One of the most important business decisions you will ever make is what to name your company and its products and services. Studies show that as much as 75% of all consumer purchases are made because of a name, or more specifically, a brand. A successful brand can fetch a 20% to 30% premium in the marketplace. It can make a company more profitable and much easier to sell when the time comes. Entire companies are acquired just because of a successful brand. In short, the name of your company and/or its flagship product may turn out to be your #1 asset.

Company or Personal Name vs. Product Name

One of the first decisions you may need to make is whether your company name and product name should be one in the same. It depends upon the nature of your business. The fourth company I started was called Innovative Communication Systems, or ICS for short. Our flagship product was called Ask Me 2000. People would call the office and ask to speak to the President of Ask Me. We changed our name to reflect what people knew us by best. There are many other examples of this inevitable name game.

Before being acquired by Microsoft, Visio was started as Shapeware. RealNetworks use to be called Progressive Networks. The products are what people came to know best, so it was prudent for these companies to rally around one brand rather than two or more. You will be lucky if you can establish just one successful brand, so don’t waste money trying to promote both your company name and product name. If the nature of your business demands that you have different names for your company and products or services, you should do the best you can to connect them together.

Microsoft has done this extremely well. The company name is almost always used in conjunction with every product name: Microsoft Windows, Microsoft Word, Microsoft Excel, Microsoft Office, etc. Users might not know the difference between Word and WordPerfect, but most know Microsoft.

Another spin on this is to associate your own name with the product or service you are offering. This is particularly important if your business is consulting or professional services. After all, the most important brand you will ever own is your own name! People are likely to engage someone they know by reputation. Examples of this are “Andew Tobias’s Managing Your Money” and “The Tom Peters Seminar.”  For more information on the concept of branding yourself, visit the discussion on Fast Company.

General Guidelines

The main objective of a name is clarity and recognition. The average person is bombarded with over 3,000 messages and brands every day. You want to reduce buyer confusion and indifference through the use of your name. You want to stand out. There are five primary considerations when naming your business or product:

1. Can the customer relate to it? Does it evoke a positive mental image?

2. Is it available? A name may be available in your state, or even in the U.S., but is it available globally?

3. Is it protectable? What is the likelihood of getting the name registered in all jurisdictions where you intend to do business now and in the future?

4. Will it translate well? Does the name have any negative connotations in other languages?

5. Is it extensible? Can the name be used in a series? An example of this is the “Dummies” series of books: Excel for Dummies, Windows for Dummies, Wines for Dummies, etc.

I try to avoid listing do’s and don’ts. Things change. Rules can be broken. Instead, let me propose the following guidelines as “things to think about and things to be careful about.”

Think About

• being distinctive (evoke strong images)
• being descriptive
• being global
• being unique and creative
• being memorable (Yahoo, Google)
• registering and protecting
• being easy to say and spell

Be Careful About

• sounding like a competitor (micro, tech)
• using your own name
• adapting a local or regional name
• sounding like every other business (copycat)
• choosing a name that promotes the category
• using initials
• being cute, too creative

Trends In Naming

The trend in naming a company or product is transparent names, or contrived names. These are names that have no dictionary meaning. They can take on whatever meaning or image the company decides to create for them, since they are not associated with any person, place or thing, in any language. A name like OPTICON, for example, sounds good and can be made to look good with the right creative flair. The advantages are:

•     It’s distinct; free and clear of competition
•     It’s unlimited in language; free and clear of translation problems
•     It’s proprietary; free and clear of restriction

The downside is it’s not descriptive. A company would need to invest heavily in marketing and branding in order to build a favorable, recognizable image for a name like this.

Step-by-Step Process For Naming

–>  Understand the competition’s names, images they evoke, and messages they convey.

–>  Brainstorm — be creative.

–>  Emphasize key strategic advantages; suitability to the audience; positioning in the market.

–>  Be sensitive to gender, race, religion, geographic biases (words have different meaning to different people).

–>  Investigate and debate the disadvantages of the name.

–>  Test the use and applications; test longevity.

–>  Check availability; search for conflicts, similarities.

–>  Register and protect; Create a mark around the name (distinctive look and feel with colors, graphics, typestyle).

–>  Have the name independently evaluated, scored.

Remember:  Trademark searches do not delineate between upper and lower case, dashes, slashes or other characters. Web site domain names don’t either.

Costs of Naming

The average cost to search a name on a national basis is about $1,500, or about $30 per state.  Companies spend $25,000 or more just to search a name globally.  The cost to register a name with the U.S. Patent & Trademark Office also varies depending upon the nature of the application.

References and Additional Sources of Information

Naming For Power:  Creating Successful Names for the Business World, Naseem Javed. You can order this book online from this page.  Mr. Javed is a world renowned expert.  I have read his book and have attended one of his seminars. A link to his company can be found under Professional Services: Name.

The Name Is The Game: How To Name A Company Or Product, Charmasson, Henri

The Name’s The Thing : Creating the Perfect Name for Your Company or Product, Charmasson, Henri

The Game Of The Name: Introducing Logic, Language And Mind, McCulloch, Gregory

Technobrands : How to Create & Use ‘Brand Identity’ to Market, Advertise & Sell Technology Products, Chuck Pettis

Brand Marketing : Building Winning Brand Strategies That Deliver Value and Customer Satisfaction, William M. Weilbacher

Building Brand Identity : A Strategy for Success in a Hostile Marketplace, Lynn B. Upshaw

Building Strong Brands, David A. Aaker

Marketing Aesthetics: The Strategic Management of Brands, Identity and Image, Bernd H. Schmitt and Alex Simonson

Managing Brand Equity : Capitalizing on the Value of a Brand Name, David A. Aaker

