While getting acquired is something many young startups hope, dream and sometimes even plan for, the actual deal doesn't always follow the script. One reason startup acquisitions often don't go as planned is that the founders may not know what to expect and how to ensure they're getting the right deal. That's especially true if it's an early exit - before the company has fully matured.

So we asked seven young founders from the Young Entrepreneur Council (YEC) - many of whom have been through the acquisition process - to share reasons why an early-stage exit might not work out, along with their best advice for making sure things do go as planned:

1. Prepare Records And Documents

When there are different perspectives on how a company should be valued, it’s hard to reach a price agreement. Different visions about where the marketplace is headed can impact perceived value. And investors who want an unrealistic return on their investment can prevent deals from getting done. Practical and personal issues can also bring an acquisition to a halt, including technology differences that make integration difficult and key team members who don’t want to work for the acquiring company.

Proper acquisition preparation can help. All your accounting records should be in order, prepared in accordance with generally accepted accounting principles (GAAP). Your corporate governance, legal records, HR and employee documentation should also be in order and easily shareable. - David Ehrenberg, Early Growth Financial Services

2. Avoid A Funding Gap

Often, venture capitalists don't get involved with a startup until a larger amount of capital is needed, and this can create a funding gap.

The best piece of advice for founders preparing for an acquisition is to get ready for change. What used to be yours isn't anymore, and you need to deal with these changes in order to make the acquisition successful. - Andrew Schrage, Money Crashers Personal Finance

3. Build Cash

One big reason early-stage exits go south is that as part of the due diligence process, there is an intense focus on the company financials. The debt you have and the cash you have in the bank matters. Oftentimes, entrepreneurs try to focus on keeping their tax burdens down by minimizing their taxable profits. While this strategy may make sense early in your business life, when you begin thinking about exiting, you want to have at least two years of higher profits. Get ready to write big checks to the IRS if you are thinking about exiting.

Second, investors want the company to have cash in the bank and debt to be low; this shows great company health. It makes it easier to justify getting a valuation at three to five times annual revenue. - Raoul Davis, Ascendant Group

4. Align Expectations

I've sold two companies, and both have had different outcomes. The main thing I would suggest is ensuring that your expectations and theirs are aligned. Many times, founders are so eager to get the deal done that they fail to consider "life after acquisition," and how this change will affect their happiness. The top three things to consider:

1. Operational roles, responsibilities, and expectations: Will you maintain your freedom to create?
2. Product road map: Where does your product fit into the acquiring company's overall strategy, and what happens if things change?:
3. Earn-outs and changes to the company What happens if the earn-out is tied to a result that you don't have any power to affect? What if the acquiring company gets acquired? It happens.

5. Practice Due Diligence

Whether a startup or Fortune 500 company, people looking to sell should practice due diligence on their own companies before handing things over to a prospective acquirer. Mistakes and oversights can be corrected, and if they cannot, the damage can be minimized. It will be very bad for your asking price if you are sitting at a negotiating table and your prospective buyer informs you that the contract for your biggest customer cannot be assigned, and that contract will have to be renegotiated. It will be even worse if doubts about your IP ownership arise as you are looking to sign the deal.

These sort of issues, and many others, are going to come to light one way or another. Make sure that when they do, you are the one in control of the situation by doing your homework ahead of time. - Peter Minton, Minton Law Group, P.C.

6. Avoid Under-Valuations And Mismanagement

Your company could be undervalued. If you wait a few more years and continue to grow your revenues, you will get closer to your maximum valuation. Keep in mind that acquisitions are often mismanaged, or the new leadership falls apart and hurts the brand. All the hard work you put into building your business could go down the drain. - Peter Nguyen, Literati Institute

7. Find A Culture Fit

Most important is culture fit. Whether you're getting acquired or merging with another company, it's equally important. We've acquired another company, and getting both teams to integrate and act as one under a mutual value set was crucial to the transition. We walked away from an acquisition opportunity because the cultures were not aligned.

Things to discuss and look for in action at a company are values, beliefs, outlooks and expectations. Other things I've found to be important are the company's risk tolerance, as well as its ability to change and adapt. As entrepreneurs, sometimes we forget not all companies are comfortable testing and pivoting. - Lauren Perkins, Perks Consulting

The controversy over Marissa Mayer's decision to ban telecommuting at Yahoo just won't go away. Mayer said the move was necessary to foster collaboration at the struggling new media giant, but what about startups? Is remote working right for very young companies? Are there particular issues to watchout for?

To learn more, we asked eight founders from the Young Entrepreneur Council (YEC) to share their company policies with respect to work outside the office - and why it works for their teams.

It turns out that while many young startups do have entirely or partly remote remote workforces, they still feel it's important to have some sort of physical space for meetings and "collaborative" work. Many have offices they use some or all of the time, and others promote remote work as a privilege or perk.

1. Boost Productivity With Fridays At Home

At Scripted, we always work from home on Fridays and have a flexible vacation and sick day policy. Our office is simply a physical resource we use to collaborate and socialize. If on any particular day this resource isn't required or is detrimental to your productivity, then you don't need to use it. Plus, our Fridays from home boost productivity the rest of the week. We all love it. - Ryan Buckley, Scripted

2. Establish Asynchronous Collaboration

We've gotten the best results from a team that has the flexibility to work when and where they believe makes the most sense, coupled with a strong anchor in our office as the primary locale for everyone. I'd say more than 75% of the team's time is spent in or near the office, but most of our collaboration is done asynchronously using tools like Yammer, Trello, Salesforce and others. - Derek Shanahan, Playerize

3. Create A Culture Of Communication

Our team is based in San Francisco, Atlanta and Los Angeles. We are rarely in a room together. Agenda-driven team calls limit the ability to collaborate. We found considerable success in transitioning from an "emailing" company to a "calling" one. When you call a teammate with a question, you work together to create a solution. Impromptu conference calls with multiple offices are truly effective. - Aaron Schwartz, Modify Watches

4. Make Remote Work A Privilege

Our people work remotely only after they've been in the office for a while. I need to get to know their personalities first to make sure they understand our culture and interests. Then, they can work from wherever they want. Real-time collaboration tools like Skype, HipChat and Google Drive make it easy to stay in the loop, no matter where you are. - Jim Belosic, ShortStack/Pancake Labs

5. Set Up A Daily Huddle Call

We've implemented a daily huddle call at 1:11 p.m. This keeps everyone on the same page. Tracking our most important daily metrics together, going over 24-hour agendas and discussing bottlenecks are regular activities. We do not have an office, but we have four people who live locally and get together once or twice a month for lunch or coffee. Hiring locally and doing daily huddles helps greatly. - Joe Barton, Barton Publishing

6. Trust Your Employees

As a company whose entire company culture is established on the foundation of remote working, we really believe in flexible work. It starts at the beginning: you must hire with the knowledge that your employees will be independent and responsible and have the capacity to work from home. When you hire right and place your trust in these employees, collaboration happens and people are productive. - David Ehrenberg, Early Growth Financial Services

7. Encourage Balance And Flexibility

Our team of five works on a remote basis, even though we're mostly located in New York. I just spent seven months overseas; it was difficult scheduling agendas and regular calls. Technologies like Skype, Ghat and iMessage made it work. We try to have balance and flexibility, and that’s what we pride ourselves on. Yvon Chouinard’s book, Let My People Go Surfing, gives insight into our philosophy. - Matt Wilson, Under30Media

8. Implement Productivity-Based Measures

Our entire company is remote and has great workflow tools in place. I agree with Mayer's decision since people blatantly took advantage of the policy. The incentives to be productive were not effectively structured. Your team needs compensation for productivity-based measures and salary. We developed workflows to require collaboration and transparency. Everyone can see what everyone else is doing. - Chuck Cohn, Varsity Tutors

A new school designed to teach people the necessary skills to work within the chaos that are startups is coming to New York. 

The Startup Institute is an eight-week program for people that want to gain the necessary skills to work in a startup and find a job. Taught by volunteers from the local tech community, Startup Institute has four tracks for students looking for the necessary acumen to work at a startup – web development, product and design, marketing and sales/business development. 

The Startup Institute started as a branch of startup incubator TechStars in Boston. Known as the Boston Startup School, the company is now rebranding itself as the Startup Institute and expanding its first class to New York City starting in June. The school was grown out of the need of many local startups looking to scale and hire employees, but were not sure where to look.

“We're trying to change professional education by coupling it directly to industry,” said Aaron O’Hearn, CEO of Startup Institute, in an interview with ReadWrite. “Right now, education doesn't prepare people to be great employees for small companies.”

Growing Out Of TechStars

Boston Startup School started, more or less, as a feeder program for employees to TechStars companies in Boston. Other local startups partnered with the school and would pay recruiting fees to Startup School (about 6% to 9% of the employee’s starting salary) if and when it hired students. The program was initially free for students and completely immersive – 9 a.m. to 5 p.m. – five days a week.

