The opportunity of a lifetime has landed at your feet. It will make your company. All those long days and sleepless nights pay off. The people who invested in your dream are winners. Yet, there is one problem. You need to bridge the gap between here and there. You want more equipment or gap financing tipsmanufacturing space; you need additional installers or programmers; you need more money.

Bridge and gap financing can be beyond the entrepreneur’s reach if there is little collateral, too many debts, or not enough months of profitability. Bankers cannot help you. Investment bankers give blank stares and a lecture on how long it takes to raise money.

Where do you turn? Turn to the people who have a stake in your company.

1 – Call That Stockholders Meeting

Stockholders are especially good sources for loans, particularly reasonably priced bridge or gap financing. Once someone invests in your company, they are the best source of additional money. They know you, your company, and your business.

Current investors are quite likely to make a second investment. You can go to one or all of your investors.

Before you do this, be prepared: know how much you want, exactly what the additional investment buys, and how much you are willing to pay for it. Decide whether you want debt or equity financing. If you decide to offer more equity, determine the fair stock value.

If you decide to get a loan from investors, know whether you want cash or collateral. If you ask for cash, know the interest rate you are willing to pay, how the loan will be repaid and in what time frame. If you decide to get a collateral from investors, called hypothecation of the loan, know what you are willing to give in exchange. Commonly accepted for hypothecation are stock, warrants, options, or a percentage of the loan, such as 2%.

If you are uncomfortable approaching your investors, look at it from their point of view. Do a little research and find out what they want. Savvy investors know that an additional investment, whether debt or equity, is smart money. Making a loan to a company in which you have an investment is the same as investing in your own company. The loan increases the value of the company, and thus the investment.

Investors and business owners alike know that inexpensive money increases profits. When you loan money to yourself (which you are if you are an investor), you receive more interest than paid by a bank. This keeps the interest payments “in the family,” so to speak, while increasing the revenues and profits.

The fact is a smart investor is going to drive a hard bargain. In addition, you may need to inform other investors, and call a board of directors meeting to approve the transaction.

2 – Take Your Stakeholders to Lunch

Stakeholders are a quick source of gap financing. Stakeholders are defined as anyone who has a stake in your company such as clients, customers, suppliers, the landlord, and even your lender. The key to identifying stakeholders is look for anyone who depends on you and your company for some essential part of their business. Often, they are willing to provide a loan in exchange for receiving discounted goods or services, or continuing to receive a required good or service they cannot get elsewhere.

Before approaching stakeholders, find out what is of value to them. Sometimes a stakeholder wants to own part of your company. As you decide whom to approach, consider who could be a joint partner or strategic merger candidate. If you do this, be certain that this is a company that you can rely on.

Your landlord may be in a good position to help you by deferring your rent for a few weeks, with interest, or taking a stake in the company in exchange for free or reduced rent over a period of years. If you are financing significant growth in your company with this loan, your landlord probably will want to lease you more space. That is a point to bargain from.

As you plan your offers to a stakeholder, think about the long-term ramifications. You may risk restricting your company’s growth. If, for example, you have established an exclusive contract to buy parts from a stakeholder who is a supplier, and later you find another supplier provides them for far less cost, you may be stuck with a high-cost item. These considerations must be made before you strike a deal.

3 – Be Like Teddy Roosevelt and Charge

You have the biggest stake in your company. If the money you need is small, say under $5,000, and you need it for a short time, AND can pay off the loan with revenues, use a credit card, or an equity line of credit, if you own your home. The credit card is expensive, expensive, expensive, and the equity line of credit less so, but if you need limited funds with a return far in excess of the money borrowed plus interest, it works.

If you go to other people, the typical reaction of most people approached for small amounts is: “if he doesn’t believe in himself enough to put in $5,000 on a credit card, why should we?”

When you can’t be Teddy Roosevelt, be a teddy bear and go to your extended self: the bank of Mom (or Dad). Other relatives also might help. These people also have a stake in your company, but that stake is you. You need to be extra careful to do the right thing, pay them back with interest, and be quick about it. Be sure to complete loan documents, and set up a regular payment schedule. Your relatives are the most unsophisticated of all investors – even if the work for Merrill Lynch – because they do this for love not money. This is not financial advice per se, it is relationship advice, since holidays can be very uncomfortable if you stiffed the family on a little loan.

It’s the Little Things That are the Hardest

Small amounts of money are the hardest to find. You should do some research before you decide which short-term gap funding method to choose. Know what makes your stockholders and stakeholders sit up and take notice.

Do not fall prey to the stickup method of fundraising: “gimme your money or I’m killing this company.” It does not work: the vinegar of a threat repels.

The honey you should spread is the sweet vision of success. Keep in mind that gap loans are intended to contribute to the long-term profitability of your company. The goal is to increase your company’s worth. The increase may not direct, but if the bridge loan takes you to a place of profitability, stability, and growth, it is worth using.

It is difficult to raise gap funding in any economic climate, so be prepared to know why this gap funding is the best investment money can buy.


Small companies feel the pain of poor cash management more quickly than most large companies, for there’s often less of a cash buffer. Good marketing and product development processes can help a company develop the inflow of new cash, but companies must also manage cash outflow to be successful.

While good expense management certainly includes knowing what expenses are important to achieving your goals, we’ll focus on managing the timing and magnitude of expenses in this article.

The rules are simple:

  1. Have a budget and use it.
  2. Track commitments, not just expenses.
  3. Review results frequently.
  4. Respond to signals.

We’ll discuss each in turn.

How many times have you heard that you need to set goals first? If you want to meet specific financial goals, make the goals specific and cash management

Some companies, short of cash, encourage their people to spend as little as they can. That sounds admirable, but it hides a deadly, future risk. When people spend “as little as they can,” some will no doubt delay purchases crucial to meeting their goals. Once the pressure is off (or sufficient time has elapsed), managers will buy many of those items they’ve been missing. That can lead to a frustrating cycle of over-spending, financial controls, postponed purchases, financial recovery (or spending in spite of controls), and repeated over-spending.

The moral? Use good decision-making processes in defining what you need to purchase. Make sure your budget reflects your strategic business needs and your tactical project needs. Make it specific, and make sure each item is tied to one or more goals. Then spend money according to that plan. If you spend less than you have and yet have unmet needs, you may create future problems.

