ataussig.com

High baud rate founders

Sat, 04 Jan 2014 11:37:03 -0800

4 key drivers of “broadband” communications for startups. (Originally posted on my Medium on ¼/2014.)

Speed of iteration is crucial to the success of any early stage company. What enables that speed to exist, however, is not always clear. So-called “life hackers” will promote their own techniques to get the most out of a 24 hour period. Agile software development practices can also push the envelope on speed. Simply working longer hours than others over a sustained period of time can be incrementally helpful, if you can keep it going without burning out.

Yet, the root cause of reductions in cycle time for startups always comes down to one thing: the rate of information transfer between actual people. We see this over and over again; the early startup teams who communicate most effectively with one and other tend to get the most done in a given period of time.

I call the people who start these companies “high baud rate founders.” They transfer information between one and other at an astoundingly high rate. (Strictly speaking, I should call them “high bit rate founders,” but baud sounds better to me. If you’re a stickler, read more here on the difference.)

A number of factors drive a high baud rate, and I have attempted to list the most important ones here:

1. Raw intelligence

It should not come as too much of a shock that some peoples’ gears turn faster than others’. This is a relative thing, but when I meet founders, I usually ask myself the question, “Is this guy or gal smarter than me?” I can get a sense for this by engaging that person in an intellectual conversation, in an area where I should be on equal footing. Basic math, science, or engineering usually do the trick.

If the whole team exhibits the same elevated pace of thought relative to me, that’s usually a sign of a high raw intelligence factor. It is essential that each founder possess this quality, since the overall processing speed of the group is governed by a min() function.

2. Efficient communication techniques

A processor can run as fast as it wants, but if it throws away cycles on useless tasks it is underperforming. Along those lines, high baud rate founders tend to send short, punchy emails with only the necessary detail. They tend to say a lot with a little. They tend to cluster similar tasks to avoid the penalty of “context switching.” In short, they maximize the amount of signal in their frequent interactions.

As an outsider, it can be hard to observe how founders economize their communication. I often get signals from forwarded email traffic, as well as the configuration of an office. There’s no substitute, however, for spending time at a company and casually observing this phenomenon directly.

3. Unspoken bonds

To deliver a message, the only thing better than an economy of words is none at all. I am always impressed by founding teams that have a bias for action, knowing full well how their colleagues will react, with no need to communicate in a confirmatory fashion. This can only be possible if the company has (A) a clear plan and (B) a strong culture. The former is necessary for the “what,” while the latter is necessary for the “why.” If both of these are solid, then each individual can usually figure out the “how” on his or her own.

I often ask founders about their product plan and what they will do in different contingent situations. Finding consistency in multiple founders’ independent responses is a really good sign.

4. Empathy for each other’s role

It is hard to have a high baud rate interaction with a peer without knowing his role and priorities. The quantity of empathy between founders is therefore strongly correlated with their collective baud rate. Founders with cross functional backgrounds (e.g. eng + product, sales + marketing) tend to be the best at this, but even a little bit of time spent out of one’s core functional area can improve the collective baud rate significantly.

This empathy can often be gleaned just by looking at the team’s background. A stronger signal, however, is the manner in which each founder speaks of the other and his respective contributions to the company. I view a “throwing it over the wall” attitude in an early stage company, for example, as a sign of trouble on this front.

In short, going faster should not be the goal. The goal should be higher throughput of all communications on the team. Getting this right will enable speed, and so much more.

Drones…in 30 minutes or less.

Sat, 04 Jan 2014 11:16:00 -0800

Why instant delivery could transform e-commerce. (Originally posted on my Medium on 12/2/2013.)

Last night, Jeff Bezos announced an ambitious new add-on to the popular Amazon Prime service: an option to have an autonomous drone deliver up to a 5-lb. payload directly to your home within 30 minutes. The program called PrimeAir is scheduled to roll out in 4-5 years, and I think it will cause a step function change in e-commerce adoption.

To date, e-commerce has been moderately successful in the U.S., linearly progressing to just under 6% of overall retail sales in Q3-2013. We have seen significant companies built in e-commerce in our own portfolio (e.g. Rent The Runway, thredUP) and others (e.g. Warby Parker, Zulily) and continue to get excited about new opportunities.

Yet, the market is transforming more slowly than, say, the breakneck shift from web to mobile. One justification is that instant gratification comes far more easily to pure software than it does to physical products, and as such the e-commerce consumer still suffers from a sub-par experience.

To the contrary, when a consumer product nails instant gratification, it quickly steals market share from its competitors. See, for instance, the effect that page load times have on the way consumers experience the web. Studies like the below are published all the time, the conclusion being that consumers hate to wait and will take their business elsewhere if need be:

Conversion rates drop by 6.7% for every additional second in page load time. (TagMan study, 2012)

The increasing speed of the web (and now mobile) has definitely contributed to the rise of e-commerce to date. It’s now pretty simple to find what you want. Getting the product to your house as fast, however, is another story.

