Lack of confidence in your self, your product, and your startup is a surefire recipe for disaster. At the other extreme, too much confidence or arrogance can kill you just as fast. It’s always painful when a startup fails, but as a mentor to founders I would hope that you can learn from these failings and not stumble on the same issues:

1. “Business plans are for dummies.” Some startups think business plans are only for investors. In reality, you should do a business plan primarily for yourself, as it forces you to think through all the elements. If it’s not written down, you can’t measure it, and thus you can’t manage it. Also written plans are much more effective communication to your employees, lawyers, accountants, and other key players in your rollout.
2. “It’s the market, stupid.” It’s great to have a passion about a favorite new toy you invented, but just because you love it doesn’t mean the whole world will love it. Another variation on this theme is the person who creates a “solution” from technology, and then makes up a “problem” that it will solve. There is no substitute for understanding the market, and sizing the opportunity, before you climb out on a limb.
3. “If we build it, they will come.” The hot term these days is “viral marketing”, meaning we won’t do any marketing, but our product is so great that everyone will know about us anyway by word of mouth and through Internet social networks. In most cases, viral marketing only begins to work after you prime the pump with several million in real marketing over a couple of years.
4. “We have no competitors.” VCs and angel investors hear this one all the time. The investor view is that if you can’t find any competitors, either you are not being honest, or you haven’t looked, or there isn’t any market for your product. Your funding request will likely go into the circular file.
5. “More features than anyone.” Just because you included all the features of Facebook, MySpace, Twitter, and LinkedIn in your new social networking product, doesn’t mean everyone will love it. In fact, quite the opposite usually happens, due to complexity and work to switch. Investors like laser focus on a market-need causing real pain.
6. “Microsoft is too big/slow to be a threat.” Usually the reason the big companies are no threat is that the market is too small. Competing with IBM, Microsoft, and other large companies is a very difficult task. Entrepreneurs who utter this line are kidding themselves. They may think it’s bravado, but investors think it’s stupidity.
7. “We have the first-mover advantage.” That’s probably the soft way of saying, we don’t have a patent or any “secret sauce” for a competitive advantage. Unfortunately, a startup with no brand name and no intellectual property is a sitting duck for the big slow company, as soon as they see you gaining a bit of traction. Sleeping giants do wake up.
8. “No need to risk my own funds.” This is usually seen as the difference between involved and committed. Investors expect the founder and other principals to have “skin in the game,” over and above “sweat equity.” If you and your friends are trying to play Donald Trump, don’t expect other mere mortals to carry the risk load for you.
9. “We’re funded, now we can relax.” Quite the opposite is really true. Now the real work starts to build a sustainable business. Now you have to manage to budgets and timelines, and avoid the temptation to splurge a bit on office space or too many new employees.
10. “Me, myself, and I.” I recently watched a promising startup I know wither and die for lack of funds because the founder refused to consider stepping aside as CEO in favor of a more experienced candidate, as a condition of a $1M VC investment. I reminded him that he could easily “kick himself up to Chairman”, but he wanted it all, and let ego take precedence over good business sense.

You probably think these are so obvious that they are clichés. I wish that were true, but I still see them happening every day. The most successful startup founders are never too busy to listen to the market, listen to their advisors, stifle their ego, and enjoy the ride. It’s a lot more fun than the alternative.

I have a certain friend who called me a while back, all excited about his latest revelation. “What if you could go to a web site and find all the recipes you could make today, with just the ingredients you already have in your kitchen? I’m going to start a website to offer this service!”

I’m sure you all realize that there could be quite a distance between a great idea and a great startup. But many people don’t have a clue on how to bridge the gap. So, trying carefully not to rain on his parade, I suggested to my friend that he complete the following analysis as due diligence on the idea before spending his life savings (and others) to roll out a solution:

