Startup-CEO.com (Eli Portnoy)

A day doesn’t go by where I do not hear from someone who claims to have the next Google of an idea and just wants to pick my brain about how to start a new business. 

This is the equivalent of fool’s gold. Ideas are a dime a dozen. Everyone has an idea, and those that don’t can buy or rip one off. Ideas are as meaningless as they are plentiful. 

If there is one thing I have learned as an entrepreneur is that the hardest aspect of starting a business is implementation and execution.

Let me give you an extreme example. There are thousands of people who are incredible writers. They have the ability to construct fascinating stories and entertain the mainstream population. Why don’t they just take their stories and turn them into movies? Because a movie is so much more than just an idea. You need a script, a budget, cameras, sets, producer, director, actors, distribution…and probably a few thousand other things. 

It is absolutely no different with a business. Yes, you need an idea to start a business, but there is so much more to it. Just having an idea or a goal means nothing.

Mark Cuban and others think they are doing the world a favor by giving away business ideas, but seriously, those are a dime a dozen. If they really wanted to help out they would give advice, strategies, and lessons learned. Then they might actually be doing someone a favor.

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In the past 12 months we have been featured on ABC7, Telemundo, NPR, CNN Radio Espanol, BusinessWeek.com, Crain’s NY, NewYorkBusiness.com, WSJ Career Journal, Inc. Magazine, Entrepreneur Magazine, Newsday, El Diario/La Prensa, Hoy, Workforce Management, StaffingIndustry.com, Hotel & Motels and various other smaller publications and blogs.

That is a tremendous amount of press for a very small company. How did we do it?

Every company has a story. Either it’s the great story about new imitative just launched, or the great things being done in production, or maybe just the special way customer service is being handled.

The problem is most of the stories being spun by companies are old and boring. That is why you need an angle. Fortunately for you, you work in a start-up and nothing is more interesting than a new product or service when there is a David vs. Goliath story involved.

The next step is letting the media know about it. First craft a one line pitch sentence which will grab the media’s attention. Don’t use crazy lines, but do find a way to communicate what you are doing in 15 words or less. This will come in handy for your pitch letter, and when you follow-up on the phone.

The next step is tedious, but you can not take any shortcuts. You need someone (preferably a professional PR agency) to manually pitch the story, one at a time, to your target editors. You need to send a pitch letter or email, a company fact sheet, and any other relevant information, and then follow that up with a voicemail and a telephone call. There are a lot of people who take a list of editors and just blast them with news releases and pitch letters. That never works, never. Editors want to their product to be great. The only way they can do that is by having original content. They don’t want to publish a story that they know 500 other sources will have.

This brings us to exclusivity, if there is one media source which you know would be perfect for what you are doing, offer them exclusivity. There is nothing an editor likes more than to hear they will have an exclusive.

So to recap: find a story that is interesting, craft a message for the media sources, let them know about it, and if necessary, use the exclusivity card. Then hold on to your hats while you bathe in all the free publicity you will reap.

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You would think that a start-up CEO is a terrible risk taker. The likelihood that a new business will emerge from nothing and be able to compete against tremendously bigger competition is next to none. And yet, the start-up CEO puts everything on the line for a chance to show that his idea and business skills will take the company to incredible heights.

That isn’t the whole story though. For most CEOs, being part of a start-up isn’t a risk-benefit analysis, it is about a calling. Just as very few people go into teaching because of the money, very few entrepreneurs decide to quit their jobs, work incredibly long hours, receive little compensation, and invest most of their life savings, for the remote chance that they will be the next Google.

The mind of an entrepreneur is wired to differently. We want to build and we want to create. It is not so much that we see inefficiencies in this world, but rather we see solutions.

We also tend to be rather competitive – we welcome the chance to go up against bigger and stronger rivals.

We love the business exercise of molding a company from the ground up, having to puzzle it all together, making every decision from the color of the carpet to the font of the logo.