That’s why I think PrimeAir is such a big deal: it will bring instant gratification to e-commerce. It is that feeling you get after a long day when you see what’s on Netflix and start streaming instantly, or when you download a new audiobook on your walk to the subway, or when you call an Uber after a long night out.

If the delivery bottleneck is broken for e-commerce, it will unleash a whole new wave of innovative companies. When you can get something within 30 minutes of your order, you will start thinking differently about what you buy and where. I have no doubt that the paltry 6% of retail today sold online domestically will at least double as a consequence of getting the consumer experience right with instant delivery.

Drones are a compelling way to implement this vision, but not the only one. What makes them a good starting point is their straightforward potential for autonomy. In many ways, a drone navigating itself between a distribution center and your home has a lot easier time than a Google self-driving car doing the same. Moreover, the economics for small packages must be far in the drone’s favor.

I have to believe, however, that we’re still going to be relying on grounded transportation for those heavier items. My platform bet in that case won’t be Amazon; it will likely be Uber, Google, or another company with a fleet of cars that have excess capacity during the middle of the day. Maybe Amazon itself will get into the ground delivery business, buying a company like UPS or launching its own fleet of trucks and city vehicles.

It is looking more and more like the next battleground in e-commerce will be logistics. The winners in the next 10 years will be the companies that embrace new delivery methods as a means to differentiate and deliver instant gratification to their customers, who will spend more and more of their wallet on online goods…perhaps delivered by your friendly, neighborhood drone.

summerathighland: Introducing the Summer@Highland Class of...

Fri, 10 May 2013 08:12:02 -0700

summerathighland:

Introducing the Summer@Highland Class of 2013!

When we opened our call for Summer@Highland applications a few months ago, the entire Highland investment team pitched in to get the word out. We came bearing pizza to almost 30 university campuses in a little over a month. We held a couple Google+ Hangouts to connect with those we couldn’t meet with in person. Nearly 900 students applied from 85 universities around the globe, and we subsequently pored over each individual application looking for the top student teams to bring into our offices this summer.

Selecting the small number of teams we can host for the summer was an enormous challenge. We were blown away by not only the amount of applications we received, but also by their caliber. The majority of teams not only have a working product, but many of them have users, partners and have achieved some insanely impressive milestones – all while being full-time students.

We ended up selecting the following nine exceptional teams from across the country (PandoDaily also wrote a nice write-up here). Please meet and congratulate the Summer@Highland Class of 2013!

Alpha (Stanford University) – Alpha is a digital university for hackers that teaches experienced developers how to build actual applications for the “real world” through project-based learning in the browser. The team is also a finalist in the BASES (Business Association of Stanford Entrepreneurial Students) 150K Challenge

Butucu (Harvard College) – Butucu, an all-freshman team, aims to help retail stores improve the customer experience by allowing them to push custom, relevant content to in-store shoppers while providing high-level analytics

Connect.com (Harvard Business School) – What if all your connections from Facebook, LinkedIn and Gmail were shown on a map? Connect.com puts all your friends on a map so you can find people when traveling, plan events and visually explore your network. The company is co-founded by Ryan Allis, previously the co-founder and CEO of iContact (acquired by Vocus (NASDAQ: VOCS) for $169 million in 2012)

EagerPanda (MIT) – EagerPanda allows educators to easily build their own custom online courses, and enables learners to connect and communicate around this content

Phyre (Boston College) – Winner of the Boston College Venture Competition, Phyre is building a portable device that makes it easy to wirelessly connect and interact with large displays from any phone, tablet or laptop

Sension (Stanford University) – A computer vision platform that makes online content engaging for the user, Sension works with a simple webcam to let anyone make videos that respond to the viewer

SkylBridge (Wharton School of the University of Pennsylvania) – SkylBridge is an online talent marketplace for businesses to find top-quality yet affordable business freelancers for short-term projects

Splat (Cornell University) – Splat is a small device that transforms a smartphone into the ultimate social-gaming console, letting users play physical, in-person, interactive video games

Technical Machine (Olin College) – Technical Machine is an embeddable platform for developers to make internet-connected physical devices

Congratulations and best of luck to each and every student who applied this year – we couldn’t be happier to now have you as an extension of the Highland family and look forward to working together in some fashion over the course of your career.

And stay tuned to this blog throughout the summer to follow the progress of the Summer@Highland Class of 2013!

- Alex Taussig, Principal, Highland Capital Partners

Announcing the Summer@Highland Class of 2013!

summerathighland: Yesterday we ventured over the Bay Bridge to...

Wed, 06 Mar 2013 18:55:20 -0800

summerathighland:

Yesterday we ventured over the Bay Bridge to visit a university in our farther away backyard, UC Berkeley.