Second, pay attention to “pipeline cash.” When you spend money, the cash doesn’t flow immediately. You first decide to make a purchase. Next, you issue a purchase order. There are potential delays in receiving the goods. Once the material has been received, the invoice goes to accounting. At the end of the month (or perhaps the quarter or even the year!), accounting provides managers with an expense report that compares actual to planned spending. (Yes, even if you aren’t taking your budget seriously, someone probably created one at the beginning of the year.)

What’s the issue? The amount of your financial commitment was hidden in the “pipeline” from the time the decision was made until managers receive and read their accounting reports. If anything is off track, it will take at least that long to discover and correct the problem. This is probably the key change most companies should consider in their accounting systems.

The moral? Track financial commitments from the point they are made.

Third, track results often. How often depends upon how closely you want to control expense and cash fluctuations and upon the nature of expense fluctuations. You’ll probably want to tailor the frequency of reporting to your experience in your company, but there are some rules of thumb. If you assume that your company spending, left uncontrolled, may deviate about 50 percent in a year, you may see up to four percent deviation in a month. If you want your spending to be within five percent of your budget at all times, you might want to track spending at least monthly, if not twice a month, to give managers extra time to react to signals.

Finally, respond to signals. When your accounting systems show that you’re over-committed, cut future spending immediately. It may be painful, but getting into a cycle of under- and over-spending is worse. If you’re under-committed (a problem many companies would relish!), look carefully to see if there are expenses you should make to provide your company the resources it needs to achieve its goals. (Note that this approach is very different from spending money simply because it’s available. Spend it in support of attaining your goals.)

If cash inflows change, revisit your outflow plans, as well. If you’ve done a good job of creating a spending plan, you’ll have a prioritized list of what you need to spend money on, and you can cut from lower priority items. Having made those plans explicit as part of creating and managing your budget lets you respond quickly to shortfalls.

What’s the evidence that this approach will help? In the mid 1990s, I saw an organization with out-of-control spending. They’d be seriously over-spent for a few months, they’d enter a period of under-spending, and then the cycle would repeat. That’s not exactly the way to generate confidence in management!

I created a simple computer model of the management spending decision process in that organization. That model could recreate the organization’s accounting graphs. By taking into account pipeline cash and by increasing the frequency of updating reports, I was able to eliminate the problem in the simulated model. When we applied the solution to the organization, expense fluctuations dropped by 95 percent.

Successful fund raising depends on many factors. Obviously, your business prospects are foremost among investors’ considerations when deciding whether to write you a check. However, there are several other factors that go into an investor’s investment decision-making process. Many of these things have little to do with improving the business itself, but in any event can increase the entrepreneur’s odds of raising Angel capital.

In the next few paragraphs, I have outlined some very general tactics and rules that you may wish to deploy in your quest of raising capital from Angel investors.

what to do and what not to do in a successful pitch

Materials and Tools for Making a Successful Pitch

So why does the presentation or ‘pitch’ matter so much? It’s the Angel investor’s first impression of you, your management team and your company. It’s the primary means by which the investor will evaluate you. One thing is for sure — virtually nobody will write you a check unless they see the whites of your eyes. During the first of couple minutes of your presentation, your prospective Angel investor will probably already determine whether you are an upstanding citizen worthy of his/her hard-earned dollars. You can send an Angel investor all of the information on your company you want, but you will be wasting your time if you don’t take the time to meet the investor and give him the opportunity to evaluate you as a person. Make time to answer his questions and concerns, and give him a sense of your ability to command a business and inspire people. I would speculate that this is a fundamental reason why online Angel fund raising websites never took off.

So, what are the tools that one should have when they go to ‘market’ on an Angel fund raising campaign?

Executive Summary — Designed to get a meeting, not for due diligence. The Executive Summary should be no more than 4 pages long and should include the following at a minimum:

  • Describe your product or service.
  • Tell the investor what problem it solves or the need it addresses.
  • Describe the investment opportunity.
  • Introduce team members
  • Give an example through summary projections of how much money investors can make (if you meet plan) and when.

You should provide only the executive summary to investors prior to your meeting with them unless they are professional investors/VCs. If the investor doesn’t have time to meet with you upon reviewing your summary, then they probably aren’t very interested in the first place, and probably aren’t worth your time to prospect.

PowerPoint Slide Show
  • Make it short, sweet and to the point, and anticipate investor concerns.
  • Use 10 slides maximum.
  • Bring paper backup.
  • Use few words on the slides.
  • Again, show them how much money they can make and when.
  • Use the last slide to remind investors that they may invest through an IRA or SEP (see below Ð IRA & SEP investments)

Prospectus/Private Placement Memorandum (PPM) — PPM’s can often be cumbersome and complicated for Angel investors to navigate. Make it as simple as possible for the investor to execute the PPM and subscription document. This assumes your business plan and financial projections will be contained in the PPM.

  • Never mail a prospectus/PPM to an investor without meeting them first. Remember, they won’t invest unless they see the whites of your eyes.
  • Include the subscription agreement at the back of the PPM, but be sure to provide a detached copy of the subscription agreement separately for easy reference.
  • Make sure instructions on how to invest are on the front of the Subscription Agreement, including all wiring and banking instructions.
  • Highlight the subscription agreement and use ‘sign here’ stickers.
  • Provide a self-addressed, stamped envelope with every investor packet.