Yet I think that the most important element driving an entrepreneur is an innate need to make a mark on the world – to build something that will last.  In a way you can say an entrepreneur is no different than anyone else out there, it is just the method chosen that is a little different and crazy.

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One of the members on my board, and a very close advisor, is a masterful communicator. He has a way of taking ideas and framing them in the context of one or two sentences.

At one point during the start-up process, we found ourselves with an interesting opportunity. It was a slight deviation from the core business, but it would allow us to generate revenue ahead of schedule. The problem was that doing so would require us to divert precious human bandwidth, and probably slow the development of our main business.

I presented the opportunity the dilemma before the board.

It was at this point that the board member I referred to above stood up and said “A laser is a ten watt light bulb that is focused.” That was that. He said it perfectly, solved our issue, and defined our ongoing strategy in a matter of seconds.

We remained focused on our primary goal, which was to develop the business as best and as soon as possible. As we moved forward more and more opportunities presented themselves, and many of them were significantly more aligned with our strategy. Had we lost focus, we probably would not have not made it this far.

Keeping the company focused on the right goals is one of the most important responsibilities of a start-up CEO, it is critical for the health of a business, and it is one of the greatest lessons I have learned during my time at the helm.

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So you want to start a business? Congratulations, there is nothing more exciting, rewarding and draining in this world. But do you have what it takes?

Anyone working in a start-up knows you need to wear multiple hats. One day you work in the marketing department, while the next you are designing the next feature set of the application you are building. This is even more so if you are the head honcho, the big chief, the start-up CEO.

Over the past few months, in an effort to improve my leadership of our company, I have put in a lot of thought into what makes a great start-up CEO. The following 15 characteristics define the superman of CEOs, the model of perfection. Bear in mind that I highly doubt any one person can be great at all 15 of these elements.

Highly intelligent

There is no substitute for intelligence. A CEO will need to be forward thinking, analytical, and strategic.

Terrific negotiator

The CEO will find himself in many conference rooms negotiating. Securing the best deals for his company will be critical at every stage of the game. Negotiations are essential when he looks for funding, when he signs customers, when he recruits, when he makes purchases and most importantly when he develops partnerships.

Charismatic leader

For a start-up to be successful, a lot of people need to get behind a company and put a lot at stake (employees, customers, partners, investors). This is much easier if the person at the top is charismatic and a people person.

Great communicator

A CEO must be able to express his views both in the board room, conference room, and cubicle. Everyone needs to buy into what he is selling.

Technical expertise

Technology start-up or not, every CEO today needs to have a strong command of technology. Without technology a start-up has too much of a disadvantage.

Management guru

The CEO needs to be well versed in the management theories of the day, but more importantly he needs to have a natural feel for managing people and projects.

Marketing maven

Good marketing is a start-ups best friend and bad marketing is an early death wish. The person at the top must approve the marketing initiatives, so it helps to have a knack for it.

Tough as nails

Rocky situations come up, and a CEO must be able to hold his ground.

Soft as tissue

Situations will arise that will need to be handled with a very soft touch.

Flexibility

Nothing ever works out perfectly, and so the CEO will need to switch gears and refocus often.

Zero Ego

A CEO with an ego can be catastrophic. They tend to hold on to strategies and products longer then they should. A CEO must be able to objectively asses every situation.

Teacher

A CEO will need to instill processes and culture into the company, and he will need to raise people to a high level, the only way to do this is to be a great teacher.

Creative

Start-ups need to out hustle and out do more established players, and the best way to do this is to be create in every sense of the word.

Disciplined and hardworking

A CEO must be focused and have an outstanding work ethic. Building a company will require many, many late nights, most weekends, and a lot of personal sacrifice.

And most importantly, CRAZY

There really is no sane reason for starting a company, so anyone who would subject himself to the constant and brutal nature of the role needs to be crazy and love being crazy.

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In my last post I discussed how difficult it is to maintain market share in today’s business and technology environment. I promised that today I would reveal the magic formula for maintaining internet dominancy.

