These guys do a great holiday video featuring their portfolio companies.
Kauffman Foundation Senior Fellow Paul Kedrosky walks through the various roads to early-stage capital in the video below, explaining which options are appropriate for which ventures and debunking several investment myths along the way. Paul is a great person to follow on Twitter.
Here is a re-work of a previous piece for Inc. on the value of speaking to angry customers.
Great recognition for the GramercyOne and GoBook.
Mark Suster interviews Eric Ries, author of the New York Times Bestseller The Lean Startup. This episode is all about building businesses in the most efficient and effective way possible. This includes having a “business hypothesis,” knowing when to go after the money, and how to “Fail Fast” while continuing to build a better product.
This is a great presentation on making a great presentation. It is particularly applicable to pitching people on ideas or businesses. Well worth the time.
Nancy Duarte's talk at TEDx East from Duarte Design on Vimeo.
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Many a company reaches the awareness, at some point in its evolution, that greater opportunity is presented by changing or "pivoting" onto a different path or into an entirely different business. It is quite common for venture backed companies to do this. But successfully pivoting a business is by no means an easy thing to do. Having watched teams do it well, here are 5 characteristics of a pivot that works out well.
1. Superior Market Awareness
Pivots that work benefit from tremendous customer awareness. They are more evolutionary than revolutionary by nature. The pivoting company learned what customers don't want and do want from the previous iteration. Simply put, the pivoter is saying "we worked really hard to sell our previous solution, the customers didn't want it. What they want, and we really know they want, is what we are pivoting to create and sell."
Pivots that lack this kind of understanding fail more often than not. The pivot into something with new customers in a wholly different market is a recipe for disaster. It is a pivot too far.
2. Head Start on a Solution
Companies that pull off successful pivots are typically able to use existing component pieces, they can get quick, positive feedback on the new solution. And more importantly, they can get to market quicker which will generate sales and momentum behind the pivot. Waiting 6 months for a new product to effect a pivot can be suicidal for pivoting companies.
3. Money in the Bank
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The CEO who decides to pivot only after exhausting all available funds is a knucklehead. The VC who lets him do this may be worse. If something isn't working and a pivot is being seriously considered, decisiveness is critical. A pivot once the money is gone will not allow the company to convince backers to get on board with the new direction. A pivot without money to execute the change is flawed and likely doomed to failure.
4. Management Conviction and Capability
The team has to be bought into the pivot completely. Yes, there may be some doubts but if the product, sales and marketing folks don't act with focused conviction - the pivot is undermined on a basic level. Everybody needs to be bought into the change and no hidden resistance is acceptable.
The sidebar to this the management has to be actually capable of succeeding at growing a business. I was involved with a company that pivoted a couple of times. The company's management couldn't execute against any particular approach so pivoting always appeared pretty desirable to them. It covered the previous failures in a blanket of past tense market focus.
The funny thing was every pivot for them was into a desirable market. But they couldn't execute well, so they just keep pivoting into new markets into which -- surprise -- they couldn't execute well enough to succeed. But, with one more pivot, they could blame the previous failure on the previous market.
5. Investor Support
The pivot point is the easiest and most tempting moment for an investor to depart or discontinue supporting a company. Investor support of the pivot might reasonably be sought first, ahead of other constituencies. If the investors are bought in, or at least, open minded to the pivot, management has a chance to re-energize financial support. If investors aren't bought in or, worse, greatly surprised by a pivot, it materially undermines any chance of success.
So, pivot if you must, but don't expect to be easy or problem free. In short term, a pivot will trade one set of issues for another set of issues. If your right about the pivot, however, your post pivot issues will become the higher quality problems of scaling and growth. If you're wrong about the pivot, try again if you can meet the criteria above.
Check out this Huffington Post piece on LivingSocial's Black Friday efforts. Huff Po
Some things can only be known in the fullness to time, for now, here's a view from PEHub and Jonathan Marino. Today, I can' t correct or dispute anything. So I won't, maybe later....
peHUB Wire--Monday, Nov. 21, 2011
INTRO:
No-Tech? Did Grotech whiff this June when it dumped a substantial portion of its LivingSocial stake? If you believe the New York Times, it seems very possible. Raising $200 million at a $5 billion valuation means LivingSocial won’t be dependent on its near-term capital to get public, and that it will have plenty of time to sit back and watch and learn from its biggest competitor’s (many) missteps. Now, they’ll also be able to pinpoint the precise moment—should it happen—when DC-area-based LivingSocial’s valuation outstrips that of Groupon. According to one TechCrunch report, Grotech’s valuation has nearly doubled inside of the last seven months. Translation: it’s a good thing Don Rainey and the gang held onto the remainder of that LivingSocial stake. Now, when Grotech is out raising its next fund, it can say it only botched their market timing on exiting about half its best investment ever, instead of the whole thing. Fortunately, for as long as Danny Snyder runs the Redskins, every other investor around the Beltway will comparatively seem like a genius.
-Jonathan Marino
Love this flow chart for posting status into social media.
Paul Sherman and the Potomac Techwire folks always put on a first rate event. This is supported by their events frequently selling out. Here is a link to an upcoming event that I will be joining the panel for on December 15th. Should be fun and interesting as always given this crew.
