A VC in Vacationland

Keeping the Sheep in the Corral

March 14, 2009

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A common problem among young start ups is "keeping the sheep in the corral". No, not the sheep on the right, but all the key players one needs to create a successful company–potential investors, board members, advisers, employees, among others. This can be a real problem for founders, one that keeps them up and on their Blackberries day and night.

What can a founder do to keep all the key players in the game? First, for investors, advisers and board members, remember the herd instinct. If you sell a top VC, Angel or board member on your ideas, getting others is a lot easier. The same goes for key employees.

Second, become close to the key players. Duh, sounds stupid, right? But you would be amazed at the number of entrepreneurs who ignore this advice. I ignore them as well. Use the key players for advice and help in recruiting other people you need to be successful. Make sure that you know they are valued members of your team.

Finally, integrate the players. People who feel they are part of a valuable team are much less likely to bail out early. Hold meetings and dinners with your key players so they can network and get to know one another. Be sure that team members are well rewarded via generous ownership shares. After all, from your perspective, a smaller share of of a large enterprise value is usually much better than a large share on a smaller one.
Free PR Redux: HARO

March 7, 2009

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So you are a struggling entrepreneur, with a great product, but cannot afford a PR firm to help you search out opportunities to get your ideas in front of target audiences. In the past, it would be up to you to get in touch with industry and trade publications, seeking to speak with anyone who might be interested in your company's story. It was not a very effective or time efficient process by any standards.

Peter Shankman's Help a Reporter Out may be a useful tool to automate some of that process. If you sign up for the free service, you will receive two or three emails a day containing twenty or so reporter's questions about most anything under the sun. You read through them and decide whether you can add any insights to the topic and send off an email to the reporter. If they are interested in what you have to say, they usually get back to you and set up a time to talk.

As Peter mentions in his web site, there is only one rule. Do not waste a reporter's time with irrelevant stuff. Other than that, give it a try. It's free and who knows who will end up reading about your great new solutions to the world's problems?
Marketing & Sales Innovators: Lifesize

February 28, 2009

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Start ups today do not need to (nor can afford to) make huge investments in marketing, sales, education, training and support infrastructure. Web-based capabilities around conferencing, meetings, webinars have allowed small companies to compete without having teams of professionals jump on air planes to visit potential/actual customer offices. Besides, in the current downturn, who can afford it?

One of the missing links for smaller companies has been affordable videoconferencing systems. There is nothing like putting your CEO and CTO in front of a key customer at an important decision point, even if the executives are in San Francisco and the customer is in Uruguay. Cisco Systems, Polycom and Hewlett-Packard all offer high-end (read: $500K and up) videoconferencing technologies for the Global 1000. But until LifeSize Communications in Austin, Texas emerged a few years ago, no one cared about offering high quality videoconferencing to the smaller company.

The company offers sharp pictures over Internet hardware for as little as $5,000, or up to $40,000 for full telepresence. To be fair, it's not like watching a HDTV in your living room, since that would require upgraded networks, but it is not a joke like some earlier low-budget offerings. And LifeSize does already have 4,000 users, including Wal-Mart, so they must be doing a lot right to keep fussy clients happy.

Think about the possibilities–you need to train 25 new clients at a company in Uruguay. The option today is to send an expensive team to the client site for a number of days. Or you could use videoconferencing, with perhaps only one employee on site to make sure the technology (yours and LifeSize) is working. With videoconferencing, many more professionals from your company could be involved in the training, increasing the value substantially to the customer.

Videoconferencing could also be used for potential customer education on your products and services, marketing and sales presentations where you could conference in numerous experts from headquarters, among numerous other uses.

Virtual, not in-person, is a critical part of new business models for most start ups.
Fiscal Responsibility

