An Initiative of the City of Akron

Accelerate Akron

Welcome to Accelerate Akron, the blog of the Akron Global Business Accelerator. Here you will find expert advice from the Accelerator team and information on issues that matter to entrepreneurs, tech start-ups, and small business owners throughout Northeast Ohio and across the globe.

Picking a name for your business: understanding trademarks

 AnnalVyas (1)  Startups inevitably face the difficult task of coming up with a name for their company. Among the many things you need to consider during the process is trademark law. Why? Simply put, certain names can get trademark protection, while others can’t.  Understanding the rules for getting trademark protection will save you a lot of time and possibly a lot of headache. 

By way of background, a trademark is something, such as a word, phrase, or logo that identifies your brand to consumers. Trademark law exists for one reason: to prevent consumers from being confused.  For example, I couldn’t open up a shoe store and call it “NIKEY” (note the extra “y”), and all of a sudden claim I’m different from the popular NIKE shoes.  A consumer would be confused as to whether my NIKEY shoes were someone manufactured, affiliated or endorsed by NIKE.  

The following is a brief guide to the types of marks that exist and which ones may or may not be protected:

  • Generic marks – Imagine you are selling pizza, and you call your pizza shop “PIZZA.”  Clearly, you could not get a trademark on the word PIZZA, and prevent others from using the word pizza when selling their pizzas.  Generic marks can never receive trademark protection.
  • Descriptive marks – Imagine now that you call your pizza shop “CHEESY.”  The default rule is that you cannot prevent others from using the word “cheesy” when selling pizzas – after all, your competitors need to use the word cheesy to describe what they’re selling.  There’s an exception to this default rule, though it doesn’t come up as often.
  • Suggestive marks – Think of “MUSTANG” for cars.  A mustang is strong and fast, and similarly, Ford wants you to think that their cars are strong and fast.  Note that unlike descriptive marks, suggestive marks have some type of imaginative leap between the mark and the goods being described. Suggestive marks can receive trademark protection. 
  • Arbitrary marks – Think of “APPLE” for computers.  No inherent relationship between an apple and a computer exists.  Arbitrary marks can receive trademark protection.
  • Fanciful marks – A fanciful mark is a made up word, such as “XEROX.”  A fanciful mark can receive trademark protection.
  • Rules on names – First and last names together can be trademarked (for example, Sarah Palin has trademarked “Sarah Palin” in relation to giving political speeches).  However, a last name alone usually will not be able to be trademarked.  

You automatically acquire trademark rights by virtue of using a mark.  So a business that operates under a particular name in Akron has trademark rights in Akron, without having filed any paperwork with the government.  However, if a startup wants protection in multiple states for its name, they may want to pursue a federal trademark registration.  If a business has successfully obtained federal trademark registration, it can use (R) in conjunction with its mark.  If a business has not yet obtained federal trademark protection, but nonetheless wants to signal to the world that it views a particular mark as its trademark, it can use TM for goods or SM (service mark) for services. 

If you choose to pursue a registration of your trademark, consult an attorney qualified in the process. There are many legal tests that need to be passed in order to receive federal trademark registration and using counsel that is familiar with the registration will be worth the investment.

The following in no way constitutes legal advice, and should not be construed as such. Rather, it is a general summary that you should not rely upon.  For information specific to your situation, consult an attorney. 

Use criticism to make your work even better

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Regardless of where we are in our career, we are all still learning and continuously improving.

It can be a challenge, however, when that valuable knowledge is offered to us in the form of criticism. Criticism may come from associates, peers or other organizations.

And it comes in many forms, including employee complaints, peer reviews, annual job reviews, feedback from customers or clients or rejection of proposals. It seems there is all too often that one person who tells you your project will not work or that your ideas aren’t good enough.

Criticism is a tough pill to swallow — constructive or otherwise. It’s almost impossible to not have an emotional reaction. You may discount the criticism and become defensive. After all, you’re the one with the experience who put the effort into your idea, project or organization.

However, once you’ve stripped away the emotion, there is almost always a grain of truth left. Like a grain of sand, if put to good use and given a little time, that grain can turn into a pearl — a pearl of wisdom that could be the missing link to success for your next project.

Indeed, when trying to get big projects off the ground, they very often do not go as planned. In our business working with entrepreneurs and startups, we have to write proposals and present ideas to a multitude of different types of people and organizations, whether investors, government entities or other potential partners.

