Tag Archives: Q&A

Young Entrepreneur Creates a New Way to Smell Good

Get to know Allan Nichols and his startup, Sweet Buds. As a member of the EnTERPreneur Academy, Allan won a $1,000 grant from the Dingman Center earlier this year. This EnTERPreneur Academy company is redefining the way women wear perfume with an innovative earring backing that releases small amounts of perfume throughout the day. We caught up with Allan to check in on the progress Sweet Buds has been making since we last saw him at the beginning of the summer.

Tell us a little bit about your business. How did you come up with the idea?
We are Sweet Buds; a fragrance company developing earring backings that release perfume throughout the day. The idea came about in a study abroad class in China through the QUEST program this past winter break. My team members and I were very excited about the project and we decided to pursue it outside of the classroom and make an actual company around the idea.

How have you been working with the Dingman Center?
We applied for the EnTERPreneur academy the first time we heard about the incubator program. Being first time entrepreneurs, we really had no idea where to go from the initial idea. The Entrepreneurs-in-Residence have been very helpful guiding us along the way, giving us advice on how to brand ourselves, perfect our pitch, and providing resources and contacts we otherwise wouldn’t have access to. We have also used the Center’s Test the Market Kiosk to conduct preliminary market research.

Sweet Buds team using the Test the Market Kiosk in Van Munching Hall

Sweet Buds team using the Test the Market Kiosk in Van Munching Hall

How will you use the $1,000 grant from the Dingman Center?
So far we have used some of the grant money to pay for patent attorney fees and file for a provisional patent for our idea. I have also been collaborating with a freelance engineer to help us finalize the actual design of the product.

What has been the most challenging aspect of starting a business?
Right now our biggest challenge is the actual design of the earring backing and getting it to dissipate perfume the way we want it to. I have an initial prototype already 3D printed, but there are some revisions that need to be made. Trying to get the perfume to release correctly when punctured by the earring itself is difficult.

Who are your competitors?
One of our major competitors in this space is actually Dustin Hoffman’s wife, Lisa Hoffman. She runs a company called Lisa Hoffman beauty which has a wide range of fragrance jewelry. The main differentiator is that her jewelry utilizes fragrance beads while ours will use regular liquid perfume. The beads make the jewelry reusable but also more expensive. We plan on being daily disposables providing our customers a cheaper option to use when they want.

What entrepreneur or business person would you love to connect with?
I would love to connect with David Kelley and the rest of the IDEO team. I am really interested in design and what they have been able to create through their design processes is nothing short of incredible. We have a lot to learn in regards to design and he could definitely teach us a lot.

Have you had to change your business model since you started?
We are still in our infancy stages so we haven’t made many changes yet but we did spend a lot of time thinking about whether we wanted to license our designs out to larger retailers in a B2B model or directly sell our product to the consumers. For now we are sticking with selling to consumers but that could change down the line.

What kinds of resources will you need next?
As we keep designing and editing the prototype will require more capital to fund. So far we haven’t had to bootstrap this project but that might be a possibility to solve this problem. We are also seeking fragrance manufacturers to partner with and to put their perfume into our product. Contacts in the fragrance and jewelry industry would be very helpful.

AllanAllan Nicholas is a junior Mechanical Engineering and Operations Management double major. He is involved in QUEST, EIP, and Hinman CEO’s and is an aspiring entrepreneur.

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Student Entrepreneur Pursues a Mega Idea for Staying in Shape

Over the last few years, the Dingman Center has been working with Obidi Orakwusi to launch his company, Gym Supreme and its first product the Mega Bar. The Mega Bar is an innovative and versatile piece of exercise equipment priced lower than its competitors. A member of the EnTERPreneur Academy, Orakwusi won a $1,000 grant from the Dingman Center earlier this year. We caught up with the student entrepreneur to get an update on his business.

 GS logo

How did you come up with the idea?

The idea came to me in May 2011. School was out for the summer, I had no plans, and I realized I probably was not going to have a job. So I thought to myself, “why note create a job?” I got motivated and began sketching the concept of the Mega Bar on the back of a job application.

I designed the Mega Bar with a friend in mind. My friend had no gym membership, so every time he went back to school he had to settle for resistance bands, which are incapable of working the entire body. With that in mind, my goal was to create a product that would provide an effective workout at home. Unknowingly, my friend was my first target customer. Once I had a reasonable sketch, I made my first prototype with plastic straws, toothpicks, and paper clips to test out the simple physics. Then, I built a full scale plastic prototype. It took me some time to order a production prototype because I was constantly making measurement adjustments. I’m a bit of a perfectionist sometimes.

Tell us about your team.

During the process of developing my startup, I learned not to rush into decisions. I don’t have a full team yet, but I do have friends with skills and connections like my corporate lawyer, web site programmer, investment banking buddy and a colleague of mine with connections to QVC and sporting good chains.

How have you been working with the Dingman Center?

The Dingman Center has been an amazing resource for me. I get to meet and connect with fun business-minded colleagues that give me advice and feedback. Dingman Center Angels Review Days, workshops, and everything Dingman offers gives me different perspectives on what I knew and what I need to do. It always feels good when I say Gym Supreme is a member of the Dingman Center EnTERPreneur Academy at the Smith School.

How are you using the $1,000 grant from the Dingman Center?

