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Learn about an old fashioned technique that’s a powerful way to influence others

23thank-you-jumbo

Let’s face it, founders, a large part of your job is to influence others: investors, partners, advisors, and of course, your colleagues. But just how do you do it?

Manners

Manners may sound like something out of the dim musty past of the 19th century. Or something you can observe in those PBS costume dramas. And aside from learning not to put my elbows on the table and talk with my mouth full, I didn’t get much instruction beyond table manners. And judging from most of my friends – no offense – and the many people I had met in my multifarious careers as a sound engineer, librarian, and executive in a software company, manners were conspicuous only by their absence.

But the headline of the article in the New York TimesThink You Always Say Thank You? Oh, Please along with the very clever four-panel graphic, snagged my attention. But more importantly, it reminded me of how I learned manners and how effective they can be.

When I joined publisher Addison-Wesley, home of the many computer science books I admired, as General Manager of their Educational Software division, one of the first things I noted was how polite everyone was. Men holding doors open for other men, everyone saying please, thank you and you’re welcome. This certainly was a stark contrast to working as a soundman, where the stars were far from polite, in fact when they talked to you at all, and the bigger the star the rarer the incidence, it was to utter an imperious command, or more often voice a complaint, “I still can’t hear myself in the monitors! Come on Mr. Soundman, can’t you just turn me up?” And while software engineers weren’t nearly so imperious and demanding, they weren’t Mary Poppins either.

What struck me the hardest was how incredibly polite the A-W editors were with their writers. And I soon learned that manners were not simply a set of words or phrases like pardon me, and may I? but were the surface manifestation of a much deeper and more powerful social interaction modality: consideration. Editors were extremely considerate of their writers – who today we would call the talent. After carefully observing the culture of the company, I soon learned that Addison-Wesley was in fierce competition with other publishers to attract and retain talent. But being thoughtful and sensitive to their writers wasn’t just a very tiny way to possibly influence them to sign with Addison-Wesely. Good manners was a key skill of the book editors and their colleagues in the software division as well. And the higher up you went in the company the more mannerly people got, especially with the company’s writers.

Manners and it’s deeper manifestation of consideration were much more evident in the day-to-day work the editors did with their authors. Textbook and consumer book publishers didn’t simply sign an author, print the author’s manuscript, and publicize and sell the book. There were many steps in between, as the book needed to be developed for its market: what we call today product/market fit. In fact A-W had two distinct types of editors: acquisition editors, whose job it was to sign and manage the talented writers, and developmental editors, whose job it was to shape the manuscript to meet the needs of the customers. It was observing the developmental editors at work that I learned that manner were a tool to influence their writers. Writers of college textbooks in the education division and the consumer division both had very large egos, not dissimilar from the egos I of the musicians I worked with in the sound reinforcement business.  (And the rule of thumb for both was the bigger the success, the bigger the ego – whether a writer or a musician.)

Consideration

Editors needed changes in almost every manuscript and authors generally welcomed the work of proof readers and copy editors. But when it got to actually changing the content, structure, and flow of their books ego would raise it’s ugly head. While in theory editors could stick to the contracts and tell writers what changes needed to be made to improve their books, in reality telling them directly what to do didn’t work that well. Hackles would rise. But worse yet schedules would slip. Authors were masters of passive aggressiveness. I soon learned that the most effective developmental editors were those who not only were the most mannerly, but also showed the most consideration for their authors. And just like record producers working with musicians in the studio or movie directors working with actors, editors influenced their writers to make  necessary changes. In fact the best of them were so skilled that they convinced their authors that the ideas for additions, deletions or changes to their manuscripts were their ideas, not the ideas of the editor.

