Business RX: Advice for entrepreneurs on how to improve or launch a startup

Dec 17, 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. She will be joined by James Foster, chief executive of cybersecurity firm ZeroFOX.

I'm pulling together my investor pitch. In your opinion, what are the one to two things I should focus on? In other words, what's going to standout among my competitors when I'm pitching investors?

Understanding customer pain point and go to market strategy. We see too many pitches where the entrepreneur can't pinpoint who is experiencing the problem and how how they plan to sell to that market.  Investors like to understand bottom-up approaches to customer acquisition vs. top down.  Explain to me how you will get your first customer, then your 2nd, then your 10th, then your 100th. 

Hi, This question is for both of you. I'm a business person who has partnered with a researcher on a business idea. What are some ways/actions I should take at the early stage to protect myself if this venture goes awry?

Hope for the best but plan for the worse. Even partners with the best intentions part ways. You need to have a clear understanding of each stake and document through partnership or operating agreements, etc. You don't have to be 50/50 partners, but you should come to early agreement. If you wait until a financing or other material event, you might turn off investors if they see you and your partner are not on the same page. These are hard, but important conversations. 

Hi Elana, love your chats and articles. I work at a six-person start up and one employee is very lazy and does not do any work. He also does not dress nicely, which reflects poorly on all of us. How can I get him to do more work? We are not being paid much since we are a start up, alhtough we were given lots of options. He pretends he is writing code but I think he is just doing fantasy football, and our boss is too busy to notice. The other members of the team are frustrated and we have to go live soon on our beta test.

Startups cannot afford lazy employees -- regardless of how they dress.  Does he have milestones or metrics or deadlines he has to hit?  First, just because you are a startup and people dress casually doesn't mean you don't need some sort of dress code, even if it just means  you jeans can't have more than 4 holes. Same with performance reviews, expectation setting and job security -- you  can put in some HR policies even if they are relatively informal.  Start by calling him out for fantasy football just so he knows you've noticed, and then move on to something more serious to clarify expectations and where he is falling short. 

Elana, what is the hot trend for 2014 in the D.C. area startup scene? Any interesting new technologies? Keep up the great chats!

I predict two trends in 2014. Increased emphasis on insider threats for enterprises as well as enterprise security offerings for social threats. - Foster

Elana-- The weakest part of my investor pitch is the cap table. I'm looking for a mentor or some guidance on how to build a cap table that won't be ripped apart by potential investors. Are there resources online or in the Baltimore area?

I'd say any entrepreneur that has raised VC funding could help you better understand your cap table, however you might need some help from a lawyer if you aren't sure about shares outstanding or conversion ratios.  Depending on the variety of instruments you have used to fund your business and number of different shareholders, the cap table can get very complicated quickly.  I've been waiting for someone to develop an app for that....

James, can you please comment on any changes that you expect to occur in cybersecurity as a result of the Snowden fallout?

I believe that there will be a few very significant changes from the Snowden incidents. I believe we are at the beginning of a long process where new laws will be put in to place to govern the U.S. intelligence capability. I also believe we will see a new person or office created to handle out-bound public relations for our IC. - Foster

Ethan-- Has your startup been a part of a co-working space or incubator? I'm in the early stage and some people in my circle are encouraging me to join a co-working space. What are your thoughts? Are they truly beneficial?

There are over 1,000 "incubators" in the United States and most of them add very little value outside of becoming your next landlord. Be careful to vet the ones that ask for equity in exchange for access to their "network" or "guidance." The best of the best are easy to find and there are only a couple dozen of them. -Foster

The recent series on government contractors made me sick - it seems as if the system is corrupt and biased. How can I, as a a true start up government contractor, compete, particularly during sequestration? I am also doing something in the IT/cybersecurity space. I worked at the DOD for 17 years.