The grant was an amazing cushion that opened up cap space for legal fees associated with the utility patent, trademark and the purchase of social media advertising. Although the grant will be split across several expenses, I know it would not have been possible to get all the legal work finished this summer without the grant.

What has been the most challenging aspect of starting a business?

For me it has been a mixture of funding and tedious patent work. The lack of funding prevented me from rushing into decisions because when you have plans that cost more money than you have, there is usually a wait period between milestones. The wait allowed me to analyze needs and create a hierarchy of tasks.

What goals have you set for the upcoming year?

One of my patents arrived on my birthday–that was a nice gift. The main goals remaining for 2013 are the Pitch Dingman Competition and a Kickstarter pre-order. The Kickstarter campaign is time dependent on the number of potential consumers I attract using various social media campaigns. When I feel there is enough interest from a significant number of followers that will likely purchase the MegaBar, I will launch the pre-order. With good revenue from that, Gym Supreme will become eligible and will apply for Cupid’s Cup in 2014, beginning the search for capital.

Have you had to change your business model since you started?

Oh yes. Initially, I was focused on a model that cuts out the middleman in order to maximize profit from sales and avoid margin reductions from wholesale. I soon learned that avoiding the big retail orders might not be effective because I would give up visibility on very popular retail platforms and have to rely solely on my own marketing to make sales. This would result in an increase in consumer acquisition costs and a decrease profit. That strategy is possible, but requires too much capital infused into marketing. The model is evolving to include a platform that will provide recurring revenue if properly executed.

How do you stay motivated to work on your business when success doesn’t come as quickly as you hoped?

I believe there is a reward associated with the risk I am taking and the reward is success. When I imagine the success of Gym Supreme I stay focused, get excited, and keep going because I am determined to reach that goal. If I give up before anything significant happens, I have defeated myself.

GDP_9540 (1)Obidi Orakwusi is the Founder of Gym Supreme and a member of the Dingman Center’s EnTERPreneur Academy. Stay connected with Gym Supreme on Facebook and Youtube or visit www.gymsupreme.com.

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Business Rx Entrepreneur Q&A with Elana Fine – Part 8

Elana Fine, Managing Director of the Dingman Center recently participated in a live chat on Tuesday April 23 with the Washington Post’s Capital Business magazine for their Business Rx column answering questions from regional entrepreneurs on improving or starting a business. This post features some of the questions from the live chat. Follow the Dingman Center’s Facebook Page and Twitter Page for information on the next live chat and other Dingman Center news and events.

Q. What kind of return do investors like to see within 1 year – 18 months of Series A funding? For example, if a start-up raises $3 million in Series A, at the end of 18 months, what’s the minimum profit margin the company should aim to achieve?

Elana Fine: Investors (meaning VC/angel in this case) actually don’t expect a return at all in 12-18 months. They are investing for the longer term – and understand that you will likely need additional investment before you exit (usually via acquisition or IPO). They invest in companies in big markets that might generate a 3x-10x return.  The investments are illiquid compared to the stock market and therefore riskier.  In exchange for this risk and longer holding period — the cost of venture capital is high.  Most venture investors don’t expect there to be profit margins right away because they understand the money it takes to scale a company.

Q. I have my own consulting business focused on data analysis, research, writing, and project management. I had started consulting when I lost my job a few months ago and found great success right away leading to a full-time offer that was too good to refuse. I want to continue consulting through my own business and have the time to pursue them, but I am wondering about the ethics of doing so.

Elana Fine: We work with a lot of companies who “moonstrap” their startups – working on them after normal work hours. I think the big question is whether you are competing with your employer — that would certainly cross the ethical lines.  I’d always go with the tenet of “honesty is the best policy.” If you are concerned, have an honest conversation with your employer. If you are running the business on your own time and it doesn’t conflict, shouldn’t be a problem.  They might be excited and impressed by your entrepreneurship!

Q. I have been following the Boston marathon bombings and think I have some good ideas for facial recognition software. I have a few friends that are coders and could help. Would a VC invest in this kind of business?

Elana Fine: I think VCs would (and have) invested in facial recognition and other security/identification/verification software.  However, they won’t invest until you have something up and running and have some initial customer traction.  I’d start by doing a competitive analysis. There were a lot of companies started in this space after 9/11. Would be interesting to see where they are now and how far the technology has come.

Q. I have been a nonprofit management generalist for 5-6 years and I recently started a consulting firm working for myself. I have been lucky and have gotten several contracts in the first few months. So far I’ve been marketing pretty broadly and while that has been successful, would it be wise to hone in on a certain expertise, or is it better to remain a generalist? Also, at what point is it recommended to work with sub-contractors? Is it ethical not to tell clients when I choose to work with a sub-contractor? Thank you!

Elana Fine: Hmmm… two questions on ethics in a row. Happy to be a moral compass 🙂  I’m actually not sure on the ethics relating to sub-contractors. I will take part one though. As a consultant I think you do benefit by becoming a specialist, as long as it is in a large enough market where you can build a strong business. You need to start with a market-sizing analysis around your expertise and broaden or narrow based on your skill set and potential demand.  This area has A LOT of consultants, so you’ll really need to focus on refining your marketing message. I think your expertise also drives the price you can charge.  Think of a handyman as an example — most often a generalist that can do a lot of different things in your house will have a lower price point.  However, when you really want to redo your bathroom, you call in specialists who will be more expensive but will know how to do the job.