Rules for Making the Presentation

Practicing the Pitch
  • The pitch should be no more than 20 minutes.
  • Always have someone (preferably several people) review your pitch LIVE before taking it to any investor. Remember, your first few live pitches are usually the worst ones.
  • If 2 people are pitching from your team, plan ahead on who speaks when. Coach those people to keep their uninitiated responses to a minimum (e.g. ‘Let’s be sure to talk more about that question after the meeting’).
Making the Pitch
  • Don’t read off of the slides.
  • Don’t get caught up in the ‘gadgetry techno babble’ during your pitch.
  • Speak to the lowest common denominator investor.
  • Don’t forget the competition slide and list, or know ALL of the competition.
  • Use testimonials when appropriate.
  • Be honest about the risks, and explain how you intend to overcome them.
  • Be humble and leave your ego at the door. Tell investors you are willing to give up the reigns, if necessary, as the company’s development dictates.
  • Remember, questions are a good thing, and if answered intelligently are more powerful than slides. Leave some things unanswered since you don’t need to cover everything.
Closing the Presentation
  • Distribute offering materials after the pitch to keep investors from being distracted while you speak.
  • Questions are often a buying signal, so welcome them.
  • Exchange business card for PPM/plan.
  • Tell the investor when you are going to follow-up with them, and then execute on what you promise.
Post-Pitch Follow Up
  • Follow up with the investor within two days after your pitch. The probability of an investor investing declines roughly 10% for every day after you make your pitch.
  • Offer to pick up the check from the investor versus having them mail the check.
  • If the prospective investor says ‘no’, tell the investor you appreciate their consideration and ask if they have any words of advice on the pitch or approach.
  • Upon receiving an investor’s check, reaffirm to the investor that they are making the right decision in believing in you, and ask for a referral.

IRA & SEP Investments

Most Angel investors are not aware they can invest in your private placement offering with their IRA or SEP investment money. INVESTORS ABSOLUTELY CAN, AND WILL, invest with money from their IRA or SEP if you make them aware of this fact. Investors need a custodian who will accommodate investments in private transactions, and not all IRA custodians will (brokerage firms, banks and other financial institutions). Carry business cards for a firm that will and hand them out to interested investors. I recommend McDonald Investments / Key Bank for low-cost custodial services who understand how to do private deals in IRAs.

Prepare for questions
  • I can’t stress this enough, the #1 question you need to answer for the investor is ‘HOW MUCH MONEY IS THE INVESTOR GOING TO MAKE, AND WHEN’. If you can’t answer this question, then you can’t expect the investor to either.
  • Be prepared to justify your current valuation, and your valuation at exit with comparable transactions and valuations in your current market and industry. The investor wants to see your reasoning and to determine for himself/herself its accuracy and validity, and to evaluate the underlying probabilities associated with your assessment of the financial outcome.
  • Be ready for ‘How much money do you and your team have in the deal?’ Of course, the more of YOUR money you have in the deal, the better.
  • Don’t be greedy on your valuation. You have 1 shot at the market for raising money once you make your mind up. I would argue that at the end of the day it is better to own 1% of a $1 billion company than 10% of a $100 million company.
  • Be prepared to justify your salary and your stock ownership %.
  • Require your Board of Directors to invest, at the very least a nominal amount, but the more the better.
  • Be prepared for ‘Will you take less than the minimum investment’ — Yes. Small checks are better than no checks, and they often lead to larger checks if you perform.
  • Considering diverse offering strategies
  • If you have a product/service that people will buy daily, consider a Regulation A Offering.

Non-disclosure Agreements (‘NDA’s)

Investors aren’t interested in stealing your idea and going into your business, so don’t expect them to sign an NDA unless you’re sharing ‘the secret sauce.’ NDAs make sharing information for due diligence purposes very difficult, if not impossible.

Investor types and amounts
  • Do not accept investments from non-accredited investors even if your exemption status allows it.
  • Set the minimum subscription amount at a higher level, since you can, and generally should, always accept less than the minimum.
  • If you desire to raise, for instance, $1 million, consider making your Offering amount less than that, say, $700,000, but allow for an over-subscription provision for an amount that accommodates more than the $1 million, without being too dilutive.
Advice for the Post-Funding
  • Communicate! Communicate with investors often. One of the biggest complaints from investors is lack of communication post funding. They will like and appreciate you more when you go to them in the future for more money, or more help.
  • Give them at least quarterly updates whether you have news to report or not.
  • Yes, report bad news. No surprises.
  • Share your financial situation, benchmarks, and how you stacked up to your ‘key business drivers’ with investors.
  • Use email to communicate often — Its quick, easy and cheap.
  • Ask for investors’ assistance — Investors can be advocates in so many ways. Ask for business development referrals, investor referrals, employee and management referrals, and recommendations for outsource partners.

Now that you’ve successfully pitched the Angel community and received your funding it’s off to doing what you do best — building a valuable company where all of your stakeholders prosper!

A new company typically begins with a vision and a business plan. The vision is focused on what the founders want to achieve in the marketplace, while the business plan lays out how the vision might be achieved, such as: more specific goals, a description of the environment, a statement of method and key players, a ‘liquidity event’, and lots of supporting detail. That vision, and the business plan to achieve it, tends to be external views – the customer and market-facing view needed to generate support and funding for the new company. However, the business plan is only part of the real plan it takes to start fast, work smart, and win. The other part of the plan needed is what we call the Internal Vision. The Internal Vision is focused on what it takes internally to build an organization capable of executing that external vision – how to start up right, ramp up fast, attract and keep the right people, and make sure those people can be effective.

The reason Internal Vision is important is that signatures on a funding document are like the starting gun in a race; everything had better be planned out and ready because there’s not going to be much time for new thought for awhile. That means things like planning, team building, communications, new hire orientation and basic process design may just get a lick and a promise while everyone is running as hard as they can down what they perceive as their main path.

The Internal Vision is an organizational effectiveness vision and plan, looking at how to:

  • Turn a new group of execs into a hot team
  • Set direction and plans, and recognize when assumptions & strategies need to change
  • Define and grow the organization
  • Hire and assimilate staff quickly
  • Establish an appropriate culture
  • Communicate effectively
  • Establish the right levels of process
  • Build satisfaction, trust and energy

As part of start-up planning, the founders of a company can address organizational effectiveness as an opportunity to ‘start right’ internally, just as they work to ‘start right’ externally. This article presents an outline for creating an effective organizational environment for the company; an environment that will help ensure maximum early effectiveness of people and processes and help enable effective early rollout of its products and services.

The Internal Vision plan addresses fundamental organizational development areas of executive team building, corporate culture, organization structure, critical processes, roles and responsibilities, recruiting and hiring, training and development, and internal communications. It is designed to be an integrated part of the overall company business plan and to address each of the six key internal capability areas: direction, organization, skills, process, communication and trust. If each of these areas were expanded with specific plans and actions for your organization, then you would have created an internal business plan. Plus, you would have significantly improved your ability to keep all the right things moving at the right times.


