There are generally five phases of startup funding as far as venture capitalists are concerned. The seed-funding phase comes first. These monies typically originate from the entrepreneurs themselves; other companies receive support from angel investors and/or crowdfunding efforts. Venture capitalists are not involved at this stage, but seed money enables the entrepreneur to build a competent, talented team and draft a business plan; both of these components are all but required to receive funding from VC firms.

Most venture capital firms are created when a group of investors agrees to pool their available funds. During the first round of funding, the firm will invest roughly one-third of their budget in a variety of promising companies or projects; successful venture capitalists understand that they may not see any ROI on any of their investments for up to 10 years.

Once a group of solid ventures have been selected to receive funding, round one ends and the second round of funding commences. At this time, the VC firm will typically sift through its various investments and decide which ones to further support — and which ones to let go. Companies earmarked for more funding typically receive additional support three to five years after the first round of funding begins.

Assuming there are no unpleasant developments, startups that make it past the second round of funding are on the fast track to success. The expansion stage kicks off when the company is close to independently making a profit and funding is generated from subordinated debt and/or preferred equity — not venture capitalists.

Once a startup is able to generate a tidy profit without VC assistance, company leaders can begin to consider initial public offer (IPO) or sale. This final stage represents a major payday for venture capitalists; typically, they rake in a 700% return on their original investment for companies and organizations that go public.

Corrections: @2:05 in the video, the board reads 3- 5 years. It should read 5 – 10.

VIDEO TRANSCRIPT

The key to wooing venture capitalists (other than having a great idea in a promising industry) is to ask for money at the right time in a VCs lifecycle. Here are the funding phases for a start-up and how they correlate with a VC’s lifecycle:

Phase 1: Seed Funding Seed funding usually comes from you – the entrepreneur’s bank account, angel investors – potentially mom and dad – or crowd funding. Seed money allows you to solidify a talented team and a business plan which is required when it comes time to talk to VCs. Right now, a company called Neptune is raising seed money through Kick Starter with plans to beat Apple to making a smartphone the size of a watch.

Phase 2: Round 1 of Funding VCs start when a group of people agree to put money in a pot and not see returns for 10 years. If the VC is worth $100 million, then in Round 1 they will invest about 1/3 of the fund in a variety of companies. As an entrepreneur, this is when you want your business idea to be noticed and funded. Square Trade Inc., a start-up offering warranties for your tech gadgets, recently disclosed receiving $238 million in round 1 from 11 different funds.

Phase 3: Round 2 of Funding Provided your business is doing well, you may receive a second round of funding after 3 years. At this point in the VCs life cycle, the firm will look at all their investments, weed out the ones that went belly up, and invest more in the companies doing well. Photobucket recently went in for an additional (and they claim last) round of funding from VCs for somewhere between $5 and $10 million.

Phase 4: Expansion Now, your start-up is 3-5 years olds and hopefully close to turning a profit on its own. At this time, funding will come from subordinated debt or preferred equity. This is the expansion phase. Twitter appears to be in Phase 4. After receiving $15 million in 2008, it’s waiting to IPO until it can earn steady profits for an entire year. This “growth” money doesn’t come from VCs, but helps start-ups push past the funded phase into the next level which is…

Phase 5: IPO or Sale By now, your start-up is 5-10 years old; you’ve either made it or folded. Now the venture capitalists are ready for their payday when you sell or go public. Most VC firms enjoy a 700% return on their investment in companies which go public – however many of their investments won’t make it to phase 5.

Reprinted by permission.

-Michael Jordan

It is frequently said that failure is something most entrepreneurs encounter on the long, bumpy road to success.  Failure provides an opportunity to learn, revise and improve.  When entrepreneurs discuss the reasons they failed, they may identify the cause as being an inexperienced team, a deal gone bad, being messed with by investors, bad timing or some other external reason.

While these factors may have been present, unless the entrepreneur takes full responsibility for the failure, meaning he or she holds themselves 100 percent accountable, the true lessons from failure will not be learned.

The Danger of Cognitive Dissonance

In practice, people tend to avoid holding themselves accountable.  They prefer to talk about failure in the abstract or in terms of shared failure (i.e. “We failed because…” or “The tough economic climate made it impossible for our startup to become profitable”).

This happens for a number of reasons.  Firstly, and most obviously, people do not like to think of, or describe themselves, as failures.  Secondly, human beings tend struggle with this form of self-awareness because we suffer from cognitive dissonance.  Because we usually don’t possess self-images of ourselves as failures, our brains strive to ensure that our interpretation of events is consistent with that self-image, thus causing us to make excuses for failure and blame others.

“Great companies have high cultures of accountability.”

-Steve Ballmer

The Antidote of Accountability

Accountability is one of the pillars of the Entrepreneur High Performance Program.  It is only when you hold yourself 100 percent accountable for your failures that you can truly learn from the experience and assume control over whether or not you succeed in the future.

By blaming failure on someone or something else, you inevitably tell the world and yourself that you do not have the power, influence or control over what happens in the future.  Once this happens, your chances of success drastically diminish.

When you hold yourself 100 percent accountable, you automatically assume responsibility for making sure you succeed.  You are no longer victim to the actions of others or external events.

If investors start to mess with you, you will challenge them and/or find alternative investors.  If your team is inexperienced, you will make the necessary changes.  And if you’re struggling to make a profit, you will reevaluate your business model and try alternatives.  Then, and only then, do you begin to truly benefit from the lessons of failure.

Reprinted by permission.

It’s probably the most common question I hear.  Communities are awesome, right?  Every company wants one!  But where do you start?

Having built a number of communities over the past few years, I’ve learned a lot about what a healthy community looks like, and how to put the right pieces in the place from the beginning.

Turns out it’s extremely simple, yet easy to avoid because the task can seem very daunting.

Ok ready?  Come closer.  Here’s the secret…

One person at a time.

Both startups and larger organizations have a problem building a community from the ground up.

Startups have a problem because they just want to scale scale scale as much as possible.  Their whole business is all about growing as quickly as possible.  Problem is, communities usually don’t work that way.

Larger organizations have a problem because they feel like they’re “established” and they have strong brand recognition. So they can throw money at it and BOOM, instant community.

The truth is, you can’t build a community over night, the same way you can’t build a company over night.  Both require that you give every small aspect of the larger goal your full attention, and build up toward your vision.

Want a foolproof community building strategy?

Step 1: Pick up your phone, and call a user/customer.  Ask them about themselves.  Ask them about their experience with your company.  Make a personal connection.

Step 2: Invite them to a private facebook group for your customers.

Step 3: Introduce them to the group and help them get involved in the discussions.

Repeat. Repeat. Repeat. Repeat.

Keep doing that until the discussions in your group are flowing smoothly.  Keep at it until you feel that your users are connecting with each other and a true community is forming.