Startup Institute CEO Aaron O'Hearn

The program proved to be a strong success. About 94% of graduates from the first two Startup School classes accepted job offers from startups. O’Hearn and company figured they were on to something and decided to turn the school into an actual company, decouple it from TechStars and expand the footprint. The Startup Institute was born. 

“While the company was born from TechStars in Boston, the transition was actually what I imagine to be pretty typical. I transitioned from being an employee of TechStars to the CEO of Startup Institute and started playing that role full-time,” O’Hearn said.

Tuition is no longer free. The eight-week program will run students $3,750 but there are various ways around that. If students pay up front, they can receive a discount on the overall amount. Or they can defer payment over three years. If a student goes to one of Startup Institute’s partner companies, the school will completely reimburse tuition. 

High Growth Companies

Startup Institute is targeting students that want to work in high growth companies. Typically that means companies that have accepted at least some venture funding and are looking to aggressively hire. 

“Our vision is to change professional education by coupling curriculum to industry needs rather than research. Because we're decentralizing the curriculum creation and delivery, we're not bound by traditional educational infrastructure. This allows us to operate at a much lower cost, and remain agile alongside the changing needs of high-growth technology startups,” O’Hearn said. 

Admission to Startup Institute is more akin to a job interview than to applying to college. Startup Institute looks for personality, drive, coach-ability, expectations and previous work experience when deciding who to admit. Some students have not even attended college. The goal is to create graduates that have both the hard (technical) skills to work in a startup while also having the soft (emotional) skills to survive in the chaotic world that is startup life. 

“Traditional education helps someone learn to think and loosely define a path they may want to pursue,” O’Hearn said. “Another huge challenge with traditional education preparing people for the workforce is around the curriculum and what's actually taught. The current infrastructure around curriculum and accreditation largely prohibits the teaching of topics and technology that are being used in industry at that very moment.”

Being smart is not enough for creating a successful startup.

There is a wide shelf of good books on how to build a new company, providing a range of useful and practical advice. Two of the best recent examples include Steve Blank’s 4 Steps to the Epiphany and Eric Ries’s The Lean Startup. If you are new to the startup game, Blank and Ries are smart guideposts on the road to becoming a technology entrepreneur.

The Startup Trifecta

A brief (and perhaps little unfair) survey of recent entrepreneurial literature boils down to what I call the “start-up trifecta":

1. Doing your homework about the market/having a brilliant insight about technology
2. Gaining sufficient investment and strong investors/advisors
3. Finding great talent: hire "A" players.

Although I frequently hear about a shortage of startup trifectas, in practice I find the opposite is true. In technology battle after battle over the past 12 years, I have faced competitors who had the trifecta in abundance. My rivals were usually as talented, deep-pocketed, and as smart (or even smarter) than my companies. For the most part, I was scared to my bones at the start of each competition.

I have had three start-up experiences in my career: one was a complete meltdown and two that were huge winners. The two wins shared a characteristic that I rarely see much discussed or written about: the team that wants it more.

Who Wants It The Most?

So when evaluating your odds of success, ask yourself this: Are you on the team that wants to change the market more than anyone else? The team that wants to introduce a disruptive technology more? The team that wants to win more? Michael Jordan more?

In 2002, I joined a Wireless LAN startup called BlackStorm Networks (we later renamed it to Airespace thinking the original name would have bad karma) as one of the first dozen employees. At the time, there were more than ten well-funded companies chasing the shift in enterprise networking from wired to wireless. It was a wide-open horse race to take on the two giants: Cisco and Symbol Technologies.

Our team was not perceived to be the “A” team, but we shared a single characteristic to a person: We wanted to win more than the rest. In 18 months, our passion and desire drove us past all of the start-up competitors and we became the third-largest player in the industry behind the two well-established leaders. In the blink of an eye, we were the thought- and execution leaders of enterprise wireless.

The 7 Habits Of Teams That Want It More

Teams that want it more can be found across the startup up universe. Wanting it more produces seven key management behaviors that help startups win:

1. Hiring teammates with something to prove: Look for the right hires who share your values. They will never cease to amaze you with their work ethic or inventiveness.
2. Working harder to understand what customers really value: Do not create your product plans over a bottle of wine in someone’s kitchen. Dig, dig, dig.
3. Making your product or service the easiest to use/understand: Two months before the Airespace launch we hated the software interface to our system and started again with an IDEO-trained human factor designer.
4. Being paranoid - very paranoid - all the time: Never rest or believe you are winning, even when you're considerably ahead. Release your product first and continue to innovate faster.
5. Taking nothing for granted: Rehearse every critical customer or market interaction. At Airespace we won 19 consecutive awards and bakeoffs. Not just because our product was good, but also because we took each comparison dead seriously and prepared.
6. Letting allies find you: Speed is the advantage of a challenger. Rather than plan on or chase strategic partnerships, use your winning position to have giants romance your company
7. Admitting failure early - and dealing with it: Sucking (for a short period of time) is not the problem. What and how quickly you deal with it is the issue. Create a plan to avoid it in the future.

Teams that want it more can overcome great obstacles or disadvantages: whether it’s 300 motivated Spartans staring down hundreds of thousands of Persians at historic Thermopylae, or a small software company staring down a multi-billion dollar behemoths in their core market.

After the startup trifecta, wanting it more is the characteristic that turns good startups into great ones.

Many of today's most successful businesses got their start without an apparent business model in mind (I'm looking at you, Facebook). But while drifting around for years as a free service without a clear path to profits might work for some businesses, it's not a road that's going to lead most startups to a good place.

That's the clear message from Dave Lavinsky advocates in his new book Start at the End: How Companies Can Grow Bigger and Faster by Reversing Their Business Plan.

A serial entrepreneur who has started multiple companies, both Web and product-focused, Lavinsky is now cofounder of Growthink, a consulting firm that claims to have helped more than 500,000 entrepreneurs identify opportunities and grow their businesses. His reverse engineering approach has useful lessons Whether your business is just getting off the ground or in the early years of startup evolution.

Essentially, Lavinsky told ReadWrite, smart entrepreneurs start by defining the goals they want to achieve and working their way backward to arrive at the steps necessary for success. You might think you've already defined your goals, but Lavinsky is looking for much more detail than the vague goals created when businesses are formed.

Stereo Vision Statements

Start by creating two vision statements:

1. One customer-focused (which most of us are familiar with)
2. One from a business perspective, which is what sets Lavinsky's ideas apart.

This vision includes not just your general business goal (Selling your company? Going public? Creating a business that spans three generations?), but also the financial metrics and business assets you'll need to achieve that goal. In other words, if you want to sell your business, how much do you want to sell it for? $40 million? Then what are the financial metrics (dollar revenues, percent market share, dollar EBITDA, financial health ratios, etc.) that will get you there?

Once you've determined these visions, Lavinsky shows you how to assess the opportunities available to you; set annual, quarterly and monthly goals and milestones; and track your progress.

Pivots Are Part Of The Process

Lavinsky is well aware that the road to success is rarely smooth, and you might need to pivot before you hit your goal. "There are several roads you can take to your destination," he says. "Pivoting is about choosing the best road for you and your company."

When you pivot, Lavinsky explains, you're changing your business model based on feedback from your customers and your market. "Because the new model is based on actual market data - as opposed to the "hunch" you had when you launched your company - it's more likely to resonate with customers and yield more success than your previous business model."

Sounds good, but how do you know when it's time to pivot? "If you've been 'spinning your wheels,' then it's time to pivot," says Lavinsky. "If you're continuing to work on your business and try new things, but without realizing the results you want, at some point, you need to come to the conclusion that either you're not executing properly, or your business model is flawed." In the former case, it's time to bring someone in to help you execute; in the latter, it's time to pivot.

Start at the End details several methods for identifying possible pivots and picking the best one for you, including:

SO Analysis: identifying your strengths and opportunities. "You're only going to build a great business if your business plays to your existing strengths, so make sure it does," explains Lavinsky.

Ansoff Matrix: the Ansoff Matrix helps determine the best new opportunities to pursue. Most important, it shows that any new opportunity targeting your current market (since you know and understand those customers) has a higher likelihood of succeeding.

Judge vs. Market Criteria: "When selecting a pivot, make sure the market is ripe for it," cautions Lavinsky.

Pivoting is not something to take lightly, and you can't do it every month, Lavinsky warns. "You need to pivot wisely and dedicate your company to pursuing it for a set period of time-perhaps six months or more."

If you decide pivoting is right for your business, you need to adjust your business plan accordingly. "Most importantly, in your plan, determine how you will execute on the pivot, such as who will be responsible for what tasks and goals." It's also crucial to establish weekly, monthly and quarterly goals and milestones, Lavinsky says, and to constantly gauge your performance against these milestones.