Brands : The New Wealth Creators, Susannah Hart and John M. Murphy

The Corporate Brand, Nicholas Ind

The Handbook of Brand Management (The Economist Books), David Arnold

Strategic Brand Management : New Approaches to Creating and Evaluating Brand Equity, Jean-Noel Kapferer, Jean-Noel Kappferer

Creating Powerful Brands : The Strategic Route to Success in Consumer, Industrial and Service Markets (Bh Marketing Series), Leslie De Chernatony, Malcolm H.B. McDonald

Bringing New Products to Market : The Art and Science of Creating Winners, John A. Hall

Defending Your Brand Against Imitation : Consumer Behavior, Marketing Strategies, and Legal Issues, Judith Lynne Zaichkowsky

What’s in a Name : Advertising and the Concept of Brands, by John Philip Jones

Trademarks: A Guide To The Selection, Administration, And Protection Of Trademarks In Modern Business Practice, Oathout, John D

Given all of this, what’s an entrepreneur to do? Answer: what you’ve always done. Keep building. Never give up on building the better mousetrap. Of course, Einstein’s definition of insanity is doing the same thing over and over again and expecting a different result, but that’s not what we’re talking about. As Erin Griffin notes in her pandodaily piece about ER Accelerator Demo Day which took place last week, “If Facebook has taught us anything it’s that an idea doesn’t have to be original or first to succeed. It just has to be executed the best.” (Politics, Planes and Paperwork: http://bit.ly/Q2cPpD). A fine point, that may well elude many an investor. (She also notes that conversely, the best execution doesn’t always win, either. Remember betamax?). Investors like founders with great backgrounds or track records. Look, they dumped millions into Color (Color.com Raises $41 Million For Building Location Photo- and Video-Sharing Social Network: http://bit.ly/SNchkr) yet a handful of unknowns founded instagram – an industry hit which left the Color investors waaay in the red. Pun intended. You’ve never heard of Sulia – but you someday may: This Tiny New York Startup Is Showing Facebook How It’s Done. http://read.bi/USQ87O. It’s the world’s first subject-based social network. They organize short-form content into channels. It’s free, and built in a way so that they can someday monetize their content. No brainer for advertisers:  here’s your dedicated audience. You don’t have to go looking for them. They’re right here in this channel. May be time to take a cue from companies like Sulia and don’t just make your focus to build lean, or do more faster. Build smart and build it your way. As Oscar Wilde said, be yourself… everyone else is already taken. End of story. Onward and forward.

- Bonnie, StartupOneStop.com

Situation:
Just before the Christmas period 2010, this Swedish hardware store took the decision to bring life to the Facebook section.  The goal was to get a bigger following and at the same time promote special offers just for the Holidays. The hardware store is spread across most of Scandinavia and also the UK. At their store you can find most of the common hardware items, such as hammers, power drills, screws etc.

The campaign started off at the beginning of December. At that point, the Facebook page had around 2,000 fans.

Action:
The first action they did was to start using a Facebook campaign ad tool to help in their advertising efforts. By using a campaign tool to manage everything from scheduling and reporting, they could focus more of the energy to create catchy ads. The tool they used was Qwaya.

This tool allows users to use a Bulk ad creation feature. Again, this left more room for them to focus on the target, which was to increase the number of followers and Facebook fan page presence. With Bulk ad creation you can let Qwaya make combinations of ads that you can try out. All you need to do is provide an X amount of titles, body texts and images and the system will create X amount of variations.

This helps spread the possibilities on click-through to your page.

The hardware store used this particular feature for more general informative ads, more in the style of “Hey! We are on Facebook, come and check out the fan page”. They also run a couple of ads including the special Holiday offers with an image of the items. In order to see the price of the product the visitor had to click through to the fan portal, which generated “likes”.

What was really good for the hardware store was that they could also use the segmentation capabilities of Qwaya to target the ads towards their demographic audience, including physical location, interests and age.

This was also a way for the company to use these ads and Facebook to get a good overview of what their real target audience was, was it as they predicted, middle-aged men?

End results:

More presence – more fans: During the four weeks the campaign was running, they manage to grow the fan base from the starting 2000 to around 11000. The campaign also created buzz on their portal fan page as people were discussing the special Holiday offers and also the brand itself. Overall the campaign was considered a success.

Ad type: The Company ran two types of ads: one general to drive traffic to the fan page and one with specific offers. The results showed that ads with specific products had a higher click-through rate and also resulted in more “likes.” One reason may be that the campaign was run over Christmas when people are trying to come up with ideas of what to buy.

Audience: This was actually a big surprise. The presumed audience, much based on stereotypes, was that the Hardware store had a heavy male-oriented target group. What this campaign showed was that there were generally more women who clicked through to the fan page. All the sudden the store had a larger portion of women than men following them on Facebook.

Qwaya: The campaign tool they used is using data directly from Facebook’s own API and therefore proved to be up-to-date and gave accurate feedback about the campaign output and tracking. If something went wrong with any of the ads or they noticed that some adjustments of the ads needed to be done, they received feedback about this right away.

Campaign summary
First off, using a campaign tool to help you in your Facebook advertisement really helps. Continuous feedback loops and tweaking is really hard to keep track of otherwise.

Another very important lesson that the hardware store learned was to never make presumptions about who your customers are. If you are open to market yourself to a broader audience you will see that you might just have it wrong all this time.

Finishing note is that even though you are representing a company that acts traditionally offline, you can still use social media platforms to gather new potential customers.

You have to write a business plan even though few people will read it.

Your projections are gospel.

Who is in the deal is more important than the deal itself.

The more money you need the better.

Think Big!

You’re the best person to run the company, until you fail to meet your milestones.

Got any others? Leave a comment.

FINISHED FILES ARE THE RE-
SULT OF YEARS OF SCIENTIF-
IC STUDY COMBINED WITH
THE EXPERIENCE OF YEARS.

