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Should Your #Startup Try #Crowdfunding?

2/18/2015

A few surfer friends came up with a great idea for a product and used Kickstarter to raise funds. Their campaign was overfunded and they're now on their way to launching their product.
A doctor had a great idea for a research project. He applied for grants but the process was long, so he used crowdfunding to bridge him to the grants.
A filmmaker used crowdfunding to pay for her short film.
An author friend actually raised substantial money for travel as part of the research for his next novel.

About a year ago in one of my #startup posts, I briefly discussed crowdfunding. For the most part, I was negative on the idea.

Now, a year later, I've seen some Crowdfunding successes and I thought the subject might be worth revisiting:

And of course there are hundreds of anecdotes about successful crowdfunding projects - just search the web. Or, better yet, take a look at How to Run a Kick-Butt Kickstarter Campaign. While focused exclusively on Kickstarter, this presentation provides excellent information not only on how to run a crowdfunding campaign, but statistics on the numbers and types of projects that have succeeded and how much money they have raised. If you decide to go the crowdfunding route, it's a great place to start.

But should you use crowdfunding for your startup?

A year ago, I would probably have given a categorical NO. Today, after seeing so many successes, I'd say it depends on your project. With the exception of the surfers' project, those I mentioned above really didn't have anything to lose in seeking crowdfunding - they weren't really startups anyway. I single out the surfer's project because they were building a unique product as the basis for an ongoing business.

Unfortunately, crowdfunding shows your idea to the competition.  You clearly lose some competitive advantage and risk losing your entire market if a larger player decides to jump in ahead of them. Thirty years ago, this wouldn't have been a problem in the surfing world, but today, there are some huge companies in the industry.

So that's probably one of my biggest concerns. If your startup is building a product and you want to preserve some secrecy about it, don't do crowdfunding.

Okay, so it turns out you don't need secrecy. Can you use crowdfunding for seed money?  How about offering your investors equity - a piece of your company? After all, family, friends, and some generous strangers believe in you and your plan. They're putting down their hard-earned cash to let you chase your dream. They should have a piece of the action, right?

Here comes that categorical NO.

In my blog on Angel Funding, I suggested that you didn't want Uncle Jim, who made money selling used cars, telling you how to run your business. You certainly don't want hundreds or possibly thousands of Uncle Jims not only telling you how to run your business, but having the right to look at everything you're doing.

With equity funding, you have to disclose your business plan and financials. These become public and in the world of crowdfunding via the Internet, everyone will be watching you and may want to 'help'. From the direction the SEC is going, equity in crowdfunding is going to be very complicated and expensive.

Let's just say NO to giving equity to your investors.

So what do you give investors who help you to raise some seed capital? First, be sure to limit your crowdfunding to a specific project.  Make sure that your obligations to the investors are well-defined and short-lived. Be clear that they're investing in a project, not in your business, and that what they receive for their investment is not ongoing. Give them early samples of a new product, discounts on future products or services, or some kind of recognition award.

Once your campaign is over, you can then grow your business with no additional baggage - baggage that might encumber your business plan, cause you to lose focus, or make it difficult to bring in qualified investors or partners.

You can use the money to get your project off the ground and use the project to help bootstrap your company through sales of your new product or service. You avoid obligations to family and friends or seed investors, and you have a base from which to launch.

So yes, I have revised my opinion on crowdfunding. I still think bootstrapping and using Angels are the best ways to fund your startup.  But for certain businesses needing help on very specific projects, I think crowdfunding can work.

#Startup - Can YOU Swing for the Fences?

First Building a Startup Post

Build it or Buy it - Which Should Your #startup do?

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Another Translation Challenge - shaggy dog stories

2/9/2015

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As I described a few months ago in my post Translating Your Novel, I'm in process of working with Peyo Amulet, a French translator, to translate The Shadow of God into French . The translation is going more and more smoothly. In fact, aside from one significant issue, there were only a handful of very minor translation errors in the latest 50 pages that Peyo sent me for review.

We seem to have worked out all of the challenges I pointed out in my previous post:

     - Language: Peyo looks for situations and chooses formal/familiar as needed
     - Sentence Structure: Peyo uses popular French so there are more fragments now
     - Culture: we assume a knowledge of American ways and don't try to create equivalents
     - Elimination and addition of text: this is less of an issue than we thought
     - Rhythm: Peyo seems to have now captured my rhythm

We've also worked on formatting and have both come to understand how dialog is represented in popular French fiction as opposed to classic French fiction. There's a lot more ambiguity in terms of which words are 'spoken' versus description about the dialog or the person speaking.  For example, "I tried," he said walking home, "eating raw sushi." becomes - I tried he said walking home eating raw sushi.