Q. What trends are you seeing in angel financing? Do you think we’ll see more funding this year?

Elana Fine: Honestly, I think angels are having an identity crisis.  Angel activity across the country increased significantly in the past two years. Now they are facing a Series A crunch – not enough early stage VC capital to fund all the companies that have raised money.  This wave of investments also differs greatly from 5-10 years ago because the companies looking for Series A are at later stages now that software development costs have come down. Angels acted like Series A investors — so are they now looking for Series B investments? And if that is the case, what does that mean for valuation and their equity positions? Will their holding period be shorter? I’m hopeful, but I don’t think we’ll see as much funding this year until we start seeing the companies that were funded in last 24 months receive follow-on capital.

Q. I’m a student startup and am in the finals of a business competition. Obviously, I’m in it to win it. When I do, what are the first steps I should take in evaluating where to allocate the prize package?

Elana Fine: Great attitude – you have to always compete to win!  Be very thoughtful about where to allocate your winnings and don’t necessarily assume you need to spend the money all at once.  Make sure to include your use of funds in your application/presentation — usually judges focus not just on the company, but the ability of the team to use the prize package to take business to next level.  If you think you’ll need additional investment, use the money to get customer or user traction that will prove demand for your product and validate your business model.  If this is a business plan competition and you haven’t already built something — use the funding to get a minimally viable product out to market to start getting feedback.  As a student you need to be careful – winning a large prize package can also create a lot of temptation.  Be smart, responsible and resourceful.

Q. As a successful woman in the finance and entrepreneurial worlds, what advice do you have for other women looking to start businesses or work in investment banking? Have you read “Lean In?” Is Sheryl Sandberg the Gloria Steinem of our time?

Elana Fine: My advice — DO IT!! I haven’t read “Lean In” yet, but it is next on my list. I’ll report back next month.  Women have so many of the necessary skills to start and grow businesses (drive, persistence, charisma, multi-tasking, delegation, etc.), but we just don’t see enough women entrepreneurs. I think the one ingredient we might be missing is appetite for risk and potentially over analysis.  We have great intuition and we need to apply it to starting more companies.  I don’t have the solutions, but it is really an issue I’d like to personally spend more time on.

cupidscup-033012-185_hr1Elana 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.

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Business Rx Entrepreneur Q&A with Elana Fine – Part 7

Elana Fine, Managing Director of the Dingman Center recently participated in a live chat on Wednesday February 19 with the Washington Post’s Capital Business magazine for their Business Rx column. Elana answered questions from regional entrepreneurs on improving or starting a business. This post features an excerpt from the live chat that was posted on washingtonpost.com. Follow the Dingman Center’s Facebook Page and Twitter Page for information on the next live chat and other Dingman Center news and events.

Q. What are your thoughts on getting involved in an existing franchise vs. starting my own company?

EF: It depends on your risk tolerance and the current opportunity. Franchising can be a rewarding route to start a business with a model that has been well tested. Like any start-up, it has it challenges, but it gives an entrepreneur an opportunity to operate an established brand. That being said, this is quite different than pursuing your own idea, dream and passion and seeing something grow (or fail). The latter may have higher risks because the idea and market is unproven, but more potential for upside.

Q. Have you owned a business? How did you become an expert on start-ups?

EF: I was an early employee at a start-up, technology-focused investment banking boutique. Our team was growing our own business while also advising early stage companies on raising private capital and buy side/sell side acquisitions. We worked with a variety of technology companies and often helped refine their growth strategy and business model to prepare them for venture financings or for exit. In my current role, I work closely with many student start-ups, as well as regional entrepreneurs.

Q. I know that it takes time to build a business. What is a reasonable amount of time to give a business before knowing if it has been successful? I guess the real question is: How many months of expenses should a person have when getting started until the income becomes regular?

EF: Ooh, that is always a hard question because it really depends on the type of business. If you are starting a restaurant, you may start generating cash flow sooner than if you are developing cancer drugs. I’d say two things:

  1. Depending on your idea, you want to put a plan in place to score card yourself to know if this is an idea worth pursuing or whether you should pivot or lick your wounds and admit “failure.”
  2. Always assume it will take twice as long and cost twice as much.

Q. I’m thinking of starting a tech company. Should I build it here in D.C. or move somewhere like Silicon Valley or N.Y.?

EF: STAY HERE! There is a thriving ecosystem of technology entrepreneurs and mentors — regardless of what you might otherwise hear. The community is supportive and collaborative with a deep bench of seasoned executives. The imminent decline in government spending should also free up tech talent who, after some soul searching, might find working at start-ups more rewarding than consulting firms. There is a funding issue, no question, but there is also a lot of expertise in grant funding and other non-dilutive financing.

Q. Is one age better than another for starting a business? I know that experience and age go together. I have known several people who reached their mid-50s or early 60s who decided to become consultants and cut back from their full-time jobs. I know college graduates who are used to living on a shoestring budget and could take the chance. But, I am somewhere in the middle. I am used to my current income level, but not my current job situation. I know that I could offer my services and have a better quality of life, but I am not sure if my finances would agree.

EF: Entrepreneurs are like marathon runners (in many ways) — they come in every age, shape and size. Young entrepreneurs are fresh with fewer financial burdens — and have the energy it takes to get ideas up and running. But they are inexperienced in hiring and managing teams, developing customer and channel partnerships, and often impatient with the ups and downs and highs and lows of starting companies. Identify your skill set as an entrepreneur and look for co-founders that might have complementary skills. There is no question your bank account will take a hit, but sounds like being your own boss might be worth the tradeoff.

