At an annual meeting of venture capitalists, a Morgan Stanley managing director gave five tips on how to pitch him. They're helpful for anyone making a big ask.

Get over yourself. Be nice.

That was just some of the advice venture capitalists got at the last session of the National Venture Capital Association conference in San Francisco on Wednesday.

Just as entrepreneurs have boards of directors they need to satisfy, venture capitalists have limited partners, or L.P.s. These are the managers of endowments, pension funds, and other big pools of money who give money to venture capitalists to invest.

In a panel called “Rants and Raves,” each of four L.P.s was given five minutes to say what they like the most, and what they like the least, about venture capital and its practitioners. There was plenty to like, but it was the criticisms that were the most memorable. Especially those from Jamey Sperans, a managing director with Morgan Stanley.

In his presentation, Sperans offered five things venture capitalists could do better during the fundraising process, when they're asking to manage his money. But Sperans’ comments provide excellent food for thought for anyone trying to raise money or making any kind of ask. Here are his five tips.

Don’t Lie

Sure, this sounds simple. But Sperans says he gets lied to every day. Some of the lies are doozies, while others appear to be white lies.

Sperans considers being hyper-promotional a lie. “What you ask us to do as investors is completely insane,” Sperans told the audience of venture capitalists. “We’re asked every day to give money to people we’re just getting to know for 12 to 15 years. It’s an act of lunacy. And it’s a game of trust.” Erode that trust--in any way--and it’s game over.

One Felony or Two?

Sperans said that during one negotiation, the venture capitalist said it should be the second felony, not the first, that would be cause for termination. Obviously, that negotiation ended quickly. But Sperans is making a larger point: There is information content embedded in everything you do. The way you treat your colleagues in the negotiation room, the way you treat the people on the other side of the table, the way you treat the secretary: They all matter. These are all things that tell Sperans if you’re a good person, and a trustworthy person. And as he said repeatedly, it’s all about trust.

Beware the Lake Wobegon effect

In Lake Wobegon, as envisioned by Garrison Keillor, the women are strong, the men are beautiful, and all the children are above average. Venture capitalists, he says, would also have you believe that they’re all above average. As a group, they may all be smarter than the average bear, but as an L.P., Sperans is not choosing between a venture investor and an average bear. He’s choosing between venture capitalists. And they can’t all be above average.

“By definition,” he said, “half of you are below average. As investors, very few of you are extraordinary bets. When you come to talk to people like us, who talk to people like you every day, a little humility and a little self-awareness goes a long way.”

The Great Dispersion

Average returns in venture capital are not good. Even the top 25% of venture capital funds, Sperans said, are bad as risk-adjusted bets. “I want the top decile or better,” he said. “I need the outlier event.” What does that means to the folks pitching him? “Think carefully about your business, the proposition to the entrepreneur, and what makes you guys truly extraordinary.”

Show Me Some Love

Sperans knew this one was not going to be popular. “I believe in the power of love in all things, but I believe in the power of love in business and investing,” he said. “I know you’re snickering already.” He said not many people talk about love in a commercial context, because “it feels soft or it feels like a lawsuit.”

What he’s referring to, Sperans says, is “the emotional disposition certain people have toward the work they do and the people they do it with. “ He’s sick of hearing about passion, because it’s so self-centered. Instead, in some people--both entrepreneurial teams and partnerships of venture investors, “there is a deep and abiding respect and selflessness that is really uncommon and really powerful.” He says the two groups that raised the most money from him showed business love, although he asks folks not to try to fake it. “It’s really painful if you do,” he said. He closed with a quote he attributed to William Penn: “Let’s see what love can do.”

Most successful businesses are built from a proprietary asset, not just an idea.Until that spark is in place, outside investment is a risky proposition.

The essence of building a business is creating something from nothing. But in reality, every business starts from something and results in something more ... hopefully a lot more.

Among the high-ambition business builders we talk to, we find a common misconception that good ideas by themselves attract money. Sure, there are VCs in Silicon Valley looking for the next Facebook, but in general they are placing their bets on individuals, teams, and track records, rather than simply ideas. This is a basic fundamental of finance: Why should someone invest in your risky business venture instead of placing safer bets somewhere else?

We've written previously about the lack of value in ideas (see Why Your Idea Isn't Worth Anything and Why You're Not Entitled to Your Idea). The vast majority of start-up businesses, even those that raise funding, are built from something proprietary: a reputation among a base of customers, a unique skill or expertise, a valuable asset such as a truck fleet or a desired location, or even someone's time and effort--sweat equity to build the business.