I have been asked to clarify, present additional information or been rejected outright. But I’ve come to learn that these types of comments can be a tool or a ladder rung to the next level and the key to a new or better idea.

Consider criticism carefully

Allow yourself to experience the emotion you feel when you receive the criticism, but preferably in private, and talk it through with a close colleague, friend or significant other. Then turn it into constructive action. You should also take a moment to guage whether it is, in fact, criticism.

Sometimes we are so close to our own projects, it’s hard to see the bigger picture. Ask yourself if it isn’t just an inquiry to obtain more information or a request for clarification that may have come off as sounding critical.

That person could very well be on your side, but doesn’t understand or isn’t clear about what you are doing or presenting — or simply requires additional information to make a decision. Put yourself in their shoes, take the emotion out of it and help them see your vision.

Figure out what parts of the criticism can legitimately be discarded. Possibly, there are these issues that can be overcome with improved communication.

Target the nuggets of truth. Where is your weakness? What has been overlooked? Where can a more complete approach make a difference? Make an action plan to overcome these issues and communicate the changes you have made.

By viewing criticism not as a personal attack but as the discovery of valuable insight into your challenges, you can use it to strengthen your programs and deliver more meaningful solutions.

Originally published in Smart Business on February 1, 2016.

Small business focus: Turning weakness into strength

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In small companies, resources are limited and people must wear many hats.  With too few resources at hand, uniquely talented individuals are sometimes assigned mundane tasks because they can do “anything and everything.”  It may seem advantageous to save time and money by using good people for everything; however, you also run the risk of burning that person out and losing them. If you can’t take on more employees, how can you work as efficiently as possible, while keeping talented individuals happy and productive? In this, I am reminded of the Theory of Constraints, a management paradigm often simplified to the expression that “a chain is no stronger than its weakest link.” 

 The Theory of Constraints was introduced in 1984 by Eliyahu Goldratt in his book entitled The Goal.  It is based on the premise that improvement for goal-oriented companies is often limited by one or more constraints and, by focusing on these constraints, a company can improve its operations and its success.  Basically, the constraint becomes a focusing mechanism to improve the company. 

 Years ago, I worked for a company and one of our constraints was the way we were using our leading researcher. The fellow was an amazing talent and we had serious R&D tasks at hand.  But we also used him for another very important task---training new customers.  This was a new and innovative cardiology technology that was being marketed to leading researchers at leading medical schools.  It was critical that after purchasing the system, a customer learn how to use our product effectively.  Often, these early customers would want to confirm the product utility on their clinical patients---and we wanted this data as well as it often resulted in peer-reviewed publications in prestigious medical journals touting our system.  This was a good thing as it resulted in more sales.

 In the early phase of product introduction, sales were one or two units per month.  And we’d send our researcher out for two days of training at each center.  Over time, sales increased to five to six systems per month; then, we’d have to have him out 10 to 12 days per month.  He did not particularly like that level of travel and it prevented his doing what he viewed as the high-value research that he was passionate about. 

 One day, after listening to this dedicated employee again express his frustrations with not having the time to do his research, somebody came up with the idea of scheduling one or two training sessions per month at our Oklahoma City offices and flying the customers, at our expense (air, hotel, parking, meals and incidentals), to our location.  I do not really remember exactly who had the idea, but it was a stroke of brilliance.  We did, by the way, nearly go into shock as we toted up the travel costs.  It took several discussions before we believed the costs were the same.  We had training in Oklahoma City for two to four days per month.  Our star trainer did not leave home.  The customers, MD and PhD researchers from leading US medical schools, got away from their offices and away from their beepers, and focused solely on our product.  The hard out-of-pocket costs were equivalent.  But the value of the training, the customer retention and the long-term satisfaction of users all improved dramatically.  Importantly, the research relationships that we were keen to establish and were the foundation for future sales were also dramatically improved.   If we hadn’t made this change, we probably would have lost the employee, and for our small company at the time, this would have been truly devastating. 

 Small companies would do well to make time to focus on the “weakest link in the chain” and take steps to improve the structural operation of their companies.  Sometimes the fix isn’t in our hardware or software, it’s in the way we are using our people. 

Step by Step: The Importance of Milestones in Goal Setting

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Happy New Year and welcome to 2016!  I hope you all had a wonderful holiday season.  Now, it’s time to take on those New Year’s resolutions! 

