Sunday, December 30, 2007

thought nuggets

In a course of just few days I have read two wonderful posts from my two favorite bloggers Marc Andreessen and Martin Varsavsky about applied note taking from Marc and tons of "thought nuggets" of Martin collected through Twitter and posted in 3 batches.....  Althogh very different, these posts have something in common - how to organize your thoughts and transfer them into bigger products. 
I keep on being impressed by insightfulness of Marc's writings and productivity and diversity on Martin. Both are CEOs of their companies and board members and advisers of dozens of other ventures...  Also, husbands and fathers of few children....
the question I have: do they sleep?

Saturday, December 29, 2007

The Google Enigma

Matt Mullenweg, creator of Wordpress, links to a terrific piece from Strategy + Business called The Google Enigma. Is the search giant "a model or an enigma?" (This pub, from consulting shop Booz Allen Hamilton is one we reference from time to time. It's worth reading.)
read here
big thanks to Found+Read

Friday, December 28, 2007

good question to ask yourself before starting your company

Q: In your experience, what are the chances a talented entrepreneur will make $1M from his startup? (And no, I don't mean making $150K/year for 6 years and 8 months. :)

A: (Brad): I have no clue as it depends on many different inputs as to be an impossible question to answer simply (e.g. you need to know a lot more to determine anything that resembles an accurate analysis of the potential outcome.  However, this is a thought provoking question which I'll answer a different way then intended. 
If the goal of a talented entrepreneur is to make $1m from a startup, he should consider getting a job that makes $150k / year for 6 years and 8 months. Whenever I meet an entrepreneur that is focused on a specific economic outcome, I lower his chance of success because I think he's focused on the wrong thing.  By definition, an entrepreneur should be striving for a significant economic payoff.  Yet the economic uncertainty of entrepreneurship is so high and the range of outcomes so broad that an entrepreneur just has to believe that if he nails it, good financial things will happen.
The direct tradeoff between a specific financial outcome ($1m) and a salary over time ($150k * 6.667 years) doesn't really capture the essence of the financial trade in entrepreneurship.  In a success case, the $1m could turn into $10m, $100m, or even more.  Or $0.  The $150k * 6.667 is still going to be $1m. 
Which would you rather have ?  (a) 0 < x < $100m+ or (b) $1m < x < $2m?  If (a) you are an entrepreneur.  If (b) you should stick with your day job.

Thursday, December 20, 2007

some funny HR math

sounds VERY familiar....... ahhhrrrrrrr
via Found + Read - read here
I have noticed some funny math in my startups over the years.

This funny math doesn't start until after VC funding — so to better explain it, I must first rewind the clock to our pre-institutional investor stage.

See, I do funding a bit different than other entrepreneurs. I launch the company myself. I form (some of) the team. We build the product. We get to revenues … and we even go profitable. In short: we get our ship lean, mean, and pumping efficacy from every valve.

Then we go get VC funding (less dilution, more control, etc.)

It's so predictable what happens next. Ya gotz some green in the bank and a newly formed HR department, replete with a salivating recruiter, brimming with job reqs to be filled. Go! Go Go!

Staffing at warp speed always scares the crap out of me.

I approve each new req. — queasy — because this new person will now solely be focused on what used to be 1/20th of my job. As I sign the req, I hope they will be better at "it" than me, care more about "it", and get more of "it" done.

But, in my heart, I feel the funny math coming on.

Each new person that gets added to a startup, instead of adding an integer worth of value actually temporarily subtracts value. The old person, instead of doing their old job, is now training the new person. Add a body and get less for your pleasure. 1+1= ½

Eventually you end up having more new people than you do old – I call this being "upside down". That is when the ownership problem starts to compound. Nobody has really been here long enough to know, or care, and once the "new job excitement" has worn off, accountability starts to dwindle. In my old company, this problem was pervasive. The more people we had, the longer it took for anyone to pick up the phone when it rang.

It won't always be this way. If you survive your terrible twos, you will eventually get more efficient with each new body. Slowly 1 + 1 = 1.25, then 1.50 and it probably never gets much higher than 1.75. With the exception of specialized industries like wholesale and investment banking, the most efficient companies in the world can achieve $1M of revenue, per employee, per year. Google is $1M, Dell is at $900K, Cisco $570K. The average of non-financial Fortune 500 is about $290K.