1. Competitors are few. Use Google or one of the many other search engines to search for existing solutions to this problem. A search argument like “recipes from the ingredients you have on hand” might be the place to start. If you find ten competitors who already have this offering, it’s probably not worth going any further.
2. No known patents filed. Maybe the solution hasn’t yet been commercialized, but a patent has been submitted by someone else, putting your idea in jeopardy. Another series of searches on Google Patents and the US Patent Office site and Free Patents Online is in order at this point. Of course, you could pay a Patent Attorney a few thousand dollars to do the same search.
3. Large and growing market. Investors will expect market analysis data from a “credible unbiased third party” – that means a nationally known market research firm like Gartner, Forrester, IDC, or many others. Hopefully, you will find, with your favorite search engine, something like the “Cooking Sauces & Food Seasonings Market Report 2012.”
4. Real customer pain and money. Your own conviction that if you love the product, everyone will love the product, doesn’t count. Customers may “like” a product, but will generally only pay for things they “need,” physically or emotionally. Talk to experts in this domain (chefs, home cooking fanatics), and listen for hidden requirements and challenges.
5. Whole solution viability. Many products fail because of “dependencies” and hidden costs. Auto engines that burn hydrogen are “easy,” but getting service stations around the world and new safety legislation takes decades. Make sure you understand all costs, sales channels, marketing requirements, and cultural issues.
6. Motivated and qualified team is ready. The most critical step is to decide if you really have the passion, experience, and team for creating this solution and business. Startups are tough on even the most dedicated and passionate founders – others will likely fail, and definitely be unhappy. No idea is worth that.

I’m sure that many of you could add additional “idea due diligence” items, from bitter experience, that I’ve neglected to mention. By the way, if team experience and resources are the only limitation, it is better to give your idea away to a qualified group, rather than selfishly sit on it, or run it and yourself into the ground trying to make it work. Nobody wins with that approach.

In case you are wondering what happened to this recipe idea, try the search I suggested and you will find a dozen sites that already claim this capability. Needless to say, after I did the work, my friend decided to quit talking about this one.

But he will be back, he always is, and one of these days he may find an idea that someone can make a reality. It won’t happen for him, because just talking about an idea doesn’t start any business. Am I the only one with a friend like that?

Most aspiring entrepreneurs believe their initial idea and inspiration requires the most important creative thinking. Experienced entrepreneurs will tell you that the initial idea is the easy part, and it’s the later implementation, and the competitive business marketing that are the real creative challenges.

There is a tough balance here to achieve, since a large portion of starting and running a business requires analytical, logical thinking. In fact, our education and training to logically associate related concepts reduces our ability to add the creative side, even though we were all born without that bias. Maybe that’s why “thinking outside the box” is so rare.

While looking for guidance on how to be more creative in growing a business, I came across Michael Michalko’s most recent book, “Creative Thinkering,” which clearly applies to business as well as personal environments. With his insights, I offer the following recommendations on how to nurture and build your creative business capabilities:

• Look for familiar patterns in unrelated subjects. Due to learned habits and routines, new ideas default to be similar to old ones. Creative thinkers get results by combining dissimilar subjects, like investors and competitors. I find that startups looking for funding often never even think of asking strategic partners, rather than just venture capitalists.

• Change the way you look at things, and the things you look at change. Stereotyped notions block clear vision and crowd out imagination. Sometimes it’s helpful to imagine contradictory approaches, or working with opposites. Many businesses have found that raising the price of a product to give it status can win more customers than a price war.

• Think the unthinkable. We all need ways to unstructure our imaginations to explore the outer limits of alternatives, so that we can go beyond the typical solutions. In business, this may be as simple as replacing a product line that is still profitable, or a recent startup making a takeover bid for a large company. Creative people at Facebook are likely working on this one right now.

• Intention is the seed of creative thinking. Intention has a way of bringing to our awareness those things that our brains deem important. One way to prime for creativity is to generate an awareness of what you want to accomplish. If you study the Amazon 1-click patent long enough, you’ll likely find something of your own worth patenting.

• Change the way you speak, and you change the way you think. Many entrepreneurs focus on deficiencies, and phrase their thoughts and ideas with negatives, such as no, never, and don’t. Make a conscious decision to become a positive-thinking person by creating positive speaking patterns. Ten customer referrals is better than “no complaints.”

• You become what you pretend to be. Attitudes influence behavior, but behavior also influences attitudes. Reality has often been shown to conform to beliefs, whether they be positive or negative. In business on the Internet today, it’s easier than ever to pretend to be a large and mature company, and successful startups don’t have to pretend long.