Executive Team Development

The leadership of the organization – the executive team – determines the vision and mission of the organization and maintains focus on strategy, goals and objectives. The team must work together to create the culture, determine the organizational structure and define operations. It is essential the executive team be in alignment on key issues facing the organization. To reach this agreement, a team must develop open communication, establish how members will handle decisions and conflict, and determine roles and responsibilities for the individuals on the team. There needs to be a conscious process of team development integrated with the day-to-day work the team needs to accomplish its objectives. This is best achieved through routinely conducted meetings, 2-3 hours in duration. Topics consistently on the agenda include:

  • What’s New (changes and happenings that need to be addressed or noted by the Team)
  • Strategy and Direction (any changes in the intent)
  • Process and Operations (where are we today?)
  • Organization and Responsibilities
  • Culture and Productive Relationships
  • Decisions and Communication

A key consideration is rapid orientation and assimilation of new executives and regional managers to the organization’s culture and operations. A theme for this work is real-time: real-time team development and real-time strategic planning. In start-up companies, these have to be processes, not events.

The Corporate Culture

The culture of an organization determines the spirit and pace of work. People joining together to accomplish tasks and fulfill responsibilities do so with certain attitudes and unwritten agreements about how they will communicate, manage conflict, provide direction and leadership and support the company’s goals and objectives. The culture defines the working environment, and must be consistent with the intended operating mode of the company. A schedule-driven, high-volume, precision operation will need a different culture from a high-knowledge, custom service operation. Certain environments inspire and motivate people, while others can impede progress and stifle initiative. While the leadership of an organization cannot create the entire culture, they have great influence on the type of culture it will become. Key leaders should agree on the sort of culture they wish to establish, model the behaviors they seek, hire the kind of people that fit, and reinforce desired behavior at every opportunity.

Organizational Structure

The structure of the organization determines how the work will be directed, where decisions are made, and who will be responsible for carrying out various tasks and duties. The structure of the organization can either help or hinder organizational communication. There are many ways to structure the organization. The model selected will generally have the customer as a primary focus, will support and be consistent with the basic processes of the business, and will enable employees to carry out their work effectively and swiftly. The form of the organization will shift with time, as more staff and new talents come on board, and as the company matures and gets in its operational groove.

Critical Process Definition

Every business has a few mission-critical processes it must get right in order to operate effectively. It is critical to clearly define each of these processes, outline desired objectives, and model desired operating methods. This provides the basis for initial training and operations. Once the processes are in place, a continuous learning and improvement loop is initiated to ensure best practices are always being used. The formality of process definition also varies with time and maturity. Too much structure and process too early in an organization’s life can strangle the flexibility and creativity that are essential in a start-up environment. A good guideline is ‘just enough’ to make it easier to do the job.

Roles and Responsibilities

Based on the structure and critical processes, the company will identify roles and responsibilities for members of the organization. The roles and duties will change as the company grows. Outlines of jobs and tasks will expand and become more complex as more people are added. Thoughtful and careful planning now helps alleviate future confusion and distractions when questions come up around whom does what and when. This is especially important in the early stages when you may be in hyper-growth, constantly parceling out old responsibilities to the new hires, picking up new responsibilities, and sometimes trading responsibilities as the business evolves.

Recruiting and Hiring

Finding the right people for the defined roles and responsibilities is essential, not only to accomplish the work that needs to be done, but also to support the desired corporate culture. Getting clear up front about the core competencies required to drive the company’s success is an essential part of strategic planning. Getting an HR person on board early to help drive the staffing process is very important. Otherwise, too much valuable executive time can get sucked up in things like preliminary interviews and helping new people get oriented. Job definitions must be written, and a list of personal characteristics that support the desired culture must be developed. Recruiting channels will need to be identified. Hiring practices, contracts, legal issues, and salary/benefits/incentives packages all need to be addressed.

Training and Development

The greatest asset of any organization is the people who work there – trite but true. Training and development of the people who work for the company will help ensure the company has effective operations and customer satisfaction, and will help create a loyal and stable workforce in the future. Initial training for employees should be developed based on the critical process definitions and continuously revised and improved as experience provides learning. Development of the leadership and executive team is an essential part of the start up process and needs to be ongoing as new leaders and managers are hired. At the beginning stages, the real training task that starts Day One is the orientation of new employees to help them get up on their responsibilities and the company’s direction and priorities as quickly as possible.

Many of the points above are cast in the light of building a very effective organization very rapidly. It is worth noting the same good practices that help you quickly build an effective organization also are the practices the help keep your good people with you – good management practices, satisfying work, and ongoing personal development are the proven keys to both productivity and retention.

Business communications are often intended to trigger action. Each time we communicate, we have an opportunity to influence actions or secure agreements. It is paramount that messages are constructed deliberately, according to a set of principles. Think of this “construction” process as “engineering” the message.

Messages usually will be understood from the point of view, bias, and need of the listener. To engineer messages for maximum success, we begin by understanding the message’s “public.”

Any given enterprise will have various “publics.” Publics may comprise employees, customers, governmental agencies, the Securities and Exchange Commission, investment analysts, and any other entity that can influence future results. Management may want to communicate to a diverse audience – for example, that the most recent quarter resulted in a profit. To each of these publics, the core of the message is the same – there was a profit made last quarter.

Employees, who were intimately involved in making that profit, have a different perspective about it than do Wall Street analysts who may be more interested in predictions of future performance. This rather simple example illustrates the need to craft the message differently for different “publics.” But, it is not always so obvious. A public may be a category of people or an individual. The key is identifying each public and tailoring communications accordingly.

To get the desired response from each public, it is advantageous to understand their individual mindsets… what will move them from passive to proactive, from listener to action taker?

What Moves Them?

Even though countless human behavior studies have concluded that people act and react in very different ways, executives often fail to account for this fact when creating messages. It is prudent to understand what audiences one has, what will motivate those specific groups of people, and how the elements of the message will yield a particular response.

We should appreciate the value proposition for, and motivating factors of, the individual or group to whom the communication is directed. To illustrate the point, let’s examine three publics — investors, customers, and employees. Let’s explore the motivating factors and how our pitch may differ depending on our targeted audience.