Unless you have some close ties or relationships, the government contracting market may seem difficult to crack. There is no easy answer, but I'd suggest you begin personally networking at the plethora of lunches or after-hours events in the area. AFCEA is an example of a good place to start. - Foster

What food businesses are currently having the most success? Cupcakes? Froyo?

Good question and unfortunately, I don't have a scientific answer for you but my son would say Froyo... 

James - thanks for taking the time to join us. We thought it would be interesting to hear a little more about your decision to change your name? I know a lot of startups stress a lot about their name and would be interested to hear your process for making this big decision. 

Absolutely. The first piece of advice is - do not stress about your name. While I believe a good name is VERY important it is not the most important aspect of the business. If it were 2000 again and you owned a great domain name, then my answer would be different. But the world has changed. Focus your efforts on building your MVP, team, and ecosystem of support. The name will either work or not and once your ecosystem is built you will have more data points if you decide to make a brand upgrade. The feedback has been outstanding on our name change to ZeroFOX from Riskive. -Foster

With the holidays approaching, what are nice ways to thank employees , vendors, etc., without breaking the bank?

I think for startups the holidays are a great time to thank all the people that have helped them. Showing that you take the time to say thank you says more than an expensive gift -- we know that TIME = MONEY.  Build up some goodwill, because you never know what hurdles you will face in the next year.  For employees, give them time off from the office and their email.  We all need a bit of a refresh before 2014 -- vacation and time with family is important and extremely valuable.  As a leader, make it clear to your team that you are really giving them a break and you intend to take one as well.  

Team potluck lunches! We have a great team that loves to have them here at the office. As a start-up we also bought jackets for all of our employees with our logos on them. If you go the route of gifts, make sure that your team will appreciate them and that they will go the distance. Stay away from generic conference swag... it's garbage. We send cards to our vendors. -Foster

I've been developing my business idea for a couple of years now. When I started no one was talking lean startup. Now everyone is talking about it, people are abandoning the business plan, etc. What are your thoughts? Are there books I can read? I want to be as relevant as possible as I move this business idea forward.

Lean is certainly a movement with a lot of momentum.  We have certainly encouraged our students to abandon the business plan and adopt any variety of the business model/lean canvases.  I'd say the most important take aways from this movement is to 1. understand the problem and 2. talk to customers. Usually they go hand in hand.  Right now I'm staring at Lean Analytics and Running Lean on my desk -- winter break reading!

I agree with the other answer but DO NOT abandon the basic principles of business. ZeroFOX runs lean, incorporates a tremendous amount of feedback into the business (technically as well as strategically), and pushed our product out quickly. However, we also had a business plan, financial model, and all the elements you would expect from a senior team that wanted to first validate our approach and market opportunity. -Foster

I go to Clemson and have heard about Cupid's Cup. It sounds interesting. How can I get involved? I currently have business with 250,000 in trailing 12 month review and strong EBITDA. We sell Clemson related apparel to alumni and the Greek system. Go Tigers!

Well, since you asked, Cupid's Cup is accepting applications from student entrepreneurs  until Jan. 6 at (shameless self promotion). We only look at businesses with traction so you sound like a great fit.  Feel free to follow up with the Dingman Center with any questions.  

Go for it! Kevin is an outstanding guy and the winners would be lucky to have access to his network and experience. -Foster

I've been a food coach for several years. I need to change how I describe what I do because it is NOT giving meal plans and recipes -- I work with the emotions underlying food choices AND I use a lot of different modalities, depending on my assessment of the client's issues. I'm getting close to hiring someone to help me and I'm not quite sure if it's rebranding (and what that entails) or simply a new marketing campaign. What are the differences? What are your best resources for me to read/see/check? thanks!

I'd start by asking your customers to help describe what you do. If you read between the lines and listen carefully they will tell you exactly why they signed up for your service and why they keep coming back. Use that as a starting point before you hire a marketing team since that is exactly what they'd want to do if they are any good. Tactical recommendation - invite 3-5 customers to lunch on you and just pick their brains... - Foster

Elana, loved seeing you at the Tien Wong panel. You were great! How can I get involved in Tien's ecosystem? I work at a small tech start up in Herndon.

