Archive for the ‘Business Observations’ Category

Great advice to help communicate about what the hell you’re doing!

September 27, 2010

Got this great pearl from here:

A Sack of Seattle

“Your elevator pitch should follow a simple “ad-lib”: We focus on ______ (target customer) who need _________ (market need), so we provide _________ (feature set) and we charge them ______ (business model). This standardized elevator pitch actually simplifies some of the challenge that the founders have been facing in explaining their business to mentors. His idea is to adjust the answers to the blanks until the statement feels exciting and feels like it accurately describes what you do. I couldn’t agree more and hope the founders take this to heart as they hone their business plans.”

For fear of mucking with a rather eloquent piece of advice, here are a couple thoughts

1. Where it says “need,” “want” works in the realm of consumer stuff.
2. Businesses are fluid and startups are especially so, so “not completely sure” is probably the truth in some of the blanks. It would be nice if that “not completely sure” were limited to one or perhaps two blanks. Never mind funding, it’s kind of hard to lead a team much less build a business if these things aren’t both understood and explainable.

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Twitter as data feed — brainstorm

May 14, 2007

Twitter is a data feed of an individual. The individual chooses what data to report and how frequently. The data format is generally text with a character limit.

Data feeds of course have been around a long, long time. Twitter is simply a new format of data feed with a community that seems to really like it. Unlike blogs and other web-based content, I suspect Twitter also has a high content generator/viewer ratio, which is good for buzz. People that participate as generators of content in a system generally are more ‘jazzed’ about the system than viewers-only.

Data feeds that have demand associated with them are assets.

Value of a data feed may depend on the data content, the data format (including its flexibility/portability), the timeliness of the data, the accuracy of the data, the “authority” of the data, the scarcity of the data, the reliability of the feed’s distribution.

A data feed has a sustained value over a long time period (say multi-year) and then a value that may spike based on the demand of the data in a specific time.

When data is ‘normal’ it is typically less valuable than when it is not normal. There is value in anomoly. For example, a police log is a data feed. If for 360 days there are no murders, then for the following 5 days in a row there are 10 murders per day, the police log becomes, in a sense, a lot more valuable in the latter period.

The more data there is (and the more data ‘feeds’), the more important it is to have optimized ‘data digestion.’

Here are some components of data digestion:

what is important vs. what is not important
what is new information vs. what is already known
what is valid vs. what is invalid
what is reality vs. perception. which matters, when?

also, this doesn’t fit in the above, but assuming a piece of data is knowledge it is often either factual knowledge or how knowledge. As in, an average 9-iron shot in golf can go 140 yards vs. this is how to hit a 9-iron 140 yards.

Clans and teams

May 6, 2007

Startups are usually the product of teams. Sometimes a single founder is clearly the driver and other people might call a startup “his startup” and they would only mean one person.

Usually, it’s a team.

Where does this team come from?

Usually some or all of the team has already worked together. They know each other. They trust each other. They have a lot of context outside of the startup.

Sometimes these teams are years or decades in the making. Even if different participants haven’t always been working together, they somehow stay part of the same group all along.

If this team, or a part of it, starts to find success, they might also find a following. People come to respect these people, want to be part of their group, etc. The team becomes the core part of a clan.

I’ve been reading some articles about teams and then had a conversation with Tony Frey of Spiceworks. He mentioned the term ‘clan’ several times. That conversation and my casual readings have led to this post.

Startups need teams. I don’t think a team made of people who didn’t know each other before their startup is nearly as good as a previously established team. This is especially true if the team has achieved clan status. A team that enjoys clan status has a much easier time recruiting, raising money, evangelizing, getting “lucky breaks,” and having great Christmas parties!

Teams don’t form over night. So if you think a startup is in your career, whether a year or ten years from now, spend time interacting with people with this in mind. Figure out if you can make a team out of people you meet or know. Or figure out if you can be part of one that’s already taking shape. The social proof alone of being a part of a talent-filled team is a career must-have.

I’ll finish with a little levity that contains a lot of truth. John Doerr, the famous Kleiner Perkins VC, once commented a good startup team is one you “wouldn’t mind getting into trouble with for five or ten years.”

