I'm not always a big fan of high profile entrepreneurs such as Marc Andreesen. Many times, in my experience, they make blanket statements about specific things such as business models, management teams, etc that are often misunderstood by the entrepreneurs. For example, the statement below about CEOs and who should run a start-up is too general. These types of decisions have to be made based on a number of factors that can't be generalized. At the same time, this particular article by Sarah Lacy is pretty interesting and is an easy read.

(Posted on TechCrunch, June 5 2009)

Marc Andreessen and Ben Horowitz are launching their much-anticipated $300 million venture fund this evening, aptly called Andreessen Horowitz.

The fund will make investments of $50,000 to $50 million (yes, $50 million), but will generally focus on early stage opportunities. And here’s a fun fact: they don’t currently have a website, and apparently they aren’t sure they will have one in the future. For now they’ve reserved a16z.com for use if they do ever launch a site. Basically, if you don’t already know Andreessen or Horowitz, or know someone who knows them, getting in contact with them is going to be…difficult.

Andreessen has long been one of my favorite people to interview, because he is tapped into nearly every hot company and isn’t afraid to answer questions directly. That is, when you can actually get him to sit down with you and a camera, notepad or tape recorder. But last week, he had to chat it up with the press since he and long-time partner Ben Horowitz were announcing their the new venture fund. This is not going to be your typical venture capital firm.

For one thing, there’s that $300 million fund size. That’s pretty big for a first-time fund and gargantuan when you consider there are only two general partners, Andreessen and Horowitz. It’s big enough that some people didn’t think they’d be able to pull it off.

How did they? Well, did we mention Andreessen was one of the partners? Heard of the browser? And the lesser-known Horowitz is no slouch. He was the CEO of their second venture, Opsware, which sold to Hewlett-Packard for $1.6 billion. As instant as Netscape’s success may have been, Opsware was the opposite, a hard post-bubble slog.

It’s too early to tell how well Andreessen’s third company, Ning, will do, but Andreessen and Horowitz’s angel stakes in companies like LinkedIn, Delicious and Twitter show their savvy at picking good teams and how much other entrepreneurs in the Valley value their advice. For instance, Andreessen is the only independent member on Facebook’s tiny board of directors. And investors were impressed by the 45 or so companies that Andreessen has independently invested in over the years. Just one, TipMobile, has gone under so far.

So, that’s how they raised $300 million in the worst fundraising environment in 40 years, here’s why: Andreessen says there are only fifteen companies started each year that matter. By “matter,” he means they’ve got the potential to generate $100 million year or more in revenues, and those companies wind up making up 97% of the aggregate industry returns. The firm wants the flexibility to invest as much as they want in those fifteen names, whether it’s $500,000 or $50 million per deal. Considering the two have run big teams and small teams over their time at Netscape, Opsware and Ning, there’s no logical reason they should tether themselves to just one stage of investing.

Like Founders Fund and unlike most everyone else, Andreessen and Horowitz are more comfortable investing when an entrepreneur wants to stay the CEO. Hiring a “grown up” CEO always sounds like a great idea, but almost always hastens a company’s failure, Andreessen argues. There’s strong evidence that the biggest hits come when the founders stay engaged at a C-level position. See: Google, Oracle, Microsoft, Hewlett-Packard, Amazon, Apple and Facebook.
Another distinction: They’re not meddlers. Because there are just two of them, Horowitz and Andreessen won’t always take board seats. If they pick the right entrepreneurs, Andreessen argues they shouldn’t have to.

The whole interview lasted about an hour, and you can see many of the highlights on my Yahoo show, TechTicker, today. Meanwhile, here are five other interesting things he said:

1. Twitter and Facebook’s investors aren’t worried about monetization, but “it’s sweet” of you to. Twitter has spent about $15 million acquiring 30 million users. It’d be a no-brainer to recoup that if need be. Meanwhile, Facebook will generate more than $500 million in revenues this year—it’s spent far less than that to build the company to date. In other words, these are pretty fiscally conservatively run businesses with huge growth potential and no trouble raising additional cash.

2. Digg isn’t done. Andreessen is still bullish on Digg, citing the fact that Kevin Rose is no longer distracted with Pownce and Jay Adelson is moving to San Francisco to manage the company full-time. He thinks having both guys focused on the company will make a huge difference in the next twelve months.