Q. What is the Cupid’s Cup competition I saw a mentioned on the Dingman Web site?

EF: Cupid’s Cup is a national business competition, sponsored by Kevin Plank, founder and chief executive of Under Armour, for students who are currently running businesses. Finalists will compete for $50,000, and access to Kevin Plank’s network, on April 5th here at the University of Maryland.

Q. As you know, Europe is in the midst of economic crisis. What is the best business that could survive this economic turbulence? Even big companies have already collapsed.

EF: The businesses that are most agile and proactive are more likely to survive. There is no magic formula — but if you are starting a business and expanding internationally, you need to think carefully about which markets to approach first. Those that are more unstable might be lower priority. Other emerging economies with vibrant start-up cultures, such as Brazil, might be a viable option.

cupidscup-033012-185_hr1Elana 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.

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Business Rx Entrepreneur Q&A with Elana Fine – Part 6

Elana Fine, Managing Director of the Dingman Center recently participated in a live chat on Wednesday January 23, 2013 with the Washington Post’s Capital Business magazine for their Business Rx column. This post features the answers to some of the questions posed by regional entrepreneurs on improving or starting a business. Follow the Dingman Center’s Facebook Page and Twitter Page for information on the next live chat and other Dingman Center news and events.

Q. I’ve seen a trend for healthy eating, but there doesn’t seem to be any major chain known for its fast food being completely good for you. Do you think a chain of drive-through healthy fast food restaurants would prosper in today’s market?

Elana Fine : This has proven to be a very tough market to crack.  It turns out there is actually only a small part of our population that demands healthy fast food options.  In fact, we are actually seeing the opposite happen with burger chains and cupcake shops exploding.  Subway might be a good model to try to imitate. They took something standard like a sub and pitched it as a healthy choice.  Look for a product that requires limited behavior change, but is significantly healthier than a burger.

Q. I have a great idea for a small business that would allow me to do something fun while filling a void in local services. That being said, I’m a federal employee who is slowly paying down my law school debt while saving for a house and starting a family. How would you advise someone like me to deal with the insecurity of giving up a steady paycheck and benefits?

Elana Fine : This is often the hardest obstacle in getting started.  A lot of times entrepreneurs are the only ones who think their idea has legs, so it becomes hard to build support and justification for leaving a job.  You need to back your idea with data on market needs, look closely at those examples, and understand the startup costs and runway needed to fund the business.  You will probably need to max out your credit cards and sacrifice some savings, so if you don’t completely believe in the idea or your ability to execute, then hold off. Finally, you will need to sell the idea to the people who will be supporting you! Start by pitching to them the same way you would pitch your business to a customer.

Q. I think that one of the reasons that I continue to work for someone else is that I know I don’t have all of the skills needed to run a business by myself. I need a partner who could take the lead on sales while I take the lead on other aspects of the business. How can I find a like-minded partner for a new business?

Elana Fine : You are smart to understand your own skill set and where you might need help.  I’d suggest starting your search with a couple avenues.  First, find industry networking opportunities where you might find others with similar interests, yet complementary skills sets.  Second, look for resources, such as CoFoundersLab, a local startup that works with entrepreneurs to find their co-founders.  Third, you can always recruit in the way a larger corporation or late stage startup would, look for successful companies in the sector and try to hire their executives. You might find that there are a lot of people itching to do something new.

Q. I recently read that VCs base their investment decisions more on the entrepreneur than on the business. I am used to focusing on selling my business idea when I pitch. Do you have any tips on how I can better pitch myself and my team as entrepreneurs to VCs?

Elana Fine : I’d say it isn’t just the entrepreneur, but the entrepreneur’s ability to execute.  While the idea and the business are important, the real differentiator is the entrepreneur’s plan for growing the business.  VCs are looking for unique business models and monetization strategies rather than repeats of past successes.  An entrepreneur can’t walk in and say they are going to start a mobile app company that will generate revenue through downloads and ads — that has been done before and VCs want to hear something different.  It is the entrepreneur’s job to sell them on how they see and do things differently.

Q. I’d like to start a business to help people with personal finance like investing for retirement, saving for college, debt management, etc., but most businesses like this are located in office parks where people aren’t likely to see it by passing by. How do I market such a business?

Elana Fine : These kind of service businesses typically don’t require a high priced storefront location because someone looking for a personal finance company is probably not looking for one while they are taking a stroll like they would a coffee shop.  Storefronts have high fixed costs, making it hard for a services business that may have more variable revenue streams.  You would be smart to consult a marketing professional, but from a startup perspective, you should look at other companies on the market like HelloWallet, Mint.com and others that are building Web-based, scalable offerings in this market.

Q. I have a full-time job as a Web developer and often think that I could jump ship and become a freelance developer. However, I also know that when someone sends me an unsolicited email offering a service, I almost always ignore it. How can someone start offering a freelance service without having their offers ignored?

Elana Fine : There is a huge void in the local market for development talent, though I wouldn’t suggest sending unsolicited emails. Instead, you could make a name for yourself quickly by taking on some small projects for local startups (even if for equity at first).  The startup community is close-knit and likely to make referrals for you if you do a good job.  Announce yourself at a D.C. Tech Meetup, local FB community or other events and you might be on your way!

