle, is the willingness of the entrepreneur to accept guidance and assistance from someone with more business but less domain expertise. As a money manager you can't step too far into any one business without losing site of the entire portfolio performance picture but you must know enough about the business and market to understand if, when and why a company is under-performing. The reason why so few venture investments provide returns, in my opinion, is a combination of three things

1. Incomplete due diligence. Not knowing or learning enough about the team or the market prior to making an investment.
2. The inability to proactively monitor company performance. Real monitoring on revenues and expenses or performing milestone trend analysis to understand where, why and how many times a business has missed key milestones. Entrepreneurs are so resistant to this... IMO, people who are resistant to disclosing basic information have something to hide.
3. The inability to effect real-time change when it is needed from leadership to product or sales strategies.

What I have witnessed is that venture investments fail primarily due to entrepreneurial stubbornness. I have been there, you know your market better than everyone else, you have traffic, customers and revenues... so why should you listen to someone who only gives your business part time attention?...

Make no mistake, it is very difficult to be a startup CEO. CEO's of new ventures must wear many hats, often being forced to neglect some core business functions. The difficult decision is what gets the majority of their attention?... The market? Money management? The product? Marketing? Fundraising? Strategic relationships? ... I repeat... Why should you listen to someone who only gives your business part time attention?... Because great decisions come from the collection and analysis of information and input. Listening doesn't mean taking orders, it means being a real CEO... so know what you know, know what you don't know and always be open to listening and learning from others.

Due Diligence, what does it really mean?

"Due diligence" is a phrase used to describe a range of assignments, legal obligations, reports and investigations which take place in business, manufacturing and law. Its most frequently heard version is the one pertaining to business, where "due diligence" refers to the steps taken by venture capitalists before investing a round of capital in a startup, the ongoing investigation as to how the funds are being distributed, or the precautionary steps taken by a larger company in deciding to acquire a smaller company.

In venture capital, due diligence involves looking into the past and present of the people and structure of a company requesting venture funding. For instance, venture capitalists are wary of investing in companies that lack people with credentials or a proven track record. Depending on the overall level of caution in the investment environment at the time, a due diligence investigation may be more or less stringent.

Due diligence is not a panacea against investment failures. Even a company made up of well-educated high achievers can falter due to unpredictable market conditions, unforeseen competition, or technical setbacks.

Due diligence generally refers to the background checks conducted after a venture partner has already made a decision about the company. Typically, partners will prefer to invest in companies led by people they already know are very trustworthy, and probably have been given funds in the past.

Savvy investors know the tricks of the trade and want to make sure that they don't attach their money, name and reputation to a risky company or person. If you are preparing for due diligence it would be best if you are ready for the following,

• A complete financial and credit history
• A comprehensive criminal and background check
• Personal and professional references that ideally know and are trusted by the potential investors
• A deep competitive and market opportunity analysis. If a savvy investor likes the space they will look to see what other companies exist that could provide better traction or terms

If a perfect stranger came to you and asked for $1 million; What you want to see? How many hoops would you make them jump through?

Twitter, the new spam

Has anyone noticed that many comments on blog posts, articles and news are now full of people with bite size, tiny URL or twitter tags?

Why would anyone click on your link if you can't take the time to craft an intelligent comment or response to the topic that brought them there in the first place?

The shorter the messages we can create the easier it makes for us to spam people and dilute the value of the content we have access to online.

Everything shouldn't be reduced down to a text message. If you can't take the time, neither will any of us.

Conducting Market Research... why this phrase is so intimidating...

Conducting market research. That statement in and of itself is intimidating, but why is it so intimidating? Maybe because many of us don't even really know what it means. Maybe because we have no idea where to start. Do we look at how many similar businesses are in the area?... How many people are there who will buy our product or service?... What is market research, what should I be looking for and what do I do with it if I can find it? To keep it simple, let's break research into 3 groups.

1. Target Customer - Where do the greatest # of my target customers live and work and what do they look like (demographics). Remember that target customers are not anyone who would buy your product or service but those who do buy similar products or services today or will have a need to buy your product or service in the near future.
2. Competitive - How many other businesses in my area fill the same need. Notice I wrote "fill the same need" not sell the same service. A need can be filled by someone selling a different service. Anything that could be chosen to replace or substitute your product or service is a competitor. For example, you want to open a health club in an area where there is an outdoor park or great mountains 15 minutes away...these other options for staying active are competition for your business.
3. Financial - What will starting and running the business by geographic area and type of location cost. What financial benefits could each option provide? A strip mall may cost a little more for space but provide instant exposure...or competition... A location a little bit off the beaten path may be cheaper but could require more marketing to create awareness.

Doing the research is never fun, but it is necessary to understand what you and your business are really getting into. Research at its core is just answers to questions. Come up with the questions you need answered to give your business the best chance of success, identify the type of people that you need to answer your questions and ask away.