Situational Study

Our imaginary company is CRM. CRM has a unique software platform that is offered to healthcare professionals and hospital administrators. CRM is currently seeking funding to launch a nationwide initiative. The company has already proved its model and has opened two new markets successfully.

The executives have developed a presentation that features product highlights, the customers’ problems it solves and effective graphics of the user interface. The management team believes that the presentation communicates everything about their product and company. The presentation has 34 slides and is presented by the CEO to customers, prospective investors and employees as a means of explaining what CRM is about. So, what’s the problem?

Although the presentation is elegant, it is not focused on a sing

le, intended audience. In crafting a “one-size-fits-all” message, the critical motivating factors of each audience (public) are compromised so that the message addresses no one directly. According to James Nardulli, CEO of New Media firm GetLiSA, “Effective messages must be from one to another. Messages aimed at many will reach no one.” Each of the three publics for the CRM message has distinctly different benefit angles or buy-in criteria affecting their decisions. Consider the chart below that illustrates how these three publics differ in their perspectives:

Table 1.1 Chief Concerns Among Different Publics

Potential Investors
Communication Goal: Gain investor confidence and move him/her to a decision to invest.
Communication Goal: Gain customer confidence and move him/her to a buying decision.
Communication Goal: Move employee from merely accepting position and doing daily work, to owning his/her piece of the vision and executing on that vision.
Product solves a unique industry problem.
How this solves my problem?
How this company vision affects me?
Market size.
What benefits will the customer realize?
How market potential will mean personal security and prosperity?
Go-to-market strategy.
Product differentiating factors: Unique Selling proposition (USP).
Technology overview that provides personal growth opportunities within the company
Key milestones.
Cost/benefit customer perception.
Key benefits for employee (i.e., salary, bonuses, healthcare, stock, etc.)

Competitive overview.

How industry-specific needs and problems affect future product utility.
How daily activity impacts company growth…worthwhile work.
Management team.
Current clients.

Revenue model.

Track record of experience.
Track record of experience.
Referrals from others

One presentation attempting to satisfy these disparate buying criteria will probably move none. However, while a tailored presentation is vital, it is only one layer of an engineered communication strategy. Other, vital layers are recognizing personality style and motivating factors of a person or group involved. We should consider the human aspects projected by our message. It is critical to develop an awareness of how different people act and react based on personality and personal motivators. Only then can we begin to answer the question, “What moves them?”

Personality Make-Up

CRM is focused on meeting with medical administrators of leading hospitals around the country. To date, the company has experienced some success selling its product to several large hospitals but wants to increase its close-to-call. The courting process is fierce and costly. By shortening its sales cycle times, the company can markedly improve its bottom line.

After evaluating their sales-call methodology, the management team realized that the sales team was seasoned and skilled in articulating product benefits but they needed help identifying personality styles and interpersonal issues. Company CRM launched a personality training session creating interaction among the team. The goal was to instill a solid knowledge of personality types and resultant motivating factors.

The four personality types that Company CRM chose to examine in order to gain a greater return on its communication strategies were: Drivers, Analyticals, Expressives, and Amiables.

The Driver personality style likes things to be done and done NOW! This person is quick to anger and slow to accept feedback. The Driver wants to know the bottom line quickly and expects other people to immediately understand all the details and salient issues. If a Driver comes out roaring like a lion, sometimes roaring back is a good idea.

The Analytical personality wants to investigate details such as numbers and financial outcomes. This personality style usually takes a longer time to make decisions. Furthermore, the wrong decision is perceived by this personality style as failure. An Analytical can become obsessed with “getting it right.” Failure is unacceptable. The ideal Analytical message focuses on the numbers and must include financial detail that would render the message fairly ineffective to other personality types.

On the other side of the planet from the Analytical type is the Expressive personality. This style is easily excitable, highly energetic and loves to be the center of attention. Often this personality style makes decisions on a whim, or by factors that excite him or her. They often make decisions without clearly thinking through all aspects of a potential decision. Expressive personalities love to have fun and are usually the life of the party.

Amiables are often quiet, timid and desire to have everyone be a friend. This personality style avoids conflict whenever possible and often makes decisions based on consensus. The goal of this personality style is to maintain harmony within the workplace. Amiables are often liked by all and tend to be great confidantes. However, back an Amiable into a corner, and they will come out roaring like a lion.

People are usually a combination of these types with one type being more dominant than the others. However, people are complex and can change their behaviors based on circumstances, time and experience. The effective executive team will put effort into understanding the intended public of a message and engineer the message to speak directly to the hot button issues and needs of the recipient. When crafting a message for an audience where multiple styles are present, it is important to incorporate key elements that make the presentation relevant to each style. Practicing message-engineering philosophy tends to produce a greater number of successful communications.

Motivating Factors

Understanding the environment and circumstances motivating people will help create clearer and more effective communication. For example, Company CRM meets with a medical director of a large multi-unit hospital system. This medical director is fighting all the same battles in healthcare as other providers coupled with internal strife. The medical director is a Driver personality style with an analytical background. The medical director likes the bottom line as long as there is sufficient detail to explain the numbers. It would seem, from the information given, that the team has enough information to assess the problem correctly and engineer the pitch. But how much more effective could the executive team be if they were able to uncover more specific detail.

It seems that the medical director was recently assigned the task of reducing costs, 30 percent across the board, while increasing patient satisfaction. The CRM team learns from a person who knows the medical director that he is under considerable stress. The medical director cannot reduce levels of care to patients, in fact must increase patient satisfaction, while reducing expenses in an already financially challenged medical group. Further research and input from some of the medical director’s colleagues reveals important underlying issues.

The team can now relate more effectively to this medical director’s situation, based on industry pressures and, admittedly, hearsay information about surrounding internal battles. With this knowledge, the CRM executive team can work to identify key aspects of a solution to resolve the specific core issues important to the medical director. This is where judgment, experience and the reliability of data sources come into play. The team must sort through the information, identify critical elements and deftly target its audience.

Peek into the Layers

Understanding the layers of communication within each Public is essential to achieving action through communication. One by one, seeing the layers of communication empowers an organization to move people from passive to proactive. This practice may be utilized in all facets of business. The key is presenting receiver-oriented information that will prompt the desired action.