Most of us start off the year with new goals to tackle; however, all too often, we end up stopping short of our final destination. We run out of time and/or dedication or perhaps our goal was too daunting to even start; resolutions are often pushed aside as we settle back into our normal, comfortable routine.  So if you are really serious about being successful, it may be useful to think about setting mini-milestones on the way to your  final objective.

This advice is especially critical for startups, because almost all entrepreneurs have the same end goal – to be successful. However, there are many goals that they need to hit along the way. Often, these smaller goals, themselves, can appear daunting, let alone the big one to “make it big.” In order to make each growth goal more achievable, setting milestones within those goals will help create a step-by-step process for completion and (hopefully) success.

For example, one of your goals may be raise a “Series A” round, i.e. a first significant round of venture capital financing. Simple enough, right? Go get money. But where do you start? This is where milestones come into play. Your plan may look something like this:

  • Milestone 1: validate value proposition and customer segment. Your early investors will want to see that your company is solving an existing problem or filling an unmet need. 
  • Milestone 2: complete market research. Your investors will also want to know that you’re operating in a market that can accommodate growth.
  • Milestone 3: develop a professional pitch deck to present to potential investors.
  • Milestone 4: identify and contact investors. You’ll need to present this deck to the right people so take some time to research and develop a quality list.

You have now broken down a relatively lofty goal into four achievable milestones that will help you stay organized and meet this end goal.

Seeing the forest and the trees

It sounds simple enough, but sometimes it’s hard to see the little milestones within a large goal. For instance, you may know that you need FDA regulatory clearance, but you have no idea where to start. This is where enlisting the right people comes into play. Whether you hire someone to help you or you work solely with your core team, using the people around you to help set milestones will make the entire process seem less overwhelming. The ideas and discoveries that come out of brainstorming sessions can also be extremely important.  And don’t forget about your EIR! Your entrepreneur-in-residence/advisor/mentor (or whatever you call them) can be critical during this process. They have most likely been in your shoes before and will be able to identify the steps you need to take to get to the next level. If you’re a startup in Northeast Ohio, you are already ahead of the game with a support network filled with experienced entrepreneurs ready to help you achieve your next goal, and set the milestones along the way.

Looking at the forest while also being able to identify the trees is a skill that most of us desire: find the details in the big picture and make it work. Whether you’re an entrepreneur trying to get that startup off the ground or simply someone trying to keep up that New Year’s resolution, setting milestones along the way is bound to make achieving your ultimate goal more attainable and more realistic.

Comfortable with the uncomfortable

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One of the things I enjoy most about being an entrepreneur-in-residence (EIR) and working with entrepreneurs is their excitement and enthusiasm for what they do. Hearing someone talk passionately about their idea or new technology further inspires me to do all that I can to help them get to where they need to be.

However, establishing a startup is not an easy row to hoe. Excitement and enthusiasm may wane or even disappear for a time, as companies struggle to find their true identity and purpose and especially as they try to cover negative cash flow in the early stages before their new product or service is bringing revenue in from real customers. This is a scary time experienced by most startups. So much so, that it has a name – the “valley of death.” During the valley of death curve, additional financing is usually scarce, leaving the company vulnerable. It is during this time that a lot of startups risk going out of business. How an entrepreneur deals with it will determine the future of their endeavor.

Uncomfortable sweet spot

No doubt about it, there is a lot of pain at this point in a startup’s journey, whether it’s relational, financial or even physical. And I certainly don’t like seeing anyone in pain. But, it is at this juncture that my job as an EIR is most valuable. In other words, this is the point when our clients need us more than any other.

Aside from the most obvious solution of helping a client find sources of funding to help get them out of the valley of death, I think there are other things that an advisor can and should do to help a client with potential for great things. There are several things I can think of that help the process and keep everyone moving forward:

  • Let them know we care. This is important. Going out on your own, even if there is a team, can be a lonely business. We want our clients to know they are not alone and that there is someone who truly cares whether they survive.
  • We don’t let them fade into the woodwork. We keep a watchful eye on what’s going on and make temporary adjustments in negotiable areas where possible, such as rent and other overhead costs.
  • We give them some tough love. It may be necessary to encourage and advise a client to take a hard look at their business. I compare startups to Clark Kent. Dig deeper, look further and underneath the surface, we might find Superman. This may require bending, pivoting and sometimes even completely scrapping an original idea, but a “Superman” idea might be in there somewhere, we just have to find it.