Examples are everywhere. Facebook was based on access to a captive network of Harvard students (the original users were required to have a Harvard.edu e-mail address). Apple was built when Steve Wozniak spent his time tinkering with early PCs and Steve Jobs commercialized his work. One of the companies we work with, Phin and Phebes Ice Cream, was built through the creativity and inventiveness of the founders, who created some amazing ice cream flavors. Our own business was built through the reputation and skills we built in a prior job that we leveraged with our first clients to establish an early track record.

Each of these businesses used these early sparks to ignite value. They all received capital infusions only after they had built a unique foundation for growth.

We almost always discourage businesses from raising outside capital until the conditions are perfect. A proprietary source of capital, such as your own savings or the profits from another business, should be used almost as sparingly. Most businesses can benefit from building their strategic assets first and only employing capital once a core business model can be scaled. Until then, it's important to identify your spark, and leverage it into a viable business.

What sparks did you use to start a business? When have you sourced capital to fuel the fire? Share your thoughts with us at karlandbill@avondalestrategicpartners.com.

Your future competitors will likely supply what you do--but from cheaper, off-the-radar sources.

There are backyard business terms, and there are--how shall we put it?--more elevated notions.

Any kid with a lemonade stand grasps "supply" and "demand."

But notions like "disruption" and "business model innovation" tend to be the province of the business literati. If you know what they mean, you've either been to b-school or read a few dozen articles (perhaps even in Build) on the topics.

This is why a recent post on TheNextWeb.com caught our attention. Sangeet Paul Choudary, author of the upcoming book, Platform Thinking, used the very friendly term "supply" to frame what, in our eyes, is a kick-ass theory on the often complex notion of disruption.

Choudary (@sanguit) explains that the key to Airbnb's disruption of the incumbent hospitality market--that is, hotels and inns--was its ability to challenge the incumbents' traditional source of supply. "Airbnb enables anyone with a spare room and a mattress to run their own BnB and benefit from a global market of travelers."

It would be one thing if Airbnb were the only upstart disrupting incumbents by challenging traditional supply sources. But in Choudary's eyes, Airbnb fits into part of a supply-challenging pattern, along with BuzzFeed, oDesk, and YouTube. What do these companies do differently?

Here's Choudary's list:

1. They create new sources of supply.

No one previously imagined an inventory of travel accommodations composed of urban households with spare rooms. Likewise, the idea that a global audience would find amateur videos (as is often the case on YouTube) appealing would have been scoffed at years ago.

2. These new sources of supply tend to be inferior to and less sophisticated than previously existing ones.

As the case study of Airbnb suggests, the average listing initially doesn't compare to established hotels in service quality and targets a price-conscious traveler. The same dynamic applies when comparing YouTube with traditional broadcast media.

3. Over time, the supply on these platforms evolves to compete directly with mainstream competitors.

As the platform finds greater adoption among consumers, it attracts mainstream producers as well. As a result, the production quality improves as the platform gains consumer traction, something that we've seen with both Airbnb and YouTube, as well as many other platforms.

So where does all of this leave you? If you're a mid-market exec, think about what your company supplies. Remember: Your future challengers are thinking about cheaper, off-the-radar ways to supply the same thing. What can you do about it? Two things:

1. Consider the long-term vulnerabilities in whatever it is you supply. How might a new business capitalize on these vulnerabilities?

2. Take a step in this direction, even if it's just a mental step. What can you do to remain nimble and competitive, if suddenly your customers can go elsewhere--and pay less--for what you supply? A larger company could simply make an acquisition. A mid-sized company might not have such fiscal flexibility.

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You're not in an infomercial, so stop acting that way on sales calls. Here's a better approach.

When was the last time someone shouted "buy, buy, buy!" at you and you went ahead and bought whatever it was the lunatic was trying to sell you?

That's what I thought. Force is not an effective sales tactic.

I know I won't buy anything from someone unless I trust the person. Whether you're pitching your personal brand, your vision, or a product or service, no one's going to buy without first developing a trusting relationship.

So stop selling and start helping. Here's how to start:

1. It's about them, not you.

Do you have a meeting with a potential customer tomorrow? Start then. Ditch the "what's in it for me?" mindset--like getting commission for a sale or affirmation from a key stakeholder--and meet this person with a new angle. Provide them with genuine interactions and guidance to build rapport. Who cares if he doesn't buy in right after the meeting--you've set yourself up as a potential option when he's ready.