Q. I recently read that one of the biggest mistakes a startup can make is asking for too much money. How can entrepreneurs zero in on the right amount of funding to ask for? Should you ask for the amount that you need or the average amount a particular firm usually invests?

Elana Fine : It is a delicate balance to find the right amount, but it does lend to your credibility as an entrepreneur.  Different companies will have different funding requirements, so I wouldn’t go for an average.  You need to target the firms based on whether they write checks in the range you need.  If you need $10M, don’t go to a VC that focuses on $3-$5M. I’d make two recommendations. First, you need a solid financial model that credibly factors in R&D, sales and marketing and other expenses (low on salaries!). Once you figure out the best case, figure out the worst case and plan for that scenario. Think about how you can raise money in tranches, receiving the 2nd tranche after you have hit some performance milestones.  Second, make sure you are approaching VCs that invest in your sector, stage and dollar amounts. Don’t waste your time if there is not a good fit.

Q. What is your opinion on using crowdfunding platforms such as Smallknot and Kickstarter as a way to fund small businesses? Is there anything small business owners should be mindful of?

Elana Fine : I think Kickstarter and other crowdfunding platforms are a viable alternative for bringing new products to market, but I’d suggest learning the ropes before engaging.  Each platform has its own limitations and learning curve.  You could spend a lot of time on a Kickstarter campaign and never get close to reaching your goal. I’d be sure to pursue other funding alternatives in addition to crowdfunding.  You need to be thinking about your next move after you fund the initial project – what will you do next to build a business? How will you fund your next steps?

cupidscup-033012-185_hr1Elana 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.

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Business Rx Entrepreneur Q&A with Elana Fine – Part 5

Elana Fine, Managing Director of the Dingman Center recently participated in a live chat with the Capital Business section of the Washington Post for their Business Rx column. Elana answered questions from regional entrepreneurs on improving and starting a business. This post features some of the questions from the live chat. Follow the Dingman Center’s Facebook Page and Twitter Page for information on the next live chat and other Dingman Center news and events:

Q. How do you think small businesses should use advertising to help sales? What are new and efficient opportunities?

Elana Fine: Depending on your business, online advertising can be an inexpensive and somewhat effective tool to build brand awareness to a target group of customers. Advertising platforms are sophisticated in their ability to use customer behavior for ad placement. However, you get what you pay for — you are still focused on customers that might not be looking for the product you are selling. Small businesses might be better served by lead generation platforms that might better connect you with potential customers, even though you may have to give them a higher percentage of your revenue. If you are brick and mortar — focus on promotions that will drive foot traffic.

Q. I am looking to open a small restaurant, and I am looking to consider my revenue before I can decide what costs I can incur. How should I calculate anticipated revenue for my restaurant?

Elana Fine: This is a tough one to answer in just a few sentences as it really depends on a number of factors. Start building your model based on expected traffic, expected revenue per customer based on price points (is this fast food or sit-down, low-end or high-end?), throughput of customers per meal (are you open for breakfast, lunch or dinner? etc.) You also need to forecast how long it will take for traffic to ramp up and how much it will cost to drive traffic. Also, think through the mix of new customers and repeat ones. Is this something people will eat once a week or once a month? You also need to think through the ongoing expenses — once you build out the space, you’ll still have food expense, which can be costly. Since you can’t store most food inventory for very long, you have to figure out a sophisticated approach to forecasting demand. So … you have a lot of questions to ask yourself.

Q. I want to start a business but not sure in what industry — my passion is sweets (candy/cupcakes/chocolate), but not sure if this can be profitable enough to sustain. Any suggestions?

Elana Fine: There are certainly a lot of options out there for sweet tooth’s — so clearly there is a business model to be found. The issue will be finding a niche for yourself among the many cupcake companies. The takeaway from the proliferation of cupcake and hamburger chains has been that people are willing to pay for high-end treats. If we are going to eat “unhealthy,” we want to do it right. This is also part of an experience — so creating a unique experience for buying candy, cupcakes, chocolate or all three is part of the model just as much as the products themselves. Look at what has been successful among brands like Georgetown Cupcake, Pinkberry and Elevation Burger. Think about what they have done well and where there might be additional opportunities that their current product lines don’t address.

Q. It would seem to me that the answer is almost right in front of this writer: If you want to have a sweets shop, you really need to get into some bakery that specializes in this to get the inside experience of how this business runs (i.e., store size, ingredients order, recipe development, etc.).

Elana Fine: Yes, get smart and educate yourself. Learning from others’ successes and mistakes is better, faster and cheaper than learning from your own.

Q. How much of my savings should I put up for starting a solo PR agency serving medical, dental and other health care professionals? I can’t borrow because of an ongoing foreclosure. I have savings, but I’m not sure how much to tap.

Elana Fine: Before investing your entire nest egg, think about how you can test the market for your services. Talk to health care professionals first and understand their current demand, how much they will be willing to pay for a retainer and what kind of pilot arrangement they’d be willing to commit to. Understand your competition — are they using other providers (which would require switching costs) or are they not engaging any providers (which might mean a longer sales cycle because they don’t have a budget)? Try to forecast when you might line up some initial paying clients and when you will have enough for the business to be sustainable. If you don’t have enough runway in your savings, you may need to think about initially consulting as part of a group or on the side before you fully commit.