Here’s a couple of simple examples. Rather than saying Delete the second paragraph on page 10, it’s obviously redundant an editor would say something like, “Let’s look at page 10 together. What do you think when you read the first paragraph, then then the second – and just stop there? The odds were good that simply pointing out places to improve the manuscript would be enough for the author to agree to changes, like cutting out the redundant paragraph. Many phrases were in common use, Would you please consider doing moving the last section of chapter one two the beginning chapter will improve the flow of the narrative and Have you looked at your leading competitor’s book? They seem to cover a spreadsheet’s built-in functions in a lot more depth than we do. What do you think about expanding our coverage of functions? While contractually A-W owned the final edit on books from their authors, much like movie studios reserved the right of final cut on their films, the best editors were highly persuasive. Part of their technique was to get the author to focus on the customer, to consider the reader’s needs. By acting extremely considerate of the author – making sure schedules took into account the author’s travel preferences, that they had a comfortable place to work while at A-W, and other actions that modeled consideration, the editor was able to get necessary changes made without the author getting defensive and setting off a tug of war over changes. I soon learned to use this technique with the software developers whose work we published. Putting myself in the developer’s place, to consider their needs, to preface the need for changes or additions very politely, all soon became habits, as they were reinforced by positive feedback. The programmer would agree that a particular feature had to be added or that a bug that they considered purely cosmetic but warranted fixing. Otherwise the bug was going to annoy users and generate customer support calls. Therefore it was in everyone’s best interests to be fix the bug, not just mine.

Empathy

Good manners are the proverbial tip of the iceberg of consideration and empathy. Below the surface of manners lies consideration, a much more sophisticated and deeper mental state. And deeper still is empathy: the experience of understanding another person’s thoughts, feelings, and condition from their point of view, rather than from your own.

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If you are a product manager as I had been, a position with high responsibility but low authority, you need to influence both product developers and marketers – as you are the emissary between the two. Start off with manners, if necessary bone up on etiquette. Once good etiquette becomes a habit, and you will know that, as you won’t have to keep catching yourself being impolite, dig deeper to understand the values and emotions of those you work with. Keep your goal in mind: engendering cooperation and collaboration from your colleagues, business partners, or even Board of Directors.

The results of good etiquette, deep consideration, and true empathy are empirical. You should see a reduction in conflict, faster decision making, and great cooperation from your teammates and improved collaboration with partners.

Etiquette is a high leverage technique. Very little effort on your part can result in very large behavioral and attitudinal changes in those you work with. Manners, consideration, and empathy are all social interaction skills, not mere linguistic expression.

And finally, do try this at home. Life with your significant other may just get smoother and better too!

 

Founder of Silicon Valley incubator reveals the secret sauce

Sometime ago I wrote a post entitled Accomplishments vs. Plans and quoted my late mentor Wayne Oler, President of Addison-Wesley Publishing Company, Steve, don’t tell me what you are going to do, tell me what you’ve done.

I ran across similar advice in the Consultants Insider article A Silicon Valley biotech hub that offers startups $250,000 in funding explains the ‘secret sauce’ to success.

The founder of IndieBio, a fast growing Silicon Valley biotech incubator has no interest in a startups lofty vision for the future.

“Your pitсhes won’t sell your сompаny,” Guptа told Business Insider during a reсent meeting аt IndieBio’s heаdquаrters in Sаn Frаnсisсo’s Сiviс Сenter distriсt. “Don’t tаlk аbout whаt you’re going to do. Tаlk аbout whаt you’ve done.”

Guptа’s ассelerаtor, IndieBio, gives startups $250,000 in seed funding аs pаrt of a 4-month inсubаtion progrаm. Gupta’s incubator transforms scientists into entrepreneurs.

His startups must focus intensely on short term goals and accomplishment when attempting to raise funds from investors. Investors are looking for traction: very strong evidence that you have validated your customer value proposition.

One of the companies Gupta funded is Memphis Meats, which produces lab-grown meat. The startup rose to the top of the 33,000 startups in Silicon Valley and has received funding from Bill Gates, Richard Branson, other angels and strategic investors ,including Tyson Foods and Cargill, a provider of food, agriculture and other products.

