What do chess and business have to do with each other? Well, it turns out quite a bit- the art of strategy!

I had the good fortune of seeing Bob Rice, successful entrepreneur, corporate titan, angel investor, and yes- a chess player- and a very good one at that! He just came out with his book, “Three Moves Ahead” and was speaking to a group of entrepreneurs here in New York City where he applied the lessons of chess to business.  It’s all how the pieces are played even if it appears that your opponent has the advantage. It’s how he or she makes the next move!

For me, a big take-away that I have been able to apply to my business life is ‘the check’.  When I joined in a chess match that day- I’m a complete novice- I was immediately called out for not seeking a check right away when it was available.  More than likely, I didn’t realize that it was available and I instead chose to move other pieces. I was chastised in front of everybody in the room by my opponent, the renowned Asa Hoffman, who accused me of wasting moves, which translates to wasted time and energy. He told me to understand how the pieces move, to think critically about the possibilities and then move to my desired outcome- a check! The truth, as painful as it can be, is always better, especially when there are valuable lessons to be learned.  I started thinking about my earlier days about when I first made the leap to entrepreneurship from corporate America and all the mistakes I made. If only I had looked for the ‘check’ back then, I could’ve saved myself from all the heartaches that nearly put me out of business. Chess may not be your salvation but it can help think more critically and strategically, so that you can apply those game changing principles to your own business.  So, let me suggest a friendly game of chess!!!

Fortunately, I was able to find support and recognize that to be successful, I had to be successful inside and out. I needed to open up and be receptive to people, ideas, and inspiration. By giving myself time to go to the gym and exercise just a couple of times per week, I was able to get my energy back and stay at a healthy weight. (In my anxious state, I lost far too much weight… yes, worrying & anxiety combined can burn a lot of calories but will ultimately wreak havoc with your body.) And, forcing myself to go to at least 1 networking event a week, helped me discover new ideas and stay on top of industry trends. I joined EO, the Entrepreneur’s Organization, which provided a great support network since all the members are also growing their own businesses.

I also read a book called Integrity by Dr. Henry Cloud, which was transformative to say the least. This is one of many standout books that has helped me assess the areas in my life that were “lacking”. It taught me that whether it was attracting cash flow or securing the right partnership deal to propel the business forward, it all came back to me and my attitude.

So what’s the result of being “whole”? I was able to successfully tackle business issues that plagued me. When I was on the verge of declaring bankruptcy and contemplating taking the next Greyhound back to Wisconsin (where I’m originally from), I was able to think about what it would take to put my business in the right place which included raising capital, outsourcing key parts of my business, and bringing on the right staff for my business. I transformed these vexing challenges into solutions, which ultimately helped me run a better, more profitable business. I really did open up and became more receptive to people, ideas, and inspiration to be ‘whole’ and succeed. My life is far from perfect, however, I am more aware of the need to maintain ‘wholeness’. Whenever I find myself veering too far off track, I just bring myself back.

1) Word of Mouth: Provide your customer with a great product, service, and experience and they’ll tell their friends and family about it - hence, “word-of-mouth.” The best part is, a word-of-mouth marketing won’t cost you a thing!

2) Referrals: Bonuses are a low-cost incentive that reward customers with discounts for referring their friends or family. Create brochures or coupons to hand out to customers. Give some thought to ways you can create buzz for your product or service; focus on a unique attribute or selling point. Even if it’s just a beautifully printed 5-by-7 post card, any copy shop (such as FedEx or Kinko’s) can print them in next to no time and for a small fee.

3) Social Media: This strategy is about connecting with your potential and existing customers in an informal way. The goal is to create a connection, sometimes emotional, with the person that is separate from the company website, which can be more formal and structured. For starters, create a Facebook fan page, which is free. This will allow you to post company developments and articles of interest to your prospective and current clients. With millions of users, setting up your business profile on Facebook is a no brainer. (Example: Wicked Start’s Facebook) If you like to write, consider a blog and write about topics that are of interest to your target market. (Example: Wicked Start’s blogs. Other social media to consider are YouTube where you can post videos about your product or service which creates an opportunity for customers to see you. (Example: Wicked Start’s YouTube channel).  And finally, set up a twitter account and build a following by offering links to interesting sites, stories, research or articles that your ‘fan’ base will find useful. (Example: Wicked Start’s Twitter account.)

4) Marketing Partners: Marketing partners are other businesses with which you cultivate a business relationship to cross-promote products. The expectation is that you will increase business for each other due to the relationship. Generally, you’ll share some characteristics with your marketing partner, such as common customers in different markets, but you won’t be direct competitors. Cross-promotion can be as simple as providing brochures to each other’s customers. An example might be a cleaning service leaving brochures in a high rise rental building in New York.

