If you read this blog, you don’t need to be reminded that I’m an entrepreneur, or that CitySquares has been funded by angel investors from eCoast Angel Network, to Jonathan Kraft, and Mark Cuban, among others. The bottom line is that CitySquares would not be here today if it were not for our angel investors, but more generally if it were not for Angel Investing as a whole. Most importantly though, angel investing is good for America, that simply cannot be disputed. So why is Senator Chris Dodd trying to make it harder for entrepreneurs and companies to raise angel financing, and why is he going to raise the minimum requirements to be an accredited investor, and on top of it all make the SEC review every angel deal before it can get done?

Is the Democrat from Connecticut out of his mind? What is he trying to achieve here, raising revenues for the federal government? I don’t get it – where’s the logic in this provision? Maybe someone smarter than me can help me understand, but in the meantime if you are for entrepreneurship, for innovation, for job creation, for small business, then go here and sign the petition to stop this nonsense.

More information can be found here on The Huffington Post, in a well penned piece from Robert Litan. A quote follows:

Various studies published or sponsored by the Kauffman Foundation have made it abundantly clear how dependent the U.S. economy has been and will continue to be on the formation and growth of new companies. Angel investors are important funders of new companies. There is no good time to make it more difficult for them to invest in startups, and now — when the economy is struggling to recover from what may be the deepest recession since the Great Depression — is the very worst possible time to discourage angel investment.

Sign the petition here.

Related articles by Zemanta

• Robert E. Litan: Proposed ‘Protections’ for Angel Investors are Unnecessary and Will Hurt America’s Job Creators (huffingtonpost.com)
• Are Incubators and Angels Gaining Leverage On Larger VC Firms? (readwriteweb.com)
• CitySquares Acquires Online Retail Directory Yokel.com (searchenginewatch.com)
• Proposed Financial Regulations Could Cripple Angel Investing (readwriteweb.com)
• Dodd Bill Could Render Startups Too Small to Succeed (xconomy.com)
• Startups Get Hit By Shrapnel In The Banking Bill (avc.com)
• Dodd Reform Bill Contains Provisions That Would Punish Startups: Fred Wilson (huffingtonpost.com)

Related posts:

1. Angels are Good, Right?
2. Getting it Done

This week ADP stated that 693,000 jobs had been lost in the month of December, and the U.S. Department of Labor stated this morning that unemployment has reached 7.2%, a 15-year high. Those are some gigantic numbers – terrifying actually. And the Fed says it’s only going to get worse this quarter, and potentially longer. Is it any surprise? Americans have been spending spending spending for years now, piling up debt, and living their lives on a credit score. Is it because of deregulation? Who knows. The fact of the matter now is that we’re now paying dearly for this recklessness in the form of job losses, bankruptcies, foreclosures, homelessness, and much more to come.

Everyone needs to smarten up, fast. Individuals, companies, no one is excluded fro this. If you weren’t aware of this a few months ago, in late Q3, you better damn well wake up! I was shocked the other day to learn that a friend of mine is actually quite clueless about all this. He’s a bit insulated from it where he lives and in his line of work, but no one is really insulated from this. My wife works at Harvard University, which recently saw its endowment cut substantially, losing 8% or $12B. For the first time in a long time, people are losing their jobs at Harvard, seeing their pay cut, seeing bonuses and scheduled raises off the schedule. Harvard, one of the most stable employers in Massachusetts, is having these kinds of problems. Again – no one is insulated.

This applies to startups too, of course. In fact, I’d say it hits us harder and faster than most other businesses. And that brings me to my point. CitySquares has been hit by all this. Sales are down as small businesses were reacting to the news in September and October, and as they refocused their energies and also smartened up. Sales are down, cash flow is down, some of our customers have gone under, some have been unable to pay their bills. Nevertheless, we’re seeing our way through this. We have an amazing tribe here at CitySquares – some extremely dedicated and passionate people. These qualities were demonstrated this week when I asked everyone to take a pay cut. The result? Some people took bigger pay cuts than they were asked to! And another thing – everyone stayed. Attitudes are great, everyone is as committed as ever. It’s just amazing to me.

I learned so much this week, as a CEO and as a Founder. I learned about employee psychology, I learned about my own abilities as a leader, as a CEO, as a founder. I learned even more about buy-in, about the difference between a decision and a choice.