Here is PTW's write up:
Venture Capital Outlook 2012 is part of the Potomac Tech Wire breakfast series that brings together senior executives in the Mid-Atlantic to discuss technology issues in a conversational, roundtable environment moderated by the editor of Potomac Tech Wire. The panel will focus on the overall outlook for venture capital investing in the DC area, current deal terms, technology trends, valuation issues and predictions.
Speakers:
John Backus, Founder and Managing Partner, New Atlantic Ventures
Arun Gupta, Partner, Columbia Capital
Don Rainey, General Partner, Grotech Ventures
Harry Weller, General Partner, NEA
Moderator: Paul Sherman, Editor, Potomac Tech Wire
Schedule:
7:30-8:00: Registration/Networking/Breakfast buffet
8:05-9:30: Panel Discussion and Breakfast
9:30-10:00: Networking
Twitter hash tag: #VCLook
Here is the link to register.
The private sharing of private information is an idea whose time has come. And, so has the ability to automatically complete forms. Here is an introductory video.
Steve Case provides consistent and quality leadership to our community and StartUp America. Here is a short video link worth viewing.
Image by elycefeliz via Flickr
The reasons to start a business are many and varied. In my experience, the CEO's that pitch us have one of three goals; they want to win or they want to make a lot of money or they want to change the world. So which CEO's tend to deliver the greatest returns?
Maybe not who you'd think.
Changing the world is consistently the best way to create value.
People whose aim is to win tend, over time, to reduce the scope of the game to one that is winnable. So rather than ambitions being large or goals getting bigger in impact as it progresses, this CEO's enterprise tends to narrow or shrink. And winning is often benefits a smaller and smaller group of people in this scenario. (Even if that means not winning for the investors) Winning is more important than the people so throwing some over board hardly matters.
A primary aim of making a lot of money introduces a whole gamut of decision influencers. Most of those influencers promote short cuts and borderline decisions. Yes, making money is the central point of an enterprise in a capitalist system. But trying to do so without creating value is akin to running a scheme.
People who seek to change the world create the greatest value. Value for themselves, employees, customer and investors. It is isn't about limiting the scope to "win" or taking short cuts to a great payday. It is about changing the world -- which is the biggest scope and doesn't support any short cuts. And changing the world requires a big idea that is well executed whereas winning or making a ton of money don't always require those in practice.
So you might ask, what about VC's? Do they want to make a ton of money, win or change the world?
Yes. Yes, they do.
Here is the job listing that we will be promoting beginning next week to fill a new position. If you or someone you know has an interest, please note the email address at the bottom of this post.
Grotech Ventures, a leading, national venture capital firm headquartered in Tysons Corner, Virginia near Washington, D.C., is seeking an Associate to join our highly successful investment team. The Associate will be expected to hit the ground running, taking a proactive role in deal flow creation through networking and actively participating in venture/startup related events; conducting pre-investment due diligence, financial modeling and deal structural analysis; researching new potential investment areas and companies; and ultimately helping execute and manage the firm’s investments. The Associate will have the opportunity to get involved in every aspect of the investment process from sourcing to executing transactions to portfolio management.
Candidates should have prior experience in investment banking, venture capital, private equity, management consulting, or a broad-based role at a technology company or startup. The Associate position requires strong analytical capabilities, financial modeling proficiency and excellent written and oral communication skills.
Compensation commensurate with experience. Resumes should be sent to Jennifer Ports, jports@grotech.com.
Really appreciate the cover recognition by Modern DC Business and the way the article turned out. Thanks to all the folks at MDB.
Here is a link to the article.
Mark Suster of GRP hosts a weekly online video show entitled "This Week in Venture Capital". I am a fan of the show for its insights into the thinking of leading VC's and entrepreneurs. Last week, Tige Savage of Revolution appeared on the show and it is certainly worth a view.
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Both LivingSocial and Groupon took the big leap and made the big investment into Super Bowl television advertising over the past weekend.
Image via CrunchBase
Given the multi-million dollar table stakes, this wasn't a small decision for either company. And with the massive audience watching the ads, it was a significant moment in each company's history and brand development. And, ultimately, both companies succeeded at communication and definition of their company brands with their advertisments. I suspect a broad swath of America has much better understanding of LivingSocial and Groupon and their respective values today.
In fact, both LivingSocial and Groupon took some risks with the ads. I won't speak to the content of these ads but it does strike that they are emblematic of the need for entrepreneurs to continually take risks. Even, or especially, when the stakes are highest. Which isn't any different than when starting out a company. It is worth noting, that it never gets easier for the entrepreneur as the stakes get larger. But it does get more rewarding when it works out. Which is another way of saying that it never gets boring and that is one of the reasons why the entrepreneurial experience is always an adventure. Kudos to both management teams to putting themselves out there.
LivingSocial's Ad
Groupon's Lead Ad
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Image by Getty Images via @daylife
Amateurs talk strategy; the professionals focus on tactics; and superstars concentrate on culture.
Superstars focus on culture because a company’s culture will determine if the company will successfully execute its strategy and tactics. A company’s culture is a statement of its values that influences all actions and every decision associated with the execution of strategies and tactics.
Company culture isn’t group think as much as it is identification of valued behaviors and common beliefs. This identification is informative to every employee -- every day. Many successful business people believe that culture is the basis of everything their employees do.
The recent success of Zappos is a result of the company being defined by its culture and succeeding on the basis of that culture. Tony Hsieh, CEO of Zappos, is famous for stating that “if you get the culture right, most of the other stuff — like great customer service, or building a great long-term brand, or passionate employees and customers — will happen naturally on its own.”