February 21, 2009
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Money is tight and many entrepreneurial start ups are looking for any ways to save money. This will be the subject of a future post. But today, we shall try and keep you out of jail. Here are a few ways NOT to save money in a bad economic environment, as they may get you in a lot of trouble:
1. Payroll tax payments. The IRS is very particular about collecting what is owed them, as are state and local revenue agencies. This is an area where you can never be in arrears, unless you would like to have the collectors descend very quickly on your headquarters.
2. Salaries.You cannot legally withhold any contracted salaries and bonuses from employees you have to let go as the result of the downturn. If there contract says three months severance, that is what you need to pay them within a certain time period, often two weeks after termination.
3. Accrued vacation pay. States are also very particular about paying employees what is owed them for holiday/vacation pay. Make sure you escrow sufficient funds to take care of all deferred vacation payments. These must be paid, even in bankruptcy. You can ask employees to take vacation days or days without pay if business is slow, but be careful it is only a few days, as many states limit the total days you can request.
4. Benefits. Again, contributions to 401(k)'s and health plans can be renegotiated, but you cannot arbitrarily just stop making agreed-upon payments on behalf of your employees. If times are tough, you can ask them to contribute more to health and insurance plans, but this must be done legally.
If you are having money issues, be sure and consult with your corporate attorneys before making any changes in employee related payments. You could save yourself a lot of legal hassles with a simple phone call. Even in the Middle Ages, Romanino, the Superintendent, (above) knew he better pay his workers on time.
What’s in a Name?

February 14, 2009

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Entrepreneurs anguish over naming their company. Rightly so. A good, basic name that describes the product can be a real help in attracting customers. My daughter-in-law, for example, named her reusable drink sticker company clinQs, as in clinking glasses together. The name is easy to remember, relates to the product and the guy to the right ought to have one on his glass to prevent someone else making off with his expensive Cabernet at the party.

There are three things to remember in naming your company:

Keep it simple: Long names are a hassle to remember and to type into the computer. Try and keep the letter count at five if possible. Go for memorable, rather than some weird combo of letters.

Keep it relevant:Your name should relate to either to the product or to the audience. Or go with the flow. Youthful sites are all about adding "ster" such as hipster.comto their names, just like biotechs search in Greek or Latin dictionaries for a root word that has something to do with their product.

Keep it inoffensive–check the spelling to make sure you are not insulting the Chinese, Muslims or some other ethnic group.

Dotomator is an interesting site found by one of my entrepreneurs. You can play around with all sorts of names and domain registrations (.com, .org) options to see if your bright ideas are already taken. You can also use their random name generator to give you interesting name options. The site lets you know if any name is taken and can connect you with a service to negotiate a sale price from the owner, if the name you have chosen is a "must have". And remember that other entrepreneurs have already registered millions of possible web site/company names, hoping to make money off you by selling you the rights.

Need some examples of bad names? Here is a list that has been circulating on the web:

These are not made up. Check them out yourself!

1. 'Who represents' is where you can find the name of the agent that represents any celebrity. Their Web site is: www.whorepresents.com

2. 'Experts Exchange' is a knowledge base where programmers can exchange advice and views at:

http://www.expertsexchange.com/

3. Looking for a great pen? Look no further than ‘Pen Island'. It can be found at: http://www.penisland.net/

4. Need a therapist? Try 'Therapist Finder' at: www.therapistfinder.com

5. Then there's the 'Italian Power Generator' company. Check it out at: http://www.powergenitalia.com/

6.'IP computer' software, there's always: www.ipanywhere.com

7. And the designers at 'Speed of Art' await you at their wacky Web site: http://www.speedofart.com/
Green Logistics: Kashless

February 7, 2009

You may have heard about Freecycle, but how about a group dedicated to business oriented freebies, instead of used cribs and playpens?

Meet Kashless, a very interesting green recycling/logistics start up:

Kashless Is Hiring, Expanding, and Pioneering “Recommerce,” Says Founder Martin Tobias

Posted: 18 Dec 2008 01:26 PM PST

startups, Software, cleantech

Gregory T. Huang wrote:

This morning, I had a good chat with Seattle entrepreneur and investor Martin Tobias, in advance of tomorrow’s holiday open house at his new startup, Kashless. Known to get around on his Segway, Tobias said he trudged down the hill on foot today to his new office, which is in Lower Queen Anne. All of his meetings were canceled because of the snowstorm, he says.

Tobias is the former CEO of Imperium Renewables, the troubled Seattle biodiesel refiner, and a venture capitalist with Bellevue, WA-based Ignition Partners. I wanted to hear more about Kashless, whose green-tech software has been in private alpha trials since Tobias raised $5 million from RRE Ventures in October. (Tobias is an investor in two RRE funds, so in part, he funded himself.) “Stuart Ellman [RRE's co-founder and managing partner] has taken a pretty thoughtful look at how a tech fund can play in the green space. He’s focused on doing software deals that relate to green,” Tobias says. He adds that other tech investors have tried to get into cleantech in areas that don’t relate to software—like solar and biofuels—and they got burned.

