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					Reprint | Post | Republish | E-Mail | More> January 23, 2009

A Knack For Making Startups Fit Together
By BRIAN DEAGON Jason Nazar, founder and chief executive of Internet documents firm Docstoc, tells a story about the time he tried to hypnotize three people at the request of his college buddies. He'd recently taken a weekend course on hypnotherapy, and this was his first show. It flopped, big time. He called the teacher to ask why he failed, and what his secret to success was. The teacher replied, "The next time you do a show, pretend that you are the greatest hypnotist in the world." At Nazar's next performance he acted as if he were Harry Houdini in the flesh, full of flash and arrogance. It worked. The group under his trance shivered when he said it was cold and panted when told they were hot. "It was the most important lesson I learned about what to do when starting a business," Nazar told an audience in Santa Monica, Calif., recently, for a presentation he gave about mistakes to avoid. "The single most important thing you need when starting a business is belief in yourself, that you can do this." Docstoc, based in Beverly Hills, Calif., was launched in November 2007 with the backing of venture capital firm Rustic Ventures and investors in other successful Internet startups. It's an Internet platform where users can upload and share a vast repository of documents on topics such as legal, business, technology and education. The site received 3 million unique visitors in January, up 25% from the prior month, said Nazar. Errors To Avoid During the presentation, Nazar ran down a list of mistakes to avoid when creating a company, among them not sharing the idea with enough people to get their impressions and advice. Another mistake lies in believing that your idea is totally unique, which is highly unlikely.

And just because someone else got there first doesn't mean the game is over. An example comes from the evolution of social networking Web sites, he said. Among the first was Friendster, which was shunted aside by My-Space and is now losing its luster next to Facebook. "Just because something has been done before doesn't mean you shouldn't do it. Just do it better," he said. He also advises budding entrepreneurs to remain confident and not give up too soon when road bumps slow their journey. Also, become your company's first salesman and prove it's a sound concept before building a sales staff. Don't over-analyze to the point of paralysis. Entrepreneur Tony Greenberg, an early commercial pioneer in the Internet industry and chairman of technology outsourcing firm Ramp Rate, says many successful startups go through three or more business-model shifts before hitting the right mark. "And people usually don't abandon a bad business model quick enough," he said. It's also important to promote innovation by clearly understanding employees' core strengths and putting them in a role that will promote that. Craig Allen, who has a track record of developing and launching interactive entertainment brands and services, and is currently chief executive at Spark Unlimited, a video game developer, advises not to underestimate cash needs and the timing of payments. "A lot of times folks know how much they need to start a business but underestimate the amount of money required to get to the point of an operational and sustainable business," he said. And in some cases payments due by partners can come in later than expected, especially if by doing so they believe they can use it as leverage to negotiate a better deal. Be Prepared He also recommends ensuring the business is ready to operate before adding staff and serving clients. This ranges from registering trademarks and having proper insurance to forming an employee handbook with all legal and policy points in place. Lawrence Langs, a corporate attorney, investment banker and serial entrepreneur, provided this: "Letting legal and financial engineering lead the business instead of a business driving these considerations leads to a lot of roadkill." On the flip side, "Not investing in proper legal structure, intellectual property protection or fully researching a business plan is sure to kill a company as well," he said. Langs also says good companies often go astray due to personality- driven issues more so than operations or product issues.

"This is especially true in family-run businesses where nepotism and the business of the family takes center stage," he said. But it also applies to most nonfamily companies since they often act similarly. Successful companies nurture and respect great talent. "Many young companies treat employees as fungible and run into unexpected business interruptions as a result," said Langs. Kelly Perdew, a serial entrepreneur and chief executive of RotoHog.com, a fantasy sports platform, warned against wasting time getting to market by overstressing perfection. When it comes to Internet ventures, get the site up as soon as feasible and start getting feedback from customers, he said. "That feedback is worth more than a year in development," Perdew said. And never forget that customers know more than you do, said Perdew. "Always listen." And when it comes to leadership, said Mike Weiss, founder of Streamcast and its Internet filesharing software Morpheus, lead by example. "Don't command respect. Earn it," he said.

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