Forget all of your plans for an “ambassador program” with rewards, exclusive swag, badges, moderators, big events, etc etc.  Start simple and focused.  When it’s time to build more structure into your community program, you’ll know.  Your community will tell you.

It’s tempting for companies to think “I don’t have time to call all of our users!”.  I’m not saying call all of them.  I’m saying call one.  Then call another.  And another and another until it starts to grow organically.  Eventually, it will.

There’s no interaction too small to be worth your time when you’re trying to build a true community.

It may seem tedious, but once it’s all done…

…nothing is stronger than a well built community.

Reprinted by permission.

Photo credit: John Keogh

Stroll through a neighborhood in Queens and you might pass a Chinese restaurant, Colombian bakery and Greek diner all in one block. While the diverse borough is home to many immigrant-owned businesses, within New York City as a whole, only 1.5 percent of immigrant business owners have founded tech companies. Enter Access Code, a new program started by the Coalition for Queens that is seeking to empower the tech community in the borough.  

Two years ago, the Coalition for Queens started out as an advocacy group spearheaded by co-founder Jukay Hsu, a Queens native who saw a great disconnect between elected officials and the tech scene. Now, Christine Quinn, Speaker of the New York City Council, is a sponsor of Access Code, and a testament to the growth in collaboration with the government.

The 8-week education program teaches participants how to make iOS applications with 50 hours worth of lesson time. Prior knowledge of coding is not required, but a MAC computer is for this program that was designed to reach those underserved in the tech community, including immigrants, ethnic minorities and women. Tuition is $950, but full scholarships are available.

“Only 1/4 of tech jobs in New York are filled and for the tech community to grow, we want to help try and solve that,” said Hsu about the motivation behind the program. “And we realized by working with Queens College and other institutions here that there are lots of really talented people in Queens and across New York who could be involved in the tech industry, but who might not have the most up-to-date skills or the network to understand how to enter tech.”

Currently, 22 students are enrolled in the spring 2013 program where they are benefiting from exposure to industry professionals such as Vin Vacanti, an immigrant himself and Harvard grad who created Yipit.

The next round of Access Code is set for spring 2013. In the meantime, the Coalition does offer other learning tracks such as Intro to Illustrator and Intro to Javascript.

For those that wish to connect with others in the tech industry, the Coalition also started the Queens Tech Meetup group, which has grown to 1300 members in just a year. Past events have included an open source conference with software company, 10gen, and future events will include hack-a-thons and a Startup Advisory Day at Nasdaq. Hsu also encourages anyone who wants to organize an event to reach out to them so they can help facilitate it.

Their most recent event, a forum for mayoral candidates to discuss tech policy, was held at the Museum of the Moving Image, just one of the many attractions of western Queens that is also now home to tech companies Songza, Uber and Shapeways. Hsu also sees the area as an ideal place for companies, since it has plenty of former industrial spaces that could be converted into company lofts.

With the future launch of Cornell University’s tech campus on Roosevelt Island, western Queens is poised to become an increasingly important locale for the tech community. But, don’t wait to enroll in a tech college to get involved. Last year, the Coalition for Queens welcomed 60 volunteers who assisted with activities such a fundraising, event planning, and aiding businesses affected by hurricane Sandy recovery and advocacy.

Before you know it, living near the 7 train won’t be a great spot because of its quick commute into Manhattan, but because you’ll be only moments away from NYC’s tech hub.

Photo Credit: Andrew Theodorakis for New York Daily News

Photo Credit: Facebook

1. The Global Crowdfunding will double in annual revenue to $6 billion in 2013

Crowdfunding was exploding quietly in 2012 for the non-believers and loudly for the embracers between March 8, 2012 and President’s Obama signing of the JOBS Act into law on April 5, 2012. Some of the largest sites in the world for rewards and donations – Kickstarter, Indiegogo, Grow VC and Rockethub – saw their daily traffic and donation amounts double within a few months. Kickstarter has had its issuers raise a cumulative $200+ million in sales 2008-2011 to reach an addition $145+ million to a total of $345+ million by year end 2012. To give you an example, LendingClub reached $75+ million per month in debt lending as a crowd funding platform in November 2012.  It is the largest U.S. peer-to-peer lender and will hit an additional $1 billion in loans 2013 vis-a-vis the cumulative $1 billion it lent since inception 2007.

The global predictions in 2013 for the debt crowdfunding industry are strong. LendingClub will add almost $1 billion in 2013 to the total of $3 billion reached in 2012. There are 34 additional debt crowdfunding firms growing globally, including Zopa ($400 million since inception) and Prosper ($250 million). The balance of the $1.25 billion will come from donations and rewards-based crowdfunding, which will provide the bulk of growth in 2013 and 2014.

2. The EU will embrace crowdfunding laws

Led by the Directorate General for Enterprise and Industry, the EU Commission will have a couple more workshops Q1-3 2013 and create a proposal towards making crowdfunding for equity a legal option by Q4 2013. It will take EU 1,000 days to make such a law legal from the day a proposal is created. My prediction is that the EU is lethargic in pan-European law implementations.

3. Crowdfunding platforms will turn into a commodity

The 700+ crowd funding sites today will increase to 1,500 by Q2 2013 and quietly contract under the hood to 200 well-financed and revenue-generating sites by Q1 2014. Sites like Crowd Valley with 300 plus private label crowd funding platforms offered free to organizations will start charging for these services. These private label extensions will lead to the growth of more community sites using crowd funding but the back end technology will be run by a few dozen leading platforms. In parallel we will see 1,000 more sites using crowd funding with free API technology from firms like CrowdTilt which allows any site to start group charging and collecting money from several projects and thousands of donors.

4. M&A will not fuel Crowd Funding in 2013, but international expansion will

Crowdfunding firms are poorly funded, with few assets to be purchased. The lack of standardized valuations for crowdfunding sites makes 2013 a year where we see growth but M&A will mature to grow fastest in 2014. M&A in 2013 will probably kick up little dust, just as it failed to do in 2012. We have seen some acquisitions but those are more of acquiring the liabilities of running sites and spending more money to drive traffic. Crowdfunding platform assets will not mature in 2013. Crowdfunding has one inherent challenge – a bottomless pit cost requirement to drive traffic to your site. Next year will see a the gold rush: International expansion firms will grab market share and organically grow with innovation being the discernible advantage. Kickstarter launches in the UK, Indiegogo is already in Germany and several other countries. We will see more international expansion by US companies in the field. Meanwhile, more leading international firms, like Crowd Valley and Give2Gether, will push into the US, while Kickstarter and Indiegogo get as much as 30% of their revenue from abroad.

5. Broker-dealers will lead the “Rich Man’s Crowd Funding” strategy

The smallest broker dealers will consist of crowdfunding for equity players licensed with FINRA that use “Rich Man’s Crowd Funding.”