Effective mentality for meetings

May 6, 2007

Every meeting has three parts:

1. the set up
2. the meeting itself
3. the follow up

The meeting itself, is usually also a set of parts. That’s for another post.

Pay as much attention to the set up and follow up as you would to the meeting itself.

I don’t know the source, but it’s been said, “life is a series of events.” I think this thought applies well to the idea that a meeting is not just one event. The set up and the follow up are especially important because they connect the meeting with life outside the meeting. They connect the meeting’s meaning, reason, and results. They are part of connecting the participants. They can connect the meeting to other people through communication. They add and shape the meeting itself and the memory of it.

Many people don’t like meetings and think they are a waste of time. Sometimes this is true. But consider what’s going on in the set up and follow up of meetings. Even if you think a particular meeting was a waste of time, perhaps what went on in the set up and follow up of the meeting was not. You’ll find yourself wasting less time in meetings if you value their set ups and follow ups.

To me, one version of meeting nirvana is when EVERYTHING happens in the set up and follow up. When this happens, the period of interaction during the meeting itself can be better spent interacting with each other.

What do Microsoft, Wal-Mart, and America have in common?

May 1, 2007

They all have a lot of detractors who constantly have ANT’s when thinking about or discussing any one of these names. An ANT is an automated negative thought, and I am borrowing the term, which is usually associated with depression. In the context of depression, it refers to negative thoughts, mostly about one’s self, that tend to occupy the sufferer’s mind to an inordinate degree. (Example: I am not good enough. Everybody hates me.)

But think about this: whenever Microsoft does anything, there is a great deal of the technical elite, especially the Mac faithful, that will instantly respond with ANT’s.

Wal-Mart, same. Anything Wal-Mart does triggers ANT’s. Whether it’s the “what about the little man” crowd or the anti-corporation crowd or the “rebel” crowd, Wal-Mart is always getting “ANT-ed.”

America, same, especially internationally.

This is a marketer’s nightmare, especially when the detractor, ANT crowd is vocal. Again, think America. Even Americans are becoming increasingly prone to ANT’s about America. [Yes, I am purposely using America, instead of United States because America is the primary brand. Still, US, United States, USA have about the same ANT trigger I would guess.]

ANT’s also tend to blend, merge, distort, confuse, generalize, magnify and do other ugliness. Bush –> Administration –> Washington D.C. –> America – ANT ANT ANT!! Meanwhile, the Bush Administration has to be composed of tens of thousands (likely hundreds of thousands?) of people who are not all bad and who are not all doing bad things. Even the leadership (say 1,000-10,000 depending how you might count), cannot possibly all be bad, no matter what your politics are. Then, even the top leadership, even Bush, sometimes does good things. Probably usually, but certainly not always, does good things. (I am quite sure, many readers are having their own ANT’s right now. They can’t possibly entertain the thought of Bush doing good. ANT. ANT.)

I don’t want to spend too much time focusing on politics because ANT’s are so prevalent in this area, regardless of political persuasion. Maybe the one possible silver lining (thin lining) is that at least ANT’s are predictable. Suffice to say, if you find someone is infected with ANT’s and that wants to engage in a conversation in any way related to his or her ANT’s, run. Quickly.

By the way, in Austin, real estate developers are one of the top targets of the ANT phenomenon.

For companies, the problem with a good portion of the market having ANT’s about you is that it puts you at a perception disadvantage. Microsoft and Wal-Mart are obviously still strong and profitable companies, but the ANT problem clearly has an eroding effect.

The trouble with it, and I don’t have a good solution, is it’s hard to counterattack. The reality is the group effect that ANT’s and their purveyors have on the ANT-susceptible crowd can only be attacked by identifying how blind the people entertaining these ANT’s are being. Unfortunately, this goes to herd mentality, follow-the-leader, sameness. Unfortunately, being Microsoft or Wal-Mart (and yes, America, too) attacking this is the pot calling the kettle black. Of course, the companies and America achieved their following by growing and achieving dominance. The subsequent ANT population grew by attacking them for being big and dominant. And for having to deal with the realities of being big and dominant — and staying that way.

