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Building Communities in Santa Cruz, California

After a couple weeks in San Francisco, it was time for me to reboot the Drive-By cross-country trip.

I re-started the trip by meeting Sean Tario (@eurotario) in Santa Cruz, California to learn about his passion in building authentic communities and engaging the local Santa Cruz geek community to drive local economic development.

Sean and I originally connected at a SXSW party in San Francisco (another reminder that a big part of life is in showing up), and I immediately loved his passion, energy and authenticity. Given what I’ve learned about local entrepreneurial communities throughout my current cross-country trip, I couldn’t pass up his gracious offer to show me around the Santa Cruz scene.

What’s Happening in Santa Cruz?

In short, people are organizing, getting involved and finding productive ways to drive economic change by focusing on the local community. Santa Cruz has some great assets: a great climate, beautiful surroundings, a deep talent base, proximity to the Valley “over the hill” and growing community support. The foundation for attracting and supporting the creative class is in place.

But it’s not perfect: the proximity to the Valley clouds the opportunities and “realness” of the entrepreneurs in Santa Cruz. Even successful entrepreneurs living in Santa Cruz may not know about the depth of entrepreneurial activity in the area, yet another reminder that organizing, building and promoting local communities can play a huge role in driving economic change, particularly entrepreneurial activity.

Even though we often focus on business leaders, building the community requires a broader focus on business, culture and politics.

Good Times Santa Cruz | New Blood:

Santa Cruz Next [is] an organization that is determined to get more twenty- and thirtysomethings involved in Santa Cruz civic life.

… “Since Santa Cruz Next has gotten started we’ve had dozens of people in our generation get off their butts and start applying to local positions in government and industry, to local boards and organizations,” says Sean Tario, a SC Next member who works for a tech company over the hill. “That’s a testament to what we’re trying to make happen.”

What’s awesome?

Lots:

  • Coworking “entrepreneurial catalyst” NextSpace. The kind of place I have always wanted to create (or lacking that, work from).
  • Customer feedback service UserVoice, a simple, easy way to capture customer feedback and empower innovation. Richard White, Marcus Nelson and Scott Rutherford were kind enough to take an hour out of their day to riff on business models and web innovation, topics I could have discussed all day, keeping them from, well, actually doing it.
  • Sol and Jacob from 12 Seconds.tv, a place to share video status updates online. Why only 12 seconds? “Because anything longer is boring.”

And lots more: if you want to learn more about Santa Cruz and its economic, entrepreneurial and community evolution, I’m sure Sean would love to help you out, or start with the links below:

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Do you have a suggestion on people and communities I should check out on my way back to Virginia? Drop me a line…

Financial Models Are Always Wrong: Create One Anyway.

Also: Check out the new, simplified model released Nov 12 at Financial Models Are (Still) Always Wrong: Create One Anyway.

Despite my wide range of interests and my pained explanations of what I do as “an importer and exporter of ideas” and “bridging online and offline experiences by driving cross-country to meet entrepreneurs and investors”, at my core I’m still a financial modeling geek that loves to use Excel to break down and understand how a business works.

Why is creating a financial model important?

Creating a financial model forces an entrepreneur to outline very specifically how a business “works”: how a company creates their products, how users and customers find and use their products and how those processes create revenues and costs. The result, a set of operational metrics, financial statements and the “equation of the business”, is one view of a potential reality of the business. While any one view is inevitably wrong, by digging deeper and analyzing the key drivers and testing a range of assumptions an entrepreneur can create multiple views to help make crucial product design, marketing, organizational and strategy decisions.

Instead of focusing on the bottom line profit and net income, focus on the assumptions and key drivers of the business. Developing a financial model creates the type of thought and data that helps entrepreneurs figure out what they are betting on and how likely their bets will pay off.

What is needed to start creating a financial model?

The best way to start building a financial model is to start thinking about how the business works:

  • What is the business? What is the product / service?
  • How do you target, and acquire customers?
  • What are the revenue streams? (prices, sales of products or services, advertising, usage fees, etc.)
  • What costs will the business create? (items and estimates, employees, hosting, SG&A; fixed costs, variable costs, etc.)
  • What timeline of development and product launch and market / customer adoption are you expecting?
  • What do you think are the major drivers of revenue and costs?
  • What do you know about the market? (# of potential customers, $ spent currently, market trends, growth, competitors, etc.)
  • What lessons, revenue / cost models and performance / operational metrics exist from studying existing competitors and complementary and substitute products?

When I work with entrepreneurs, I typically ask for some preliminary information and data around the above questions, and then after an overview conversation I am able to hack together a first draft of a customized financial model. I typically start with one of two models:

  • Simple Model: A basic one-sheet model that outlines the customer acquisition process, revenues and costs; customized to help an entrepreneur understand the business they are creating.
  • Complete Model: A highly customized, detailed model that creates a full set of financial projections that can be used to raise capital and operate the business.

For an example of a detailed Complete model, download the sample financial model below:

What happens next?

After your startup is up and running, it’s time to start managing your finances; we’ll delve into how to manage your finances in a later post. Have a question you need answered now? Drop me a line…

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Thanks to Bryan for forcing me to outline my typical data request…

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