Now count aloud the F’s in that sentence.  Count them ONLY ONCE; do not go back and count them again.  See below…

Answer below…

ANSWER:

There are six F’s in the sentence.  One of average intelligence finds three of them.  If you spotted four, you’re above average.  If you got five, you can turn your nose at most anybody.  If you caught six, you are a genius.  There is no catch.  Many people forget the OF’s.  The human brain tends to see them as “V’s” instead of “F’s”.

They meet every other Tuesday in a nondescript building in Seattle’s Central District. Andre’ runs a home decor business, in addition to working full time at a local law firm and coaching track part-time. J.J. creates unique contemporary jewelry, when she is not writing grants for struggling artists. Kristen hosts birthday parties for kids and operates her own T-shirt press, in between her job at a local marketing company. Kristi works around the clock at her fledgling catering business, trying desperately to balance the demands of running a business and being a single parent. They are proud, hard working women. They are the sole proprietors of their businesses and their lives. They are the Moxie Mavens.

A group of women business owners, part of Washington Community Alliance for Self-Help, or Washington CASH for short, have voted to call themselves the Moxie Mavens. Washington CASH is a non-profit organization founded in 1995. Its mission is based on the microenterprise training and lending movement started by the Grameen Bank in Bangladesh over twenty years ago. There are now hundreds of microenterprise lending groups around the world. As with the larger microenterprise movement, Washington CASH is dedicated to assisting low-income women and other economically disadvantaged populations by providing hands-on business training and low-interest loans.

Andre’, J.J., Kristen and Kristi take their group responsibilities very seriously. They have to, you see, because they are personally responsible for each other’s loans. They are trained by the larger organization, empowered by each other, and ultimately accountable to themselves. The Moxie Mavens were formed after each member completed a six to twelve week intensive business course. They learned how to conduct a feasibility study and write a business plan. They learned how to prepare a profit and loss statement. When they formed the group, they became each other’s loan officers.

Kristi initially wanted to start a business organizing romantic evenings for couples. She wanted to marry her love of cooking with her love for intimate gatherings and good conversation. After reviewing her business plan, the Maven’s were united in their assessment. “That isn’t a business, it’s a hobby,” they advised nicely, but firmly. “Why not a catering business?” And with that, That Brown Girl Catering was officially launched. After two loans and a lot of hard work, Kristi now counts Nordstroms and The Gates Foundation among her clients. She often cooks all night in borrowed commercial kitchens, then delivers her orders all day. Somehow she finds time to call on new accounts, work on her website, and deal with scary issues like taxes and accounting. “Washington CASH gave me the technical and financial resources,” she says. “The Moxie Mavens inspired what I do and who I am.”

Kristen found Washington CASH through a former graduate of the program. “I saw how successful her business was becoming and how determined she was, and I knew that was what I wanted for myself.” Kristen was studying early childhood education when she was forced to drop out of college because of a rare illness. Ironically, her work with children exacerbated her illness. She took an unfulfilling job to make ends meet, but felt she was missing her calling. She hit upon the idea of hosting birthday parties where kids can design and make their own T-shirts. She bought a T-shirt press with a loan from Washington CASH. My Special-T brings out the artist in every kid. “They wear their T-shirts home and are so proud to show everyone,” beams Kristen. “They have a great time and feel a real sense of accomplishment.” Apparently, no more so than Kristen herself. “There were so many times that I wanted to throw in the towel because I thought it was too tough, I wasn’t feeling well, and I just didn’t think I could pull it off. The Mavens never let me give up. They are not only good businesswomen, they are good friends.”

J.J. knew she was destined to be a designer when she was eight years old and nailed the wheels of her metal skates to an old board. “Needless to say, I didn’t get credit for inventing the skateboard!” she laughs. As with many women of her day, her life became her husband and helping him to build “his” business. Her life reached a crossroads when carpal tunnel syndrome forced her to abandon her profession as a Massage Therapist. “And don’t you know, that happened just as my alimony was about to end!” Undaunted, she decided to start a business even though she had no formal training. To start Saguaro Lake Jewelry, J.J. took a loan on her credit cards to augment the one she got from Washington CASH. Her one-of-a-kind jewelry is now sold through several high-end galleries and on the web. “I was visiting one of my retailers one day when a customer walked in and bought the piece right off my neck.” Anyone who knows J.J. knows she is a walking billboard for her jewelry and for Washington CASH.

Andre’ admits to having champagne taste as long as she can remember. “My mother introduced me to a needle and thread and I have been making my own clothes ever since. After I started a family, that skill transferred to home decor.” Andre’ also took some classes and worked at a home decorating store. She eventually found the confidence to apply for her own business license under the name, Beau Joli Decor. “I had the knowledge of designing and sewing, but Washington CASH gave me the business foundation and the plan,” she says. Andre’ was further encouraged by her daughter LaShaun, who also joined the program. LaShaun was already operating a successful hair salon and wanted to expand. As with many Washington CASH graduates, LaShaun moved on when she no longer needed the support of the group, but she is still proud to call herself a Moxie Maven. As for Andre’, she faithfully attends each meeting. Although yet to risk taking her first loan, she says wistfully, “Washington CASH has given me the confidence and the push I needed to become a future entrepreneur. Being a Moxie Maven has enlightened my life and given me the drive to stride for the highest of highs.”

It is now 7:00 p.m. and the meeting of the Moxie Mavens is in full swing. Their voices are rising higher and higher to be heard over the clamor of the other groups meeting around them. J.J. has draped a “Fluffy Ruffle” around her neck and asks for advice on selling this new line of outerwear accessories through local stores. Andre’ is thinking about hosting a holiday house party to sell some of her home decor items. Kristen passes around pictures from a recent birthday party and talks about how much easier it was for the kid’s to make shirts with her new press. Kristi proudly displays her new menu and asks for leads on finding a permanent kitchen. A Washington CASH staff member listens attentively and takes notes. Their group mentor offers suggestions and assistance, but admits he gets far more inspiration from them than they do from him.