In my current company, I made a firm decision to combat the chaos of these mathematics from the outset – wielding the best weapon I have in business: honesty. I started warning people about it from day one. During "all-hands" company meetings, whilst folks munch pizza and hear about our financial numbers, I remind them " 1+1= ½". When I see five people in a meeting that only requires two, "1+1= ½" is all I have to say.

Way to succeed by believing into it

another great post from Found+Read.
the author expands on delusions which can help you being successful

Tuesday, December 18, 2007

Will it Fly?

A great framework for evaluation of the new business ideas. Discovered through Found+Read (I love this blog!).
Executive summary (thanks to the same Found+Read people):
  1. Tractability: How difficult will it be to launch a worthwhile version 1.0?
  2. Obviousness: Is it clear why people should use it?
  3. Deepness: How much value can you ultimately deliver?
  4. Wideness: How many people may ultimately use it?
  5. Discoverability: How will people learn about your product?
  6. Monetizability: How hard will it be to extract the money?
  7. Personally Compelling: Do you really want it to exist in the world?
Full article here

The Ideas People

Check this out

Monday, December 17, 2007

Mobile Ads Will Go Big By 2010: IAB UK Survey

By Carlo Longino - Thu 13 Dec 2007 03:15 PM PST

Mobile advertising will become a mainstream medium over the next three years, according to results of a newly released survey (warning: PDF link) from the Internet Advertising Bureau in UK. The IAB surveyed its members and garnered responses from 41 companies, with just over half of them coming from agencies. While its not a deep pool of responses, it does give some indication of how companies active in internet advertising view mobile. The full report can be downloaded here. Among the findings:

-- 41 percent of respondents say mobile ads will be mainstream in 2010, and 27 percent believe theyll make it to the mainstream in 2011, while 20 percent believe it will happen in 2008.

-- The ability to create one-to-one marketing relationships because of the personal and intimate nature of mobile phones is cited as the most popular reason why mobile ads will be successful. The ease of response, and the ability to target and make ads very relevant were also mentioned. More after the jump.

-- The main barrier to the respondents use of mobile ads was a lack of evidence of the success and effectiveness of the medium. While the demand for a clear-cut ROI is understandable, this is a bit of a chicken-and-egg situation: until mobile ads become more widely used, there wont be a huge amount of data about their efficacy. The push isnt just solely for volume, though, as marketers are also looking for standardized and consistent measurements.

-- Many of the same issues were cited as barriers to growth of mobile advertising, along with the issue of reach. Advertisers are looking for volume in mobile, just like in other media.

-- Its unclear what role operators should play. Some people believe operators shouldnt be involved at all. Others say they should play a supporting role, while some believe they should take the lead. This is a big question hanging over the sector. While plenty of big names and small companies are moving ahead with their plans, so too are operators, many of which see mobile advertising as a huge potential revenue stream. Both sides seem to be headed for a collision here, and the uncertainty of what operators will try do, or what theyll allow could be holding back some marketers from embracing mobile ads.

Sunday, December 16, 2007

how you should run your business

Ignore how you "think" you should run your business.
Start running it the way you "know" in your heart you can run it.
Success will follow.
via Found+Read