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Tony clearly believes in a “culture first” approach.
For everyone else who intends to start a business from scratch and succeed, you need to have a handle on culture creation and culture support. If you create the right culture, it can enable you to succeed even when strategies flail and tactics fail. Culture will enable employees to do the right thing.
How do you do this? Define your values clearly, realize that little things can mean a lot, and always reinforce your words with actions.
Define your cultural values and live them
What do you value? What behaviors does your company reward? Would you like employees to help customers or “surprise and delight” them? Is it desirable for employees to work well together and “recognize others”? Defining cultural values is to specifically describe the behavior and/or goals of the organization within a context of broad principles.
Since your cultural values must be useful to employees, they must also be definitive terms. Company values shouldn’t be solely aspirational. Don’t suggest that employees “strive” to do something. Everyone has a different definition of striving for that matter. Your values must be results oriented to be useful.Think “make,” “achieve,” and “deliver” rather than “demonstrate,” “show,” or “lead.” Employees want to do the right thing but in many instances aren’t sure what that right thing is given the circumstances.
Once you have defined your organization’s cultural values; you have created a framework that informs all employees. Your declared company values provide insight during those oh-so-frequent moments when an employee is faced with an unanticipated situation. I recently responded to a Facebook ad that promised a $50 instant credit for a first purchase at Bonobos. I bought a pair of pants and due largely to a credit card snafu was credited twice for the $50. I called Bonobos to rectify the double credit and the customer representative said “Hey, we can’t fix that in our systems, thank you so much for calling, you need to consider the extra $50 a bonus.” (Shout out to Bonobos Ninja, Tim MacGougan ) What?? I suspect that Bonobos informs it employees to “delight” customers rather than “satisfy” them. That cultural bias will win you customers for life as Bonobos did here with me.
Honor employees very publicly and demonstrate when they have values
If you want employees to champion the values; make a point to publicly and materially reward those employees that exhibit the company’s values in their actions. This will benefit all employees. Google is famous for providing six figure bonuses to team members responsible for major innovations. If you value innovation within your culture, reward it generously to foster the desired behavior. If you value delighting customers, reward that behavior when you see it. Positive reinforcement is a strong motivator. Put your money and your recognition behind your values.
Little things mean a lot
mazon uses old doors on sawhorses for desks. It is one thing to say we are a frugal company with a “no frills” work environment and it is another to use old doors for desktops. Amazon doesn’t need to tell employees working from old doors that they should be on the lookout for opportunities to save money. If they don’t see it on the desk in front of them, they won’t get it from any other form of communication.
Honor the culture you create in all you do, big things and small. Don’t allow the culture to push back at any of the fringes with exceptions. Understand that there will be continual resistance to doing certain things in certain ways. Or, in spite of a commitment to give back to the community, that there is a legitimate economic gain for the company NOT giving employees four hours a month to volunteer locally. Cheap hotels are often not as nice as pricier ones and the potential rationales to upgrade will be many and varied. Maintain consistency by being inflexible on the values application to all decisions.
Actions must continually reinforce words
As a leader, you must exemplify the culture and its values. If you punish failure with disapproval, you diminish risk taking. People seek approval and if you aren’t ready to continually recognize people for acting appropriately related to your cultural norms, you aren’t building the culture. In fact, you either support or diminish the culture with each every hiring decision.
You should be careful to hire people that fit within your culture. Zappos is famous for its $2,000 “quit bonus” to new employees. The quit bonus is offered to employees who are completing week one of a four week training program and stands until the end of the fourth week. If an employee isn’t interested in the company or more than a paycheck, they can take the quitting bonus and leave the company. In fact, 1% take the quit bonus. The other 99% want to be there and are committed to the company. As a recult, Zappos doesn’t have an issue of hiring employees who don’t support the company culture.
Ultimately, your company’s culture will influence every element of strategy and every tactic executed by the team on a daily basis. Without a supporting culture, strategy and tactics are somewhat meaningless. Culture doesn’t self define, however, and needs direction attention. Successful business owners envision their company culture from the start. They believe that culture super cedes strategy and tactics. Go ahead and define your organizations’ culture, then follow with strategy and end with tactics… by doing so you can be assured of reasonable execution and informed employees.
Originally published on BusinessInsider on 12-15-10.
This was a great TV appearance following the Amazon investment announcement.
As a former entrepreneur, now on the “dark side” of Venture Capital for the last ten years; here are 10 lessons I got from the investment side of that experience . These lessons still serve me well on a daily basis.
1. Price doesn’t really matter
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If a deal works out, the price was right at some level. Get in good deals, and forget about getting the last dollar in a negotiation for that good deal. If the venture fails, whatever you paid was too much. Yes, in the event of success, you would have made more if you paid less… but that is always true of successful investments.
2. Management is everything
Great management will make the right pivots at the right time. The talent, drive and vision of the management team will determine success or failure. If you’re looking at a great idea, if it’s paired with poor management…run.
3. Never pursue a small idea
It is no safer, no easier and much less rewarding to pursue a small idea rather than a big idea.. What’s the point in trying to change the neighborhood when you can change the world. Small ideas struggle to find their way, so do larger ones, so you might as well be working on the large idea. Small ideas are never worth the trouble.
