• Send your comments on the petition (instructions are here.)
• Tell others to send comments.

With some discussion happening around this petition we will have gotten people in the SEC to take notice.

With enough discussion around this petition (comments by the hundreds) as Paul Spinrad puts it, this becomes a story that fits the ever-newsworthy journalistic trope of “Old Institution, Blindsided, Is Forced To Confront New Phenomenon.”

I’ve been tracking my spending over the past few years by doing just the opposite of the above, by putting as many purchases as possible onto my debit card.  I use Mint.com to keep track of those transactions, the ones that my bank has conveniently decided should not be available via their website after 6 months.  Using Mint has the added benefit of automatically categorizing some of my expenses.  It’s categorizing system is not very good, I still have to manually tag most transactions, but it’s better than nothing.  Using these years of debit card transaction data as a baseline, how much can I avoid spending by forcing myself to spend cash when at all possible?

Stay tuned for the answer to this question in a future post!

Keeping your sales hat on is a great idea for just about any situation where people make the final decisions on who ‘wins’ from a pool of applicants.  Think business plan competitions, applying for a job , grant applications, enterprise sales, etc.  In all of these cases until you’ve closed the deal, signed the check, etc, you want to:

• Differentiate what you are offering from the rest of the pack.
• Be a person as opposed to an application in the eyes of the decision makers.
• Deliver well on the hard measurable stuff to get into the final selection.
• Make it clear how you will ‘add value’ to the person you are selling to.

To be clear: you do these things in all stages of ‘winning’ the competition, both in writing and submitting your application and in any interviews or followup discussions.

In making these kinds of decisions people often use a rank ordering of the hard measurable stuff to trim down the selection pool before they spend actual brain cycles picking the final winners.  Delivering on the measurable stuff gets you through that first hurdle.  Being a person and having a unique spin on how you are going to ‘add value’ out makes it easy to pick you in the final selection.

In the case of a generalized seed-stage startup accelerator program, adding value means you will use the program to build a successful business.  You add more value if that business will likely get sold at some point and the program then makes a return on their equity stake in your company.  That said, an eventual sale of your company is too far down the line to focus on in the application phase, stick to the more general stuff on building a successful business.  The programs also look for ‘adding value’ in terms of improving the business ecosystem in their communities.  There are a lot of ways in which that happens, but suffice to say, building a successful business hits a lot of those points.

How do you continue to do these things in your sales process after you’ve submitted the application?  It’s all about people.  Find out who is involved with the selection process.  Keep in touch with those people, let them know what you are doing to improve your business’ chances of becoming a success.  In startup land, a predictor of success is the founding team’s ability to learn about their business as they go.  Talk about your efforts, how they are working or failing, and what you are learning from those results.

What have you found to be useful sales strategies?  What has worked for you in winning from a pool of competitors?

On Boing Boing, Paul Spinrad links to a great piece by Tim Kappel focusing on artists raising money to record albums. The amount of money involved and the relationship of a crowd to a planned venture are similar in tech startups so most of the conclusions can be transfered to discussing seed-funding for startups.  Tim goes into a bit of detail on some successful crowdfunding models in Brittan and Germany and talks about how those models would work in the US.  These are models where the crowd expects to make money on their investments and for that reason, they won’t work in the US.  Our regulatory system is built in a way that burdens investment securities with no lower limit on how much money is being invested.  For Crowdfunding to be a success for startups in the US new ground will have to be explored.  Can existing exemptions in securities laws be leveraged in a way that the smaller amounts of capital being raised are not dwarfed by the regulatory burden of raising that capital?

I certainly hope there’s a way for this to work, I can’t imagine a more efficient way for seed-stage companies to get off of the ground than by having a self-interested group of their peers backing them.  The financial support would be magnified by having hundreds of self-interested fans, followers, beta-testers, users and customers.  A strong cocktail for quickly reaching product-market fit.

In some related research, I took some time to check out sharespost.com where one can “anonymously buy and sell private company shares.”  They have a detailed set of legal disclaimers to limit their liability and more importantly, to exempt the site from some SEC regulation.  I’m sure the click throughs and other contracts you make when actually buying or selling through the site are even more intricate.