3. The venture capital market should stop whining about Sarbox and other factors that are hurting their ability to take companies public. Says Andreessen, “Build Companies More Valuable and You Won’t Have this Problem.” That said, he sees a conceivable scenario where public markets are no longer how investors get returns at all. Instead, the same institutional names that used to buy the bulk of the shares at an issue, will just buy out VCs at premiums in private deals. That’ll essentially mean everyday Joes can no longer invest in high growth companies. That’s a good thing or a bad thing, depending on how many scars you have from the dot com bust.

4. At least 300 venture firms will go out of business in the next five-to-ten years.

5. Innovation and opportunities to build businesses on the Web aren’t done. They won’t be done for a long time because the Web is one of the only inventions that’s pure software, compared to computers, the television or even the railroads. That means it can completely change without having to fit into set molds. Anyone—Andreessen included—is deluding themselves if they think they know where it’s going. (In other words, don’t listen to anyone making Web 3.0 predictions.)

GRASSROOTS BIZ!

We have seen a rise in the number of entrepreneurs that are starting smaller side projects. Since the increasing number of layoffs and jobless claims that began in 2008 individuals are trying to create additional streams of income to hedge against the loss of a job.

Here is a quick reading article that highlights a few interesting businesses as well as some interesting SBA facts.

ECONOMIC UPDATE - BORING QUARTER

Here's a good video that provides a snapshop of our current economic situation. Jobless claims come out prior to the holiday weekend...let's hope for smaller numbers!

http://www.cnbc.com/id/15840232?video=1167028705&play=1

WALL STREET JOURNAL - BIZ PLANS!

There are dozens of articles floating around about business plans, how to write them, why you shouldn't bother writing them, etc. This article that a friend sent me is a good one and worth the glance.

Wall Street Journal - Article

PART 5 - THE EXIT

The Exit is the final section of a well written Executive Summary. In this section, you should explain to the investor how you plan to provide a return on their investment. There are some key points in my previous post "Exit...Stage Left." This section gives you the opportunity to build trust with the investor. You should be 100% certain to show the investor that you will be a good agent of his/her money. Also, you should show that all partners and founders are in alignment and understand the possible exit strategies.

Below is a good video from our friends at FundFindr about exit strategies.

PART 4 - THE REQUEST

This is an easy section of your Executive Summary. It's pretty simple...here you'll state how much money your project needs to execute the strategy and tactics you've outlined in the remainder of your business plan. This is a great section to help you build credibility. If written correctly, this section will show the investor that you have at least given some thought to where you intend to deploy the $5m you just asked for. It should clearly state, in rough estimates, how much you need for marketing, website, equipment, office furniture, and other assets, as well as how much you need for working capital to keep the business liquid until it reaches a level of fitness. You should also state here what type of capital you are looking for...is it debt or equity financing?

Again, as in the other sections of your Summary, don't be overly wordy or detailed. Give them enough info to generate interest and leave the boring and made-up details for the next start-up that is pitching to them.

PART 3 - THE BUSINESS MODEL

So far we've discussed the first two sections of a well crafted Executive Summary: The Problem and The Solution. Next in line is the section we call The Business Model.

The Business Model section of your Summary should explain to the reader how and when your cash register is going to ring. It should explain who the actual paying customer is and your best assumption as to how frequently they will buy from you. You should explain the different ways you make money and drive revenue into the business. For example, in the health club business, club members pay a monthly or annual fee that may be automatically deducted from their preferred bank account. Additionally, clubs may have other revenue streams such as value added services that may include massage and spa treatments. They also may have a snack bar that creates an additional source of revenue.

Resist the urge to write a 2 page explanation of your Model here. The Summary should be just that...a Summary.

PART 2 - THE SOLUTION

In my previous post, I discussed the section of your Executive Summary where you clarify to the investor what problem you are solving in the marketplace. The next critical piece is your Solution. In this section you should be specific but brief about what you are offering and to whom. This section should depict the essence and energy of your business because this is where you sell yourself to investors. Clearly depict your product or service with commonly used terms to state concretely what you have, or what you do, that solves the problem you identified in the previous section. You should avoid using jargon or acronyms that don't mean anything to most people. You may also want to clarify where you fit in the value chain as well as the dynamics of your distribution channels and how you fit in. You should also use this section to be clear about any current customers and revenue channels so you can show you have passed the wallet test.

PART 1 - THE PROBLEM

Is your new product or service a "solution" looking for a "problem?"