The most importаnt pieсe of аdviсe Guptа gаve Vаleti involved dissuаding him from foсusing too muсh on his dreаmy long-term vision of reduсing wаste аnd sаving the plаnet from сlimаte сhаnge. Insteаd, Guptа frequently enсourаged him to tаlk аbout the goаls his сompаny hаd аlreаdy ассomplished, suсh аs mаking reаl meаt without a single fаrm аnimаl.

Insteаd of pаying too muсh аttention to a fаr-off tаrget, Guptа аdvises finding a disсreet problem аnd homing in on a сreаtive, vаluаble solution to thаt. With Memphis Meаts, for exаmple, the ultimаte goаl wаs reduсed wаste. But the smаller problem wаs meаt that doesn’t require bаrn houses full of аnimаls.

Gupta has learned the same lesson I learned mentoring teams at The MIT Sandbox fund: equity has to be allocated on the basis of how much work each founder is contributing. If not the team will quickly be riven by internal conflict. If the people working the hardest in the company aren’t recognized and valued problems with the team will arise unless this problem is quickly and fully addressed. And pats on the back do not equate to more shares in the company.

The key in talking with investors is to showcase your accomplishments, which have to be both a product you’ve developed and market validation: that customers are already using your product to solve a significant problem they have. Ideas must translate into products which in turn translate into creating value for people.

What’s very interesting to me, having mentoring post-doc scientists in MIT’s ICorps program, is that unlike typical angels or seed funds who are looking for a quick return, Gupta is investing in scientists. He manages to transform them into successful entrepreneurs by helping them focus on the here and now, not a dream barely visible on the horizon. The time frame for academic research is almost always far longer than any investor is comfortable with. That’s why it is so important that scientists who want to commercialize their research findings learn the time frame and expectations of the startup world and the ethos of what have you done lately, not what your grand vision of world dominaton is.

I’m not sure whether or not I’d be up for eating lab-grown chicken from Memphis Meats, but that feat landed them on the cover of Inc. magazine.

Economies of scale are not economies of operations

cash

I was quite surprised the other day when I was in a mentor meeting and we were discussing how the founder could grow their company. This was a very early stage startup with no funding. Yet we always focus on scaling as almost every founder we mentor wants to grow and grow big. Very few are interested in creating a lifestyle or boutique business.

Economies of scale

The other mentor exclaimed how the founder would be saving money on servers, as they grew the company, due to “economies of scale.” Buy achieving economies of scale often mean expending more cash, which isn’t saving money, it’s spending it.

Well what does that economies of scale mean? According to Investopedia:

Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger factory will produce power hand tools at a lower unit price, and a larger medical system will reduce cost per medical procedure.

There’s a lot more to learn about economies of scale, so I recommend you to Investopedia. But the key point was the confusion – temporary I must assume – on the part of the mentor between operating and cash flow vs. economies of scale. In order to achieve economies of scale a venture needs to invest in scaling! That takes cash! And as we all know, cash is king in startups.

In days of yesteryear for a software company to achieve economies of scale required the investment of hundreds of thousands of dollars if not more in hardware as well as a system administrator to run it all. Today, thanks to Web services pioneered by Amazon AWS but now also available from Google, IBM, and Microsoft as well, scaling doesn’t require nearly so much cash or even a sysadmin.

Financial statements

Just the same, every startup needs to maintain the holy trinity of financial statements: income statement, cash flow, and balance sheet. For early stage companies the cash flow statement, expenses out versus revenue (income) in needs to be maintained at least monthly. Every Board meeting should begin with a review of the financial statements. And keep in mind that the larger the customer the longer they will usually take to pay you, as much as 90 to 120 days, one negative about enterprise customers. That’s why the cash flow statement has to be the most important statement, the lodestar of the CEO, because unlike the income statement, it takes into account the variable of time. As a startup you can try to stretch out your vendors like the big boys, but since 90% or more of your operating expenses will be staff salaries that won’t help much with cash flow.