If a sizable (I would say 1%) of your market are both ANT-ridden about you and vocal, this is a serious threat that should be monitored and dealt with aggressively. Again, I wish I had the answers. To add to the challenge, these ANT-ers are often fanatical about their ANTs. The ANT-ers are one with their ANTs. Very hard to attack the ANT without being perceived as attacking the person with the ANT.

Perhaps, if possible, preventative measures are the best way to fight and contain the problem. Keep your ears to the ground and try to listen for ANT’s popping up.

If you’re an Ayn Rand fan, ANT’s of ANT-mongerers is what ultimately drove the industrialists to the hills.

Dead Man Dancing

April 30, 2007

What a great story: Dead Man Dancing (by Matt Trossen)

He talks about his company facing financial crisis from the lens of a fully committed founder.

I have found myself on occasion staring into the unknown, wondering if I had made catastrophic decisions. Wondering if I had simply made a string of wrong decisions at various points that have had cumulative negative effect. And wondering if I was on exactly the right course, and just needed to keep going. When you’re a founder or leading a startup in some capacity, those around you often cannot give you good feedback, and those that can, often know you have to go through the tough episodes yourself.

I like how Matt points out that he isn’t romantacizing. I concur completely. When we spell out these thoughts — to ourselves or to others — they come out sounding like the romantic adventure of a hero. And that is not the intention, nor the meaning, at all. Dealing with danger is part of the ‘right stuff’ that ultimately makes an entrepreneur. I think a lot of this is not natural — or if it is for some, they are gifted with a beneficial bias, not a perfected mindset. The mindset has to be shaped over the years. The thing is, as with successful people in all walks of life, they often shield the world from their own hardship. Out of modesty…as in not wanting to talk about themselves, or the opposite…out of calculated persuasive benefit (so they do indeed look heroic to others). Or out of pain…as with other painful experiences in life, sometimes they just are not fun to discuss, during or after the experience.

This type of subject matter is also why I like Paul Graham’s writings so much. He does a good job articulating subject matter about founding companies in a very personal and nuanced way. Just recently, he posted an article that specifically mentioned how many founders are not only ‘hackers,’ they are gun shy, timid, unsure, and processing enormous emotional stress to move forward.

Quote: “What investors still don’t get is how clueless and tentative great founders can seem at the very beginning.”

This is in high contrast to the gung-ho portrayal of founders generally. Some emerge that way, but they don’t start that way.

Whether or not company founders achieve their ultimate dreams and end up with fistfuls of cash, I do think founders of companies are perhaps one of the greatest subset of the population in terms of self awareness, contemplation, and reflection. They gain these rewards because they are often forced to suffer one way or another, within the framework of a very productive endeavor.

Seattle’s Best – epicenter of global marketplace?

April 30, 2007

I’m working on a longish essay on China, globalization, World Is Flat themes. But it occurred to me that Seattle’s Best might provide a shorter lesson but equally important insight on ‘butterflies in China.’

See, Seattle’s Best is not just a place that sells coffee. The store contains things that were purchased from all kinds of industries and markets, especially considering the customer traffic and all their accompanying possessions.

This thought, of course, dawned on me while sitting at Seattle’s Best, so it was easy to simply look around and take in a random sample:

Furniture
Chemicals
Coffee Beans
Packaging
Juices
Water
Holiday retail
Leather
POS systems
Payment processing
Credit card issuers
Commercial printers
Lighting
HVAC
Electricity
Architecture
Real estate
granite
marble
copper
media
garbage collection
paper
textile
semiconductors
education
publishing
cell phones
telecommunications
eyewear
makeup
watches
jewelry
tea
paint
labor
security
delivery
music
music players
hair care
denim

After a few minutes, I just quit listing because I realized the list would be endless. In fact, I propose that Seattle’s Best can be substituted for Six Degrees of Kevin Bacon, and any kind of enterprise (even cottage industry) can be connected back to Seattle’s Best within six degrees. Try it in your head. I am working on a better way to illustrate.