Good Stuff At The End

Perhaps not surprisingly, one of the most useful sections of Start at the End comes near the end. "Multiplier Tactics" offers real-life approaches to turbocharge your business. My favorite example? The woman who had never worked in her late husband's business until he left it to her, but then doubled its profits in a year by asking the managers to do more of the 5 things that worked best and less of the 5 things that worked least.

Lead image courtesy of Shutterstock.

Not every tech startup enjoys the luxury of launching in Silicon Valley — or Silicon Alley, or Austin, Texas, or another high-tech hotspot.

What’s the solution?

Instead of waiting for someone to offer a helping hand, or packing up the U-Haul and moving across the counryy, try taking the entrepreneurial approach and turning your home town into a high-tech startup community.

Brad Feld author of Startup Communities: Building an Entrepreneurial Ecosystem in Your City, says it can be done.

Feld, who has over 20 years of experience as both an entrepreneur and an early-stage investor, is a co-founder of tech accelerator TechStars and knows whereof he speaks. He bases his book on the lessons he’s learned from 20 years in the vibrant startup community of Boulder, Colorado.

Too often, though, cities trying to build high-tech startup communities make one or more key mistakes that keep their plans from reaching fruition. According to Feld, here are the six common problems that afflict — but don’t have to squelch — startup communities:

1. The Patriarch Problem: Is your city’s startup infrastructure ruled by “old white guys”? If your ability to get funding depends on who you know, where you went to school and where you’ve worked, your city might be suffering from the Patriarch Problem. If funding is based solely on what you do, congratulations - you’re in a vibrant startup community. Getting beyond the patriarch problem is tough (in the worst case, you’ve got to wait for people to die), but can be done if enough leaders of the startup community decide they’re going to ignore the patriarchs and just keep doing what they’re doing.

2. Capital Shortage: If you’re complaining about the shortage of local capital in your city, Feld’s got news for you: Entrepreneurs everywhere — yes, even in Silicon Valley — are complaining just as loudly about the same thing. “Let it go,” advises Feld. Instead, just keep doing what you’re doing, and if you do it well enough, you’ll attract capital from around the country.

3. We’re From The Government, We’re Here To Help: While Feld acknowledges that government can provide some help in constructing and supporting startup communities, entrepreneurs who rely too heavily on government will go nowhere fast. “Government moves at a much slower pace than entrepreneurs,” Feld warns. Just keep doing what you’re doing — don’t wait for Uncle Sam.

4. Do I Know You? A startup community that’s suspicious of newcomers is likely to die on the vine. “In Boulder, when someone new shows up in town, the entrepreneurs swarm them… to make the person feel welcome,” Feld writes. In contrast, if your city makes newbies “earn their way into the hierarchy,” you’re basically creating your own Patriarch Problem.

5. Feeders Trying To Be Leaders: Feld identifies government, universities and venture capitalists as “feeders” who can help support an entrepreneurial ecosystem. The problem occurs when feeders try to be “leaders” and take charge of entrepreneurial growth. A successful entrepreneurial ecosystem must be led by entrepreneurs themselves, says Feld, who cautions that when feeders try to take charge of entrepreneurial growth, they typically slow it down with committees, initiatives and other photo ops that create a lot of noise but do nothing — essentially the antithesis of entrepreneurial behavior.

6. Risk Aversion: Are you afraid of putting your time and effort into growing your own startup community — especially when you’re busy creating your own startup, too? You can’t create a startup environment without taking risks, says Feld. His advice: Jump right in and try stuff, but always set a time limit. If your effort doesn’t work out in that time frame, try something else. Trying — and even failing — without fear is a hallmark of a vibrant startup community.

See a common thread here? “Just start doing stuff and keep doing it” is Feld's entrepreneurial mantra. Startup Communities clearly conveys the contagious sense of energy, enthusiasm and possibility that’s at the heart of the most successful startup communities.

There comes in a time the life of many startups when it starts to become clear that everything is not going according to plan. But how do entrepreneurs tell if they need to keep going all in on the original plan, or pivot to something new?

To find out how real-world companies deal with that decision, we asked eight successful young entrepreneurs from the Young Entrepreneur Council (YEC) when they realized they had to let go of the products, plans and strategies that they worked so hard to develop. The most common indicator? Customers made it clear they wanted something different.

1. As Soon As You Can

Smart companies almost always pivot, usually multiple times. You might change the product because it doesn't meet the needs of the market you identified. You might change the market you're targeting because another market finds the product more useful, will pay more money, or has a larger pool of prospects. You might change the revenue model to one more attractive to customers. One of your primary goals early on should be to find out which elements of your business model are flawed as quickly as possible, so you can correct the course with minimal wasted time and effort. The key to doing this is having data. Analytics, surveys, face-to-face interviews and more will help you make informed decisions and ensure any pivots you make get you closer to your goal. - Sean Johnson, Digital Intent

2. Find New Goals You're Aligned With

It's quite the blow to the ego when you wake up one day and realize, "Wow... this isn't working, and it hasn't been working for a while." But the good news is, when you know something isn't working, deep down, you usually also know what would work better. It's just a matter of allowing yourself to "go there" and tune in to what feels out of alignment with who you are and your mission. The way I do this is by thinking back to a moment when I was working on something using one of my "old" models and feeling really frustrated and irritable. I think of the words that were forming in my head at that time (usually, it's something like, "If only I could ____ instead"). That's the clue that tells me what I should change. And voila: you've found your pivot point. - Amanda Aitken, The Girl's Guide to Web Design

3. The Feedback-Induced Pivot

It is time to pivot when your customers are consistently giving you the same feedback that things would need to be different for them to purchase. It often takes six months to a year to determine whether or not you are on the right path. Too often, we see entrepreneurs pivot too early before they have talked to enough customers to constitute an adequate data sample. - Eric Corl, Fundable LLC

4. Don't Throw Out Your Code!

Pivots are an evolution of your business, but it doesn't mean that you need to entirely let go. It can make your transition easier if you view the pivot as setting aside your previous hard work to pursue a strategy that will be stronger. Especially for technology entrepreneurs, I caution against scrapping and forgetting the code you and your team have worked hard to develop, because it's likely that, even post-pivot, you can adopt or adapt something from the early version of your product for the pivoted deliverables. Shelve your products and plans to pursue your pivot full-force, but don't let go of them completely. - Doreen Bloch, Poshly Inc.

5. Your Customers Tell You What They Want

We started as a free-screenwriting-software company back in 2008. Our goal was to give away screenwriting software and convince producers they should buy screenplays from us. It wasn't until 2010, when Levi's came to us and said "Hey, you have a ton of writers on your screenwriting software platform (50,000 at the time), can they work on non-entertainment industry projects?" After we finished the project, we realized we were onto something, and more and more folks starting coming to us asking for help with blog posts, tweets and other written content - so we pivoted to Scripted. Our pivot was driven entirely by customer demand for our product. - Sunil Rajaraman, Scripted.com

6. You Need To Grow To Survive 

Pivoting is a big decision. The only time to consider pivoting your business is when a huge opportunity is in front of you. If you are going to make a major change to your organization, it's important to realize that this will affect everything else that goes on. Pivoting is not the way to fix smaller problems. The times when we've pivoted a business required looking at our entire operation and refocusing or even replacing sections. When we first launched Yodle, we intended the company to address all the Web services needs of small businesses. As we discovered what it would take to scale that business, we realized we should pivot and focus on just advertising and marketing. - Ben Rubenstein, Yodle

7. You Aren't In Love With The Future 

You're inevitably going to hit setbacks, so it's important to be motivated about reaching your destination. For that reason, you should pivot when you're not excited about the long-term direction you're heading in. Here's an example from my own business. I own a marketing company. And in the early days, we used to work only one-on-one with clients. When I looked into the future, I realized I would only be able to serve, at most, a couple dozen clients. I saw how this business model was limiting our growth and our overall impact, so we changed course. We pivoted to start offering self-service training in addition to one-on-one services. And we've been happier and more successful ever since. - Pete Kennedy, Main Street ROI

8. Your Product Isn't Connecting

First and foremost, it's always smart to listen to your customers. Their feedback is priceless, and a majority of businesses pivot because either their product/service is not connecting, or they can't monetize it. When a majority of customers keep saying your product is overpriced, it's probably true. If you are a service-based company that founded its business model on retainers, switch to a pay-for-performance model. These little things end up making a big difference. - Blake Beshore, Tatroux 

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

Guest author Matthew Zehner is the CEO of ZehnerGroup, an interactive agency that specializes in launching Web startups and innovating established businesses.

Many startups scramble to create a "minimum viable product," or MVP, to get a version of their product to market quickly for testing. It’s a great way to cost-effectively test a website or app with real users. But be careful, if your MVP is too minimalist, it could torpedo your company's future.