Venture leasing

If your startup requires hardware other than servers, for example, lab equipment, you might be able to conserve your cash by what is known as venture leasing. Basically venture leasing enables your firm to rent, rather than buy, capital equipment. That reduces cash flow and also enables you to upgrade your mission critical equipment without necessarily needed to dispose of the old equipment. However, this financing term has venture in it’s name because this type of asset-less lending is only available to venture funded companies. No bank or other typical lender would provide equipment without collateral. Venture leasing does not require collateral, but does require that you’ve raised at least a Series A from an A level venture firm. That greatly reduces the risk for the venture leasing firm.

We did a small venture leasing deal with one of my VC-backed startups, which conveniently had the wife of one of our major investors as CEO of a venture leasing firm. But be advised that often venture leasing firms want warrants to give them some upside for taking on the risk of basically renting you your needed capital equipment. Once again we will turn to that very helpful web service Investopedia, just in case you don’t know what a warrant is, or the difference between warrants and stock options.

stock option is a contract between two people that gives the holder the right, but not the obligation, to buy or sell outstanding stocks at a specific price and at a specific date.

A stock warrant is just like a stock option because it gives you the right to purchase a company’s stock at a specific price and at a specific date. However, a stock warrant differs from an option in two key ways:

  1. A stock warrant is issued by the company itself

  2. New shares are issued by the company for the transaction.

Any one who knows me knows that finance is far from my strong suit, and if it isn’t yours you may do like I did and bring on a part time consulting CFO to help you with your financial statements, setting up your accounting system, such as Quicken, and handling your accounts payable and receivable. Otherwise you can do all these financial statements yourself until you do reach scale.

Who prepares the financial statements is not important. Who keeps their eye on them is what is important – normally the CEO, CFO, and the Board of Directors.

As a startup it is usually very hard to project revenues, but expenses should be fairly easy to project. So keep a tight rein on your expenses, learn how to stretch your dollars, and watch your cash flow. Running out of cash is second most common reason why startups fail!

 

Questions to ask at a first sales call

sales meeting

I’m a believer in always getting to meetings early. But on Tuesday ,due to my calendar dyslexia, I managed to show up at 10:30 a.m. for a noon mentor meeting!

But the staff at The Venture Mentoring Service were unfazed and gave me a conference room to work in. But to compound my mixed up morning I also managed to forget my iPad and I’m too fat fingered to write more than a text or short email on my iPhone, wasting valuable time wrestling with Apple’s autocorrect and losing.

So I got out my trusty pen and paper, both already booted and waiting for my words of wisdom.

I’ve had a few mentor sessions recently where the founders were at the stage of talking with prospective customers for the first time and so I gave them my two classic closing questions:

  1. What questions should I have asked of you that I didn’t?
  2. Who else in your company or elsewhere would you suggest I talk with and could you please give me an introduction?

There are a number of other questions that should precede these two closers, so here’s what I managed to jot down off the top of my head, the only part that’s working these days. Once you’ve gotten introductions out of the way and heard your customer’s objectives for the meeting you can move into the closing phase of the meeting:

  1. Have you ever tried to solve this problem we’ve been talking about before?
    1. When?
    2. How?
    3. Did you use internal staff or an outside firm?
    4. If an outside firm, what criteria did you use in selecting them?
    5. If internal resources, what department(s) in the company were involved?
    6. If the solution failed, do you know why?
  2. What products or services similar to ours are you using or have you tried?
  3. Do you have the authority to purchase our product? If not who does?
  4. Who else is involved in purchasing technology products in your company?
  5. Would you be willing to run a pilot test with us? If so, let’s plan on working out how we’ll judge the pilot’s success and what the next steps would then be.
  6. If we do run a pilot with us will you be the technical (or business) contact? If not can we meet with the firm’s technical or business contact?

It’s very important to have business and technical contacts on both sides of the table. Don’t leave without knowing those contacts.

Of course, there are many other questions you might ask. Just be sure to find out ahead of the meeting how much time you will have and who will be attending (name and role in the company – titles don’t always tell you the latter).

One exercise I recommend is to sit down with your team and have one of you take on the role of the prospect. That person’s job is to come up with every possible objection to your product or service. The other members of the team’s job is to come to address those objections. Then turn this role playing exercise into a document your sales team can use to prepare for sales meetings. It’s always powerful to anticipate a customer’s objections rather than waiting for the customer to voice them.