An article published by the Harvard Business Review presented the concept of “marketing myopia.” In the article, the author argues that companies tend to give information and offers that seem appropriate and logical from the company’s perspective, not from the customers’ point of view. Communication is often based on what the company wants to share rather than on what really matters to the customer. This article perfectly underscored the need for engineered communication strategies.

Communication strategies should be engineered to be receiver-specific, receiver-important and emotionally relevant to the receiver. A reference to a hot-button issue of your audience should never be more than a slide or two away. Peek into the layers, understand your public, and always ask, “What moves them?”

How well is your Web site doing? Has the site been an excellent referral source? Have your customers received better service, become more knowledgeable about your products, and become better customers because of what you have offered them online? How do you know?

Too often businesses spend the money to develop a Web site, throw a launch party, add the Web site address to the stationery, and then neglect to follow through to see how well their Web site measures up. An effective Web site takes significant time and resources to develop and maintain, so it makes good sense to measure how well the site performs against the business objectives it is designed to accomplish. These objectives may include increasing the business you do with existing customers, generating leads, gaining new customers, reducing selling costs, supporting your referral community, and providing more effective customer support.

Defining your objectives was the first step toward analyzing the effectiveness of your Web site. The next step is to select the performance criteria you will use to measure success. These criteria may include the volume and sources of site visits, call to action conversion rates, increases in online and offline sales, increases in referrals, customer and partner satisfaction, and business operations improvements.

Collecting the data you need to evaluate all these criteria should not be difficult. Web site traffic tracking software is widely available, and most business Web hosts offer access to Web site statistics as part of their package. Analyze your site traffic trends regularly, and share with those who are responsible for achieving the Web site’s objectives.

What are the key data to look for? Web site traffic statistics packages vary in the extent to which traffic patterns are tracked. You will want to watch how popular your site is, where people visit, and who refers visitors to you. Page views measure how many individual Web pages have been viewed. By tracking the number of page views over time, and at different times and days of the week, you can gain insights into your visitors. Studying which sections and which pages people visit most often will point out the hot features and content. You can also find out which search engines or other Web sites refer visitors to your site. These traffic data can track how effective your marketing and advertising campaign is, and provide valuable feedback.

Apart from Web site traffic statistics, you can gain good insights from studying the customers acquired as a result of your Internet presence. The benefits of these insights can be demonstrated by the experience of one of our clients. The company is methodical in tracking how they acquire each of their leads and comparing their success rates in closing the deal with customers from different sources. Their Web site is an integral part of their marketing strategy. Their sales staff track the effectiveness of the different marketing and advertising media in attracting customers. They then continue to track the buying process and how these different groups of potential customers interact with the sales staff. Finally, they track the closing ratio. Armed with these data, the company can identify the most cost effective ways to acquire a customer. Not surprisingly, as backed by industry studies, people who have visited the company’s informative Web site are twice as likely to buy as people who have not. These customers also have a shorter buying process, thus allowing the sales staff to serve more customers. Finally, these customers are also more satisfied with their purchases, because they are more informed about the products.

You can use similar approaches to define the criteria and the performance matrix you use to measure how well your Web site meets your business objectives. The data you gain will be invaluable in testing assumptions about the market, and providing information you need to refine or change your strategies.

Building the site was only the beginning. Now it’s time to know whether people really visit your site, and when they do, whether they become your good customers.

In the wake of blatant frauds by some formerly high-flying companies, a new set of rules has to be followed. Even though these rules are aimed at publicly traded companies, early-stage companies that aspire to receive investment funding, become publicly traded, or be acquired by a publicly traded company are going to have to operate with these new rules in mind, because if you violate them, publicly traded companies are going to be reluctant to invest in or acquire your company.

The Sarbanes-Oxley Act of 2002 may be the most important legislation governing public corporations since the Securities Exchange Act of 1934. Early-stage, and high-growth companies will be affected directly by Sarbanes-Oxley in ways both intended and unintended.

Corporate governance, ethics, and the rule of law are on many people’s minds, and with good reason. Three of the shooting stars that entrepreneurs were told to emulate, were shown to be frauds: Tyco, Enron, and WorldCom. Together, these three big (alleged) frauds cost investors far more than the total loss in the entire dotcom sector. From the economic rubble of these and other fraudulent companies came Sarbanes-Oxley.

business ethics


Everyone involved with a company has specific responsibilities under Sarbanes-Oxley, including employees, officers, owners/investors (especially holders of more than 10 percent of the outstanding common shares) the board of directors, CPAs, attorneys, and brokers, dealers, investment bankers, investment advisors, and financial analysts who work for these companies.

If you are an entrepreneur, you must plan Sarbanes-Oxley into your company, not just from the standpoint of protecting yourself and your investment, but also in protecting all who work for you.

It probably won’t happen immediately, but angel investors, potential directors, liability insurance companies, and all those other service providers eventually will want Sarbanes-Oxley compliance to protect themselves.

If you work with entrepreneurs, invest in entrepreneurs, or sit on the board of directors of a company that might, one day, become a publicly traded company, you better delve deeply into it. Sarbanes-Oxley changes the tried and true rules and sets new and very onerous penalties for even accidental mistakes, and even more severe consequences for knowing deceptions.

Any company that takes investors’ money, gives or sells stock options, or even attempts to raise capital, can potentially become a publicly reporting company. This means that you only have to be required to report (not necessarily be trading) to be affected by this law. Most high-growth companies can be swept into the requirements for public reporting unintentionally, if the company violates some part of the exemptions that all early-stages companies use to raise money.


Non–compliance with Sarbanes-Oxley, simply put, adds one more risk for early-stage investors, as well as its own advisors. It is the “trickle–down effect,” as John Desmond, partner-in-charge of Grant Thornton’s (GT) Long Island, N.Y., office, called it in an interview available from GT. He was referring to the general business environment, but for early–stage companies seeing investors, the trickle–down effect is literal.

Investment in an entrepreneurial company is the culmination of a long chain of events. Angel investors are put at far greater risk than previously because of the ten percent ownership rules. The Sarbanes-Oxley responsibilities are placed on their shoulders. For the first time, early–stage investors may pray for dilution of their stock position. This means that angel investors are going to have to become more active in making sure that their companies are compliant, even if they are not on the board of directors.

