Wishing a Merry Christmas to everyone and their families at this special time of year. Now that I’ve finished writing the Entrepreneurship Series, I’ll be taking a short break and spending time with family and friends.

January will bring a number of new posts that I’ve been turning over in my head for a while, discussing topics such as Net Neutrality, partisan politics on the internet, and a post inspired by Bo Peabody’s book Lucky or Smart (which I highly recommend).

See everyone in 2007.

This article is the fourth in the Entrepreneurship Series.

When starting a company, probably the last thing any entrepreneur thinks about is his exit strategy. The exit strategy, sometimes referred to as a “liquidity event” or “harvest strategy” is basically the entrepreneur’s way of “cashing out” of their company. This is the part where years of hard work come to fruition and turn into profit. Cashing out is often not as simple as it seems. There are numerous ways of converting the non-liquid asset of equity in a private company to the liquid asset of cash, and each is fraught with it’s own unique pitfalls.

The Lifestyle Company
While this isn’t an exit strategy per se, it is certainly a way to extract cash from your business, without giving up any ownership. If you’re running a sole proprietorship, you’re pretty much free to do whatever you want – and that includes setting your own salary or paying yourself bonuses. The Lifestyle Company is one that operates to make profits for itself, but also to support you, the owner’s, lifestyle. This type of company doesn’t strive for explosive growth or high valuations, as it exists to provide you with a stable and sizeable income year in and year out. Of course, the size of that income probably depends on your profits, so growth cannot be totally ignored. You must keep in mind though, that any money you take out of the business as salary and bonuses is money that the company cannot spend to support itself. If your business requires capital to grow, taking too much out now can really hurt your company in the future.

Acquisition
An acquisition is one of the most popular exit strategies, especially among today’s startups. Today, large companies such as Google and Yahoo are recognizing that growth through acquisitions is often easier and cheaper than organic growth. This means that it’s easier for a large company to purchase a small company to gain entrance to a new market, rather than trying to break into that market themselves. This is good news for entrepreneurial companies that can distinguish themselves and attract customers early in their lifetimes. Acquisitions are usually quite profitable for the investors in the acquired company, and depending on the terms, can still leave them with a lot of control over their product. Often, a larger company will choose to keep an acquired company mostly autonomous, especially if it has a very strong brand or management team. An acquisition can often prove the most desirable exit for the startup founder, allowing the conversion of equity to liquid cash, while often retaining a large amount of control over their venture.

Initial Public Offering
An Initial Public Offering, also known as “going public”, is the most profitable and most high profile exit strategy. However, it is also the hardest to successfully execute, and the rarest. Fewer than 100 companies go public every year, and there are only about 7000 public companies out of the millions in operation in the United States. Having a successful IPO is equivalent to going pro in sports – your chances of getting there are almost infinitesimal, but the payoff is huge if you do.

If going public is a feasible option for your company, the first thing you’ll have to do is hire a team of experts who will assist your business in its IPO. You’ll need a law firm, an investment bank, and an accountant. Choose candidates for all three of these positions that are well qualified and experienced with IPOs – they will manage most of what goes on with your IPO.

Another important and time-consuming task facing the IPO team is the development of the prospectus, a business document that basically serves as a brochure for your company. Since the SEC imposes a “quiet period” on companies once they file for an IPO, (which generally lasts about 25 days after a stock starts trading) the prospectus will have to do most of the talking and selling for your company during the most important part of your IPO. The prospectus should include the past five years of financial data for your company, information on the management team, and a description of your target market, competitors, and growth strategy. There are other key components as well, which your IPO team will make sure are included.

Being a public company comes with certain benefits and drawbacks. The more immediate positive is the large amount of cash raised through an IPO, which can enable solid growth. Also, after going public and converting your company’s equity into the currency of stock shares, acquisitions and changes in ownership are made much easier. All you need to do is buy and sell stock. Furthermore, as a public company, you’ll enjoy increased exposure and prestige, which will help you hire and retain the best executives and employees.

However with increased exposure comes increased regulation and scrutiny. A public company is required to regularly file detailed financial statements with the Securities Exchange Commission, and is subject to accounting audits. Your newly public company will also be subject to the scrutiny of market analysts and the public in general. All of your strategic moves will be analyzed, and the market’s opinion of them will affect your stock price. Analysts will regularly make forward-looking statements about your business, and it will be crucial that you meet these expectations, or risk a decrease in stock price.

In summary, there are a few different options for exiting your business, each with a different set of benefits and drawbacks. It’s impossible to say which is the “best”, as each business owner has a unique set of goals, and a unique expectation of what they expect out of their business.

This article is the third in the Entrepreneurship Series.