What’s that? Currently you raise private capital mainly through SEC exemptions. Most common is Regulation D, 506 which allows you to have only 35 non-accredited investors and an unlimited amount of “rich people” allowed to invest.  To be accredited you have to have earned $200,000 ($300k for married couples) the last 2 years or have a net worth over $1 million (and you must exclude the value of your home). Reg D, 506 as we call it, stood for $900 Billion in capital raised in 2011.

The large distribution online promised by crowd funding technology will empower broker dealers to differentiate and use the crowdfunding as a tool for their clients. It was presented to the National Investment Banker Association Spring 2012 and today we have seen recent movements of SoMoLend and CrowdFunder, which signed up with the leading broker dealer Gate Technology whose back end crowd funding platform is run by visionary CEO Vince Molinari. We will see the two to three dozen crowdfunding-for-equity pure plays partner up with broker dealers in Q1 2013 and start pursuing SEC broker-dealer transactions under the Rich Man’s Crowd Funding option, as everyone waits for crowdfunding to become legal.

We predict Crowd Funding for Equities will not become a legal SEC / FINRA regulated program in 2013 but rather by January 2014 because of the byzantine processes required for the SEC and FINRA to interpret the JOBS Act and implement the law. See Obama’s 10 Steps with SEC & FINRA to Legalize US Equity Crowd Funding.

6. By July we will see issuers raise $1 million in capital per week

By year end we will see a total of 104 startups in 2013 having raised a minimum $1 million through crowd funding in 2013. Crowdfunding will be a generally accepted tool to raise capital and the general public explosion will come in 2014 when corporate America officially embraces it.

This article was written by David Drake of the Soho Loft and originally appeared on Forbes.

Joe Doran
CEO Rallyverse

What does “Made in NY^TM” mean to you and your company?

To us, “Made in NY^TM” means not only being born and based in New York, but that the company also feels and acts like New York.  A New York company is diverse, decisive, competitive and up-to-speed with everything that’s going on in the city and the world.  If you asked us for one thing that defines New York, it’s that everybody is hustling, every day.  And we embrace that energy and hustle – we see it in our company, in our clients and in our competitors, and we love it.

What can be done to maximize the “Made in NY^TM” campaign?

We believe that the key is to get everyone excited to be involved.  Expanding the promotion of “Made in NY^TM” companies specifically to other businesses that are based in New York would go a long way.  There are so many amazing New York companies out there and we feel like there are some great opportunities for us to work with each other to help grow and expand.

Taking this idea a step further, we like the idea of hosting a series of meetups that establish personal connections between “Made in NY^TM” companies and potential customers/clients.  A lot of companies, like Rallyverse, have limited time and resources, so participating in cool events that also provide extra help in attracting customers or great NYC-based talent would really accelerate the campaign.

What else can be done to promote early stage entrepreneurship in NYC?

Since people and space are a startup’s biggest costs, any incentives would be great for us to stay here and do more in New York, whether it’s tax breaks or subsidies on items like rent.

Further joining together the academic and business worlds would also be a huge help, especially if we could make it easier for graduate students with high-quality talents (particularly computer scientists) to participate in internships at startups like Rallyverse.

Where does your company fit in the ecosystem?

Just like how New York often sets the trends for the rest of the country and is something of a central idea hub, Rallyverse help Fortune 1000 companies scale social marketing through the discovery of great sharable content.  We try to make life easier for social media managers who have to plan out dozens of posts a day across multiple social networks and multiple accounts.  This is hard for the average person to accomplish, as there are millions of sources out there.  At Rallyverse, we monitor trending conversations across various social networks so it’s easy to discover, curate and recommend the most relevant content for your brand – creating ready-to-publish tweets, posts and ads, in real time.  We’re proud to be “Made in NY^TM.”  And just like the best startups that have come out of the Big Apple, we’re trying to make your life easier and your brand stronger.

Read what other thought leaders have to say about “Made in NY™.”

So I’ll be 25 this Saturday.

I’ve gone through a huge evolution in thought regarding careers, passions, the concept of “work” and life direction in the past 10 years.

My first job at the YMCA (at 15), I figured out within 2 weeks that I was great at “pitching” myself during the interview — and I’m a likeable guy…but the work was boring and tedious…and it showed. It’s hard to keep high enthusiasm during summer camp, trust me.

I thought it was the job that sucked.

So I moved through a series of other jobs hoping that I’d find one I liked: museums, retail, grocery stores, restaurants…a ton of things. Each one had some element I liked — but within weeks I always felt like I was literally an indentured servant working for pennies with no end in sight. The worst part about this was when I’d see people who had been in these jobs for 30 years and were in a state of zombie-like compliant quasi-misery.

Like moaning dogs laying on nails who are too lazy to move.

I remember during my training at Publix (grocery store), one of the assistant managers pointed to his boss endearingly and said “Greg hasn’t missed a day or called in sick in 27 years.” As if this was some good thing, a point to be proud of.

I just remember thinking to myself “What the fuck is wrong with these people?”

I quit that job faster than Kim K quits a marriage.

Eventually I came to the realization that I could job hop my whole life, I could go to college and get a degree and hop around with that on higher paying jobs — but in the end, the problem wasn’t with the employers…it was with me.

I had the problem. It wasn’t about getting a better PAYING job. It was about having a job period.

I was having a major case of cognitive dissonance between what I wanted my life to be and the options I saw available. Part of this was coming because at a very deep level, I was afraid to admit what I really wanted. I was afraid I’d be called lazy, impractical, idiotic, etc. I didn’t want to be ridiculed. I’m not afraid anymore.

You know what I want? I don’t want to work. Like…not ever.

I don’t want to be responsible for showing up anywhere, simply because if I don’t show up, I won’t be able to feed myself/my family (in the future).

I don’t want to be told I can’t do something, that I “don’t have any ‘sick days’ left”, that I won’t be getting a raise or I’m being laid off. I don’t want to worry that I’m late or not meeting someone else’s standards, and as a result, might not be able to keep supporting myself. I don’t want to be forced to stay in a specific location and never get away because I have to clock in somewhere.

You know what I hate?

When people ask me “what do you do?”

What do I do? I don’t DO anything. I AM somebody. I can do so much. I’m not narrowly defined by skills I use to make money.

What you do to make money is completely separate from what you do with your time. Ironically, many people spend all that time getting more money.

Am I the only one who sees the sick paradox here?

If it were up to me, you know what I’d do?

I’d spend my life traveling, learning languages, practicing martial arts, reading, programming, eating good food and (eventually) raising smart, open-eyed children. All the other shit can suck it.

I mean, can we just be honest here. It’s just you, me and this letter. If it was up to you, you wouldn’t go to work tomorrow, would you? Even if you “like” your job, wouldn’t you much rather be doing exactly what you want to do at the pace you want to do it?