If the investment comes from a venture capital firm (VC), most likely the VC raised money from another VC, mutual fund, pension fund, corporations, and/or individuals. Some of the biggest VC firms are publicly traded. All through this chain, prudent risk managers are going to be looking for the “Achilles heel” in the organization, and that well may be an investment that is not Sarbanes-Oxley compliant. This is because any company that might invest in your company is put at risk by your lack of Sarbanes-Oxley compliance.

While most of the discussion about Sarbanes-Oxley has concerned reporting, it affects other aspects of how early–stage companies do business. For example, Sarbanes-Oxley puts the legality of cashless option exercises by executive officers and directors of public companies into doubt. As with all new things, there are multiple ways to read Sarbanes-Oxley. One interpretation holds that cashless option exercises could be viewed as violating Section 402 of the Sarbanes-Oxley Act, which involves personal loans to officers and executives. The Gray Cary law firm, active with early-stage companies, actually prescribes a way of structuring such option arrangements to conform to Sarbanes-Oxley. Who is right? Time, and legal actions will tell.


For early-stage companies, this means that to keep clean all the way through from the inception of the company. Sarbanes-Oxley dictates what must be done and defines penalties for not taking these actions. As with many other laws, no harm needs to be done to others. A violation is a violation.


While that is not the question you want to be asking about an exciting new company, that is the question for everyone involved in a company, today. In addition to or in lieu of jail time, immense (for us mere normal people) fines can be levied.

Everyone affected by the act is personally responsible for compliance. Buck passing and ignorance will not save you. As an investor or a service provider, you have to insist that entrepreneurs you are involved with take steps to comply with Sarbanes-Oxley, and you need to know what compliance means in real, everyday action-item terms. While this is burdensome, it is just a new cost-of-doing-business with high-growth companies.

Entrepreneurs, focused on the myriad of other challenges, are most likely going to be reluctant to devote precious energy and thin resources to this. Those working with them are going to have to internally enforce compliance.


The greatest risk for early-stage companies appears to come from not establishing best practices specifically in regards to Sarbanes-Oxley. Resources for best practices are quickly found on the Internet. The sources cited in this article are just a taste of what is out there, and while from high-quality sources, they are not better than the rest. The text of the Sarbanes-Oxley Act is available from several sources. The AICPA has a summary of the text available.

Education is the best thing that all of us involved with early-stage and high-growth companies can do to protect ourselves. Once we are educated, we have to make sure that best practices are put in place and actively followed. Once this has happened in your company, Sarbanes-Oxley will transform from a threat to a manageable set of behaviors. The greatest risk is doing nothing.

As more business is conducted electronically, the “bandwidth capacity” of your company’s facility will become a bigger issue. If underestimated, these issues can become problems.

To avoid these potential problems, discuss the following questions with your Landlord before signing a lease to make certain your company is getting the best service to fit its telecommunications needs:

  1. What size, type and number of conduits do you have in the ground?
  2. Who pays for my service provider to use your conduit?
  3. Where is the point of demarcation in the property?
  4. How does one get from the point of demarcation to my space?
  5. Can we have access to the roof?
  6. Is there exclusive use to the roof?
  7. How is security provided for the roof equipment?
  8. How do we assure no interference with our equipment?
  9. Is there a charge for rooftop use?
  10. Who is liable for damage to the roof?
  11. Is there ample room in the building telephone room for multiple providers and feasible access to my space from the telephone room?
  12. Is the relationship between the provider and Landlord transparent to me as a Tenant?

These 12 questions will provide a good foundation for you to size up a new landlord’s ability to give your company an adequate telecommunications infrastructure for now and in the future.

David Isett and Richard Wood energetically and entertainingly described the process of raising capital through an investment banker.  David is the CEO of Concordia Coffee Systems.  Richard is a co-founder of First Hill Partners, a middle market investment bank.  Based on their experience in working together to raise about 10 million dollars for Concordia, they offered general guidance to those interested in using an investment banker to raise capital.

Concordia Coffee manufactures coffee makers that make café quality beverages at the touch of a button.  These machines can make over 1,000 drink combinations.  The emphasis is on quality.  If you drink one of these beverages and come away saying, “it’s pretty good for a machine,” David sees that as failure.  The goal is a high quality coffee drink, period.

Why did Concordia raise equity?  The world-wide market for this kind of coffee machine is booming.  Coffee is the most consumed beverage other than water.  Fifty percent of coffee beverages are sold to go.  Concordia’s machines are the anti-barista, in that they produce high quality beverages instantly, as opposed to the 2 to 3 minutes that it takes a barista to produce a beverage.  The company knew that it had stellar growth ahead and wanted to realize that growth.

Why did Concordia chose to raise capital through an investment banker?  David has raised capital many times in the past.  This is the first time he has used an investment banker and now he says he will never raise capital any other way again.  Seattle is not a good market for a manufacturing company, such as Concordia, to raise capital.  The focus in Seattle is on technology – everyone wants the next Google.  Concordia needed somebody that represented the company, not the various needs of the investors.

David’s criteria for choosing an investment banker:

1.      Can they get you the money?

2.      Want a licensed securities broker/dealer.

3.      Experience in your space and size.

4.      Wanted principals, no juniors.

5.      Hunger – want banker hungry for success.

6.      Chemistry – have to be able to get along with the banker.

7.      Fees – it costs a lot of money, but it’s worth every penny.

First Hill Partners is a regionally focused, middle market investment bank.  This is First Hill Partners’ second year in business.  The partners wanted to work in the community and with entrepreneurs.  They don’t have any juniors.  They believe in long term relationships.  They want to build equal access to funding for growth companies.  They can help an organization by telling it what things will build value in the organization.  Richard and his partner believe in a hands on approach and can only do so many deals a year as a result.  First Hill offers merger and acquisition, capital raising and advisory board services.