Why Entrepreneurs Fail

April 28, 2007

Entrepreneurism is broad, and I mean to be interpreted broadly, but primarily in the context of starting a productive venture from scratch.

The number 1 reason why entrepreneurs fail is a confusion in the order of importance between logic and passion. When entrepreneurs venture out, they often do so motivated by a deep passion–either for themselves, their idea, getting rich, serving their hallowed customer or for some other object of their passion. Armed with such passion, they are compelled to set out into the unknown. They take a risk and set sail.

This productive wanderlust is desirable, but only as an engine steered by unmerciful logic. Ventures these entrepreneurial protagonists pursue, by nature, do not have the benefit of already being established. Thus, in contrast to a regular job, the entrepreneur cannot merely follow known processes or even improve upon what exists. The act of venturing is one of discovery and then of building and then of refining, with the goal of course being to ultimately create a business of great value. On a continuum of intellectual demand, the “job choice” of entrepreneur might be compared to dual roles of inventor + marketer, film director + producer, or architect + developer. Admirers of such professions know that these all require tremendous mental dexterity individually, let alone in combination.

Yet passion tends to distort reality. The notion of the “future working itself out” is an alluring cop out as the entrepreneur passionately burns through time, energy, and money pursuing an ill-defined endgame on an ill-defined path to get there. And inevitably, when a cycle of failure sets in — missed deadlines, shortfalls in sales, expenses not turning into expected results — objectivity and reason become even further blurred by the mind-bending distractions of doubt; of answering to the disappointment of investors (or spouses and underpaid cohorts); of blaming “uncontrollable” variables that seem to haunt the entrepreneur and the venture with relentless ferocity.

Depending on the venture, the resources in play, the level of gamble, the level of partial success, it lasts until this passionate entrepreneur sputters to a stall. Truly, in this analysis, it doesn’t matter whether the venture was a colossal failure or it turned into a wee little business. The envisioned level of success was not achieved. The entrepreneur failed. And even at this end, most entrepreneurs still let their passion reign as they refuse to admit–even to themselves–that the failure was a result of their own error in judgment (whether at the beginning or along the way).

Yet, no research scientist would admonish himself for an error in judgment at the onset of an experiment. Indeed, the nature and purpose of an experiment is to test a hypothesis. And upon review of data, the idea is to improve upon relevant judgments and set forth further experimentation. The researcher contains the cost and time of testing hypotheses along the way in order to arrive at some destination of study. Also, along the way, the (good) researcher is ardently dispassionate, in a sage attempt to avoid bias in interpreting results. The researcher is able to remain passionate in purpose (as in, an engine), while allowing his objective logic to drive (as in, steering wheel).

The entrepreneur is similarly and necessarily required to make predictions, judgments and conclusions from start to finish. And wherever the failure along the way, that’s where the error in judgment is to be found.

This truth is almost foreign in the stark contrast with the chorus of excuses: “We could not predict the market timing” … “Funding for our type of business dried up” … “Larger competitors stole the market” … “The development team did not deliver” … “Pricing pressure made it impossible” … “My partner was at fault” … “Unforeseen costs killed us.”

These are all, in fact, errors in judgment. If the error shows itself early, could it not have been predicted from the onset? If it emerges later, was there not an opportunity to set a new coarse?

Not all businesses can succeed, no matter what. Some ventures that start for all the right reasons and operate under sound logic along the way, still will fail. Perhaps my title should be “why most entrepreneurs fail,” or perhaps better, “why most ventures fail.”

All fail because of an error in judgment. Most fail because of one or more avoidable errors in judgment. And, of these, most errors occur because the entrepreneur’s logic plays second fiddle to emotion (the less savory word for passion).

Financials and maturity in startups

April 25, 2007

I read a couple posts (here and here) this morning about how GAAP standards in accounting can do more harm than good, particularly for startups trying understand their business and trying to interpret performance.

I also think this applies to early stage projects in both reporting and projecting financials. I find that helpful “compromises” in terms of presentation of numbers is important. Obviously, abiding by standards is important when you’re communicating to external audiences, and along the way when you’re reporting “official” statements.