Q. For tech start-ups, what are your thoughts on raising seed funding via crowdfunding (i.e., Kickstarter)? Will this scare away formal forms of financing down the road (e.g., venture capital)? If so, how should entrepreneurs address that?

Elana Fine: VC firms will need to be open minded about crowdsourced funding because of its increasing popularity on sites such as Angel List. These sites also give VCs insight into deal flow and help build future pipeline of early stage deals. Entrepreneurs do need to be aware of their capitalization and careful about having too many small investors that might cause problems in later rounds. I think crowdfunding can be a helpful substitute to a friends and family round—to help fund development so you can test the market. Beyond that, I think it is important to really know your investors and what they can bring to the table in exchange for equity. Angel investing is very risky even for the most sophisticated investors, so the diligence really needs to go both ways.

cupidscup-033012-185_hr1Elana 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

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Business Rx Entrepreneur Q&A with Elana Fine – Part 4

Elana Fine, Managing Director of the Dingman Center recently participated in a live chat on Wednesday October 17with the Capital Business section of the Washington Post for their Business Rx column. Elana answered questions from regional entrepreneurs on improving and starting a business. This post features some of the questions from the live chat. Follow the Dingman Center’s Facebook Page and Twitter Page for information on the next live chat and other Dingman Center news and events.

 Q.  Elana, I am building out my software business and I want to have an advisory board. Is this a good idea? How do I compensate them?

Elana Fine:  All startups should have an advisory board that can balance out any voids in expertise you might have and to help make additional connections. Some advisory boards are given equity, but some also volunteer their time because they enjoy working with early stage companies.  More importantly, you will need to differentiate between an advisory board and a Board of Directors (BoD).  A BoD has very specific rights and accountability whereas an advisory board does just that – advises the company, but does not have the same kind of decision making power as a BoD.  Typically, board seats refer to a Board of Directors and are related to equity stakes granted via angel or VC financing terms.

Q. I am a graduate student at a local university and I want to start a business with my engineering professor. How do I get started? No lawyers please – I already have lots of loans!

Elana Fine: You don’t need lawyers…yet.  If you and your professor are interested in spinning out a company based on university IP, the first place to go is your Office of Technology Commercialization. They will help you through the process of licensing the technology from the university. I’d also suggest doing lots of market research as well as speaking to a lot of customers in different industry verticals to understand the commercial opportunities of your product. Steve Blank’s Lean Launchpad class is a great model for this. Startups based on university technologies have significantly better chances of success, so good luck!

Q. My business has experienced a lot of growth in the past year and I can no longer run daily operations alone and I’ve recently hired 4 new employees. I have experience running a business, but very little experience being a boss. Can you give me some general advice on how to manage my staff? 

Elana Fine: We see a lot of entrepreneurs start to stumble a bit while they transition from starting a business to growing a business.  At your stage you need to make sure you hire staff members that are also self-starters who will not need to be micro managed.  You need to find people who will be almost as passionate and committed as you are, or your will lose momentum.  You also need to make sure that you keep your team focused.  A lot of startups fail because they lose focus and try to do too many things at once.  I’d make sure that 80% of what your team is working on is part of your plan (which will always be evolving) and the other 20% of their time is available to be opportunistic.  Have a checklist of top three priorities and if something doesn’t fit, don’t do it.  You should also make sure you understand your team’s work style and make sure they understand yours.  For example, if you’d prefer to be in touch via email. If you plan to have daily or weekly meetings, make sure they are on the calendar and don’t get skipped.

Q. Are you aware of any new state funding or tax breaks for entrepreneurs in Maryland? I want to start a kids clothing boutique but the tax breaks and credits seem to be only for biotech companies.

Elana Fine: There are a number of new funding opportunities in Maryland through TEDCO, such as the Propel Baltimore fund and Maryland Innovation Initiative but these are all more focused broadly on technology vs. apparel and retail.  I do not know of any breaks for a retail boutique.

Q. I have a full-time job and sometimes I do some side work by helping friends with their websites. While I charge for my services, I haven’t created a formal business. I know that if I ever formally create a small business, I will have to separate my personal expenses from my business expenses. Should I begin separating personal and business expenses now while my business is still informal?

Elana Fine: I’m certainly not an accountant, but sounds like you are at the point where you should keep a separate account for those expenses. Business expenses are generally tax deductible (so I hear) so you are better off keeping them separate.  If you are charging for services it is kind of like being half pregnant – you either have a business or you don’t.

Q. Does Maryland have any areas where students can run their businesses? It would be great if I could operate at a football game or at a basketball game.

Elana Fine: Our team at the Dingman Center is working very hard to create additional opportunities for student businesses on campus. There are a few regulatory/bureaucratic hurdles we are facing, but we are working with a number of partners across campus to create student marketplaces. Stay tuned!

Q. I am currently interested in starting my own brand of ice cream. How do I get in touch with an ice cream manufacturer who will be willing to produce my ice cream?

Elana Fine: I’d suggest networking with ice cream shops to understand who supplies their product. If you create a flavor they like, they might be more likely to make an introduction! You may also want to look in the dairy cases of high end stores like Fresh Market and Whole Foods who carry a lot of upstart ice cream companies – I know a few are made locally. There could be some partnership opportunities there.