Brainstorming, ideation, thinking outside the box, disruption, creative thinking – whatever you want to call the process of developing successful new business approaches – is something that must explore every day in your business. You have to let go of things that are holding you back, and take chances in business, especially after that first great idea.

You cannot will a new idea. But you can train your imagination, like a muscle with regular exercise, to conceptually blend dissimilar concepts from different contexts, leading to original ideas and insights. How long has it been since you have conceived and implemented a really creative idea in your business?

The days when you locked and loaded your career in school, and then blasted away down that same narrow path the rest of your life, are gone, never to return. Career survival today requires thinking and acting like an entrepreneur starting a business, staying nimble and resilient, willing to pivot, and supersensitive to the market realities of supply and demand.

Over the years I have spent mentoring entrepreneurs and startups, I often notice the similarities between successful professionals managing their careers and successful entrepreneurs building a business. Reid Hoffman, cofounder of LinkedIn, helped me crystallize these similarities with his new bestseller “The Start-up of You.” Here are key survival skills for both lifestyles:

1. Adopt the mindset of a permanent beta. “Finished” ought to be an F-word for all of us. We are all works in progress. Each day presents an opportunity to learn more, do more, be more, and grow more in our lives and careers. Keeping your career in permanent beta forces you to acknowledge that you have bugs, and intend to improve yourself.
2. Regularly assess and refine your competitive advantage. Your competitive advantage is the interplay of three different, ever-changing forces – your assets, aspirations and values, and the market realities of supply and demand. Smart professionals constantly assess the market, and strengthen and diversify skills.
3. Plan to pivot as you learn. Change is the only constant in this world, and every change is an opportunity to learn. Plan to adapt, and start it every day on the side. Don’t wait for something to fail before you learn, or before you consider a change or pivot. The best pivots are to take advantage of an upside, rather than avoid a downside.
4. Build and use your network. World-class professionals don’t try to take on the world alone. People playing a solo game will always lose out to a team. Successful entrepreneurs are ones who put together the best teams. Build your network with people smarter than you. With effective networking, who you know is what you know.
5. Pursue breakout opportunities. Success begins with opportunities, but these mean nothing unless you execute on them. Others taking breakout opportunities can be dismissed as lucky, but more often it’s the result of their work to be at the right place at the right time, with the right mindset. Be curious, confident, and willing to learn.
6. Take intelligent risks. We are all risk takers. But we are not all equally intelligent about how we do it. In a changing world, minimizing risk is one of the riskiest things you can do. The most intelligent risks are those where the potential downside is limited, but the potential upside is virtually unlimited. Those are the risks every business jumps to take.
7. Maintain that sense of urgency. Entrepreneurs know that in business, change overtakes the best of big companies, and even startups have to maintain a sense of urgency to stay ahead of the curve. For every professional, opportunities come and go at an astonishing speed, so only a continuing sense of urgency will keep you alert.

In addition to you and the network around you, there is a broader environment that shapes your career potential. It’s the local culture and society around you. So think carefully about where you choose to live and work, or where you choose to start a business. Your maximum potential may be in another place in the global environment, or as a volunteer versus an employee role.

In the bigger picture, I’m convinced that we were all born as entrepreneurs, with the instincts listed above to survive, grow, and prosper. How many of these career survival instincts have you used lately to deal with the changes we all see?

Every engineer who has invented some new technology, or is adept at creating solutions, believes that is the hard part, and it should be a short step to take that solution to market as an entrepreneur. In reality, that short business step embodies far more risk, and a poor technology solution is not near the top of most lists of common reasons for business failures.

In fact, a recent Duke and Harvard survey of over 500 technology companies showed that only 37% of their leaders even have engineering or computer science backgrounds. Clearly, engineers should think twice before assuming they have an advantage over the rest of us toward being an entrepreneur.

