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Top 5 Management Lessons I Learned While Doing Burpees

When my trainer Vanessa asked me to do 10 burpees during our first session, I had visions of those white rectangle cloths I used when my kids were infants. Vanessa was talking about the squat-push-up-n-jump burpees that go by the same name, but the reference was apt since the last time I worked with a physical trainer was when my second son was born nearly five years ago. Losing the baby weight was the justification I needed for what can otherwise seem like the unnecessary expense of hiring a professional trainer (“just do it” comes tauntingly to mind). This time the training sessions resulted from a bet with myself, “If you raise the the venture capital for Little Pim, you’ll get a trainer for 8 weeks.” I wasn’t exactly sure if this was a motivator or a deterrent to raising the capital, but either way, the capital had been raised and now I was stuck doing burpees at 7:15 on a Wednesday morning.

Correct way of doing Burpees

That was four weeks ago. Call me an obsessed entrepreneur, but my weekly sessions with Vanessa have started reminding me of key management lessons, ones that were directly applicable in my company. Since we are now venture backed, my team and I — who made it through the narrow canals of start-up life into open water — are now deep in metrics, accountability and generally transformation into a high-performing company. I’ll tell you, it isn’t a walk in the park, it’s more like a walk on a StairMaster!

Here are a few lessons that seem to apply to both my “sweat” and “sweat equity” workouts:

1) Create a culture of success

After my first session with Vanessa, she sent me an email with my “in-between sessions workout” which seemed designed for an Olympic athlete. I could only do about half of it, which left me feeling like a total failure. When we next met, I requested she tweak it so that it was a set of exercises I could accomplish. She did, it worked, and the next time I felt like a winner! Something to keep in mind when setting new higher goals at work. Make sure they can be reached, or you are creating a culture of failure when they can’t.

2) Resist the urge to be negative

In growing a company you have to try out many new things, and hopefully a few of them will spur significant growth. Nothing kills new ideas as fast as negativity… yet when Vanessa asked me to do deep knee squats while catching a 12-pound medicine ball and other things I really didn’t like, I noticed I had to fight back the urge to say, “I don’t like these, can’t we do a different one?” Negativity is a very natural, self-preservation reflex, but one we need to fight if we want to grow (or in my case, tone). This message is driven home in the classic business growth book, “What got you here, won’t get you there” where negativity is deemed a trait that must be shed if you want to excel. Agreed.

3) Be willing to look silly

Thing that stifles growth in companies is people not wanting to take a risk, for fear of looking stupid or silly if it doesn’t work out. In working with Vanessa I have had to do butt kicks and high knee skips across the entire gym and back, while fellow runners or weight lifters get to look dignified at their quadriceps machines. A good reminder that you sometimes have to risk looking silly to get results. And I need to set an example of that for my team and try a few crazy ideas myself.

4) You work harder if you like each other

My trainer and I chat while I do my reps; I like hearing about her double-life as a trainer and graphic designer. People like to feel a connection with the people they are working hard with. It’s important to foster bonds at work so people will enjoy working there. And it makes the tough reps easier to get through.

5) Set goals and give positive reinforcement

Vanessa and I determined right from the beginning of our work together which parts of my body we were going to try to improve (list too long for this blog…). So we have a sense of shared gaols that keeps me on track. “You are doing a great job. I can really see improvement since we started,” she wrote at the end of one of my in between workout emails. I found myself beaming as I read it, and feeling doubly motivated to get to the gym. I made a mental note to thank my awesome team when I got to the office.

When my eight sessions are up, I won’t have a six-pack, and at work we’ll likely still be doing the burpees and butt kicks needed to ramp up our growth. What I DO have is a stronger core, and a great reminder that both at the gym and at work, it’s important to set goals, work toward them with people you like, get positive reinforcement along the way, and sometimes be willing to make a fool of yourself in service of accomplishing something that really matters to you.

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5 Tips for Successful Marketing Online

So retail is down and e-commerce is up. This presents entrepreneurs the chance to make an end-run around mass retail. At Little Pim we have been scaling the retail wall since we started selling four years ago, and we rapidly realized we could grow our own customer base online by being creative, focused, and um, entrepreneurial.