5) Website: Every business needs a website. This is your calling card. It’s how customers are going to find out about you and learn about your product or service. Today, everyone searches online for everything. Make sure that you have a web presence as this can be your primary sales channel. There are many low costs solutions for setting up a website such as Intuit.com, 1&1.com, Wordpress.com. Remember to “Optimize” your website. This is known as Search Engine Optimization or SEO. The goal is to make sure that when a potential customer in search terms on Google, Yahoo or Bing, that are relevant to your business, you want to be one of the first businesses results to be returned. Getting a top listing will mean making sure that keywords relevant to your business are included on the pages in your website.

6) Public Relations (PR) : Public relations is something that you can do to get the word out to your community about your business. Start by issuing a press release, which is a document detailing something new or unique about your product or service along with contact information. You can provide this to the local newspapers; national newspapers or any other media outlet that  might like to write about you. Further, reach out directly to reporters, writers, and bloggers and offer them a ‘hook’, which is a unique angle to make it newsworthy. Your goal is to get them to write about you. This strategy can take some time but doesn’t really cost you anything. You can pay $200 or more to put your press release on PRWeb.com but it’s hit or miss. I recently put out a release on PRWeb and ultimately got a feature published in Entrepreneur Magazine so in my case, it was well worth the $200.

All of these strategies can be found in more detail in a Guide that I wrote. Happy Reading!

So, where do you get funding to get going? At this stage, leveraging your savings or tapping into friends and family is the best bet. Also, for smaller amounts- say less than $50k, crowd funding is an option, check out ProFounder. The founder, Dana Mauriello, is truly brilliant. Rather than sell you an equity stake, investors buy a percentage of your future revenue streams. Think of it as a royalty of sorts. It’s a great way for people to invest small sums in startups and help you get $$ to launch.

If that isn’t an option because you need a lot of capital- something in excess of $100k- and you don’t have the resources to do it, there are Angel investors to consider, who are wealthy individuals who will take risks to invest in startups. These folks don’t know you so if you get the opportunity to get in from of them and pitch, make sure that you get them to really understand your business, how it’s going to make money, and why you’re the person to make it happen. Make sure you’re prepared to invest the time to foster these relationships because it can take several months at minimum to secure a deal. Gust has an extensive list of Angel investors.

In summary, unless you’ve got an online/scalable prototype, don’t waste your time looking for VC funding as a startup. Start with your own resources, and then hit up friends and family. Once you’ve got the business going and you think you need more capital, Angel investors or possibly VCs may be next on your investor hit list. Good luck and keep me posted.

Related articles

• VC funding hits 10-year high, though mid-stage startups suffered (news.cnet.com)
• Tips for Entrepreneurs from a First Year VC (pandodaily.com)
• Calling all startup CEOs: What matters most in choosing a VC? (venturebeat.com)

This enables the startup to really get going with a home or virtual office that saves on expensive leases, office and telecommunications equipment but still gives you the feel of the ‘big guys’.

Back to 2012 trends— Overall I expect that the following trends are going to gain momentum and you’ll be hearing more about them.

1)      Easier to market for less money- Think social media. Businesses with an online presence that are able to gather friends, fans & followers will also effectively get new customers while retaining older ones. Through newsletters, blogs, Facebook, YouTube, Twitter, or any other online community, you can connect with your base.  Before this, you needed to stand on a corner and hand out flyers or put an ad in the local paper.  Social media is not necessarily “free” as you need to spend the time of an employee or resource to connect and communicate but hey, you need to consider this part of your marketing effort. It can be more effective and less expensive than other types of traditional marketing since it’s very targeted.

2)      Anything mobile- According to Gartner, in 2012 and beyond, the dollar growth will be in smartphones and tablets like the iPad. This industry is not dying out any time soon. People will continue to use these as a primary way to connect to the internet and web related services. Making life easier or accessible for consumers in their palm will dominate. Startups that leverage this mobile technology for their own products & services will win the hearts of their customers. I too will have to make my online business accessible on smartphones within the next 12 months— someone tweeted about it. (How great is it to get that kind of feedback in real time?)

3)      Alternative sources of financing-  With banks still reticent to lend- even with loosened SBA standards, what’s a startup to do to get $$? Besides breaking your piggy bank, and hitting up Uncle Buck, you can consider some alternative sources of financing. Consider crowd source funding using sites like ProFounder or IndieGoGo to raise money in the form of ‘donations’ for cool ideas; think Diaspora, the NYU student run, personal web server that combines social media which raised $200k in 2010. ProFounder offers a couple of options from a revenue share to selling equity in exchange for $$. I know the founder, Dana Mariello, and she’s brilliant so check it out. 

Entrepreneurs must make many critical decisions during the long process of transforming an innovative idea into a profitable global company. Perhaps no decision is more important than choosing the right board of directors.

