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Ecovadis–How Green is Your Supply Chain?

October 10, 2009

Image by Getty Images via Daylife

With thanks to VentureBeat for finding them and writing an excellent article on them….

Start up Ecovadis provides companies with a software
platform that lets them weigh the environmental and humanitarian impacts of
their supply chains — even those that circle the globe. Essentially, it scores
suppliers based on sustainability and social responsibility criteria, helping
their clients make more informed decisions, the company says.

What makes Ecovadis’ platform unique is its collaborative features. When
companies are determining how to best create reliable and efficient supply
chains, they gather input from their procurement departments (obviously), but
also their engineering and design divisions to better understand what is
necessary and why. Ecovadis takes this team approach into account, allowing for
direct and continuous communication between engineering and procurement
personnel so that the overarching company can optimize its transactions while
still acting sustainably. This collaboration also includes the suppliers
themselves, so that they can hold open dialogue with customer companies on how
they can make their processes more sustainable. For example, a company could
suggest that a particular vendor use less packaging, or more recycled
material.

Ecovadis specializes in suppliers in four categories: retail, automotive, IT
and pharmaceuticals. Each of these areas comes with its own set of environmental
and humanitarian concerns. The company says its platform is intended to
highlight labor issues, as well as environmental or conservation problems. So,
for example, in the retail sector, supplier scorecards take a hard look at child
labor risks. For IT, they examine energy efficiency and recycling capabilities,
etc.

By highlighting these problems early on, ideally before a company’s supply
chain has been finalized, Ecovadis spares its customers risks, in terms of
finances and reputation. Just think of the number of companies that have taken a
public hit due to poor overseas labor practices. Also, with the federal
government looking to institute more stringent energy and carbon reporting
standards, more companies are scrambling for services like Ecovadis’ so that
they can answer for their suppliers’ emissions and activities. The start up even
suggests that its platform could lure the growing number of investors looking
for sustainable portfolio companies.

Ecovadis rates suppliers across 150 categories, including batteries, plastic
packaging, labels, freight transfer, waste management, temporary labor, office
furniture — and the list goes on. For each of these service providers, it looks
at labor relations, health and safety compliance, potential discrimination,
corruption, anti-competitive practices and truth in marketing — in addition to
its environmental analysis.

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Redefining Fashion Sales & Supply Chains: Gilt Groupe, Quiet Logistics & Kiva Systems

October 3, 2009

Image via CrunchBase

Designer clothing and accessories move through some of the most complex and expensive (read: not so green, either) sales and supply chain channels in the world. Made in Asia or other third-world countries, shipped to European, Asian or North American distribution facilities and then sold through in-store or stand-alone boutiques, fashion products consume inordinate amounts of supply chain, sales and retail resources and costs.

With the global slump in high end fashion sales, major designers are increasing shedding "excess" merchandise to emerging online retail start ups, which specialize in "private sales" of discount designer clothing and accessories. The Wall Street Journal recently had an interesting article on the space, entitled, Designer Bargains, for the Invited. These new companies strip away at least part of the super expensive distribution channels, generally taking excess goods from designer warehouses into their own facilities and selling the products in day-long sales at discount prices until the product runs out. The WSJ article cites discounts of as much as 50% on handbags, shoes and clothing.

The idea is that discreet sales online on members-only web sites is preferable to the designer than to have the stuff ending up at Marshall's. For the start ups, margins are higher that retail, inventory risk is minimal and you can outsource your logistics operations to outside providers. The good news is that the online channels can reduce outbound supply chain and retail resource use, and lower operating costs, making fashion a lot more green, but a lot less profitable for designers.

That's what Gilt Groupe, one of the major players in the online retail fashion start ups, has done. They struck a deal with Quiet Logistics, another start up that uses robotic technology from one of my portfolio companies, Kiva Systems. Genius move. Gilt can experience even higher margins because Quiet Logistics operating costs are much lower than traditional 3PL providers, due to the efficiencies inherent in the robotic technology.

As we look to green up our supply chains, companies like Gilt Groupe, Quiet Logistics and Kiva Systems are excellent examples of how significant reductions in supply chain resource consumption are not only possible but happening today.

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Seed Round Funding: Don’t Get Hosed on Terms

September 26, 2009
Image via Wikipedia

Chris Dixon has an excellent post on his Blog about on seed round funding and the deal terms which create the correct incentives for both investors and founders.

Overall, I agree with his ideas, but founders should recognize the difficulty they may have in achieving these favorable terms in today's difficult funding environment. It helps to have a good lawyer on your side to make it happen. I agree with Chris that Gunderson is an excellent choice, having used them in many of my portfolio companies.