Now there are many resources out there to help engineer entrepreneurs, such as a recent book by Krishna Uppuluri, “Engineer to Entrepreneur: The First Flight.” He identifies the key business misperceptions of most engineers, and provides a workbook approach to provide a quick-start on various business lifecycle topics. I’ve summarized his points, and added my own, as follows:

1. “Everyone loves ‘cool ideas’ and new technology.” Before investing a lot of time and money into any idea, entrepreneurs should assess the commercial viability. That means evaluating third-party market research, getting real customer feedback from prototypes, and listening to concerns of successful executives in the same business area.
2. “I need to go-it alone to assure quality and elegance.” Engineers assume that the business issues can be resolved later. Working alone, or with other engineers, is great for the average engineer introvert, gives them better control, and minimizes distractions. A team with diverse skills is harder to manage, but more likely to build a thriving business.
3. “Marketing is fluff and selling is black magic.” The old adage, “If we build it, they will come” came from engineers. In reality, building a solution won’t make it connect with customers, manage competition, or communicate and proselytize the offering in the industry. With today’s information overload, selling is always required.
4. “We need to get functionality maximized before we focus on customers.” The business reality is that you can’t engineer the functionality right UNTIL you focus on customers. Superfluous functionality, from a customer perspective, is a failure. The mantra for an entrepreneur today should be to ship fast, make changes, and iterate.
5. “A good engineer hates unpredictability and risk.” A good entrepreneur embraces risk as an opportunity, whereas most engineers are risk averse and cautious. The result is that engineer-driven solutions often are too little, too late, if they ever ship, in today’s fast moving market. Managing risk is good; eliminating risk is bad for startups.
6. “We can’t worry about making money until we get it built.” If you can’t make money, it isn’t a business. Business constraints, such as market size, customer demographics, manufacturing, distribution, and support costs need to be set, or there is no context for getting it right. Getting it right at the wrong cost will get you no customers.
7. “Outside funding causes loss of control and undue pressure to deliver.” Funding is like a turbocharger for a startup company, if used correctly. Investors love to fund growth and scaling of a proven business model for entrepreneurs, and they avoid at all costs funding research and development for engineers. Hence the pressure to deliver.

Certainly there are many examples of great companies led by engineers, including Microsoft with Bill Gates, Oracle with Larry Ellison, and Google with Larry Page. This is strong evidence that it is possible to make the step from engineer to entrepreneur, or team with someone who can provide the complementary skills and perspective.

In fact, as Krishna says in his book, the stars are uniquely aligned these days for engineers to be entrepreneurs. The Internet is the great equalizer, allowing all of us to develop broad, as well as deep, skills and insights quickly. With the economy on the rebound, we need more entrepreneurs to satisfy new demands and solve new problems. It is time for more engineers to take the first big step.

I’m hearing more and more these days about a new type of small business, called a “micro-business” (or micro-enterprise). These are usually characterized as owner-operated, with five employees or less, and less than $250,000 in sales. With the low cost of e-commence entry, and powerful Internet technologies, they require minimal capital to start, perhaps as little as $500.

I see the potential for these to become big business in this entrepreneurial economy. According to the Voice of Microenterprise (AEO) website, if one in three micro-enterprises in the United States hired an additional employee, the US would soon be at full employment. These businesses are usually run out of the home, and range the gamut from consulting services to e-commerce.

Dal LaMagna, in his humorous recent book “Raising Eyebrows: A Failed Entrepreneur Finally Gets It Right,” leads with the foundational principle of micro-businesses, which is to start small. This allowed him to learn enough from all his early mistakes to hit it big with a global beauty tools company called Tweezerman. He offers several additional principles as follows:

1. Tailor the business to you. Do you love antiquing? Fishing? Cars? Cooking? Now, think about what pursuing this passion might mean for your lifestyle. Think how you want to spend your day; where you want to live; whether you want to work with people or alone; in the morning or at night, and so on. Eliminate any aspect of your business that doesn’t create your preferred lifestyle — and will work against you.
2. Be frugal. Don’t spend money you don’t have. Don’t invest in anything you don’t need. If this means baking cupcakes in the local church basement and delivering your signature pastries by bicycle to local stores — two dozen at a time — do it. Take the money you make and put it right back into the business.
3. Record every expense. From the dollar you gave to the homeless guy on the way to meet a prospective client, to the new tie you bought to look professional, write down every single penny. The key to launching a micro-business is to keep expenses under control and fully accounted for.
4. Keep a monthly profit-loss. For the first two years of your business, complete a monthly profit-loss statement. This helps you stay on top of where your business is going, where it could do better, and why it fluctuates.
5. Find free stuff. Many items needed to start and run your small business are available for free or next to nothing. Be creative. Use freecycle.com; ask friends if they have an old computer or printer; or visit a thrift shop for office furniture or office supplies.
6. Write down agreements. With a very small business, your clients sometimes make the assumption that they don’t have to sign an agreement. Wrong. Get in the habit of thinking like a company founder and get promises in writing. And while you’re at it, keep your side of agreements.
7. Keep it simple. When Dal first started Tweezerman, he did nothing but focus on tweezers and selling them to cosmetic counters, one store at a time, which he did very well. If you can do one thing well, don’t dilute your efforts until you have been turning a large profit over a consistent stretch of time.

