Updated presentation to students at Northeastern. By Ken Berkun

1. How to Entrepreneur
Ken Berkun, President and Founder
Labels That Talk, Ltd.
May 14, 2021
https://www.slideshare.net/kenberkun/how-to-entrepreneur

2. Agenda
• Introduction
• A little bit about me
• My current company
• So you want to be a founder
• Founding a company
• Funding
• Various details
• Some lessons learned
• Q/A

3. Who am I?
• I guess I’ve always been entrepreneurial
• Shoveling Walks and Mowing Grass
• 1977 – BS “Human Machine Interaction”, UC Davis
• Various Jobs
• North West Computer Society
• QSI 1
• QSI 2
• Digital Equipment Corporation (DEC) 1984 – 2007
• Equator
• Singingfish
• Labels That Talk

4. Soundpaper
If Paper Could Talk,
What Would It Say?

5. Soundpaper Emotions

6. Soundpaper Memories

7. Soundpaper Personalization
• Photos
• Photobooks
• Calendars
• Greeting cards
• Invitations
• Announcements
• Stationary
• Postcards
• Photo gifts

8. Soundpaper
Everything is stored in the barcode itself.
Soundpaper
Capabilities
Authentication/
Digital Signature
Tamper-evident barcode
Time stamp
A single barcode that does it all.
Embedded URL for
Web delivered content
Geocoded location
Audio Message
HTML5 – Including coupons, animations, graphics, photos and text
Serialization Encryption

9. Unique, Practical, High Margin
• You’d think a product like that would be a
slam dunk
• But, for us, not so much
• Focus is everything
• But maybe we focused on the wrong
thing
• Or maybe we were just incompetent
• Back to scrapbooking
• (Soundpaper.com is safe, certificate issue
is being resolved)

10. So, You Want to be a Founder
• Where to start?
• Idea
• Team
• Funding
• Prototype
• Minimum Viable Product
• First Customers
• More Funding
• More Customers
• Still More Funding
• Dilution
• Wild Success
When you are the boss, you can’t blame anyone else.

11. You Have To Be Insane To Do A Startup
• 90 odd percent of all start ups fail
• You have to believe that yours will be different
• But it won’t be
Insanity. n. mental illness of such a severe nature that a
person cannot distinguish fantasy from reality, cannot
conduct her/his affairs due to psychosis, or is subject to
uncontrollable impulsive behavior. (law.com)

12. Example from Andreessen Horowitz
https://corporatefinanceinstitute.com/resources/knowledge/other/how-vcs-look-at-startups-and-founders/
Note: Not to scale. Why?
Of the 200 per that are funded by top VC’s, 15 of those startups
will generate nearly all of the economic return.

13. How to Do Everything Wrong
Ken Berkun

14. Don’t Be Trendy

15. Invent a Really Bizarre Product

16. Build Hardware

17. Work On Something You Know Nothing About

18. Hire a Famous Engineer

19. Fire Your Famous Engineer
Accidently copy him on an email about how bad he was.

20. Try to Raise Money at the Worst Time
Recession

21. As far from money as possible
Where
We Are
Where the
money is

22. Try to Raise Money From VCs

23. Try to Raise Money from Angels
How Angels See Themselves
How we see Angels

24. Don’t Raise Money At All

25. Raise Money in a Really Really Weird
Way

26. Focus on the Product

27. Focus on Raising Money

28. Focus on the Product

29. Focus on Raising Money
Repeat until despair sets in.

30. Spend a Fortune on Patents
Get nothing for it.

31. Compete Against Free
Free
Not Free

32. Never Say Die

33. Failure is not an option – it’s a requirement
• No one likes failure
• Everyone tells you that failure is OK so
long as you pick up the pieces and go
on to the next project
• That doesn’t make it fun
• My biggest mistake with LTT was not
accepting failure after I spent the first
half million
• I’ve failed a lot more than I’ve
succeeded

