Yaniv Nizan's Personal Blog

Closing Costs - Critical Lesson

2012-01-06T23:25:47+02:00

This is a post I was putting on the bench for some time but I think enough time has passed for it to go live.

One of the invaluable lessons I learned as one of the founders of EyeView was about closing costs. Simply put, Closing costs is the minimal amount of money you will need to close the company. I'll go into more details about how to calculate it but let me share the lesson first.

After raising a first round of $1M, it almost seemed like EyeView can never run out of money. We were young and inexperienced at that time so that sum of money seemed like it can last for a very long time. Reality was different. Once you move from a garage based operation to actually having employees and offices the money start to vanish quickly from your bank account. Our case was no different. We arrived very quickly to a situaiton where additional funding was needed.

One advantages to having a VC back you up is that you have a pretty good idea where the extra funding can come from. However, that extra level of comfort comes with a price - you don't know if you are getting a fair deal or not. As inexperienced as we were we decided that we should shop around before taking the initial offer from our VCs. In retrospect, this was a bad move especially as we overlooked two critical points. One false assumption that we made is that the offer we received from our existing VCs will be waiting for us after we shop around - this was not true. The other mistake was ignoring our closing costs in our assessment of how much time we have before we will have to default to the original offer.

The end of that story was that we realized our closing costs in the middle of a round and didn't have time to close the external round. We had to come back to our VCs with almost 0 negotiation power and the initial offer that we weren't sure about got a lot worse. The round we raised wasn't a down round but we lost much more equity on that than we needed.

How to calculate closing costs

I'm sure there are more thorough ways of doing the math but the following rough estimations could save you 90% of the trouble. Assuming your notice period for employees is 30 days and the accomulated unused vacation time is 14 days (since it's unlikely that your employees used their vacation balance / PTO balance), you need to calculate 1.5 months worth of salary for any non-founder employee. For 6 developers this would roughly be $100K. To that you want to add the notice period on your office rent contract multiplied by your monthly rent and any other significant commitment you might have such as hosting, freelancers and vendors.

What to do with that number

So after you calculated that, you might have some dollar figure in your hands let's say $150K. This is actual money you need to put aside. Painful as it may be, you don't really have that money as you already comitted to pay it. If you don't put it aside, my advice is to consistantly deduct it from any cash balance calculation you are doing and to make sure every time you calculate how much time you have before you need more funding, you don't relay own that money.

Top 10 Challenges of Intrapreneurship

2011-12-11T21:28:27+02:00

Being an Intrapreneur can be very challanging. Here are the top challanges for taking an idea and turning it into an Intra-startup based on my experience as the Intra-foudner of INTENTclick.

1. Develop and qualifying your idea - there are many ideas out there but the process of taking an idea and making it into something that is going to worth your time and energy requires a lot of effort. Moreover, it requires speaking to a lot of people and getting invaluable feedback that will help you evelove the idea. Doing so inside a company requires a lot of courage.

2. Locking management commitment - unlike with external ventures an Intra-startup doesn't raise capital. However, in order to start executing on your ideas as your full time job inside a company and to be able to get additional resources you will need to get management buy in. The process is very simillar to pitching to a VC, at the end of the day it's all about making the busienss case for your venture.

3. Not giving up - preseverance is a big piece of the puzzle in entrepreneurship but it's actually harder for an Intra-founder to push through endeavors as the alternative of going back to the comfort of the corporate world is relativly easy.

4. Crossing the chasm - once you have reached a few market successes you need to start rolling your product out. Intraprenuers are faced with 2 alternatives - going through the existing sales department or developing it's own sales and marketing.

5. The internal sale - Sales orginzations are success driven and tend to focus efforts where the success is easy and rewarding. New products usually represent the exact opposite as they require more effort and are initially harder to succeed with.

6. Market Cannibalization and Territorial Conflicts - Developing an alternative sales organization can be very challanging as it presents the risk of internal competition between the two organizations. Doing so requires a clear differentiation between the markets that each organization is pursuing.

7. Corporate alignment - Startups usually have to figure this one out only when they are getting acquired but an Intra-startup has to constantly check it's alignment with the overall corporate vision.

8. Hiring employees - Intrapreneurship is very rewarding but at the same time it is very demanding and requires a pesonal sacrifice. This is also true for anyone who will come to work on your venture so you need to make sure they are able to enjoy the rewards by allowing them to identify themselves with the venture.

9. Maintaining focus - keeping an eye on the target is key to succeeding with any venture. An Intra-startup is exposed to a great deal of distractions from various internal sources which makes it all that harder.

10. Aiming High Enough - comparing my role as Intra-founder of INTENTclick to CEO in a VC backed company. The latter one is forced by his investors to aim high while an Intra-founder sets the bar for himself in many of the cases.