4. You are not a rock star and never will be one as an investor
The entrepreneurs are the stars and they always will be the stars. If you want to be a star go be an entrepreneur. If you’re an investor, work to make your entrepreneur a rock star. Enable their success and enlist recognition for them and what they’re doing.
5. If you don’t add value outside of board meetings, you’re not adding value
The board meeting is a stilted environment for contribution. If you can’t establish yourself as a worthy advisor outside the board meeting, you’re likely not one in it.
6. Don’t invest in people who ignore good advice
Some people have a world class talent for ignoring good advice. Many of them end up as self employed entrepreneurs . Those kinds of entrepreneurs are not worth investing in. Great people and great business people are more open to alternate points of view. Invest in bright people who don’t or won’t ignore good advice.
7. Try to win in the long term….not the short term
If you strike deals which over time prove unfavorable to the other side, your opponents (and they will view themselves as such) will be motivated to screw you. And they will usually succeed at doing so. Strike agreements that are good now and still fair later.
8. Never panic
There are few things uglier than a scared venture capitalist. Don’t ever be anxious to the point that anyone notices. Sometimes slow and steady wins the race. Not many good decisions are made based on fear, especially business decisions.
9. Be nice to people; it pays well
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Most of the better deal flow comes from people who like me better than my venture capital competitors. Why me and not them? I strive to treat everyone with respect. (I’m sure it’s that and not my jokes…) Be nice to people. It pays off every day.
10. Great deals tend to be great already
In ten years in the VC business, other VC’s haven’t really ever asked me to look at anything other than their dog deals. The great deals are out there but you are going to have to find them yourself. The good news is that they are great deals already. The challenge is to recognize that.
When I started in Venture Capital, my firm directed me to create “proprietary deal flow” which was a term that I didn’t initially comprehend the meaning of. Proprietary deal flow refers to development of a deal pipeline that contains opportunities not seen by others. Today, ten years on, I have pretty good proprietary deal flow. To create that proprietary deal flow, I needed to internalize the 10 lessons listed here -- which might be summarized as be fair, be a good person and look for good people to back.
This article was originally published on BusinessInsider.com
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Paul Sherman and the folks at Potomac Tech Wire always do a great job executing these events. They typically sell out so if you have any interest best to buy a ticket sooner than later.
I will be one of the panelists and the others will be:
Phil Bronner, General Partner, Novak Biddle Venture Partners
Thanasis Delistathis, Managing Partner, New Atlantic Ventures
Tige Savage, Managing Director & EVP, Revolution LLC
Harry Weller, General Partner, NEA
Image via CrunchBase
Here is a link to the event overview.
And a registration page.
These non-obvious people tend to be the people in your work life who march to a different drummer. Sometimes quirky or just a little different, these folks distinguish themselves via insight or work ethic or activity. You may enjoy their company and appreciate interacting with them without fully appreciating how valuable these folks can be to your career.
These “different drummer” folks, including nut jobs, hustlers, self-promoters and geniuses, may not be your “go to” people in your work life. But if you want to rise as a star, you need a diverse network of “go to” people around you, and these folks can be especially valuable.
Success is facilitated by a network of friends and associates that provide with unique insights and timely support. If you have people in your network that see things others don’t, you will be enabled to jump a step ahead ( or stay there). You may not naturally gravitate to reliance with these types of folks, but strong relationships with them will serve you well. You will need to create ties to them, but first, you need to recognize them. Here are four unusual friends:
1. The Nut Jobs
Image by Stephen Dyrgas via Flickr
2. The Hustlers
Hustlers work relentlessly harder than their peers. They tend to get promoted. Shock of all shocks, people who work harder tend to promoted above all others. If you want to be promoted consistently, you are going to work pretty hard too. Hustlers are easy to identify – literally, because they will be the ones starting early and staying late; and figuratively, because their contributions (and hopefully yours) are the ones that stand out.
Hustlers talk to more people.They do more. They hear more and know more than almost anyone in the environment. They are usually adept at predicting what initiatives will fly and which will fail, whose stock is on the rise and the changing of management focus.
3. The Self-Promoters
Cover of Smart People
Look, you may or may not be adept at self promotion. Either way, you need to identify and cultivate relationships with the great self promoters in your sphere of influence. Self-Promoters are an accurate barometer of the current view of success; and they provide the conventional view of any situation. The self promoter has a valuable skill set and needs a message that sells; while you may need those skills and have a message that needs to be sold.
While you can argue that self promoters are attempting to influence and direct the real time perspective of success and thus their value as a barometer is undermined, it is unrealistic to ignore their innate sensitivity to promoting things that people accept. Get to know a self-promoter and you will get to know the conventional wisdom in your arena.
4. The Geniuses
No matter how bright you are, you will encounter people who are a great deal more intelligent than you. You need to build a cadre of exceptionally smart people who can help you tackle your vexing dilemmas. The true geniuses that you encounter are unlikely to identify themselves. Most people aren’t observant
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Befriend, align yourself and otherwise connect with Nut jobs, Hustlers, Self-promoters and Geniuses to fuel and support your career. They each offer a value far greater than the time invested in the relationship. And you may find yourself with unexpected friends.
Originally published on BusinessInsider.com on 11.17.10
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Can you get better at spotting the most promising opportunities? How do you recognize the next big thing? How does anyone know it when they see it ?