2. Don't bullsh*t.

If your helpful attitude isn't genuine, people will see right through it. Drop your run-of-the-mill sales personality and provide your customer with the facts.

3. Do your research.

Consider yourself a solution-provider. How can you help someone if you don't truly understand her business? Take the time to familiarize yourself with what she does, and look for ideas on how you can help.

4. Ask questions.

Toss out your fears of being too inquisitive. Questioning potential customers is essential part of doing your job. Ask questions that clearly show you want to learn more about their needs and goals. For example, you may want to ask them about the specific type of audience they're attempting to reach with their service or product. "That's a great question" is the reply you should want to hear.

5. Focus on the outcome.

Broken-record salespeople tend to focus solely on what they're selling. This doesn't develop any emotional connection for the customer or client. Instead, go over end results and goals. Generating an interest in the big-picture achievement is far more enticing and also shows your interests are aligned.

6. Be direct.

Nothing is sure to throw off your potential customers more than complicated slideshows and PowerPoints. Treat whomever you're speaking with as a confidant. Toss out your fancy presentations and remove jargon and big words from the conversation. Instead, meet them with direct and informative conversation, and when necessary, concise materials highlighting the basic facts about your solutions.

7. Sell your team.

Stop selling your product and start selling the people behind it. Your potential customers are more likely to latch onto and connect with a person. Even if you're selling a house, focus your conversation on expressing how great the builder is--not just the exceptional craftsmanship.

8. Don't follow up too much.

Pressing calls and emails are certain to turn potential customers running in the opposite direction. Did you have a helpful idea for their vision or an introduction to someone useful to their success? Following up with your audience is important, but keep it casual and friendly with occasional reminders.

Drop the forceful marketing and simply start helping. You're certain to see better results.

Have you found success by providing guidance rather than selling your customers?

What will the future look like? Everything--including your own body--will be even more connected than it already is.

These concepts are still in their infancy--you might not see mass consumer versions of them for years, maybe even a decade. But that doesn't mean you should ignore them. By the time these tech developments become as commonplace as Facebook or electric cars, it might be too late.

1. Embeddable Electronics

Self-monitoring is nothing new. Gadgets like the Fitbit Flex, part of the growing so-called "quantified self" trend, show you exactly how many calories you're burning during the day. In the future, these sensors and electronics will go deeper--literally. Instead of wearing a chip around the wrist, people will embed directly in their bodies. "This will allow people to have better insight, hour to hour, and day to day, on the state of their bodies, and thus monitor their health and wellness in ways that just haven't been possible before," says Intel futurist Steve Brown. The chip could report when a heart attack could be imminent and alert emergency personnel.

2. Programmable Materials

Imagine the ability to program a plant to form into a specific shape when it grows larger. Many futurists say this kind of programmable biology--where materials can self-assemble over time according to specific triggers--is a key trend for the future, and businesses should take note.

According to Carlos Olguin, a materials analyst at Autodesk Research, this could lead to a "have" and "have not" scenario when normal biology and digital biology start to overlap, similar to how the analog and digital worlds intersect. "This will not only be about the separation between those who are able to understand and exploit information technology and those who cannot, but also between those who are able to be enhanced biologically and those who cannot or decide not to do so," he says.

3. Quantified Society

The Quantified Self is about to go macro. A few examples: Recently, a professor at Texas A&M's school of business revealed how he knew a student had not opened an e-book during a course. Research at West Point and Samford University in Alabama has shown how law enforcement in the future will track how often you speed and then issue a robotic ticket for frequent offenders.

"Big brother will know about everything you do, your habits, which Internet sites you attend, where you shop, your medical records, what you download to read or watch," says Dr. Tom Furness, a University of Washington engineering professor. "This will feed into custom algorithms to create advertising and inducements for the way you spend your money and just-in-time intervention for the things you need to know for upcoming events in your life."

4. Smart Cars

Cars will become much smarter, which will create new opportunities for start-ups. Today, Ford is already working on an initiative called MyEnergi Lifestyle where your car connects into a smart grid and knows when the charge rates are lowest. Brown says cars will be even more connected, safer, and efficient to drive. "Expect to see impacts to the insurance industry, the taxi industry, and people running body shops," he says.