And not because you’re lazy and don’t like putting effort into your pursuits — it’s because you’d rather put your full energy into the things that really ignite you. Whatever those things are.

Now, 95% of people will say “But Daniel, you have to do SOMETHING for ‘work’. You can’t just be a bum. You need to get a job or something and then do stuff on your free time.”

This is incorrect thinking based on the overwhelming cultural paradigm that says work should be placed squarely at the center of your life, with any fun/recreation coming as an afterthought.

It’s the deferred life plan, where you save, save, save for 50 years, contribute to your 401k and when you’re 60 (that’s early retirement actually…), you hope to be able to finally stop working and live the last 20ish years of your life in frugal quietude, clinging to a slipping middle class existence as inflation goes up and your savings decreases.

At least now you have time to finally do everything you wanted to do…right?
Sounds bittersweet to me.

I propose another way.

We’ve seen what happens when work is your central focus. Working for work’s sake, spending all your time making more money or obsessing about money instead of doing the things you really want to do because you’re ashamed to actually admit what those things are for fear of being labeled different. God forbid you don’t have “work ethic”.

What if you were to make your life and the pursuits that interested you – traveling, learning, physical activities, art, whatever- the center(s) of your life and fit work in like a planet in orbit, designed to support your life and pursuits without completely taking over?

What if your presence wasn’t actually required to generate the resources that support you, and you were left to roam the earth freely?

What would you REALLY do with your life?

Have you ever considered that in a completely digitized society this is a very real possibility?

This isn’t a popular way of thinking, and if you don’t have any friends or role models living like this, it’s hard to imagine that this is even possible.

But as I’ve met more and more incredible people through my blog — people who are living that “fictional” life — I realize that it’s not only very possible, but that there’s a formula to creating these circumstances. It’s not luck, and it’s not voodoo or “positive affirmation”.

In the past 12 months I’ve gotten increasingly closer to this reality.

Are you one of the few who believes a better way is possible, not just for people in books or in the news, but for YOU?

Leave me a comment below and let me know.

Reprinted by permission.

Daniel DiPiazza teaches young people how to stop doing shit that they hate and break free of 9 to 5 boredom by starting their own businesses at his blog Rich20Something. Click here to join his tribe of hungry young entrepreneurs and get free coaching.

Image Credit: Shutterstock.com

As you will remember, HTML describes what each part of a web page is to your browser.

Below you will find a downloadable HTML Tags Cheatsheet with a list of all the tags you need in order to get started in HTML, as well as notes on how to put ‘em to use!

Use our cheatsheet to build your own website, or fix something in WordPress. Print it out, tape it up, and get your HTML on!

Download Your HTML Cheatsheet →

The tagline for Joe Medved’s personal website reads, “Startup addict and Cleveland sports fanatic,” a solid description considering that Medved invests $250K-$1M in about 8-12 startups each a year.

Medved has a history of working with media-related ventures.  He previously worked as an associate and analyst for J.P. Morgan Technology, Media & Telecommunications Investment Banking, then went on to become an associate at Constellation Ventures, a media and communications venture capital fund.

Since 2005, when Medved joined SoftBank Capital, his focus has largely been on investing in digital media companies, primarily offering seed and Series A funding.  In 2009, he co-founded the networking group, Digital Media VC/Corp Dev Connection, which connects investors and corporate development professionals involved with digital media.

Although his office is based in New York, Medved has strong ties to Boston and serves as Chairman Emeritus of the New England Venture Network, a vast network of young venture capitalists.  In 2011, he was inducted into Boston Business Journal’s “40 Under 40.”  About 500 nominations were reviewed for the honor, which considers both professional accomplishments and community involvement in the region.  On making the switch from Boston to New York, Medved told the Boston Business Journal, “There’s a lot of talk about New York vs. Boston, but it would be foolish to ignore either market.  We continue to invest in both.”

Medved graduated from Boston College’s Wallace E. Carroll School of Management with a B.S. in Finance and completed The General Course at the London School of Economics and Political Science.

VC Firm:

Partner at SoftBank Capital (Founded in 1995)

Sector Focus:

Advertising Platforms, Consumer Internet, E-Commerce, Education, Games, Mobile and Social Media.

Selected Investments:

BestVendor
Taykey
CrowdTwist
Thumb
Piictu
YouAreTV
MobileDay
Hyperpublic
Poptip
Burstly
BuzzFeed
True&Co
GameGround
SellerCrowd
Jump Ramp Games
GoodCrush

Boards:

BestVendor
CrowdTwist
Thumb
JumpRamp Games

Expertise Areas:

Media, Games, Mobile Technology, E-Commerce, Corporate Development and Business Modeling.

Blogs, Twitter & Websites:

Twitter
Website

Memorable Quotes:

On the next generation of social companies:  “In searching for the next generation of successful social companies, VCs will look for not only growth, but engagement, mobile success and strong intent.”

On the importance of working with Japanese companies:  “[Japanese companies] are very advanced in their infrastructure, speeds, access and distribution.  But the U.S. leads in software, and has seen more innovation in ad technology.”

On whether or not a company should have an “Anti-portfolio,” a collection of deals that got away:  “I think it is always important for VCs to reflect on their investment track records so that they can learn lessons from their past investments. Thinking about the companies you failed with, either by investing in something that didn’t work out or not investing in something that became a big winner, to determine what you missed in either situation is a very healthy thing to do.  And I believe that most VCs do keep track of their failures in this way, particularly with the companies that win big.  Whether or not one should promote it formally as the “Anti-Portfolio” is a different question.  Bessemer does it, which I think is fantastic, but we have never gotten around to doing it here at SoftBank.”

On what’s the first thing a VC firm cares about:  “It’s team, team and concept.  It has to have a large potential market. But at the early stage, you really want to bet on great teams.”

On explaining his role:  “My role is to network heavily in order to connect people.  I’m just sort of entertaining people all day long and talking about ideas.  I love my job — I would do it for free.”

Since the early 90s, mega companies such as Amazon and eBay have been using ecommerce to reach a wide customer-base. Now, startups everywhere are making use of this convenient, online industry. This past week at the Apple Store in SoHo, Women Innovate Mobile hosted their monthly tech panel, to address the popularity of ecommerce. Emily Hickey, COO at Lolly Wolly Doodle, Selby Drummond, Accessories Editor at Vogue, Chantel Waterby of Chloe & Isabel, Liza Kindred of Third Wave Fashion, and Andrew Mitchell of Zig Capital were invited to share their insight.

The evening kicked off with the panel sharing some of the most exciting sites out in ecommerce today. Some of those included:

Wantful.com, mentioned by Liza Kindred, for its ability to get rid of a headache – I mean solve a common problem – which is how to find the perfect gift for someone.

