Making Stone Soup

Stone Soup CoverPop Quiz: Why did the Berlin Wall fall?

Some say Reagan orchestrated the Soviet Union’s demise. Others surmise that Communism was a doomed economic model bound to eventually fail on its own accord.

However, I believe that Communism failed because the West possessed three very powerful “secret” weapons: the board game Monopoly, “Green Eggs and Ham”, and “Stone Soup”.

Yes, that is correct. The Russians were brought down by two children’s books and a board game.

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You may recall from “Three Key Execution Skills” that the three most important skills that you (or a member of your Core Team) must develop if your startup is to be successful are: (i) networking, (ii) selling and (iii) negotiating.

“Stone Soup” – Establishing Meaningful Relationships (Networking)
Networking is ultimately about establishing meaningful relationships with people who are in a position to lend their efforts and resources to further the advancement of your adVenture’s goals. If the ability to establish meaningful personal relationships is missing from your Core Team, your adVenture will be at a significant disadvantage.

“Green Eggs and Ham” – Entrepreneurial Sales Training (Selling)
Although Dr. Seuss was a well-intentioned, Left Coast hippie wannabe, he inadvertently added at least $20 Billion annually to the US’s GDP by penning the most effective sales training manual ever conceived. “Green Eggs and Ham”, which is discussed in, “Be Like Sam”, has been the unintentional primer for top salespeople in the Western world since its 1960 publication.

Monopoly – Cutthroat Negotiating Can Be Fun (Negotiating)
Monopoly, which the foolish Russians banned, is a devilishly clever way to indoctrinate America’s youth regarding the joys of land ownership and the visceral satisfaction that comes from driving your competitors into bankruptcy. It is hard to think of a more effective way to instill Capitalism’s Darwinian ‘sink or swim’ precept than to pit players against each other in a winner-take-all board game. See Monopoly for ‘real world’ negotiation lessons that you can apply to your startup.

Playbook for Making Something Out of Nothing
Some say that Marcia Brown’s 1947 retelling of the classic French folktale, “Stone Soup”, is a parable describing the joy that comes from sharing your bounty, no matter how meager, with your fellow man.


When viewed from The Fringe, we see that “Stone Soup” is actually a veritable playbook for how to start a venture. More valuable advice can be found in this slim volume than in the entire Harvard Business School library.

Do not believe me? Read on.

In Ms. Brown’s version of this oft told tale, three Soldiers enter a small town during a time of war. Initially, all of the villagers run into their modest homes and shun the Soldiers’ request for food and lodging. However, what the villagers do not realize is that these three travelers are not just Soldiers. They are also entrepreneurs, and the ‘venture’ that they are about to launch involves a filling meal, a darn good party, and some much needed excitement.

Something from Nothing
One of the most powerful lessons from “Stone Soup” is also the most obvious. Every entrepreneur is faced with making something out of nothing. When you start your adVenture, it is nothing more than an idea. The only way you will turn your idea into anything of substance is by pulling together a powerful team and then supplying them with adequate resources.

The Soldiers invite the villagers to join their ‘team’, and convince them to contribute the necessary resources to make the team successful. When the soldiers carefully gather the ‘right’ stones and announce that they will make stone soup, the villagers respond, “Stone soup? That would be something to know about.”

As an entrepreneurial leader, you must instill this same feeling of inclusion and wonder. Through your enthusiasm and optimism, convince your team that it is capable of accomplishing extraordinary things and that your adVenture is a unique and meaningful endeavor worthy of their involvement. Just like the Solders, when you launch your adVenture, you must ask employees, vendors, suppliers and investors to join your team, throw their resources ‘into the pot’, and share in the resulting creation. If you do your job properly, the team will be motivated to accomplish extraordinary things, and the end result will be far more valuable than the sum of the participants’ individual contributions.

The Prototype
Successful entrepreneurs know the value of a prototype, or prop, to help them ‘tell their story’. In the famous scene from Jerry Kaplan’s book “Start-up”, he describes how he mesmerized a group of jaded Kleiner Perkins VCs by throwing his leather portfolio onto a conference table and describing it as a handheld device that could recognize handwriting. As Kaplan spoke, the VCs passed around his ordinary portfolio, envisioning the future of handheld devices through the power of his story.