My net recommendation is that if you consider yourself a do-it-yourself entrepreneur, preferring to do things yourself rather than forking over money to consultants, then definitely the micro-business approach is for you. The down side is that you business will probably grow slowly and more organically.

If you prefer to rely on others for most things, or want to get there fast, the investor approach may be the best answer, but the price is higher in time, dollars, and control. It’s your choice, but remember that the wrong choice probably won’t get you there at all.

Every startup and every big business wishes that all their employees were star performers, but wishing doesn’t make it happen. Some coaches and leaders seem to have the magic for bringing out the best in everyone. Research has shown that it isn’t magic, but a focus on engaging people in their work, so that their work triggers the same emotions as play does for you.

Some of you cynics may think that such a thing isn’t possible, but Shawn Kent Hayashi, who has worked for years with entrepreneurs, as well as Fortune 500 giants, argues otherwise. In her new book, “Conversations for Creating Star Performers,” she offers examples and ten strategies to leverage conversations into game-changing moments for team members and your company:

1. Build awareness of expectations. Conversations about what effective performance looks and sounds like are an obvious strategy, but too often found missing. No team member knows what they don’t know, so regular communication from leaders is key.
2. Understand individual motivators. Star performers are always people who have aligned their work to their values so that they are passionate about what they are doing, and the work will feel like play. Great leaders align the values of work to their team.
3. Capitalize on the strengths of each team member. When hiring or inheriting new team members, it’s important to discuss their strengths, development areas, and blind spots early. Always try to align people’s roles to their natural talents and interests.
4. Help team members develop a plan for their future. Take the time to develop individualized development plans for every team member, as a joint effort. Focus should be on current strengths, blind spots, where they want to go, and how to get there.
5. Make new skill development an ongoing priority. Survival in today’s fast-moving business world requires continuous learning and broadening of your skills. You will need to be inspiring and connect the dots to show the benefits of new abilities.
6. Get people unstuck and back on track. People don’t get back on track unless they know there is a problem. It’s up to you to give the tough feedback, without emotion, while keeping it in context. Then, with clarity, provide the next steps to get back on track.
7. Support team members in being accountable. Communicate the measurable results expected, and get a commitment for specific action steps and timeframes. Remember that you must role model and reward accountability to get it from your team.
8. Provide real feedback on their performance. Performance feedback works and is appreciated when it is done often, and in the context of specific accountable actions. Once per year discussions, only when there is a problem, don’t work.
9. Celebrate successes and even small steps. Always affirm and reward team members often, and criticize infrequently. Experts say it takes five positive interactions to dilute one negative, if we want the relationship to thrive. Create a positive emotional wake.
10. Develop future leaders early. Successful competition in the marketplace is correlated to a company’s ability to attract, retain, and develop talent. Develop a deep talent pool and it’s never too early for succession planning. This forces you to think about how team members can grow to satisfy their long-term objectives and yours.

A strong and positive business culture is instrumental in bringing out and retaining stars. Top executives and leaders set the culture, but every manager’s actions and interactions with top performers and every team member solidify and drive that culture.

During the recent recession, it was easy to conclude that you have other priorities, and team members would perform at their best to keep their jobs. But keeping a job and top performance at the job are two different things. Now, as business confidence builds, it’s time to double-check how you’re treating all your potential star performers. They will love it or leave it.