Richard outlined the capital raising process:

1.       Get Ready.  2 to 4 weeks.

2.      Talk to Investors.  5 to 7 weeks.

3.      Closing.  4 to 8 weeks.

The deal is not done after the first meeting.  It’s important to stay top of mind and to get requested information to potential investors quickly.  Momentum is important.  The process includes talking to many investors and being willing to look outside of the community.  It’s also important to think about the fit with the investors.  Are the investors going to stay involved long term?  The objectives of the investor and the company must match.  Don’t take the money without understanding the investors’ goals.

According to Richard, closing is your enemy.  The company seeking the funding wants this part of the process to be as short as possible.  The potential investor wants this process to be as long as possible and will drag out due diligence.  The company really needs to push this and not let the potential investor drag it out.

The company seeking funding really needs to understand the process between signing the term sheet and closing.  The company must understand precisely what events need to occur to close the deal.

The company also must understand the implications of the security that the investor is taking.  This can be a huge deal and result in the founders not getting much at the exit, while the investors do well on their investment.  Richard emphasized that getting a clean deal is more important than the valuation.

David said that the single most important thing for him in this process was to be honest about what he didn’t know.

The Top 10 Lessons offered by David and Richard:

1.      Pick the right banker/ pick the right client.

2.      Be prepared, really prepared.  Do this, no matter how painful it is.  Do not let potential investors find anything on due diligence.  Grill the investor team and practice.  Hard core coaching is a must.  David said that it’s not fun, but going through this process made the company a better company.  Do not let 8 hours go by without answering a question from a potential investor.  One hour is preferable.  Time is your enemy in this process.

3.      Allow enough time.  Don’t start raising money when you don’t have any.  Start raising money before you need it.  A company does not have any bargaining power when it needs the money to meet payroll in two weeks.

4.      Get enough money the first time.

5.      It’s all about having options and choices in the end.

6.      Allow no surprises if at all possible.  (Don’t miss your numbers!)

7.      Fund raising is a team sport:  banker, company, current investors, lawyer, auditors.  The prospective investor will talk to all of these people.  The current investors must support raising more capital – after all, their shares will be diluted.  The current investors might need to make an additional investment in the company before outside investors will agree to invest.

8.      Shut up!  More information is not always helpful.

9.      Let your bankers do their job.  They are better at this than you are and you must trust them.

10.  Don’t let the business go to hell while you are out raising money.  Raising money takes about 80% of the CEO’s time, over a 4 to 6 month period.  It is essential to keep the company from losing ground during this time.

Thanks to David and Richard for their informative and entertaining presentation!

When you’re just getting started and cash is tight, you often have to cut corners. Is your computer network a place to economize? Robert Jones gives us his take on the fine line between frugality and stupidity.

Setting up an efficient computer system is one of the most important challenges facing you as you establish a new business. Do a good job and your staff will hit the ground running with all the resources they need. Fail and you will waste precious time and money dealing with e-mail problems, missing files, viruses and, the biggest headache of all, your frustrated employees.

Over the years, I have had the dubious pleasure of working with many computer systems – good, bad, and downright ugly. It is hard to over-state the impact that badly designed computer systems can have on a fledgling business. In this article I want to share some of that hard won experience in the form of basic design guidelines.

computers for your business

Start Planning Now

Networking, Internet access, hardware, and software need to be thought through before you move into premises and before you hire staff. Those plans are guaranteed to change but, just like writing your business plan, going through the process will help you really understand what you need to get the job done. Those initial plans give you a framework on which to build as your plans mature. More importantly, they will help with your budget and they reassure your investors.

A Little Knowledge is a Dangerous Thing

You know about computers. You’ve installed software, added another hard drive, or setup a network at home. This stuff isn’t that hard, right? Wrong! Building systems that support an entire company is a whole different ball game. With respect, even if you do know as much as you think, you should be building your business, not setting up e-mail. A modest investment in outside help will really pay off. There is plenty of help available from consultants to student interns. Look for experience working with start-up companies and interview them. A good consultant will be happy to give you a free initial consultation.

You Do Not Need a Sports Car

We’ve all been there, looking through those glossy computer catalogs, lusting after that sleek laptop or that wide LCD screen. Do not be seduced! You don’t need the latest and greatest technology. It doesn’t do anything to advance your business, it doesn’t impress your customers and it makes your investors really uncomfortable. Instead, look for hardware that has been available for a year. Any kinks in the technology will have been worked out; there will be plenty of customer reviews available and, most importantly, this is where you find the best deals.

But on the Other Hand, Don’t be Cheap!

Buying a second hand computer is a bad idea. It is not like buying a car. You have no idea how many miles are on the clock and there is no service record. The only things you know for sure are that a machine is old and its current owner wants to get rid of it. Auctions of computers from bankrupt companies attract a lot of attention but there are no great deals to be had there. Refurbished computers from the manufacturer can offer good value but I have not had good experiences, especially in terms of their software configurations. It really is false economy to save money this way. You are trading low expenditure today for hardware problems tomorrow. Those problems are always more expensive in the long run. Finally never, ever, buy a refurbished or second hand laptop. The screens, hinges and disk drives are guaranteed to cause you problems.

Little Boxes all the Same

You can save yourself a lot of pain in the long run by making your desktop computers identical throughout the company. Everyone gets the same hardware and software and every machine is configured in exactly the same way. Your systems person has less to worry about and your users can share their knowledge with each other because every machine looks the same. Of course there are going to be exceptions but a homogeneous computing environment is a big win for efficiency.

Practice Safe Computing

Computer security is a serious issue for every company. Before you ever connect to the Internet, you need to have virus protection software on every machine and you need a ‘firewall’ between your network and Internet to avoid hacking attempts. Without exception, your computers will be subject to viruses and to probes from hackers looking for a way in, most likely within days of connecting to the Internet. Protecting yourself is relatively straightforward – cleaning up after a successful attack is not. Your security is only as good as its weakest link, so get some outside help from a consultant or possibly from your Internet provider.

Be Patient

When it comes time to move into your premises, be sure to give your systems staff time to set up the network, the printers, e-mail, etc. before you start using the systems. Trying to do both at the same time is a recipe for frustration all around, not to mention the disruption caused by the muttering and strong language of your systems staff. Be patient, give them a clear block of time to install and test everything before going live – and then take them out for beer and pizza.

These guidelines just scratch the surface but hopefully they will give you something to think about as you plan your new company.