For the past nine months, the mainstream and financial press have attempted to find an explanation for the collapse of the Nasdaq and the demise of numerous dot-com companies. A large number of these stories relied on pundits and analysts, but the authors had a more unconventional choice. Believing that no one could provide a better historical perspective on succeeding in a revolutionary environment and guiding a young enterprise through a changing business model than George Washington, Alexander Hamilton and Thomas Jefferson, the authors sat down with America’s Founding Fathers for a lengthy discussion on topics ranging from start-up funding to entrepreneurial leadership to shareholders rights. Here is what they had to say…

A: Gentlemen, thank you for being here. Let’s start with you, President Washington. Obviously these are extraordinary times for entrepreneurialism. But while the current economic climate is still pretty strong, the technology sector, in particular Internet start-ups have been hammered. There are some analysts who say that the rash of dot-com failures, lay-offs and the Nasdaq’s bear market are indications that there really is no “New Economy”. What advice do you have for the managers at Internet start-ups who are struggling to find their way through the current climate?

GW: You know in the aftermath of the Revolution, we faced a similar situation. We had a Declaration of Independence, and we had a new country. And after the Treaty of Paris, we all kind of looked at each other and said, Well, now what? (laughs) There was a period there where morale started to waver; we were floundering through a depression. There were all kinds of administrative issues, payment of debts, dealing with pirates, various rebellions. We were a “New Country”, but we weren’t really sure if we were going to make it or not…

AH: Right. Those were times that really called out for strong leaders. I’m still amazed at the number of men who stood up to the call. I mean it wasn’t as if there was no personal risk involved. There was risk in everything we did. Had we lost, we’d all have been hanged. There are probably a few CEOs of start-ups out there who can empathize with that. But there was a real passion – people believed so much in what we were doing. We were just making things up as we went along, like any start-up. It’s not as if we had nothing to go on – we had Parliamentary procedures and the examples of the British and colonial governments. But while they were an example, they were also an example of what we didn’t want to be.

TJ: Yes, we were full of new ideas, arguing about everything –particularly General Hamilton and me. We had a plethora of ideas and in retrospect not all of them good ones. I would venture to guess that the managers at start-ups, senior and middle, are facing similar dilemmas: which way do we go and what do we do?

A: And what should they do?

GW: Well first, I think you need to assess your own leadership abilities. Leadership –in business, politics, whatever– hinges first and foremost on articulating a plan. You can go around in a circle once, maybe twice, before people start to question your vision. And even if your plan is bad, just by virtue of having one people will follow you around the circle maybe one more time than they would have. But without a plan, a road map, a clearly articulated vision of where you want your enterprise to go, and who you want to be, then you are lost as a leader.

AH: I like to use Valley Forge as an example. The Continental army went through a tough, tough winter, and the only thing that kept those men from deserting were loyalty to George and the cause of liberty he constantly preached. The other piece of leadership is that once you have articulated a plan, you have to start reaching some milestones and achieving little victories building towards larger ones. Otherwise, no matter how dynamic a leader you are, your troops will desert or rebel against you.

TJ: I agree with General Hamilton, for once, and I would like to add that a lot of people confuse having a plan with having a strategy. I’ll submit that these are two separate things. A plan starts with a vision and ends, almost always, with a new plan. Meaning, if the execution of the plan was successful, the result calls for a succession plan. If the execution was unsuccessful, the result calls for a contingency plan. But, the execution’s success or failure is largely dependent upon the strategy. Strategies can be debated between leaders and followers –visions cannot. When I wrote the Declaration of Independence…

AH: …I knew you’d get that in.

TJ: What? As I was saying, when I wrote the Declaration of Independence…

AH: …Drafted.

TJ: -Wrote! I had a clear vision of a new democracy. Now, Alex, I know you’re not a big fan of “Democracy”…

AH: Oh, that was two hundred years ago. Can we move on?

TJ: …hold on –I was almost going to agree with you again. I was going to say that a start-up is no place for a “democracy”. I personally don’t think that in a start-up environment, there is enough time for much consensus building. Feedback and some amount of consensus are important for morale. When I was elected to my first term, consensus building was necessary to get anything done, but I’d submit that it is an exercise that doesn’t work in a start-up environment, so to truly get things done – and I’m thinking of the Louisiana Purchase now – I had to massage a few things through the “regular channels” and I went around regular channels on other things. I think any struggling young company that has to manage by committee is doomed. A start-up needs a strong leader immune to criticism and passionate that his or her vision is right and attainable.

AH: A big part of leading a start-up is inspiring the troops. Unlike President Jefferson, President Washington is too modest to toot his own horn. I mentioned Valley Forge earlier, and the fact is we owe a great debt to President Washington for his leadership and courage. In spite of great odds and obstacles, he managed to inspire his troops, to articulate a vision and a strategy, and then achieve some small but notable victories that inspired his troops. I don’t think you can underestimate the value of morale in an enterprise’s success. And hand in hand with that goes team building. That team encompasses everyone, from senior management through the corporate hierarchy to the receptionist.

GW: Thank you General for those kind words. I would agree with your statement that the team building encompasses the entire enterprise, and add that at the end of the day, everyone in your office should at the very least be able to recite your mission, vision and goals by heart. If you are a really good CEO, every single person in the organization will know the company strategy as well and will understand his or her role in finding a way to help you achieve it.

A: One of the early “truisms” about Internet start-ups was that speed was essential and thus the phrase “doing business in Internet time” was coined. How essential is speed vs. deliberation, President Jefferson? Is there a managerial “turtle and hare” lesson to be learned from the failure of so many start-ups?