If you're trying to raise money from a venture capitalist or angel then you should always pitch your business from the perspective of solving a customer's problem. Don't make the mistake of telling everyone how cool your new widget or new technology is unless you can directly tell the story of how it solves someone's problem. It's the same thing when you're a sales person and you're constantly selling your product or service's "features" instead of its "benefits." A customer doesn't care about the bells and whistles of your widget unless they can see how it will benefit them.

The same concept holds true when putting together your business plan. You have to be crystal clear that your business is solving problems and generating a benefit to a market. Start by explaining why the situation exists in the marketplace and why it is that only now can it be addressed. Use this part of your Executive Summary to explain the market dynamics and the size of the opportunity...briefly.

NEED CAPITAL - GET ATTENTION!

Aside from prayer and/or doing the moondance naked through an investors office there are only a few real-world things you can do to get their attention. Guess what? Without their attention you don't get a check. So, pay attention!

Your business plan is one of the most important tools that you can have to create buzz about your project. The Executive Summary in your plan is often the first and last section that investors will read. If your Summary is positioned and written well then the investor will have lots of questions about your business model. If not, they will most likely show you the exit. Most entrepreneurs make the mistake of making their Executive Summary a description of their business written in operational terms with piles-o-jargon. As Guy Kawasaki puts it, the "Executive Summary is about selling not about describing."

We have had much success using a simple and straight-forward approach that includes 5 key components. Although I can't guarantee that your plan will generate a check, I can tell you that these 5 components will help you position your business for investment and perhaps soon you'll be off changing the world with your new product or service.

In the next 5 blog posts I will define these components:

1. The Problem

2. The Solution

3. The Business Model

4. The Request

5. The Exit

CONNECTING ENTREPRENEURS AND MONEY!

Here is an interesting video from Vator.tv. In this particular episode of Vator Box they are discussing the different websites and organizations that match investors and angels with entrepreneurs and ideas.

See this video on Vator.tv »

NO DECAF STRATEGY!

If you follow me on Twitter then you saw that I made a comment about Starbucks recently. Apparently, they plan to pursue a number of cost-cutting initiatives including cutting jobs and store locations. In addition, they plan to stop offering decaf coffee in the afternoons. Isn't that when people drink decaf? I guess I'm kickin' it "old school" when it comes to this stuff because I don't understand that strategy. Without having a complete picture of the idea it would be my guess that this may improve operating margin in the short-term. At any rate, this post is mostly about the reaction that Caribou Coffee is taking towards the Starbucks decaf cut. I LOVE IT!

Here's a recent press release:

MINNEAPOLIS, Jan 29, 2009 /PRNewswire-FirstCall via COMTEX/ -- Caribou CoffeeCompany, Inc. (Nasdaq: CBOU), the second largest company-owned gourmet coffee house operator based in the U.S., will give away free cups of decaf coffee starting at noon on Friday, January 30.

The promotion is in response to competitor Starbucks eliminating decaf coffee ready in the afternoons. All Caribou Coffee locations will offer free 12-ounce cups of decaffeinated coffee from noon until closing on Friday, January 30.

"Decaf drinkers deserve better!" says Caribou Coffee Senior Vice President of Marketing Alfredo Martel. "Caribou Coffee is first and foremost a coffeehouse, emphasis on coffee. We strive to give our customers the very best coffee, when, where and how they want it. And if that means a cup of decaf in the afternoon,then we're more than happy to oblige. We invite all decaf coffee drinkers to experience Caribou Coffee's exceptional customer service by tasting a truly delicious cup of our Natural Decaf(TM) coffee on the house.

"Contrary to competitors, Caribou Coffee first selects the highest quality coffeebeans, then uses an all-natural decaffeination process involving no chemicals. Soaking the beans in an all-natural water solution draws out the caffeine, leaving the robust coffee flavors, but none of the buzz. The result is a smooth,delicately balanced decaffeinated coffee experience, indistinguishable from regular coffees.

ABOUT THE COMPANY Caribou Coffee (CBOU), founded in 1992, is the second-largest company-owned gourmet coffeehouse operator in the world based on number of coffeehouses. At Caribou Coffee, our mission statement is "an experience that makes the daybetter." We provide this by sourcing the highest-quality coffee in the world and craft roasting it in small batches to bring out the best in every bean. We then bring this extraordinary coffee to our customers via several channels including grocery locations, online or via our coffeehouses, which provide a relaxing escape for our customers. Caribou Coffee is committed to expanding our business by bringing this experience to new customers through multiple means without compromising our unwavering commitment to quality. Caribou Coffee is a proud recipient of the Specialty Coffee of America Association's (SCAA's) 2008 Roasters Choice Tasting Competition Gold Award.