A brief recap on my arguments yesterday:

Today more then ever internet companies are feeling competitive pressure. It takes 50k or less to develop a working prototype on the internet. Any kid with a computer can build a replica of my space, craigslist, youtube… so in today’s world, you not only need to worry about the big guns coming after you, but you also have to worry about some teenager cloning your site.

In today’s post I would like to examine how certain sites were able to handle the competitive pressure from both the big and small companies, and how they managed to survive and what we can learn from this.

How is it that Craiglist.com enjoys such a market dominance even though there are over 100 small sites that have better technology and more user friendly design (edgio.com, oodle.com, epopuli.com and hundreds others). Not only that but Google (Google base), MSN (Live Marketplace) and many other huge companies have also tried to break into the space. Why does Craigslist still live? What is its secret sauce?

Why does ebay.com hold the #1 slot by HUGE margins? Yahoo, Amazon, Overstock, and many others have tried to break into its space.

Hundreds of small sites also tried with similar services and just couldn’t.

The answer is in the natural monopolies that these sites produce. The internet allowed for a completely new type of company, one of matchmaking. The company doesn’t produce or provide anything other then a marketplace. Craigslist lets “buyers” and “sellers” share information. Ebay is a marketplace for junk and other stuff. What they have in common is that the service can only survive by having mass penetration on both sides of the equation. They need the buyers and the sellers, and unless they have a huge stream of them, the companies don’t work and can not survive. It is a natural monopoly, internet style.

The thing is I can set up a craigslist clone, but unless I have 50million people looking through it, I can get as many people as I want to post real estate and jobs and the site is not going to work. It is a catch-22 situation for a web operator. They can’t get the buyers unless they have the sellers, and they cant get the sellers without the buyers.

In my opinion that is the biggest Sustainable Competitive Advantage an internet company can have. It means that no matter who, no matter how much, and no matter what technology they come up with, no one will be able to dethrone a market leader. That is exactly why craigslist can afford to have a shitty site. It is why Ebay can keep jacking up prices.

The same is true for monster.com, the reason they are so big is not because of technology and not because of their brand (though it does help), but because they have the largest user base of jobs and candidates. Match.com works the same way, if you are looking for a girlfriend, its where the women are, and if you are looking for a boyfriend, that’s the place to find them.

So what is the secret magic formula for internet dominance? The marketplace. Figure out a way to incorporate a marketplace into the equation and you will be set. Google.com did it with their advertising network. Amazon.com did it with their Amazon Marketplace service and with all the data they have on user behavior. The list goes on.

So find a way to create a natural internet monopoly and then maybe Google and those 15 year olds won’t be able to steal your business.

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A plethora of trends have come together to create the perfect competitive storm. It is just too damn easy and cheap to copy existing business models. No technology company is safe from competitors cloning their business and undercutting on price. Worse, big pocketed competitors can play the waiting game and see what works and what doesn’t, then throw together the technology and add layers of service, cut the price, and wait until you die. Scary? You bet it is…

As an entrepreneur this has kept me up at night. Entrepreneurs take all the risk, build a business that works and then wake up to 15 copycats. 

In the past a company could rely on the cost of technology as a barrier to entry. It took so much money to create a business that a huge percentage of potential copycats where weeded out to begin with.

The second barrier a company could count on was the technology itself. If the technology was good, one could feel safe knowing that it would take someone months if not years to clone it. That is no longer the case as the tools to build technology are so good that most websites can be redone in a matter of months, if not less. 

Branding used to be another great competitive advantage. People would use your business, love it, and never even think of switching. Those glorious days are gone as well. Today we consumers have become a fickle kind. There is so much access to information, that we are always hearing about the new and the better, and we have no problem switching.

Finally, companies used to be able to lock users in with a high cost of switching, extensions, compatibility, and closed standards (think Microsoft Office). The problem is consumers won’t even hear of it today. We live in a world of open standards and people don’t even try closed systems anymore (with the exception of ITunes and the Ipod). 

The good news is that all of these reduced barriers also mean the risk of starting a business has diminished substantially, and if you can figure out a way to fight off competitors, then the potential is huge.