Thanks, I had a good time.  As one of our panelists mentioned, D.C. has a great ecoysystem and community thanks to leaders like Tien.  I'd say think about how you can best leverage that network -- is it for employees, sales leads, professional services, mentorship, etc. You don't want to network just to network.  Attending events can be a time suck unless you know you are looking for.  As Doug Humphrey mentioned later in the day, you do make your own luck by tapping in to the right people and being in the right place.  Understand your pitch and be clear about your ask. 

This isn't your first startup -- what lessons did you learn from your last company that you've applied at ZeroFOX?

The stakes only get bigger when it's your second time around and previous success doesn't guarantee future success. With this said, I learned that you need to invest in sales early. Bring in customers ASAP and make sure you are honest with them. Tell them where you are today and where you are going - transparency will ultimately pay off in the long run. -Foster

As a follow up, what do you look for in hiring for sales? Do you favor sector experts or generalists who understand who to run a process?

Ultimately, we will end up hiring both types of individuals. Novices will start on the phone in inside sales until they are ready to go outside and become an enterprise field rep. -Foster

We've heard a lot of VCs and others say that cyber will continue to be a hot market for this area for obvious reasons -- how has the local infrastructure and expertise helped propel your biz?

Actually, I think the local infrastructure has helped and hurt the business. Too many people and companies in the "cyber" market are a bad thing as it causes customer confusion. Customers are getting a false sense of security and are being sold snake-oil by good sales people with low value technical offerings. The upside on the infrastructure is the federal government client base is right in your back yard. -Foster

I have been in the computer industry for 20 years and I am bored with my current job. Looking back, I was often bored with my previous employers. I never feel like I have enough work to do and can't do it my way. I think I have the skills with technology to be able to work on my own or as part of a startup, but without ever having do it before, I don't know where to begin. I want to stop working for others and be able to take control of my own career and projects.

Certainly worth a try -- there is definitely rarely a dull moment working at a startup. However, you also need to think about your risk profile -- are you willing to sacrifice stability and short term income? There is a glut of programming talent in the market, so your experience is likely in high demand.  Find a sector you are interested in/familiar with and start tracking, networking with startup in that sector.  There is certainly not a glut of events in DC -- probably hardest to decide where to go first. 

Network, network and network. Find advisors that believe in you and your idea whom can get you advice. Once you believe that your idea is really solid, start applying to incubators and accelerators. At the bare minimum, if you are accepted then that will be further validation that you may be on to something. -Foster

You've received a lot of traction from angels and some early stage VCs, any tips for negotiating with both types of investors?

Short and sweet. When you are ready to fundraise, go hard and go fast. If you don't have multiple offers then you really have nothing to negotiate. -Foster

Congrats to everyone on an eventful 2013.  We'll be here in 2014 -- to answer your questions and connect you with the DC community.  Happy Holidays and Happy New Year!

Be Fearless,


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.
James Foster
James Foster is chief executive of ZeroFOX, a cybersecurity company. Foster is an industry veteran and a world-renowned thought leader on cybersecurity. In 2006, he founded Ciphent, a cybersecurity firm that grew to almost 100 employees with 1,000 customers before being acquired by Accuvant.Foster has worked with several other high growth cybersecurity organizations such as Booz Allen Hamilton and Computer Sciences Corp.; has executed on exit strategies for Foundstone (acquired by McAfee for $86M), Guardent (acquired by Verisign $135M), and Information Security Magazine (acquired by Tech Target Media for an unpublicized amount). Foster started his career as a civilian in the United States Navy in Annapolis. In 2005, Foster became a Fellow from the Wharton School of Business at the University of Pennsylvania and received his Bachelor of Science in Software Engineering from Capitol College.
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