There’s no getting around it, these are tough times for entrepreneurs. We all are strapped for cash, both in our households and in our business enterprises. What keeps coming back to me is a philosophy one of my old mentors, the late W. Hunter Simpson used to say: “Take care of your customers, and the dollars will take care of themselves.”

So, let’s get back to basics. We’re all in the same boat. Regardless of the particular field we’re in, there is always a customer. As a group, let’s focus on what makes our customers’ lives easier. If you’re in the healthcare technology field, as I am, we should be focusing on simple, reliable, concepts that save us all money, leaving more cash for other things regardless of who is picking up the tab. If you’re in an IT field, focus on making your technology last longer and at a lower price point, while improving performance. If you’re in an energy field, then focus on bringing new technologies that reduce reliance on foreign sources at reduced (future) costs. If you’re in a transportation field, then focus on making transportation easier and less expensive for those who need it.

Of course, all of this is just common sense, but we often get so wound up in our quest for our own benefit that we forget about the customer. We make things disposable that really don’t need to be so that we can get ongoing revenue, and forget that the overall cost may be raised in the process. We sometimes make things less reliable than we could with the excuse that future versions or models will generate more revenue for us and be even better for our customers. I think there is growth opportunity in the basics, and the dollars will take care of themselves.

[Editor's note: To help launch Xconomy Detroit, we've queried our network of Xconomists and other innovation leaders around the country for their list of the most important things that entrepreneurs and innovators in Michigan can do to reinvigorate their regional economy.]

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Years ago, new medical device companies were often formed by a small group of people who came up with an idea for a new concept and started the company by working on it nights and weekends in someone’s garage. Often, this new company had little or no real financial backing other than the money that the founders were able to put into it themselves from their own savings.

The product concept would be developed evenings and weekends to a point where it could then be shown to investors, often individuals, who would put up meager amounts, relative to today’s standards, of money to take it to the next level. Then, venture capitalists or other larger firms would step in and fund the later stages of the development.

The rewards for the entrepreneurs were sometimes quite large because so little capital went into the company at the start and their ownership percentage was so great. As time passed and both entrepreneurs and angel investors made large amounts of money for their early efforts and risks, venture capitalists realized that, if they were to step in earlier, they could take larger shares of these new companies for smaller amounts of cash. This enabled them to make bigger financial returns, as well as have better control over the trajectory and management of these companies.

So, venture capital firms started funding entrepreneurs at even earlier stages, providing enough funds to pay the entrepreneurs a full- time salary while working at the startup. New companies were often even started in venture capital offices by entrepreneurs with the venture firm providing the space and office support that would otherwise rob needed cash from the creative development efforts. Sometimes these entrepreneurs started the company with no real product in mind, except the desire to seek out and find a large market with a substantial clinical need. This position is presently referred to as an “entrepreneur in residence” within the venture capital firm.

Eventually, venture firms even went so far as to fund “incubator” companies with a small group of salaried entrepreneurs and enough capital to take an as yet undefined concept to a level where it would be fully funded by them and perhaps one or more additional venture capital firm. These incubator companies would then spawn one or more companies using the seed funds provided to them. As might be expected, this all served to accelerate the formation of companies and sped up the early stage growth of the ones that were funded in this way, a real boon to the entrepreneurs and investors alike.

Of course, it wasn’t all roses. The early bite taken by venture firms cut into the founders’ equity and the larger amounts of early money made those same entrepreneurs less cautious about how they spent their cash. It put a premium on speed. The result was … Next Page »

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…is coming soon.

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