The right board members offer an outside perspective on—and often personal experience with—execution and growth issues, strategic direction and key hiring decisions. Your board should not only offer strategic guidance and vision, but also be willing to make introductions to potential hires, partners, customers and investors.  As an entrepreneur, you need involved and supportive board members you can lean on during the first years when you don’t have full management teams in place, but also board members who have the expertise to guide the company in later stages through growth, partnerships, acquisitions and potential exits.

Some of the key issues board directors should be involved in include: selecting the right management team; compensation and how it’s linked to actual performance; the right strategy at every stage; and monitoring company health, strategic planning, setting key objectives, performance and risk.

When setting out to build a board, the first step is to make a list of the types of needed expertise. Of course, you want executives who know your business inside and out and who have built companies in the space from the ground up. You also want connected partners who will introduce you to key players. But you may also need access to very specialized expertise that only a few people possess. Work directly with your venture investors to get the right people around the table.

Secondly, make sure you get the right types of board members. Two main types exist. The High-Maintenance Board Member wants to get involved in every aspect of your day-to-day business. Avoid these people because they will waste the CEO’s precious time and will distract management from executing on important goals. You don’t need the organizational confusion of board members who act like part of the everyday executive team.

The second type of board member is the Value-Add Board Member – and these are the folks you want. These people bring focused expertise to the table and jump in when asked for advice or when they believe they can add real value, but they leave the day-to-day operations to the CEO and his or her management team.

How do you tell the difference between the two types of board members? That’s one place your venture investors can help—because they likely know your prospective directors personally or have at least run across them in their network.

The current excitement among entrepreneurs and venture investors is palpable. After a few long recessionary years, companies are lining up to IPO, hiring is on the rise, and the business climate is improving. The next generation of Internet, technology, and consumer business leaders are emerging.

With this return to optimism, venture firms are again keen to invest in high-quality startups with the potential for greatness. The result, as always in times like these, is that too much money is chasing too few good deals. Entrepreneurs are in the driver’s seat.

If you’re a proven entrepreneur starting an innovative, revenue-generating business today, you’ll probably have your pick of venture firms. VCs had the upper hand in structuring deals during the recession, but many are beginning to realize they need to “earn the right” to invest in the best companies. At Maveron, a venture firm founded by and for entrepreneurs, we’ve always taken this approach. We approach venture investing as a partnership; we provide the funds to support an entrepreneur’s dream of building a great consumer business.

The shift today toward an entrepreneur-driven funding market is not just a temporary result of the return of high-profile exits and increased optimism. In fact, the entrepreneur should always be in the driver’s seat no matter how the exit markets evolve. Why? Because startups simply are not as reliant on VCs as they were 10 years ago. There are several reason why this is the case.

One, it is cheaper to start a startup today. Moore’s Law has made hardware cheap; open source has made software free; the web has made marketing and distribution platforms accessible; the cloud has made geographic location irrelevant; and more powerful programming languages mean development teams can be smaller. In other words, the entrepreneurs who created all this amazing technology have changed the game for the entrepreneurs who come after them, making start-up costs much lower and the need for a big infusion of venture capital less pressing.

Second, startups are reaching profitability sooner. Every startup is constantly calculating the “runway” – how long they have until the money runs out. But because startups have become cost effective to run, that runway is longer and the threshold of profitability can be reached sooner. If you have a profitable company, you don’t necessarily need venture capital to sustain growth.

Despite these realities, VCs aren’t about to disappear overnight. The firms that understand this new world of “capital efficient startups” will not only survive, but thrive, in the coming decades. Entrepreneurs that want to build really big global businesses will still need venture money – because even if you’re profitable enough to keep growing slowly and organically, you’ll still need a big capital injection to take a big leap.

If you’re an entrepreneur in this position right now, how should you vet the VCs clamoring to fund your company?

1. Approach the fundraising process as “buying capital” rather than “selling equity”. You need to buy capital at the best possible terms for your company, with the goal of using that capital to reach clearly defined growth goals.

2. Research VC firms carefully and come up with a short list of firms that are the best fit for your company. Things to consider are:

3. What business sectors does the firm have expertise in? Does this expertise map to your business?

4. Do they have any partners who are proven experts in your industry? Do they have operating backgrounds?

5. Which companies in your space have they already backed?

6. What is the potential “network effect” via the key partners’ industry contacts?

7. How much does the firm typically invest per deal and how much “dry powder” do they have in reserve?

8. How are their investments typically structured?

9. What are their exit expectations?

10. Are they known as entrepreneurial friendly and can they be referenced to prove that?

Competition among VCs for the most promising companies is fierce right now – and due diligence is a two-way street. As an entrepreneur, you should be as interested and concerned about the qualifications of your potential investor as they are about your qualifications, business plan, and execution strategy. Ask for references and investigate each partner’s professional and career background. Ask for a list of the CEOs of their portfolio companies, so you can contact them to get better understanding of how they work with entrepreneurs. Meet all of the investment team members and the other partners in particular.

