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John Osher, developer of the low-cost spin toothbrush, was a successful entrepreneur because he thought differently. William Sahlman, professor at Harvard Business School, breaks down the three most important factors in Osher’s success in this entrepreneur thought leader lecture given at Stanford University in 2007.

The key to improving your fortunes, he says, comes down to:

• Reflecting on your experience to improve your understanding.
• Looking at the situation differently to successfully innovate.
• Scanning your environment to find new opportunities.

Tags: Stanford University

People: John Osher, William Sahlman

Startup incubators continue to spread across the country, and one of the latest is BoomStartup, a Utah-based organization that’s graduating its first class of entrepreneurs next week.

If you’re a San Francisco/Silicon Valley snob like me, Utah might not seem like a great place for an incubator. Sure, you can find companies in that area, but are there enough for an annual batch of startups? Cofounder Robb Kunz said there are — in fact, BoomStartup were about 150 applications. And of the 10 chosen companies, two have already received term sheets from investors, he said.

“I always saw the Utah is a little bit undiscovered,” Kunz said. “But there are some historical names here, like WordPerfect and Omniture.”

The system is modeled on TechStars, the Boulder-based program that recently opened an office in New York City. (Kunz said he unsuccessfully approached TechStars founder David Cohen about expanding TechStars into Utah.) The training program lasts from May to August, and BoomStartup invests about $15,000 for a 6 percent stake in each company.

What’s unique about BoomStartup’s approach, according to Kunz, is the fact that it matches up each startup with a specific investor-mentor, who they work with for the entire program. Those mentors include Omniture cofounder John Pestana.

The incubator will hold its first Demo Day, where the startups present to investors, in Park City, Utah on Sept. 10. If you’re an investor interested in attending, you can find more details here.

And here’s a list of the startups, with descriptions provided by BoomStartup.

• 3PointData is iTunes for business data. 3PointData creates an online marketplace where others can sell their data. In real time, buyers can stream data into their spreadsheets, databases, and web applications.
• Bazari is a SMS database platform that helps microfinance institutions’ field agents update customer accounts, send electronic receipts, and arrange for product delivery, all through the simple mobile phones.
• Case Rover is an online platform targeted at U.S. litigation support and compliance markets. It specializes in software solutions, integration, security and maintenance for companies and government agencies.
• Fashion Genome Project aims to be the next big thing in online clothes shopping, utilizing revolutionary technology to eliminate the pain points and unpredictable results that usually come in the process.
• IActionable enables any site to define and automatically award public badges and points to their users when specific actions are performed.
• icount is a political website that allows an individual to communicate with their elected officials. Politicians can engage with their constituents, get real feedback on legislation, and clarify positions and voting.
• KarmaKey is like SkyMiles for restaurants. It helps consumers simplify their wallet by replacing traditional loyalty cards with virtual cards that can be tracked, traded, redeemed and stored on a mobile device.
• MashWorx creates network and browser deployed applications of engagement for conventions and hotels to improve the branding experience and increase sales.
• O-Codes helps publishers, advertisers, and marketers measure in detail how consumers interact with their offline content via text messaging to engage customers.
• TaleSpring provides an online authoring system for do-it-yourself mobile publishing, with an initial focus on interactive, animated children’s books for the Apple iPad and iPhone.

[image via Flickr/Alex E. Proimos]

Companies: 3PointData, Bazari, BoomStartup, Case Rover, Fashion Genome Project, IActionable, icount, KarmaKey, MashWorx, O-Codes, TaleSpring

People: Robb Kunz

(Editor’s note: Jim Fowler is the co-founder of Jigsaw, a Web-based B2B directory. He submitted this column to VentureBeat.)

You probably know the importance of establishing and maintaining Facebook, Twitter and LinkedIn profiles – but there are plenty of other sites and directories where hiring managers, recruiters and potential clients – or investors – may find your profile.

Myriad sites and services collect business-to-business contact data and pass it on to large and small companies that are looking to make connections or recruit new hires. According to an online reputation survey done by Microsoft in December 2009, 79 percent of U.S. hiring managers and job recruiters said they researched the online identities of job applicants. 70 percent of those said they rejected candidates based on what they found.

When it comes to managing your online identity, it’s critical to control what’s presented about you. Outdated, inaccurate and unflattering information shouldn’t pop up during a web search. You don’t want to be identified at an entry-level job, for instance, when you advanced years ago. Making sure your information is listed accurately in B2B databases can be a critical part of landing the right job opportunity, starting a business relationship or being reachable when a new client wants your product or services.