TJ: Well, the right answer, of course, is that you need to do very thorough deliberating very quickly. I would say speed is definitely key, but not at the cost of developing a sound business. When I made the Louisiana Purchase, we had a lot of competition for the land and its resources. It seemed like half of Europe had claims to parts of the land. While those countries were an ocean away, the real risk was from British traders with bases in Canada that had made inroads with different Native American tribes and established routes as they explored different areas. I understood that we quickly needed to solidify our claim on that area but we couldn’t do it by antagonizing the local tribes, I believed it would be cheaper to co-opt them with trade than beat them with bullets. The latter would be even more difficult with a powerful competitor right next door that was trading with and wooing the native tribes. What I understood is that the early bird may get the worm, but the bird needs to make sure it is not eaten by a cat.

AH: What?

TJ: It would appear to me that this lesson was lost on many Internet companies. Many of them felt that if they established a brand name, got some customers and revenue, and went public that they would block out future competitors and would be well on their way to becoming the next Wal-Mart. This was proved not only to be incorrect but foolish. Furthermore, many of these companies were spending money faster than Benny Franklin on one of his “diplomatic missions” (makes Italics with fingers) to Paris.

A: President Washington do you agree?

GW: I do, I had to sign Franklin’s expense reports.

A: No, I mean regarding President Jefferson’s portrayal of the Internet businesses.

GW: Certainly, and I would add that winning the battle does not necessarily mean you win the war. The Battle of Trenton was a turning point but not because of the scale of the military victory. It was a turning point for morale of a ragged Continental Army and to demonstrate to the British that we could attack them anyplace and anytime. I believe this example is relevant because many Internet start-ups ignored the fact that going public is only the initial step in becoming a successful enterprise, but the market and shareholders would demand revenue and expense targets would need to met every quarter without fail. Only then do you have a successful company that can earn a staggering valuation.

TJ: This is not unlike our own experience in creating a new nation, it didn’t happen over night and it certainly didn’t happen in “Internet time”.

A: General Hamilton, President Washington raises a good point on the rush to go public. Two follow up questions: First, was that driven by the market euphoria? Or was it an inherent factor in the funding of these start-ups? Second, how important is an exit strategy in starting a new business? And should it always be an IPO?

AH: Well, I’ve always felt that profitability is the best exit strategy. When I use the phrase “exit strategy”, I define “exit” to mean moving away from a situation where you’re relying on someone else to keep you going. This can mean going public, selling out to a competitor, becoming profitable, or worst case, going out of business. So obviously, if you use that definition, it’s very important to have an exit strategy laid out up front.

GW: I agree with that. Regarding the first part of your first question, yes, obviously the market prior to the Nasdaq’s collapse was a self-fulfilling prophecy. I mean, there was just too much money available to fund any idea, but there weren’t enough good ideas to spend all that money on. But as far as exit strategies go, the days of “flipping” are clearly over. There just isn’t the mania out there anymore that will let you cash out in an IPO without a clear path to value.

A: OK. General Hamilton began by talking about the risks faced during the Revolution. Let’s go back to risk-taking and the role of the manager. How do you balance the need to assume huge risks in this environment while maintaining a fiduciary responsibility to shareholders?

GW: First of all, start-ups are all about risk. It’s not like you’re walking down to the corner store to buy milk.

AH: Depending on your neighborhood…

GW: Agreed (laughing). I think in today’s world, you have a fiduciary duty to assume large amounts of risk, but to do it responsibly. The key is to work within an adaptable business model. President Jefferson talked earlier about how a plan starts with a vision and always ends with another type of plan. We recognized that the Articles of Confederation were weak, but frankly after the Revolution it was the best we could do to keep the colonies together into some type of union. It quickly became apparent that it was not viable, and that upstart Shay really helped demonstrate the need for a strong central authority to help with certain key duties. We adapted that initial model with a much more viable framework, that has allowed future generations to adapt and amend where they needed.

A: Then how do you view the large number of shareholders’ cases filed against the management of companies who’s stock has taken a nosedive?

TJ: Shareholders are the fuel of the capital markets and must be protected. You can’t have shareholders wondering if the information they are receiving from executives, analysts and auditors is suspect. That is not to say that they can expect to be shielded from all risk – there should be a certain element of caveat emptor too. Like George said, buying stocks isn’t like buying milk. The risk is what creates the value. But that risk really should be limited to market and talent speculation, not ethical speculation. So, if you make a bad investment without being mislead, you have no one to blame but yourself. But look, I bought Cisco at 25. Before it split. Ask the General over there when he got into Amazon.

A: General?

AH: OK, OK, I got caught up in the excitement…I bought in at 113.

TJ: This from your Treasury Secretary, George!

GW: I know.

A: Let’s get back to the theme of adapting the business model. The conventional wisdom only a few years ago was that the traditional “clicks and mortar” retailers had to either adapt quickly or like dinosaurs perish in the face of the Internet wave. Is that no longer the case, President Jefferson?

TJ: After our Revolution, and particularly after the French Revolution, it appeared that the days of the aristocracy, which I abhorred, and of course Alex loves, were numbered. It appeared that aristocracy was outmoded as a form of government and that rapid changes would sweep across Europe. The only question was would it leave the chaos of the Jacobins or a relatively ordered revolution like ours. In that example, it was not a zero-sum game and I believe it is a similar case where the traditional companies who have established competitors must continue to fight for market share and profitability. The Internet will provide them with another marketing channel to achieve those goals. Some of the Internet start-ups will survive, and thrive, but they must start demonstrating some fiscal responsibility, as we did in working to pay off our national debt after the Revolution, a policy that was proposed by General Hamilton.

A: General Hamilton, perhaps you can expand on the issue of fiscal responsibility. How do you balance the spending of funds between a “land grab” mentality and the need to produce profits?