Beyond the info. session we held at the Haas School of Business, we got to meet with a few other student groups that are helping inspire the entrepreneurial spirit on campus. One was the Haas Entrepreneurs Association, which is the largest student organization at UC Berkeley with over 500 members. The other was the CSGE (Computer Science Graduate Entrepreneurs), which is a smaller, more specialized entrepreneurial group that’s focused on solving highly technical challenges.

A lot of questions about Summer@Highland circled around how we evaluate team members, and with our investment focus on technology, many students asked if you have to be technical in order to apply. The answer? It depends. What we look at when we’re evaluating each team is if they have the background and credibility to execute on their idea. So if the idea is highly technical and there are no technical team members, we will likely have less confidence in your company’s success than if you did.

But really at the end of the day you should only apply (and pursue an entrepreneurial venture in general) if you have an idea you’re so passionate about you can’t stop working on it. It gets you out of bed each morning and keeps you up late at night, and feels more like a personal endeavor than a professional one. It’s that sort of drive and excitement we’re really looking for versus strictly what’s on your resume.

And on that note, only 26 days left to get your application in. Have at it!

- Amy White, Director of Marketing, Highland Capital Partners

A good recap of our trip to Berkeley:

Nightingale Blog: Highland Capital Easter Egg Hunt

Wed, 27 Feb 2013 13:32:18 -0800

Nightingale Blog: Highland Capital Easter Egg Hunt:

Well, looks like someone found our Summer@Highland easter egg! Go check out his post on how he did it.

nightingaletalk:

So I was hacking away on Nightingale yesterday when Delian mentioned that a few guys from Highland Capital had emailed him, encouraging us to apply for their summer accelerator. I didn’t think much of it until he told me that there was secret easter egg on their site which would get us…

summerathighland: Last week, we spent some time in our...

Tue, 26 Feb 2013 10:34:05 -0800

Highland Partner Manish Patel giving some sage advice.

Student entrepreneurs share their ideas.

Summer@Highland alum Rebecca Hinds meets a fellow student entrepreneur.

Summer@Highland alum Erin Parker and a fellow student.

summerathighland:

Last week, we spent some time in our backyard (and my alma mater!) on the Stanford campus (special thanks to SWIB and BASES for helping put this together). Instead of hosting an info. session that only covered Summer@Highland, we thought it would be more fun to have an informal meet and greet with some of our Stanford Summer@Highland alumni, all of whom are either still working on their Summer@Highland projects or have moved on to new ventures – either way, they’re continuing down the path of entrepreneurship.

What most impressed me was the feeling of camaraderie and support among the students who are looking to start their own companies. Many came specifically looking to speak with our alumni about their own startup ideas and learn more from their peers about how they got started. It very much emulates the off-campus startup scene in the Bay Area – there is a sense of mutual respect for what each entrepreneur is going through, and a real sense of community in terms of sharing tips, contacts and forming truly mutually beneficial partnerships.

As someone who works in a people-based business, I’ve come to learn the benefits of building your own network are immeasurable – you never know what someone you meet today may end up doing tomorrow; you may be able to help them down the road or vice versa. It’s exciting to see that Stanford students already recognize this and are taking advantage of everything the campus has to offer. Hopefully, you’re doing the same on your campus, too!

- Manish Patel, Partner, Highland Capital Partners

summerathighland: Yesterday, we spent time at both MIT and...

Thu, 14 Feb 2013 17:26:01 -0800

summerathighland:

Yesterday, we spent time at both MIT and Harvard, hosting five different events at both schools in one day. That’s a lot of free pizza! We met more than 120 students over the course of the day, all of whom are interested in building technology products and are exploring their options for the summer.

What has really resonated with me (Alex) is how much the startup scene has changed over the last few years at MIT and Harvard, both schools I attended. At MIT, the $100K has always been the center of the ecosystem, but now it seems like students have access to greater resources throughout the year. Like most significant changes at universities, this one was driven by students, and now the faculty and administration have co-opted it as their own. A similar situation exists at Harvard, where right around the time I left HBS in 2009, startups became a thing people wanted to do. The creation of the “Startup Tribe” (MBAs) and “Hack Harvard” (undergrads) started a groundswell of interest which now has been bolstered by the administration’s increased support of CS50 (Intro to Computer Science) and an expanded, more engineering-focused curriculum.

Finally, and perhaps most importantly, startups seem to be coming to campus to recruit, which certainly wasn’t the case in my day. My final talk of the day at Harvard Hack Night, which started at 10:10pm (!), was followed by Pooja Sankar of Palo Alto-based Piazza. She did a great job telling her and her company’s story; and it occurred to me, while sitting in the audience, that we would never have convinced a speaker of that quality, at such an early stage in her company’s life, to come all the way from California to present at 11pm on a Tuesday night.

