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BY GUY KAWASAKI Can you check off all the items on our List? If not, fine-tune your business skiLLs with these insider tips from entrepreneurial guru Guy Kawasaki.

G

uy Kawasaki is the legendary founder of Garage Technology Ventures, a VCfirm in Silicon Valley, and the former chief evangelist of Apple Computer. He has founded two software companies and has helped wore than loo companies raise venture capital. His current best-selling hook, The Art of the Start: The TimeTested, Battle-Hardened (iuide tor Anyone Starting Anything, reflects his experience as an evangelist, entrepreneur, investment banker and venture capitalist. Given his expertise, we asked Kawasaki to provide you with the ultimate startup checklist. This list is for entrepreneurs who want to avoid getting bogged down in theory and unnecessary details. My as.siimption is that your goal is to change the world—not sttidy it. If your attitude is "Cut the crap and just tell me what I need to do," then this checklist is for you.

The ATt of Starting
• Do you make meaning? Great companies change the world by fighting the status quo, inertia and ignorance. They make people's lives better, fix the bad and perpetuate the good- Mediocre and unsueeessful companies start out only to make money. Here's the aeid test; If your company never existed, would it matter to the world? • Do you have a company mantra? Forget a mission statement. Think mantra—three words, tops. What three words capture the essence of what you do and why you exist? Great example: Mary Kay's mantra is "Enriehing women's lives." • Are you typing or prototyping? You're spending too mueh time with Exeel, PowerPoint and Word. Prototype and prospeet instead. Don't have the funds to do this? There's no magical solution for this Catch-22, but the lack of funds never prevents a true entrepreneur from starting.
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• Have you defined a business model that is credible, simple and specific? This is a question that the entire high-tech sector skipped during the dotcom days. The salient questions are: Who's got your money in his or her pocket? And how will you get it?

The ATt of PositioniTig
• Can you describe your product or service without using acronyms or jargon? If it takes five years of industry experience to begin to understand what you do. you've got a problem. Your parents should be able to explain your product or service. Your grandparents should be able to use it. • Are you occupying the high ground? Focus on what you can do for your customers, not on what your competition can't. No-

body buys anything to help a company kilt its competition, so resist the temptation to trash other companies. • Are you seizing a niche for your product or service? The ultimate business position is to provide a unique product or service that customers really need. This is called filling a niche. You can be unique in terms of features, service, pricing or location, but don't try to be all things to all people. • Does your positioning pass the "opposite test"? You claim your product is fast, secure and easy to use. Docs the competition say its product is slow, dangerous and hard to use? If not, your positioning will only work in a vacuum—and a vacuum, no pun intended, sucks.

The ATt of Pitching
• Can you explain what your product or service does in 60 seconds? Buildings are getting taller, but elevators arc getting faster. Most investors bave a short attention span for elevator pitches, so the longer it takes to explain, the less likely your pitch will succeed. • Are you answering the little man? Imagine there's a little man sitting on your shoulder. Every time you say something in a pitch, he asks, "So what?" For example: You spew out a line about your "opensource, client-server, Java-based technology." You think you've shocked and awed, but your audience is wondering, "So what?"
• Have you practiced so many times that you're not embarrassed to watch a video of yourself? You need to give a pitch approximately

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25 times to get good at it. Don't think you'll "rise to the tKCasion" when you're inftx)ntof investors, because you won't. T When you're making a pitch, have you distilled your presentation to just 10 sUdes? Trust me: Your curvejumping, paradigm-shifting, patentpending way to sell dog food online doesn't merit 50 slides. The crucial topics are the problem you're solving, your solution, the business model, the underlying magic, marketing and sales, the competition, the management team, projections and key metrics, and current status. • is the smallest font you use 30 points? Divide the age ofthe oldest person in the audience by two to get the optimal font size. The number you'll come up with is approximately 30 points. Can't fit everything on the slides in 30-point font? Then you're using too much text.

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The ATt of Writing a Business Plan
• if you threw away page three and beyond of your business plan, would it still attract investors? The