I’ve often imagined the sound of money falling from somewhere to my bank account while I’m toiling away at work.  I do a quick calculation based on my hourly wage or yearly salary to come up with how much time passes between each penny I earn.  It’s a quick distraction and gives me a visceral feel of the value you are capturing while doing my job.  Intrinsically knowing how much money I’m earning is something I’ve missed in corporate and startup jobs.  The stint of time I spent selling cotton candy at the baseball stadium was enjoyable partially because of the direct and obvious connection between work performed and money earned.  Each time someone handed me some bills in exchange for goods, I earned money.  If they gave a tip, I earned a bunch more.

A project by artist Blake Fall-Conroy reminded me of counting my earnings this way.  It’s called the Minimum Wage machine (see image below). You turn the crank on this box, and every 5.04 seconds a penny falls out of the box.  That’s $7.15 an hour, the NY state minimum wage.  What does $7.15/hour sound like?  Here’s a widget to give you an idea:

Dollars Per Hour 4.5 seconds left

You might be surprised by how quickly or slowly pennies drop at your job (assuming 40 hr. work-weeks, 2000 hr work-years for the salaried jobs):

• $8.00/hr (Illinois Minimum wage): 4.5 sec/penny
• $10/hr: 3.6 sec/penny
• $15/hr: 2.4 sec/penny
• $20/hr: 1.8 sec/penny
• $25/hr: 1.44 sec/penny
• $30/hr: 1.2 sec/penny
• $30/hr and we’ve not even hit 1 penny per second yet!
• $75,000/year: 1.042 pennies/sec
• $100,000/year: 1.39 pennies/sec
• $200,000/year: 2.78 pennies/sec

You’ve got to get to $200,000/year before you start getting a nice rhythm to your penny flow!

• 1 penny/sec: $72,000/year
• 2 pennies/sec: $144,000/year
• 1 nickel/sec: $360,000/year
• 1 dollar/sec: $720,000/year

What other techniques can you use to get a feel for how much physical money you are earning at hourly or salaried jobs?

The scale of investment in each of these types of deals is relatively the same.  Seed stage investing involves relatively large amounts of money being brought to the table by either one or a handful of investors who share in the proceeds from a future sale of the company.  Let’s call this the 1x$100,000 model where investors are investing on the order of $100,000 each in seed round financing.

What happens if we move the zeros around in this model?  100x$1000, or 1000x$100 for example?  How does the deal change?  First of all, $100 or $1000 is a much more accessible sum of money for most people, potential investors or not.  For entrepreneurs, the prospect of 100 or 1000 investors may not be a good one.  1000 people expecting your company to grow and produce a return, 1000 shareholders who have say in the decisions the company makes.  Having 1000 shareholders in a company puts expensive limitations on how the company can do business from a corporate law perspective.

What if the 1000 investors are separated from decision making at the company?  Assuming the administrative overhead of having 1000 investors can be mitigated, what other upside potential exists for companies and investors at this scale?  Having 1000 investors means finding beta users is not a problem and networking to find people with specific types of experience is easy.  This networking can go in many directions: the entrepreneur can get introductions to potential employees, the entrepreneur can also meet potential advisors, partners, even future investors.  Small startup companies following metrics driven approaches to building their businesses need some scale in their user base to be able to test hypothesis about products being built and reach useful conclusions.

Successful, thriving companies in a community can improve the landscape of that community for everyone.  One successful company can produce good exits for its founders, who potentially become angel investors in the future.  The business model created and proven by a success can inspire similar companies to pop up, and who best to make those companies than people who were involved in the initial success?  Success also attracts interest from outside of a given community, further increasing opportunities for the community.  In short, investment in building successful companies in a given area is what makes future successes possible in that area.  The lowered barrier to investing that a 1000x$100 model offers could make it feasible to fund many more seed-stage startups in communities that are not known for having good investment climates.  In a best case scenario, 1000 investors in a company would provide an instant support network for seed-stage companies, a network rivaling that of the best connected companies in the best investment climates.