5. Wearable Computers

And you thought that new Samsung smartphone was slim and tiny, eh? Computers are going to get much smaller, last even longer, and even become part of everyday items. "As we move to the year 2025 and beyond, computing power will get so small and so inexpensive, we'll approach an era where computing can go into everything around us," says Brian David Johnson, an Intel futurist. "A table, our clothing, and even our bodies can become computers."

6. Predictive Analytics

Tools like Geckoboard are invaluable. They help you understand the current state of your small business and help you react accordingly. And many IT companies like Applied Predictive Technologies are already helpings companies understand massive data sets. In the future, the field will become much more advanced. One key business opportunity for the future: Predicting people's health.

"Imagine a future version of a system that would scan the face or body of a person, then in the presence of a mole or facial asymmetry, the system could correlate this data against a number of other data sets, including 3-D scans of other people, the person's own genome, or the genome of other people," says Olguin. "Based on all this analysis the system may recommend the person talk to her healthcare professional."

Minimal founder Scott Wilson talks about Ooba Baby Furniture, which he launched when expecting his first child.

Partnering with a huge company can bring visibility and growth to your start-up. Here are five tips to help it go smoothly.

For a start-up, a name-brand client can be a game-changer. Big brands can mean big opportunities, but it’s important to enter any partnership with clear goals and an understanding of potential pitfalls.

In CrowdTwist’s earlier stages, we were able to grow through partnerships with organizations such as Pepsi, Sony, The Miami Dolphins and Nestle. Here are a few things worth keeping in mind if you find yourself with an opportunity to work with a big brand:

Sell to the stakeholders

Any large organization hosts multiple influential decision-makers, each with different priorities. The folks on the marketing team are going to want to see how your product or service will help them better understand, reach, and activate the public. Someone from technology will want to know what’s needed to integrate and support your system.

When you’re selling to a larger company, it’s critical to understand the different motivations of the various people involved. Take the time to listen and appreciate each group’s problems and then explain how your product can help. A one-size fits all approach is rarely effective in a complex sale.

Understand the implications of “big” versus “small”

Large companies have both advantages and disadvantages. The big ones have the capital and exposure to move the market, but size means bulk, and bulk means that things move slowly. As a small company, you don’t have as many resources, but you can adapt and move easily. Your flexibility is your best asset.

As our team grows, we recognize that fast decision-making and immediate action are invaluable assets. If a client makes a request that can move the needle substantially and makes sense for our business, we want to be able to execute quickly. Eliminating the need for extensive documentation and long approval processes allows us to be responsive and to stay innovative.

Ask for commitments

A big partnership can bring you major attention - if you ask for it and if the other party agrees to provide support. From sales references to press and marketing efforts, it is easier and more effective to define and outline those aspects of your professional relationship before a contract is signed and work begins. No matter what, large companies are powerful from a validation standpoint and can help your company grow substantially. That’s so much more powerful when they’re willing to speak publicly.

Be patient

Big companies typically have a complicated bureaucracy and formal approval process for even relatively minor decisions. Something that is of the utmost importance to you may be just one of many mundane tasks for the person on the other side of the table. Your client contact has to navigate a complicated web of legal, business and creative obligations, all of which takes time. Be aware of your place in the grand scheme of things and act accordingly.

Stay true to your own brand and business practices

Don’t compromise your business goals in order to satisfy one client, no matter how big. One major partnership will not automatically make your business successful, and sacrificing your core beliefs, or devoting too much effort and time to one company, can hurt your ability to move forward with other clients and prospects.

We were once trying to work with a company that had a clear idea of how they wanted our platform to function, but their desires weren’t aligned with our roadmap and beliefs. While the client was large and the business alluring, we took the longer-term view and declined the work, based on what we felt was best both for our business as well as the success of our partnership. This meant we couldn’t expand the contract as much as we’d hoped to, but it allowed our team to remain focused on our core platform and mission. Ultimately, that led to greater success with more customers.

It is okay to turn business away or push back. Ultimately your responsibility is to make sure you’re running a business that’s delivering results you can stand behind.

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You can't lead if you can't learn. And not all adults learn that well. How to change that.

Here’s a puzzle: Even though people talk about leadership all the time, and roughly eight kajillion leadership books have been published, we’re still plagued with fair to poor leaders in many, perhaps most, organizations.

Why is this? Part of the problem is that most of us, deep down, don’t really think it’s possible for an okay leader to become a great leader. We believe leadership ability is inborn. Either you have it or you don’t. Unfortunately, thinking something is impossible makes it very difficult to accomplish.