The Bitter the Better

2011-12-09T20:15:51+02:00

I'm going to go off topic and out of my habbit of writing about business, leadership and tech and dedicate this post to beer and more specifically bitter beer which is my favorite type of beer.

I only recently discovered that I like my beers as bitter as possible. However, Israel is not the best place to come by that discovery as most beers are from the watery kind or the fruity and sweat kinds. I had to identify what is it that makes beers bitter and what would be the acronym or word that I would be looking for when I'm checking a menu.

Ok, so the first thing about bitter beers is that they have lots of hops in them. Now, I'm probably not going to make one myself so why would I care about that? Well, apparently if you go into a restaurent in America and tell the waiteress that you want a beer with lots of hops in it she would ask the barman and assuming the guys knows his stuff he will be able to get you one. I'm assuming that the situation is simillar in the UK but in Israel that might not cut it.

Pale ale is another name you should remember if you are in to bitter beers. At least in scotland and in the U.S. that is true. There is another variation of this kind of beer which is India Pale Ale or IPA for short. There are beers in the UK that is called IPA but they are actually not as bitter as an IPA beer would be in the U.S. Not sure where the 'India' part of the name comes from. I doubt that IPA beer have more to do with India than french fries have to do with France but it's still a good bitter beer.

From some reason English people and American always have hard time agreeing on names. Conviniently enough bitter beer is simply called 'bitter' in the UK. IPA would be less bitter over there but Extra Special Bitter would be the way to go. ESB is used in the US as an acronym for Extra Special Bitter.

Sorry if it came out a bit too informational. Most important thing is to enjoy your beer and drink responsibly.

P.S. - I used this wiki as a resource - http://en.wikipedia.org/wiki/Bitter_(beer)

Entre and Intra - preneurship by a founder and an Intra-founder

2011-11-15T13:33:32+02:00

Intrapreneurship is a form of entrepreneurship in which the entrepreneur is innovating within an existing company. Unlike in a startup company where the entrepreneur would raise funding from individuals often called angels or from venture capital firms, intrapreneurs would instead convince the company they are working for to execute on their idea and turn that into an intra-startup.

I had the opportunity to try both types of entrepreneurship, as a co-founder of EyeView I played the entrepreneur role while as the intra-founder of INTENTclick and it's Managing Director I get to play the intrapreneur role as INTENTclick is part of Kontera.

The one challange that people usually associate the most with being an intra-founder is internal politics. There is always a concern that somebody will steal your idea, take credit for it or try to use your success for his benefit. While entrepreneus don't normally have this problem, they do share the same concern that somebody will steal their ideas everytime they try to get feedback or pitch to someone. As explained in one of my former posts - asking to sign NDA - this approach will set you up for a failure. My observation is that there are a lot more good ideas than people who are willing to take the risk and execute on the ideas. The same thing applies to internal entreprenuership. If the idea is big enough to be a stand alone business, the real challange is on the execution. The long road from turning the idea into a reality will require the intra-founder to get as much feedback as he can and convince a lot of stake holders to support him so hiding the idea is not an option. At the same time, the exercise of getting the buy-in of all the stake holders ahead of time will attribute future success to the intrapreneur so no one will be able to steal it from him.

Another big difference I noticed is the organizational culture. With INTENTclick, the culture was partially inherited from Kontera with some influence from founding and management tream while with EyeView, the foudners had a much bigger role in setting the organizational culture. Note that not every corporate or company allows another organization to grow inside of it. As an intra-founder you need to consider what culture you want in your intra-startup and factor that in the decision to innovate from within a given company.

The other set of challanges with intrapreneurship that is somewhat unique is the constant need for the intra-founder to align it's small boat with the mother ship. Startup companies usually have to do that only after they get acquired by a bigger company and then the merger between the two companies is much sharper and causes the alignment to be quite drastic. In a way the intra-startup is constantly going through the experience of being purchased by the bigger company.

As intrapreneurship is less known, I see it as my mission to get the word out there and make the case for all intra-founders that are building great intra-startups. If you feel you are an intra-founder - you can join the linkedin group.

10 Tips for Contacting a Blogger

2011-10-13T16:50:56+02:00

Here is a post to those of you who have a product for bloggers. Here are the things that we have found to work:

1. Domain tools allows you to research a site - finding historic "whois" records that sometines have the contact information, reverse the IP and see what other sites are owned by the same person and figure out the contact information from there.

2. Leave a comment on the blogger site with a good advice or good feedback on the content. Most bloggers read their comments and will appreciate your contribution to the conversation.

3. Link to them from your own company or personal blog. Bloggers love links and often monitor who links to them. You want the link to go out of a good interesting post so the blogger will find your ideas interesting.

4. Connect with them in social networks. I have found that most bloggers love to tweet and monitor their 'mentions' (every time . Pay them respect by retweeting, mentioning or responding to their tweets - they are very likely to respond to that.