Trust the process

Today’s entrepreneurs are smarter and savvier than ever and their technology is changing the world. Enthusiasm, excitement and passion are important, but even more so are resiliency, flexibility and being open to advice. I’m here to help, but it works best if it is a partnership. And it’s not necessarily during the valley of death. Initially, there may be unclear goals, gaps in a business plan or the technology is not where it needs to be. At any of these moments, it would be easy for us to say no because there are so many unknowns. But we’d rather say yes. The rest will follow.

Don’t feel like you have to go it alone; few entrepreneurs actually do

Chris Bollinger

My dad became an entrepreneur at the age of 52. After a 30-year career in human resources, he left the corporate world and bought a book store, which he and my mom ran for 20 years.

He loved running a small business. And even though he was proud of my burgeoning career in high tech – first as a software engineer and then as a product manager – he kept trying to persuade me to leave the corporate world and start my own business.

I wouldn’t hear of it. I was making good money and doing work that I enjoyed. Chucking my career and going out on my own was much too risky. What if I failed?

Besides, I didn’t know the first thing about running a business. Well, that’s not entirely true. I had earned my MBA, so I knew how to run a business theoretically. But I also knew that running a business requires a lot of skills and experience that I didn’t have. For example, while I excelled at marketing, I sucked at sales. I understood the principals of accounting, finance and other aspects of business, but I wasn’t sure that I could do them well.

I was used to being part of a team, where I used my strengths and other members of the team used their complementary strengths. So I stayed in the corporate world, growing increasingly disenchanted with my inability to make much of a difference in how my company performed.

What I didn’t realize is that many successful startups are not one-man shows, but teams of people who complement each other. Today, few entrepreneurs go it alone; instead, they build or join a team.

Example 1: My Parents

When I talked to my parents during the early years of their book store, my dad would often “talk shop.” My mom, on the other hand, would talk about family stuff. I knew that she was running the book store with my dad, but I tended to think of my dad as the entrepreneur.

The reality is that both of my parents were entrepreneurs. They started the business, and ran it, as a team. Their strengths were complementary. For example, my dad is a numbers guy, whereas my mom is more of a people person. They formulated the strategy for the store together, bouncing ideas off each other and ensuring that they were in lock-step for all major decisions.

They also broadened their team to include the store’s employees. Rather than paying employees just an hourly wage, my parents did profit sharing. The better the store performed, the more pay employees received. Employees were encouraged to offer ideas for improving the store, and many of those ideas were enacted.

As big-box book stores, such as Borders and Barnes & Noble, began to dominate the market, my parents’ store adapted, survived and even grew. Then, as Amazon began to kill off most brick-and-mortar book stores, again, my parents’ store adapted, survived and even grew. The late-in-life entrepreneurs closed the store 11 years ago, when they were ready to retire.

Example 2: Summit Data Communications

About the time that my parents closed their store, I decided to do a startup. I didn’t think of myself as an entrepreneur, however, because I was part of a team.

That team initially consisted of three product managers in Cisco’s Wireless Networking Business Unit. Each of our respective roles at Cisco was diminishing, and we wanted to sink our teeth into something more fulfilling. Ron Seide came up with an excellent idea for a Wi-Fi product, and Andy Winson and I worked to build a business plan around it. Joined by two others, we left Cisco in early 2006 and started Summit Data Communications.

None of us could have done Summit on our own. In fact, getting Summit off the ground required the efforts of all five of us, sometimes independently and sometimes in concert. The synergy of the team was far greater than the sum of the parts. We were all entrepreneurs.

Example 3: The Bit Factory

The solid team at Summit was augmented by the team at the Akron Global Business Accelerator, specifically Terry Martell. I and other senior managers at Summit spent many hours with Terry – sometimes just venting, but usually asking for guidance on a big decision that we needed to make. Terry’s calm demeanor reassured us, and his thoughtful and probing questions helped us figure out the right steps to take.

Now that I am a mentor for The Bit Factory, a relatively new accelerator for software startups, I see first-hand that many startups need the same things that Summit needed in its early days: a solid team with complementary skills, and guidance from outsiders who have walked a similar path before.

Yes, an individual can start and build a successful company, even in the high-tech world. But for every lone ranger who makes it, there are dozens or hundreds who don’t, often because they fail to build a team and seek guidance from experienced entrepreneurs.

How starting a business is like running a marathon

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I ran the Akron Marathon a few weeks ago. It was my first marathon and it was certainly a great experience. For the record, I finished and was happy with my time as a first-time marathoner.