As part of the sales call you will most likely be asked to compare your product to competitors. Avoid those terrible check box comparison grids – they will either bore your customer or stimulate them into focusing on your competitor’s product not yours. Rather you should focus on why your product is a superb solution, giving very concrete examples, not abstract or highly technical reasons. Best of all is to tell stories about how your product either displaced a competitor’s or was chosen instead. Success stories are the best stories. You want to keep the customer focused on your value proposition, what makes your product both different and better. And rather than get into technical details, foresee the typical concerns of corporate IT:

  1. How easy is it to integrate your product with the their legacy products? Can your product read and write the necessary file formats?
  2. How much training does your product require? (best answer is “none”)
  3. What installation problems have you run into? (“None” is not a good answer. Tell a story or two about how you have overcome installation problems. Much more creditable than saying no one has ever had a problem.)
  4. Can I talk with other customers who have been using your product?
  5. Tell me about how you will keep our data private and our application secure?

Keep in mind all these questions are based on on one goal: to get the next meeting with both the business and financial decision makers. Or if necessary, the next meeting with the firm’s technical team. Don’t quit when you’ve gotten agreement to a next meeting. Make sure you set the agenda, the goals and attendees in addition to date, time, and place.

A typical corporate sale might involve three meetings: the initial call by the sales person, (in person or via a video conference), a follow-on meeting with decision makers and/or IT staff and a closing meeting where you may want to bring in your CEO and/or founder to help you close. (With many calls and/or emails to coordinate schedules and answer questions.) When a small company is selling to a big company the major question for them is “will you be around to support this product?” Meeting the CEO and hearing about your investors can help address that issue.

There are pros and cons to sending your sales presentation ahead of time. On the pro side your customer might just review it before the meeting, saving precious meeting time. But don’t count on it. People don’t read is one of my maxims. On the cons side you lose the ability to change the presentation before the meeting. Well you can of course change it, but you don’t want to confuse your prospect by having two different versions of the same presentation. What I recommend is you email your 30-second pitch to your contact. That way he or she can easily forward that very short and engaging (!) email to any colleagues who will attend that meeting. Your chances of having them read a short exec sum are far higher than having them review your presentation in advance – but don’t count on it. Start all meetings from square zero whether or not you’ve sent a document in advance. That refreshes everyone’s memory and gets the entire customer team on the same playing field.

So what are you waiting for? Get your customer call list together and start booking appointments!

 

A Prototype Is Worth 1000 Meetings

ideo

As the saying goes, “Great minds think alike.” Not sure that it’s really true, but in any event I actually wrote two posts on Mentorphile based on the same saying, A picture is worth a thousand words:

Why a prototype is worth 1,000 pitch decks

Sequel to a prototype is worth 1000 slides

But Tom and David Kelly of Ideo fame’s article “If a picture is worth 1000 words, a prototype is worth 1000 meetings.” still has some valuable points for founders doing pitches. (And if you are not familiar with Ideo, they are a global design firm – check out their site.

Given how important design has become I recommend all founder’s learn at least the rudiments of design. Here are some valuable words of advice from the article:

Getting early feedback and making updates in a prototype is much convenient and almost takes no cost as compared to making changes in an implemented system. and

Without a prototype, it’s only a concept. It can be difficult to get a potential client to commit to the purchase of a concept. –Steve Upton

 

One simple tool for competitive intelligence

alerts

While I totally agree with Jeff Bezos that ventures should focus all of their attention on their customers and how to surprise and delight them not on their competition. But if are just at the idea stage you really need to keep track of others who may be pursuing something similar.

Ive had at least half a dozen mentoring sessions where a mentor pulled out their smartphone and did a Google search and found several other companies pursuing the same idea we were discussing with the founder – much to the consternation of the founder, who obviously either hadn’t ever done a Google search or hadn’t done one recently.

As a blogger I’m constantly on the lookout for articles that may be of interest to readers so I rely on Google Alerts.