34. What is the difference between me and the
people who start Unicorns
• The Gates/Zucks/Brin/Job’s has a level of drive that I don’t have
• They are way smarter than me
• Notice where they went to school and their connections
• Bill Gate’s Mom
• A certain kind of charisma
• I got lucky once – that doesn’t mean I can do it again
• Doing a bad job with my current company
But I wouldn’t be doing anything else

36. Are you Founder Material?
• Entrepreneurially oriented
• Driven
• Communicative and well connected
• Charismatic
• Friendly and outgoing
• Technical
• Optional, but it helps
• Dropped out of college
• not really recommended
• and not really true
• Focused
• Generally unpleasant to be around
https://www.businessinsider.com/mark-zuckerberg-steve-
jobs-tech-executives-never-graduated-college-dropouts-
2019-5
https://hbr.org/2015/01/the-myth-of-the-tech-whiz-who-
quits-college-to-start-a-company
The top 0.1% of startups were
started by founders over 45.
https://hbr.org/2018/07/research-the-average-age-of-a-
successful-startup-founder-is-45

37. If you have questions like these, then you are not ready.
Things we
hear all the
time
• I have this great idea, all I need is funding and a
technical founder
• I have this great idea, but I can’t tell you about it
• How do I patent something?
• How do I find out if something is already patented
• This is something that’s never been done before
• Oh yes it has
• There is no competition
• Oh yes there is
• Even if it’s just the status quo

38. Where to get ideas?
• Ideas are easy
• https://twitter.com/BoredElonMusk
• Implementation is hard
• Best to stay with something you know
You don’t know what you don’t know
about things you don’t know.

39. So, you have a good idea?
• Google is your friend – has it been
done before?
• If not, why not?
• If yes, then what makes you special?
• That Moat Thing
• Can you present it in 30 seconds?
• Once again, do you know anything
about the field?
• When you tell people about it - do
they understand it and like it?
• What is your secret sauce – what
sets you apart?

40. Market
Feedback
• Forget about secrecy. You absolutely must
have market feedback to see if anyone cares
about your idea besides you
• That’s what keeps us going at LTT
• Not getting the feedback is making things
very difficult for a friend I’m helping
• The more you get the better – and if you can
do so in a formal way you can use it to help
persuade funders
• Focus groups
• Surveys
• Ad response

41. Just for fun:
208 Of The Biggest, Costliest Startup Failures Of All Time
https://www.cbinsights.com/research/biggest-startup-
failures/
Passion is
not enough
• You have to have a foot (or two) in reality
• Far more important is a product or service
that people want
• (This is what keeps me going with
Soundpaper)
• Realistic viewpoint of your competency and
the market

42. ALL IN
• Startups are basically black holes. They swallow up everything that
comes with their gravitational field. They will consume all of your
time, money, energy and still have room for more. As with black
holes, this makes them fascinating, irresistible, and, frankly, deadly.
• Founders have the hubris to believe that they can do it all. Secret —
we’re not nearly as capable as we like to convince ourselves. That
hubris just mean that we can disrupt massive giants, it means that we
believe we can have everything, all at the same time. The even bigger
joke — we’re sure that our experience of those things is unchanged.
https://medium.com/unfounded/the-four-fs-a-system-for-surviving-startups-and-life-53cb4fd64974

43. Company Types
• Lifestyle
• Not Fundable
• Software Companies
• Most Fundable
• Hardware Companies
• Things are better than they were
• Kickstarter
• Other Techs
• Health Tech
• Bio Tech
• Health Care
• Non-Tech companies
• Tougher to fund
• What is fundable?
• Fast growth
• Big Exit
• Lot’s of connections
• Personal Charisma
• DRIVE DRIVE DRIVE
B2B, B2C, Enterprise, Consumer, Retail, etc.