I’d be remiss if I didn’t mention Jigsaw as a place to start, but beyond my own company, here are five sites you need to check when managing your online business identity:

Google Profiles: Google’s version of an official online profile is a great way to aggregate information about yourself that you want to present to the world. Create your Google profile (or claim your existing profile if you already have a posting identity for Google blogs) and start updating it any time. Your Google profile can include links to photos, your blog or website and other sites such as your Facebook or LinkedIn pages. If you have a verified Google profile, it should boost search engine optimization at your linked sites, making them appear high on Google search results.

123People and Pipl: These, and other personal information aggregators, crawl the Web looking for personal and professional information on individuals. That means they are searching out your online identities from every corner of the Web and aggregating them. Sometimes the information they dig up is accurate, sometimes it’s not: They leave it up to their proprietary software to figure out what’s correct. Editing your profile in these services may be challenging, but you should at least visit these sites and see what comes up about you. Some allow you to verify your information online, while others provide tips on how to update your search results.

MySpace and Friendster: Remember that account you had in high school or college? Even if you’ve moved on, your old alter ego may still live there – and it may not reflect kindly on your professional self. (Shirtless beer pong photos, anyone?) Delete your ancient social networking accounts. Or, if your long-time social profiles have great SEO, consider replacing all your old information with a business version of yourself. That way, they will be appropriate venues for prospective new employers or clients to find you.

Also, don’t forget your own website and blog. It’s a no brainer, but if possible, you should own your domain name (e.g., www.firstnamelastname.com) and set up at least a simple profile as a home page. This is a critical part of building your business identity online. You can also use it to host a blog, where you can share content you create and establish yourself as a thought leader in your profession or industry.

On the other hand, if you have an abandoned blog that never got off the ground, delete it or you’ll risk looking stale or flaky. You can still promote yourself by following and commenting on industry blogs and other online publications relevant to your field of business and linking back to your cleaned-up, complete and relevant social profiles online.

(Editor’s note: Serial entrepreneur Steve Blank is the author of Four Steps to the Epiphany. This column is an abbreviated version of a post that originally appeared on his blog.)

My two daughters are now in college and have put their toes in the working world with summer jobs. As they’ve grown older, they’ve heard their parent’s advice about women in the workforce.

This post is not advice. Nor is it a recommendation of what you should do. It’s simply my interpretation of what I have observed. Our circumstances were unique, times have changed, and your conclusions and opinions will most certainly differ.

When my girls were younger and started to play soccer, I used to remind them, “Make sure the people on the field aren’t carrying sticks – because if they’re playing field hockey while you’re playing soccer, you’re going to get hurt.”

As they got older, they understood I wasn’t only talking about sports but that I was trying to teach them how to figure out the rules of any game they were about to play – and that included the workplace.

My advice to our daughters about women in the workplace has been pretty simple:

• The language of business is about winners and losers. Bosses who read Sun Tzu’s “The Art of War” as a guide to business strategy or “Leadership Secrets of Attila the Hun” are unlikely to create a culture of collaboration.
• There are implicit rules of competition and collaboration in companies.  It’s not that anyone is hiding a secret rulebook; it’s just that no one has articulated the rules.
• In most companies, men set these rules. Again, nothing secret here, but men don’t realize that they behave and think differently. They don’t have to explain the rules to other men, so it never occurs to them to explain the rules to women.
• As women, they will be expected to perform to boy’s rules as defined in their workplace: This means they need to spend the time understanding what the rules are in their company and industry. If they don’t, they will find others who are less competent but more adept at playing the game getting promoted instead of them.
• Women can be equally competitive if they desire. It’s not a question of competency, or a skill only boys have. If they want to succeed by competing, they can. They just have to learn the rules and practice them.
• Find mentors then become one. In every organization or industry there’s someone who’s figured out the rules. Seek them out and know what they know. By the time you do, it’s your turn to mentor someone else.
• Collaboration can make you a stronger competitor. The irony is that organizations that collaborate are more effective competitors. When they reach a position of authority, use their instincts to build a fearsome organization/company.
• If they prefer to collaborate and don’t want to play by boy’s rules, they need to understand what their career choices are. There are plenty of other ways to be a productive member of society other than a position on a corporate org chart.
• Understanding the rules and career options doesn’t mean the rules are right or they have to accept them as the only career choices.  They can make change happen if they so desire. But they need to understand the personal costs of doing so.
• Some find the idea of gender differences uncomfortable. Having fought to have men and women be treated equally, discovering that there may be gender specific hard-wiring for behavior sets up cognitive dissonance. Some simply won’t accept that there are workplace gender differences.
• I may be wrong. Perhaps I misunderstood what I’ve seen or that time has changed the workplace significantly. Take this advice as a working hypothesis and see if it matches your experience.