Was he walking home when he tried it or did he say he was trying while he was walking home eating the sushi? And paragraph usage - in modern French fiction it appears that there's no good way to represent multiple paragraphs in one person's dialog - it's all one paragraph no matter how long. But as I said, we've worked out all these challenges.

But now, the culture issue has come back. I guess this is to be expected, but we thought we'd worked out a strategy to handle cultural differences. Not this one.

In The Shadow of God, Jim is a somewhat reclusive character who steps into a family of lawyers and well-connected people who love to share their larger-than-life experiences.  Coming from more humble origins and a being a bit more circumspect, Jim still gains immediate credibility by telling shaggy dog stories. For those of you who aren't familiar with shaggy dog stories, these are tales that are embellished as much as possible to lead your listeners down the garden path and then to conclude the story with a play-on-words pun. Many of you are familiar with one that ATT turned into a television commercial some years ago.

I'll avoid the shaggy dog aspect by keeping it short - I could go on and on about descriptions of the people, the lands surrounding the kingdom, the chases, etc., but I won't. It's the story of a kingdom besieged by a giant dragon with huge yellow fingers. Knights try to slay the dragon but the creature scoops them up in his massive yellow fingers and tosses them into his mouth like popcorn. With all the knights eaten, their squires try to slay the dragon but they, too, are scooped up by the horrible yellow fingers. After weeks of siege, the kingdom is starving. A young page volunteers to get past the dragon to reach the sheriff who will bring an army to kill the dragon. But the king can't see sending a young page to his certain death so he refuses. Weeks later, people are dying of starvation. The page volunteers once more and this time the king reluctantly agrees. The people gather on the parapets of the castle and watch as the little page makes a run for it. The dragon scoops him up easily and a collective sigh of disappointment and despair runs through the crowd. They turn away. But then someone says "Look!" and sure enough, the little page is so small that he has slipped through the yellow fingers. The page starts to walk and as the fingers come down, he escapes again. Ultimately, he makes it to the sheriff who indeed does bring the army to slay the dragon and the kingdom is saved. The moral? Let your pages do the walking through the yellow fingers.

Now it's possible that this ATT motto - Let your fingers do the walking through the yellow pages - does exist in France. In fact, page has the same ambiguity - it can be a young trainee for knighthood, and it can be paper in a book. They do have les pages jaunes (yellow pages), so this one MIGHT work. Peyo is looking into it. But I can guarantee my next two shaggy dog stories with their plays on words won't translate. The expressions don't exist in France and even if they did, the translation of the plays on words definitely won't work. In one, my play on words is based on glass and grass. Verre and herbe clearly won't work.

So what do we do? One possibility is for Peyo to substitute French shaggy dog stories. These must exist as the French love les jeux de mots (plays on words).

The other possibility is that Peyo keeps the existing translations and then adds a footnote for each, explaining the English expression and the juxtaposition of the words to create the play on words in English. I kind of like this option as it preserves the integrity of my way of telling these stories and of Jim's character.

We many end up with a combination of the two approaches as one of the stories uses such an obscure expression as the base for the play on words, that even with a footnote, it wouldn't make sense to someone who didn't grow up in an English-speaking culture. That one probably needs to be replaced with a native French story.

The good news is that with over a third of the book translated, aside from the shaggy dog stories, I think we've seen all the major issues we're going to see. I now go through the upcoming sections of the book in advance and give Peyo warning about possible difficulties so he can move through them prepared. I did this recently for hang-gliding scenes where I researched the French vocabulary for hang gliding terms and made them available to him. He was flawless in his application of terms to a sport he'd never experienced.

So here we are, more than a third of the way through the text being translated. We're actually probably more than half-way through the process given all we've had to learn about language, style, and working together.

I'm having a blast.

Writers usually work alone. But, I must admit that it's fun working with someone else.  And, it's incredibly rewarding to see my story reemerge in another language.

I'll post again on this topic if other significant issues arise. Otherwise, I'll post in a few months when we have feedback from a few of our initial French readers. Note the 'our' in the last sentence. If there's one thing I've confirmed in this process, translation, at least in the way we're doing it, is really a joint rewrite. For the French version, Peyo is my co-author.

