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Your Startup Guru

Helping you launch and grow your business

Your Startup Guru Client – Kansas City Kwik Dry Total Cleaning

Kansas City Kwik Dry Total Cleaning needed a business plan to launch and meet startup capital expenditures. With the custom-made business plan we created for Kansas City Kwik Dry Total Cleaning, they are well on their way to providing exceptional janitorial services in the Greater Kansas City area.

Contact us to get your expertly written business plan.

Stop doubting yourself

You can create something great when you stop doubting yourself

The COVID Small Business Boom

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The Commerce Department said on Thursday, July 15, 2021, that business applications reached a seasonally adjusted 448,553 in June, 2021. In total, Americans have started 6,714,318 new businesses since the pandemic began last March, which is an all-time record.

According to Julia Pollak, an economist with ZipRecruiter, COVID created a very unique set of circumstances that made ideal conditions for people to start a business.

  • Many people were laid off on furlough and suddenly had time, but they didn’t have time that they needed to use to spend desperately searching for work because they also got a little bit of fiscal support. So there are many people who took that stimulus check and decided to take their $1,000 and use it to start a business.
  • Also, starting a business now is really fast and really cheap. You can register your business for just a few hundred dollars. And a lot of these companies are really little. It’s like a little store on Amazon or on Etsy. The startup costs for these businesses are super-low, so a stimulus check for $1,000 can make it happen in a way that it couldn’t have even 10 years ago.

If you are ready to start your business, contact us and let’s discuss the right path for you.

What Angel Investors Prefer

At Your Startup Guru, we fundraise for a wide range of clients from a broad spectrum of industries including restaurants, software as a service (SaaS), to fintech and more seeking capital ranging from $10,000 to over $10 million.

We get capital from a wide range of sources including private equity, banks, credit unions, government economic development authorities, angel investors, and more.

However, not all industries get the same attention. For example, according to a recent report based on an analysis of 2,492 transactions across 2,444 companies all completed in 2019, angel investors are more likely to prefer certain industries and deal structure type (e.g. convertible note).

Selected portions from the report below:

Industry

The 2019 data revealed a first-time decline in the information technology/software segment as a percentage of total transactions relative to other investment segments (2019/2018) — 29% of the investments (2019) were in info tech,
compared with 38.6% (2018). Yet Information Technology still remains the dominant segment for angels.

Consumer Products / Services sector saw significant growth, up from 18.2% (2018) to 25.75%.

If Healthcare and Biotech were combined, they would comprise 21% (2019) of transactions versus 18% (2018). We added Biotech as a discreet sector to track in 2019, but for comparison sake, you can observe that even without Biotech, the Healthcare segment continues to be a major category for angels.

We also noted an increase in Financial Services’ Fin Tech in 2019, which was too small in 2018 to warrant its own category. In 2019 companies in this sector participated in 3.55% of all transactions. The Energy sector also rose to over 3% with a few related Environmental companies included.

And for this year, we found enough companies to warrant adding Ag Tech (1.2%) as a separate category and clearly growing. While Info Tech and Software is still the leading category for angel investing, but by a much smaller margin than in the past, we also acknowledge that Info Tech / Software is often a necessary core component of many other sector investments.

Deal Structure Type

While we continue to see the use of SAFE notes they are a minor percentage of all Seed transactions at 4.7%. The primary structures were 51% Convertible Notes and almost 41% Priced Preferred. SAFE’s are not reported in our data as frequently as we hear them discussed amongst early stage entrepreneurs.

Series A transactions were (as expected) Preferred Stock 86% of the time, with 12% standard Convertible Notes associated with a Series A, typically a bridge to Series A, but distinctly beyond Seed stage.

We did find SAFEs were most frequently used in Mid-Atlantic Region at 12%. The Mid-Atlantic use of SAFEs may be heavily influenced by US Federal DOE, NSF, NIH, and other grant money which does not permit debt as a liability while grant funds are in use, hence early stage companies who do not wish to price their round are opting for SAFE notes.