If you’re like most people, throughout your life a few great opportunities will land on your doorstep. And again, if you’re like most people, you’ll ignore these rare opportunities because you won’t recognize them as great chances for success.
Don’t feel bad; even people in the opportunity recognition business – including prominent venture capitalists – miss out on great opportunities. Bessemer Venture Partners has an “Anti-Portfolio” on its website of prominent successful companies that they chose not to invest in.
Bessemer is a long time, successful venture capital firm which passed on Apple, Google, Federal Express (multiple times), Intel, and Paypal. Everybody misses a few, no one gets them all. The Bessemer Venture Partner firm approaches these missed opportunities with maturity and grace (probably at least in part because missing isn’t their predominant pattern). They have a lot of hits in their history, more hits than misses overall, which is the foundation of their success.
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We all build success from our realized opportunities. And we all strive for more hits than misses. If you can do better than average at recognizing the opportunities in your life, you might truly prosper. But how does one build opportunity recognition ability?
I argue that internalizing four concepts about the nature of opportunity can markedly improve your recognition skills. These four concepts are:
1. It won’t be perfect
The ideas that will develop into great opportunities tend to be fully thought out when you hear them. But they aren’t perfect. Not at the beginning, in the middle or at the end. Your ability to see the imperfection shouldn’t blind you to the larger possibilities. In my venture capital firm, when we hire new,(typically younger people), into the business, we are accustomed to the newcomers hating every deal. They are smart enough to see the imperfection but not yet experienced enough to be confident accepting that the imperfection doesn’t define the opportunity. Endeavor to see the opportunity in spite of the imperfection of the current presentation.
Does it sound like it could be a big idea? If no, don’t bother looking any further. But if the answer is yes, accept the reality that there will be obstacles between the current moment and achievement of the imagined goal.
Regardless of the obstacles and imperfections, great opportunities are usually well thought out. Which is to say, that someone or a team of someones is thinking through every aspect of realizing the opportunity. They may not have all the answers for every challenge that must be met, but they are thinking about everything.
2. The future is built with today’s tools not tomorrow’s tools
The great innovations of tomorrow are usually built with today’s technologies in new combinations. You would be mistaken if you think true “invention” is the source of innovation or the typical great opportunity.
Many people seek a technological breakthrough or outright marvel as proof of the existence of opportunity. (And sure, sometimes break troughs and marvels are proof of opportunity), but many great opportunities are not driven by a breakthrough as much as a re-packaging or a better combination of advances. Apple’s iPhone is the migration of a friendly operating system onto a smart phone and the Apple iPod series is built from broadly available components.
For that matter, don’t focus your evaluation of an opportunity on what’s missing like the big technology step forward or novel process. Look at what is present today. Because the big breakthrough is rare, and you must focus on what’s present.
3. Appreciate the evolution of previous failures
Failed attempts at an idea are more a testament to the value of the idea rather than a repudiation. In fact, most great opportunities aren’t realized on the first attempt of an idea’s execution but rather as the perfected evolution of previous failures.
When Youtube.com got going in the summer of 2005, it had no less than 30 comparable competitors. Failures in the video sharing website genre go back to ZoomCulture.com in the fall of 1999. YouTube perfected their formula by making videos easy to upload and discover; but more importantly, by allowing other websites to embed the videos, Youtube broke through to widespread distribution. And with wider distribution, Youtube became the winner.
eBay was one of dozens of online auction sites with comparable functionality in the late 1990’s but yet it was eBay who emerged to lead a massive new category. eBay succeeded by solving the initial buyer trust issue with a feedback system. That feedback system enabled eBay to succeed as the online auction leader over auction sites with arguably better technology. They perfected the model.
In order to fairly assess an opportunity, you must examine the causes of preceding failures.Early video websites failed, in large part, because people had limited bandwidth. If the underlying cause of failure isn’t applicable any longer, the idea may be poised to succeed.
4. Timing can be everything
The single most powerful question you must ask yourself about an opportunity related to timing. Is right now the right time for this idea? There are a lot of great ideas that don’t become great opportunities until the time is right for them.
Interacting socially online with people of common interests or social circles has succeeded repetitively. The current social networks are simply the most successful. The current social networks reached a point of critical mass, for example, when there was nearly ubiquitous Internet access AND widespread personal usage of the Internet. If most of your friends aren’t online frequently, a social network is of limited utility.
Facebook wasn’t the first social network and neither was MySpace. I invested in an online site for a teen audience to create their own online space with email, music and status sharing in 1996. It was called Myroom.com and…. it wasn’t the right time. The idea of a social network can probably trace itself back to the original computer bulletin boards. A major factor for Facebook success was the timing.
You will find analogous failures for every opportunity you ever consider deeply. If you can’t comprehend why they failed, you will be ill equipped to evaluate the modern day equivalent. But the truth is, thanks to accessibility of people and their stories, you usually can find something, somewhere wherein the founders detail those causes.
In my thirty year career, I have encountered five great opportunities and recognized three of them. In your career, in order to do better on the final accounting of opportunities vs. recognition; you must first recognize the opportunities … and they don’t always show up gift wrapped. Taking these truths into account, you should have an improved ability to know ‘em when you see ‘em.