5. Offer to write something for them or at least give them idea to write on (with an angle). Writing frequently is a hard job and new ideas for interesting and engaging posts are not easy to find. Most bloggers will have a list of ideas and half baked posts to help them survive dry spells. Bloggers love guest posts since it takes away some of the work load.

6. Try following their tips and recommendations and tell them your feedback. This can be done through any of the methods above.

7. Email them. Once you got the blogger's attention and build a level of relationship, the next step is to email but my recommendation is not to go directly into hard sell mode. Instead, try to refer the blogger to content that might interest him and will build your authority in a domain that relates to your product. If you have an SEO product - refer to SEO content, if you have an infrastructure product - refer to tech elements, etc.

8. Invite him to a conference. Conferences are a great way for bloggers to learn from other bloggers, interact with them and get new writing ideas. One way - is to set up your own event - it can be even a small meetup for drinks at a bar. Another way is to sponsor an event and hand out free passes or if you are on budget even recommending a good blogging event early on will help the blogger save with early bird discounts and will win you points.

9. Meet the blogger. Make sure to bring value. Interact with him, buy him drinks, bring value in the form of opinion about conference sessions, ideas to write on, connecting him to other bloggers, etc.

10. Follow up and talk about your own product. This is only the last step after you developed a relationship that provides value. Note that most bloggers are blogging on weekends and working during the week.

Channel Sales and Marketing

2011-08-30T23:29:37+03:00

I haven’t written about Entrepreneurship and about Sales and Marketing for quite some time so this post is going to be about a topic that has a lot to do with both – distribution channels.

Once you start scaling up your small startup, one of the things VCs will be looking for is strategic distribution alliances. When I was in EyeView, in a meeting with Yossi Sella and Ed Maldavski from Gemini their message was simple – we haven’t had a single successful venture that didn’t have good partners. This is not coincidental, marketing and sales channels are one of the keys to the success, here is some of the rational:

Channels show maturity - Selling a product through a channel requires a certain maturity level on the product and process side. If you don’t have that you will not be able to scale and it’s a lot easier to fool yourself that you are ready than to fool a channel
Channels validate your position in the market - your ability to sign up a channel requires that the channel will believe that your product is the best solution for a problem that his customers are having and that the market potential is interesting enough
Channels block competition –a committed channel already invested time and effort in preparing co-branded marketing material, educating his sales team, training his support staff and putting his name on the line telling his customers that your product is the best they can get. For a competitor to win over the channel, the channel has to redo all of these so the competitor needs to be twice as good. If there are technology and operational elements involved (as in OEM channel) – this becomes even more powerful
Finally – channels end up buying you – large portion of the acquisitions especially in the small to medium sizes ($25M-$500M) are made by a strategic channel partner

Ok, so by now you are probably convinced that channels are important. The next question is how to get them but getting a channel is not that hard – it’s getting a qualified and committed channel and keeping him active that is the key. Here are some basics you will want to cover:

Qualification – once you start looking for channels you will likely to have more partnership opportunities than you can handle. If you have 20 strategic partners – none of them are strategic so you want to focus on 3-5 really good ones if not less. You can qualify the companies before the contractual agreement but it’s very important to keep qualifying and replace the ones that don’t perform. The key elements are: access to market, product fit, commitment, visibility to pipeline and ultimately results.
Access to market – this is simple, you want a channel that is in touch with as many possible companies in your target market.
Product fit – your product needs to be a good fit for what the channel is already selling into the market, what his perceived domain of expertise is and what people/departments in the target companies is he in touch with
Commitment – unlike sales, a channel partner usually doesn’t commit by signing the agreement. The commitment is done gradually by actions in the field – the first deal that gets signed, the first time you overcome a customer crisis together, joint marketing, co-branded marketing material, sales training and support training.
Visibility – in order to effectively work together both sides needs to trust each other and visibility to future deals as well as to future problems is key

While creating a great channel system can be hard at times. It's important to use your ability to acquire and retain channels as a qualification for your product. If you are unable to get good channels to be consistantly satisfied it might be a good indication that you need to invest more in your product and makreting and than try again until you get it right.

Top 10 SEO Tips

2011-07-28T20:56:42+03:00

I recently did some research about the field of SEO. I thought I would share some observations:

1. from some reason my experience is that wordpress works much better for SEO compared to any other platform. Not sure why.

2. try to get back links from gov and edu sites. Some of them are easy to get and they have a high link authority.

3. SEObook and SEMrush are great tools for tracking your SEO progress

4. make a lean website that loads quickly.

5. have unique IP addresses for different domains. The hosting will be a bit more expensive but the SEO impact justifies it.