The issue is that an MVP is usually the customers’ first exposure to your product, and a bad first impression could have long-lasting consequences.

So don’t take the word “minimum” too literally. Your goal is not really to create a minimum product, but rather a high-quality but focused product that you can create and release quickly.

Know Your Users

When mapping out the functionality for an MVP, the first step is to understand your potential users.

Think of three people who might use your product and identify everything you know about them. What kind of car do they drive? Where did they go to school? What kind of phone do they have? And so on. The more you know about your users the better equipped you’ll be to determine the features they’ll want from your MVP.

Once you’ve worked out the essential feature set, build your MVP around that. Stay focused. Don’t waste time adding features for every potential user need and scenario.

Focus On The Alpha Hypothesis

Define your Alpha Hypothesis early and stay true to it. Don’t ever forget the core of what your product is and what makes it unique and desirable.

How do you define an Alpha Hypothesis? After you have defined your users’ needs, identify your business goals. Create a feature set where the two intersect. Don’t release an MVP until it includes all of those features.

Any startup should be able to articulate its competitive edge, and it’s essential that you include all of the functions that differentiate you from your competitors in the MVP, even if those functions are the most technically difficult to create.

When you allow real customers to use your MVP, you’ll be testing your Alpha Hypothesis, and you’ll be able to identify where you need to adjust the functionality to meet the needs of your market.

Set Your Sights High

If you’re aiming to create the next big thing, be prepared for the fact that you might just do it. Build your MVP to be scalable, so that it can handle large traffic numbers and complex functionality in a capable manner. This will avoid the need to rebuild the site from scratch if your traffic or the user needs become too great for the current setup to handle.

How do you make your MVP scalable? By utilizing Web technologies that will easily grow with your product.

For example, rapid application development tools and frameworks have made it easier and faster to prototype, create and scale web software. A lot of successful startups have used Web frameworks such as Django (Python), Rails (Ruby) and Cake (PHP), as well as emerging Javascript and mobile frameworks. To speed the development process, automate as much as possible and standardize the codebase to simplify the ramp up of new developers.

Infrastructure has also been evolving to allow lower cost, a lower barrier to entry and instant scalability. Cloud computing, cloud storage and NoSQL all allow startups to pay only for the data storage they are using at the moment, but still be able to quickly scale up resources as needed.

So don’t think of your MVP as a minimum product, but as a focused product. Then get it to market and be prepared to scale for when your product gets traction towards becoming the next billion-dollar company.

Failure gets a lot of praise in the tech world. It’s a great learning experience, it’s a vital growth opportunity, etc. But nobody celebrates the actual event. Recently several entrepreneurs in New York City got together to do just that, holding the inaugural Startup Funeral to honor the memory of three dead technology companies.

“Every startup has a launch party, but what happens when a startup dies?” asks event co-organizer Leo Newball Jr. “No one is around to commemorate the life of that startup. There are launch parties but never any funerals, so we wanted to have an event that celebrates startups that don’t make it and what was learned from that.”

Joining Newball to organize the event were four of his colleagues at New Work City, a coworking space in New York's Chinatown: Kevin Galligan, Jason Kende, Valerie Lisyansky and Jason Nadaf. They had people dressed as priests, mourners, urns full of hard candy, a bagpiper and lots of alcohol, which is almost always a good idea on occasions like this. (The alcohol, not the bagpiper.) They thought about a casket but caskets are expensive, even to rent.

Addieu, Get-A-Game, Kozmo.com

The dead startups honored were mobile social-networking company Addieu, mobile game and activity locator Get-a-Game and the late, seldom-lamented but often-derided Kozmo.com, which failed way back in 2001 but to this day is held up as the embodiment of dotcom-era foolhardiness. Three ex-execs spoke and 100 or so in the audience listened and commemorated.

“These people never got the opportunity to say goodbye properly to the startup they founded or worked for,” Newball says. “So it felt like a real goodbye for them. It was cathartic on a certain level but it was all done tongue in cheek, so there was a spirit of fun and many people just enjoyed the ridiculousness of it. The event was different things to different people.” 

After Grieving, Starting Over

For Chris Siragusa, former CTO of Kozmo, it was a chance to talk about his new company, Max Delivery, which is a lot like his old company. Kozmo offered one-hour delivery of snacks, coffee, DVDs, magazines, tubes of toothpaste - pretty much whatever you wanted at a moment’s notice. Max Delivery does the same, with one big difference: Kozmo was free and was killed by its high-cost, low-revenue business model. (In 2000 its revenues were $30 million, delivery costs $35 million and net loss $120 million.) Max Delivery charges a fee and makes a profit.

“Startups are often an iterative process,” Newball says. “Even if one dies, the entrepreneur can go on and learn from the process. Life continues, even if the startup doesn’t. That’s the message of Startup Funeral. Not everyone is going to make a Twitter or a Facebook on their first try.”

More Funerals Coming

The team behind Startup Funeral is now planning its second event, which will take place early next year. They’re deciding between a marching band and a Viking funeral theme. The hardest part, says Newball - aside from getting a permit for a flaming Norse galleon - is finding startup founders willing to stand onstage and tell an audience what they did wrong.

“It takes a brave person to get up in a public forum and say, ‘Hey, I failed.’ But, honestly, we don’t care what you say when you get up to the podium. You can talk about your dog if you want. Or you can talk about the lessons you learned. We won’t judge you one way or another. We’re just happy to have you at the event.”

Two people who did not attend the Startup Funeral were Kozmo cofounders Joseph Park and Yong Kang, the guys who blew through $250 million in funding in three short years. Park is now president of BibleGateway.com. Kang went back to his former career, Wall Street investment banking… at Lehman Brothers. Some people never learn.

It’s like a harmonic convergence. Startups need workers, and the largest generation ever born in America — the Millennials — is desperately searching for work. But as every startup knows, it's never as easy as all that.

According to a new research study from PayScale, the world’s leading provider of on-demand compensation data and software, and Millennial Branding, a Gen Y research and management consulting company, Millennials (ages 18 to 29) are underemployed. According to Dan Schawbel, founder of Millennial Branding and author of Me 2.0, their unemployment rate is a whopping 14%.

Not only does that mean there are millions of Millennials looking for work, but the survey shows they prefer to work for smaller companies that “allow for more flexibility, an opportunity to embrace their entrepreneurial ambitions, and the opportunity to use social networks at work without strict corporate guidelines.”

Does that sound like your startup? Just be aware, though, that some studies have indicated that new graduates are not interested in startups. (See College Grads Shun Startup Jobs - And How To Hire Them Anyway.)

Tech Employers Get The Most Interest

Most of the Millennials surveyed even say their “best” employers would be technology companies. And they’re preparing for employment by “arming themselves with skills and educational training focused in technology and social media.” Schawbel says they’re more likely to major in neuroscience and bioengineering — “the degrees that are in demand today.”

But there are other skill sets Millennials can bring to your startup, too. Schawbel’s study reports some of the most common job skills for Gen Y workers include blogging, social media optimization and writing press releases.

Obviously coming of “career” age when they did, Millennials’ job hunt has been hampered by the economy. This quickly put an end, Schawbel says, to the labeling of this generation as “entitled.” Millennials now realize, says Schawbel, that “nothing is guaranteed.”

How To Keep Gen Y Workers From Leaving

One rap against Millennial staffers is that they don’t stay on the job, often leaving after less than two years. Comparatively, according to Schawbel, Gen X workers stick around for five years, and Baby Boomers are loyal for seven years.

That may not be an issue for many fast-moving startups (see Why Job-Hopping Is Essential For Startups, but there are ways to change that equation by giving Gen Y more reasons to stay. Schawbel says the number-one reason Millennials leave a job is due to “lack of career opportunity.” If given more chances to advance, Millennials would stay on the job for nearly five years.

This is particularly important when competing against bigger companies (particularly in technology) that want to hire some of this young talent. In fact, Schawbel notes that some big companies are buying startups just to get their hands on the young talent. (See "Will Work For $1 Billion.")

Can Startups Cope With Acqui-hires?

Schawbel says you can win the talent war by “guaranteeing” Millennials a promotion within the first year. But I’m not sure a guarantee is your best option. After all, do you really want to promise an untested employee more money and more responsibility? Schawbel suggests that startups create internal procedures that help pave the way for new young hires.

So where can you find Millennials eager to work for your startup? Online, according to another study, "The Multi-Generational Job Search” Millennial Branding conducted, this time with job site Beyond.com. In fact all generations spend between 5 and 20 hours a week searching for jobs, and almost all say job boards are their top go-to resource, followed by company websites and classified ads.