As a new brand in a crowded children’s space, we have been uber-focused on online sales, and this holiday season we’re seeing the payoff. For the third consecutive quarter, we have seen a 40% rise in our Direct to Consumer sales. Here is what is working for us:

• Understand the buyer’s journey.

In the past we had many different lead offers using only discounts; everything from 20% off to buy-one-get-one-free. Take a minute to understand your potential customers’ decision chain, and what’s most important to them. Once you do that, you can match the right offer. We now offer a free trial of our product to get leads to the top of the funnel. Then we try and educate them about the value of language learning, and throw in a tasty offer offer from time to time. With this multi-staged approach, we’re beginning to see much higher conversion rates and lower CPA.

• Use Google, and learn how to use it well.

Take a webinar in Google’s host of tools, and make sure to keep up with the rapidly changing services they offer. Ask fellow CEOs what is working for them. Google ads, SEO and YouTube marketing can make or break your online presence. Analyze what is working and what isn’t with rigor and tweak often, not just the offer but the creative too.

• Turbo-charge your customer service.

Make sure whoever is answering phones is prepared to upsell, offer special discounts and incentives and take orders on the phone. Getting the customer to call or click is only half the equation. Take a page out of Zappos’ book and make sure your customer service people understand your product, understand your customers, and are a pleasure to talk to.

• Quality vs Quantity: Stay focused.

We have had greater success cultivating a smaller number of people and guiding them through a very intentional sales funnel, than when we cast a wide net to people who might not fully align with our target customer.

• Experiment.

We set aside 25% of our marketing budget to try new things. There are so many new tools, services and mediums to try. Unless you are strict about setting budget aside, you can keep doing the same thing over and over and miss opportunities to discover new things that could end up seriously paying off.

Having just seen Life of Pi, it occurs to me that online marketing for small businesses is like being that young man in a tiny boat at sea. You have a set number of things you can use to survive and thrive – a net, a spear, resilience and creativity. Use them all and get to safe shores. You may even find you can outrace the big cruise ships in reaching your customers.

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Life in the 4%, or 10 things I wish I knew when I started raising venture capital

When I set out to raise venture capital to grow my business, I knew it would be much harder than raising angel money, which I had done to get my business off the ground. Women CEOs receive only 4% of total venture capital invested every year in the U.S.

My entrepreneur group (Entrepreneurs’ Organization) is 85% male, so I am used to being one of the only bosses in heels, but 4% still seemed a surprisingly dismal number. As I looked into venture capital firms, I noticed their ranks were 99% male, and imagined that might have something to do with the 4% statistic.

The fact that my company is making a product for kids, sold mainly to mothers, also didn’t seem like it was going to be a big advantage with predominantly male gatekeepers. Like most entrepreneurs, the more I read about these obstacles, the more I became determined to be in that 4%.

By the time I secured funding, I had spent six months doing pretty much nothing but that. In order to make it over the various hurdles, I hired a business coach and a public speaking coach, tapped my advisors and board members for advice, did dozens of practice sessions, brought on new staff, created at least ten versions of my PowerPoint and pitched anyone who would listen. Last week I closed on $1.5M, and am proud to be in the 4% clique, complete with a new set of mountains to climb. It was one of the hardest things I have ever done, but definitely worth it. Now we have the capital we need to grow our business, plus a great new VC partner, and we have gained a highly experienced board member.

These tips might be particularly helpful and applicable to women, and to anyone who is learning the VC dance. The more time I spend with other entrepreneurs, the more I think our problems are mostly identical, regardless of gender. But, if you are a woman entrepreneur seeking VC funding, get some good running shoes, call your friends who’ve been through it, and get out there. I want future women entrepreneurs to see “VC funded” women led companies in at least the double digits!

My top 10 tips for raising VC money:

1) It’s a marathon, not a sprint. Start getting your company’s house in order 3-4 months ahead of when you will actually be out pitching. For example, we brought on a legal intern (free, found through our lawyer) who spent weeks working part time at organizing all our legal documents into a Dropbox folder (contracts, copyright and trademarks, incorporation docs, etc). That saved us a lot of work when the VCs who made their offer came in for due diligence, and helped us our deal close more quickly. I also made sure my team could function without me, as I was out of the office twice as much as I ever had been.