So, CitySquares underwent pay cuts this week and I can honestly say that on this blog with pride, and with my head held high. Because I know that our team is prepared to do what it takes to weather this storm. Because they understand that paycuts for everyone means no one gets let go, everyone stays. And this tribe is aware of the same goal we’ve had for the past two years – the goal that’s now within 5-6 months from happening – the goal of cash flow positivity. The only way we can make that happen is if everybody here is on the same page, and that has not changed. Everyone here must work towards the same goal! Cash flow breakeven, in this market? In this economy? Outstanding! Show me a business that’s within 12 months of cash flow positivity, and I’ll show you a business that gets it. But show me a business that’s not making changes, not making the necessary cost reductions, not doing everything to ramp revenues and I’ll show you a business that’s in a lot of trouble.

Another thing, we wouldn’t even be here talking about this right, nor ever even arrived at this moment in time, if it weren’t for our investors, our angel investors from eCoast Angel Network and other outside investors like Jonathan Kraft, Mark Cuban, even my own father, among several others. We’re truly fortunate to have such fantastic individuals behind this company. Angel investors are special and its easy to forget how important they are to the economy, to the capital systems, and to the world of entrepreneurship. Angels make it happen.

So, there you have it folks. The truth as bare as it comes! And that’s what my blog entry from earlier this week was about – the difference between decisions and choices. Decisions I had to make, and choices that I had to give to the staff. There were difficult, very difficult, decisions that I had to make, along with our board of directors. These decisions lead to other decisions, and choices, for the tribe – and this week they all chose to help each other, to make the necessary personal investment, to protect each other.

Monday was one of the hardest days I’ve ever had at CitySquares. Today is one my proudest.

Related posts:

1. Doing What You’re Good At
2. When the Going Get Tough…
3. Decisions, Decisions

Our primal fight-or-flight response – something that’s deeply ingrained in our primal instinct – is tested during times like these, among others. Fight-or-flight theory suggests that

“animals react to threats with a general discharge of the sympathetic nervous system, priming the animal for fighting or fleeing. This response was later recognized as the first stage of a general adaptation syndrome that regulates stress responses among vertebrates and other organisms.” – Wikipedia

Basically it means this – when faced with a challenge that threatens your survival, what do you do? Do you fight? Or do you flee? Either answer could be right. For example: If you are in the forest and face-to-face with a mother-bear in the woods, you’re natural instinct may be to flee – run for your freaking life! And you may be right, but do you take that risk? Or do you just stand still and don’t make a single movement. That’s also the right answer. Or, do you stand tall, wave your hands like a maniac and create the illusion of size, height, strength, fierceness? Either way, what you’ve decided not to do is to fight the bear. Yet if you’re face-to-face with someone who’s invaded your house in the middle of the night, you’re natural instinct is to fight the attacker off with a weapon. That might be the wrong answer. Either way, we’re talking about instinct here – our primal reaction to what challenges our survival.

There are fine lines here too, subtleties. For example, some people face very tough challenges in their lives. Maybe a child lost her parents when she was very young – does that child now stand up on her own and claw her way through life, taking care of her baby brother? Or does she give up, and rock back and forth in a fetal position? Hard to answer, hard to say. How about an adult who loses everything to a gambling habit or to drugs? Do they claw their way back or do they slide into the downward spiral? And when do they decide to start fighting? Hopefully before it’s too late.

OK, you get the point – sorry to be so depressing but these are examples that shape who we are, these are decisions we all face at one time or another, in our respective ways. They define people for the rest of their lives.

This now begs the question – what does a company do when faced with hard times? When an economy is slowing down, when the chips seem to be on the other side of the table, what decisions does the company take? How does it respond? How does its personnel respond? How about its sales people? Management? What about the Board of Directors, or the shareholders? How do all these stakeholders respond? And do they all agree?

I was on a flight the other day thinking about this very subject while flipping through the recent issue of Inc. magazine when at page 28 I came across a little quote from famed management guru Tom Peters. To quote Inc.:

Tom Peters is most associated with managing during bad economic times. His In Search of Excellence was published amid the sharp recession of 1982, and Thriving on Chaos debuted on Black Monday in 1987. On TomPeters.com he recently wrote about running a business in a time of “significant and sustained economic disarray.”