AH: I call this the “Black Jack Principle”. If you have infinite funding, you can’t lose at Black Jack, you just double your bet every hand you lose until you’re up. But without infinite funding, you can only double your losing bets to the extent of your bankroll. Some of these dot-coms thought they had infinite funding with their inflated market caps to use as currency. But when the bubble burst, a lot of them were actually valued at less than their cash on hand. In hindsight, the quickest path to profitability is probably the best path. That still doesn’t rule out M&A activity. But I do understand the land grab mentality that drove a lot of the excess. When George asked me to take over at Treasury it was clear that revenue was the most important issue facing us. We had to go through the exercise of weighing investment in westward expansion versus shoring up our immediate financial situation. We were deeply in debt. We had relied on printing paper money along with foreign loans to finance the Revolution, and like any start-up, after it was over, we desperately needed our own revenue model. We’d ended up with hyperinflation from all the money printing, but really, it was our only practical solution at the time. Finally, we were able to calm the chaos with a reasonable taxation and a legitimate banking system. Only later, when we were on more solid footing, could we think seriously about financing an expansion.

TJ: I think it’s an issue of economies of scale, which is the holy grail of the start-up. In the early going, like Alex said, we were heavily dependent on a depreciating currency and foreign aid. But when we were in a better position financially, a brilliant M&A move, again, a little something I call the “Louisiana Purchase” created an enormous economic windfall, doubling the size of the country overnight. We had to debt finance it, of course, there was no other choice. But the deal paid for itself almost immediately in new taxes and trade. So, larger is better if you can leverage your existing infrastructure as you expand. You know who handled that deal for us? Barings – you know the English investment bank that went broke a few years back when that trader in Singapore kept covering up his bad derivatives trades? There’s your Black Jack Principle. Anyway, the feeling of Manifest Destiny that a lot of these start-ups feel certainly isn’t unprecedented when held up to that light. We had a huge competitive advantage in terms of location and we used it to take away the very lucrative fur trade from the British, and later the vast natural resources of the area west of the Mississippi.

GW: I would like to follow up on President Jefferson’s comments if I could. At the time there was not a consensus on his “M&A move”, and it was a risky endeavor that helped to make this country what it is today. However, there appeared to be an overwhelming agreement among those in the financial sector that the only way to become the predominant Internet power was through land grab fueled by an incredible cash burn. Few, if any, analysts believed that there was another avenue to achieve this goal –of course you can’t get any of them to admit it now. President Jefferson once spoke of the danger of entangling alliances, and I think we have seen some of that over the past few years with the alliance of venture capitalists, investment bankers and lawyers, each with very entrenched interest in the companies they were involved with going public at incredible valuations. A large number of these companies frankly had neither the revenues nor a sustainable business model to justify being a public entity. If you looked at their business plans and the projected revenues and expenses were so ludicrous they should have just written “a miracle happens and we become profitable!” Of course none of this prevented the companies from going public and once they did and began their spending sprees, that cash worked its way into the pockets of other entangled alliances –recruiters, realtors, advertising and public relations agencies, consultants, interior designers with bean bag chairs and fooz ball tables, even washed up rock stars for IPO parties! My point is that there is a difference between legitimately spending money to become the dominant player in a market and the negligence we have witnessed over the past 3 years.

A: One of the buzzwords these days, or catch phrases rather, is “Idea Economy”. The notion that, as business continues to move faster and faster, ideas will become the currency of the future. Do you agree that new ideas are becoming more important to the economy?

TJ: I think the question is misleading – you’re misrepresenting the issue. Ideas have always been important. I don’t think we’ve ever not had an “idea economy”. Maybe we just didn’t have enough easy money to get to all of the good ideas before. Now we have almost the opposite situation. I do agree with the thesis that infrastructure costs that prevent good ideas from spreading will become less of an obstacle as technology progresses. This country was founded on a great idea…We had a lot of disagreements in the late 1700’s over the exact role of the Federal government versus the States, but in a larger sense, we were all on the same general page compared with the thinking in the rest of the world. It was a slow and bloody process, but here we are. But then, its not like we had a ton of VCs funding other ideas about how to run a government.

A: And on that note, gentlemen, I want to thank each of you for your time and insights.

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Jeff Belle is Business Manager/Product Manager for EoExchange, a San Francisco enterprise search services firm. He can be contacted at jbelle72@cs.com. Sam Khalil is a Product Manager with Telcontar, a provider of location-based software and services, and his parents are happy he has finally found a use for his history degree. He can be reached at sam_khalil@yahoo.com. George Washington, Alexander Hamilton and Thomas Jefferson are dead and cannot be reached.

The manager maintains, the leader develops.

The manager relies on systems, the leader relies on people.

The manager counts on controls, the leader counts on trust.

The manager does things right, the leader does the right thing.

-  Fortune Magazine

Entrepreneurs are not like normal folk. They often don’t fit well into the role of corporate executive – their brashness (arrogance) puts them at odds with others and they chaff under controls, bureaucracy and politics that get in their way. Conversely, most corporate executives are ill suited to be entrepreneurs – they lack the drive, risk tolerance and personal attributes needed to guide a new venture through almost constant adversity. Over the past few years, we saw many executive “dream teams” come out of corporate America and receive lavish amounts of new venture funding specifically because of their corporate experience. Yet many of these executives, and ultimately their companies, failed and in large part because they lacked the “entrepreneurial gene.” So the question becomes, how do investors, and aspiring entrepreneurs themselves, predict how well they will do in an entrepreneurial setting?