All in all, it’s great to see entrepreneurship alive and well and my alma mater(s). Thanks to all our hosts for their hospitality, and we’re looking forward to visiting more schools to tell the Summer@Highland story. Early deadline’s coming up soon!

Neat summary of our visit to Harvard and MIT this week.

Is HBS becoming a tech feeder school? I hope so.

Sun, 10 Feb 2013 11:00:22 -0800

I graduated from Harvard Business School in the nuclear winter of job seeking: spring of 2009. I remember quite a few of my classmates thinking they were going to “career transition” into private equity out of consulting or I-Banking being sorely disappointed. We hit a record low for job acceptance, and many of those who accepted were returning to prior employers. Interestingly, a large number of great startups (Rent The Runway, thredUP, VigLink, Cloudflare, etc.) came out of my class, perhaps a slight consequence of the dim traditional job prospects.

I usually follow HBS MBA job stats as something of a curiosity to see how much things have improved since I was there. The school recently released the most recent data for the Classes of 2012 and 2013, and what it shows is a surprising shift towards supplying labor into the tech market:

More engineers: 36% of undergrad degrees hold by the Class of 2013 were STEM vs. 33% in 2012.
More job seekers: 88% of grads were looking for jobs in 2013 vs. 74% in 2012.
More technology seekers: 19% of 2013 summer internships in technology vs. 12% of 2012 full-time jobs.
More Silicon Valley: 15% of 2013 summer internships in Bay Area vs. 12% of 2012 full-time jobs.

Overall, 6% of the Classes of 2012 and 2013 accepted full- or part-time jobs at startups last year. That’s slightly down over the prior year’s statistic of 7%. So while HBS seems to be gaining a tech focus, startups remain roughly flat as a percentage.

To me, these are good signs. Often the best role out of an MBA isn’t to join something small, but to join something a bit larger with some structure in place. I suspect that’s what is going on, but if you tracked these cohorts of students for 5-7 years, I bet you’d find a high percentage of them in startups. Happy to see HBS growing its influence here.

Jim Cash is a special advisor at Highland and recently paid us a...

Thu, 07 Feb 2013 09:53:00 -0800

Jim Cash is a special advisor at Highland and recently paid us a visit in Silicon Valley to speak with a few of our founders and CEOs. Jim’s bio is pretty mind boggling. He has served on 18 public company boards (currently serves on those of Walmart, GE, and Chubb) and taught at Harvard Business School from 1976-2003, where he created much of the technology curriculum and served as Chairman of the MBA Program. He works with companies that spend a minimum of $200 million on IT annually, or up to $6 billion. Jim also runs the Cash Catalyst, an exclusive CIO forum that he created to encourage the sharing of best practices. He views his job as a board member to be the connector between the creators of innovative technology and the ultimate buyer: the large multinational corporation.

Our CEOs asked Jim a few questions, and although it was a closed door session, Jim has graciously allowed me to share a few of his thoughts below. Everything you read below is my paraphrasing of his responses, so please interpret liberally. Enjoy!

How do big companies switch from on premise IT systems to the cloud?

For a large company, the first step in migrating to the cloud is to simplify on premise solutions. You must both consolidate the systems you have, and then standardize across the organization. If you don’t do this first, migrating to the cloud will be a mess. Not everything will eventually get pushed out of the enterprise though. Most big companies are looking at “hybrid clouds,” keeping certain essential resources behind the firewall and centralized.

Is monitoring and visibility increasing on the priority list of customers?

If you asked CIOs that question, they would probably say “yes.” However, until you have a big issue come up, it’s not an actual budget priority. Often, the great driver of monitoring and visibility as an enterprise application is regulation. The type of monitoring is changing, too. More and more, we are moving away from sampling transactions and towards a world in which we process all the data.

How about security? Is that now a top priority too?

It depends on the company. The way I determine a company’s priority is to ask, “Where does the Chief Information Security Officer (CISO) report?” I am pushing the companies I work with to create a reporting relationship similar to internal auditing. Some companies have a technology subcommittee of the Board of Directors, and could have the CISO report to this subcommittee. The one exception is when there are multiple autonomous business units competing in different industry segments, but otherwise I like this structure.

Can small companies effectively work with big companies?

My strong belief is that the era of centralized R&D is over for most large companies. We’re in the age of “distributed innovation,” which means that large companies must find ways to work with smaller companies to field innovative products and processes. P&G has a program called Connect & Develop, for instance, which is a good model for others.

So, if you believe that too, the real question is, “How does your target partner perceive distributed innovation?” The ones that embrace it will, of course, be more willing to let your startup guide them, and less likely to accidentally get in your way while doing so.

How do big companies decide which cloud applications to adopt?