2) Meet with other entrepreneurs and advisors. I spent six weeks before taking any meetings with potential investors just checking in with Little Pim’s advisors and board, and fellow entrepreneurs who had raised VC money. They offered good, free and surprisingly consistent advice about how to position the company, how much to raise and how to find the right investors. Another advantage of these meetings, is that I found out which VCs my advisors know or have worked with. A warm introduction to a VC is not only the best kind – it’s the only kind.

3) Get ready to kiss a lot of frogs. I prepared my family and staff for the fact I would be putting myself out there and would need their support. It can be demoralizing to get so many “no”s (I have read that some entrepreneurs pitch over 200 times before they find a VC! I presented about 25 times). Each conversation or meeting may not lead to funding, but each one is a great opportunity to practice your pitch, improve your PowerPoint deck, and refine how you are describing the company’s potential and your need for funds. Even if an investor doesn’t fund you, he or she may be able to make introductions, so get into a positive mental space where you can give your best on each call or meeting.

4) Be prepared to grow. You may find you need a new set of skills to accomplish this. Even though I had raised over $2M in angel funding and was a professional nonprofit fundraiser for 5 years, I needed new training for raising institutional money. When I discovered I’d be pitching to 100 people at one VC firm, with a strict 10-minute limit and only one chance to get it right, I decided to hire a public speaking coach. This made a huge difference in my confidence level and in my delivery, and the pitch went great.

5) Do your homework. If this is your first time dealing with the VC world read up on the VC dance. Here are the resources I found most helpful:

– Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist by Brad Feld, Jason Mendelson and Dick Costolo
– Mastering the VC Game by Jeffrey Bussgang
– “10 things to know before you pitch a VC” – two talks by David Rose on Youtube
– Shark Tank episodes on Youtube

6) Learn to speak VC. VCs use a specific set of financial vocabulary you will need to understand and be able to use comfortably. The Venture Deals book will teach you most of what you need to know (I read it toward the end of my round and wish I had read it earlier). Do not think your lawyer will handle all of this; you need to be well versed in these terms to negotiate and understand your Term Sheet. These need to all roll off your tongue: liquidity event, Capex, valuation, dividends, preferences, tranches, and more.

7) Be a rock star. You need to own your power. Leave your insecurities at the door. This is no time for humility. Do what you need to do to get over any insecurities you may have about your ability to achieve extreme growth with your business (or at least table them for a while).

8) Know your business inside and out. You’ll need to speak with conviction about your margins, run rate, COGs, and Ebidta, both today and three years from now. I can’t stress this enough. You might be expected to talk about the product or service your company produces and the VCs will have some preliminary interest in that, but they will be most interested in the numbers. Make sure you have a good accountant to help you prep your projections spreadsheet and meet with advisors who can ask you practice questions before you have an actual meeting.

9) Have a sexy PowerPoint presentation. If you don’t have a graphic designer on hand, consider hiring someone to help you make an outstanding PowerPoint. It doesn’t need a lot of bells and whistles but it needs to be sharp. Favor the visuals. Not too much text and not too many slides. You’ll be showing it dozens of times so make sure it’s telling your story in the best possible way. We revised ours over 20 times before we came up with our final version. Ask advisors to show you decks they used or like. Load the presentation onto your iPad or whatever device you carry around (you never know who you’ll meet). I also recommend practicing using a remote clicker and not looking at the screen. My media coach helped me with this part, and David Rose’s talk focuses on this as well (see Tip # 5).

10) Look like you already have the money. Buy an expensive suit and make sure to look and feel like a million bucks if you are going to ask for a million bucks (or in my case, two).

Remember, the skills that got you here are not necessarily the ones you’ll need to get there. But you are entrepreneur, you can go get the skills, and then you’ll be glad you did.

Bonne chance!

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Why The Source Of Venture Capital Is As Important As The Money Itself

This post is written by Serguei Beloussov, PhD, is a Senior Founding Partner at Runa Capital, a founder of a virtualization technology company Parallels. Follow him on twitter.

