Find the weaknesses and sell expensively

One thing many startup entrepreneurs have used over and over again is the “find the bigger corporations weaknesses and create a solution for it, then use those weaknesses against the big corporation and have them notice it”. Why is this good?

Big corporations, especially big publicly listed companies is owned by big financial institutions (big chunks of these companies at least). These institutions hate losing money. The managers running these companies hate losing their job because they upset these financial institutions.

If you threaten their market position, then of course they want to either crush you or buy you out quickly as possible. Bankruptcy is never an option.

If you avoid getting bankrupted, then you can make serious money. I have never done this myself, but believe me, I have my plots:). I have actually started a plan yesterday.

There is a little telecom company in Sweden with close to nil idea of how bad their marketing is. They have this new home movie system (a little bit like TIVO wannabe in fact). The thing is, they don’t see how easilly I can eliminate them by just giving away the home movie system for free (no matter how expensive this might be upfront it still pays of when you, at the time of the give away, have people sign up on long term membership agreements).

Of course, this company do not know where I can beat them. They seem totally dumbfunded about it.

So this is the plot:

1) Either they take me in and make me revamp their marketing plan and give me 50% of all the turnover above the 2008 year revenue level OR

2) I will start my own company with a slightly different system (to avoid getting IP law problems) and do as I mentioned above. Give away the system for free and also have people sign up on long term agreements and make the money back that way (and then keep making money by renewed agreements).

And if I do choose choice number 2, then this telecom company will either be in need of closing up shop, transform to compete with my startup or buy me out for a rather hefty price. Pretty easy really. Isn’t business lovely:)?

Use the media as a good partner!

Let me ask you: Do you know how to get free publicity in the newspapers:)?

Do you think I know:)? Short answer: Yes.

It’s as simple as this: If you are in the financial business like me you look around in the bigger newspapers in the financial columns. You do a notification of the journalists who write articles frequently there. They usually have an email adress you can reach them at.

You email the journalist and simply ask him: “What kind of stories are you looking for this month?”. It doesn’t matter what they are focusing on that particular month, because your aim is to tailor make a story that is newsworthy, that entails your company and that also entails what the journalist are looking to make a cover story on.

Example:

You lead a debt relieve company and the financial journalist is this particular month after a story covering “the growing presence of scamsters in business”. How can you tailor make a story for this journalist that entails your company and his aim? That is the stuff to think about. In this case you may think something like this “hmm, my company could ask the journalist to write a story about my company doing a campaign to stop scamsters by paying the legal costs for 1 guy already affected by this scamster crowd the journalist want to have a cover story on. The news value is in the sobbing story about this innocent man getting screwed over and now this nice company jumps in and saves the little guy”.

Tailor make your story to the story the journalist wants to tell and you will be golden. Try it:).

Give equity to partners!

I am not speaking about, necessarily, partners you bring onboard on a “person-per-person” basis. I am more talking about bringing in other companies in your company as partners. Give them share ownership for their time and effort instead of paying them cash.

Say, for example, you need professional help with marketing your new product and you also need help with customer service,  sales, accounting etc. Why not bring on board companies doing this on a professional level? Bring them onboard as owners in the company?

Let me explain how this goes:

You have formed a company with $10,000. Pre-value of company is $10,000.

You then sign a CEO agreement worth $120,000 a year and $600,000 on a 5 year term you agree to stay on as the CEO in this example. You recieve/cash in 3 months worth of stock every quarter and build up your equity that way.

You then bring these willing partners (you need to shop around) onboard and give them shares for every month they stay on and help you out with professional services. Say you would be forced to pay $2000 every month for marketing services, then you give away shares in your company worth $2000 instead. The same goes with customer service, sales etc.

This way you can evade going the normal route of angel financiers, prospectus and VC’s. There are, as you can see, so many ways you can fund a startup or have it up and running pretty fast.

Why would I give up ownership in that manner, you ask? One argument: Because it is smart. If you bring on smart professionals you will thank God you where that smart to understand “synergy”. Because that is what this is.