Tomorrow I will post my thoughts on how to build a sustainable competitive advantage.

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As a CEO one of your primary job functions is to look into the unknown and predict the future. That is obviously an impossible task, but with some careful analysis and thought you can attempt to set a direction for your company that will benefit from emerging trends.

These are some interesting trends I see developing that will affect business in the coming few years.

Positive Trends:

1. Cost of starting a business plummet

The drastic fall in communication costs allows even one person start-ups to have access to a worldwide talent pool at rock bottom prices. In addition, technological advancements are driving down the cost of establishing web or technology based companies. Finally, technology is driving all sorts of efficiencies and allowing for greater productivity across the board, allowing smaller companies to accomplish more.

This is both good and bad, on the one hand it means that fast thinking companies can continue to expand, add features, even entire business lines in the blink of an eye, and try for homeruns without being killed if they fail one or two times.

Alternatively, it means you can never stop watching your back because anyone out there can start a business and put pricing pressure on you.

2. International Consumption Soars

The international middle class is soaring and there is unprecedented global wealth.

Regardless of the US economies, the international economy will continue to soar. It will only get better as the international wage equilibrium begins to balance and international wages rise to meet US payment scales somewhere in the middle.

This provides fantastic opportunities for global minded entrepreneurs who are able to tap into this new golden age of consumer spending.

3. The emergence of the Hispanic demographic

This is clearly an undisputed trend. Look at your neighborhood magazine rack, and if you live in one of the largest 50 cities in the US, you will see a plethora of Spanish based media. Still don’t believe me? Turn on the TV. Still not 100% sure you agree, then look at the facts, because the Hispanic demographic is growing at four times the national average. It is estimated that within 34 years Hispanics will constitute 25% of the entire US population. They will account for 700 billion dollars in spending power as little as four years.

Hispanics will form a very important part of the US economy and understanding this early on is critical.

Negative Trends:

1. The housing slowdown will halt consumer spending to a crawl and drive the economy into a recession.

This is incredibly worrisome, because a bad economy is bad for all business – plain and simple.

2. Iran and N. Korea build a nuclear arsenal

I don’t see how we stop this. The US is spread too think to deter anyone, and any offensive campaign against either of these two countries will result in a world war.

From a business perspective, this means continued international political instability, and probably allows for oil prices to stay at a high level for a long time to come.

3. Poor get poorer

This is a two prong problem. The first issue is that as communication costs collapse the wage discrepancy across countries is becoming less justifiable. The reasons for paying four or five times more money to employees simply because they live in the US are becoming less and less compelling. The next few years will see a resetting to equilibrium of global wages. US wages will fall, international wages will rise.

This leads to the second issue, which is that we absolutely need undocumented workers in the US. We can not compete against China, India, Mexico, Brazil and just about every other country if we pay dishwasher wages of $14 an hour when a PHD programmer in India makes $8 an hour

At the same time, a guest workers program is too controversial and far reaching to actually go through. What this means is that nothing will change and the government turns a blind eye towards the undocumented worker.

The problem here is that there already are too many low-wage employees for the jobs we have available. This is a very recent phenomenon, but in the past 3 years we have inverted the ratio from one where work was plentiful, but workers were hard to find, to one where there are just too many people fighting for the same jobs. If people continue to come into this country illegally and we don’t close our borders to illegal immigration, we will have seriously suppressed wages at the lower end of the spectrum, which will trickle all the way through to the middle class.

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Sometimes the most difficult decisions are really quiet simple when analyzed from the right perspective. It is in that regard that I think stories and examples are useful, as they can frame a situation in a comical, but revealing manner.

At one point during a pre-negotiation process for the sale of a company that one of my mentors was involved in (lets call him SK), the acquiring company was pushing hard for an all access pass to the financials of the company. As it was very early in the game and this company was a potential competitor if the deal did not go through, it was clearly a problematic situation for SK.