Money can be different; it can be “smart” and “not so smart”. When seeding or growing a start-up, it’s critical to attract the “right” investors with “smart” money. While this may fly in the face of conventional wisdom – embrace any investors willing to bet on your business model – entrepreneurs must really pause and consider if they are making an equally shrewd bet on the investor, too.

One of the cases in my personal business carer: a prominent but conventional investor was introduced to me at a certain point about investing in Parallels, a profitable software company that we founded in 2000; his businesses bringing in steady cash flow, this big shot was hunting around for new opportunities. While due to the internal re-structuring we somewhat urgently needed to find a buyer for some small % of Parallels stock, working with this guy was doomed from the get go. Why? He truly didn’t understand the software business model. “Let’s compare your business with a hotel,” he proposed. “How can you ask for 20x EBITDA valuation, when I could only get 5x EBITDA for my investment in a hotel?” Although it seemed rather obvious – hotels have lower margins, higher fixed costs, limited scalability with any expansion requiring high capital costs – the software model just wasn’t an intuitive recipe for his investment cook book. His flawed comparison set off alarm bells. Ultimately, we couldn’t reach an agreement, as I realized that while this person could bring money to the company, I would have had to constantly explain and spoon-feed every aspect of the business to him, whenever there would be a change, which is in the fast growth business is actually almost constantly, and so the trade-offs were not worth the effort.

By viewing money as the most important thing for their business, startups often bring themselves into a corner. Entrepreneurs must place a premium on the quality of the investor(s) and understand why a smaller amount of money can serve companies better, in most cases, than big money with little or no relevant business expertise. Parallels has grown into a worldwide leader in cloud services enablement and desktop virtualization software, due in part to the presence of relevant investors who have helped and continue to its rapid and profitable growth with their critical expertise and guidance.

There is an important advantage to an association with superior investors: It gives you the ability to recruit the best employees, partners and suppliers, as well as best future investors. Potential partners and top-level employees don’t have the resources to conduct the sort of due diligence executed by relevant VCs or private equity investors. If your early round of funding comes from top-notch sources, this signals to potential partners and sought-after employees that there’s a good deal of knowledgable confidence in your company’s business model and potential for future success.

At Parallels, for example, we’ve been able to attract an impressive roster of top talent, including many members of our leadership team, who have deep and relevant industry experience from the likes of Microsoft, Alcatel-Lucent, General Electric, McKinsey & Company, Novell, Symantec, VMware, and Yahoo! I attribute a good deal of our recruiting success to the message that is sent by the involvement of the top investors in Parallels – including Bessemer Venture Partners and Intel Capital.

Because I believe in the model of both “investor and incubator/accelerator” I put my time and resources into a growth and early stage VC firm, Runa Capital. Runa takes a very active part in the daily life of a startup, including consultation and hands on help, if needed, on operations, engineering, business development, strategy and planning the liquidity event of next round of financing. Runa makes introductions to key potential partners in a startup’s relevant market, assisting with talent recruitment, providing guidance on obtaining patents and protecting IP, and even marketing advice and searching for future investors.

For example: Jelastic, from Zhitomir, Ukraine, is an emerging player in the cloud computing; they provide a next-gen Java (and soon PHP and Ruby) development-as-service platform which can run and scale any Java application without the need to deploy and administer the complicated infrastructure. Runa Capital, introduced Jelastic to many of the world’s largest hosting companies when the company had virtually no name or technology recognition. And most of them responded by eagerly bringing Jelastic into their data centers. This cooperation with Runa resulted in Jelastic signing its first 15,000 customers. If Runa hadn’t provided Jelastic with counsel and made the introductions to the who’s who of the hosting world, Jelastic’s progress would have been much delayed (or, perhaps, never taken off).

The net-net is that quality costs money. And quality money costs more, too. Entrepreneurs and their start-ups must be prepared to give up more equity if they expect to have a quality team backing them up. Don’t be dumb. How much your share of the company could be worth in five years is much more important than the shares you barter away to investors. And, regardless of what you give up, make sure what else you get in return from your investors is just as valuable to your future success as is the check they hand you.

