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Books on Business: Book provides excellent advice for young companies

Sunday, November 18, 2001

By Carnegie Library Business Librarians

"Every Business Needs an Angel. Getting the Money You Need to Make Your Business Grow" by John May and Cal Simmons. Crown Business, 2001.

"Every Business Needs an Angel" is a bible for young companies in need of early stage financing. An "angel" is a type of venture capitalist interested in investing $100,000 to $1 million in promising young companies with high growth prospects. Accredited by the SEC, angels have a liquid net worth exceeding $1 million dollars and an annual income of more than $200,000. They prefer to back a company after a product or service is fully operational, when they might agree to fund marketing or another aspect of your existing business to help it grow. As angels themselves, authors May and Simmons offer advice on where to find other angels for seed money and how best to present your company for funding.

The authors are founders of the Dinner Club, an angel investor club in Virginia, and take you inside one of their dinner meetings. Executive summaries on many new companies are sent to angel clubs, but only a few are selected for presentation at these monthly meetings. The authors furnish personal anecdotes from their experience in dealing with young companies at these presentations. They point out issues to consider such as the nondisclosure agreement. To protect its idea, a start-up may require that an angel club sign a nondisclosure agreement before the presentation is made. The Dinner Club will not sign these agreements because they can't guarantee nondisclosure by all the members. One young CEO invited to present his pitch asked to see the membership list of the Dinner Club. He noticed that a member was in a similar business and withdrew from the process of speaking to this particular group of angel investors. It's all part of the dance, and Every Business Needs An Angel is full of similar tips and cautions.

Angels like a good story accompanied by strong evidence of talented management and skill. They want to see a team and product already in place. Good vision, only a prototype of a promising product and the absence of good management will not garner angel money. In a pitch to angels, one must be totally candid about competitors' strengths and weaknesses. If you say there is no competition, angels may assume there is no market for the product or that you are clueless. Instead you need to focus on your unique advantage over the competition. Since they are engaged in early-stage financing, risk is always foremost in their thoughts. Angels often piggyback onto previous financing, as they seek to spread the risk and increase their comfort level. In evaluating a prospect, angels like to see third-party endorsements such as incubator programs or research grants; they don't like to dance alone. May and Simmons list all the dynamics involved during these short presentations and the follow-up questions. They stress that all start-ups should anticipate as many questions as possible and answer them before they are raised.

May and Simmons also offer valuable insights into the process of accepting funding. Learning to distinguish between cash and "warm money," for example, is essential. Warm money is characterized by the angel's willingness to share expertise, experience and important business contacts with the new venture; inexperienced angels offer "cold money" and often give bad advice, a situation to avoid. Every new company would love to have an angel, and with the advice in this book your company can be one step closer to finding one.

"Eyewitness to Wall Street: Four Hundred Years of Dreamers, Schemers, Busts and Booms" by David Colbert. Broadway Books, c2001.

"Eyewitness to Wall Street" offers a diverse collection of firsthand accounts from Wall Street's first three centuries. Editor David Colbert's informal and anecdotal approach pays off with a vibrancy that more conventional histories, those focused on a linear timeline, are sometimes missing. "Eyewitness to Wall Street" is rife with tales of thievery and heroism, stupidity and genius. Silver Thursday, Black Friday, the Saturday Night Massacre, the Nifty Fifty, the Keating Five, White Shark, the Predator's Ball -- the provocative nicknames alone reveal the extent to which the business world and the reporters who cover it revel in the drama inherent in winning, losing and sometimes stealing ungodly sums of money. Drawing from the works of dozens of writers and journalists, ranging from the 17th century to recent days, Colbert does an expert job of formulating a loose but coherent history of Wall Street, reminding us that a good editor can sometimes tell a story as well as any writer. Colbert's skilled stewardship of these tales proves that such charmed places as Wall Street don't always need historians to tell their story -- they'll tell it themselves if somebody lets them.

"The War for Talent" by Ed Michaels, Helen Handfield-Jones and Beth Axelrod. Harvard Business School Press, 2001.

How do you attract, develop, excite and retain highly talented managers? In the late 1990s McKinsey & Co. conducted studies to discover how the best companies build a strong managerial talent pool, expecting that higher-performing companies would have better human resource processes. Instead, the researchers determined that it was actually the attitude of an organization's leaders that make the difference in exceptional corporate performance. Further research launched in 2000 explored just how companies do manage leadership talent. The result is the "The War For Talent," written to educate corporate leaders on how to actually implement a strengthening of an organization's talent pool.

People used to stay in one job for a working lifetime, but the corporate downsizing of the late 1980s first broke the traditional covenant that traded job security for loyalty. In the mid-1990's, along came the surge in job opportunities and the greater knowledge of job availability through the arrival of the Internet. The old taboos against job hopping were no more. Given this new climate, the authors provide guidelines and examples for improving your company's talent pool at all levels of the organization, whether it be a CEO, division president, department head, project team leader, store manager, etc. The basis for success is that the top leadership has a "talent mind-set" -- a "deep-seated belief that having better talent at all levels is how you outperform your competitors ... the catalyst that activates the other talent-building imperatives."

This approach is not for the faint-hearted. It involves a thorough commitment to take bold actions. It means looking at current managers at all levels and making sure they share the commitment. When necessary, it means replacing people who cannot perform in consonance with this approach. It also means looking at recruiting -- new talent must be pumped in at all levels -- and at what the company has to offer the employee -- intrinsic satisfaction with work, the work environment, colleagues, etc. While compensation is important, it is far from the only factor. Once you have recruited desirable employees, you must provide opportunities for them to grow. Traditional training programs are not enough. Employees must be offered challenging experiences, mentoring, coaching and feedback.

These guidelines are supported by examples of the effects of active leadership in companies today (Synovus, hardly a household name, saw its market capitalization grow from $2.2 billion to $8 billion over four years) and by succinct comparisons of past and present ways of handling human resource issues to emphasize the authors' points.

"The War for Talent" provides a battle plan for a winning campaign that allows organizations to attract and retain talented leaders.

Also recommended are:

"The Ernst & Young Tax Saver's Guide 2002" by Margaret Milner Richardson. John Wiley & Sons, Inc., 2002.

The Rules of the Global Game: A New Look at U.S. International Economic Policy Making" by Kennth W. Dam. University of Chicago Press, 2001.

"Wall Street Secrets for Tax-Efficient Investing" by Robert N. Gordon. Bloomberg Press, 2001.

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