What about social networks? We’ve all heard how valuable LinkedIn is in looking for employees, but that seems to hold true mostly for Baby Boomers, for whom it's the top social platform. If you want to hire Millennials, though, you’re more likely to find them (35%) using Google and Google+ (also the first choice of Gen X job seekers). Job-seeking Millennials do use other services, including LinkedIn (23%), Facebook (21%), and lastly, Twitter (only 8%). (Actually no generation found Twitter particularly useful for job seeking.)

Hire Millennials. Or Compete Against Them

If you don’t hire Millennials, you’ll likely find yourself competing with them. The third most popular major for the Millennials in the PayScale survey was “entrepreneurial studies.” Schawbel says Gen Y workers realize they “need to do their own thing and be proactive” about pursuing that goal.

Personally, I believe Millennials are the most entrepreneurial generation this country has ever seen, so consider yourself warned.

Image courtesy of Shutterstock.

Now is the best time in history to start your own business. But depending on what kind of company you’re building, you have to figure out if your idea is poised to capture a trend - or doomed to miss one and face a much tougher road to success.

To learn about the impact of properly timing a trend - or of missing one - we asked 8 successful young entrepreneurs from the Young Entrepreneur Council (YEC) for their experiences. And we also got their advice on how to perfectly time your business:

1. Missed Opportunities Open New Doors

It was 2011 when we started building a platform for social media. By then, Buddy Media had already raised over $90 million, Wildfire announced that they had over 10,000 customers, and companies like Vitrue and Involver were the industry titans. Some potential investors told us we were late to the party. However, in hindsight, and especially in light of all of the recent acquisitions of the aforementioned, I believe we had a core advantage to really plug into the “second wave” of social, which has the potential to be even more disruptive than the first. We were able to speak to people who were already using a social media platform and figure out what needs still weren’t being met. By staying small and nimble, we were able to quickly adapt to the rapidly changing landscape of social media. - Abby Ross, Blueye Creative

2. Revisit Past Failures

There’s no lack of ideas that were “before their time.” Many business models that failed in the early 2000s are now incredibly successful because now, the timing is right, the technology is here, and it’s easier than ever before to achieve scale. As an example, my company SitePoint tried selling eBooks back in 2000 and no one bought into it. It was a complete and utter disaster and forced us to print and ship physical books – which sold like hot cakes. The reason is simple, people were still getting used to the idea of shopping online, and paying for digital goods was still a foreign concept to many. Fast forward a few years, with the iTunes revolution, Kindle and iPad, and all of a sudden, eBook sales are trending sharply upward every year. - Matt Mickiewicz, Flippa and 99designs

3. Some Ideas Transcend Timing & Trends

Timing is everything – if your idea is reliant on time. If you want to create a flash valuation or raise a certain amount of money quickly, then it’s of utmost importance. And it’s important for tech in general. But I believe that there are other ideas – rooted in timeless truths – that are not restricted to a certain epoch or Zeitgeist. If your idea is rooted in one of these things, then timing is far less important. If you’re a social entrepreneur fighting for human dignity in a particular area, for example, then it’s less critical whether you start today or tomorrow. My personal view is that I want to be involved with an organization that I believe will be important a thousand years from now. If I find an idea worthy of that standard, then I know it’s rooted in something essential. - Luke Burgis, ActivPrayer

4. Timing Boosts Your Success Potential

Bad Idea + Wrong Time = Biggest Failure Ever. Bad Idea + Right Time = Total Failure. Good Idea + Wrong Time = Likely Failure. Good Idea + Right Time = Best Chance of Success. Timing is essential. A business can come to market before people are truly ready or after too many market leaders have established footing for you to truly get through the door, but in the end, I still think that a phenomenal idea that is well-executed can survive average or even poor timing. For example, last year, I would have said that the app Path was too late to the social media market, but the company has executed the business in such an amazing way that it no longer matters that it followed Twitter and Facebook. Path scratches an itch that those networks don’t, and it does it so well that it is growing like crazy. - Shaun King, HopeMob

5. Start Your Own Trend

Timing is not everything. Some people get lucky but, over time, it is the ones who adhere to proven principles and have enough self-knowledge that continuously succeed. Trends come and go; change is constant. So, to paraphrase Gandhi, be the change you wish to see in the world. Great companies start trends and make movements – they don’t follow others, nor are they solely motivated by their greed to take advantage of fickle market whims. Believe in your own ideas, test your ideas, accept that you’re going to fail sometimes – or maybe a lot at first – and do it all in your own authentic style. Too often we focus on trying to “getting it right” within the context of others' point of view. Rather, we should strive to get it right within our own perspective. - Matthew Ackerson, PetoVera

6. Overnight Successes Don’t Exist

It often takes longer than you expect for an idea to catch on. What that means is that when you’re working on an idea and worried that it’s “too early,” you need to be patient. Grow slowly and conserve cash until the market is truly ready. Many of the best companies start out when only the earliest of adopters are ready for it; with the patience and dedication of learning from those customers, they become prepared for the bigger opportunity that eventually exists. The challenge is keeping your finances tight during that time and seizing every opportunity to grow and learn from the market. Then what you may have been working on for years will suddenly seem like it has the “perfect timing.” - Jason Evanish, Greenhorn Connect

7. Timing Sure Does Help

I wouldnít say that timing is everything, but it certainly helps. I launched Money Crashers at the height of the recession and that certainly was to my benefit in the beginning. This is the way I look at it: If you launch a business based on a fading trend, youíre unlikely to succeed. For example, if you're looking to start a small business based on the “daily deal website” business model, you may not have much luck. Some daily deal sites still exist, but many are struggling today. On the other hand, if you come up with a product or service that meets a need people didnít know they had, you can create your own market trend. One example of this is a website called Gradsave. With this website, you can create a way for family and friends to contribute to your child’s 529 plan. - Andrew Schrage, Money Crashers Personal Finance

8. Don’t Depend On Timing

If you’re depending on timing to ensure that your company is going to make money, you probably don’t have a sustainable business model on your hands. Timing may help, in terms of getting ahead of the competition, but you need to be sure that you’ve got something that can do well even if the timing gets screwed up. There are exceptions, of course, but personally, I wouldn’t want to run a business that is dependent on catching the wave of a particular fad. It’s just not going to provide long-term growth. - Thursday Bram, Hyper Modern Consulting

The Young Entrepreneur Council (YEC) is an invite-only nonprofit organization comprised of the world’s most promising young entrepreneurs. The YEC recently published #FixYoungAmerica: How to Rebuild Our Economy and Put Young Americans Back to Work (for Good), a book of 30+ proven solutions to help end youth unemployment.

There are a number of certainties in life. There’s death. And taxes. And if you’re the founder of a successful startup and you’re not named Mark Zuckerberg, there’s the day when you’re replaced as CEO. Don’t pout - your ouster is actually the ultimate validation of your company.

So says David Feinleib, author of Why Startups Fail: And How Yours Can Succeed. Feinleib has been on both sides of the process. He was a venture capitalist at Mohr Davidow Ventures and, prior to that, he founded four companies of his own, one of which was acquired by Hewlett-Packard, another by Keynote Systems.

See The Silver Lining

He’s learned to see the founder pink slip’s silver lining.

“An old colleague recently called me, upset because the guys who gave him money for his startup wanted to get rid of him,” Feinleib says. “My response to him was, ‘Congratulations, man. You’ve arrived!’”

Of course it’s not easy to give up the business you’ve built. When your board members call you in to tell you it’s time to move on, you might be mad, you might be sad, you’ll probably have to force a smile, but you should be glad.

Why Getting Replaced Is A Stamp Of Approval

Founding CEOs should consider getting the boot a stamp of approval, Feinleib says. “It means you did something right and people care enough about your company to want to replace you.”

OK. This is where you start rolling your eyes at the VC-speak. But Feinleib has a valid point and many of the best entrepreneurs know it. They launch and leave - and let other people sweat the long-term.

“But other founders are more like, ‘This is my baby and there’s no way you’re taking it away from me,’” Feinleib says. “They may even see that things are not going the right way or they don’t have the right skill set - and still they won’t relinquish.”

Don’t Take It Personally

Most founders get replaced because they have the vision to create a great company but they don’t have the tools to scale it.

A common shortcoming is interpersonal skills. Often founders with a genius for product are not so good at managing people. Maybe they don’t hire fast enough or they’re too short-tempered to attract top talent. That’s when the board decides to kick the founder to a corner office so the company can grow.

The key is not to take it personally, Feinleib says. “If you’re getting replaced as CEO, it does not mean you’re a failure or disgrace. It can mean quite the opposite. It can mean the company is outpacing you as the founder and you either have to transform yourself or get out of the way. But it’s hard for a lot of founders to see that.”

Seeing The Writing On The Wall

Something else many founders don’t see: the warning signs, even though they’re usually readily apparent. This, according to Feinleib, is why investors are often unfairly cast as the bad guys, blaming the founder for everything and giving him the quick heave-ho when it suits them.