The concept of Kashless, as I understand it, is to provide an online service whereby people can efficiently acquire and give away stuff for free—equipment, furniture, whiteboards, and the like. It’s a combination of social network, community message board, and Web service, all with a green environmental theme. Kashless calls it “recommerce.”

Kashless currently has five employees and is looking to hire four more senior software engineers, Tobias says. They have moved into a 1,200-square-foot office, which will be on display tomorrow evening. (Tobias says he expects around 100 guests, so it might get crowded.) Not surprisingly, Tobias used Kashless to furnish the new office. “Every piece of furniture was free,” he says, from tables and chairs to whiteboards, and even some computer monitors. “Kashless could be an interesting tool for startups to reduce their expenses.”

Tobias says he even got some of the beer for the holiday party for free. He was looking for a beer fridge, and instead found several people trying to give away unopened cans and bottles. “We’ve been amazed what you can find for free in the community,” he says.

As for his product, Tobias says there are now 13,000 items in the Kashless system. The software searches community sites like Craigslist and Freecycle.org for all free stuff, and posts it. So far, Kashless users can’t post their own items yet, but that will come in January. Tobias says the service will move into beta trials in March or April—when the site will be “feature-complete but you’re working on scalability and usability” for a large number of users.

“Our idea here is to get more of this stuff actually moving around the community,” Tobias says. The longer you can use something, the better.” Recycling is great in principle, he says, but e-waste recyclers are not always reputable. “We prefer to extend the lifespan of an item as an alternative.”

So what will Kashless provide that isn’t already covered by community e-mail lists and websites? “We’re trying to hook into lots of different marketplaces and lots of different lists, to get the largest potential distribution for free stuff,” Tobias says. “You can see stuff from all over region. We certainly want to partner with STS [the Seattle Tech Startups list] and the whole startup community…We want to make it extremely valuable for people in Seattle first, before we pour gas on the fire.” But the eventual plan is to go national, and then global.

Tobias points to some expansion lessons from Craigslist, including the site’s ease of use, simplicity, and being lightweight. The key is to build a high-traffic website without a big staff, he says. “A lot of startups make the mistake of hiring a lot of people. I’ve done that myself…We’re focusing right now on building a valuable service. We’ll figure out how to make money later.”

In the meantime, he says, “We’re funded, we’re expanding, and we’re hiring.”
Who Writes the Check?

January 24, 2009

The CEO at one of my former portfolio companies (we sold LeanLogistics last year to Brambles Logistics), Dan Dershem, reminded me of the most important question an entrepreneur can ask themselves as they develop their business/product/service plan–who writes the check?

What he meant was who writes the check at your potential customers. When I ask the question of entrepreneurs, I often get a foggy answer. Next to having a world class product/service idea, the most important part of a business plan is figuring out who is going to write you the big checks to buy the solution.

I have sat on boards where this can be the question du jour. It often starts with the concept that a C-level executive is going to be the key decision maker/buyer. Fine, but the C-levels turn over the details to their subordinates and that's where the problems start. Your world class product/service technology undoubtedly steps on someone's toes/project/ego/whatever. What started out as an easy sale to the CEO ends up in a nightmare of bureaucracy, with numerous additional "approvals" needed to close the deal.

How can you avoid this rookie mistake?

First, be sure that you can answer the question: "who writes the check?", not only in developing your initial business plan, but every time you need money–from Uncle Jack, outside investors, customers or your bank. You need to clearly understand the terms and conditions under which they fund companies, as well as what types of businesses they are interested in funding.

Second, make sure your team is tuned into where the money will ultimately come from in the products and services you are developing. Designing solutions for the wrong audience can make the sales process difficult and elongated, as additional players need to be sold.

Third, you better be working all the "influencer's" in the potential customer organization besides the C-level executive. No one likes to be told by the C-level guys that they are stupid for not having discovered your great new solutions. Theses "influencer's" will find all sorts of reasons to make your deal and your life difficult.

Finally, keep testing the market place around the "who writes the check?" concept. When you see competitors who have equal or inferior (note: they are never better than your product, right?) offerings beating you in the market, I'll bet they are doing a superior job of getting to the people who write the checks at the customers.
Can You Help us, Mrs. Market?

January 17, 2009

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Mr. Market sure has done a job on most of our portfolio company valuations in recent months, not to mention individual portfolios. I began thinking that perhaps his wife, Mrs. Market, might take a kinder, more gentler approach to managing global finances. I did find a photo of her, dressed in her early 1900's finery, but no indication that she was interested in taking over the management role from her dear husband, who is perhaps best personified by Mr. Henry Potter from It's a Wonderful Life.

