A VC in Vacationland

My good friend, Chris Jones, SVP, Services at Descartes, reminded me of this 'consultant's expression'. Perfect is the enemy of good is something founders should muse on often during their company build-out. And not just in product development–the concept should penetrate all aspect of the business. Here are a few examples, based on real-life experiences:

• Founder: 'We really need a strong C-level team'–Dave: what you really need is a bunch of guys that can get things done, not a bunch of guys looking to manage a bunch of guys getting things done…
• Founder: 'If we only had (XYZ) more bells & whistles, customers would by our stuff instantly'–Dave: sell what you got, buddy, customers don't often use the last 30% of a software's capability anyway..and if they ask for a 'special' report or application, say 'next release!'
• Founder: 'If I only had another million, I'd be successful!'–Dave: did you ever hear about resource allocation? If you need more <whatever>, how about re-prioritizing your current spend to focus on what's going to make you successful

You can continue the process yourself with you own 'pet' complaints about start up life, but remember that perfection is something only your mother sought from you, and it does not apply to the real world…

I get asked all the time by entrepreneurs about how best to manage outsourced manufacturing arrangements. Here are a few tips to help you be more successful:

1. Hire the right in-house professionals–Often, companies outsource because they don't have the expertise to make the product. Fine, and you better have a team in-house that can manage outsourced operations or you are likely to be plagued with quality, delivery, and cost overruns. If you can't afford a full-time person, bring in an operations/engineering consultant to fill the void.
2. Use a local outsourcer initially–many of my calls with entrepreneurs start with the phrase, 'I want to outsource to China'. Great, perhaps in a few years when you understand your customer's needs and how to produce the actual product. Use a local outsourcer, if available. Perhaps a bit more expensive, but you will be able to learn how to manage the production process before you move it thousands of miles/many flying hours away.
3. Choose an outsourcer that can scale–too often, entrepreneurs choose a company that may be excellent at small batch operations, but cannot scale as production ramps. Nothing is more frustrating than to get a big order, only to have the outsourcer tell you that they can fit you into the schedule in two months.
4. Consider multiple suppliers–even if your outsourcer can scale, consider having more than one provider to avoid production issues, especially with a high growth start up. It may be more complex to manage and a bit more expensive, but beats missing sales opportunities.The same logic applies to parts and component supplier…more is better in a high growth world, and the lack of a two cent part from a single-source provider can shut down your production line.
5. Invest in in-house operations management technology–outsourcers usually can provide product design/production management technologies as part of their service, but web-based solutions are fairly inexpensive and assure that you have control over your own data.
6. Consider having an on-site manager at the outsourcer–having an employee spend part or full time at the outsourcer can help solve issues before they become problems.

There are many more pitfalls to watch out for, but these ought to help you get a good start on developing an effective outsourced manufacturing program for your start up.

Tony Tjan's HBR Blog piece on the key strategic question every business must ask is a great way to determine how focused entrepreneurs are in their pursuit of success.

With apologies to John Hiatt, whose song, 'Have a Little Faith in Me', inspired this post…

Faith is my ultimate fall-back feeling I have when dealing with my portfolio companies. Losing faith in the idea, founders, or fellow investors is the worst thing that can happen as far as I am concerned when dealing with one of my investments. When all other rational behavior fails, I roll my eyes and 'take it on faith'.

I'm no super religious kind of guy. Far from it. But I do fervently believe in the ability of my companies to do what they say they are going to do to be successful. When a hiccup comes (quite often, for sure), I remind myself to have faith–in the idea, the business model, the founders, etc. etc.

I preach the same thing to my companies–to have faith in their employees, their lawyers, their board and advisers, their clients, etc. etc. Unless everyone believes in their heart that 'it' can happen, meaning a successful company, then it can fail. I ask my CEO's to keep checking on the level of faith in the company, its customers, and its investors. One cannot ask this question too often.

So next time you think all is going great, remember that not everyone may be on board and have the same faith as you do. Get out there and poll the crowds, founders. Make sure that the faithful are still on board the bus…