The other difficulty is that most adults aren’t very good learners. In order to become the best leader (or, actually, the best anything) you’re capable of being, you have to become a great learner. Here are the three things most required to be that kind of powerful learner:

Accurate self-awareness

To get better at something, you have to be clear about your current knowledge or capability. For example, I met someone a few months ago who thinks he’s a truly great leader, while nearly everyone around him sees him as a poor leader.

I call this kind of deeply inaccurate self-assessment The American Idol Syndrome, in honor of all those contestants who are convinced they’re going to be the next pop sensation but who can’t actually sing. Their lack of accurate self-awareness makes it nearly impossible for them to be open to feedback or learning.

In order to master anything, you have to start by being able to objectively assess your own current capability.

Curiosity

True curiosity is a very powerful thing, and it’s built into all of us. Anyone who’s ever been around a little kid can attest to that. Their endless asking of “why?” and “how come?” and “what’s that?” all arise from that impulse to investigate: curiosity. For children, curiosity is a powerful, instinctive survival mechanism. The more they understand about their environment, and the more quickly they understand it, the more likely they are to succeed as human beings. Kids’ insatiable curiosity drives them to learn to speak, eat, walk, and interact with other people remarkably quickly. It leads them to know what is dangerous and what is safe, what is delicious and what is disgusting, what is useful and what is pointless.

Unfortunately, many of us lose touch with that inborn curiosity as we become adults. We assume we understand things well enough, thank you very much. Also, our curiosity is often stifled by others. We’re taught, “mind your own business,” “don’t read ahead,” and “do what you’re told.” These are all clear societal messages to stop investigating the environment.

In order to learn to be a great leader, you have to re-connect with your innate curiosity. The best learners and the most successful leaders are continually asking curiosity-based questions such as, “How does that work?” and “Why is that happening?” and “How can I….?” and “What if…?”

Be willing to be not-good

This may be the toughest aspect of true learning. The path to being great at anything includes many, many points of being not great. Or even not good. That’s frustrating and embarrassing.

This is especially difficult for people who are smart and quick learners in general. The first time they run into something that requires real time and effort to master, where their initial efforts are clunky or incorrect, their impulse is to give up and go back to stuff they’re already good at.

Being able to keep going, and to work through incompetence, is essential to real learning of any kind. Real learning requires both being OK with our own initial ineptness and faith in our ability to get through it.
So if you want to get good at anything, you need to be realistic about where you’re starting from; unleash your innate curiosity; and be willing to be not-great before you get great. And the results are powerful: as a master learner, you have the key to becoming the best leader--or anything else--you can be.

Every success formula ever written or published boils down to these seven steps.

If you boil down every "success formula" that's ever been devised or published, you pretty much end up with the following:

1. Know where you're starting from. (A).

Every journey has a starting place. With the journey towards success, it's an understanding of yourself, the resources you have available, and the realities of the world around you. Without this, any action you take will be meaningless.

2. Know where you want to be (B).

Every journey has a goal, too. Nobody defines success in exactly the same way, so your destination must be specific to you. The more specific the goal, the easier it will be to get there, which is why goal-setting is so essential.

3. Build a plan to get from A to B.

Everyone needs a plan, so spend the time to create one. However, the trick with success plans is to remember that they're always tentative and subject to change. Use whatever role models and methods you like, but don't cast anything in concrete.

4. Take massive action based on that plan.

Most people with a plan don't take enough action. A few tentative steps aren't going to let you discover whether your plan is working or not. Do 10 things when most people would be satisfied with one or two. You've got to totally blitz this sucker.

5. Observe whether you're closer to B.

This is difficult for most people because once they've put some effort into a plan, they desperately want to see the results they hope for. They even see such results when they're not actually there. So take a hard, objective look. Get outside help if you need it.

6. If the plan is working, double down on Step 4.

If you can prove to yourself (and to an objective observer) that the actions based upon your plan are truly getting you from A to B, then you should redouble your efforts. Take even more massive action. Don't forget, though, to do Step five afterwards.

7. If the plan isn't working, go back to step 3.

The reason you took massive action is that you can't fool yourself into thinking that the problem was that you didn't really try. You can now go back and build another plan, armed with the valuable knowledge of what didn't work.

I called this the 99 percent success formula because it raises the question: what's the other 1 percent?

It's "luck."

The whole point of every success formula (including this one) is to reduce the influence of "luck" so that you don't have to think about it when you're either planning or taking action based on your plans.

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