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Dane Madsen 35 years of looking for the perfect business.

Seattle, WA

Founder YellowPages.com, 20 year recovering financial drone, technology CEO/operator, business strategist including startup, shut down, and turn around.

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Business Strategy

Dane Madsen • Seattle, WA
Created 8 years ago in Sales & Marketing / Growth Strategy

Founded and led multiple organizations taking innovation into spaces dominated by incumbents. Successful took two companies to China in the most difficult of spaces (tech and water), managed IP development, go to market, Branding, and execution.

Dane Madsen Seattle, WA

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Dane Madsen

Seattle, WA

Founder YellowPages.com, 20 year recovering financial drone, technology CEO/operator, business strategist including startup, shut down, and turn around.

$5.83/min

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Business Strategy

Founded and led multiple organizations taking innovation into spaces dominated by incumbents. Successful took two companies to China in the most difficult of spaces (tech and water), managed IP development, go to market, Branding, and execution.

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Dane Madsen answered

When sending out a teaser for seed money, if we manage the process ourselves instead of using an investment banker, will we be taken seriously?

In agreement with others, you should not get an IB involved at this stage. Seed investors (or super angels - since you did not say how much you are raising) are sensitive to fees being spent from the proceeds. They want everything possible going into the business, not 3rd party pockets.

However, you should also think about the process differently. You need to focus your presentation on getting meetings, not the investment first. You will learn more in the meetings that will improve your story and fundability.

As others have mentioned, you need to have market validation that your product is interesting. Smart investors (versus the legendary "dumb money") that you seek to assist the company with more than just capital will want to see team, technology, and traction.

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Funding

Raising Venture Capital

angel investing

Dane Madsen answered

How can I get an NDA for my startup?

I am a consultant that has has been involved with over 35 startups as an angel investor, VC, founder, CEO, Director, advisor, and core consulting in strategy, product/market fit, and corporate governance.

Needing an NDA at the initial phase depends on who you want to speak with about the project. Most people will not sign an NDA until they have a broad perspective about the project so they do not lose optionality if they do not engage with you. You should reserve the most sensitive areas of the idea until they commit to learning more at which time you can ask them to sign an NDA to move forward. Discussing and idea that may or may not be viable usually will not motivate a person to sign an NDA. I common fear with new startups is that a person will take their idea and execute without you. That may happen occasionally, I have not seen that occur in over 20 years looking at hundreds of startups. Ideas are easy, but change with knowledge and often evolve, so in the oft chance you do discuss with a person by the time you launch, the idea has changes significantly to where the NDA will not be applicable.

Having an NDA with team members is expected. A consultant will sign an NDA at the point they know if the project fits their skills and availability. An investor will usually never sign an NDA until they invest, then only as part of the closing documents. Potential customers will not sign NDAs.

There are many free resources providing templates. As suggested, you should acquire one, work through the language to cut down inapplicable material or add specific material, and perhaps then go to an attorney with corporate experience for a final review.

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Start-ups

Starting Companies

Dane Madsen answered

How can I get started on building a directory website?

Before you start you have to have a solid local data source. Users demand accurate data including all the fields normally important in any directory including base data, extended data such as hours, types of payments, specialties, accurate categorization, and more. You will need to develop processes to clean and normalize the data, and maintain the add/deletes/updates. You will need update process allowing businesses to self-fulfill, but also need verification processes to limit changes to data by the owner of that data. You may be able to use a white label version from a national provider, yet they often require minimum revenues and customization fees. Directory is always about accuracy.

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Business Development

Dane Madsen answered

How does my startup hire an affordable marketing expert?

I always hire a marketer (even freelance or part time) first, not last. A common failure in businesses is to think marketing is advertising. Marketing is many things, including if you even have a space you should bother trying to move into. Advertising is about telling the market what you do and why they should care, but a marketer will write that script.

You will get nothing for $10 an hour that will motivate anyone, including yourself. You should save this money. If your budget for the "pilot" is so low, your budget for the airplane will be nothing. As mentioned above, marketing is an investment that will drive your success or failure. Depending on your location you may find it lower cost (Boise versus Manhattan) but cost should not be your driver, it should be quality of output to reach your audience. As an interim thought, however, given you are non-profit, you may reach out to local universities for interns in marketing that will experiment with you as you experiment with them. Because you are non-profit, they may get some credits for the effort but you need to be aware they will produce based on their experience not that of a high quality "expert" marketer.