Every organization, no matter how small, has one or more people who are quite simply obnoxious, and they drain energy from everyone and can strangle your company. Sometimes they are also intellectually brilliant, or closely related to the boss, so there is no easy way out.

In fact, they may even be the boss. So if you find this article taped to your desk, it may be time to look in the mirror. At any rate, if you are stuck working in an office, at least you deserve some clues on how to recognize the different types, and know it’s time to run:

1. “I knew that was going to happen.” This know-it-all has an answer for everything, and is proud to let you know, always after the fact, that they actually predicted ahead of time every calamity that has befallen the world and the office.
2. “You wouldn’t believe my latest conquest.” For the loudmouth, the word ‘discreet’ isn’t part of his dictionary at all. His conversations at the water cooler, or on the phone, always seem to be audible across the whole office.
3. “I’m so angry I could scream.” In my view, people with short fuses and anger issues ought to be banned from the workplace. People are always “walking on eggshells” to avoid creating another outburst, and office tension stays at an unhealthy high level.
4. “Have you heard the one about…” Every office has the joker, and he particularly likes to shock people with crude or off-color stories. He doesn’t seem to take anything or anyone seriously, and especially loves his pranks on shy people who blush easily.
5. “I’m so busy, I don’t have time…” The whiner will always be complaining about how busy they are, and how many hours they put in, but you can never quite see anything they have accomplished. But they always seem to find time for talking loudly on the phone, or discussing the latest gossip.
6. “I have no life.” Woe is me, and I’ll be happy to tell you the gory details of all my lost loves, my amazing string of illnesses, and the strife in my family. These people will definitely suck the energy out of everyone.
7. “I’m so worried about the project.” Always in a state of panic, these people bring stress to the whole office, just by their hand-wringing, hovering over people’s desks, and nagging everyone to double-check for the dire consequences of possible mistakes.
8. “I need a moment of your time.” We all love to help people, but when the request happens ten times every day, and for the same trivial issue, your blood pressure is bound to go up. It’s not efficient to have two people doing every job.
9. “I’m surrounded by idiots.” This person has an ego the size of a mountain, and won’t listen to anyone long enough to assess whether they are a genius or an idiot. In the long run, their statement will be true, because all rational people will have run away.
10. “This world isn’t fair.” This type is often associated with Gen-Y, but some people seem permanently afflicted as they get passed over for promotions. As Bill Gates said a while back to a high school graduation crowd “Life is not fair – get used to it.”

I’m sure I missed a few obnoxious types here, so help me out with additions, and tell me how many of these you have in your office. I wish I could give you specific solutions and antidotes, but that’s a bit tougher, and maybe the subject for another article. In general, survival requires large doses of tolerance, patience, and the ability to turn your ears off.

If it’s your company, you can’t just ignore it. If you recognize several of these types on your team, you need to do something now, before they have sucked the life and energy out of your dream. Tolerance for you is not an option. People will follow your leadership, or lack of it.

If you are new to the startup space and Angel investing, you probably don’t realize that some groups of Angel investors charge entrepreneurs a fee to pitch to their groups. This practice has caused a rousing debate among key players, with some calling it a scam, and others defending it as necessary to cover expenses.

Jason Calacanis, a well-known entrepreneur and Angel investor, opened the debate a while back in a strongly-worded article on his blog which attacked the practice on ethical grounds, and called out popular Angel groups charging fees ranging from several hundred dollars to $5,000 or more. He calls these a scam, and “Angel group” payola.

Others, including noted Angel David S. Rose, founder of the New York Angels and Gust, have spoken out in defense of the practice, at least for smaller amounts, commenting that, aside from covering expenses, it also provides a degree of “filtering”. In reality, these fees are usually trivial compared to your real costs of preparing, travelling, and presenting to investors.

While I’m definitely a proponent of full disclosure to prevent surprises, I see nothing wrong with experienced investors charging a fee for listening and evaluating startup proposals, and providing feedback (or funding) to entrepreneurs to help them achieve their objectives. Lawyers and other professional consultants have done this for generations.