California was #2 in SAFE usage at 10%, influenced by California incubators and possibly by science companies vying for Federal grant funds.


There are considerable pre-money valuation and round size discrepancies when it comes to the various demographics of entrepreneurs that highlights a disturbing flaw in the angle investment community but that goes beyond the scope of this blog post.

How to Be More Influential

Influence - The Psychology of Persuasion by Robert B. Cialdini, Ph.D.
Influence – The Psychology of Persuasion by Robert B. Cialdini, Ph.D.

One of the best podcasts for business or for learning anything really, is the Freakonomics Radio podcast. This particular episode was especially interesting because it has direct relevance to sales. One of the biggest issues for any business is generating revenue. In order to do that, your revenue centers have to be skilled at influencing clients to purchase from your business.

The social psychologist Robert Cialdini is a pioneer in the science of persuasion. His 1984 book Influence is a classic, and he has just published an expanded and revised edition. In this episode of the Freakonomics Radio, Cialdini discusses the seven psychological levers that manipulates our self-described rational minds and lead us to act, follow, or believe without a second thought. The seven levers of influence are reciprocation, liking, social proof, authority, scarcity, commitment and consistency, and unity.

Some key excerpts from the interview:

  • Reciprocation – Reciprocation is the rule that is installed in all of us, in every human culture, that says we are obligated to give back to others the form of behavior they’ve first given to us. 
    • For large groups, he would ask the first person for an order, and no matter what s/he ordered, he would frown, lean down so everyone could hear, and say, “That’s really not as good tonight as it normally is.” And then he’d recommend something slightly less expensive from the menu. “This, this, and this are really good tonight.” So, what he did was to say, “I’m being so honest with you, I’m willing to recommend something that will give me less of a tip.” Then when he returned at the end, he would say, “Would you like me to recommend a dessert wine or a dessert?” And people would all look at each other and say, “Of course, Vincent, you know what’s good here, and you have our interests at heart,” and they would spend on wine and dessert.”
  • Liking – Being likable makes you more persuasive
    • But how do you make someone like you? One is to point to genuine similarities that you share. The other is praise. Because first of all, people like those who are like them, and secondly, they like those who like them and say so.  Car salespeople, for example, are trained to look for evidence of such things while examining a customer’s trade-in. If there is camping gear in the trunk, the salespeople might mention, later on, how they love to get away from the city whenever they can; if there are golf balls on the back seat, they might remark they hope the rain will hold off until they can play the 18 holes they’ve scheduled for the next day.
  • Social Proof – We are more likely to say yes to a proposal or a recommendation if we have evidence that a lot of others like us have been doing so. 
    • The power of social proof is so substantial that people who watch a presidential debate on T.V. are said to be significantly swayed by the magnitude and direction of the applause at the live event. This is not at all a recent phenomenon.
  • Authority – Deferring to authoritative figures and sources
    • In one study, someone called the nurses in various wards of hospitals and claimed to be a doctor on the staff who the nurse had never met and ordered the nurse to give a double dose of Astrogen to a patient. They’re not supposed to take these orders by phone. The dose was twice the maximum dose that was on the bottle of Astrogen. But 95 percent of them were on their way to give the drug to this patient before they were interrupted by a researcher who said, “Wait, don’t do that.” The researchers concluded that one would think there would be multiple intelligences operating to decide whether to give this amount of drug or not. But it turns out that, because of the principle of authority and the deference that the nurses were giving to the physicians, there was only one such intelligence function. As highly trained and intelligent as nurses are, in a fast paced challenging environment, it is easy to unthinkingly follow an authority’s directive.”
  • Scarcity – An insufficiency of amount or supply
    • In the book, you tell the story of your brother when you were much younger, that he would buy and resell used cars. And his big trick was to tell all the prospective buyers to come view the car at the same time, so that he’d have everybody come Sunday at 2:00 p.m. to create a sense of demand or a false scarcity.
    • Another example is companies that create an artificial scarcity, essentially by limiting the amount of production they engage in. Let’s say it’s a T-shirt, a sneaker, a luxury watch. They could make a million a year. They choose instead to make 10,000 a year and charge 100 times what it might go for on the market as a mass-market item.
  • Commitment & Consistency – Seeming to appear true one’s decisions, beliefs, and/or actions
    • In one study, when six- or 12-person experimental juries were deciding on a close case, hung juries were significantly more frequent if the jurors had to express their opinions with a visible show of hands rather than by secret ballot. Once jurors had stated their initial views publicly, they were reluctant to allow themselves to change publicly. Should you ever find yourself the foreperson of a jury under these conditions, you could reduce the risk of a hung jury by choosing a secret rather than public balloting method.
  • Unity – The power of social identities to drive people’s behavior
    • In the United States, citizens agreed to participate in a survey to a greater extent if it emanated from a home-state university. Amazon product buyers were more likely to follow the recommendation of a reviewer who lived in the same state. People greatly overestimate the role of their home states in U.S. history. Readers of a news story about a military fatality in Afghanistan became more opposed to the war there upon learning the fallen soldier was from their own state.