The thing to understand is that there is a large opportunity cost in top down provisioning. You simply do not know what the best solution is. It used to be the case that you had to pick one and hope you were right. But now, each of your employees can pick what works for him, download the client software (or just open it in a browser), and then the crowd will decide what the right solution is. Big companies need to move away from command and control of the actual software, and focus on owning and securing the data those applications produce. The end play here is an open market for software inside of enterprises.

You’ve been on a lot of boards with legendary CEOs like Bill Gates of Microsoft and Mike Duke of Walmart. What’s the common attribute that you’ve found in great CEOs?

It’s a hard question to answer. The biggest commonality I’ve found is the ability to identify significant talent in other people and challenge them to push their limits. They have the humility and self-awareness to truly hire people that are better than themselves at whatever they do.

What advice do you have on constructing a Board of Directors?

My first tip is to put term limits on outside directors. You can always modify these later, but I think it’s bad to have lifetime appointments. In addition, keep the board small and relevant to the task at hand. We used to run Microsoft with 7 directors when it was a $300 billion market cap company. Why do some private companies have 10-12 directors? Also, don’t confuse advisors and board members. The former is for specific helpful tasks, while the latter is for good governance. If you want to get someone involved with your business, get them involved as an advisor first. The bar should be a lot higher for a director. Finally, the CEO should do a 30 min call with each board member before the meeting. There should be no surprises in a board meeting, and all members should be prepped on the data and key issues before going into the meeting. That way, the actual time of the board meeting is used most efficiently and everyone comes in on the same page.

summerathighland: On Tuesday, Highland hosted a group of...

Thu, 31 Jan 2013 10:29:48 -0800

summerathighland:

On Tuesday, Highland hosted a group of Stanford GSB’ers at the Old Pro in Palo Alto. The backgrounds of the folks we met varied quite a bit from the canonical MBA profile. We met at least three materials engineers, one console gaming market analyst, and a guy who used to build brain/human interfaces. And, above all they wanted to know how to use their skills in the context of a startup. Excited to see what they are going to accomplish this summer!

summerathighland: Last night, the Highland team invited a few...

Fri, 25 Jan 2013 12:27:00 -0800

summerathighland:

Last night, the Highland team invited a few of our friends from BASES (Stanford) to dinner at the Creamery in Palo Alto. Burgers, fries, and milkshakes flowed liberally, as did the conversation.

At my table, the big topics were privacy on social networks and the inflated popularity of the CS major at Stanford. On the former topic, older people often assume that the 18-25 year old demographic really doesn’t care about privacy. I’ve found this to be less true than one would think. In fact, because the younger generation is a bit more digitally savvy, its members understand the implications of putting something on interwebs - that it stays there forever. Alcohol may interfere with that rational understanding from time to time, but they do “get” it. That’s why many of the youngest ones have fled to ephemeral services like Snapchat.

The latter big topic was a bit counterintuitive as well. One would think that CS majors would welcome converts to the fold. Yet, there’s a growing suspicion that students increasingly declare a CS major at Stanford to make themselves more attractive to the consulting firms and investment banks when recruiting season hits. My argument was that it’s tough to sit through junior year “Operating Systems” if you’re simply padding your resume, but the group felt that this was a real problem.

In any case, it’s always fascinating to hear what students are thinking about and working on. We’ll be keeping you posted as the Summer@Highland university outreach rolls on!

Announcing Summer@Highland 2013

Thu, 24 Jan 2013 08:10:16 -0800

Six years ago, we started an experiment here at Highland to see if we could find a better way to get to know the most promising entrepreneurs at local universities. We recognized that many of the great companies formed in the last decade or so, especially in consumer internet, have been the creation of founders who weren’t too far out of school. In some notable cases, they never finished.

Yet, we also recognized that many of these student-founded businesses ran into the same problems with hiring the wrong people, building the wrong product, or going after the wrong market. Students, almost by definition, don’t have the benefit of hindsight to guide them to make informed decisions. This frustrated us because we felt that our shared knowledge of company building, garnered over the last 25 years of Highland’s existence, could help students get to the right answer faster, and create lasting value for their companies.

And so Summer@Highland was born. We designed it exclusively for student founders and the unique problems they face:

Hard to find flexible sources of small amounts of capital. We give each team an $18K stipend, no strings attached. Founders retain ultimate flexibility with what they want to do after the program.
Challenged to engage relevant business mentors. We actually spend time with the teams, and treat them as we would portfolio companies.
Lack of initial business network. We bring in top founders and CEOs and introduce them to the teams. We also open up our personal networks to help these founders grow their businesses.
Difficult to procure short-term office space. We open up our offices in Silicon Valley and Boston for these teams to work alongside one and other.

So far, we believe the program has been successful. Our 35 teams have raised close to $100M in venture capital, and we are proud to have companies like Cloudflare, Gemvara, and Wildfire as alumni.

We are thrilled to announce that the application for Summer@Highland 2013 is now open at http://summer.hcp.com. We’re looking forward to another great year, and can’t wait to see what this year’s applicants are working on!