If you aren’t familiar with Google Alerts you should be! Google Alerts enable you to monitor the web for content of interest. Alerts is very easy to use. You simply enter what you want to create the alert about into the alert box.

Assuming your have a Google email address, Alerts will then give you a number of options for your alert, all with defaults : How often;Sources ,which include news, blogs, Web etc.; what language you want for your alerts; and what region. Region is very important because you may get a lot more alert emails than you care to wade through and if your venture is confined to the U.S. setting your region to United States will cut down the emails substantially. Google also gives you a choice between Only the best results and All Results – though how Google determines “best results” is a mystery. Finally you can chose the mailbox where you want your alerts delivered. If you get a lot of results in the Alert preview you might want to refine your alert terms or even create a new email address for your alerts.

There are two parameters with search: reach (ensuring that you are searching as many sources as possible) and relevance (how closely connected or appropriate the results are to your search term). Google does a fantastic job of mediating between these somewhat contradictory goals, but if you use a generic alert term like “mentor” you’ll end up with far too many alerts. And bear in mind, Google makes it even easier to delete or edit an alert than to create one so I recommend you start off with a substantial list of alerts and then whittle them down as you see how many hits each alert generates.

As to the content of the alerts, you will want to include your company name, your product name, the names of competitors and channel partners, your name and the names of your co-founders and anyone else in the venture who may have a public presence.

If you have an intern, handing off the task of reviewing the alert messages every day can be delegated to them, easily done if you’ve created an email address solely for alerts. In searching for Google Alerts I came across yet another Google tool that I was not aware of: Google Trends. If you are riding a trend like machine learning or the blockchain you may want to use Google Trends as well, they just added new features and a redesign.

But just like the Web itself it’s too easy to fritter away time following all the news stories Google Alerts delivers to you. So be disciplined. I recommend starting or end each day with a review of the day’s alerts email. Set aside ten minutes or so. And keep in mind why you are doing this: to track mentions of your company and product as well as competitors. However, think about what will you do with the new information Google digs out for you? If you are a blogger the answer is simple. But if you are a founder decide why you need to know this information and what you will do with it. For example, it may be a good way to track the efficacy of a public relations campaign. Or ascertain the impact of a new product release. Activity without purpose is just activity, founders need to focus on results, not activities.

VC funding and its alternatives

50 dollar bill

I find that a very high number of my mentees plan to raise funding from venture capitalists. They seem to do this because to them it’s expected behavior in a high tech startup. However, they don’t seem to understand the issues they should about venture capital funding and their alternatives.

  • As a venture capitalist told me, venture money is the most expensive money you can buy! You will be selling your equity to a venture capitalist in exchange for cash. Of all the ways to raise capital you will “give up”, meaning sell, much more equity to a venture capital firm than to any other type of investor. Not to speak of the terms and conditions that will come with that money.
  • Here’s one way to think about VC money: it is rocket fuel. Rocket fuel is very, very expensive, it is highly combustible. Like a rocket your firm is expected to get big, fast. That translates into 80 and 90 hour work weeks and a totally unbalanced work vs. life balance. Say goodbye to your family. That’s why investors love young entrepreneurs who aren’t married, don’t have kids and don’t have a mortgage. Young entrepreneurs can deal with not having a life, because they aren’t weighed down by obligations.
  • Your rocket may get stuck on the launchpad and never get off the gantry, due to technical problems, team problems or a host of other problems.
  • Your rocket may not have enough fuel to reach escape velocity, and fall back to earth, with disastrous results.
  • That expensive rocket fuel you bought is highly combustible and your rocket may blow up in the air ,as the VCs kick out the founders and replace you with professional management.

So what are your alternatives to the most expensive money you can buy?