44. How to Organize the Company
• Company Types
• LLC
• Chapter S
• Chapter C
• B Corp
• Non-Profit
• Partnerships
• Where?
• Delaware is always good
• California is always bad
• WA State is generally good for
software
• (No surprise!)
• States with incentives
• Midwest and southern states
https://businessfacilities.com/state-by-state-incentives-guide/

45. Where is the right place?
• Never where you are
• You’ll always hear “this isn’t silicon
valley”
• OK, but if you move there, you’ll be
a small fish in a large pond
• Try doing a startup in Hawaii. Now
that’s CRAZY.
It absolutely matters.
It absolutely does not matter.

46. When is the
right time?
• Never
• There’s always something wrong:
• Inflation
• Deflation
• Too many founders
• Too few founders
• Money is tight
• Money is loose
• There’s a pandemic
• Whatev’s - if you have everything else in
place don’t let the timing stop you.
It absolutely matters.
It absolutely does not matter.
https://www.statista.com/chart/22134/coronavirus-impact-on-startups/
Google: “Worst time to start a company”

47. How many founders?
• 1 or 2
• Singingfish example
• More than that it gets hard to agree on things
• If there is only 1 you must have a strong team in place
• VCs are not investing in the company – they are investing in YOU!
• You can have someone that is effectively a founder but doesn’t hold
that title
• It can get ugly
• There are a zillion issues about ownership
• You must have a lawyer

48. The Team
• The Team counts for a LOT
• Experience
• Depth
• Breadth
• CEO
• But it’s OK to say that you are looking for the right CEO
• CTO
• MUST have experience in the field
• Sales/Marketing
• MUST have experience in the field
• Really good lawyer
• Doesn’t have to be an official team member, but you’ll need one
• Everything else is optional

49. Names are real real hard
• Try not to get sucked into it, you can spend forever on it
• How Singingfish got its name
• But pay attention to the obvious:
• Existing copyrights
• Availability of domain names
• Search engine optimization (SEO)
• Made up words are the easiest to copyright and trademark

50. Do you need a demo
• It sure helps
• Given limited resources do you work on a demo or on the actual
product?
• Yes
• No
• There is no right answer
• I lean towards demos
• I still have a “smoke and mirrors” button hidden in my so that I can be
sure the demo works perfectly
Smoke and mirrors is fine – so long as you’re
honest about it.

51. Founder Roles
• A founder is all in
• This is all you are doing
• You have no other job
• You have no other life
• You are living on savings or couch surfing
• What it means to be “all in”
• Start Up Haven requirements are good list of what it takes to be a
founder:
• https://startuphaven.com/who-can-
join/#:~:text=In%20order%20for%20Startup%20Haven,recovering%20from%2
0such%20an%20experience.

52. More Founder Roles
• What do I do each day?
• Damned if I know, but I sure know I’m busy!
• If there is only one job it is to make sure there is money in the bank.
• You are your number 1 sales rep.
• No one can sell like you
• No one knows the company like you
• No one else has your passion (I hate that word)
• It’s all phone calls, emails and meetings
• And keeping the rest of the team motivated

53. Funding
• Funding Sources
• Five Fs
• Accelerators
• Angels
• Qualified Investors
• VCs
• Self-Funding
• Where to get funding?
• I used the money I was going to do a bathroom remodel with
• Equity Crowd Funding
• Just Don’t
• Different from Kickstarting
Early Stage Funding Presentation:
https://www.slideshare.net/kenberkun/early-stage-funding-
62789265?qid=d9562506-383d-4b18-af73-
551b2ae954fc&v=&b=&from_search=24

54. Types of Funding
• Convertible Debt
• Preferred Shares
• SAFE Notes
• Common Shares
Valuation
• Percent of company given up
• For how much?
• What is typical?
• What is fair?
• Grants
• SBIR
• STTR
• Research grants
• Translational grants
• Licensing
• Royalty Financing
• Tax Credits
• Loans
Non-dilutive Funding

55. Company Stages
• Concept or Idea
• Seed Stage
• Pre-Revenue
• Series A
• Growth Stage; Post Series A (B, C, D…)
• Mezzanine
• Exit
• Sale or IPO
A Miracle
Happens Here