The Beauty Counter (as well as Chloe & Isabel), mentioned by Selby Drummond, for its model which empowers customers to be the seller, thus simultaneously helping to grow real brand attachment.

Warby Parker, mentioned by Andrew Mitchell, for its ability to eliminate the middleman, thus providing affordable glasses to the masses.

Posh Mark, also mentioned by Liza Kindred, since its part of the many companies who are creating sites that allow users to sell their own content to each other.

The ecommerce market has certainly grown large enough to the point where Kindred even noted that she finds it saturated, save for exceptions such as those above. The panel thus tackled what they thought was driving the innovation in the market and what might have been holding it back.

According to Mitchell, it’s the “push and pull effect” in which traditionally, brands pushed out their ideas and consumers were forced to accept them. Entrepreneurs, however, find a niche and focus on making their business transparent, which is what customers want to see. Thus, more customers are rooting for those new brands to succeed.

Another source of innovation, said Chantel Waterby, is the increasing usage and importance of social and mobile networks. She noted that 74% of consumers look to social networks to guide their purchases, while 91% of people trust recommendations friends make online.

Emily Hickey agreed with the social aspect and remarked that 60% of her revenue is made through a Facebook newsfeed. Thus, if five people comment that they want an item, five are made and if 500 comment, 500 are made. At the same time, both she and Chantel said that the lack of innovation in the platforms that support these businesses are currently holding them back. While Emily said the startup cost is a lot lower, when trying to scale up and build your own technology to support the demand, you realize that you have to slow down your progress.

If indeed the ecommerce market is saturated, companies must further stand out with their sale strategy. One example of the innovative business models mentioned:

StitchCollective, mentioned by Kindred (whose company ‘lives and breathes fashion tech’). StitchCollective lets people vote on the design to be produced. Kindred is interested in social production since, as she sees it, “When people are involved in the brand earlier, they’re much more invested in it and much more likely to make a purchase.”

Another important factor of sales strategy for ecommerce is the mobile experience.

For Waterby’s company, her main focus is to ensure that her sellers can build an experience that can showcase each of their style in an accessible way.

Kindred and Drummond both stressed the idea of a mobile’s accessibility. A phone, said Kindred, can let you know which stores are nearby. Drummond gave the example of walking into a Prada store and finding that a shoe you want doesn’t come in your size. You should be able to easily look it up online and purchase it that way.

Mobile and online have created more opportunities for businesses to interact with customers. As Hickey noted, interacting with customers on Facebook has allowed them to build genuine relationships where people are comfortable enough to post pictures of their newly adopted kids in the company’s clothes. With online so popular then, is there a need to innovate offline?

“This is where the importance of having a ‘touch-point’ comes in,” Kindred. “What everyone knows is that people will always want to have that experience of physically trying something on.” Thus, the popularity of pop-up shops, or as Drummond noted, places like Story, a sort of popup evolution based in Chelsea, which holds month-long stores for online shops.

And back to those famous billion dollar companies mentioned in the beginning. Sure, they set the trend, but will their models still work in the future?

To Kindred, Amazon does commodity purchases well but not editorial, which is what many niche businesses focus on instead.

For Mitchell, achieving Amazon-like success is really what a company’s end game is.

For Hickey, their end game is to become the top kids brand in the country. At the same time, they never want to sell wholesale and don’t try to compete with Amazon’s shipping and pricing. Right now, they’re taking things one step at a time, with this question always in the foreground, “How do we serve our community?”

Which, in the online world, can be a pretty big neighborhood.

“If you think about it, this is an even more powerful computer because it has a location and it’s something that you carry with you all the time,” he said.

There’s no doubt people carry these supercomputers with them everywhere. But is that a good thing?

Forbes featured a post this week that asked the interesting question, “Are smartphones making us dumber?”

While author Katherine Ellison quotes a neuroscientist in the story who says he’s unaware of studies that prove the affirmative, there are plenty of people writing about the subject, giving their books titles such as “Distracted: The Erosion of Attention and the Coming Dark Age,” and “The Shallows: What the Internet is Doing to Our Brains.”

Maybe no one has yet measured actual decline in intelligence or ability to focus due to the flashing and pinging screens we seem to constantly look at, indirect evidence suggests there’s reason to worry.

Ellison points to studies conducted at the University of California at Irvine in which a researcher found that people who work on computers switch tasks every three minutes and flit between windows to check email or surf the web 37 times an hour, on average. Another UC Irvine study done in collaboration with the U.S. Army found that after five days without email 13 office workers were found to be multi-tasking less, less stressed and more able to focus.

Brain and behavior studies aside, smartphones are definitely a tool many people use to behave in incredibly stupid ways.

Texting while driving, walking and biking can kill people. Everyone in the developed world knows it, yet this dangerous behavior persists. If you’ve spent any time driving since the advent of the smartphone my bet is you’ve seen someone texting, emailing or otherwise tapping on their device while driving, and you’ve probably seen them swerve out of their lane while doing it.

My son’s school is only a few miles from our house but the idea of him biking there is absolutely out of the question because of the very real possibility he will be hit by a car because of all the idiots driving while messing with their phones. When I was a kid, paying attention to the road was drivers’ modus operandi.

Speaking of texting, how about people who use shorted text language like “u” for “you” in an email message or some other non-text medium. In my opinion, if you’re using a keyboard off of which words can speedily fly, there’s really no reason to shorten them. Yet acronyms such as OMG and LOL are ubiquitous and reflect the degradation of our language. Just flip through any classic book written more than 100 years ago and compare it to whatever’s at the top of The New York Times Best Sellers list. The way we write and speak has evolved into something that’s much more simple and streamlined. While some might argue that’s a good thing, many readers today have a difficult time with vintage prose.

Another thing I see all the time is little children—at a playground, for example—in the presence of an adult paying little to no attention to them, instead glued to his or her phone. Every time I see this I want to inform the individual about the oft-forgotten fact that time flies; in no time the little angel will be in college. Not only that, our kids get smarter the more we talk to them. I’ve even seen public service announcements regarding this problem posted in the Midwestern city in which I live. It’s sad that parents today need to be told to put down their devices and interact with their kids.

And where etiquette used to mean saying “please” and “thank you” or holding the door for a lady, today people need manners training regarding the myriad of aggravating ways they use their phones. Consider the clueless person talking on her phone in confined public spaces such as the table right next to yours, or holding up the line at a store because of tapping or talking on their phones, or worst (in my book)—when you’re having an in-person conversation with someone who keeps checking his or her phone.

So are our smartphones making us dumber? Even if scientists can’t prove it, I say in practice there’s no question.

This article was written by Christina DesMarais and originally appeared on Techlicious.