In recent years behavioral scientists and organizational development specialists have studied the attributes and characteristics that make successful entrepreneurs different from successful corporate executives. One of the leaders in this area is Carl Robinson, Ph.D., a long time member of the NWVG community. Over the past several years he has been collecting data on the personality differences between startup executives and mainstream executives to help quantify the question…are there really any differences and what are the differences? He is currently writing a book on his research aimed to help individuals who want to be entrepreneurs or who are already startup/entrepreneurial executives understand what it takes to survive and be effective in that demanding fast paced business environment. His research findings could also help VCs and executives do a better job of selecting individuals for their companies.

[Interview by Tom Eckmann, Managing Editor of the Venturer Newsletter]

[Venturer]: Carl, can you tell us a little about your research?

[Carl]: Over the past several years I have tested 50+ senior startup executives, most of whom were CEOs, using a very well respected, scientifically validated leadership personality assessment tool, the ASSESS by Bigby/Havis, which was developed from assessing over 35,000 managerial and professional candidates. Using my sample data, the psychologists at Bigby/Havis were able to create a profile (template) that graphically shows what a typical startup executive looks like on 21 different personality factors such as insight, energy level, assertiveness, criticism tolerance and acceptance of control. When one looks at the graphic profile of a startup executive next to a profile of a typical executive, it is clear that startup executives are a different breed.

[Venturer]: Why did you undertake this project?

[Carl]: VCs and executives involved in startups repeatedly say that startup executives are different from mainstream executives. They say this from intuition and gut experience. My research not only quantifies that intuition but goes much deeper and broader than the few intuitive differences VCs point out.

[Venturer]: Why is this important?

[Carl]: Well, I’m going to step on some toes here, but most VCs and hiring executives happen to be notoriously poor judges of leadership competency. I know this from being called in to help derailing founders, from the feedback of successful startup executives I’ve interviewed and coached, from HR professionals and from a few very insightful VCs. What I’ve seen is that VCs and most senior executives have very strong opinions about what are the traits of successful executives but fall down in the discipline of assessing these qualities. VCs, for example, are all too easily bamboozled by the entrepreneurs who make their living presenting compelling pictures…they’re great salespeople. And now in this down market, many entrepreneurs are even getting professional training on how to sell themselves even better…the NWVG provides some of that training through the Five Minute Forum.

We know that most interviewers make various types of “interview bias errors,” without even knowing it. I’ve learned that few VCs, for example, actually use a structured interview process using behavioral oriented question or do in-depth reference checking. Few know how to ask questions that illicit useful information from executives. They don’t know what to ask beyond the skill set questions or simply rely on past behavior and recommendations from others.

Of course the old saw goes that “the best predictor of future behavior is past behavior.” Unfortunately, great leadership behavior in a mainstream organization may work in another mainstream business, but not necessarily in a startup. The pressures and tasks are so different. VCs and hiring executives could improve their odds in the selection of executives by gaining a better understanding of the personality underpinnings that influence effective decision-making and leadership.

[Venturer]: You talk a lot about leadership. How does an entrepreneurial leader differ from a mainstream corporate leader?

[Carl]: The research on leadership clearly shows that the personality makeup of an executive greatly influences what, how and when they use a particular leadership tactic. Executives attend workshops or read books to learn about leadership tactics, e.g. reading Shackelton’s Way, the leadership lessons of Sir Ernest Shackelton the Antarctic explorer, which is a hot seller right now that illustrates many of Shakelton’s methods However, what the books can’t help a person do is to control their emotions so that the executive can make an appropriate tactical decision rather than an emotional decision. For example, if you have low frustration tolerance (one personality characteristic we assessed) and the pressure is on to get a product out by the end of the week you might blow up at your subordinates rather than “provide encouragement” – one of Shackelton’s ways. You can learn all you want about leadership, but if your head isn’t screwed on right, all the good advice goes out the door under pressure. So, discerning, for example, an executive’s frustration tolerance is of obvious importance. Our research provides new, additional, useful information to answer those questions for and about the startup executive.

Take, for example, the thinking style characterized by a deliberate, carefully planned approach to dealing with information and situations, which we call the “serious/restrained” thinking characteristic. Early stage organizations are generally characterized as being nimble and able to adjust quickly to market changes. This requires that their executives trust their gut feelings or intuition more to make faster decisions with less data. Executives in corporate settings tend to be more deliberate and cautious in their decision-making and correspondingly often test having a much higher level of the “serious/restrained” personality characteristic than entrepreneurial executives. Individuals with a high level of the “serious/restrained” personality characteristic simply have a hard time making on-the-fly decisions and may have difficulty thinking “outside-of-the-box.”

[Venturer]: Could you talk more about what you mean by interview bias errors?

[Carl]: These are unconscious decisions that people make when interviewing people. We’ve all heard the saying that we make decisions about people in the first 10 seconds we meet them. This is a form of the “subjective bias error.” Another example is the “halo effect,” which is one of the most frequent interview errors that VCs make in my opinion. The halo effect is unconsciously thinking someone is well qualified because of things like who they know, who recommends them, if they came from a name brand B-school and if they’ve been in the press. We are often told by HR professionals that the best candidates come through referrals but that’s not necessarily so at the executive level. I know of too many golfing or sailing buddies that were recommended to run companies when more qualified people were available. Of course, the VCs will say they are not so easily influenced. From my conversations with head hunters, executives and my own experiences, VCs rarely employ well developed structured interview processes to guard against these common errors.

[Venturer]: How do testing and your research address the interview bias problem?

[Carl]: Use of leadership personality assessment has been a staple of executive selection and development for a long time. Almost every Fortune 500 Company, for example, uses some type of sophisticated psychological assessment at the executive level because it adds that additional, more objective scientific perspective to the selection and development of executives. Useful data, however, for startup executives has not been available until now. Our research findings now scientifically quantify what was simply opinion and intuition before. And, the results are interesting.