Q. My friend and I started a company. I designed the product and he was going to be the COO/CFO. Now, we are close to getting some VC money and I am afraid I am going to be Eduardo from Facebook, the co-founder who winds up with nothing. What do I do?

Elana Fine: I just gave a few answers above that indicated not needing lawyers, but in the case of protecting your equity stake and rights you do need counsel. When you are negotiating term sheets with VCs, make sure you understand the anti-dilution provisions and what will happen in future funding rounds. Most founders will get diluted along the way, but you need to make sure you understand how, why, and when that will happen. In many cases you will have a smaller stake of a larger pie if the valuation of your company continues to increase. In general, I will repeat three pieces of advice that one of our angel investors gives 1) READ THE DOCS 2) READ THE DOCS and 3) READ THE DOCS.

Q. If the fiscal cliff happens, where do you see angel funding in 2013?

Elana Fine: I think the biggest driver in angel funding in 2013 will be related to increased VC funding or exit opportunities. Angel investing has been incredibly strong these past 2 years, but investors will hold back if they don’t see their companies receiving follow-on capital to grow the business and increase its value. The same goes for exit opportunities, if strategic buyers sit on cash and don’t grow through acquisition, angel investors will be less inclined to take the risk and will allocate investment dollars in safer alternatives. I think crowd funding is only one aspect of the JOBS Act that will have an impact. The increased cap on private shareholders, reduced disclosure requirements and broad classification of “emerging growth” public companies increase the access to capital and reduce the cost of taking companies public.

Q. We are trying to sell a new product in a fast growing market with existing competitors. Any thoughts on how we can introduce our product and gain some attention without cutting our prices too low or being forced to spend a ton on marketing? 

Elana Fine: It’s hard to say without knowing more about the product or the market you are targeting.  However, the key is just that. Understand what part of this growing market you can gain the best traction. Is there a customer segment that will appreciate a feature of your product vs. another? Is it a high end product that differentiates by a high level of customer service? Or will you in fact gain more traction by being a low cost provider? In a fast growing market, a newcomer can often be more nimble in attacking the fastest growing portion of the market, but you have to do your research to find your own niche. We often suggest that companies identify their first target market and then test three different ways to attract that market whether via social media, paid advertising, earned media, promotional events, or word of mouth. See what works and then double down.

Q. Hello, my wife and I have a small non-franchise residential cleaning service in Maryland. So far, our only marketing is through word of mouth and a simple website. Where should we go from here in terms of marketing our business?

Elana Fine: There are actually a couple of new local companies like Seva Call, Urgnt.ly and Trust Pages that are focused on connecting residential service providers to customers. Word of mouth is really the best way when it comes to service providers coming in to your home so you need to think about how you can engage new customers that will make referrals. You could think about going out to real estate agents and offering to clean houses for free before going out on the market.  If you do a good job they may recommend you to whomever buys the house or they may pay you to do the next job. One free cleaning may pay dividends in the future.

Q. I have an idea for a business I’d like to start, but I’d love to have an advisor who could help me think through all the particulars. Is there a resource in the D.C. area for that?

Elana Fine: There are a lot of great resources for startups around the area, such as FoundersCorp, Maryland’s SBDC, Startup MD/DC/VA, Foster.ly, DC Tech Meetups, ProudlyMadeinDC, Rockville Economic Development Inc., etc.  However, before you start thinking about paying for an advisor you need to first find the right advisors that understand the problems your company is tackling as well as the challenges that you are facing.  When you network, specifically say “I’m looking for someone with a skill set in X that can help me with Y.” I know I’m always more likely to make connections when it’s good match.

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.

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Business Rx Entrepreneur Q&A with Elana Fine – Part 3

Elana Fine, Managing Director of the Dingman Center recently participated in a live chat on Wednesday September 19, 2012 with the Washington Post’s Capital Business magazine for their Business Rx column. Elana answered questions from regional entrepreneurs on improving or starting a business. This post features some of the questions from the live chat. Follow the Dingman Center’s Facebook Page and Twitter Page for information on the next live chat and other Dingman Center news and events.

Q. How important is it to write a business plan? If I am not looking for a loan or investment money, do I really need one?

Elana Fine: We’ve been encouraging entrepreneurs to use planning resources such as the Business Model Canvas or other simple tools before writing an entire business plan. This type of tool really helps you identify your value proposition, target customers, key partners, etc. before spending the time to write a full plan. This is where you can best determine the feasibility of an idea and how you will start.

Q. Do you have any recommendations for software or any other tools, apps or gadgets that could help entrepreneurs brainstorm or think through business models, financials etc.?

Elana Fine: I’m a big fan of the book “The Business Model Generation” which includes an interactive business planning canvas (actually a great iPad app). There are other tools and methodologies such as Lean Launchpad that help guide through the venture creation process. Best thing to do is also bounce your ideas off as many people andpotential customers you can to get feedback on whether they’d buy your product.

Q. Any specific advice for women looking to start a business? I have three young kids and am afraid I cannot do both.

Elana Fine: I know a lot of women who have initially started their businesses in their home so they can still be close to their kids. Identify a few successful local entrepreneurs and pick their brain about how they started and balanced their various obligations. I’d also say build a great support system of friends and family who can help pitch in while you get things started.

Q. I am noticing two trends lately: some businesses are closing their brick and mortar operations and moving online, and some online only businesses are opening brick and mortar stores (e.g. Buy Buy Baby). What would you recommend for a boutique stationery/paper goods store? Online only, brick and mortar, or both?