  • Friends and family money. This includes your money, which needs to go in first, assuming you have any! The key thing with friends and family is that they need to understand the very low probability they will ever get their money back. So they can’t invest more than they can afford to lose. That goes for you too. Now I’ve met investors, mainly angels who actually expect you, the founder, to have skin in the game by putting your own money in. I can understand why they say this, after all why should they invest if you won’t? Of course, at perhaps years of 90-hour weeks you will be investing – your time, everyone’s most precious asset, superseded only perhaps by your health. If you do raise money from your family consider doing it as a convertible note.
  • Angels. They are wealthy individuals who are what is known as accredited investors. The rule of thumb is that they must have a net worth, excluding their primary residence, of a minimum of $1 million. There’s a bit more to it than that. Hit the link for details.
  • Angel groups. Angel groups have been growing as venture capitalists are tending to put more and more money into later rounds, leaving an opening for seed rounds of much smaller amounts. Angel groups operate in one of two ways: either the group invests as whole or individuals who belong to the group may make their own investments. Established groups are getting more and more like VCs, doing extensive due diligence and tying their investment to terms and conditions that favor the group at the expense of the entrepreneur, these Ts and Cs are known as preferences.
  • Strategic investors. I’m very biased in favor of strategic investors as I’ve had many, including MIT (twice) and Apple Computer. However, there are significant differences between strategic investors. See my post The pros and cons of taking corporate VC money
  • Royalty investors. These investors are rare as hen’s teeth. But they do invest. Instead of taking equity in your venture in return for giving you cash, royalty investors put in a sum of money in exchange for you paying them a share of your revenue over some fixed period. This can be a great choice if you will have very predictable revenue, such as a SaaS model with subscription revenues. But you will have to prove out this model before any royalty investor will put any money into your company.
  • Grants and foundations. Virtually all grants and foundation capital is invested in non-profit companies. However, there are a few exceptions like SBIR grants. If you or your co-founder is a research scientist Small Business Innovation Research grants may be a viable route for you. But you’ll need to do your research, as usual you can start with Wikipedia, but since this is a Federal program there’s plenty of information on the Web from the government.
  • Your credit card. There are a few companies that have been launched by the founder taking out a number of credit cards and maxing out every one of them. This is a risky strategy at best, only advisable as a last resort and when you have revenue in sight but you really need a bridge loan. That’s the best way to think about it.
  • Crowdfunding. Kickstarter, Indiegogo and numerous others harness the power of the crowd to fund product startups. Almost always in exchange for funding the members of the crowd receives not equity but some significant benefit over regular consumers: a steep discount on the product to be developed, receiving the product sooner than consumers or receiving a special version of the product or an accessory. I have zero experience with this but even if I did I would advise you to research it deeply by studying the success stories of the major crowdfunding sites to see if you think you have the elusive investor/venture fit.
  • Incubators. Y-Combinator pioneered this program for startups and they have been wildly successful. Not only do you receive a small amount of capital from incubators and accelerator, usually $100,000 for 6% of your equity, you gain access to their very valuable and active alumni network. But getting into the topflight incubators and accelerators can be as difficult as getting into an Ivy League school. I was told by MassChallenge that this year they will receive 1,700 applications for 120 slots in their incubator! But I highly recommend going this route if you can.
  • Going public. This may seem far out of reach for a startup. The rules and regulations governing going public have recently changed to make it easier for small firms via JOBS – Jumpstart Our Business Startups Act.  This is well worth checking out. The program, like most federal programs has been slow to get off the ground. As with most ways of raising capital you will need the advice and guidance of a CFO with deep experience in raising capital for startups.

I may have left out one or two other avenues, your consulting CFO (you don’t want to hire a CFO out of the gate) and a law firm with deep experience with the financing of startups can both help you. Several law firms in the hotbeds of startups like Boston, New York, and of course Silicon Valley have special programs for helping startups. If you can qualify for one they are well worth participating in. Basically blue chip legal firms are making a bet that by helping you out they will get your business, generating substantial fees over the years. Wilmer Hale in Boston is one such firm. The Web in general and Quora in particular have a wealth of information about how to raise money.  And I’d be remiss if I didn’t put in a plug for my former advisor and investor Brad Feld’s book Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist.

Finally the best means of raising money is also the oldest:  customer revenue.