Prototypes make the ‘story’ real, and give the listener something to touch and feel. In “Stone Soup”, the prototypes are the rocks that the Soldiers have the villagers gather for the soup. As the villagers gather the stones, they begin to view them as something more than mere rocks, just as the otherwise sophisticated Kleiner Perkins team viewed Kaplan’s portfolio as an electronic device with seemingly magical powers.

Ask for No Money
One of the most effective techniques for acquiring an investment is to not ask for money. Sounds counter intuitive, right? Think about it.

Banks and VCs prefer to give money to people who do not need it. If you ‘need’ money, it is probably because your business cannot yet survive on its own, which means that your startup entails a fair amount of risk. Thus, in order to make yourself a more attractive investment opportunity, act like you do not need anyone’s money.

If you have the financial luxury to launch your venture without institutional funds (i.e., you tricked your friends, family and fools out of cash that they cannot afford to lose), then the best approach for getting VC money is to not ask for it.

The process is simple, but the key to its success is your ability to instill confidence and convey a ‘desirability’ that the VCs seldom see.

Meet with potential VCs, and make it clear up-front that you are not currently looking for funding. Instead, you want to “preview” your venture, and seek their input. Everyone loves to give their input, and VCs are no exception. In fact, I would argue that VCs greatly enjoy sharing their input, as discussed in “Brian Epstein is Not John Lennon, and Neither is Your VC”. With this approach, you will get meetings faster than if you walk around ‘hat in hand’.

Their unspoken response will be something to the effect of, “Who is this entrepreneur who comes into our offices NOT looking for money? I must learn more.”

The goals of a ‘preview’ meeting are to: (i) alert the VC as to the existence and nature of your venture, (ii) obtain some free consulting (it may be worth what you pay for it, but at least it is free), and most importantly, (iii) tweak the VC’s curiosity so they will be receptive to your future updates.

During such meetings, in addition to “oohing and awing” over the VC’s impressive portfolio (and tactfully steering clear of their many investment failures), you should also make them aware of several of your near-term and intermediate milestones. As a knowledgeable member of The Fringe, you will under-promise regarding such milestones, and you will discuss only those that you know you can deliver (and maybe even some upon which you have already delivered...).

For instance, if you think that you will have three paying customers in two months, tell the VC that you plan on having two paying customers in three months. By sandbagging in this manner, you are essentially guaranteeing that you will achieve your verbal commitment, with a decent probability that you will exceed the VC’s expectations.

As you accomplish each milestone, send the VC a short email update, reminding them that you are that strange entrepreneur who is not looking for money, and that you just beat your latest milestone (again).

In this way, you are building their trust by delivering on your stated objectives, demonstrating your ability to execute, and making it clear that you are not desperate for cash.

Once you have created sufficient value, and the timing is right for you, you will have the rapport necessary to ‘invite’ the VC to join you in funding your venture. Inviting money to the table, as opposed to begging for it, will generally result in a healthier valuation, as well as a relationship built on trust and mutual respect.

The ‘do not ask for money’ approach is the tactic utilized by the Soldiers. They soon realize that going door-to-door requesting food will not work. They regroup, set up camp in the middle of the town and proceed to ‘launch’ their venture by collecting ‘special’ stones.

Once their venture is ‘launched’, the townspeople’s curiosity is heightened. Eventually, one of the bolder villagers asks the Soldiers what they are doing. After the Soldiers ‘tell the story’ of their venture, they then ‘invite’ the townspeople to become involved. However, at no time do they pressure the townspeople to become involved – each one joins the venture willingly and with their own unique resources in hand.

Start with a Big Pot
The Soldiers’ first requests are innocuous. Instead of asking for food, they simply request a pot and some water. Fortunately for the venture, the Soldiers have the foresight to ask for a big pot.

If they had requested a small or medium sized pot, it would have been difficult to capture the villagers’ imagination. Since you have to work extremely hard to make any venture successful, you might as well enter into one that has the potential of a large payoff. The larger the potential opportunity, the more likely you and your team will retain a meaningful equity stake as your venture matures.