SOURCE Caribou Coffee Company, Inc.

A BUSINESS PLAN CAN SAVE YOUR LIFE!

Most of you know that I am a big proponent of business plans. Here's a great video about how a plan can save your life and your business.

Click Here!

RUDE CUSTOMERS - BEWARE!

Here is a post from Geoffrey James that my team has found very interesting. Although we haven't seen a rise in the number of rude clients (they're rare), we do have reports from other sales professionals in our network that tensions are high out there due to the economy. Enjoy!

I started my morning off with a customer chewing my rear off about a product. We’re talking rude, degrading, disrespectful insults flying out of this man’s mouth! I put on my best smile and worked to “pop” his balloon. But to no avail. He hung up, probably satisfied that he was superior in the battle. He slammed me, my company, and companies that did business with us. It took every part of me to keep my control and let this guy fume! My question is…are there just some times when all your sales knowledge just doesn’t help? And is there ever a time when you can just let loose? Please say yes! I’m still steaming!

Well, the standard answer is that you’re never supposed to “let loose.” After all, if “the customer is always right,” it’s your job to stand there, nod, and take it, right?

I don’t think so.

If you’re in sales, you’re a professional. Which means that you have the RIGHT to civility and respect. No exceptions.

Before I go further, though, I need to emphasize that the advice that I’m about to give is for sales professionals, not people working in customer support. Sales professionals can and must interact with customers on a peer-to-peer basis. Customer support personnel are paid to be subservient. Different role, different approach.

So here’s my advice for sales professionals. If somebody is being intense with you, then a failure to get intense in return only makes them more intense. If you want to defuse the situation, you need to get in rapport with the customer, which you can’t do if you’ve got “welcome” tattooed on your chest.

When a customer gets rude or loses his temper, the correct response is not to placate (i.e. “put on your best smile”), but to increase your own intensity and then demand civility.

Here’s how:

STEP #1. Raise your own intensity level. Don’t become as intense as the customer, but let your voice become firm and authoritative. If you’re face-to-face, put on a serious expression, one that expresses clearly that you don’t appreciate being yelled at. You’re a professional, not a doormat. Act like one.
STEP #2. Call the customer’s bluff. State clearly that you’re willing to help resolve the problem, but you’re not going to be yelled at. Don’t mince words. Make it clear that your help is dependent upon the customer’s ability to behave in a civil manner. In most cases, the customer will BREATH A SIGH OF RELIEF. It’s quite noticeable.
STEP #3. If the customer doesn’t comply, end the conversation. Do this politely but firmly. State that you’ll be glad to help once the customer is willing to treat you with the respect that you deserve. You will almost never need to do this, but it sometimes happens.
STEP #4: Apologize for the problem. Once you’ve demanded, and gotten, civil behavior — then and only then — you should apologize for the inconvenience that the problem has caused the customer. Explain that you are just as committed as the customer is to resolving the problem.
STEP #5: Work on the problem. Now that you’ve established rapport and the fact that you’re a professional, you can go ahead and work the customer’s issue.

The reason that sales pros don’t insist upon respect is that they’re afraid that that the customer will become even more rude. But answering intensity with (appropriate) intensity is giving the customer what he or she really wants, which is a connection. The customer wants to be heard. And nothing is more frustrating to an angry person than getting a “have a nice day” brush-off and nothing fuels a bully more than weak-kneed caving.

There are three advantages to demanding respect, before you work a customer problem:

1. It’s easier on your nerves. No job is worth being abused. If you’re a sales professional, you can always get a job elsewhere, anyway, so there’s no excuse for putting yourself through this kind of emotional wear and tear.
2. It establishes your credibility. When you placate, you’re just proving to the rude customer that you’re not a professional and therefore not reliable as an individual. The customer figures that, if you had something valuable to offer, you wouldn’t take the guff.
3. It prevents future flareups. Once you’ve laid down the ground rules for interaction, you’ll get the respect you deserve. I saw this happen with a boss who yelled at employees until they mustered the courage to yell back. At that point, he was satisfied and never yelled at that person again.

In other words, stop getting “steamed” and start standing up for yourself. You’ve got nothing to lose… except the aggravation.

What are some situations that you have been in with a customer? How did you handle it and what tips do you have?