Finally, it is critical that trust, honest communication, and respect form the foundation of every new funding relationship. Building a company is likely the most challenging thing you’ve ever done – and you want a venture partnership who shares your goals and is “in it to win it” right alongside you.

I have certainly made mistakes along the way but I’ve rated high in the 3 P’s of entrepreneurship— passion, persistence and problem solving ability.  With these “P’s” you’ll be armed with the right tools to address the challenges in growing your business, in whatever industry. Then, on top of that you’ll have your startup roadmap for execution. If you’re unsure of your business idea, take the “Is My Idea Viable Quiz?” (take the quiz) Do you have experience? Have you developed a working version of your product or service? Where will startup capital come from? If can’t follow these basics, you’ll fail. There may be exceptions but you’re likely not going to be one of them.  When you read about many of the entrepreneurial success stories, you’ll find that they’ve got the 3 P’s.

Do yourself a favor and think it through. There is no easy road to success… you need to stretch yourself and earn it. When you do, it can be oh so rewarding!

The common adage goes, a banker provides money, but a VC (supposedly) provides smart money. Venture capitalists shouldn’t just pony up cash, in other words, but should also dive in head-first to help build companies from the ground up. Investors often have past operating experience at large companies or as entrepreneurs themselves, and they leverage this expertise to offer advice and guidance to the startups in their portfolios.

While this seems like a win-win situation, some entrepreneurs wonder whether this guidance is a help or a hindrance. After all, many entrepreneurs are driven, passionate individuals with clear ideas on how they want to create, run and grow their businesses.

Their concerns are understandable. But there are ways that a VC can really help.

A VC with operating or entrepreneurial experience is a valuable strategic partner. VC operators have “been there and done that,” and have learned a lot along the way. Maybe a VC grew a company from startup through a big exit, or maybe he or she managed a large team and P&L at a large corporation. As an entrepreneur trying to build the most successful business possible, in the shortest amount of time, is it not helpful to take advantage of this expertise?

There are many ways a VC can help an entrepreneur strategically ramp up growth. Every entrepreneur should feel free to ask their investor for guidance in the following areas:

• An outside perspective on—and often personal experience with—management issues that can prove especially useful in the complex relationships between founders and CEOs;

• Operational experience in scaling a business, managing people and building infrastructure—and an understanding of what it’s like to be in the trenches and what it takes to move forward;

• Understanding of competitive markets to give an operational assessment on whether the business model is sustainable and how the company can rise above competitors;

• Experience running all the ecosystems in a company (finance, marketing, recruiting, sales, etc.)

• A strong referral network of contacts in many areas who can add value to the startup to help with recruiting key personnel, meeting strategic partners and potential customers, and forging alliances in market channels.

This all sounds good … so what’s the problem?

A long-term strategic relationship between a VC and an entrepreneur will never work without “alignment.” At Maveron, we don’t ask ourselves “What advice can I offer this entrepreneur?” but rather “How can we align our goals to work together to build a great company?” Clear communication, a commitment to joint success, authenticity and trust, and an ongoing open dialogue are the cornerstones of a solid VC-entrepreneur team. As the startup grows, the entrepreneur and VC must continually realign their mutual goals, adapting to changing markets and business milestones to continue to generate the best business outcomes.

Only when the entrepreneur and VC are aligned can they work together to build and scale a great company.

The truth is that great VC’s want their companies to succeed as much as the founders do. So why not align our goals to increase the probability of a fantastic outcome?

Create your own ‘forum’- or group of peers- who you can share your experiences with so you can learn and grow with each other. An excellent group of peers would be fellow entrepreneurs who are not emotionally or financially committed to you- so NOT spouses, partners and employees.  I first discovered this ‘forum’ concept when I joined the Entrepreneurs’ Organization (EO). They have over 25 years perfecting this model…so, if you have built a business that’s generating $1M plus annually, you may want to consider joining EO to get a valuable community to help support you as you sustain and grow your business. When I joined EO several years ago, my forum helped me think about how to raise capital and scale my business to take it to the next level.

Recently, with my current business, I’ve lead the charge to start a new forum for scalable/tech startups, leveraging what I’ve learned over the past several years.  I reached out to 10 folks who I respected and admired in the StartOut community— and even a couple of folks who I didn’t know but could potentially benefit from the experience (and didn’t compete directly with each other). All of them saw the need and 8 signed on for the experience. An ideal forum is 5-10 people, this allows for diversity of thought? Convinced that a peer group/forum would help you? What are you waiting for… go get connected!!!