“In one way or another, someone on your board has been indicating to you that it’s time to ramp it up well before the ultimate conversation ever takes place. For founders, there are telltale signs that they may be in trouble and need to step aside. Like if you agree to hire a new VP of engineering and six months later you still haven’t done it, you’re heading for a conversation with your board members.”

Another red flag: a board member suggests you sit down with someone because that someone might have good advice. A lot of founders reject the suggestion out of hand. Others nod and smile and never take the meeting.

Investors notice. And eventually they react.

When they do, try to look at the upside. “Getting ousted is a rite of passage,” Feinleib says. “It means you’ve arrived. You’ve done enough. You’ve raised enough money, you’ve hired enough people, you’ve built a great product.”

Sort Of Like Getting Dumped By A Girlfriend

At times, Feinleib starts to sound like a girlfriend who’s breaking up with you. “It’s really a growth moment,” he says. But he’s right. And besides, there are lots of other fish in the Valley.

“Getting replaced as a founding CEO is not the end of the world, especially in Silicon Valley. It’s not a black mark. You’ll have the opportunity to start another company. There are tons of guys who have rebounded and gone on to new and better things.”

Hmmm. Where have we heard that before?

Adam and Eve. Sonny and Cher. Jobs and Wozniak. Legendary partners all. Sometimes even the most dedicated, uber-competent entrepreneur doesn’t have everything it takes to ensure startup success. That’s when you need that “perfect partner.” But how do you find the right one?

Finding that ideal startup partner can be as elusive as finding a compatible mate. And just like millions of people have put their love lives in the hands of technology, you can now find your business soul mate online. 

Kaviani co-founded CoFoundersLab less than two years ago with the aim of bringing entrepreneurs together to launch startups. CoFoundersLab makes matches (for free) via its online platform or through in-person Meetups. The company is currently in six markets, but expects to at least double that number by year end. It has also teamed up with TechStars in Boulder, Colo., Harvard i-Labs in Boston, and with New York University’s Stern School of Business.

To find out more about how co-founders can help startups succeed,and how founders can find the right partners, I talked with Kaviani and Julie Edge, Ph.D., who is the founder of Inside Edge Solutions, on the faculty of Washington University in St. Louis, and has worked with Kaviani.

RIEVA LESONSKY: CoFoundersLab has been described as “eHarmony for entrepreneurs.” Is looking for a co-founder like looking for a mate?

DR. JULIE EDGE: Ironically it is a bit like looking for a marriage partner.You need to have great trust, be able to engage in healthy conflict, and hold the other person accountable. You need the right personality match to get through the dark days together. In business you need to know if this person has the right skill set for you.

But don’t look for someone who is “most closely aligned” with how you think. The Hogan Personality Inventory (a personality assessment tool) shows that the best teams are the ones that are the most different on all [measurement] scales.

SHAHAB KAVIANI: You also need an equal-level appreciation of the co-founder’s “art” and what they do. The level of complexity for tech roles is highly valued today; the subtle skills of sales and marketing not as highly. But there needs to be mutual appreciation.

LESONSKY: If tech skills are more highly valued, how do the co-founders strike the right balance?

EDGE: First, you need to make sure you need a co-founder, and not an employee. Co-founders = co-owners, both parties have skin in the game.

KAVIANI: Ask yourself, “Am I ready for a co-founder? Can I give up the sole decision making, or am I really just looking for [help]?”

LESONSKY: Then why not go it alone and hire the skills you need?

EDGE: Not everyone needs a co-founder. If the business doesn’t have to scale quickly, going it alone might be the way to go. Technology is a highly competitive industry with a race to market. To get up and running is often too much work for one person. You need a co-founder so you can divide and conquer and get a leap ahead.

KAVIANI: Industries with high partnership rates include clean energy, green businesses, biotech and health. They’re also growing the fastest.

EDGE: The biotech and health fields [are ideal for partners] since science and tech come together. Science doesn’t know business. Two to three skill sets are needed to make a company viable. Many accelerators are only looking at co-founder teams. There’s a 12-14 week period to build a company very quickly.

LESONSKY: Shahab, you’re a veteran of co-founding. What do you look for?

KAVIANI: Here at CoFoundersLab we meaure “teamability.” Are they ready for commitment, and compatible with the team? They need to be empathetic, level-headed, and have ability to look at issues from different points of view.

LESONSKY: So in this age of technology, can co-founders have a long-distance relationship? Or do they have to “live” together?

KAVIANI: Co-founders don’t need to necessarily spend all their time together, but partners should be within 150 miles of one another and get together at least two to three times a month. [Co-founders] need to build trust. That happens in person. The more distance, the higher the likelihood of failing.

LESONSKY: But why would someone need a “matchmaking” service? Isn’t it riskier to partner with a stranger?

KAVIANI: Almost half the people who team up now do it with family or old college roommates. But you have to think with your head and not your heart. The new aspect [of our business] is getting people who don’t know one another to team up.

EDGE: Trust is the primary reason people turn to people they already know. It’s more comfortable to team up with someone from college. There’s a tradeoff using a service like CoFoundersLab. You get a better fit, but you don’t have trust at the beginning.

LESONSKY: How do you establish trust with a stranger?

KAVIANI: You have to make sure the innate characteristics of the size of play is the same — that you share a common goal. Do you [each] want to build a lifestyle business or a VC-backed business? These have different tempos and you have to be on the same page. You both have to be willing to do whatever it takes.

EDGE: The hard part is people don’t know that at the beginning. And don’t divide the equity too early. One co-founder might not do as much as the other. Don’t worry about defining equity until you understand what each co-founder does.

LESONSKY: How does CoFoundersLab help?

KAVIANI: We look at a range of skills.  What does each person bring? It could be money, sweat equity, connections or industry experience. Very soon you'll be able to filter by personality, values and goals.

EDGE: The science of personality has been around a long time, but there’s no magic formula. There’s a better chance of success if you’re paired using personality theory. We’re talking about fit, not just for a job, but with another person. Tools, if used properly, pull emotion out of the decision. They make co-founders see how they behave vs. how they think they do.

LESONSKY: You both feel strongly about the benefits of a co-founder?

EDGE: Yes. Entrepreneurship is a hard road. It’s easier to grow a business if you have someone to share the journey with.

KAVIANI: Emotional support is not talked about a lot. But that, and camaraderie are valuable contributors to a startup’s success.

Sonny & Cher image courtesy of Shutterstock.

By necessity, running a startup is like flying by the seat of your pants. Because the company is new, founders often have to make up things as they go along - with little opportunity to check and see how they're doing. That's starting to change, though, as new startup benchmarking services promise insight on how well your startup stacks up against peers and competitors. But are these benchmarks relevant to all tech startups, and do they really help new companies succeed?

We're about to find out. According The Wall Street Journal, several new companies are providing benchmarking measurements, based on various algorithms, for startups. The Journal claimed that thousands of startup entrepreneurs have turned to companies such as Startup Compass, G-Score, and BOSI, to "assess their young companies, based on an analysis of comparable data from their peers." (In May, ReadWriteWeb's Tim Devaney and Tom Stein wrote about Startup Compass in Stop Flying Blind: Use Big Data To Benchmark Your Startup.)

Several entrepreneurs told The Journal they thought the services were helpful by pointing out potential danger spots. But the Journal also quoted Patricia Greene, a professor of entrepreneurship at Babson College(which often ranks as the nation's top entrepreneurial college) warning that benchmarking could actually discourage companies from using innovative business models. "You could go into analysis paralysis," she explained.

Good Points, Bad Points Of Startup Benchmarking

Gail Goodman, the Chairman, president and CEO of Constant Contactsees both advantages and disadvantages to benchmarking your startup. "Tools and models are helpful because they can force you to step back, especially when it's easy to get lost in the weeds of the day to day [operations. But] no two companies are the same," she warns, "and benchmarking is no substitute for building a great mentor team to advise you." The number one thing startups need to do, Goodman says, is "to build a team, and not necessarily a paid one." Goodman believes startups particularly need people they can count on, whether it's an informal board of advisors, peers, a formal board or a mentor.

Don't Benchmark In A Vacuum

Ken Yancey, the CEO of SCORE, a nonprofit organization that provides mentors and counseling to startups and business owners, believes business algorithms can "potentially be a good tool, but shouldn't be used in a vacuum. You need other metrics about what drives your business to make smart decisions." Yancey adds that it's always a good idea to seek as much data as possible: "Entrepreneurs who seek knowledge will always outperform those that don't."

But sometimes all that knowledge can be overwhelming - there's just so much data to keep track of. One tool that might help early-stage entrepreneurs stay on top of all this information is this startup dashboard from InfoCaptor. It's simple, and best of all it's free.