A few additional observations:
- Use of Convertible Debt–Instead of (or in addition to) common stock as the initial instrument to fund operations, consider using a simple convertible debt instrument with pro rata rights for seed investors. I have successfully used convertible debt, with or without warrant coverage/interest provisions in most of my seed round funding. Angels often feel more comfortable with debt preferences versus common share equality with the founders. The incentives around successful launch and Series A funding remain the same for founders and investors with debt financing. Note: Chis is not a big fan of convertible debt. His recent post on the subject is re Blogged below.
- Valuation–Perhaps the most difficult "term" to negotiate in the current start up funding world is the worth of the company. Chris makes a good point and one that bears emphasis. Don't overvalue your company in the seed round and then have to accept a down round in Series A. Not only is it demoralizing to founders and employees, but you get marked with a scarlet letter (remember Hester Prin?) in the venture community and future rounds become even more difficult. Take Chris' advice and choose a rational valuation number you can beat in the Series A round.
- Liq Pref–A 1X liquidation preference should be the standard. Period. Unless someone out there can give me a good reason why higher first round investor preferences are critical to the success of an early stage start up.
- Ownership–The amount of company an entrepreneur will "give away" during initial funding is closely tied to valuation and seed round investment levels. Be prepared to have even angel investors want up to 40% or more of the company in the seed round. The more you can self fund, develop beta software, get grants or SBIR loans, have initial customers, etc. before you approach angels the better. This is the new economy and DIY is big among start ups who want to preserve ownership. Besides, on-line and often free tools allow faster and cheaper software development, breaking the old cycle of 18 months to market for start ups.
- Chumming the Waters–make sure your seed investors are able to continue supporting your company in future rounds, in case new funding sources become problematic. Some angels and early stage VC's "chum the water" with lots of small investments, then focus on only a few for real funding. Early stage funds who decline to invest can create negative market perceptions of your company.
Related articles by Zemanta
- Why seed investors don't like convertible notes (cdixon.org)
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Start Up Hiring

September 19, 2009

Image via CrunchBase

StartUpHire, a Vienna, VA-based job board that specializes in
advertising open positions at venture-backed start ups, is a great place to post that post funding job opportunity.

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Taking the Pain out of Hiring Talent

September 12, 2009

Start ups often struggle with the hiring new talent. Lack of an in-house HR staff, no technology to manage the process and extended recruiting time frames due to a lack of processes all conspire to make the process more difficult than it need to be. But there is hope.

Software company Jobscience has announced the launch of a new applicant tracking system for Google Apps. The new application, developed on the Salesforce.com platform, allows small and medium-size companies to broadcast their job openings, accept online applications and utilize Google Docs to manage resume processing. "The recruitment industry is moving toward a candidate centric, CRM style approach to applicant tracking, and we are on the leading edge of that movement," said Ted Elliot, CEO of Jobscience.

5 Reasons Your Business Plan Is In A Trash Can

September 5, 2009
Image by juhansonin via Flickr
5 Reasons Your Business Plan Is In A Trash Can

London Business School professor John Mullins says now is a
great time to start a business. He
writes in the WSJ:

Costs are lower, and more talent is available,
thanks to layoffs. Prospective clients are more likely to try a new supplier who
can help them cut costs or increase their competitiveness. Established players,
too, are focused on cutting costs instead of increasing market share.

Of course, starting a business means finding funding, and finding means
writing a business plan.

In his very
long WSJ article, Mullins explains what not to do
when writing one up. We've boiled it down to five bullet points:

Don't focus on your amazing technology. Focus on the
customer need your business will solve.

Don't overestimate the size of an untapped market, and then
claim your business will only need to capture a small slice of it. In untapped
markets, the consumers don't know they need a product yet and they don't know
how to get it. Mullins calls these the "Coke-for-Every-Kid plans."

Don't stretch the numbers. Mullins quotes an entrepreneur
who says, “With a couple of beers and an Excel spreadsheet, you can make a lot
of money in no time." Don't try it.

Don't lead with your resume. Investors don't care how many
Harvard MBAs there are on your team.

Don't ignore the risks your business will face. Investors
know all businesses have their weaknesses. Don't be naive and try to pretend
yours won't.

Happy Labor Day! Boo Hoo–summer's almost over.
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Marketing & Sales Strategy: Brainshark & BrightTALK

August 29, 2009

Image via Wikipedia

One of the big problems many start ups face is developing quality marketing collateral. At best, they may have a pretty good website, perhaps a brochure or two and, oh yea, numerous PowerPoint presentations. The problem is that the founders are not always able to do a live presentation or webinar for a prospective client or funding source. Here's where Brainshark and BrightTALK comes in.

According to their website, "Brainshark is the leader in on-demand business communication
solutions, with patented software that empowers businesspersons to easily
transform Microsoft PowerPoint slides and other business materials into
powerful, voice-enriched, interactive presentations. More than 1,000 companies,
including a third of the Fortune 100, rely on Brainshark software and services
to accelerate training, increase marketing response rates, shorten the
sales cycle or enhance corporate communication."