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executive simimary, which is the first two pages ofyour business plan, is the most important part ofthe document. If you do this well, investors will read the rest. If you don't, then nothing in the next 18 pages will pull them in. T Is your business plan longer than 20 pages? The optimal length of a business plan is 20 pages. You're mistaken if you think investors care that your 50-page financial model shows you'll spend $65.25 on pencils in the fifth month of the fourth year. • Do you provide key metrics as well as numbers? Let's face it: You picked revenue numbers out ofthe air. The key metrics ofyour business—for example, the number of customers, installations and locations—are just as important to in\'estors. Hint: If you indicate that you're going to close 50 percent of the Fortune 500 companies as your customers in the first year, you're hallucinating.
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a tnisted source. This is where your lawyer, aecountant and vendors ean earn their keep. No investor ever funds a plan with a cover letter that begins with "Dear Sir." • Is your act together? In times of irrational exuberance, investors look for reasons to do a deal. In times of irrational depression, inThe ATt of Recruiting • Are the people you're hiring in- vestors look for reasons not to dt) fected with a love of your product a deal. This is a depressed time, so or service? I believe this is at least clean up your act. For example, if as important as a candidate's edu- your employer thinks it owns the cational background and work ex- technology you invented in your perience. Heck, my work experience garage, resolve this Issue before was counting diamonds for a jewelry looking for money. manufacturer when I went to work T Can you demonstrate revenue? for Apple (Computer as its software These dnys, investors will tell you evangelist. But I did love Macintosh. they're looking for proven teams, • Have you crossed the psycho- proven teehnology or proven marLogical barrier of hiring people who kets. There's one factor, however, are better than yourself? A players that cuts through the hype, and hire A+ players. By contrast, B players that's good, old-fashiimed revenue. hire C players. C players hire 1) players. A company that has significant revPretty soon, you're surrounded by enue is always interesting, so focus Z players, and this is called "The on finishing your product, and start Bozo Explosion." If candidates can't selling. Maybe you won't have to do their prospective jobs better than raise capital. you can, don't hire them. • Do you acknowledge your comT Does the candidate pass the petition? "We have no competition" "shopping-center t e s t " ? If you means you're either serving an unhappened to see a job candidate attractive market or you're clueat a shopping center, would you less—and neither is conducive to rush over and say hello? Or would raising money. A complete and inyou jump in your car and go to an- sightful analysis of your competiother shopping center to avoid him tion builds credibility. The best way or her? In a startup, you're going to to present a competitive analysis be working many long hours with is with a three-column chart listing employees, so you'd better enjoy your competitor's name, what you their company. can do that it can't, and what it can do that you can't.

market is always an exciting number. But you're building a business from the bottom up, so forecast that way; How many sales reps will you have? How many sales calls can they make? What percentage will be successful?

The Art of Raising Capital
• Are you building a real business? Call me a romantic, but businesses that fill needs get funded. Those that don't, don't. This goes back to the first question on this checklist; Are you making meaning? Because if all you're trying to do is make money, you'll probably fail to raise money, make money and make meaning. • Have you been introduced to the source of capital? The process of raising capital isn't a level playing field. You need to tilt the field in your direetion—first of all, by getting an introduction to the firm by

The Art of Partnering
• How will the partnership affect your spreadsheet? As a rule of thumb, if a partnership doesn't enable you to increase sales or decrease costs, you shouldn't do it. T Is your partnership a win-win deal? Are both parties truly going to benefit, or did you pull a fast one? Because if you did, rest assured that the partnership won't last. • Is there an "out" clause in the deal? At the beginning ofa partnership, you hope that it will hist forever. Forever is a long Lime, and

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The ATt of BTaTiding
• Have you created a contagious product or service? The foundation of all great brands is a great reality. Think cool, effective, distinctive, disruptive, emotive, deep, indulgent and supported. This is a long Ust, but the point is that branding is easy when you sell something great. . Branding is hard when you sell crap. • Can a mere mortal get your product up and running right out of the box? The best and cheapest form of branding Is word-of-mouth. To achieve this, customers must he able to use your product or service without reading a manual—much less having a Ph.D. in applied physics. Think of setting the clock on a VCR, and make sure what you sell is easier to do. • Are you taking care of your evangelists? Customers who spread the word for you are called evangelists. Their compensation is the satisfaction of making the world a better place. Embrace evangelists with inside information, gifts and seminars because they will earry the battle forward for you. T Can your employees "talk the walk"? Let's assume you have a meaningful product or serviee, and that you are "walking the talk." Don't assume your employees can talk the walk. Ensure that they can tell your story as well as you can, because a brand is built one conversation at a time.

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The ATt of RaiTimaking
T Are you "letting a hundred flowers blossom"? This is stolen from Mao Zedong, but it's not clear that he walked the ideology. Startups often see that people who were unintended customers use their products and services in unintended ways. Embrace this—don't freak out. These flowers are lightFEBRUARY 2005 • 97

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Some attractive reasons to oum a Merle Norman Cosmetic Studio: houses that illuminate the markets where you can achieve success. Flow with the go. • Are you going after agnostics instead of atheists? Selling to big, well-known firms supposedly yields eye-opening numbers and credibility. However, big companies seldom believe in the products and services of startups. Spend some time on atheists, but focus on believers and agnostics instead. • Are you sucking down and sucking across? To make sales, most entrepreneurs suck up to people with impressive titles like CEO, CIO, vice president and director. Unfortunately, the higher you go in most organizations, the thinner the air, and therefore the harder it is to support intelligent life. Focus instead on the people who do the real work: secretaries, administrative aides, customer service people and technical support people. Suck down and suck across, and you'll reach the real decision-makers—and differentiate yourself from the clueless companies that only suck up. T Have you enabled people to test drive your product or service? Instead of bludgeoning people into becoming your customers, enable them to test drive your product or service with demo versions or samples—whatever it takes for them to try before they buy. • Have you provided a safe, easy first step? Or are you trying to force prospective customers to do something risky to try your product or service? Provide a slippery adoption curve so you can suck people in. Don't force them to throw out everything they've done in the past or change a lot of infrastructure if you want them to convert. For even more information about the various "arts" of entrepreneurship, refer to my book The Art of the Start. At the very least, tear out this article, discuss it with your co-founders and determine how you're doing, because doing—not wanting to do. learning to do or planning to do—is the essence of entrepreneurship. •
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