Chances are if you’re starting a company these days, you’ve also thought about what your website will look like. This is especially true for web based startups – your website is your storefront and your public face, probably your most direct and frequent contact with customers. Therefore, you should spend time to ensure that your website is as effective and user friendly as it can be. The best websites clearly and pleasantly convey your company’s message, and make it obvious how the casual browser can become a customer or user. You can take large steps toward these goals by following these guidelines:

1.) Put your most important content “above the fold”
For years, newspapers have put their headlines and biggest stories “above the fold” – meaning the top half of the page that you would see before opening the paper. This same principle applies to web design. Put your most important content at the top of the page, where people can see it without scrolling. Visitors should be able to get a clear picture of your site’s purpose, learn how to navigate around, and hear your call to action (see below) without ever scrolling.

2.) Have a prominent “call to action”
Virtually all web sites have a persuasive purpose – to get someone to register, subscribe, bookmark, or buy something. The success of your business is often measured in terms of the number of users you have, and a loyal user is worth more than you may think. As an example – Google recently bought YouTube for $1.65 billion, or $82 per each of YouTube’s 20 million unique monthly visitors. So how can your business convert a casual visitor into a user? All you have to do is ask, and be sure your visitors hear you. Somewhere above the fold (as discussed above), make sure there is a colorful, prominent, and clickable “call to action”. In marketing speak, a call to action is text that compels a person to take action (typically buy a product). For example – “Register for free today”, “Call us at (704) 555-1212″, or “Buy our widget now”. This conveys to the visitor what you want from them, and what they need to do right now to get involved.

3.) Minimize “hoops”
Web surfers in general have notoriously short attention spans, so if you’ve been lucky enough to hook them with your call to action, you need to make sure you reel them in quickly and successfully. Even if a visitor is interested in registering for your site, an overly long, elaborate, or invasive sign up or order process will quickly send them elsewhere. Minimize the number of hoops they must jump through to become a registered user. When designing your sign up form, consider what information you need right now, and which can wait until after the person is registered (prompt them to fill out their profile). Chances are, all you really need right now is their email address and a password. Unless you’re going to charge them up front, their name, credit card, address, dog’s name, and favorite food can probably wait until later.

4.) Play well with others
One of the hallmarks of “web 2.0″ is open content. Sites like Flickr, Facebook, and YouTube have all made their data available to other applications via APIs. Take advantage of their openness – let your users import their information from these sites and others (assuming it’s relevant) instead of uploading it again themselves. This minimizes “hoops” for the user, as they only have to upload/update/enter their information once, even if it’s on another site. And as we’ve learned before, having fewer hoops is crucial for getting and retaining users.
If you’re going to take advantage of other site’s openness, you should also follow their lead. Make your own content available for your users to view and use anywhere on the internet. Implement an API, offer RSS feeds and email notifications. Let people embed your content in blogs, MySpace pages, and personal homepages. Witness how successful this philosophy has been for YouTube. One of the major reasons YouTube has been so successful is that their typical user never actually visits their site. Most of YouTube’s videos are embedded elsewhere on the web, with only a small YouTube logo in the bottom right to identify them. YouTube’s brand is spread across the entire internet, making it nearly impossible to not see their logo during a browsing session. As a web designer, your first instinct is to try to increase traffic and page views, but remember – by being social and opening your content, you are able to put your content and brand in front of your users, even if they’re not actually browsing your web site.

5.) Be transparent
In the same spirit of openness, also make an effort to make (parts at least) of your company transparent. Today’s internet is all about community, and your company needs to be a part of that. One of the best ways to keep in touch with the community is to keep a company blog. Periodically write a teaser post about an upcoming feature, an update on the direction of the company, or call for feedback. Let your users comment on these posts, and read their comments. Then, next time you’re looking at new features to add, consider what your users asked for. If you end up adding what they asked for (and you should!) write a post announcing the new feature, and credit the original feedback you received that inspired it. This makes your users feel involved and connected, and encourages them to continue participating in your community.

In summary, keep the user in mind when designing every aspect of your startup’s web site. Everything you do should be designed with the user’s experience in mind. Today’s internet is a fast paced place with tons of new startups, and if you want yours to be relevant, you’re going to have to fight for it. Grabbing visitors with a well designed and usable web site is the first step toward success.

This article is the second in the Entrepreneurship Series.

Hours of banter, pages of writing, and thousands of dollars of research have been devoted to answering one of the most popular and elusive questions about entrepreneurship: “What Makes a Successful Entrepreneur?”. Is it a personality trait? Can entrepreneurship be learned? Can it be taught? What kind of person does it require? Can anyone become this kind of person, or are certain people born for the entrepreneurial life? These questions can be answered by examining anecdotal evidence, industry trends, and scientific research. And in short the answer is – it depends.