Brainshark developed the application to feed the need for
leads. Lead generation was fast becoming an all-consuming job for Brainshark's marketing
team. Its efforts to create awareness of the company's offerings and spark a
dialogue between qualified prospects and sales were successful, but the process
to manage leads and nurture them through the pipeline was clunky and cumbersome.
The biggest obstacle Brainshark encountered was its use of several SaaS
offerings that didn't fully integrate with each other. For example, critical
prospect data housed in Salesforce.com wasn't able to sync with other
applications, thwarting marketing's efforts to utilize that information in
targeted campaigns.

BrightTALK allows easy creation of webinars. As stated on their web site, "presenters can create powerful webcasts using one, two, or all of our three
main business components:

1. brighttalk.com is our simple-to-use live webcast platform—built using the
latest Web 2.0 principles—where business professionals create and view webcasts
through BrightTALK™ Channels.

2. BrightTALK™ Conferences deliver thought leadership events focused on
market areas where access to the latest information is essential to driving that
industry forward. Enterprises use these conferences to generate qualified leads
and associations use them to keep their members up-to-date and accredited.

3. BrightTALK™ Webcasts provide individual and customized webcasts delivered
through our webcast content management system—BrightTALK™ Media Zone. You’ll
work with our experienced video and audio production teams to create
high-quality videos and to reduce the stress of delivering online events."

I have not personally used either software, but have positive feedback from friends that have developed enhanced marketing materials using their services. Check them out.

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Ten Unconventional Wisdoms for Funding Start ups

August 22, 2009

Image via CrunchBase

I have probably covered many of these topics over the last three years, but Founders Fund angel fund's Naval Ravikant has well summarized how best to approach venture capital firms in today's environment.

Ten Unconventional Wisdoms for Funding Start ups

I would add that developing a broad network of people who can help you gain the right kind of financing is perhaps the most important piece of wisdom that I can give entrepreneurs.

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Is the Venture Capital Model for Developing Software Dead?

August 15, 2009
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In a word, yes, the model is dead. That does not mean that loads of software start-ups will get millions in funding this year, run out an hire a CEO, development team, marketing & sales guys, lease office space, etc, ,etc. And that may be the right model for many teams. But it is not the new model.

The new model takes advantages of major changes in how software can be conceived, developed, hosted, marketed, sold and supported.
- The Big Idea–best developed while immersed in a problem, rather than tackled from afar. Intrapreneurs, often working closely inside target customers on daily problems, can produce some of the most useful new technology.
- Development–innovative languages, open source software, which is increasingly sophisticated plus less expensive offshore software teams can accelerate time to beta and significantly reduce costs. I have seen stealth software under beta development that will come in at less than $100K for a working version of a sophisticated solution.
- Marketing–uses B2B engagement marketing technologies, coupled with contract writers and outsourcing industry specific partnerships and social
  media like Facebook and Twitter, which provide free viral marketing platforms.
- Sales–co-sales, affiliated sales, network sales, partnering and outsourcing are all new strategies start-ups are using to drive faster, cheaper sales growth as opposed to just using traditional "sales guy" models.
- Hosting–not in the cloud? You should be..cloud computing,
  which allows companies to outsource their entire IT infrastructure a minimal cost is the future of computing
- Support--wikis, on-line training
So, what's the point of gorilla picture? There's a first time for everything. The female gorilla is using a stick to test water depths, proving that anyone can adapt to new ways of doing things. If you are contemplating a software start-up, consider the above new ways of doing business as well.

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Rules for a Good Entrepreneurial Life

August 8, 2009
Image by juhansonin via Flickr

There are only two rules you need to follow, according to the sages, to have a good life as an entrepreneur:
1. Don't sweat the small stuff
2. All stuff is small.
To the first-time entrepreneur, all the challenges look big time–how to develop a killer business plan, where to find money, how to attract clients, hiring the right people, etc.

My advice is to parse the problem. Break the tasks into smaller pieces so that everything is not so daunting.

For example, don't try to write that business plan in a day, for example, unless you are a genius. Most good plans I see have taken months. Got a fear of flying, or of writing the plan? Start with the one most important page–how are you going to make money. The rest of the pages will flow more easily after that.

Similarly, get one great initial customer who can help you attract others. A lot of start ups I see have a bunch of obscure clients. Sure, these customers may be really happy with the solution, but will mainstream Fortune 1000 companies be impressed? One leading-edge industry leading customer is better than ten obscure ones.

Finally, resist the temptation to spend huge amounts of time trying to figure out all the applications and features that your potential customers could ever want. Spend your time focusing on those features that will have the largest return on investment for your customers.

Happy 63rd birthday, my brother….

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5 Reasons Your Business Plan Is In A Trash Can