The format was Q and A and some quality questions were presented.  Most of the discussion lead back to well worn themes in entrepreneurship and building startups.  A few of the comments gave me new insight on some past situations:

When VC firms make early stage investments (we’ll call that investments less than $1M) they are looking to get in early on a company that has a good chance at making it on a much bigger scale.  The VC investment model works on the scale of $4M+ in capital.  Companies that can’t take that much money (and turn it into even larger numbers) won’t be a big win for the firm even if they can generate huge returns in the 200-1000% range.  What this means is that your business model, the problem you are addressing, the amount of value your company adds, and the amount it is able to extract must be on a scale that can give a good return to the VC firm.  This math is a prerequisite for the investment opportunity you are presenting to be interesting to a VC firm.

Don’t give up though if your company is only addressing a $50M yearly problem, and can potentially extract $5M in revenue.  There are other types of investors who operate at the scale of $100,000.  Check out angel investors, investment arms of large corporations, and the SBIR program for some starting points.

Bijan talked about the events that lead to Spark investing in Avner Ronen and his company, Boxee.  Over the course of 18 months or so, Bijan and Avner met several times.  On each successive meeting Avner took Bijans feedback to heart, tried the suggestions that Bijan made, and explored the assumptions.  Avner came back with a better investment opportunity each time, he made improvements to the product and the company and had good reasons why Bijan’s suggestions were good ideas, or why they were misplaced.

Steve and I have pitched HaveMyShift to a few investment groups over the past 18 months or so.  We are in a great position right now, with lots of suggestions to explore and people to follow up with.  That said, this post is getting long and I’ve got work to do!

The SBIR program exists to encourage small businesses to develop and commercialize technology that the government could later purchase commercially.  The departments that fund SBIR work do retain rights to for a period of time to the IP produced by the research, but in general, if the company that did the research is selling a product with the technology, the department will generally purchase that from the company as opposed building it elsewhere.

SBIR grants are up to $100,000 for six months of Phase I research (Project Feasibility).  Phase II grants (Project development to prototype) are up to $750,000.

How to win SBIR contracts

1. SBIR solicitations are released 3 times a year.  The next set will be released on July 27th 2009.  When the solicitations are released, search through them, find the 10 or 15 that you and your company’s background are suited suited for.
2. Call the listed contact for the solicitation.  This is a key point.  The people in government agencies who are involved in creating and distributing these grants are people like anyone else.  You are basically in the position of selling your proposal to the decision makers in this process and a “warm” proposal is always going to carry more weight than a “cold” one.  The more people you can get in touch with and build relationships with who are involved in this process, the better.  Talk to the solicitation contact person about the problem they are addressing.  Talk about your proposed solution to the problem.  Try to get a feel for how well your solution addresses the problem, and how well it will be received.
3. Eliminate the solicitations that you don’t have a chance of winning from your list of potential proposals
4. Write the proposals!  Proposals are capped at 20 pages; writing 20 pages of technical content for the chance at a $100,000 grant to build IP that you own is a pretty good proposition.  You can submit multiple proposals per solicitation period, submit proposals to as many solicitations as you have time and energy to write.

It can be helpful to be aware of the three general

categories of solicitations:

1. The writer of the solicitation has a specific problem in their work and is looking for some creative and innovative approaches to solving the specific problem.  If you’ve got some cool technology or experience that can be applied to that specific problem, you are in good shape
2. The writer is responsible for multiple projects joined under a general theme (wireless data transfer for example), and is looking for some cool ideas that industry can come up with around that general theme.  If you are crazy enough to think outside the box, but credible enough to not be written off as a crackpot, you have a shot at getting a proposal accepted.
3. The writer has a specific problem but already knows how they want to solve it.  They are basically looking for someone to do the grunt work of proving out and implementing their solution here.

You can find the DOD’s SBIR program here (flashback to what the Internet looked like in the early 90’s!).  There are also SBIR programs in the DOT, NSF, DOE, NASA, and various other government agencies.  Check out the SBA’s list here (watch out for blink tags!!)

My immense thanks goes out to Warren Katz for his session at TechStars Boston.