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Marketing Mojo: Making $8K Look Like $120K

At Little Pim we established ourselves pretty quickly as the go-to product for parents seeking foreign language programs for their kids, but we needed to go beyond this customer base if we were going to achieve the kind of scale we dreamed about. We wanted to capture share of wallet of the same parents Disney, Nickelodeon and Fisher Price were selling to, but doing so would inevitably put us head to head with the 800-pound gorillas in our space. We knew they were spending hundreds of thousands on marketing a month, while we were trying to keep it all below something in the region of, um, $8-12k…

We spent our first two years throwing a lot of marketing spaghetti at the ceiling. We tapped our board and advisors relentlessly for tips and help, (See Luring Top Talent…), evaluated each initiative carefully, and by year three we had a pretty good idea of which strategies were actually sticking to the proverbial ceiling. We focused the majority of our marketing spend on search engine marketing, got our ROI up to 185% and our conversion rate close to 2%. This allowed us to build up a loyal customer base and keep growing while keeping our spend low.

Some of our stickiest spaghetti:

1) Work with a good PR firm. A well-placed article or interview in a nationally read magazine is worth more than any print or broadcast ad we could afford. We also got some great TV features (The View, Today Show) and those always lead directly to sales. While it was painful to shell out a fee to a PR firm month after month, we still felt it was money well spent.

2) Master SEM/SEO. We knew it was critical that Little Pim come up consistently on page one of searches (both in organic and paid results) when parents were seeking foreign language products for their kids. We outsourced this, and oversaw it very closely. We went through about three firms in three years, and became extremely SEO/SEM savvy in the process. It’s really been on of our best marketing tools for accurately tracking ROI, and is therefore adored by CEOs and boards everywhere.

3) Make it trackable. After a few months of trial and error with banner ads and the like, we opted to go with a strict policy that every advertising campaign has a coupon code. This allowed us to track the source of non-web based campaigns. I wish we had figured this out even earlier. There is almost no point in spending marketing dollars if you can’t tell who saw what, and whether it made them buy. Now we have great data and know which campaigns are working and where to spend strategically.

4) Partner with companies in the space. We found other companies also selling to our same kinds of customers, (such as clothing companies, educational toy companies and food companies) were happy to cross-market with us so long as our products didn’t compete with theirs. This allowed us to reach the right kind of customer without spending big marketing dollars and acquire many new names for our email list and customers.

5) Invest in social media. While we can’t always draw a direct line from our customers’ social engagement through our FB page or our Tweets to a purchase, we know it builds loyalty and community. Originally we had an external consultant doing our social networking, but once we brought it in-house it became a more authentic voice of our company, more of a lead generator, and has helped us foster relationships with our most enthusiastic customers.

Some of the less successful spaghetti has included:

1) Untrackable Ads. When we spent marketing dollars on ads where we couldn’t track the conversions we usually didn’t renew those ads.

2) Slice and Dice.
 When we went after small sub-communities of our main target population we often spent a lot of time and energy identifying web site and groups, but it didn’t really pay off in sales. We probably would have gotten a better ROI just marketing more to our main audience.

3) Tinkering with Direct Mail. Sending out snail mail seemed worth trying (we did a 5000 piece post card mailing to a group of very likely to buy parents), but learned the hard way that we probably would need to do this repeatedly for it to pay off. While trying new things is always tempting and worth doing from time to time, probably best to keep putting money into the strategies that work.

Marketing is one of the parts of the business I love, so I spend a lot of time on it. I also see it as a critical budget item since it can easily become a kind of bottomless pit if you aren’t careful. We found that the winning combination for Little Pim was building tracking into every campaign, focusing on paid search, seeking new ways of reaching customers via advice from board and advisors and setting up cross-promotions instead of simply buying ad space. This mix of things has enabled us to grow our customer list 5X within two years. We never spent more than $12k a month, which came back to us in spades in our Direct to Consumer sales. We grew our DTC business from 5% to 30% of our revenues over the course of three years and mapped out a blueprint for direct to consumer marketing. This would prove an invaluable roadmap to have when we set out to raise our first institutional round the next year…

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