Business RX: Advice on improving or starting a business

Mar 12, 2013

Elana Fine, managing director of the Dingman Center for Entrepreneurship at the University of Maryland's Robert H. Smith School of Business, will take your questions.

What if your network of friends and family is small in your area, like D.C.? Who are the best people to approach to get seed capital without giving away too much ownership early on?

It really depends on how much you are looking for and the stage of your company.  Quite truthfully, it is very hard to find outside funding if you haven't already started building a product.   The D.C. area does have the benefit of being so close to federal grant funders like the NSF and NIH.  The process can be long, but worth it for non-dilutive funding.  You hear a lot of stories about entrepreneurs maxing out credit cards to manufacture their product samples.  Some companies have had recent success using crowdfunding sites like Kickstarter for launching new products.  Look for creative ways to get products built, look for people to join you who might have specific skills sets to trade for equity, find early customers who might understand your pain point and fund some development.  The bottom have to be entrepreneurial about being an entrepreneur.  

I don't want to start my own business, but I often think of new initiatives I'd like to launch within the company I work for. What do you think is the best way to go about introducing my ideas without stepping on any toes?

Great question -- we get a lot of questions about starting businesses -- but there is a lot of innovation that happens within large corporations.  Like launching a new company, starting something new requires a lot of selling.  You need to be able to pitch your idea to the right people, to build coalitions, identify your target customers and their pain points.  You also need to be able to identify resources needed within the organization and a clear roadmap to get a minimal viable product. Be clear on the "what's in it for us" - does it help the company beat out a competitor, get to market faster or produce cheaper?  Just like a startup, you need to be tenacious and often not accept "no" for an answer. 

What management qualities are important in an entrepreneur? I've worked for several entrepreneurs who had great skills for starting a business on their own but failed at communicating and letting go once they needed to work with their staff.

If you talk to employees at many startups they will likely tell you that their bosses are impossible! The mind of the entrepreneur is always on overdrive - thinking of new ideas and new directions.  The most successful entrepreneurs learn to balance between being focused while also agile.  They understand that employees can't always read their minds and that they have to slooowwww down at times and make sure they communicate the path forward.  You need to build an organization and culture where the team feels part of your dream and your vision rather than just worker bees. 

Do you think the sequester will have a chilling effect on start-ups in this area, or just larger companies?

I'm sure most people won't agree with me, BUT sequester could end up being one of the best things to happen to this region.  I don't mean that we should be cheering for furloughs, but there is a federal spending bubble that is going to pop. Our region has been insulated from impact of the great recession. Rather than starting high growth technology  businesses, our top talent is working for government consultancies.   There is now a higher risk to working in/for the federal government, so the tradeoff to start a business has changed.  If you are sitting at your desk right now, unsure of what lies ahead, see a market need that matches your skill set, start thinking about starting something of your own! There are a lot of successful serial entrepreneurs in this area willing to help. 

Are all new businesses considered a startup or is that term reserved for new businesses that are breaking ground by offering something new?

Startup has typically referred to a technology company in a high growth field.  We rarely hear the phrase "I have a startup nail salon" or "startup dry cleaner." Those companies are typically referred to as small businesses (rightly or wrongly so -- I'd love a startup nail salon that can figure out how to get me in and out in ten minutes - huge market and I'd pay a premium!)   The difference is that the startup world is usually focused on attacking large, billion dollar markets, backing from venture capital and a potential for acquisition or IPO.  Both are just as hard to get going and are risky, just usually different paths to funding and growing those companies. 

Huge fan of your columns, Elana. What is your take on the Marissa Meyer work from home controversy? Seems like working from home is a great way to keep costs down for a start up and a big company like Yahoo. She is on the wrong side of work-life balance.

Hmmm...I actually think the policy has nothing to do with work/life balance but on fostering corporate culture.  Just like companies have different products, they also have different corporate culture.  I need to ask some of our faculty here at University of Maryland for the exact research, but anecdotally I agree that innovation happens when people are in the same room.  I see it with my team, with the startups we work with on a daily basis, the magic often happens when people are sitting in a room together.  NOT all the time and not all magic -- but if you are Yahoo and you need to compete against Google, Microsoft, etc. you need to do everything you can to foster a culture of innovation and creativity or you won't survive.  There are other ways to offer flexibility -- on site day care, flexible work hours, etc.  We can't expect every company to have the same definition of work/life balance. 

If one person recruits others to join forces in their startup - it would be reasonable to set some general expectations that we'd be working in exchange for equity, right? Say the new recruits begin to work without pay. After a month the founder is willing/happy to initiate work requests, but is less willing to have a discussion about equity or other kinds of compensation. At that point, is it  reasonable for the parties to part (as friends, if it can be helped)?

Ooohh yes.  Just because you start a company with your best friend, doesn't mean you don't need a contract. You need to sort out equity/compensation in advance of performing any work duties.  If you wait until later you usually are having a discussion when things start to take a turn for the worse.  

I am interested in starting a daily deals site for guys in their 20s and 30s. I have also read about the troubles of Groupon and LivingSocial. Do you think that this market is oversaturated? I have a great business plan and believe I have some seed money.

I'm just going to answer this with one word - YES. These companies have shown the customer acquisition and sales costs are very high and unsustainable.  Hyperlocal is hard. Merchants haven't seen the kind of customer loyalty they were promised. People are tired of daily deal emails and can't get through the noise.  Plus there are already a few companies out there targeting that space.  

Did Dingman have a presence at SXSW this year? What trends are you seeing?

Yes, we just got back after going for the first time.  I will say that if you are out there and you have an idea about how to solve the problem of device power at conferences -- get yourself down to SXSW. I have never seen that many people fighting for iPhone chargers.  On that note -- the best takeaway is that the D.C. tech community is strong! Between the local startups that participated, Mayor Gray attending and speaking, Senator Warner working with Startup America, Springboard supporting women entrepreneurs, the list goes on.  

In This Chat
Elana Fine
Elana Fine was appointed Managing Director of the Dingman Center in July 2012, after joining the team in 2010 as Director of Venture Investments. As Managing Director, Elana's primary focus is leading the Dingman Center in support of its mission and strategic plan. Key responsibilities include oversight of our student venture incubator, Dingman Center Angels investor network, business competitions, and technology commercialization efforts. Elana earned an MBA in Finance and Accounting from the University of Chicago's Booth School of Business in 2002, and earned a BS in Finance, from the University of Maryland, College Park, in 1997.
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