I was amazed by the amount of people from my hometown that supported, ran, volunteered and came out to cheer for the runners.  We are very fortunate to have such a wonderful community and organizers who make this event possible each year.  I also had lots of time to think during my run. I thought about how building and running a business is very similar to training for and running a marathon.

Here are some things that I learned that may be helpful to those running or thinking of starting a business.

Don’t go out too fast.

Everyone is anxious and excited at the beginning of a race. The same holds true for starting a business. You (and hopefully your customers and staff) are excited about what you do. But, if you start out too fast, don’t pace yourself and don’t stick to your own strategy, you can create errors that can set you back. It is important to take the time to develop a comprehensive plan (like a training strategy) and stick to it.  

Be realistic about your goals.

I wanted to finish the race in less than five hours. But my time was a little slower than that and I was still happy. What I realized was that sometimes the goals we set may not always be realistic and we fall short. However, the diligence in setting the goal and the discipline applied in working toward it will always lead to a positive return.  Ultimately, preparing the best we can to achieve the goal may be just as important as meeting the goal itself.

Finding the right people is important.

When you train for a run a marathon, it is important to find people who will support you, push you and be there before, during and after the race. The wife, Andrea, and daughter, Michaela, were there for me.  The same holds true in business. It is easy to fall into the trap of hiring people because they are your family, friends or have the right experience. But it is even more important to find those who will help you get better, fit within your company culture, will grow with you and help you toward the many finish lines you will have during the lifetime of your business.

 It’s hard.

Anyone who says running a marathon is easy can’t be telling the truth. Anyone who says running a business is easy is lying too! While running a business (and a race) can be rewarding and exhilarating, it takes a great deal of hard work, perseverance, patience and humor.

Celebrate even small accomplishments.

Some business owners never celebrate reaching the small, yet important milestones. I realized as I ran the marathon that every time I hit a specific mile marker (5 miles, half marathon, 20 miles) that I was able to celebrate even a little bit. Business owners need to take time to celebrate – and include key staff – when there are even small accomplishments that will propel the business forward. It helps a great deal with staff morale. You may never reach the complete fulfillment of your vision but you must find satisfaction and joy in the journey.

Will I run again next year? Maybe, maybe not. I have yet to decide. But I will definitely take the experience and the lessons learned with me for a very long time. The one I learned the most…. Running a business, like long races, is a marathon, not a sprint.

 

 

Avoid these ten common legal mistakes that startups make

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By Annal Vyas, program director, The Bit Factory and advisor to the Akron Global Business Accelerator and The University of Akron SEED Legal Clinic

Throughout my career, I have provided legal counsel to hundreds of startups and in my experience, I’ve seen startups make the same legal mistakes time and time again.  Here are ten that occur often. 

(Please keep in mind that the following is not legal or tax advice, but rather a general discussion of legal issues.  You should consult with an attorney and/or tax professional for advice specific to your situation.)

  1. Not forming an entity – If you operate a business without forming an entity through the Secretary of State, you open yourself up to personal liability. For example, suppose you start a business that sells ice cream out of a truck.   You accidentally sell expired ice cream to a child whose parents end up incurring $100,000 in hospital bills.  The child’s parents can sue you individually for that amount – meaning that your personal assets, such as your house or your own child’s college tuition fund – could be wiped out.

    But things could get even worse.  Say you started that ice cream business with your best friend, and he sells the expired ice cream, not you.  The parents could still sue you personally for the entire amount (not just half), even though you didn’t do anything wrong. 

    Forming a legal entity (usually either an LLC or a corporation) is the best way to avoid personal liability for the mess-ups of a business.

  2. Choosing the wrong entity - Most founders choose between a limited liability company (LLC) or corporation.  If your startup plans to seek venture capital, it often makes good sense to organize as a Delaware corporation. Why a Delaware corporation?  Delaware is universally recognized as the nation’s leader in corporate law and venture capital firms prefer to invest in Delaware corporations because of the flexibility and stability of Delaware law.

    However, if a company is not seeking VC money, then forming an LLC in the state in which the company is located often makes more sense. 

  3. Failing to treat your company as separate from you individually - I can’t tell you how many founders go through the process of forming an LLC or a corporation, but then continue to sign contracts personally.   Moreover, many founders don’t treat the company as separate from themselves.  For example, founders may fail to open a separate bank account on behalf of the business.   If a court believes that you are not taking adequate steps to treat the company separate from you as an individual, the court very well could hold you personally liable for the company liabilities.