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Social Media Marketing

Marketing Strategy

Digital Marketing

Dane Madsen answered

How to leave a company and get what you deserve?

I am involved in a similar action currently. I am negotiating a severance package (actually litigating it because the investors simply chose to not honor it).

Relationships change all the time. Divorce in business is common. First issue is to make this simply a business deal. The disagreement about the way the business has been run and, you will be aware, "borderline illegal" is 1) borderline, 2) difficult to prove, and 3) not relevant to the discussion since you just want to move on while retaining your ownership.

Key here is to keep your emotions in check and to manage the emotions of your co founder. Nobody wants a business to fall apart so make that clear. You wish them total success and cheer for them in the future.

Yes, 6 months is reasonable. They may want (you should check your corporate documents) to buy your shares back. If so, there should be a process there. You will need to have confidentiality agreements and non-competes for a period of 12 to 24 months, or as long as you are a significant shareholder.

The best advice is to tell your partner that you have come to this "difficult" decision, do not make it about him or his processes, and say "this is what I would like to do". Do not threaten or belittle anything and it goes faster, farther, and at lower cost.

You can email me at Dane@DaneMadsen.com or call me in Seattle at 206.900.5852 and I can share some thoughts.

Dane

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Business Strategy

Legal Advice

Advice

Dane Madsen answered

I want to establish a perks program for my members by offering them discounts from travel partners like airlines, hotels, etc.

This is vague. You do not detail what your members do, what revenue you/they generate, and why they would be interesting to a travel partner. If you are a not-for-profit you must have a compelling value to the travel partner for your membership (since you are selling access). Recall that the NRA was only getting a limited 5% discount off full coach tickets for members going to the national conference from the airline companies. Arguably this is about as high value (set aside the subject matter) and loyal membership in the USA. Further "published rates" are so off the rate card, they are rarely used. I have an AmEx Platinum that gives me a "free companion ticket" every time I book a first-class ticket through their travel desk. First, I do not fly first unless I am upgraded by my carrier, and 2 the cost is usually about 2x what the direct cost is. Giving me a discount on something I would not buy is not a member perk.

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Product Development

Product Management

Supply Chain Optimization

Dane Madsen answered

Is an idea worth 5% of an 11 billion dollar company?

Ideas have little value. Technology, traction, and team have value. Look at many of the high-value applications (Instagram, WhatsApp, etc.) and see exactly how far they had to get prior to being interesting to Facebook. Making an assumption you know what the execution plan for an $11 B company may be is a fast way to being ignored. Design the system, file for patents (but do not be delusional about the time, cost, and actual grant - these are years in process and cost hundreds of thousands in many cases - and often get gutted or rejected). Even then, 5% (or even 1%) of a company that has revenues of $11 B is simply a non starter. Patents will not protect you - there are many ways around that, particularly with that kind of capital.

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Increased Profitability

Dane Madsen answered

What type of business can we start with our skill sets?

I have 35+ startups in my background in multiple industries and multiple roles.

There is good advice from others on finding a real problem you inherently know and build a service you and others would find valuable to use. If you do not have this idea (not one suggested by us), it could be the fish and a bicycle cliche, a solution seeking a problem to solve.

What you have not made clear is why you all want to start a business *together*. If it is only that you are three females in a tech-bro world where you all have frustrations where you all (individually or collectively) work, that is not a strong platform for success. Is it that you deeply like each other? Is it that you deeply trust each other? Do you share a common bond or interest in a specific subject (not what you do professionally, but something human)? Do you have other bonds than skills (hint, you all have the insufficient/wrong skills - as all of us did, so you will need more) and gender?

In the 3 Ts - Team, Technology, and Traction, the reason you all want to work together is crucial since it is why you will not fall apart.

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Entrepreneurship

Dane Madsen answered

How to structure a sales team and process of SaaS ?

If you have no marketing strategy, hiring a sales force is not your critical need. I have watched several companies fail because they did not have product/market fit (a marketing function, not a sales function) and hiring a VP of Sales who wants a team of sales people who have no idea who they need to call, who really wants the product, and who does not understand the market needs. Hint: If you think you have product/market fit at this stage, you are wrong. If you are not wrong, you are the very first company ever to hit it at this stage.