Originally published 11.19.10 on BusinessInsider.com
Image by asvensson via Flickr
For an entrepreneur, the truth related to opportunity, market, product, and customers is a constant pursuit. The truth, however, is fungible. Things change and if you want to succeed as an entrepreneur, you need to match the moments of truth with appropriate change. Discovering the truth about your business, or your customers or your marketplace is one side of the issue. The other side of the issue is avoiding false beliefs.
So, where will you encounter mistruths? Fom people who provide false statements, beliefs or assumptions in the form of opinions or advice. It is a fact of life that people will mislead you on occasion. Some people will intentionally mislead you, and others will inadvertently mislead you. Some people will do it all the time and others will do it only sometimes. Either way, a person’s intention is irrelevant if you are ultimately misled or make decisions based on faulty information.
If you want to do well with your business, you’ve got to be superior at spotting nonsense and recognizing crap when you hear it. Strive to develop a well-honed B.S. meter. Without one, you waste time and squander opportunities. With one, you avoid time wasting tangents, useless fire drills and other time sinks.
If want to enhance your B.S. spotting skills, you should do the following six things.
Determine the speaker's self interest
Whenever someone is presenting a point of view, you owe it to yourself to consider how their opinion might correlate to their own self-interest. After all, there must be some reason they have to make the argument to you in the first place. And that reason more likely correlates with their own self-interest than with yours.
I started my business career with the naïve assumption that if I worked hard, kept my head down and contributed well as a team player, I would get noticed and promoted by upper management. You can imagine my shock when I realized that some of my peers chose means other than hard work and valid contribution to pursue recognition and promotion. These folks, ( let’s call them rat bastards), sought advancement via self-promotion, empire building, bandwagon jumping and good old fashioned back-stabbing. What I didn’t originally anticipate was how many rat bastards ( which is ultimately a term of affection) I would encounter along the way. I also underestimated their effectiveness. Nor did I have any tactics to handle them.
By the time I became a CEO, I was able to identify and remove rat bastards or at least shut down their activities. If you’re lucky enough to work in a company where political behavior is frowned upon, the culture will probably declaw these folks. If you’re not, you need to learn to cope with these folks and their maneuvers.
Now, a little self promotion or well-timed politicking may sometimes be a powerful additive to your work efforts. But if self promotion doesn’t come naturally to you, you need to counterbalance the rat bastards without sacrificing your integrity or becoming one of them.
So here is a quick view of some of the rat bastards (“R.B.’s”) and how to handle them. These are some practical yet relatively innocent counter-measures for some typical rat bastard behavior.
The Self Promoting R.B.
Who they are:
Barnum the Rat Bastard is adept at using all media and messaging available to amplify his or her successes, contributions and achievements. The level of achievement or degree of difficulty associated with any success isn’t a primary concern. The primary objective is the communication to a targeted audience for the purpose of inflating perceived value of the self promoting R.B. While you may be toiling away and hoping for mere recognition of meeting significant milestones, this isn’t part of the paradigm of the self promoter. The self promoting R.B. promotes often, loudly and without discernment.
How to deal with them:
As a practical matter, you can’t say or do anything contrary to R.B.’s self promoting messaging regardless of how overblown it is. Instead, you need to re-amplify the message as much as possible. If the self promoter sends out an email trumpeting a personal/organizational achievement, embellish the claims and expand the distribution by forwarding the email to a broader list. Don’t re-amplify every message mind you, but only those messages that are the most transparently self promotional. Yes, there is some downside risk in re-amplification but the upside is that the self promoting R.B.’s credibility typically suffers because anyone broadly understood to be a self promoter ends up with a credibility issue.
The Empire Building R.B.
Who they are:
Julius Rat Bastard, the grabber of headcount, budget and all manner of territory for means and to ends unclear even to himself. For this R.B., the only point that matters is building the kingdom. This R.B. operates with the presumption that more resources equates with more value and importance. There isn’t an evaluation on Julius’ part about making the sum greater than the total of the parts; Julius is just focused on making the sum as big as possible by acquiring more parts.
How to deal with them:
To slow Julius R.B. down in the long term, you need to be “helpful” in the short term. First, take all your marginal performers, known troublemakers and general pains-in-the-neck and get them into a single functional group. Then, task that group with something that either appears to or does overlap responsibilities with a group working within Julius’ organizational functions. This will prompt an irresistible temptation for Julius to petition upper management for the transfer of your troublemaker group into his domain. When the discussion inevitably arises, you agree to the transfer of this function and it’s associated group to Julius R.B. In one move you have reduced your management headaches while transferring them to a place where they can do you some good; and you appear to be a great team player. That can be the end of it. (On the other hand, you may choose to comment on how poorly the group is faring after the move and state that you never had any issues with the team. But that would be perilously close to rat bastard behavior.)
The Bandwagon Jumping R.B.
Who they are:
Like a newly converted 2010 Miami Heat fan, this R.B. will align himself with any obvious winner. Using revisionist history and creative story line gerrymandering, this R.B. can trace his role and contribution into every organization success. In order for him to do this, the Bandwagon jumping R.B. has to constantly monitor people’s perspectives on the status of many initiatives. In order to jump on the right bandwagon at the right time, he must always seek association with potential successful bandwagons.
Image via Wikipedia
How to deal with them:
Your mission is to simply tout the likelihood of successful outcomes for every initiative you’re aware of. Occupy the bandwagon jumping R.B.’s time by recommending initiatives and projects. Help this R.B. claim involvement or create tenuous relationships with many looming victories. The farther afield geographically, organizationally, or functionally the better, as the gravitational pull of any bandwagon is powerful to this rat bastard. And since there won’t be much intellectual honesty about the association or involvement, you can leverage the pull of many bandwagons across a broad array of activities.