However, spreadsheating financials is often done best not only quick and dirty but nuanced to your business as well.

Many first time entrepreneurs (whether “small business” or “startup” types) fixate on conforming to what is seen in textbooks. This tends to make the financial part of planning the business cumbersome while the entrepreneur is trying to bring a vision to reality.

I find it’s a more helpful exercise to simply try to express the vision with numbers naturally, try to understand that, refine, and repeat.

For example, most startups deal with cost of acquisition of some kind. Particularly with projections, a team’s ability to develop some model and understanding of how this works is crucial. While this is a metric that doesn’t naturally spill out in a financial statement, it’s way more important to understand for most startups than how to properly account for depreciation of fixed assets. Obviously that, too, becomes crucial as the business scales, but doesn’t do much for understanding and reporting on a startup.

I find it strange that engineers/software guys in startups tend to not spend too much time with financials and/or avoid those meetings/roles all together. Odd since these guys are generally good at math. They aren’t necessarily good at constructing a financial statement. Why? Because they were learning to hack when their business major peers were trying to keep themselves awake during intro to accounting courses.

This needn’t be. When I start a company or join a startup again, I will insist that anybody considered to be on the core founding team have a good understanding of the business from a dollars and cents perspective. Everybody should be able to, with a blank whiteboard or virgin spreadsheet, be able to crudely develop a model of the business and how it intends to make money.

To beat a dead horse, I think it’s a self-limiting behavior to avoid a core subject matter critical to your success. In a startup, this would be core subject matter, no matter your role. I also find it patronizing and bad for chemistry for “business-side” founders to limit financial discussions with the “tech-side.” Give me a break. This is often done in the name of “shielding” the tech team from unnecessary detail, when in reality it is more likely a power play. And for those developers who would tolerate or welcome such “shielding,” I would suggest that this is akin to standing outside the fire and a sign of problems to come.

More research into the startup scene issue

April 20, 2007

A startup entrepreneur Adam Kalsey waxes elequently on the Sacremento startup scene…sounds like some of the same issues from another capitol city. 🙂 His article. It also references this piece, by Ben Metcalfe about the UK startup scene issues.

I thought both were genuinely interested in the recipe and for improvement, not just drawing attention to a hole. Both seemed to focus on good networking and really hard work (never ending work days).

Ben also drew attention to capital availability. I thought it was interesting that he pointed out that not only is there not much VC capital in the UK, but also that what is available actually gets invested internationally — mainly, in Silicon Valley companies. He also, along the same lines, rejected the thought that location of the capital itself and the managers of it, was critical–thus negating the ‘ecosystem’ theory. I think his point about lack of capital availability could be summed up as follows: it’s not really where the capital comes from, it’s where the investors want it to go. Most VC investors, regardless of their own location, invest in Silicon Valley.

I think this is very interesting. Adam’s location underscores the point. Sacremento is maybe two hours from Silicon Valley, depending on where you define Silicon Valley. So clearly proximity to capital is relative and it would seem, relatively unimportant.

Culture, problem solving, and the types and methods of solving those problems seems more central. Sharing without hidden agenda seems central. Genuine interest is clearly involved.

Not to get too “new age” but some of the themes bear resemblence to self-actualization. It’s not that startup folks in Sacramento or the UK — or Austin — aren’t talented or are not doing meaningful work. There’s simply a lack of convergence/support between startup teams and the community at large. Everything just kind of clicks in the Valley.

For grins, I hopped on indeed.com, a job site, and searched
“startup” for Austin, TX and for San Francisco, CA. It’s not that I wasn’t prepared for more quantity in San Fran. That’s reasonable. It’s that the difference was unbelievable! In the Austin search, most results had to do with the “start-up” process related to installing HVAC equipment, which I assume means what it sounds like. But even when I filtered out “A/C” and “HVAC”, I still got pretty limited results. Sure, there were some. But with SF, not only did I not have to do this filter, the results were what you would expect. Pages of job-postings touting well-funded startups, web 2.0, and bleeding edges.