Time will tell whether we gave our daughters good advice.

Tags: discrimination, gender wars, women in workplace

(Editor’s note: Jason Katz is Founder and CEO of Paltalk, an interactive video community. He submitted this story to VentureBeat.)

The word “freemium” may be less than four years old, but the business model it describes – offering basic service access for free and then charging for advanced features – has been around for decades and is utilized by some of the Web’s most successful companies.

There’s power in words, though. And once the model was tagged with the freemium label, pundits decried it as a loss-leader and predicted subscription-based services would soon be the industry standard.

As that debate continues, many companies are building successful and profitable bases on a freemium business model. You might have heard of a few:

Pandora - Since its launch in 2005, the company known for giving away “free” music to users has expanded to 20 million unique visitors. In 2009, it brought in $50 million in revenue – all the while as a freemium business.

Flickr – The well-known image and video hosting service began by offering a free service allowing users to upload pictures to share with friends. As demand for the service increased, Flickr began offering two types of accounts – free and subscription – providing unlimited bandwidth and storage for paying subscribers.

Drop.io – Founded in 2007, Drop.io, a real-time online collaboration and file-sharing service, offers an upgrade to 25 GB of storage for $10 a year. Through the freemium model, Drop.io saw a 500 percent increase in revenue in 2009.

For freemium companies, growth comes not only from new customers, but more often from existing ones. If clients are happy with the free portion of a service, they’re substantially more likely to pay a small fee to get additional services. More importantly, they’re the ones who evangelize your business on social networks and blogs, as well as tout it to friends and family. Furthermore, the customers who trust the product so much they are willing to pay are even more inclined to refer their friends and family.

“Try before you buy” is a mantra that the Web has fostered since the early days of shareware. And freemium businesses fit snugly within this model. At the same time, they leverage a large base of loyal users to generate revenue — something subscription-based companies can struggle with, since they must simultaneously build that user base and convince it to pay a recurring fee.

Converting free users is a tricky dance, but the best way to do it is to make premium customers feel especially important. This can include sneak peeks at beta versions and first crack at new products and features from your company. (Ironically, this can bring user referrals full circle.) It’s also a good idea to give free users a taste of what’s behind the pay wall.

Though it may seem counterintuitive to give a product away for free in hopes that a customer would pay for an upgrade, the success of the companies above (not to mention the overwhelming success of social network game companies like Zynga and Playdom) speaks volumes.

There isn’t a universal business model that fits every company, of course, but as you explore options, don’t obsess over the “free” part of freemium and rule it out automatically.  With a high conversion rate and its ability to create an incredibly loyal audience, freemium has become a cornerstone of many successful startups.

Alain Raynaud is a mentor at TheFunded’s Founder Institute and the founder and chief executive of Fair Software.

Why do other entrepreneurs seem to raise millions without breaking a sweat, while everyone you pitch to never calls you back? Tweaking words on your PowerPoint deck may be a waste of time, if we look at the winning co-founder pitch during the Founder Conference earlier this month.

When Ron Park comes on-stage to pitch GrocerEye, a startup that helps you save on groceries, the odds are not in his favor. Grocery shopping is not exactly a hot topic, especially among the rather tech-focused audience. His slide deck is average at best, with a few vague statements. Even worse, another pitch also targeting food deals features very slick iPhone screenshots and boasts an impressive resume from a “Senior Technologist at Yahoo!”.

Watch the clip below — it’s less than 3 minutes. It starts slowly, but very early, you can feel the confidence in the hip-hop inspired moves. Ron is direct. he exults confidence.

He does a great job of dismissing GroupOn, his obvious competition, in one short punchy sentence: “I don’t know if GroupOn will go out of style, but groceries, never.” Again, that’s confidence.

Does he explain the secret sauce to his startup? No. All he needs to say is: “It’s just a big data entry problem, and I got that locked down.” But the conviction he puts in that statement is worth much more than a lousy attempt at building a technical argument. That’s why when Ron produces that elevator pitch in front of a VC, he will get invited to the meeting.

How can you apply these tips to improve your pitch and your chances of success?

Confidence partly comes from knowing your stuff inside out. You must know everything about your industry, your potential competitors and where they are headed. In other words, become an expert. But that won’t be enough.

You must also appear resolute. Doubt is not permitted, at least not in public. When you pitch, you must project an aura of certainty: your vision will happen and resistance is futile. Practice. Practice again in front of a camera. Watch the results and repeat a hundred times. Really.

Finally, you must genuinely believe in what you are saying. Tricks worthy of a used car salesman will not save the day. You are pitching to highly educated investors and engineers. They detect phony pitches instantly.