[ reposted with love from http://summerathighland.tumblr.com ]

How to set a Wildfire

Fri, 11 Jan 2013 11:51:18 -0800

It’s January, which means it’s “east coast schools visit Silicon Valley” season. Harvard Business School, in particular, does a great job at connecting students with alumni entrepreneurs out here. A week or so ago, I attended one of these HBS events featuring ‘08 alum Victoria Ransom, co-founder of the social media marketing pioneer Wildfire. Victoria started Wildfire during our Summer@Highland program in ‘07, and recently sold her company to Google for an undisclosed (but most likely very favorable) price. Victoria had a couple pieces of advice for the audience, which I’ll share here.

Just say “no” to customization.
Customization leads to low margins, due to a higher level of service and added distraction for the development team. While some companies may charge separately for services, adding a services component in most businesses reduces the ability to scale quickly, even if revenues are higher.

Victoria took the position that Wildfire would build tools for its customers to manage social media marketing campaigns, but would not customize its tools beyond the core feature set. Such behavior should be saved for digital agencies, not tech companies. This decision was a contentious one, since Wildfire was often approached by companies with big marketing budgets demanding special attention. Yet, it enabled Wildfire to have great margins, the evidence for which is how little venture capital it raised to get to a similar scale as its competition.

Use a commission-based sales model with a low base.
Setting a low base salary for her inside sales force created several benefits for Wildfire. First off, sales costs scaled in line with revenue, so the business stayed capital efficient. Second, a high commission structure relative to base attracted a different type of sales person: younger, hard-working, more driven to succeed. Finally, because high commission structures are attractive to those earlier in their careers, the pool of people to hire was significantly larger.

The caveat here is that a great sales machine, which takes inexperienced young people as an input, requires world-class training. As such, Wildfire hosted regular sales bootcamps and promoted its own star salespeople into managers to run them.

Enable every employee to be a recruiter.
In the competitive Silicon Valley hiring market, relying on paid recruiters is an arms race, where the company with more money and more recruiters wins. Wildfire took a different approach. A key metric watched by management was employee churn (excluding those let go for performance reasons). They noticed that low employee churn correlated with a high degree of job referrals from the employee base. No surprise: happy employees tell their friends to come work at their company.

Today, roughly 50% of Wildfire’s new hires come through employee referral. When you’re running a business that scales with a sales machine, that organic hiring ability is a real competitive advantage.

What irks me about Avis-Zipcar

Thu, 03 Jan 2013 07:47:28 -0800

I started using Zipcar at MIT during my grad school days in late 2005. Living in a dorm on campus for $900/month and getting paid next to nothing, I certainly couldn’t afford to park a car, much less own one. Zipcar seemed like a great way to have access to a car, without the associated overhead. There were a number of cars just down the street, so it was convenient. Plus, Zipcar was the only car rental company that wouldn’t slam me with an “under 25” fee. If anything, Zipcar was cheaper for the 21-25 crowd because of significant student discounts. And the experience (pre-smartphone days, mind you) of swiping an RFID card, getting in a car, and driving off was simply delightful.

I had rented cars before when I was with my parents, and not much has changed with that process. I don’t use Avis frequently, but from what I remember it’s not much different than Hertz. I use Hertz all the time, usually gritting my teeth. I’ve written before that renting a car is one of the sleeziest mainstream consumer experiences: the inability to hold the reservation you made, the ridiculous upsell to insurance you don’t need, the poor service when all you want to do is fall asleep after a 6 hour bicoastal flight, the insanely bad GPS systems that cost as much as gas in some cases.

Post acquisition by Avis, I hope that Zipcar doesn’t go the way of its conventional car rental brethren. Zipcar succeeded early on because it delighted customers with a value proposition they couldn’t find elsewhere. My worry is that, as long- and short-term rental blend together as a category, the service will start to deteriorate. The temptation will be too strong to apply traditional upsell techniques to Zipcar customers, and that’s when they’ll start to leave in droves.

So tred lightly, Avis. You could really screw this one up.

Back in the saddle

Wed, 02 Jan 2013 07:00:03 -0800

You may have noticed this blog has been a bit sparse lately, if not totally barren. The change from my weekly-ish posting to nothing at all was somewhat intentional. With a cross country move just completed, I forced myself to focus on getting in the swing of things out here in CA. No time to blog unfortunately.

It’s been in a crazy end of 2012 to say the least. I am involved in several, early stage investments now, all of which are tackling big problems with technology. At this point, however, I can only talk about one of them: thredUP. I will do so in a future post.

I have also taken the reigns of our Summer@Highland program, which we will be launching formally over the coming month. We are very excited to roll out our sixth annual program to help university students build companies over the summer. More to come on that as well.