More from Techlicious:

• Is Your State One of the Clumsiest?
• Are You Addicted to Facebook?
• Two Doctors Accused of Filming Women with Hidden Cameras

Here are 6 tips for negotiating effectively:

1. PEOPLE SHOULD ALWAYS COME BEFORE PROFITS

Relationships are the currency of influence and success in business.  No matter how badly you want the deal or a certain outcome, do not use, manipulate, insult or demean people to get it.  Not only does it create bad energy that will come back to you, it also sets you up to be found out and have people walk away from the deal unhappy.  While you can’t control anyone’s opinion of you, you can operate with integrity and treat other people with respect.  This is the first, and most important, rule of negotiating.

2. KNOW WHO’S ON THE OTHER SIDE OF THE TABLE

I can’t tell you how many times I’ve sat down to negotiate a deal and had people make all kinds of wild assumptions about me, my company and my partners.  A lack of research on your part says that you either don’t care enough to prepare properly, or you’re an amateur who isn’t savvy enough to research the other side.

Take the time to understand who you’re negotiating with – what makes them tick, what that might want in the deal, why they might want what they want, what’s urgent versus important for them.  As with sales, the more prepared you are, the more effective you’ll be.

3. KNOW WHAT YOU NEED, WANT AND WOULD LIKE TO HAVE

Before you arrive at the negotiating table, know what you absolutely cannot compromise on and what you’re willing to concede.  This prevents the temptation to get caught up in emotions and the desire to reach a conclusion.  Even when it’s uncomfortable, it’s important to keep your objectives in the front of your mind and advocate for them.

4. CREATE LEVERAGE

In many cases, you have advantages in a negotiation that are not obvious to you or the other party.  To fully maximize your opportunity, it’s important to think about what advantages you have that make your proposal more desirable to the other party.  It could be a strategic partner that the other party wants to work with or a future promise that you could easily fulfill.  Keep 2-3 leverage points handy, and use them if negotiations begin to stall or go south.

5. GIVE SOMETHING MEANINGFUL

The best way to start a negotiation is with a meaningful gift.  In his classic book, Influence, Robert Cialdini explains the concept of reciprocation, which says that when we give something to someone, they feel indebted and want to create balance by returning the favor or gift.  The reason to give is not to get something in return.  The purpose is to set the tone for the negotiation.

If you’re a genuinely kind and generous person, you’ll want to do things that create goodwill.  The gift could be something as big as courtside tickets to a sporting event or something as simple as a Starbucks gift card for $10.  The gift is less important than the proper motivation and follow-through.

6. CLOSE QUICKLY AND GRACEFULLY

If you’re a fan of the ABC television show Shark Tank, then you’ve probably witnessed people talking themselves out of deals by not knowing when to stop talking.  Going back to point 3, identify a point that’s satisfactory and immediately close.  Don’t linger or talk out of nervous energy.  Simply state the terms, seek confirmation and then discuss the next steps.  Don’t give the other party the chance to change his or her mind and spend time waffling over inconsequential details.  Be clear, be firm and be progressive.

Want more advice?  Check out Influence by Robert Cialdini and Getting Past No by William Ury – both books are fantastic primers on negotiating and personal selling.

What strategies do you use?

Reprinted by permission.  This post originally appeared on the author’s blog.

The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs.  In partnership with Citi, the YEC recently launched #StartupLab, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses via live video chats, an expert content library and email lessons.

Don’t ‘pitch.’  Tell a story.

– Mary Lemmer

For a quick pitch, make it simple and clear.  Tell me succinctly and directly what it is you’re doing and what problem that solves.  Try out your simple elevator pitch on friends in and outside of the startup scene and see if they understand what you’re talking about.  It’s okay to use analogies if they hold (‘this for that’) — anything that allows someone to quickly understand what you’re doing can help.  You must then be prepared to own that positioning (‘…right, so like an airbnb for cats, but we’re focused on…’).

– Ellie Wheeler, Greycroft

Be confident and be yourself.

– Mary Lemmer

My words of wisdom for females seeking funding are to assume they will be pitching their ideas to men who might be unfamiliar with their concepts if their companies are targeted towards women.  For example, a male investor might not understand how many women will spend thousands of dollars a year on blow-dries.  Female co-founders, founders, etc. have to explain their case, potentially using comparisons the opposite sex can relate to!

– Caroline Scheinfeld, Zelkova Ventures

Be resilient.  Be ready to hear ‘no’ but don’t let that bring you down.

– Mary Lemmer

Women need to have more swagger during fundraising time.  Male founders typically say, ‘Hurry up, there’s only $250K left of my $500K round!’  Women will say, ‘Crap, I’ve only raised $250K towards my goal.’  To use an over-the-top anecdote for a moment, if a pair of jeans doesn’t fit, remember that it’s because your waist is too small, not that your rear is too large.  Women need to focus on the success demonstrated by their in-progress achievements.  So be proud of the fact that you raised 250,000 FREAKING DOLLARS, and realize that investors are lucky to get in on your project since you’re limiting the amount you will raise.

– Christine Herron, Intel Capital

Be confident – you have been invited to pitch and your audience wants to hear you present.  Also, listen.  If they are asking questions, be flexible to respond.  Let them see your vision and get interested in it first – there’s time for details when you have subsequent meetings.

– Kathleen Utecht, Comcast Ventures

Reprinted by permission.

Now 5 years later as the recovery gains traction, new data shows the tables have turned. Instead of necessity-driven new businesses, more U.S. entrepreneurs are launching ventures based on perceived opportunities, growth ambitions and a broad optimistic outlook—a group sometimes called opportunity entrepreneurs.

“The opportunity entrepreneur has come back,” said Donna J. Kelley, associate professor of entrepreneurship at Babson College, located outside Boston. “People are just jumping in,” said Kelley, who authored the 2012 Global Entrepreneurship Monitor.

Rise of Opportunity Entrepreneurs

While necessity-driven entrepreneurs have not disappeared, opportunity seekers returned in 2012. Research found that nearly 78 percent of entrepreneurs last year started ventures to pursue opportunities. That is up from 71 percent of total entrepreneurship in 2010. Before the financial collapse unraveled, about 87.3 percent were opportunity entrepreneurs in 2008.

“People are now seeing a positive environment and jumping in,” Kelley said.

Based on a survey of about 5,500 entrepreneurs across the country, the annual report offers an in-depth analysis of American entrepreneurship. It also offers a peek into what’s happening on Main Street, a traditional driver of past economic recoveries. The latest, annual report was released Wednesday, May 22.

New Business: Off the Cob

Cameron Sheldrake, founder and president of Off the Cob, an Ithaca, N.Y.-based maker of sweet corn tortilla chips, is among the new business owners who opened shop last year.

Sheldrake launched his company after spotting an opening in the crowded specialty-food market. Off the Cob chips feature sweet, organic corn with no genetically-modified organisms or GMOs. “I wanted to pursue a niche,” said Sheldrake, who graduated in 2012 from Babson College, which focuses on entrepreneurship.