The Back Stabbing R.B.
Who they are:
Richard Hatch of the original “Survivor” TV show comes to mind. Sure, you may not know who they are as you won’t hear their musings, statements and mistruths until after they’ve back-stabbed. In my experience most back stabbers are the toughest R.B.s to spot. Some will be your “friend”, most won’t bother with the charade. These are R.B.s who operate in the shadows, making private derogatory comments and accusations that can torpedo your credibility and success.
How to deal with them:
The only proactive method for dealing with these R.B.s is to spot them before they have the (next) chance to backstab. Spotting them is critical to diffusing their effect. Unfortunately, you will probably identify one only when a manager or someone trusted approaches you to validate one of the R.B.’s statements. However, if the R.B. has simply declared that you are an idiot, you won’t likely be provided with the opportunity to address the statement – and spot the back stabber R.B. As a manager, if someone (the prospective back stabber R.B.) tells you a colleague is an idiot, you can respond in one of two ways IF the accused “idiot” is on your team or under your management level First, ask “Does he know he is an idiot?”, and second, declare “If not, let’s get him in here and let him know – or at least let him know you think that. Let’s get this on the table.” Sure, there are real idiots out there. But it is better to deal with these things head on as a manager. This technique keeps you in the management role and “outs” the back stabbing R.B.
If the accused “idiot” is a superior. DO NOT ENGAGE. The Back stabber R.B. will take any conversation (even one-sided) about a superior and put your name on the statements that occur in the conversation.
Once the back stabber R.B. is identified you can call him out in a number of ways. If you hear anything suspect, you can make statements like “I can’t believe anyone would say that….” or “WHO did you hear that from?” or “Gosh, it sounds like you’ve been listening to “Back stabber R.B.” Make sure you circle back to Back stabber R.B. to make him aware of your comment. Back stabbers are a form of bully, just much less direct. And bullies and back stabbers don’t like folks who strike back or have their number.
Roundup
The presence of political behavior demonstrates the absence of management. If you are now or ever will be in a position to extinquish it within a group, there are few things as beneficial that you can do for your team’s well being. Until the day when you are in a position to vanquish this behavior, there’s no rationale, valor or redemption in accepting these behaviors or failing to handle these rat bastards.
Originally published on Business Insider's Strategy Section on 10/14/10.
LivingSocial comes in at #25 in this article.
Image via CrunchBase
Congrats to Tim O'Shaughnessy and the team as well as the Silicon Alley Insider for putting this together.
Image by Venn Diagram via Flickr
Here they are:
10. Inadequate Focus
When everything is a blank piece of paper, there is an unlimited set of possibilities. The great dual-edged sword of the start up experience is freedom. The freedom exists to pursue anything or everything. Success, however, is a function of focus. Start ups that don't focus in early and completely upon a target customer/solution/market/etc. will fail. Sure, you can build a technology or a product that is useful to many individuals or companies or industries. But to succeed, you have to pick a specific set of individuals, companies or industries that your technology or product helps and focus intently on them. With an industry focus, for example, the second customer sale is easier than the first, and the third sale easier than the second, etc. If Marriott is a customer, for example, then Hilton or Gaylord knows immediately that a respected competitor has "validated" your product. Another customer from another industry just wouldn't provide Marriott with that same validation.
9. Substandard Product
In the 80's, the statement was "perception is reality". This reflects the power marketing once had to influence prospects about a product. Today, reality is reality thanks to the availability of user reviews of everything. Previously, you could achieve the perception that your offering was superior with a less than stellar product via creative marketing or sales muscle. Some companies grew well with vaporware. Those days are over. Now, the product has to be great. Not kind of great, or great in certain lights, but great in the opinion of knowledgeable users. Oh, that's the other thing, the world is now full of knowledgeable users - who want great products. Not products with great marketing, sales or positioning.
The commitment to create a great product is central to a successful start up's DNA. It permeates all thoughts, actions, plans and attitudes. If it doesn't, the product isn't going to be great. If the product isn't great in today's market, the start up is ill equipped to compete and is unlikely to survive.
8. The Value Proposition isn't Understood or Valued
The solution the start up offers must solve a problem that is acutely felt by whoever has it and the solution the start up offers must be recognized as the appropriate answer. In life science investing, for example, the target market question is in two parts. First, how many people have the condition or disease that this treatment addresses. Second, how many with the condition seek treatment. The market is the subset that desire a solution.
If the target market doesn't understand what it is or what it does or why they might want it, the start up will not make it to its happy place. Yes, something can be a great shampoo, floor wax and dessert topping but what it can do or how it can be used is the seller's perspective. But it will never sell on the basis of being good at any of those things, it will only sell for what it is great at doing from the customer's persepective. The buyer's perspective is not all it can possibly do, but the one or two things it will do for them and do for them better than anything else.
7. Salespeople determine Target Markets
It is unfair to ask salespeople to define target markets. The job of truly understanding the market segmentation and customer profiles is a broad responsibility across a start up. Many start ups task their limited sales force with solving this question on a "trial and error" market segmentation, where they call lots of people and report back on what they hear. The result is unscientific to the point of being completely unreliable. The right people have to be asked the right questions to determine the best prospects with the greatest need and perceived value for the solution. Only when the target profile is developed can salespeople deliver real value.