56. How to get started when you have nothing
• The first million is the hardest
• Build on what you know
• DO NOT GO INTO A NEW FIELD
• Stick with something you know
• Tap your friends and family
• Very small team of only critical people
• Think small
• You can go bigger next time
• You are NOT Mark Zuckerberg
• Accelerators/Incubators

57. Starting From Nothing
• Angels want the traction that VCs used to require
• VCs want to see strong cash flow and hockey stick
growth
• Don’t get sucked into side jobs like consulting
• They bring in money but prevent you from doing work
on the main project
• There are some tricks:
• Create a landing page and see how much attention it
tracks
• Start selling a product you don’t have and if there is
traction then develop it
• Kickstarter
• Crowdfunding (just don’t!)
https://searchcustomerexperience.techtarget.com/definition/hockey-stick-growth

58. But It Can Be Done
“Invisible unicorns: 35 big companies that started with little or no money”
https://techcrunch.com/2017/07/01/invisible-unicorns-35-big-companies-that-started-with-little-or-no-money/
Smart Money vs. Dumb Money
• “They” say smart money is best
• Maybe
• Dumb money gives you a lot of freedom
• Smart money provides connections
• Are you smart enough to take advantage of the smart money?

59. Problems With Today’s Funding Environment
• Angels want the level of
traction that VCs used want
• VC want you to be successful
already
• Small deals are harder to fund
• More money is going into
second rounds to keep the
first-round companies alive
• More Big Rounds (Go big or go
home.)
• On the other hand – There is a
LOT of money out there!
Problems With Today’s Funding Environment
https://bothsidesofthetable.com/a-deep-dive-into-what-has-really-changed-in-venture-capital-
f5d225f7f8

60. But VCs run in packs
• So you might want to pick something trendy
• If you know something about it
• Singingfish was not our first idea, but it was more trendy than the
other ideas we had
https://nvca.org/nvca-2020-yearbook-10-trends-to-watch-for-the-start-of-a-new-decade/
Today’s hot areas (in tech):
• Blockchain
• NFT
• AI
• Cyber security

61. The NDA
• Funders will not sign NDAs. Period.
• If your idea is so simple that they can take it from you in one meeting,
well, it’s probably not that great an idea
• Employees and contractors should have contracts which include a
reasonable NDA
• And this includes you – the founder!
• The real reason for NDAs is that they can protect you when/if you file
a patent as it can delay the start of the clock
• You should use a lawyer for this

62. Accelerators and Incubators
• The good
• Cash in hand
• Lots of connections
• Surrounded by other brilliant idiots
• The bad
• They take a stunning percentage of your company
• 7 to 10% for just $30K to $50K (averages, huge variability)
• The ugly
• Often those investments have strings or are paid as “in-kind services”
• This is seriously bad
• They can demand even more equity for advice from the most connected
mentors

63. Business plans
• You have a plan so that when things don’t go to plan you know about it
• Business plans are much less formal than in the past
• They are for you, not for your funders (usually)
• At Singingfish we had a plan, but...
• Business plan presentation:
• https://www.slideshare.net/kenberkun/business-plans-13598877
“Zero percent of companies perform to their
business plans”
Gordon Bell

64. Legalities and Accounting
• Always do things right
• Do not take legal or accounting shortcuts
• Required documents
• Business licenses
• Founding documents
• Employee contracts (including yours)
• SEC filings
• Cap Table
• Separate bank account
• There are lots of issues around who is an employee and who not
• You will spend money on lawyers
• It’s painful but you’ll be sorry if you don’t

65. Patents
• Patents are a very expensive hobby
• Do they make sense?
• There are really only two good reasons for a start up to have patents:
1. Investors like to see patents (whether that makes sense or not)
2. If you do get sued for patent infringement you can use your own patent
portfolio for horse trading
• Provisional patents are great, but that year goes by very quickly.
• Trade secrets do have protection under the law (if you are careful)
Forms of Protection:
• Patents
• Copyright
• Trademarks
• Trade Secrets