Each villager who puts something in the pot suffers a loss of control over their respective assets and the risk that their ‘investment’ in the collective endeavor will be worthless. Once the food they contribute is placed into the pot, they lose their ability to consume it at the time and place of their choosing. Their individual resources become part of bigger whole, and their share is ‘diluted’. However, as in any successful venture, the contribution proves to be worthwhile, as the sum of the individual components exceeds the value any one villager’s contribution.

Share the Bounty & Celebrate
Once the soup is prepared, the Soldiers share it first with the villagers before eating any of it themselves. To ensure the satisfaction of all your Stakeholders, use the same approach with your adVenture. Every employee should own equity in your startup. The most conventional method of sharing equity is in the form of stock options that vest as the employees contribute their time and energy to the company’s success. Even a small number of options can serve to significantly motivate and align your team.

The Soldiers do not just stand around the pot slurping the soup and then trudge off to bed. No. They encourage the villagers to bring out a large table, and they turn the preparation and consumption of the soup into a celebration.

Entrepreneurs too often get caught up in the battles of the day and do not set aside enough time to celebrate small victories. Company meetings, picnics, holiday parties, etc. all require an investment of time and energy on the part of the Senior team, but it is time well spent. See “Bang a Gong” for tips on how to create a culture of celebration.

Sell the Smell
People will do far more for the ‘smell of money’ than they will for a pile of cash sitting in front of them. Why is this?

The smell of money is seductive. It is bound only by the limitations of the entrepreneur’s ability to craft a word-picture of the future riches to be created by the venture. Our imaginations are capable of quickly conceiving of a king’s ransom, though reality usually pales in comparison, no matter the size of the real pile of cash.

In the early stages of your adVenture, you will often have to sell the smell, as that may be all you have. You are selling the sizzle instead of the steak. Your goal is to make it “smell” as wonderful as possible. The sizzle suggests a phenomenal gastronomic experience, regardless of the actual taste of the steak.

The Soldiers understand the power of ‘selling the smell’. Their description of the soup causes the villagers to imagine a fantastic meal beyond their wildest dreams. However, the solders also understood the power of not overselling, as noted below.

Fool No One
If you are a cynic, you may think that the Soldiers duped the unsuspecting villagers into giving up their food for nothing in return; essentially ripping them off.

However, the astute reader who views life from The Fringe will note that the Soldiers do not con the villagers out of their food and hospitality. In return for the meal, the Soldiers give the villagers something that was acutely missing from their lives – fun, excitement, and a temporary escape from their war-torn world. They give them a chance to be part of something ‘magical’, something that fills them with wonder. If you can make a fantastic meal with three smooth stones, anything is possible.

Entrepreneurs who con people are never successful in the long run. You may be able to temporarily fool your employees, investors, etc., but you will be ‘found out’ in the end. Successful serial entrepreneurs always treat their stakeholders honestly, and give them the respect they deserve, as noted in the “Time Wounds All Heels” entry.

If you doubt that the villagers felt an even trade was made, turn to the final page of the book. Rather than waking up the next morning with a hangover, feeling that they had been tricked and running the Soldiers out of town, the villagers provide them with generous provisions for the road, and give the men a warm sendoff.

On the last page, below a drawing of the villagers waving goodbye to the three men, are the words, "Such men don't grow on every bush". This is exactly the sentiment you want to impart on your stakeholders. You want them to shake their heads in admiration and exclaim, “Such entrepreneurs don’t grow on every bush”.

Such MenIf you who have not read “Stone Soup”, run to your local library. If you have to snatch the book out of a First Grader’s hands, do it. The traumatized child will eventually recover but your adVenture may not, if you do not avail yourself to this entrepreneurial tome.

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Copyright © 2007-9 by J. Meredith Publishing. All rights reserved.

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John Greathouse is a Partner at Rincon Venture Partners, a venture capital firm investing in early stage, web-based businesses. Previously, John co-founded RevUpNet, a performance-based online marketing agency sold to Coull. During the prior twenty years, he held senior executive positions with several successful startups, spearheading transactions that generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition.

John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara's Faculty where he teaches several entrepreneurial courses.

Note: All of my advice in this blog is that of a layman. I am not a lawyer and I never played one on TV. You should always assess the veracity of any third-party advice that might have far-reaching implications (be it legal, accounting, personnel, tax or otherwise) with your trusted professional of choice.

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