The smarter people who co-own the venture with you the more wealth you will gain almost per automatic and with a whole lot less hassle. Greedy behaviour has a sour after effect in startups. It is easier just giving a piece of your company in return for professional work/input and work less hard. And have more fun.

Because startups is not about stressing your heart out, it is supposed to be a group effort and everyone shall have fun in the process. Really:). Believe it or not.

Your time as Equity in a startup

Many miss this part when starting a new company. You can use your time as Equity in your new startup venture. Instead of drawing a salary, you instead recieve stock options which you regularly (in intervals) cash in for shares in the company.

The fine thing is: with the right partners you can build a company with mainly stock options:).

Example:

You form a company with shares. This costs you $3000 from your own pocket. You pay it. The company is now worth $3000.

You now create 100,000 shares. Your strike price per share is now $3000 / 100,000 shares = $0,03 a share.

You now write a stock option agreement for yourself worth $2000 a month (the salary you would otherwise ask for) for a 24 month period. Every quarter, the agreement says, you are allowed to cash in 3 months worth of stock options for shares in the company. Converted at the strike price $0,03 a share. Hence for 3 months, you recieve 200,000 shares worth a total of $6000 ($2000 X 3 months).

You’re company is now worth a total of $6000 + $3000 = $9000. Strike price per share is still $0,03.

Now, if you want to give away stock options to partners, then you use the same action. You check how much they want every month for their time, convert that to how many shares you need to give away at the current strike price and the ownership split is complete.

As you can see, with the right partners you don’t need millions in the bank to start a company. And you don’t have to do it all yourself. Split the ownership and build something together instead. Easier and faster.

Just be sure to bring in partners who can actually bring expertise to the company. That is the hard part, but otherwise this thing is rather straight forward and easy to setup.

How you buy luxurius homes!

This is a kind of startup strategy, but more for buying luxurius homes in fine places around the globe.

The idea is this:

You create an LLC structure. You find an expensive  and luxurius property in an ideal place and then you ask for a real estate agent if they can find a rental tenant for 6 months of the year for this particular property. This way you can earn money and still be able to use the property for your own desires. Free of charge. The tenant pays for the party.

Usually these kinds of luxurius homes (the ones I am talking about) cost above $1 million. A lot of money for many people on this globe.

But here is the thing: You don’t have to have the money yourself. You can either bring on board an equity investor or you borrow money and use someone elses good credit and cashflow as security. You’re choice.

An example:

You find a nice Monaco mansion for USD$10 Million. You setup an LLC structure. You contact a real estate agent specialised in luxurius homes. Tell the agent “help me find a rental tenant for 6 months of the year for this monthly amount given to you in this email”. When the agent has got someone under contract, you then contact your private banker (cultivate a contact if you haven’t yet done this). You contact your private banker and tell him you have found this incredible property i Monaco and you just have to have it.  You tell him that you have a rental tenant agreement for the first year worth this and this much (your equity). Now, you only need an investor who is either willing to put up cash money into the LLC structure (USD$10 Million that is) or give his good credit and cashflow stream as security for a bank loan (in exchange for equity in the LLC).

If the rental agreement you have secured is worth USD$ 6 Million for year one and the investor secures the USD$ 10 Million (paying for the property), then you will recieve USD$ 6 Million / (USD$ 6 million + USD$ 10 million) = 37,5% of the property. The rest is controlled by the investor.

So that could mean, depending on how you have decided to do the deal, that you will get 37,5% of the available 6 month period and the rest is for the investor to use as he see fits. 37,5% of a 6 month period is approximately 2 months of the year (mind you, free of charge. Only the trip to and from Monaco will cost you money:)). You got this for just putting different resources together. So never say you can’t have something because it cost a “hell of a lot”. Because it is not correct. You need to think in possibilities. You can have it all, but sometimes you need to share it a bit with others. If you can agree to sharing, then life will be so easy. At least financially wise. Greed is not always good. It can be detrimental to success in many cases.