66. I cannot emphasize enough:
You will be doing a lot of public speaking and presenting.
Presentations
• Types of presentations
• Elevator Pitch
• 5 Minute funding pitch
• 20 Minute funding pitch
• 1 hour in depth
• Types of audiences
• I modify every presentation for each pitch
• Read your audience they are all different
• Perfecting the Pitch on Slideshare:
• https://www.slideshare.net/kenberkun/perfecting-the-pitch-with-note-slides
Never say Basically

67. Honesty
• Always be honest
• You can always say “I don’t know, I’ll get back to you”
• Be honest to:
• Yourself
• Your team
• Your funders
• The public
• One reason we didn’t have pissed off employees at Singingfish was
we kept our employees informed

68. Sales
• Who is your best sales rep?
• You are
• If you don’t like sales you shouldn’t do a start up
• Can you sell something that doesn’t exist?
• Yes, but it’s not easy

69. Marketing
• Types of marketing
• Marketing communications
• Research
• Planning

70. Term sheets
• Beyond the subject of this talk
• But be aware of all the ways VCs can screw you
"95%+ of non-founding employees don't know
shit about equity," Zaharias says.
"Investors, founders and the law firms they
work with systematically & ruthlessly exploit
startup equity information asymmetry to their
gain and employees' pain.“
Chris Zaharias
https://www.businessinsider.com/this-22-year-veteran-of-startups-says-employees-are-getting-screwed-by-vcs-and-ceos-2014-3

71. Dilution
• By the time you are done you may own a tiny percentage of your own
company
• But a small percentage of a success is more than all of a failure.
• Every time you sell a piece of your company you own less of it
• Things you accomplish along the way make the company more
valuable
• Or less so
• “Down round”
• Company V Example
• Founder shares: 4%
Nothing beats cash in the bank.

72. The Exit
The Good:
• Sell to another company – Most common by far
• Go Public
• SPAC
• Direct Listing
• Reverse Merger
• IPO
The Bad
• Bankruptcy
• Orderly shutdown
The Ugly
• Everybody sues everyone else
• Singingfish Example
https://techcrunch.com/2018/07/31/what-every-startup-founder-should-know-about-exits/
https://www.statista.com/statistics/885893/global-startup-age-acquisition/

73. Who Gets Rich?
1. Most likely: No One
2. The most recent Investors
• Company E example
3. Perhaps the founders
4. Maybe the earliest employees
5. Everyone else
• Think of it as a nice Year End Bonus
• Or maybe a lottery ticket (and we know how bad those are!)
You must understand cap
tables, valuations and risks.

74. Things We Did Wrong at Singingfish
• Hired a fixer
• Focus!
• Recognized that we were in a bubble and sold out at the right time.
Things We Did Right at Singingfish
• Everything else
• Too many founders
• Too much in-fighting
• Lousy sales (and marketing)
• Indecisive president

75. Things We I Did Wrong at LTT
• A lot of positive feedback on the product
• Raising Angel Money
• Convertible Debt
• Common stock
• Good but not great advisors
• No Board
Things We Did Right at LTT
• Spending money on the wrong things
• Good but not great advisors
• Raising Angel Money
• Convertible Debt Bad (as it turns out)
• No Board
• Founder not spending enough time on sales 

76. Where to Get Help
• Meetups
• Universities
• Startup groups (like startup haven)
• Online classes
• Watch out for organizations that want your money
• There are plenty of free or very low cost groups
• Angel Groups
• Local
• Angel List
• K4, however, is one to stay away from (my humble experienced opinion)
Founder’s dilemma: Who to listen to?

77. Startup Employee
• Trade off: Equity or Pay?
• What is the equity really worth?
• What can you learn?
• How can you grow?
• What will this prepare you for next?
• How will deal with their failure?
• As an employee you will not get rich.
• Might learn something, though
You must understand cap
tables, valuations and risks.

78. Thank you.