Why should you spend time (and money) on design

via Found+Read
Why Design Matters, Too
Posted: 27 Nov 2007 09:01 AM CST
Let's face it, startup founders have their hands full with a multitude of issues, large and small. Most attention is placed on the nuances of business models, viral marketing, user acquisition, etc. But an often overlooked success factor in building a web business — or any business — is design. Good design can often tip the scales in your favor; make your company very hard to ignore. In this post, I'll explain a few important reasons why design matters so much.
1. Good design implies credibility
You only get one chance to make a first impression. When people visit your website, most won't go through a fact-finding expedition to figure out your Series A numbers, who your investors are, and what your story is just to decide if your company can be trusted. Initial trust is a gut-feeling. The easiest way to put your company on that path is via well executed visual design that shows you put some effort, and money, into delivering a first-rate and satisfying experience to your customers. They will notice. Ignore design and you risk creating distrust of your business from day one, and driving up that bounce rate.
2. Brand+1
There's no such thing as a 'neutral' brand experience. This little word is kicked around a lot and its meaning is often confused. Your company's 'brand' is how other people feel about your company. (Yes I said feel!) Put another way, it's what your customers say about you, not what you say to them. You might even call it your company's personality. For example, what do you think about That's their brand. If Amazon has done a good job, what you think will match up with what they want you to think, also known as their "brand values." Every interaction between your company and your customer affects your brand in a positive or negative way. Well-executed visual communication can go a long way to providing the right takeaways.
3. Usability is life and death
In the world of web 2.0 and beyond, a UI is what turns an idea into a usable product. A well-executed, intuitive UI is what turns a usable product into a successful one– especially today when there are so many options available. There have indeed been successful pieces of software over the years that were poorly designed, but in these cases you can point to lack of competition, closed-standards, or sheer market power. Web 2.0 changes this, and is forcing companies to create simple and elegant solutions that create the shortest paths from start to finish for their tasks. This is especially true with free apps, where little is invested. The age of feature bloat and design by engineers, with all due respect, is over.
4. Design is a powerful business advantage
There's another adage about building a better mousetrap. Somebody had to design that mousetrap. For you MBAs out there, first-mover advantage is powerful, but great design by a second-mover can nullify it. Do you remember who released the first MP3 player in America? If you do, kudos, and you probably also know that they aren't around anymore. The Apple iPod was three years late to the game, has less features than competing devices (the Zen, and now the Zune as well), and yet completely dominates the market today. Why? An innovative UI in the clickwheel, and purely emotive and beautifully-designed branding that pioneered music as a necessary component to your lifestyle.
5. Connect with your customers emotionally
Design is one of the only ways you can connect with your customers emotionally. Design allows you to deliver visceral experiences that can affect people. Recent advances in neuroscience, specifically FMRI, have shown that people tend to act on emotion, then back it up with reasoning later (if at all). This revelation has spawned a whole new marketing movement, known as emotional branding. The vehicle is pure design. Emotional brands, says Marc GobĂ©, create "strong…personalities that closely match the aspirations of their customers" through "the strength of their culture and the uniqueness of their brand imagery." Apple is so successful at this that it spawned a book, The Cult of Mac. Facebook's new product pages are an excellent vehicle for emotional branding, too: people become 'fans'; when they publicly declare support for your product, they are saying your values match up with their own. You've connected with them emotionally. You've won.

Jason M. Putorti is currently the lead designer of Mountain View-based, which makes software for online consumer money management. Prior to Mint, Jason founded an advertising agency and publishing company in Pittsburgh, Pennsylvania.

Friday, December 14, 2007

Sales: a Scince or the Art?

A post from from Seth Levine's VC Adventure saying it is science....

Other opinions?

Sales is a science, not an art

Andy Blackstone had a great comment to my post yesterday on Atul Gawande's New Yorker article about explicit behavior (in the case of the article, doctors using checklists). I've edited the comment slightly for clarity.

An important concept in the article is that the checklists are not aimed at a specific condition but at an overall process in the ICU. One of the objections I often encounter in my consulting practice is "my business is different" - I'd contend that at the process level that's most often not true. The resistance to adopting these checklists often comes from doctors that think the "art of medicine" is being threatened by the regimen of the checklist. In my practice, I see sales managers and salespeople with the same objection. In fact, as the article states, it is the reduction of the routine aspects of the process to the rigors of the checklists that enables the art to emerge. Finally, I was struck by the feeling of the doctors in the ICU that there was just no time available in the midst of their chaotic day to deal with checklists - a reaction I've seen in lots of business managers as well. This is a major barrier to implementing any new business process. The success of checklists in the ICU in not only reducing accidents, deaths, and costs, but in making the doctors time efficient, can be seen as new business processes are implemented as well.

It's the perfect lead in to some thoughts about what's wrong with many sales organizations – a topic I've been meaning to write about for a while). Sales, in my experience, is significantly more scientific than people typically give it credit for. And because people (sales professionals, CEOs, boards) don't always see sales that way, they let slide behavior that is counterproductive to the overall goals of the organization ( i.e., to sell more and – importantly – to sell with increasing efficiency and predictability). Specifically, the lack of a detailed and well documented process for sales results in:

  • Salespeople wasting huge amounts of time on deals that are hopeless, because there's no enforced checklist that keeps them from continuing to pursue opportunities where essential events aren't being checked off
  • Sales cycles that languish while salespeople have "good meetings" instead of checking off the next task on the sales process checklist
  • Executive management, sales management, and BOD members searching for the magician that will improve the "black magic" sales situation instead of incorporating and enforcing process that ensures success independent of superstar performance
  • Turnover in the sales organization but without improved performance
  • A lack of predictability in sales performance (lumpy and generally random sales results)
  • A stagnant pipeline – sales people can't handle as many deals as they should be because they're spending too much time on deals they shouldn't be working on and the deals themselves take longer than they should because they're not actually being pushed through a real process
  • "Fuzzy" pipeline reviews (where every deal has a story associated with it, but where the basic questions of where the deal stands are never really answered)