There are four stages of sales:

1) Founder sales. If founders are not in the market talking to, and trying to sell to, who you *think* is your target market, then you will not understand the market. You and your co-founders must be talking to the people you think might like your product. You will not achieve product/market fit without this. This is also where you grasp the CAC/LTV that fuels your forecasting. Hint: It is way more expensive and competitive than you thought building code.
2) "Explorer" sales: Once the Founders have sold product enough times and think they have product/market fit (you will still be wrong) and must retool the technology, build a new tech strategy, and get the next version in production, you then hire one or two "explorers" who take that lead but with the express focus of validating the product/market fit, not only revenues. You must listen to their feedback closely.
3) Strategic Sales: This is a small team that 1) understands the market, and 2) selling cycles in that market who can develop the selling process. These are high-talent, intuitive sales people who know how to listen, not talk. They will build the process.
4) Infantry sales: This is once you have the product/market fit nailed, and a developed, replicable process the strategic sales people believe can be scaled.

You have a ton of work in front of you before you hire a sales team. Selling process is not your biggest concern at this point.

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SaaS Sales

Marketing Strategy

Sales Funnel Optimization

Dane Madsen answered

How can I structure a contract to bring on a co-founder to help my business when I can't pay them?

I am a corporate strategy consultant with a focus on operations, corporate governance, and have been a direct or indirect investor (as an angel and VC), operator, founder, officer, Board member, advisor or consultant to 30+ startups. Cap tables and the impact over time are a particular area.

The question that first must be asked is "why do you need a co-founder?".

If you are seeking a true partner, a person who will be in the trench with you that has skills you do not have, and will keep you sane when you are not keeping them sane. it is one approach. Every startup has bleak times when this emotional, albeit business and mission-based, period occurs.

If this is for optics alone, meant to influence investors who see you need a team to make an investment, the approach is very different, but with similar implications.

If this is just as an incentive to get them to work for "free" while the product is developed and funding is in doubt, it is another approach.

A true partner/co-founder should have a stake in the firm that will reflect what the expectations will be from both of you. You may have cultured this firm to its current level, yet you need more hands and thinking to get it further. In that version, while you may retain the controlling interest, it is difficult for a co-founder to put in 80 hour weeks without a meaningful outcome for them. Should you hold 95% and they have 5%, the economic imbalance will affect the dynamic.

If it is for optics, not only does the economic imbalance apply, but investors know it and will act accordingly. They do not want a "decorative" co-founder; they want to know there is someone else there who can lead the company when the times get rough, as much for your sanity as for business reasons. If they see a 95/5 split, they treat that co-founder as an employee, not a co-founder.

If it is for economic reasons alone, you must first deduce the input/outcome expectation of the person. Assume a full partner is a 50/50 split (e.g. the two of you had teamed up at the beginning) that implies 80 hour weeks, credit card financing, and zero early compensation, you can model the equity based on the amount of time and for what period the person can commit. Commit is the key word. For example, If they can commit to 20% of a full, all-in role, you could set 10% as the target (20% of 50%).

Finally, LLCs are easy but messy for investors. You can do it, but you need a compelling business or they will force you to convert to a C-Corp (interim you can elect Sub S election). You can do multiple classes of shares and an option-like class, but this is a complexity that, unless you have a CFO and/or a crack lawyer, is more complexity that you need while building a business.

Hope this helps.

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Contract Management

Early-stage Startups

Founder

Dane Madsen answered

How do I evaluate how much I should be paying my company's accountant?

I am a corporate strategy consultant with 35 startups in my background as an angel and professional investor,m Founder, CEO, Director, advisor, or consultant.

The difficulty in answering this is lack of context and framing. If you were a startup with little revenue and significant losses that had paid € 1000 and now you are more mature with revenues at break even and the firm is asking € 3000, then you have one set of conditions. If on the other hand that cost was € 10,000 going to € 30,000 it is an entirely different set of facts.

In the US, we often have large accounting firms work at reduced rates with startups they like with the understanding that the rates will rise as the company thrives. They do not require anything other than a verbal agreement, i.e. they cannot and will not force you to stay if you choose not.

Finally, that you do your own bookkeeping is not relevant. It is expected that you would do so by all accounting firms. However, they do have to review all of that bookkeeping to summarize the financials because they will be at legal and brand risk should something implode; your bookkeeper will not be.

Hope that helps.

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Accounting

Outsourcing

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Member since December 2016