Don't Be A Slave To The Benchmarks

Are there dangers in benchmarking? Yancey and Goodman both warn that startups shouldn't be a "slave to benchmarking." Information is useful, but success is about taking action. Business consultant Brian Moran, CEO of Brian Moran & Associates, says that while it makes sense to incorporate the "critical data" a benchmarking service can provide into your strategic plan, "there is a time for planning and a time for execution." Too many startups fail," Moran says, "because they constantly look at their plan, but don't execute it."

Everyone agrees you can't factor "gut reactions" out of the process. "Benchmarking," says Yancey, "can take the guess work out, but it can't take away the 'gut work.' By itself benchmarking is not as valuable as your knowledge and your gut feelings. But if the benchmarking doesn't support your gut, you need to ask more questions, and possibly amend your startup plans."

Anti-Entrepreneurial?

To me, though, relying on algorithms is almost anti-entrepreneurial. Babson's Greene warned that "Abnormality might be [a startup's] competitive advantage." But a benchmarking tool might not see it that way.

Goodman agrees. "Constant Contact overinvests in customer care. But it's my differentiator. Of course I'm not going to match the benchmarks, but I do it on purpose."

The decision of how much to rely on benchmarks and algorithms is obviously up to every startup. Yancey says benchmarking can be "immensely valuable for fast-growth" startups, looking to avoid big mistakes as they scale up. On the other hand, some entrepreneurs succeed precisely because they follow the path less traveled.

Several months ago General Motors and its $10 million marketing budget walked away from Facebook, announcing that advertising on the largest social media platform in the world had “no value.” (As I write this, however, GM is considering returning to Facebook, and the man who made the decision to pull the ads was just fired.)

You won’t get many arguments that having a social media presence indeed builds awareness. But just because someone “Likes” your business on Facebook, checks in on Foursquare, gives you a rave review on Yelp or tweets nice things about your company doesn’t necessarily result in a sale or more revenue to your bottom line.

Measuring the Impact of Social Media

In fact, it’s not easy to actually measure the return on investment (ROI) of these activities. But analytics software provider Alteryx says it has the solution. Paul Ross, Alteryx’s vice president of product and industry marketing, says the company’s strategic analytics program has found a way to “capture core social media activity and marry it with what actually happens in a business” to measure if a “customer who likes your company on Facebook is more likely to purchase your products.”

The data indicates, according to Ross, that 1,000 check-ins on Foursquare equals a 1% to 2% impact on a company’s sales. For Facebook, it’s a little more complicated, with results dependent on specific demographic breakdowns. For instance, the research shows that people who “Like” your business on Facebook are more likely to purchase “high-value items.” Armed with that knowledge, you can more intelligently target your prospects.

Ross says that the more “big data” you have, the better prepared you are to make strategic decisions. But the key for startups is the ability to easily understand what the data is telling you. As Alteryx President and COO George Mathew notes, most entrepreneurs aren’t armed with Ph.D.s in data science and statistics. But they “know [their] business, know and understand the data that surrounds their business and are smart about what they need to get done.”

Mix Social Media With Metrics and Traditional Marketing

Ross believes “data adds deeper context to [a company’s] social media engagement.” The bigger trend is the continued convergence of social media and traditional marketing, with information being central to it all. Ross says there are some other emerging trends startup entrepreneurs should pay attention to:

• It’s important not to get enamored of social media analytics all by themselves. You need to tie them into business performance.

• Find the connections between your virtual world and your actual customers.

• There’s a shift underway from investing in social media for building awareness to driving behavior.

• For many businesses, there’s a new emphasis on location-based actions. Will your customers in Washington act the same as those in Wyoming? (This is important whether your business is in a physical location or online.)

The more business intelligence you have at your disposal, the more successful you are likely to be.

A new study shows that startups do better when they’re launched in the place where their founders were born or have lived for a long time. Makes sense, but the reasons why are surprisingly complex and modern.

Our first guess was that the key to startup success is the founder’s ability to go to their parents’ house to cadge a hot meal. And that’s not entirely wrong. But there’s more to it than that.

The study, by Professor Olav Sorenson of the Yale School of Management and Michael Dahl of Aalborg University in Copenhagen, Denmark, is titled “Home Sweet Home: Entrepreneurs’ Location Choices and the Performance of Their Ventures.” It looked at data from 13,166 Danish startups founded between 1995 to 2004 and discovered that companies launched by founders with an average tenure of 6.4 years in a region had a 9% lower failure rate and took in $8,172 more in annual profit than companies launched by newcomers. Each additional year of tenure reduced the failure rate by nearly 2% and increased profits by $1,362.

Location = Industry Experience

“The effect we found is substantial,” Sorenson told ReadWriteWeb. “It’s similar in size to the value of having prior industry experience.” Although his study was conducted in Denmark, he thinks the data would look similar in other parts of the globe.

Sorenson surmises that startup founders do better amid familiar surroundings because social networks are vital when you’re starting a business. “You need investors and early employees to trust you and those are people you already know,” he says.

Prevailing wisdom has it that the path to startup success is shorter and smoother if it leads through Silicon Valley. But Sorenson says this is not necessarily the case. Remember: for every Mark Zuckerberg who moves to the Valley to build Facebook, there are thousands of itinerant founders who go there and faceplant.

Follow the Money

His caveat: if some investor throws a stack of funding at you, go wherever the VC asks you to go. “If you find a VC who will fund your business if you move, you should probably move,” Sorenson said. “Because VCs don’t just bring money to the table, they connect you to other execs and early employees and suppliers and so forth. So that mitigates some of the disadvantages of moving to a new place.”

But what if you live in, say, Idaho and you have a great idea for a new company? Shouldn’t you load up the Corolla and set the GPS for Palo Alto? Sorenson said “no”. Unless you have VC waving cash at you from Sand Hill Road, you’re better off staying home in Coeur d' Alene.

“Your chances of success will be better, your expected profitability will be higher. And for the same amount of money you will probably get higher quality people onboard in Idaho.”

And you won’t have to pay $2,000 a month for a one-bedroom apartment in Cupertino.

Image courtesy of Shutterstock.

Nope. We’re talking about bloggers.

Sure, investors and customers are vital to the success of a startup business, but few things can turn your tech startup into the “it” company on everyone’s lips (and tweets) as quickly as getting mentioned by a prominent blog or blogger.

As a journalist and blogger myself, I know a thing or two about what captures the attention of the media, about what makes a founder or company interesting. Here are some tips to get you started on your attention-getting campaign - from bloggers or mainstream journalists. (While I’m concentrating on bloggers here, many of these tips could also help you get the attention of a relevant newspaper or magazine writer or columnist.)

Selecting Your Target

First, choose your target. You probably already know what blogs and bloggers matter most to your industry. Competition is fierce to get mentioned by prominent tech blogs. To make it a little easier, try also targeting blogs that aren’t tech-specific but focus on your industry.

For example, if you’ve started a website that helps people with personal finance, target financial bloggers. If your blog sells beauty products or apparel, go after beauty or fashion bloggers. You get the picture.

If you want to expand your list of blogs and bloggers beyond those you know, check out Alltop and Technorati to find the most respected and influential blogs in a wide range of fields. Ask friends and colleagues what they read, too.

Once you build a target list of blogs and bloggers, get familiar with what they cover. Bloggers can instantly recognize pitches from people who have no idea what they write about (trust me on this). Read the blog to get a sense of what aspect of your story might be most appealing.

Making the Connection

You can get in touch with bloggers in a couple of ways. One is to post comments on their blogs. Make sure they’re relevant to the topic and don’t come off too self-promotional. You want to show the blogger that you’re knowledgeable about the topic, the industry and technology.

You can also contact bloggers directly. Many will list their contact info right on their blog. If they don't, look them up on Twitter and contact them that way. (I am starting to get a lot more pitches over Twitter.) Once you get in touch, use these tips to ensure your message isn’t ignored:

• Make sure your pitch is relevant to what the blogger writes about. Someone who covers industry gossip isn’t going to do a product review. And someone who writes product reviews won’t write about how your company just got funded.

• Piggyback on recent posts. If a recent post got lots of comments and attention, is there a related but new angle you can take that makes your business newsworthy? Maybe someone just blogged about why there aren’t enough women in tech. If you’re a woman with a tech business and you have a difference of opinion, tell the blogger why and share examples from your business of why you feel that way.

• Be controversial. Speaking of women in tech, controversial issues get bloggers going (because they get readers clicking and commenting). Taking an unpopular or devil’s advocate stand on one side of an issue can get bloggers’ attention - just don’t do so unless you truly feel that way.

• Easy does it. Bloggers are insatiable beasts - they’re constantly looking for new ideas to feed the Internet’s gaping maw, and they’re always in a hurry. Make it easy for them to find the information they need to write about your business by including a Media or Press section on your website that features your press releases and any news about your business; an About section with your startup story, mission and bios of you and your team; and a Contact section with plenty of ways to reach you quickly (email, phone, Twitter, etc.).