The most fascinating take-away is that the more “rational” aspects such as features, benefits, quality, value, or pricing is not a major direct decision making factor. Although, it is arguable that quality, features, etc. can fall under Like; they prefer substance over style, etc.

Listen to the whole episode here:

Another effective marketing strategy is using the MAYA approach, “Most Advanced Yet Acceptable” also incorporates some of the levers of influence namely Liking and Commitment & Consistency. Read about MAYA here.

How to Sell Something Old and Something New

Believe in Yourself

There is a lot you can achieve if you believe in yourself.

New Product Development Flowchart

New product development is a complex and variable process. This flowchart provides a general macro view of the new product development process. Each decision and process step is an entire field of study onto itself with significant details and nuances beyond the scope of this flowchart. Please note, every decision and process step may require significant costs and expenses.

A general macro flowchart of the new product development process

This process is applicable to many products. For example, in 1920, candy store owner Christian Kent Nelson, invented an ice cream brick with chocolate coating. Because he did not have the know-how or means to mass produce his invention, he secured an agreement with local chocolate producer Russell C. Stover, of Russell Stover Candies, to mass-produce them under the new trademarked name “Eskimo Pie”. The dessert was rebranded to Edy’s Pie in 2021, because the original name contained a derogatory term.

Truth

An Instagram post from one of our clients.

The path to success is rarely linear or the same as for others.

Pandemic led to U.S. housing boom, reduced credit card debt, New York Fed says

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Last month, the Federal Reserve Bank of New York released their quarterly report on Household Debt and Credit for the fourth quarter of 2020.

Although the ravages of the pandemic are still massive and widespread, there were some glimmers of a silver lining. Some takeaways being:

  • The coronavirus pandemic changed the way U.S. consumers use credit, as lower interest rates spurred a boom in home buying and refinancing and virus-related shutdowns led to a drop in credit card use and an increase in paying off debt, according to a report released on Wednesday by the New York Federal Reserve.
  • Home buying and refinancing took off last year after the Federal Reserve slashed its key overnight interest rate to near zero to fight the economic fallout from the pandemic, leading to lower mortgage rates. A massive shift to working and learning from home also bolstered the housing market, as some families searched for properties with more living space.
  • Credit card balances increased by $12 billion in the fourth quarter but balances were still $108 billion lower from a year earlier – the largest yearly decline since the report was launched in 1999.
  • In total, all household debt not related to housing – including credit card debt, auto loans, student loans, and other debts – increased by $37 billion during the fourth quarter but was still below pre-pandemic levels seen at the end of 2019.

Read the full report here.

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