High performing sales organizations have real rigor in their process and religiously enforce that rigor from qualifying leads, to initial contacts, to how they move a prospect through their pipeline to an extremely detailed "closing" list that guides an organization through the final stages of each close. They use this rigor to determine which leads to follow up on, what prospects are real, and what steps remain to a sale for each and every potential customer. They quickly put prospects onto a hold list when they don't meet specific near-term buying criteria and they generally have a good view of what's possible at the end of each quarter because they know exactly what steps remain for each prospective customer, who needs to sign off on what, and how they will (or will not) be able to make that happen in a timely fashion. Pipeline reviews are focused around where a prospect is in the sales process and are crisp reviews of each account (a few minutes is more than enough time to cover an account at a high level – spending more time than that is either wasting time or a sign that the "story" is covering up the lack of real progress or understanding of that account). Every sales person (not to mention the VP and CEO) can take you through the stages of an account, the "[insert company name] way of selling", and the closing process. In short, the entire company is on the same page around what it takes to turn a prospect into a customer.

All of this isn't to suggest that sales as a discipline and sales people as practitioners of that discipline don't possess skills that range far beyond the ability to check items off a list. To the contrary, skilled sales people are extremely nuanced in their ability to understand the buying patterns of their prospects, navigate the internal landscapes of customers and, of course, effectively convey the value proposition of the product they are selling. But sales people are human and – like doctors in an ICU – benefit from the rigor and oversight that is provided by process.

Thanks to Andy for sharing his thoughts on this subject with me in both his comment and in email (which I borrowed from liberally in writing this post). Head to his site to see more about the sales process work he does at Blackstone Associates.

Tuesday, December 11, 2007

when founder-CEOs do really well, that also increases the chances that they’re going to be replaced

HBS's web magazine Working Knowledge has another useful piece today that addresses the reasons why founding CEO's are so often replaced by their boards of directors. It also reveals a frustrating paradox: "when founder-CEOs do really well, that also increases the chances that they're going to be replaced."

The Founding CEO's Dilemma: Stay or Go? is based on a new work co-authored by Noam Wasserman, a professor of entrepreneurial management at Harvard, and Henry McCance, Chairman of VC firm Greylock Partners. We've highlighted a few important points, including the authors' Rich or King Test, which they borrowed from Onset Ventures. Take it to see if you're replaceable or irreplaceable founder.
Says Wasserman to Working Knowledge:

Typically, early in the life of a company—when it is developing its first product or service—the founder who conceived of the idea and began developing it is the perfect person to lead the company … However, when that milestone is reached … The challenges within the company change so dramatically…

Now, the product has to be sold: You have to create a sales organization, manage multiple functions, deal with customers, handle more complex financial issues, and deal with a very different set of challenges for which many founder-CEOs are not equipped. … it is precisely their success that has increased the need to replace them at this point.
Of course this pattern is exacerbated when a founder-CEO brings in outside investors. VC's, says Wasserman, "often make the assumption that the person who started the company is going to have to be replaced along the way, and may therefore have a quicker 'trigger finger.'"
Then Wasserman shares one way to tell if you are more, or less, likely to be replaced:
The Rich vs. King Test
We teach a case in our first-year entrepreneurship course on a Silicon Valley VC firm called Onset Ventures … called the "Rich versus King" test. It gets to this essential trade-off around what drives an entrepreneur: Is it the need to control the company (that is, to be King), or is it the drive for success, particularly financial success (Rich), which may require that the entrepreneur step aside once certain business milestones have been reached? Onset does not like to invest in founders who "want to be King" out of concern that they will not want to be replaced if such a step is required in order for the company to be successful.
The only founders who can assure their ability to continue as CEOs are those who don't raise outside money from Onset and its peers.
Of course, that outside money is often necessary to build a valuable company, so King-motivated founders usually have to give up a lot of potential growth to remain King. In the entrepreneurship class, I push students to think hard about why they are choosing to be founders to begin with, and then to make conscious choices that are consistent with those motivations. The founders who get into trouble are often the ones who make decisions without regard for "Rich versus King," and who therefore decrease the chances that they will achieve their goals because they haven't made choices consistent with their motivations.
via Found+Read