6. The juice of a backlink is dependent on the quality of the website linking to your site: page rank and authority but it also depends on how close are the topics of the pages on the two sides of the links. If you have a website about finance, linking in from a gossip blog would not give you much juice.

7. Deep linking is having other website link to internal pages in your site. The more pages you have links going to the better.

8. If your content is duplicate Google will simply ignore it. So far Google doesn't seem to penalize - just ignore duplicates.

9. You can get many back links by sharing content, video or a widget and including a link back. This technique of sharing something to get links is known as linkbait.

10. Focus on a small number of search phrases at a time and have a URL or domain that reflect the search phrase and content to match.

Thoughts on Mediamind acquisition

2011-06-18T09:21:04+03:00

Earlier this week Mediamind (formerly EyeBlaster) was acquired by DG for $414 million in all cash transaction. As noted by several Industry vaterns, the main motivation for DG with this move is to enter the digital advertising market. While the acquisition makes perfect sense in retrospect I'm wondering how many experts was able to predict such an acquisiiton before it happend. You have to give the credit to Gal Trifon who found an oppotunity to sell by not looking under the light and chasing the usual suspects (Google, Microsoft, ...).

This brings another interesting observation that there is a difference between selling a small company and selling a big company. Small companies can be bought by a bigger company from the same industry (mainly for their technology). Examples in that category - 5min Acquisition by AOL, Dapper acquisition by Yahoo or Teracent acquisitoin by Google. At the same time, if you were able to grow your comapany beyond a certain size like Mediamind did you will be better off looking for your buyer by positioning yourself as a category leader and looking for a buyer outside of the market. Another example of this kind of acquisition is the acquisition of Omniture by Adobe where Adobe - a company that provides technologies and tools for creative agencies acquired omniture who are a category leader in the e-commerce analytics space.

Quick notes on SEO

2011-05-07T13:20:09+03:00

As I’m learning more and more on SEO these days, I thought I will share some of the basic concepts for those who are less familiar with it:

Page Rank – this is a number between 1 and 10 that Google assigns to each domain based on a few parameters. A higher number means your page is more likely to appear higher in the search results compared to a page that has similar relevancy. Here are a few of the factors that google will take into consideration in determining your page rank:

Domain Age – younger domains can’t get high page ranks
Back links – This refers to sites linking in to your website
Traffic – the more the better

Keyword domains – this is a method of repeating the desired search phrase in the domain name often with hyphens between words (e.g. www.auto-insurance-cheap-quotes.info). This method is often used by affiliates who want to target specific search terms and get in the top 10 results and then sell the traffic to a company that can actually provide the product or service. Here is a video by Google on this subject:

Back link brokers – since google highly appreciates back links as part of you SEO rank, there used to be a whole business around selling and buying those links and some websites would just have a page with tons of outgoing links in them so they can sell them. Google made some changes to its algorithm to ignore websites who have too many outgoing links and also started factoring in the page rank of the website linking back in the algorithm so these days you need to get back links from high ranking websites in order to rank higher.

No Follow – another popular way to get a lot of back links was to post comments and other types of user generated content and including a link in the contribution. No Follow is an HTML attribute telling Google algorithm to ignore the link in the comment. Posting a back link in a website that has this is pointless but it’s very easy to detect by viewing the source of the web page (CTRL + U on most browsers) and looking (CTRL + F) this up.

Some common misconceptions:

The content has to be readable to humans to rank high – not true and in fact most of the pages appearing in the top results in popular affiliate categories would make no sense if you read them closely
The .com domain is the best one to have – not true for SEO – it actually makes no difference for Google and other extensions (.info, .org, .biz) are more likely to be available. It does, however, make it easier for users to get back to you if that’s your goal.

This is obviously just the tip of the iceberg. There is a lot more content about this topic online. You can assume that if somebody has mastered SEO, he will appear high on google.

Are you Still Calling your Employees Resources?

2011-04-17T22:56:34+03:00

Have you noticed that more and more companies are renaming the HR department to Human Capital? Is employees really resources that you move around like pieces of equipment or are they the core asset in your company? I guess that depends on the type of the company. In the High Tech Industry the answer is very clear – the employees are one of the biggest assets of the company. In other industries it might not be the case but even if it isn’t – calling employees resources is quite diminishing and bears very little benefit.

One way to take this approach to a more practical level is in the way the company is staffing projects. Most companies would look at the project as the core and will ask what employees/resources we can use to staff the project? A company that really treats its employees as assets will probably try to keep the teams together and assigning projects to a team that is already working together even if it means that the project has to wait a few days more. This creates a situation where the team has already passed all the stages of forming and learning to work with each other so when they take on the project they start performing immediately. It also means that the team sticks with the project from the beginning until the end and has more accountability for a high quality timely delivery. The team also gets to enjoy the success together which builds up the team as a unit and enhances motivation and performance. A true WIN-WIN.