• By the numbers. It’s sad but true: bloggers do love numbers, lists and catchy titles that get people to click on their blog posts. So pitching yourself with a “5 reasons” or “3 things” or “10 best” angle can help grab their attention.

• Be trendy. For the same reason, tying your pitches into current events - whether it's the new crowdfunding regulations under the JOBS Act or TomKat’s divorce proceedings - is also a good way to go. Watch Twitter or Google for trending topics and relate your pitches to them.

Maximizing Success

OK, so you found the Holy Grail - a mention in a hot blog. What now?

Maximize the potential by tweeting it, Facebooking it, linking to it on your website and spreading the news any way you can think of.

While you’re at it, don’t forget to thank the blogger. They’ll appreciate the recognition and it just might be the start of a beautiful friendship.

1. Set an example. An innovative company needs to start with the founders and top execs. While even the most creative founders can’t drive innovation all by themselves, someone has to lead the way. Show your employees (don’t just tell them) that you value innovation by making it part of your daily life.

2. Clarify goals. Innovation doesn’t happen in a vacuum. Every person on the team should be clear on the startup’s business goals and what you are trying to achieve at each stage of development. This helps them know what’s important and what areas might benefit from new ideas.

3. Offer rewards. Yes, you’re a startup and don’t have a lot of cash on hand, but there are plenty of other ways to reward your team for innovations. Public recognition, a bonus, paid time off or promotions are all great rewards for successful innovation. And make sure you show public appreciation for employees’ efforts to come up with new ideas, even if they don’t pan out.

4. Build it in. Make innovation part of employees’ job descriptions - not just something that’s “nice to do if you have time.” Build it into the review process - reward it when it happens and ask for it when it doesn’t. This goes for every employee — from customer service to your head of engineering. Not every employee can rethink your business model, true, but they can rethink their own jobs and offer valuable ideas.

5. Have a hack day. Consider following the example of Google, which famously has employees devote 20% of their time to activities unrelated to their jobs. Set a day or a morning each week aside for a “hack day” where employees can explore things outside their responsibilities.

6. Take ideas seriously. Employees won’t innovate for long if their ideas are dismissed without a second thought or, worse, made fun of. Even if you’re all friends, feelings can get hurt. Develop a system to capture ideas so they don’t disappear into a black hole. Give each idea a respectful hearing and make sure all other employees do, too.

7. Implement ideas. This one may sound obvious, but too many innovation programs are all talk and no action (remember that forlorn suggestion box, anyone?). If you never implement any of your employees’ ideas, you’ll soon find the well of inspiration drying up. Don’t have any ideas that are ready for prime time? Pick two or three that are almost there and have your team focus on fine-tuning them until at least one is worth testing.

Some entrepreneurs start out to create a company that they intend to spend their lives growing and maintaining. Others form startups with the expressed hope of being acquired by larger companies. If an acquisition is part of your exit strategy, you need to build your business with your buyer in mind.

To find out what strategies helped real-life entrepreneurs negotiate their own acquisitions, we asked four successful young entrepreneurs from the Young Entrepreneur Council (YEC) for their advice. Even if an acquisition isn’t on your radar yet, these tips can be helpful to you in getting - and keeping - a future buyer’s attention:

1. Strategy Is Important - Storytelling Is Critical

Everyone loves a great story. We all “invest” in stories one way or another - it’s the way we make them ours. The friends you choose, the experiences you have and the dreams you chase are all investments in stories that you can then share. It’s the same for companies. Your customers are investing in your story to share in it, as are your investors - literally. “The only family-run startup in the industry” or “the only app that actually helps me fix this”… you get the idea. The upshot is that you better have a great story to tell. The better the story, the more people are likely to want to invest. If your story is truly great, and you can tell it with absolute conviction, you may just find someone who wants to own it. - James Rohrbach, stealth

2. Clarity in Past and Future

To me, it wasn’t just about having a clear vision for the future, but having a transparent past. If you’re building a business to sell, make sure everything is organized and recorded properly from inception. When you sit at the bargaining table, you want to be able to present your company in a neat little package, with everything from incorporation documents to licenses and key agreements systematized. Any missing or “broken” piece may be seen as sloppy on your part. And if a potential buyer begins to think you’re sloppy in some areas, they will begin to wonder where else you might have been negligent. Few will risk buying to find out. - Nicolas Gremion, Foboko.com

3. Demonstrate the Adaptability of Your Business

A partner and I recently sold a startup to another company that was only looking for certain elements of what we had created - in particular, a Facebook app. Entrepreneurs must have a clear strategic vision to have useful discussions with potential acquirers. But you must also demonstrate that your product or service is built on a strong foundation that is flexible enough to fit within the new organization. Your people need to be able to adapt to the new culture, your marketing strategy must be easily subsumed by the acquirer’s, and your product must fit within the larger catalogue. When you build your business, you must have a clear vision and road map. But as soon as you sell, what was once “yours” is now part of a greater whole. - Aaron Schwartz, Modify Watches

4. Keep Your Books Consistent

Potential buyers are always going to look at numbers. Don’t leave anything in question by being as thorough as possible along the way. The more data you are able to supply to the end buyer, the more professional you look and the more confident they will be with their purchase decision. - Logan Lenz, Endagon  

The Young Entrepreneur Council (YEC) is an invite-only nonprofit organization comprising the world’s most promising young entrepreneurs. The YEC recently published "#FixYoungAmerica: How to Rebuild Our Economy and Put Young Americans Back to Work (for Good)," a book of 30-plus proven solutions to help end youth unemployment.

Successful businesses often have one thing in common: The management team has carefully designated roles. These aren’t jobs like CEO, CFO or CIO. They are roles like “the logical one,” “the idea person” or “the touchy-feely guy.”

The 3 Types of Intelligence

John B. Montgomery explores this concept in depth in his new book, Great From the Start: How Conscious Corporations Attract Success. As a Silicon Valley attorney and founder of technology incubator StartWorks, Montgomery has participated in many tech startups and has a natural interest in what makes them succeed. Drawing on the work of organizational development consultant Ward Ashman, Montgomery explains that there are three aspects of human intelligence: logic, emotion and intuition.

Logic is left-brain and process-oriented; intuition is right-brain and systems-oriented; and emotion is feelings-oriented. While every person has logic, intuition and emotion, Ashman’s theory holds that each individual tends to rely primarily on one of those types of intelligence. Understanding which of the three “human intelligences” predominates in your life can give you new insights into why other people respond to you the way they do.

For instance, realizing that logic is your dominant intelligence should help you understand why you sometimes come off as maddening as Star Trek’s Mr. Spock to members of your team. Or knowing that you’re primarily emotional can remind you to display facts and logic when presenting to potential investors. Once you know what type of intelligence you tend to rely on, you can also make a conscious effort to tap into the other aspects of intelligence.

Building a Balanced Leadership Team

Of course, no one is perfectly balanced, no matter how self aware they may be. That’s why creating a team with a balance of human intelligences is so important, Montgomery says. When your management team balances each other, they function as a whole brain, creating a system of checks and balances and to the founder’s preferred mode of intelligence.

Similarly, understanding what modes of intelligence are dominant in your management team can make it easier to work with them. For instance, you’ll realize that the logical person who takes longer to make decisions just wants to know all the facts, so they can think through every option. And that the intuitive person who seems to make snap judgments may be able to grasp the “big picture” faster than most.

Montgomery calls this “whole-brain leadership,” and his attention to the inner workings of the startup founder’s psyche is one of his book’s most valuable aspects. You might not expect a lawyer to talk about topics like mindfulness and meditation, but Montgomery’s experience has taught him the importance of “conscious leadership" in today’s transparent business environment. This requires a clear understanding of your personality, your strengths and weaknesses, and how you come across to others.

Expert Voices

Montgomery’s thoughtful book also pulls in a variety of expert voices to speak on various aspects of building successful companies. His writing mirrors his advice to tech startups: Don’t try to nail everything down from the get-go, be flexible, stay in the present and call in the people with the skills to handle new priorities as they arise.

Great From the Start does present a concise, well-rounded guide to all the basic elements of a successful startup, such as creating a business model, business plan, a strong brand, a good board of directors and a firm legal foundation.

But like the ideal startups he envisions, Montgomery has a larger purpose. Citing research showing that when we work in supportive workplaces, our brains produce neuro-chemicals that make us happy, he claims that “Great From the Start is a preliminary blueprint to design humane corporations that will enable the ultimate paradigm shift: a sustainable global economic system designed for humanity that runs on trust succeeds the prevailing economic system that alternates between hope and fear.”

Techies aren’t known for their emotional intelligence, but startup success depends on engaging others, including investors, employees and customers. That makes Great From the Start’s focus on the human side of business more than just fluff.