The chips at $3.99 a bag are available in about 70 stores, most of them independently-owned and in New England. “Something that’s unique and tastes great, it’s going to sell itself regardless of the greater economic climate,” Sheldrake said. “It’s a good bet that people buy snacks even in a recession.”

Like Off the Cob, most of the new ventures launched last year straddle consumer businesses—about 41 percent. Examples include retail stores or websites, restaurants and hair salons.

Highest Level in More Than a Decade

It’s enthusiasm like Sheldrake’s that’s a big theme in the 2012 report. More Americans are feeling hopeful about business prospects, and subsequently pushing entrepreneurship activity to the highest level in 14 years. Last year, the average total, early-stage entrepreneurial rate increased to nearly 13 percent, an all-time high since the survey began tracking such activity in 1999.

Such high entrepreneurial activity suggests business owners are opening up smaller shops—and chasing larger opportunities such as restaurant chains, Kelley said.

The report, conducted with Baruch College in New York City, also found many entrepreneurs had just opened businesses and paid salaries for less than 3 months in 2012. That data suggests future small-business owners had been poised—and just waiting for economic headwinds to shift before taking the plunge, Kelley said.

Not only has traditional bank lending been static since the 2008 meltdown, entrepreneurs have been wary about a broad pickup in consumer demand for goods and services. The entrepreneur report mirrors the National Federation of Independent Business’s widely watched Index of Small Business Optimism. The index rose 2.6 points to 92.1 in April, erasing a drop of 1.3 during March.

Don’t Mess With Texas

The 2012 report also revealed Texas boasts a high level of opportunities for entrepreneurs, compared to other states. For would-be entrepreneurs, the state has a lot to offer.

There’s no state income tax. Capital and grants to the local startup community are abundant. Strict mortgage rules prevented Texas from experiencing many foreclosures, keeping the local housing market stable. And the public school system is highly regarded and growing, according to the report.

Amid such a business-friendly environment, younger innovators and women are especially active in Texas compared to the national average, according to the report. “Texas is such star,” Kelley said.

Austin is a particular draw for early-stage high-tech startups, said Patricia Greene, entrepreneurial studies chair at Babson College. The annual South by Southwest (SXSW) conference has helped bring entrepreneurs to the region, she said.

Houston is drawing more female entrepreneurs to fields not usually associated with women, including construction and waste management, said Greene. Female business leaders may be making a mark in a sector, and subsequently persuading other women to follow in their footsteps. “I do wonder about the impact of role models” in Houston, said Greene, also academic director of the Goldman Sachs10,000 Small Businesses program.

All Is Not Rosy

But for all the enthusiasm to start a new venture, staying afloat remains challenging. For those who shut down a business last year, 18 percent said they closed shop because they couldn’t get financing. The closings occurred broadly between mid 2011 and mid-2012. That compares to 11 percent for startups closing in other wealthy economies, such as western Europe and developed Asia. That gap may suggest a disparity in lending environments and access to capital.

And when it comes to accumulating money to open a business from the get go, forget banks and crowdfunding apps. Many upstarts still turn to traditional sources of funding.

The median amount of capital to start a business is around $15,000. And 82 percent came from family and friends, according to the U.S. report. It’s otherwise known as good old-fashioned bootstrappin’ and beggin’ for money.

Reprinted by permission

Sage Wohns
Founder of #Agolo

Tell us about the decision to apply for ER Accelerator.

#Agolo is a social product, responding to questions asked on Twitter with social data taken from your network. We applied to same philosophy to our decision to apply to the ER Accelerator: we reached out to our network and found that some of our most respected colleagues are involved with ERA, and each gave it a ringing endorsement, particularly for the quality and accessibility of its mentors and its collaborative environment!

Tell us about the product that you are launching.

#Agolo is your Twitter personal assistant that recognizes your inquiries and provides answers, mined from your unique social network. We’re live now, answering your bar and restaurant questions with #Agolo!

What market are you attacking and how big is it?

#Agolo involves search, social networks and data mining, so it is a confluence of significant markets.  We think there is a significant advantage in being able to refine your considerations through friends’ credible opinions and social interactions, leveraging natural language processing, helping ease real-time decision-making and engaging with local businesses.

What is your take on the current scene in New York today?

New York is quickly becoming the data science capital of the world, and we’re thrilled to be riding that wave.  The city’s emphasis on innovation as a strategic priority, combined with the unique resources it has afforded us (and its ambitious nature) has made it a great place for us to continue to grow our company.

Where does your company fit in the ecosystem?

Our team is made of six Data Scientists, and three of them are on a leave of absence from their PhDs from Columbia (and four of whom are international). Through foundations at Columbia, we are also one of the first startups admitted to their new Institute of Data Science and Engineering, granting us access Columbia student interns and class projects. These partnerships also allow us to be involved in dialogue about both the city’s and university’s tech evolution as it comes to bear.

Read about the other startups selected for the 2013 ER Accelerator Summer Class.

The servant leader serves people through mentoring, direct assistance, listening and acting on their employees’ input. It’s the opposite of self-serving, domineering leadership, and it makes those in charge think harder about how to respect, value and motivate the people reporting to them.

Robert K. Greenleaf developed the concept in 1970.  Greenleaf felt that servant leaders are effective because the needs of followers are so looked after that everyone reaches their full potential, hence performing at their best, both individually and as a team.

According to Greenleaf, Martin Luther King, Gandhi and Jesus are all good examples of servant leadership.  What do you have in common with them?

If you recognize yourself in most of the following questions, you may not be another Gandhi, but you are well on your way to becoming a servant leader.

• Do team members believe you want to hear their ideas and will value them?
• Does your team believe you have a strong awareness of what is going on and why?
• Does everyone follow your direction because they want to, or because they have to?
• Do others on your team communicate their ideas and vision for the organization when you are around?
• Do people believe that you are committed to helping them develop and grow?
• Do people come to you when the chips are down, or when something traumatic has happened in their lives?
• Does everyone have confidence in your ability to anticipate the future and its consequences?
• Does the team believe you are leading the organization to make a real difference in the world?
• Do people believe you are willing to sacrifice your own self-interest for the good of the team?
• Does everyone feel a strong sense of community in the company you lead?

Many of the characteristics implied in these questions come more naturally to some people than others.  Experts argue that some traits are inherent and difficult to learn.  But characteristics such as listening, awareness, persuasion and the ability to build a community are all learnable skills.

You should reflect and thoughtfully assess the degree to which you have what it takes to be a servant leader.  If you are committed to being the best servant leader that you can be, I urge you to continuously work toward developing these characteristics.

Some executives think serving people’s needs creates the perception of being slavish or subservient.  A sense of balance is required because leaders need to serve the needs of customers and stakeholders, as well as those of team members.