I liken Tom’s quote to this very subject – fight-or-flight. My favorite line, and the same line quoted in Inc., is in bold text below:

While many businesses will fail amidst the current economic crisis through no fault of their own, some will survive in spite of the odds—and a few will surprise by turning a messy situation into economic-competitive advantage. The requisite winner’s attitude is expressed by former Ritz-Carlton chief Horst Schulze, commenting on his decision to launch his new high-end hotel business, Capella, despite the market madness: “I do not accept the explanation of a recession negatively affecting the [new] business. There are still people traveling. We just have to get them to stay in our hotel.” And, indeed, getting an “unfair share” of “what’s left” is near the heart of the matter. Schulze’s remarks also remind us that instant, mindless cutting of R&D or training or salesforce travel in the face of a downturn is often counterproductive—or, rather, downright stupid. Tough times are in fact golden opportunities to get the drop, and the longterm drop at that, on those who respond to bad news by panicky across-the-board slash and burn tactics and moves that de-motivate and alienate the workforce at exactly the wrong moment.

Tough times indeed require tough and unpleasant decisions—but thriving, not just surviving, is an option for those who mix wisdom and boldness of leadership with transparency and maximized employee involvement and engagement. Without suggesting that there is anything humorous about the pain that bad times cause, one can say that “this is when it gets fun” for truly talented and imaginative leaders at all levels and in businesses of every sort and size!

I frequently hear words of doomsday and panic from those I’d expect to hear it from – backseat drivers and people who’ve never really done anything, or who’ve never really  been there and done that. From people who’s claims-to-fame are an MBA, or who rode a wave at a time of great opportunity and when everyone else was riding the same wave. I hear words of fear, reactionary language, strong opinions from those who don’t see beyond their own horizons, from those who lack vision. Yet I hear words of encouragement, of calmness, an almost harmonious philosophy, more proactive and forward thinking language, and open-mindedness from those who have been there, who have done that, who are glass-half-full, those who have vision.

The hard times in life test people – test our instincts, like our will to survive. Hard times test our humanity, shape us into who we are. Hard times make us stronger, but only if we choose to fight.

Companies are no different. We must choose our battles wisely, but we must forge ahead. We assess the battlefield, have a battle plan, fortify our properties, and attack the weak spots of enemy lines. We put the sun to our backs to blind our competition, and we fight! We do not run! We do not hide! We attack in waves, one powerful wave of attacks after another.

Entrepreneurs, you’ve arrived at this destination by your own choosing! You cannot control the climate, or the environment, you can only control your reaction to it. Smarten up, stiffen up your spines, and get to work! When the going get tough, the tough get going. Fight! These are opportunities!

Related posts:

1. Choices and Decisions
2. Decisions, Decisions

Jason’s email has a “focus on the entrepreneurial and startup depression and economic downturns/depressions–and how you can deal with them.” He suggests that the economic downturns we’re seeing right now will kill 50-80% of startups within the next 18 months, and that entrepreneurs need to be prepared to take certain steps to fortify, but also to monitor and address their own “entrepreneurial depression and anxiety.”

I love this topic. I’ve stated many times on this blog, and otherwise, that one of the biggest defining characteristics of an entrepreneur is his/her perseverence and resiliency. Those characteristics are to an entrepreneur like water to a fish. These are traits that an entrepreneur just requires 100% of the time. Jason states,

“Depending on your DNA, getting your ass kicked is either complete torture or deviantly rewarding. Truth be told, I like getting my ass kicked because it makes me angry, motivated and focused.”

That’s just worded perfectly. You either got it or you don’t folks! I know, for myself, I work best when the chips are down. When I’m in second place, I move into first. When I’m behind in the count, I hit a double. I’ve always been like that. I think most entrepreneurs are wired the same way.

Jason makes some very specific recommendations about things you can do right now to cover your ass. Some of those recommendations are as follows:

1. Execute better: This is fairly simple, as I describe above. Rank
yourself and your performance and improve it.

2. Grow the talent you have: When the market is down, it’s a great
time to get your team educated and to the next level. Invest in
training and education of your top people, because they are the ones
who will lead your company through this mess.