Finally, let me add again that I appreciate all the support of the regular readers of this blog. Do me a favor and tweet, share, or subscribe to spread the word. Here’s to a productive 2013!

P.S. I wrote this post in the Tumblr app on my iPhone 5. Mobile first, baby!

Some notes on culture

Thu, 27 Sep 2012 11:13:00 -0700

Culture is one of those traditionally hazy business concepts that everyone thinks is important, yet no one can define. Or, if they can define it, the definition sheds almost no light on what to do tactically to build culture in a company.

This morning, I sat in on a brief panel discussion that had a few choice nuggets on culture. Combined with a few of my own observations, this represents a decent subset of what I deem to be tactical when it comes to setting culture in a startup organization:

Culture is how people decide what to do in the absence of explicit instruction.
When you have 4 founders around a dinner table, it’s relatively easy to discuss difficult topics and come to a decision point. When you have 400 employees, that’s impossible. Eventually, someone in your company is going to make a critical decision without consulting you, and you want her to do so in a way that represents your company’s values. The goal is that she knows which decision to make because she refers to strong, pervasive cultural norms.

Your employees learn culture in the first few months, and then it sticks.
Should I forward this email with cat pictures to the list-serv? Should I invite my manager to this meeting? People ask themselves these questions a lot when they start a new job. They find the right answer by looking towards their colleagues. After that point, they assume that’s “the way things are done” and go on autopilot.

As such, the main cultural decisions (“No, we don’t send out time wasting emails” or “Only invite your manager if a resource allocation decision needs to be made”) are decided in the first few months after you hire an employee, so it’s important to enforce them early and often.

Put all decisions in the context of the mission. This reinforces culture.
Any time you make a decision that has some exposure in the company, tie your justification explicitly to the mission of the company. Use these opportunities to communicate and reinforce the message, and in doing so you will show practical applications of the company’s culture.

Culture means nothing if it doesn’t influence hiring, promotions, and terminations.
Reed Hastings likes to point out that the values of Enron were Integrity, Communication, Respect, and Excellence. Were these traits really valued? Of course not. A culture is only authentic if managers take action (read: hire, promote, or fire) on the basis of that culture. A lot of people should have been fired at Enron if those were the true values of the company.

All hands meetings are 100% necessary and should be made at least weekly.
Github holds a “all hands” meeting each week it calls “Beer O'Clock” where it does at least 3 things. First, the CEO introduces each new hire and describes what she is working on. This helps the employees find one and other in the organization and set the expectation of an eventual work product from that person.

Second, he talks about what was shipped that week, and occasionally does a demo. That shows employees that shipping product is a key value of the company.

Finally, he talks about the general state of the company and reinforces his philosophy on what he is building, again taking the time explicitly reinforce culture.

Develop metrics for culture, like everything else.
A good culture is attractive. People want their friends to work at their company if they love their company and its culture. Make it easy for employees to bring their friends into the fold, and then track how often they do this. It’s a great example of a metric that shows positive cultural growth.

Another good one is how often you, the CEO, get called out for violating the company’s values. The comfort an employee must have to do this shows how pervasive culture must be.

Never compete on compensation with larger companies.
If you’re the highest bidder, as a startup, you’re probably not sending the right message to a new candidate. The message you are sending is that your culture is about extracting financial value, which may not be the one you want to promote.

Furthermore, you should assume that everyone will eventually know what everyone else makes. Paying people in similar roles drastically different salaries due to different hiring situations can engender resentment.

Don’t define culture in negatives.
Google is famous for “Don’t be evil.” Atlassian has “Don’t f*&% the customer.” These look great on T-shirts, but when it comes down to action it doesn’t help with edge cases. What about sort’ve being evil? Or sort’ve f*&%ing the customer? I mean, charging them more for additional services if they don’t notice isn’t really evil, is it?

Instead, define culture in positives. Atlassian has another core value that I like better: “Be the change you seek.” That tells me that, when I can’t get others to do something in the organization, it’s my responsibility to get it done myself.

Finally, whatever culture you create, optimize it for happiness.
Happy employees stay at your company, and they often bring others into the fold.

If you have other suggestions, please leave them in the comment section below!

Check out this thread on VYou today, with a bunch of VCs...

Sun, 23 Sep 2012 12:30:00 -0700

Check out this thread on VYou today, with a bunch of VCs discussing hardware vs. software (myself included). If you have something to add to the discussion, just click Answer above!

Building a biodiverse startup team

Mon, 13 Aug 2012 11:59:48 -0700

An early PayPal employee revealed to me recently that one of the key success factors early on for the company was hiring only friends or close acquaintances of the founding team. Some clear advantages of this approach are:

Each candidate is already vetted.
Compensation will probably be more reasonable since the relationship is proprietary.
The close rate is naturally going to be higher.