For comparison purposes, autocratic leaders tend to make decisions without consulting their teams.  Laissez-faire and democratic leaders normally allow people within the team to make most of the decisions, based on consensus.  In reality, the very best leaders are those who can use a variety of leadership styles effectively, and use the right style for each situation.

I encourage you to take a look in the mirror and check your leadership style.  Just to make sure you are not looking through rose-colored glasses, ask a few of your most trusted associates what they see.  If the answers surprise you, it may be time to find a leadership mentor.

Reprinted by permission.

Ari Lewine
Triplelift

What does “Made in NY™” mean to you and your company?

Made In NY represents an exciting movement in New York to celebrate the thriving startup scene. Triplelift is excited to participate in this movement as we have seen fast paced growth in the rise of the visual web. New York has long been known as the advertising capital of the world, and with a steady influx of tech talent and venture capital investors, it is a fertile environment for an ad tech startup.

What can be done to maximize the “Made in NY™” campaign?

Social media outlets provide a great tool for maximizing awareness for “Made in NY™.” Getting more companies to create Made in New York videos would be a valuable tool to help accomplish this.

What else can be done to promote early stage entrepreneurship in NYC?

Increasing entrepreneurship funding incentives with added investor education programs. It’s also crucial to attract young talent, with added mentor and internship programs.

Where does your company fit in the ecosystem?

TripleLift is the advertising solution for the visual web. Brands work with TripleLift to identify and promote their best images. Publishers partner with TripleLift to create beautiful native ad experiences. Our clients include top 10 agencies and some of the most sophisticated brands and publishers in the industry. TripleLift’s native ads outperform traditional banner ads  by 15x in terms of ad engagement.

Read what other thought leaders have to say about “Made in NY™.”

Each week we bring you a handy guide to just a few of the events we think should not be missed. On any given night, there are too many events. You can’t attend all of them and neither should you, unless you’re a career socialite. For the week of June 16^th – June 23^rd, here are our suggestions for navigating the scene:

Tuesday: 6/18/2013

New York Venture Summit
8:00AM-5:00PM
Use Code “aw” for our industry discount
55 Broad Street @Digital Sandbox

AlleyWatch is pleased to be an industry partner for The New York Venture Summit. Come meet, interact and network with more than 500 VCs, Corporate VCs, angel investors, investment bankers, incubator managers and CEOs of early stage and emerging growth companies. Use Code “aw” for our industry discount.

Thursday: 6/20/13

VC Insights: When and why you should take your startup global
6:30PM-8:30PM
Free
154 Grand St @ WeWork

Join this informative discussion and networking event to hear from some of New York’s most respected venture investors about the rationale and timing behind a successful international strategy.

Friday: 6/21-6/23

Startup Weekend NYC
6:00PM-9:00PM
$125
500 7^th Avenue @ AlleyNYC

54 hours of awesome. Startup Weekends bring together developers, designers, marketers, product mangers, and startup enthusiasts to share ideas, form teams, build products, and launch startups!  AlleyWatch is pleased to be a media partner for the upcoming Startup Weekend NYC.  Anyone who shares this post on Facebook or Twitter with the hashtag #AlleyWatch will be automatically entered into a drawing to win free tickets to this awesome event.  Winners will be announced on Wednesday, June 19th.

For more, please visit the full calendar of startup and tech events in New York.

“Friction” is feedback mixed with emotion or drama, making it all the more difficult to sort out the value.  There should be no immediate assumption that one side is right, and the other is wrong.  It may be an indication that one party isn’t giving feedback well, isn’t taking it well or both.  Both of these modes are wrong and are not productive.

Unfortunately, many entrepreneurs I talk to confess that they put off giving feedback because they are uncomfortable.  Others tell me they can’t deal with friction or negative feedback, so they don’t listen.  If feedback is so important, why is it often ignored?  Let’s look at what causes friction and how to prevent it, resulting in productive feedback.

• Make your feedback “information,” not a judgment or evaluation.  Words such as “good” or “bad” telegraph evaluation, on either the quality of work or correctness of behavior.  Label words, such as “careless” or “disloyal,” signal judgment about a person’s character.   Most people don’t like judgments, so they respond with friction, rather than listening.

• Descriptions in neutral language lead to recognition.  People tend to keep listening and consider changing when they recognize themselves in non-confrontational descriptions of an actual event.  When they can’t relate to the data, you will have friction and they will tune out.  Stick to what you know and what you observed.

• Secondhand feedback poisons the process.  Too many entrepreneurs create friction by highlighting comments from other people.  This stems from two problems.  Firstly, this he-said-she-said doesn’t include concrete examples and clarifications.  Secondly, people become defensive when feedback is not firsthand.

• Pick an appropriate time and place for feedback.  Getting feedback in front of your peers or when you are rushing to meet a deadline is embarrassing and prone to causing friction.  Now, if you are trying to give feedback with privacy, and the person never has time to listen, that’s a different problem.

• Feedback given at work should be only about work.  Don’t mix in observations about commitment and loyalty to work issues with observations about actions within private relationship seen at a party or elsewhere.  Again, stick to the facts you know and your personal observations, and avoid absolutes such as “always” and “never.”

• Minimize the perceived power difference to facilitate listening.  Feedback to top executives is more readily received from outside experts and mentors, rather than less experienced team members.  Inversely, feedback given to newer employees should be given by their direct manager, or even peers, rather than a top executive.

Not all feedback should be about things that need improvement.  Everyone needs positive reinforcement on items and actions done well, which opens their mind to receive any feedback without friction.  In fact, most psychologists agree that people advance more rapidly by positive reinforcement, rather than negative reinforcement.

We never see ourselves as other people see us.  We see friction, and we react to friction, based on our standards, what we consider important, what we value and what makes us uncomfortable.  Understanding that, and understanding the triggers to friction outlined above, you as an entrepreneur need be able to deal with friction as the most important feedback of all.

Reprinted by permission.

Tell us about the decision to apply for ER Accelerator.

We were especially drawn to the ER accelerator for its extremely strong leadership and associated mentor network. Their connections to the NY investor community were also strong selling points.

A number of companies in previous ERA classes worked on vertical search engines and we were hoping to learn from their experiences when developing our product.

Tell us about the product that you are launching?

Machinio is a vertical search engine for industrial machinery. Think Kayak.com for machinery. We index listings from hundreds of marketplaces and individual seller websites to create a single repository of for-sale machinery. With over 600K listings, we’re already one of the most comprehensive resources.

What market are you attacking and how big is it?

The used industrial machinery market is a $40B market.

What is your take on the current scene in New York today?

We recently moved to NYC in order to participate in ERA and therefore don’t yet have a strong sense of the New York entrepreneurial scene. However, we expect great things.

Read about the other startups selected for the 2013 ER Accelerator Summer Class.