For example, one would intuitively think that executives should be fairly reflective and insightful people and that would help them be more effective. Our research shows that startup executives, as a group, are more reflective than executives in general. So, an aspiring startup executive might want to be sure they develop his or her ability to be more thoughtful and insightful about people and issues if they want to compete well with other startup executives. Similarly, when assessing if an executive from a large mainstream company would be able to make a good transition to a startup you might want to know if they score as highly on the “reflective/probing scale” as the group of startup executives.

We also found other differences in characteristics such as acceptance of control and need for freedom. Again, you would imagine that startup executives would not function well in work environments that are highly structured and bureaucratic … a no-brainer. Our research shows how extreme that characteristic really is. Startup executives as a group are significantly more likely to have a very high need for freedom and very low acceptance of control. No wonder they don’t work well in mainstream organizations and no wonder it’s hard to get them to apply appropriate organizational structures in a timely fashion to their startups. They don’t like to be corralled with structure and rules!

Another area is criticism tolerance, which is an extremely important characteristic that impacts interpersonal effectiveness – leadership. Successful startup executives seem to have a higher criticism tolerance. Something they need to withstand the constant door slamming and now more frequently head slamming they receive from VCs, etc. Those are just a few that we have quantified.

[Venturer]: How receptive have VCs and other investors been to your research and findings?

[Carl]: With the high cost of replacing a derailed executive and the real potential of tanking a company through poor executive selection, you would think they would want to bring the same discipline of due diligence to selecting executives as they do to looking at the business plans of companies. Unfortunately, many VCs come out of B schools with no training in interviewing and selection and the rest were executives from hi-tech companies with little if any formal training. In general, most executives rarely receive any formal training in interview processes … they are too busy running companies and leave that to the HR folks -whom they mostly ignore when it comes to the final decision anyway. Last fall I gave a seminar for VCs and Angel investors titled: Selection by Design, Not by Chemistry – Upgrading the Assessment and Selection of Founders, CEOs and Key Executives for Startups,” that 15 VCs and Angels attended. Two years ago when VCs were funding just about anyone and believed they all had the Midas touch, I don’t think anyone would have attended.

[Venturer]: How about executives? Given their freewheeling nature and aversion to structure, are they open to the idea of testing?

[Carl]: Well, when I’m wearing my executive coach’s hat, this type of information is invaluable in helping an executive zero in on areas that need development. When you use this type of assessment tool with an executive and show him or her how they compare to other executives, it gets their attention real quick. It’s extremely helpful, for example, in explaining to them why it might be hard for them to take certain actions that they know they should – based on all those great leadership books. More importantly, by knowing more specifically what might be inhibiting them, you can help them develop new, more effective ways to deal with certain situations. So, for example, if they are low on criticism tolerance, we can help the executive develop the ability to better accept useful input rather than becoming defensive and dismissive or abusive. Or, for those who want to improve their insightfulness, consulting psychologists have many ways to help people enhance that capability. Performance enhancement is always more effective when you can be specific about what needs to be developed. The knowledge we gain from this type of personality research makes performance enhancement easier and more cost effective.

[Venturer]: A lot of your research focuses on personality traits and strengths of the aspiring entrepreneur. Has any work been done to measure or quantify the role or importance of the entrepreneur’s support network of family, friends and others in their success?

[Carl]: In my work with entrepreneurs, I’ve heard all sorts of stories about how their support networks play out in their successes or failures. Unfortunately it’s a hard area to quantify so there isn’t much “scientific” research. It’s mostly anecdotal. However, having worked with over a hundred early-stage executives it’s my experience that there are few that become successful without having very supportive and forgiving loved ones, mentors and friends behind them. The image of the lone ranger, in my opinion, doesn’t apply to most successful entrepreneurs.

[Venturer]: Can you give us one of those “top 5 lists” that itemize the leadership personality characteristics a startup executive could develop to become more effective:

[Carl]: I would make the following 5 a top priority for development for any aspiring executive:

• Insight about people – people smarts or what Daniel Goleman would call Emotional Intelligence.
• Frustration tolerance – the ability to handle frustrations, rejections and pressure with grace.
• Criticism tolerance – the ability to receive, assimilate and put to use critical feedback.
• Optimism – the deeply held belief in a positive future.
• Self-Control – the ability to manage ones emotions under pressure.

[Venturer]: How about a list of characteristics that entrepreneurs need to keep in check?

[Carl]: Some characteristics that startup executives most need to manage or control would be:

• Need for freedom and acceptance of control – Startup executives need to corral their intense need for freedom that can cause a resistance to reasonable organizational structure; structures that can create efficiencies.
• Need to be liked – All too often entrepreneurs have a difficult time making hard personnel decisions, especially with “loyal buddies,” because they have difficulty with people being angry or disappointed with them. Too often loyal buddies are kept on board when they should be replaced. Worrying less about what their “buddies” think of them and learning to be a bit more hard-nosed could help them make those tough personnel decisions.
• Realism and pragmatism – Entrepreneurs are dreamers and idea people who often have difficulty bringing something to market because they want to keep making it better. Learning to be more pragmatic and realistic could help them bring products to market quicker and be more prudent with their burn rates.
• Self reliance – Entrepreneurs are too often “”John Wayne/Clint Eastwood” types who have a hard time asking for help in a timely fashion. I’ve seen too many fired because they tried to bully through problems when asking for help from board members or trusted advisors could have provided timely solutions. Therefore, asking for appropriate help and advice is important.

[Venturer]: Carl, I’d like to thank you for taking time to share your insights with our readers.

Carl Robinson, Ph.D., provides executive development services specializing in executive coaching, executive team development, board/executive development and management assessments for selection and development of executives. He is a consulting psychologist and a member of the Society of Consulting Psychology of the American Psychological Association. He can be reached at: carl@leadershipconsulting.com or 206.545.1990. ALC’s website is www.leadershipconsulting.com.