Elana Fine: If your business requires a lot of customer service and will rely on walk in traffic, you still might need a physical location. For a stationery or paper goods store I think it really depends how you will differentiate from your competition — if it is on price and variety — you may be able to build a business online, but if you are providing guidance/advice on invitations or other customized goods, you might be able to better serve your customers either from a home office or a brick and mortar store.

Q. How do you suggest cutting through the clutter of the digital ad world to promote my business? My sales are down and looking for ways to improve.

Elana Fine: Social media and digital advertising can often be inexpensive ways to attracts users and customers — but you need to think it through strategically versus just spraying and praying. You need to really identify your target demographic and where you can find them online. Building a social presence can take time. Experiment with social media and advertise on sites using small tests and see what is most effective.

Q. For the past two years since I was laid off, I have been doing freelance writing. With the rise of content mills and the “all information should be free” expectation, I’m pessimistic about my long-term ability to support myself. How do I go about trying to figure out what else I can do to make money? Should I try to reboot myself as a corporate good-grammar coach, or try something else entirely?

Elana Fine: Writing has become commoditized — however the use of the Web now requires organizations to create a lot of content and put a lot more information online. There may be opportunities to help organizations with their Web sites or taking internal information and repackaging in a more digestible online format.

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.

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Business Rx Entrepreneur Q&A with Elana Fine – Part 2

Elana Fine, Managing Director of the Dingman Center recently participated in a live chat with the Washington Post’s Capital Business magazine for their Business Rx column answering questions from regional entrepreneurs on improving or starting a business. This post features some of the questions from the live chat. Follow the Dingman Center’s Facebook Page and Twitter Page for information on the next live chat and other Dingman Center news and events.

Q: A lot of buzz has been going around on the lean start-up methodology being applied in technology and other industries. How can first-time young entrepreneurs get their hands on training and implementing such methodology to their business ideas?
A: The best way to learn about the process is to talk with start-ups to understand how they determined their minimum viable product and how they determined when & how to iterate. As you start your business “leanly,” you have to also think about the decision points to iterate less and grow more.

Q: How can entrepreneurs get more involved in the local community? I would like to interact with our start-ups on an informal basis, but don’t know where to turn.
A: The D.C. tech community is thriving, with plenty of options for entrepreneurs looking to get connected. Organizations such as D.C. Tech Meetup and Foster.ly are providing great forums for entrepreneurs to meet. There are also new incubators such as The Fort and Acceleprise that bring in mentors to help with their companies.

Q: I have an idea for a specific niche service market to build an online/mobile business and I need to develop potential revenue projections. While I am realistic I still want to be optimistic for a 3-5 year time frame. Could you provide some advice for a framework?
A: The best frameworks is a bottoms-up approach — identify your revenue streams and growth assumptions for each stream, then show how they grow over time. For example, if you are going to win two customers in month one, six customers in month eight and 20 customers in year two — the projections should reflect that growth and revenue expectations per customer (or user, etc.) over time. Top down, taking a large market and making assumptions about a percentage of that market you can capture usually leads to significantly inflated projections and doesn’t show advisers or investors that you have given thought to how you will methodically grow your business. It is also important to think about the bottom line — what are expenses associated with generating that revenue? To quote one of my favorite lines from our investors this year, “Is the juice worth the squeeze?”

Q: I am launching a new mobile app and I will need additional capital (maybe $250,000) to help complete the next stage of development. I think angel investors might be the right fit, but what is the best way to approach them and get their attention?
A: In the current environment, the best way to get funded for a mobile app is to show that you have traction with users. Get a minimally viable product out there and show that you can reach your users and understand their needs. There are so many apps in the marketplace that it is hard to convince investors that you can break through the noise.

Q: What is the line between a hobby and a business? Is there a financial threshold that one must cross before having to deal with becoming a formal business? For example, if a friend knows I have my own personal Web site and offers to pay me to set one up for him, have I started a business?
A: I’m certainly not an accountant or tax specialist, but if someone pays you for a good or service you have provided, that is technically a business. A hobby would be if you liked to set up Web sites for friends for free.

Q: I’d like to start an interior design business. I believe in my talent, but I don’t exactly have a portfolio full of projects that I can show to potential clients since I am fairly new at this. What is the best way to get my foot in the door and start establishing myself?
A: Would you like to start at my house? All kidding aside, figure out what kind of projects you can do in your spare time for family and friends for free, and use that to start your portfolio. Even if it is a small room here and there, you can create the “before” and “after” shots to convince others of your talents.

Q: I’ve been working as a solo consultant to nonprofits. I’ve been courted by a consulting firm, which is attractive because they would handle billing, provide a training system for me to use with clients instead, and will help market me. On another level, I have some concerns: I would still have to get my own clients, they want exclusivity (so I can’t serve other clients on my own, without giving them a cut), and a non-compete clause (I’m prohibited from pursuing their clients if I leave, but they get a portion of my earnings for a year after I leave — because they have trained me). What advice do you have on weighing whether to remain solo or join a firm?
A: This is a really tough question and really depends on how important it is for you to have control over your company. You may be able to generate more business by being able to leverage other infrastructure, but you do lose independence and flexibility when you join with others. It sounds like you could probably continue with being a sole contractor and find other outsourced service providers to handle billing and training, without signing on with another firm.

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.

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