But this did not deter me from thinking about how Mrs. Market would react to the current financial crisis. Would she be motherly towards her panicked children, telling them to wait out the storm in safe investments? Would she be aggressive and tell them that there has never been a better time in their lives to invest in solid companies? Would she practice the fear and loathing that bankers and other lenders, like Mr. Potter, have wrought on the poor folk in Bedford Falls?

My sense is that she would do none of these. Unlike Mr. Market, who believes that all worldly solutions to financial dealings should be solved in a free market setting, Mrs. Market would be much more pragmatic. After all, she is the one who has to feed the children when the husband runs away or dies in a tragic accident. She knows all about dealing with crises.

She would let weak companies fail, then work to rebuild economies around those companies who will be long-term survivors. People will lose jobs and eventually will get new ones. She would not let anyone starve to death, although everyone will not get what they think they deserve. She would sacrifice her own well being to make her kids more successful.

We are a society that has run up big debts and will run up more in the next few years. That will create burdens for our children unless we get down to business now and revamp the world economies. We should start the painful process now and stay away from corporate/state/local government bailouts that will only prolong the misery.

Let the markets work, but with compassion. We never want the miseries of the Great Depression again. People will need to be helped through foreclosures, finding new jobs and financial restructuring. But we should use our national wealth to invest in the new, new world, not the bankrupt industries that lead us to the precipice. That, in my mind, is what Mrs. Market would do.
Time to Accelerate Marketing?

January 10, 2009
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So you all of a sudden realized that your sales pipeline has dried up? That is clear from the hundreds of "new" emails I am getting every day from people I do business with. Forget about it. You are just irritating me. I do not care if everyone else has stopped buying your products. I am not going to make up the difference.

Which brings me to the point of this blog. Any marketer who goes into panic mode and sends an email a day, instead of one every few weeks should be fired. You really need a consistent and well planned approach to the market, dude.

How can you do more effective marketing in a down economy? Here are a few suggestions:
1. Change your Messaging. When I was a supply chain consultant, we sold revenue growth opportunities when the economy was doing well and cost savings ones when in a recession. It worked every time. Think about the pain your customers are now feeling and suggest ways that your solutions can help reduce the misery.
2. Focus on Success. No one wants to be told time's are bad. They already know it. Buying your solution should not be positioned as grasping a life raft in the storm. They want solutions that will have lasting, positive impacts on their bottom line, hopefully through good times and bad.
3. Increase the Frequency. Yes, I said earlier that more messages with the same focus only irritated me. But it was because the basic marketing message had not changed, or it was all doom and gloom. Sending the same old stuff out more times is not the answer. But sending new messages offering compelling evidence of revenue growth or cost savings through your solutions is the right path.
So take a few hours to review all your marketing plans sooner rather than later in 2009. We are still many months (or years) from being back to some normalcy in the economy. Spending will continue to be reined in by both consumers and businesses. Marketers will need to be very creative to attract new customers in 2009.
Your Entrepreneurial Journey

January 3, 2009

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"Travel only with thy equals or thy betters; if there are none, travel alone." — The Dhammapada

The Buddha had it right. Your journey as an entrepreneur (and through life) should always be with your equals or better.

I often see young entrepreneurs who are overly eager to get going on their idea and end up partnering with people who will not be able to make them successful. Finding the right people can be frustrating and time consuming, but it is preferable to being stuck with incapable or worse incompetent professionals.

If you make only one resolution for 2009, let it be to hire the best possible people to help you on your journey. Many highly qualified people are available due to the recession. Take your time and find the best.

Here are a few ideas to organize your search:

Have a Plan. Sit down with your advisers and discuss what your hiring needs will be in 2009. Do it under a variety of scenarios, since no one knows how long the current recession will last. Make sure you use potential revenue production as a key driver for each new position. It's a tough economy out there.

Consider Outsourcing. Many options exist for getting all sorts of technology development, marketing, web site revisions, support operations, etc., outsourced, not just in India, but also in Eastern Europe and South America. Look at each in-house position with an eye towards whether you can get the same results much cheaper overseas.

Part Timers. I have detailed the benefits of using interim or part time people for key positions in previous Blogs, especially when the company really does not have the resources or need for full time staff. Many of the best available professionals also prefer such arrangements, especially ones who enjoy working for multiple clients. Discuss with your advisers if this might be best for your company, not only to conserve cash, but also to tap the best available talent

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