  4. Failing to understand IP issues - Startups often run into a whole lot of trouble by not understanding intellectual property issues.  For example, a startup could pick a name for their company, only to find that it infringes on the trademark of another company.  Or a startup could discover that it doesn’t actually own the copyright to software created by a third party.  Or a company could fail to file a patent application in a timely fashion, thus forfeiting patent rights.   The list of IP considerations is long.

  5. Failing to sign a founders’ agreement - Some type of agreement between the founders of the company is essential.  In an LLC, this founders’ agreement is called an operating agreement.  An operating agreement is similar to a prenuptial marriage agreement, but for your business.  In an operating agreement, you want to deal with important issues, such as equity allocation, voting rights, vesting schedules, buy-sell agreements, and the like.

  6. Failing to understand key employment issues - Startups often prefer to classify workers as independent contractors and not employees, so as to avoid paying employment taxes.  However, worker misclassification can lead to significant penalties.

  7. Failing to understand tax consequences - Startups often mess up tax issues, as tax is a complicated area with many nuances.  For example, if a founder has stock that is subject to a vesting schedule, then he or she should file an 83(b) election to save money on taxes.

  8. Failing to adhere to securities laws - Like tax, securities law is extremely complex.  For example, startups can run into problems by raising money from non-accredited investors.

  9. Ignoring internet legal issues - Companies often copy and paste terms and conditions and privacy policies from other websites.  That’s a mistake, and can lead to significant problems down the line.  For example, various states have enacted “shine the light” provisions which mandate that a website operator disclose what information is collected from users and how that information is used.

  10. Not seeking legal counsel from an experienced business lawyer who deals with startups - Finally, startups should seek out a business lawyer who has experience dealing with startups.  You wouldn’t go to a cardiologist for a brain issue.  Similarly, you shouldn’t go to your uncle who’s a divorce lawyer to handle your startup legal issues.   You want to find someone who has a track record working with emerging companies. 

Avoiding these common mistakes will save you time, money, and headache! 

Make your application stand out from the rest

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As part of my job as program specialist here at the Akron Global Business Accelerator, I manage client company intake and deal flow process. This means I review applications, handle questions from potential clients, present applications to our team and arrange applicant meetings with appropriate staff. I guess you could call me the “gatekeeper” to the Accelerator. What you may not know is that all incubators and accelerators have “gatekeepers” that manage the flow of applications for their organizations. If you’re thinking about applying, it’s important that your application not only stands out, but also makes it easy for them to do their jobs. 

Needless to say, I read a lot of applications and I talk to a lot of potential companies.  Over the course of my time here, I’ve encountered a few repeat scenarios that sometimes cause delays and roadblocks in the process.  In order to help you avoid these unexpected delays, I’ve compiled a list of things you should do to help get your company to the top of the queue.

Follow directions
I know it sounds simple, but those of us in my position love processes – it makes our jobs easier! So follow the procedure the incubator/accelerator has in place and have patience in the process.  It’s ok to follow up to ensure that they have received your application, but give them some time to read it and review it.  Sometimes we do our own preliminary research before we get back to you.  Just remember, if we tell you that the best way to get a meeting with someone is to submit an application, make sure you do that.

Be focused
Know the technology sector that you’re working in. You can’t possibly be all things to all people.  We are looking for focused entrepreneurs! Checking all of the boxes won’t get you to the top of the list – in fact, it will have the opposite effect.  If you apply saying that you are in the “Advanced Energy,” “Advanced Materials,” AND “Medical Technologies” sector, that’s a red flag to me.

Be concise
Be clear and concise when describing your product or service AND your value proposition.  This is probably the first time we’re hearing about the problem you’re solving and the product you’ve invented, so be sure that you are writing it in a way that ensures we don’t overlook it. If you provide us with the bones of your value proposition and product, we’ll be able to flesh it out in a follow up meeting.

Know your market
You should have a preliminary understanding of the market you are planning to operate in and who your customer will be.  While you don’t need a detailed market analysis right now (that’s what we’re here to help you with) you should be able to provide some verifiable numbers that substantiate the need for your technology and show that your company has high-growth potential.