That’s why it’s hard: being yourself, while being both aggressive and confident, takes a lot of work. It doesn’t come naturally to most.

Companies: Founder Institute, GrocerEye

People: Ron Park

(Editor’s note: Scott Edward Walker is the founder and CEO of Walker Corporate Law Group, PLLC, a law firm specializing in the representation of entrepreneurs. He submitted this column to VentureBeat.)

A reader asks:  I’m the founder of a mobile apps startup, and we’re starting to get some incredible traction.  I’ve been bootstrapping the venture for the last year, but I’d really like to raise about $2 million to scale this thing.  If a VC invests $2 million, what percentage of the company will he own?

Answer: It depends upon the value of your company prior to the investment (commonly referred to as the “pre-money valuation” or “pre”).  The VC’s percentage ownership is calculated by dividing the amount of its investment by the post-money valuation of the company (which is equal to the pre plus the amount of the investment).

For example, if the pre were $4 million, the VC would get one-third ($2,000,000 divided by $6,000,000); on the other hand, if the pre were $1 million, the VC would get two-thirds ($2,000,000 divided by $3,000,000).

The real issue then is — how do you determine the value of your company prior to the investment?  Let’s look at that.

I come from the M&A world in New York, where the valuation of target companies was more science than art.  Indeed, targets were typically valued based upon a discounted cash flow method (DCF) – which basically estimates the net present value of the target’s future cash flow, discounted to reflect risk.

In the startup world, however, DCF doesn’t work because there is little or no historical financial data and projected cash flow is thus pure speculation.  Accordingly, the valuation of startups is highly subjective and is more art than science.  To put it bluntly: your startup is worth whatever the market says it’s worth, which was starkly demonstrated during the dot-com bubble.

So what does this all mean in practical terms?  It means you need to get out there and effectively pitch a bunch of VC’s in your space and get them excited about your venture.  By doing so, you can, in effect, drive the market by creating a competitive environment and playing the VC’s off of each other.  This is akin to what investment bankers do when they’re selling a company: they create a competitive environment (or the perception of one) to drive-up the purchase price and to provide negotiating leverage.

That being said, you should be aware of the following caveats:

• This process is a tricky one – and best done with the help of an experienced lawyer and/or consultant.
• At the end of the day, you will still need to convince the VC’s that you can deliver a 10X return (i.e., that they will make 10 times their investment).  VC’s will thus take into account certain significant factors such as the quality of your management team and the size of your market.
• As I have previously discussed, startups often make the mistake of focusing too much on valuation.  Indeed, there are other important terms that affect the economics of a financing, including the liquidation preference and the size of the option pool.

Startup owners: Got a legal question about your business? Submit it in the comments below or email Scott directly. It could end up in an upcoming “Ask the Attorney” column.

Disclaimer: This “Ask the Attorney” post discusses general legal issues, but it does not constitute legal advice in any respect.  No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction.  VentureBeat, the author and the author’s firm expressly disclaim all liability in respect of any actions taken or not taken based on any contents of this post.

Tags: ask the attorney, valuation, VCs, Venture Capital

Backblaze, a startup that offers an easy way for users to continuously back up their hard drive, is making a rather unusual announcement on its blog this morning — that it was almost acquired.

Cofounder and chief executive Gleb Budman writes that Backblaze accepted an offer from a larger company and everything was just days away from being finalized, before the deal fell through. It may seem rather strange for a startup to write about a deal that ultimately didn’t happen, but Budman says Backblaze is an open company by nature (for example it published the designs for its storage infrastructure last year, so that anyone could use them), and that he wanted to shed some light on the process.

Who was the acquirer? Not surprisingly, Budman isn’t saying. Backblaze was first approached by a large company that he calls Spacely Sprockets Software, and after some discussion, the offer fell into the “OK but not thrilling” category. So Backblaze went looking for another buyer and got a second offer from a company Budman calls Cogswell’s Cosmic Cogs.

More negotiations ensued, and finally Backblaze decided to accept an offer from Cogswell’s. The price is another thing that Budman isn’t identifying, but he told VentureBeat via email that “this was large enough that even the most junior employee would have been purchasing a house in SF.” The startup signed the offer, the due diligence process began … and then it fell apart.

Right after the end of the diligence period, Cogswell’s CEO reportedly called Budman and said his board of directors wouldn’t accept the deal without some restructuring. Namely, they wanted to move money from the upfront payment to the earnout period after the acquisition, to help ensure Backblaze executives wouldn’t leave right away. Backblaze decided that wasn’t acceptable, so there was no deal, and the startup will be going it alone for now. That’s okay, Budman says, since Backblaze is profitable and has plans for “hypergrowth.” And it hasn’t raised any venture capital, so there’s no pressure from VCs to sell.