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#Startup - Can YOU Swing for the Fences?

2/6/2015

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Last night I had dinner with an entrepreneur who presented me with the five-year plan for his growing business. It's a solid plan that builds on his current business, expanding slowly for two years, then growing more rapidly. I thought it was brilliant because the entire growth path, which might even get him into the IPO league, is self-funded. He has contingencies for potential future problems and possible missed goals, and from what I can see, it's unlikely that he won't see the success he has laid out so carefully.

But then he told me about his special project.

It's true, most of us have them.  After all, we're entrepreneurs. We're idea people. We can't help it.

Unfortunately, we have learned the hard way that these special projects can kill us. They distract us from the focus we need to be successful. And as my friend went into more and more detail about the technology, the initial trials, and the size of the market for the product that so intrigued him, I couldn't help but fear for the future of his main business.

At the same time, I must admit that I, too, was fascinated by the opportunities in his special project.

He asked me if I thought he could raise venture capital for it. And of course, I had to ask the question: "Are you prepared to give up your main business to pursue this opportunity?"

With his negative response, I told him that first, I thought this special project was a perfect bootstrap candidate, and second, that if he were to raise VC investment, in addition to giving up a substantial piece for seed/early stage funding, the VCs would demand that he focus on this single opportunity. That he 'swing for the fences.' That he drop his main business.

We then kicked around the idea of him hiring someone to take over his existing business while he goes for it with the new one.

In previous posts, I've suggested that 'swinging for the fences' is something you can choose to do at various times in your life/career. If you're young with no mortgage payments, family, or major obligations, you don't have much to lose. Or, if your kids have left home, you've got some money in the bank, and some years of experience, again, with little to lose, why not take the chance?

But in thinking about it further, I began to ask myself (and my colleague from last night) if it might be more a question of temperament. Does he have what it takes to swing for the fences? As I thought about it, I realized that personally, I really don't have it.

Some part of me wants to build a sustainable business that guarantees a reliable income for me and my employees, and is pretty much assured of at least moderate success. I don't want to put them, me, or my brilliant idea/business plan at that much risk.

Okay. Maybe I'll never make it really huge, but as I suggested in my post  #Startup - Go Big or Go Home? , it appears that people who build these sustainable, non-VC-backed companies usually do better financially than those who swing for the fences. So maybe it's not really a character flaw to be a more conservative type of entrepreneur.

Ultimately after much discussion last night, my entrepreneurial friend admitted that he was like me. He came from a place where he didn't like a lot of risk. Clearly, starting any business is a risk, but we want to take as little risk as possible. We want to be assured of winning every time, even if we don't win as big.

I concluded with my insurance at blackjack strategy. I don't gamble much but when I do, I play blackjack. I admit it, I count cards. I do whatever I can to turn the odds in my favor. If you know blackjack, you know that if the dealer has an ace up, s/he will offer you insurance. You can 'insure' your bet by purchasing insurance which pays 2-1 if the dealer has blackjack. Statistically, if you have blackjack, the odds of the dealer having blackjack are smaller. So you shouldn't take insurance if you have blackjack.

On the other hand, if the dealer actually does have blackjack, you push - a tie. You don't lose your money, but you don't win either.

Me, I take insurance if I have blackjack. Why? Well, if the dealer doesn't have blackjack, I've paid 50% of my bet for the insurance, but I win 150% for my blackjack, netting me a gain of 100% of my bet. If the dealer does have blackjack, I push on my bet, but I win 2-1 on my insurance, netting me a gain of 100% on my bet. In other words, I always win - always.

In the long run, I may not win as much as I would have if more often than not I'd won 150% of my bet but tied some of the time. I'm the kind of person that given the choice, would rather never lose and be guaranteed that I'll always win. I'm just not a swing for the fences kind of guy. I take insurance when I have blackjack.

As we wrapped up the evening, my friend admitted that he's the same.  He's now exploring hiring someone who doesn't take insurance when s/he has blackjack to head up his higher-risk venture.

Negotiating Agreement

Should Your #Startup Try #Crowdfunding?

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Should Your #Startup Try #Crowdfunding?

Another Translation Challenge - shaggy dog stories

#Startup - Can YOU Swing for the Fences?

Steve Jackowski

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