SK thought hard and long about the dilemma before him. On the one hand he was certain that the acquirer was a perfect match and he knew that if they saw his financials the deal would fall into place, in addition, he did not want to do anything or deny them anything that would upset them and perhaps derail the entire deal. On the other hand, he knew that allowing anyone to see your financials that early in the game is a suicide play, and he was in no mood to give the upper hand to the other side of the table.

At the next meeting between the two sides he used a story to illustrate and make clear that he could not show his financials this early on.

The story he told went as follows: A few decades ago when arranged marriages where more common a young woman was of age to get married. Her father looked high and wide for the perfect match until he found what seemed like the fantastic boy. He was smart, kind, eloquent, good looking, and wealthy. At once the father was convinced that this was the boy for his daughter. The father of the girl approached the young man and offered his daughters hand in marriage. The boy was delighted and agreed pending one condition; he wanted to see the girl naked first to make sure he knew exactly what he was getting, and to make sure there were no surprises later. The father was shocked and certainly disagreed. However the boy insisted and to reassure the father of his good intentions offered that the father be in the room and even promised to keep a distance of 20 feet from his potential future wife.

The father consented, but only because he was sure that this boy was sincere and was the perfect match for the daughter. The day came and the father and daughter met in a room with the young man. The potential groom stood 20 feet away from the girl and her father. The girl undressed and the boy, always a gentleman, took a quick look and turned away.

The father came over to the boy and asked him if now that he had seen his daughter fully he was satisfied with the girl and was willing to marry her, to which the boy replied “Thank you, but I will have to pass, as I do not really like her nose.”

The company understood that SK could not put himself in a position of such weakness. They saw where he was coming from and realized it was an unfair demand. They continued the negotiations and things worked out very nicely.

Next time you find yourself in a tough bind, try to simplify the problem to its root and usually it will be clear what you can and should do.

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I have recently been hearing a lot of the 80 / 20 rule; especially the variation of it that suggests that 20% of your time is spent adding 80% of the value. This has always troubled me because of the waste that the rule implies regarding the 80% of time that is only adding 20% value.

In the context of entrepreneurialism it makes no sense. I would like to coin the 100 / 100 rule (or the entrepreneurial rule of time management), which states that when starting a new business 100% of your time must always be adding at least 100% value. There is so much to do when setting up a new venture, and resources are so tight, that the luxury of dedicating 80% of time for only 20% added value is ridiculous.

I would like to take this idea further and propose that achieving value with each and every second of the day is the essence of “entrepreneurialism”, which is what so many companies and individuals aspire to reach. When companies talk about going back to start-up stage, or when they talk about harnessing the “entrepreneurial spirit”, all they are really saying is that they are too bogged down with nonsense work to get anything done.

I think the 100 / 100 rule is what separates a successful start-up and one that is not. A good C.E.O. must ensure that everyone working on a project dedicates every second that is spent in the office geared towards adding the absolute most value. There is no other way around this. Two companies might be working on the same idea, but one always ends up blowing the other one out of the water. Why? Because one of the C.E.O.s was able to instill in his company the virtue that in order to attain success they must be productive all the time.

There is absolutely no place in a start-up for bureaucracy or any other type of time wasting.

Having worked at a top global consulting firm I was able to see a clear contrast in the working style of a behemoth company and an emerging start-up. The biggest difference wasn’t the drive, as people can be ambitious in all walks of life, rather it was the way people spent their time, and the different things that took up the majority of the day. In the consulting firm, 25% of time was spent filling in time-sheets, evaluations, and expense reports, while another 25% was spent answering unrelated company emails, organizing events, and kissing ass, yet another 30% of the time was spent going over documents and incorporating changes from 20 different sources. Only 10% was spent thinking, acting and doing. This is a stark contrast from the entrepreneurial setting, where the priority is putting together a fantastic product, and everything else takes a backseat.

When you start your next venture, or you can apply this to whatever you are doing now, remember that the special start-up juice that allows understaffed and under resourced companies to upstage their much bigger rivals comes down to allocation of time and the 100 / 100 rule. Make every minute count.

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