I have long recommended that entrepreneurs do their own “due diligence” on potential investors and Angel groups before they waste their time and hard-strapped funds, and here are some additional thoughts for entrepreneurs thinking of paying to pitch their case to investors:

• Improve your odds by networking and warm introductions first. With the rise of social tools, potential investors are increasingly more accessible outside the pitch room. If they know you by a warm introduction from a friend well before the pitch, or you have one or more advocates in the room, your odds of success go up dramatically.

• Evaluate feedback from individual investors first. If you have been given private introductions, but the investors declined to hear your pitch, don’t assume that paying money or presenting to larger numbers will solve your problem. There is probably a fundamental problem with your business or how you present it. Find and fix that first.

• Weigh the cost against the track record and “reach” of a specific Angel group. A fair question to ask any Angel group, fee or no fee, is “What is your track record of funded investments, versus number of pitches?” Spending $1K to get $1M is usually better than spending nothing to get nothing. Does their “sweet spot” match your type of business?

• Consider your startup stage. If you’re in seed-stage with young, first-time founders, and think you’re ready to raise some capital, your odds of funding success are so low that I would skip the fee alternatives. On the other hand, if you have solid revenues, good growth, and need to scale faster, it may be worthwhile to get to the best Angels in town.

• Don’t wait until you are desperate. Investors can spot an out-of-money entrepreneur a mile away. They won’t even notice that you are angry because you had to pay for the opportunity, and they won’t fund you on principle, since it doesn’t appear that you can manage your plan very well.

I’m convinced that most Angel investors are not out to squeeze a dollar from poor cash-strapped entrepreneurs, as implied by Jason. They are, however, always looking for better ways to make use of their time, and quickly find the entrepreneurs who have the best case and the least risk. Their only real gain is from a win-win situation, and it’s up to you to take the right first step.

The official start date for your startup is the date you incorporate the business. This is obviously important for tax purposes, but may also dramatically influence how potential investors, customers, and competitors look at you.

My rule of thumb expectation is that it should take two months to set up the legal entity, six months to finalize the business plan, and by the end of the first year have a prototype product ready for customers. At this point every potential investor will listen. Timelines which vary dramatically from these will be questioned, and need to have good explanations.

For time and effort considerations, I tell clients that a sole proprietorship or partnership is the simplest setup, because it basically requires no legal forms. Incorporation as an LLC, a C-Corp or an S-Corp is more complex, but has the great legal advantage of limiting liability to the entity, away from personal assets.

A C-Corp is the most complex, and is recommended when you need multiple classes of stock, expect venture investments, or have over 100 shareholders. But even this one can be done in a month in most states.

For more specific considerations, you should consult your attorney, or at least visit one of the many sites which focus on this process. Many startups defer the incorporation decision until they have an investor lined up, but that can raise significant tax issues, as I outlined in an old article on founder’s stock.

Aside from the tax considerations, there is nothing wrong with tinkering and honing an idea for years (on your own funding), before you incorporate a company and take it to market. But once you incorporate the company, all measurements start and you need to keep the process moving.

Consequently, if you approach investors for funding, and they find out your company was formed five years ago, but gone nowhere due to your other activities or false starts, they will likely assume that you are a procrastinator, or worse yet, that you have failed to make progress despite your best efforts. No investment will be forthcoming, and competitors have likely closed in.

On the other end of the spectrum, remember that you only get one chance for “first impressions” with investors, So don’t rush it by trying to sell your “idea” to investors with only a verbal spiel, before you even have a company or a business plan. Save these discussions for friends, family, and trusted business advisors.

In conjunction with the timings above, here are my recommendations on the sequence of events:

1. Focus and solidify your product idea and company name before incorporating.
2. Incorporate before spending big money on development or assets to limit liability.
3. Assemble the core team for development using personal, friends, or family funding.
4. Move quickly to prepare the case for external funding, if angel investors are required.
5. Build a minimum product, add sales, and test the market quickly, then iterate.
6. Scale the business, getting venture capital funding as required.

Obviously, timings can vary dramatically when technology or regulatory constraints are involved. The key is to show everyone a record of continuing momentum. If investors or customers lose confidence in you, or you run out of cash, the momentum can stop on your startup as quickly as it starts.

Your timeline and momentum is the message you scratch in the sand for investors. Don’t let the passage of too much time blow it away.