You need to position salespeople to win by defining the prospect clearly. Salespeople are often talented hunters but, for maximum efficiency, they need the prey to be carefully defined for them. If you say, "Go shoot rabbits", without further definition of rabbits, salespeople will shoot at everything that moves, declare them all to be rabbits, and argue that whatever they hit is proven as a "rabbit". It wastes time and won't secure customers that can be profitably sold and serviced on a scaleable basis.
Even given an infinite amount of time, most salespeople won't hone in on the best target customers. It isn't their skill set. Salespeople are great at determining fit of a solution to a customer's needs. Do them a favor by eliminating as many suspects as possible. Then, they can focus on fit, budget and compelling action. More will be sold as a result.
6. Wrong Timing
Being early to a market is a slower death than being late to a market. Either way, if the timing of the offering is well off of the market opportunity, failure is highly probable. It is easy to get timing wrong. Most Venture Capitalists have stories of great ideas that suffered from nothing more than abysmal timing.
If you have ever surfed, you know that once you see a big wave, you have probably missed it. Timing the great wave is about properly anticipating it within the context of many waves. By the time the success of a Groupon or LivingSocial is widely recognized, the opportunity to ride that wave is long gone.
You can also be too early. Even with a great product and a well defined market, timing is critical. I led the creation of a product called MyRoom.com in 1997 as an online private space for teenagers where they could create their web space, invite friends, have an email address, and enjoy a customized radio station. It was well executed, and way too early. If the company's market timing is way off, the start up won't often live to see its day in the sun.
5. Not Enough Experimentation
You cannot understand too much about anything related to a start up's progression. The rapid assimilation of the truth is a competitive advantage for a start up. All things being equal, in a competition the faster start up to get to the truth wins the race. At the end of the day, everything will be known by pretty much everybody. Before that point, a better understanding of key customer insights is a competitive advantage. A management team that prides itself in being "smarter" about customers without being data driven for its "intelligence" gets beaten by a team with better data -- nine times out of ten.
If the product and key processes aren't continually perfected with feedback and testing, the start up doesn't have a chance. If you don't get into a mode of test and refine cycles, you won't arrive at the processes, product, support and understanding necessary for growth. The start up that relies on its own wisdom consistently over the results of dispassionate customer dialogue and testing is screwed or soon will be.4. Low Urgency
Consistent with the previous point, every start up is in a race against time and insolvency. Show me a start up management team that isn't moving like its hair is on fire and I will show you failure in the making. When the team doesn't keep a fast pace, they fall behind in everything. When they fall behind in everything, there is no amount of money or cleverness that will close the gap between them and their faster moving competitors. There is no functional equivalent to a time machine, time lost is time gone.
There are legitimate reasons and times to move slowly and carefully. And it is difficult to know when patience should outdo urgency. To stay appropriately urgent, start up management teams must assess the rationale for going slowly. If critical data points are imminent, it is usually worth waiting. If the desire is to perfect something prior to launch, it is usually not worth waiting. Your team must accept that the perfect is not the enemy of the good. Many times, good will be good enough because failing to act is failure. There just isn't time for inaction. A management team that tends toward slower response to opportunity and challenge will create cumulative damage to the company's standing.
3. Total Random External Events
Stuff happens and sometimes that stuff is both random and devastating to a start up company. Many start ups fail for reasons beyond their control. Any start up making reasonable head way in the summer of 2008 with a product for the larger financial firms, including Wall Street, Large Banks or Mortgage Companies, knows this well. Sometimes things are "overcome by events" and fail as a result.
A start up can do almost everything right and still fail because of external events. So can large companies for that matter.
2. Poorly raised or managed Capital
This isn't just about the health or receptiveness of the capital markets, the company must either make do on the capital it has OR get more capital. Success requires more capital than failure requires. It isn't necessarily about the underlying growth or lack thereof, but moreover, the management of the capital available to the business. If enough money isn't raised or care is not exercised over what resources are available, then the money needed to survive isn't there. And the game is over.
Picture a growth market where companies are trying to gain marketshare while attempting to re-define a market of five players down to the two "winners". The availability of capital and access to it will have a disproportionate influence on the outcome. Or imagine alternatively, a down market where the stewardship of capital will determine the survivors.
Start ups need a capital strategy for well-being and growth. Many start ups fail due to lack of a sound capital strategy.
1. Unwilling or Unable Management
Start ups most commonly fail because their management isn't willing or able to make them succeed.
Getting start up successfully launched can be hard. Sometimes they can be nearly impossible to make succeed. In practice, it is far more likely that management is unwilling than unable to make a go of something. Many a management team backs off when they realize how long and difficult the road to success is going to be for their company. They will simply say, "This is too much". Which is true for them. It is entirely fair for them to admit.
Is too much for anyone? Maybe. Sometimes it is too much effort and time for little prospect of return. Sometimes, it is just too much for a given management team. Other times, the start up fails because it is beyond the abilities of the assembled team. This is less frequent in my experience. A management team that is willing but lacks ability will renew itself with deletions and additions. By comparison, a management team lacking in determination isn't situated to fix that or even motivated to fix it.
This post was originally published by BusinessInsider.com on September 3rd, 2010. Here is the link