Budman identifies a few key lessons from the experience:

1. Build trust — it’s job #1
2. Getting acquired is expensive
3. Find great advisors
4. Know your wants and walkaways up front
5. Require quick movement

For more details, read the Backblaze blog post.

Companies: Backblaze

People: Gleb Budman

Screw-ups are inevitable when you’re launching your own business. Entrepreneurs are often less clear about their company’s purpose than they thought they were – or hit roadblocks they didn’t anticipate and don’t know how to handle. Serial entrepreneur Jerry Kaplan, in this entrepreneur thought leader lecture given at Stanford University, runs down the list of mistakes that are most likely to bring a startup down. (The lecture’s seven years old, but the advice is timeless.)

If Kaplan’s advice strikes a chord, you might also want to check out his thoughts on the five critical skills entrepreneurs need.

Tags: mistakes, Stanford University

(Editor’s note: Ro Choy is a veteran Silicon Valley tech entrepreneur and CEO of PeerPong. He submitted this column to VentureBeat.)

Nearly four years ago, I decided to leave a director role at eBay to join a small 4-person team called RockYou.  At the time, a lot of folks told me I was making the wrong decision. Several questioned whether social media was a fad, if we would ever make money at it, and the value of a service that existed as a ‘feature’ for another site.  Four years later, conventional wisdom would argue the opposite.

Six months ago, when I left RockYou to join PeerPong, a startup in the knowledge management/ social Q&A space, I faced the same questions. Looking at my rationale then and now, there were some basic patterns that helped me make the call.  If you’re considering making a leap of faith yourself, here are a couple of basic thresholds I used when jumping into a new opportunity.

It Begins with Team  – In the case of both RockYou and PeerPong, making an informed call on the people who would work at the company was absolutely critical.  In my opinion, there are a couple of values to look for in the initial team.

• Answering Hard Questions – Every member of the team needs to have answers for a lot of hard questions.  In the consumer space, for example, experience in scaling users and the technology to support it is absolute. Ultimately, whether it’s experience or outright smarts, having a constant stream of answers to tough questions across the team makes things much easier for everyone.  Having a CEO or CTO source all the product or business ideas slows a startup down considerably and often avoids the needed conversation and consensus within the team to come up with the best answers.
• Accountability – Each member of the team needs to be fully responsible and accountable for his or her work.  This is closely linked to generating answers.  In general, a startup team needs to run across as flat an organization as possible, where even interns have an immense amount of responsibility and in turn, accountability for what they do.  With so little time to prove a business model, having anyone on a team that isn’t pushing their objectives aggressively severely limits the potential for the entire startup’s success.  It’s truly a situation where the weakest link can kill an entire team’s efforts.

For me, understanding the strength and character of the team I was joining made the risk/reward decision a lot easier.

Vetting the Technology – One of my biggest frustrations working at a large public company was the lack of product knowledge at the executive level.  How do you succeed if you don’t know what the most current technology can even do?  A great product, at whatever stage of development, radically reduces the risk of people jumping to a new opportunity.  When deciding to join the “new new” thing, I made sure to vet the heck out of the technology the company had built.

In the case of RockYou, this meant going through thousands of profiles on MySpace, Hi5 and other social networks, mapping out how RockYou’s widgets compared to all its competitors. In this case, making a bet on a product leader was an easy decision, even if the product category was still undefined.

In the case of PeerPong, measuring the effectiveness of indexing and routing of expertise was the focus.  There are established leaders in the Q&A space given the years players like Yahoo Answers and Answers.com have had to build up a base of users.

What I found with PeerPong was a unique, cutting edge and hard to replicate technology.  I compared that to the competitive set in the space and found few players using a similar product or with a team capable of building the same platform.

In both cases, the technology was a true, measurable asset to the startup, whether through proven user adoption or complexity and value.  Having a strong sense of the value of the technology let me worry less about the means to success (the product) and focus on the end potential (the opportunity).

Ultimately, if you’re looking at making the jump to a new, unproven startup and market, ask yourself a few questions:  What’s your appetite for ambiguity?  Does the unknown gear you up or stress you out?  Are you comfortable depending and trusting others for your success?  Would you use this product/technology yourself and sell all your friends on using it as well?  Can you work effectively with very limited guidance or direction?

The answer can help ground your decision.  Or if you’re more a fly-by-the-seat-of-your-pants person, just say the heck with it and do it.

Tags: technology

Companies: PeerPong, rock you