3. Firing the average people: Again, it’s totally politically
incorrect, but I highly recommend firing anyone who is good or
average. Startups are an Olympic sport and every slot on your team is
critical. You wouldn’t put a “good” swimmer in a relay, would you?
Don’t have one in your startup. Fire the good and replace them with
the great.

4. Cut spending every where you can: Recurring costs like
connectivity, phones, rent and insurance are things that you can
easily cut. Go to each of your providers and ask for 20% relief
immediately or you’re leaving. Most, not all, will give it to you.

5. Find a revenue stream and ride it: If you don’t have a revenue
stream right now, you’d better find one on Monday. Seriously, by the
end of the day. Once you find this revenue stream, ride it. Put at
least 25% of your effort into bringing in revenue.

6. Focus on your profitable clients: If you have revenue, start
focusing on which clients are most profitable. Take them to lunch and
figure out how you can over-service them and sell them another product
(or more of your current product). You’re gonna want to protect these
accounts because the folks reading Point Five are going to be calling
them!

7. Make your top ten 10% better: Look at the top ten aspects of your
business and come up with a plan to make each 10% better in the next
30 days. Ask everyone in your company to make suggestions for the 10%
better program and execute on the ones that will provide the most bang
for the buck. Sometimes, there are things you can do today that will
make something 10% better for free–you just haven’t brainstormed
enough.

8. Hold an optional off-site breakfast meeting on a Sunday and see who
shows up: If folks don’t show up for you to grow/save the company on a
Sunday for a two hour breakfast, they probably aren’t going to step up
when the sh#$%t really hits the fan. You need to know who the real
killers on your team are and you need to get close with them now.
Again, it’s fine to have 9-5ers on your team–if you’re the Post
Office. You can’t have them at a startup company. Note: if you reading
this and saying I’m anti-family, save it. Folks don’t have to work at
startups and some of the hardest working folks I’ve met have families
and figure out how to balance things.

9. Build marketshare: One of the best things to do in the down market
is build marketshare. Look for competitors that are going out of
business and buy them or just “steal” their clients and talent (i.e.
pick them up).

10. Raise money: I know I said above most folks won’t be able to raise
money in the down market, but that’s not because the money isn’t out
there–clearly it is. The issue is that the big money out there
doesn’t want to fund small ideas that are in the death spiral. Build a
plan based on revenue and taking market share and folks will consider
funding you.

I think it’s also worth noting entrepreneur and author Seth Godin‘s statements in a recent blog entry:

“Inc. magazine reports that a huge percentage of companies in this year’s Inc. 500 were founded within months of 9/11. Talk about uncertain times.

But uncertain times, frozen liquidity, political change and poor astrological forecasts (not to mention chicken entrails) all lead to less competition, more available talent and a do-or-die attitude that causes real change to happen.

If I wasn’t already running my own business, today is the day I’d start one.”

I wholly agree with this and it seems others do too. Many contend that the best time to start a business is now, during a recession.

Inc Magazine has a nice piece from May that tells the story about a select few businesses who started during a downturn, and prospered too. Fast Company readers respond to this article.

The Industry Standard gives Five reasons why a recession is a good time to start a company.

With Congress on the verge of approving some sort of bail-out for this financial nightmare, it’s important that people keep their heads on straight and stay focused. Perhaps this is an overly simplistic analogy, but it’s sort of like when the power goes out during a winter storm. You don’t know when the power will come back on, you feel the temperature in your house dropping, the pipes might start to freeze, and your children, your pets, and everything starts to be affected. But that doesn’t mean you light a fire in your house either. You don’t start burning the furniture. You stay calm, you buckle in. You get prepared to ride it out by finding sweaters and doubling up on socks. You fill up jugs of water, you let the ice melt, you light a few candles, but not all of them, you play a board game, keep your spirits high, and take it slow. But you also have a plan.

Now is the time to fortify and strengthen, get better, get mean! Those who panic aren’t thinking and don’t have a plan. So think – have a plan. Have a plan B. But most importantly, stop for minute – recognize the opportunity that’s in front of you! These opportunities don’t come around too often.

Related posts:

1. Calacanis Lit a Fire, Here are My Thoughts
2. My Truth about Entrepreneurship
3. Choose Your Weapons Wisely