In recent years, the term “entrepreneur” has escaped its stereotype as “your friend who can never hold down a job” and transitioned into “your rich friend with celebrity status”. “Entrepreneur” used to carry roughly the same definition as “inventor”, which conjures images of a mad scientist in a garage. Now, thanks to the wild success of companies like Facebook, Yahoo, Google, and Ebay, entrepreneurship is cool. Kids that used to want to be fireman now aspire to create the “next Facebook”, and colleges are creating entrepreneurship programs to cater to them. So if entrepreneurship is suddenly so hip, why do 99 college graduates out of 100 take solid jobs at established companies with stable incomes? The answer may lie in the personality of that one student that strikes out on his own and starts a venture. Let’s look at the results of some studies performed on the personalities of entrepreneurs, and examine their conclusions –

• Entrepreneurs are non-conformists. Being non-conformists, they are innately driven to differentiate from the status quo. They don’t listen when someone tells them something cannot be done. [1]
• Entrepreneurs are motivated by achievement rather than power or money. They set high goals that they can reach through application of their skills. They are more interested in creating something than getting rich (which ironically, sometimes is the result). [2]
• Entrepreneurs prefer to do new things, or to do familiar things in a different and better way. Entrepreneurs have a preference for innovation. [3]
• Entrepreneurs have high uncertainty tolerance. They are willing to accept that they cannot predict the future, but recognize that they can guide it through their actions. [4]

So what are we to make of these characteristics? Can you teach someone to be a non-conformist? Can you lecture on uncertainty tolerance? It seems the answer is no – entrepreneurs are born, not made. The research suggests that you cannot become an entrepreneur – you ARE an entrepreneur. This is supported by examining children’s early manifestations of entrepreneurial traits, prior to receiving any formal training.

Long before they were starting innovative companies, they were trying their hand at the most time tested entrepreneurial exercise ever conceived – the lemonade stand. Nearly every child has sat on the curb and hawked lemonade on a hot summer afternoon, and most only did it once, determining that the few dollars wasn’t worth the time in the sun. However, a few children realize that by deviating from the basic formula, they can easily turn a few hours of work into a new bike. Perhaps they move out of their front yard to a more desirable location in front of the local pool. Maybe they hire a friend and operate two locations at once. Maybe they expand into cookies as well. This children are entrepreneurs – long before they have had any sort of formal training in entrepreneurship, or even business, they are exhibiting some of the key entrepreneurial characteristics outlined above.

So if entrepreneurs are born and not made, why do so many colleges and universities offer programs in entrepreneurship? These programs exist not to train new entrepreneurs, but to cultivate and enhance the entrepreneurial spirit that may be lying dormant in young college students. In addition the in-born characteristics that drive entrepreneurship, there are important entrepreneurial skills that can be learned – the ability to see and articulate a vision, team leadership and motivation, and opportunity identification, to name a few. There are also many talents needed by today’s entrepreneur that clearly must be learned. Writing a business plan and executive summary, creating pro forma financial statements, and the art of the elevator pitch, to name a few.

We can conclude that successful entrepreneurs are both born and made. It appears that entrepreneurs have a dual composition – a certain set of born-in personality traits that drive them to seek out and succeed in the entrepreneurial life, as well as set of learned skills that enable them to apply their natural gifts most effectively.

Citations

[1] Rosenfeld, R.B., M. Winger-Bearskin, D. Marcie, and C.L. Braun. 1993. Delineating
Entrepreneurs’ Styles: Application of adaptation-innovation subscales.
Psychological Reports, 72(1), 287-298.
[2] Hornaday, R.H. 1982. Research about Living Entrepreneurs. In C.A. Kent, D.L. Sexton,
and K.H Vesper (Eds), Encyclopedia of Entrepreneurship (pp. 20-34). Englewood
Cliffs, NJ: Prentice Hall.
[3] Chen, C., R. Green, and A. Crick. 1998. Drucker, P. 1985. Innovation and Entrepreneurship.
New York: Harper and Row.
[4] Chen, C., R. Green, and A. Crick. 1998. Drucker, P. 1985. Innovation and Entrepreneurship.
New York: Harper and Row.

A post on SaveTheInternet.com announces that HR 5252 has been defeated in Congress (background reading on network neutrality at Wikipedia). This is the famous “Anti Net Neutrality Bill” sponsored by Alaskan Senator Ted Stevens. Yes, the same Ted Stevens that gave us the following choice quotes:

“…an Internet was sent by my staff at 10 o’clock in the morning on Friday, I got it yesterday. Why?”

“They want to deliver vast amounts of information over the Internet. And again, the Internet is not something you just dump something on. It’s not a big truck. It’s a series of tubes.”

Stevens’ bill would have stripped the section guaranteeing net neutrality from the upcoming rewrite of the Telecommunications Act. The bill was supported by massive lobbying by large telecommunication companies (AT&T, Comcast, Verizon, etc), who have spent over $150 million on lobbyists and disinformation campaigns like the below commercial aired nationwide on cable and network TV.

The bill’s recent defeat is a testament to the power of the individual citizen, despite the power of big business’s lobbyists. Over 1,000,000 people signed a petition delivered to Capitol Hill in support of net neutrality. It’s encouraging to see our elected representatives listen directly to their constituents in this manner.

It’s a bright day for network neutrality and internet users across America, however, nothing will be secure until network neutrality is passed into law. A number of bills are in the pipeline that would create meaningful and enforceable laws protecting net neutrality, so call your congresspeople today!

PS – You may continue to sign the petition for Network Neutrality at SaveTheInternet.com