Know what stage you’re operating in
Incubators are often interested in what stage of business you are in because they typically focus on early stage companies.  For the record, you can’t really be in multiple stages at once, so don’t check all of the boxes.  Really think about where you are.  Are you just imagining what you could invent?  Do you have a rough beta of your product but need further development before you can make a sale?  Or have you sold a few early renditions and are now working on more specs?  For help in understanding this, refer to The Ohio Development Services Agency’s Commercialization Framework.   

Do your research and know what you need
I’ll handle the latter part first – you need to know what YOU need.  Do you need space?  Do you need investment?  Both?  Know that ahead of time.  You also need to know who you are applying to, so you must do your research.  Some incubators provide space and business development support (like the Akron Accelerator) but do not provide investment monies to companies.  Make sure you’re not applying to this type of incubator if you’re only looking for investment.

All of these things will help you get one step ahead of those who are less prepared and there is always an advantage to helping us do our jobs! If you are interested in applying to the Akron Accelerator, please visit www.akronaccelerator.com/entrepreneurs/apply.

When cash flow is a challenge, get creative

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If you’re in business and have anything to do with the finances of the company, you most likely have heard people say that cash flow is the lifeblood of businesses. Well, they are right – it truly is.  Without it, things can come to an abrupt halt, interrupting important technical developments. In fact, stable and consistent cash flow is essential to protecting your business assets, sustaining an effective operation and retaining employees. 

But sometimes, your company may have to make tough decisions and look to unconventional sources of financing to pay down debt, make payroll and otherwise grow your company.

Some years ago, I was asked to take over a cardiology startup company that had hit the wall.  The sale of the company’s first product was starting slowly; the salesforce was too big for the introductory level of sales; the company could not pay its current bills; and it was choking on a small mountain of debt.  For all practical purposes, the company was D.O.A.  I wasn’t sure whether my immediate job was to save the company or arrange a gracious burial.

And then Stuart walked in to help me assess the company’s options. Stuart was with one of the investors.  He was a magician with operations – particularly cash flow.  In quick order, we had assessed the sales pipeline and re-forecasted a realistic sales level.  Then we had to take two initial important steps, in Stuart’s words, to “cut the cloth to fit the body.”

We had to right-size the sales force: Expenses had become a huge portion of the monthly burn rate. We evaluated the sales team and made the difficult decisions about whom to keep and whom to let go. This is never an easy task, but particularly so for the new “boss.” 

We reviewed operating expenses: We made immediate changes here and ended up with a positive cash-flow operation forecast going forward.   

However, we hadn’t dealt with the company’s debt. Most of it – about $375,000 in the early 1990s – was owed to vendors and suppliers we still needed to operate our business. Without a plan to address the debt, we would cease to exist. Stuart gave me some clues, but told me to figure it out on my own, which led to a third step.

We leveraged relationships with vendors and suppliers: With equity capital too far away and the ability to raise it uncertain, the only way to control our own destiny was to “borrow” from the vendors and suppliers we already had. I called each one of them and met with everyone I could.  I told each of them the same thing – if they would agree to the same plan, we could proceed. The terms included:

  • All 22 vendors and suppliers – 100 percent of them – had to agree to the same plan.
  • We agreed to pay COD (cash on delivery) for all new purchases and to pay the accumulated balance off over a 15-month period.  (Incidentally, the balances were not paid linearly over the 15 months; they started small and ballooned up near the end.) 

If all of these key vendors and suppliers did not agree, it was going to be over. But they all agreed to the terms and the company made all payoffs in the full amounts. We needed to re-negotiate the payoff plan several more times.  Once we established a short track record of paying what we’d said we’d pay, things changed.  We received tremendous support. It wasn’t always pretty, but the payment plan worked and the company lived to fight another day. 

The same basic principles hold true more than 20 years later. Recently, I helped a company here at the Accelerator that could not find any way to pay for its startup equipment. The founder arranged for enough working capital to sustain him through most of the projected initial period, but did not have enough to pay for the equipment he needed from a critical vendor. We called the equipment supplier and after some wrangling, they agreed to a 50 percent up-front payment and a payment of the balance next year. The balance is essentially on an informal lease – the company will not “own” the equipment until the second payment is made. The “loaned” amount was the missing capital that this company needed to launch.

Startups have many challenges – cash flow being one of the largest. But like everything else founders and their management teams face, creativity is a skill that most, if not all of them, possess. In situations where cash flow is a challenge, using that creativity to get out of the rough spots will go a long way toward keeping the company viable and growing over the long term.