The main disadvantage of this approach is that it doesn’t naturally scale beyond the social network of the founding team. At some point, even though the marginal employee brings on new connections, the number of net new connections will experience diminishing returns. I call this a lack of “biodiversity” on a team. At some point, you need to bring in an outsider to provide a shock to the system, which can make it more resilient and open up new networks.

The big question is when to do this. I’d argue as late as possible. Keep the team small and familiar until you simply can not do so anymore.

Unfortunately, I’m seeing lots of companies giving up too soon. And when they do give up, the floodgates open. Professional recruiters (both inside and outside the company), LinkedIn, GitHub, and other sources of leads are necessary at a certain point. But these can become a hard habit to kick once the recruiting machine is up and running.

If you’re going to reach out cold, at least focus on a few core people that matter deeply in your industry, and get those folks on board. Make sure their social network is non-redundant to that of your team. Then, empower their new hires to begin the cycle of hiring their friends and close acquaintances.

Thinking of each new hire as bringing on net new connections is a far better way to approach recruiting and will help push out the need for a cold-call recruiting engine until much later in your company’s life.

Rebuilding my RSS feed

Wed, 01 Aug 2012 09:56:34 -0700

A little over 4 years ago (sometime during business school), my good friend Rylan Hamilton told me to set up an RSS feed to follow a few sectors that I was interested in for job opportunities. This piece of advice became my #1 tactical recommendation in the years that followed for all job applicants. (You’d be surprised how many people don’t know that reading every day about your sector makes you a more qualified applicant. Go figure.)

Lately though, my RSS has become bloated and inefficient, so I spent a few hours over the weekend rebuilding it. A few folks have asked me what I follow, so here’s the list in completeness.

NOTE: I’ve hyperlinked a few of my less well-known favorites that you all should check out. If you have some non-redundant additions to the below, please leave them in the comment section. Thanks!

Tech & Internet

Andrew Chen’s blog
BostInnovation
Hacker News
PandoDaily
TechCrunch
VentureBeat

Product & Design

Ask E.T.
Six Revisions
Bokardo
Little Big Details
Presentation Zen
Oneextrapixel
Wireframe Showcase
Design Staff
Inspect Element
pinch/zoom
tripwire magazine

Marketing

Marketing Pilgrim
Startup Marketing Blog
The KISSMetrics Marketing Blog

Robots & The Future

KurzweilAI
MAKE Magazine
MIT News - Robotics / artificial intelligence
Science Daily: Robot News
Singularity Hub

Other (highlights only)

HACK Education
Earth2Tech
Letters of Note
Steve Blank
A VC
Ben Horowitz’ Blog
Demo Memo
Visualizing Economics

Crank turners

Wed, 25 Jul 2012 10:55:47 -0700

I had lunch yesterday with a friend who runs product at a giant consumer tech company. We talked a bit about my impressions of Silicon Valley and the temporariness of some of the startups we’ve both come across. His response was that the sole reason his company was successful early on was that they “had 10 really smart people in the same organization, working on the same problem, for 3-4 years.”

Imagine how difficult that would be now, with talent as fluid and competitive as it is in Silicon Valley. Many of those smart people are tempted to build an incremental feature on top of something another team spent years focused on. Sometimes that strategy works, and when it does, it reinforces the cycle that this is the best thing for smart people to do: build incrementally and move onto the next thing.

The American author David Foster Wallace critiqued this approach in the world of literature in a 2005 interview, when he called these people "crank turners.“ I think the analogy is somewhat apt to the startup world:

But when you talk about Nabokov and Coover, you’re talking about real geniuses, the writers who weathered real shock and invented this stuff in contemporary fiction. But after the pioneers always come the crank turners, the little gray people who take the machines others have built and just turn the crank, and little pellets of metafiction come out the other end. The crank-turners capitalize for a while on sheer fashion, and they get their plaudits and grants and buy their IRAs and retire to the Hamptons well out of range of the eventual blast radius.

There are some interesting parallels between postmodern crank-turners and what’s happened since post-structural theory took off here in the U.S., why there’s such a big backlash against post-structuralism going on now. It’s the crank-turners fault. I think the crank-turners replaced the critic as the real angel of death as far as literary movements are concerned, now. You get some bona fide artists who come along and really divide by zero and weather some serious shit-storms of shock and ridicule in order to promulgate some really important ideas. Once they triumph, though, and their ideas become legitimate and accepted, the crank-turners and wannabes come running to the machine, and out pour the gray pellets and now the whole thing’s become a hollow form, just another institution of fashion.

Take a look at some of the critical-theory Ph.D. dissertations being written now. They’re like de Man and Foucault in the mouth of a dull child. Academia and commercial culture have somehow become these gigantic mechanisms of commodification that drain the weight and color out of even the most radical new advances. It’s a surreal inversion of the death-by-neglect that used to kill off prescient art. Now prescient art suffers death-by acceptance.

We love things to death, now. Then we retire to the Hamptons.