A VC in Vacationland

Seeking the next gen supply chain technology breakthroughs

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  • Communicating Effectively: The Story of Jack & Jill

                                  "Jack & Jill went up the hill

                                   To fetch a pail of water

                                  Jack fell down and broke his crown

                                  And Jill came tumbling after"

                                                      -Old English Nursery Rhyme

    One of the most common problems I face in my everyday VC life is figuring out what someone is trying to tell me.  This is true in web sites I visit, presentations made to me on company strategy, pitches for money, phone calls, among other media-including youtube.  It is frustrating to devote the time trying to get ready for a meeting or webinar when the background materials are unclear or misleading.

    Most people who have worked with me have had me recite the "Jack & Jill" rhyme to them, normally after I have read a poorly designed business model, pitch or strategy presentation.  The reason is because I have not understood the "simple story" the presentation was trying to communicate.  Too often, mountains of statisticscs on market sizing, competitor share, future growth, etc. obscure the fundamental story that needs to be presented, such as what is the business model or what strategy are you proposing.

    Here are three simple rules to make sure that your presentations are effective at communicating ideas that sell the reader:

    1. Write the simple story first-spend a lot of time trying to get the key ideas and their flow down on a single piece of paper before you draft the 50 pages of Power Point. You can and should spend many hours getting this story correct. For ideas on what the simple story should contain and how to organize it, see my earlier post on Elevator Pitches.
    2. Flesh it out with your team-whether your team is a great group of advisor’s, your fellow founders or just some friends, spend the time reviewing your simple story with them.  Ask what they think about the believability of the story line, whether the idea will play well with potential customers, is fund able, etc.  Be sure and go through as many simple story iterations with your supporters as they can stand.
    3. Try it out with a friendly buyer-ask a current (or potential)customer, VC or even a competitor’s customer to review the simple story. Often, this can be the most valuable feedback mechanism on how well your story is communicating.  It is certainly easier for someone to review a few pages outlining the simple story first, then later seeing the simple story in the context of customer needs, competitor solutions and market sizing analyses.

    So, next time you think about taking pen to paper, or more likely fingers to keyboard, remember to draft the simple story first.  Your probability of success will rise dramatically if you follow the above rules and make sure you communicate the essence of your proposition clearly and concisely.

  • Supply Chain & Marketing Innovator: Pop! Technology

    You should check out Pop! Technology just to view their cool website and demos, including one on YouTube.  Never have I seen animation used so effectively to sell a product, except of course in video games.

    Founded in 2004 by Jon Cameron, Pop! Technology holds a broad methods patent on integrating bar codes with thermal indicators.  What, you say?  Aren’t all the RFID guys running around trying to monitor product temperature variations with complex chip/reader technologies?  Yes, they are, but how about a simpler solution, like one integrated with our old friend the bar code.  The Pop! Technology solution allows you to attach a thermally sensitive bar code that can be read by anyone’s UPC readers and have the data reported out to IRI and Nielsen.

    So who cares?  It turns out that a lot of beverage manufacturers do. Before Pop! Technology, companies just got total beverage sales by store, not sales by on-shelf(warm) versus cold vault.  It turns out that beverage marketers care a lot about how to position their product in stores and Pop! Technology thermally sensitive bar codes can tell them which products were sold warm and which cold.

    The same is true for many pharmacy products, which must be kept in certain temperature ranges to avoid affecting the efficacy of the drug.  Pop!’s bar codes can report when those parameters have been violated in the supply chain and where the violation happened, assuming the products are scanned during the shipping process. The data can then be reported back to the shipper via existing shipment tracing capabilities.  UPS, for example, can support such thermal reporting today as part of its overall shipment tracking process.

    In addition, Pop! has developed an anti-counterfeiting, anti diverting solution for the pharmaceutical industry, in partnership with BTI.  The solution is much simpler than the current ePedigree technology, using a 5-way check which can be done at any point in the supply chain, even at the consumer level.

    From a food safety perspective, the technology has obvious appeal.  Being able to track temperatures in the cold chain is a big deal to consumer wanting guarantees about how their food has been handled. Unfortunately, one could strip off the "bad" (high temperature reading) bar code and put another one on, but not if the only labels were available at the producer.

    Pop! Technology is still operating in a pseudo-stealth mode, since many of their major clients want the technology to be a well-kept secret (read: competitive advantage). However, they have not signed any exclusive deal, so you can get in on the action if interested.

  • Founders: Why Should You Stay

    Last week, we examined the conditions under which a founder should leave the company that they started and grew.  This week, we look at when a founder should remain active in their baby.

    How can founders be involved?

    • Critical Relationship Management–Founders often have very close relationships with key customers, channel partners and employees.  Finding ways to take advantage of those relationships on an ongoing basis is an excellent way for a founder to stay involved and help grow the company, as long as it is in conjunction with existing senior management.  Having a founder "responsible" for the relations with a key customer is not a good idea, either from the company or founder perspective. For example, the founder may not be fully aware of all that is going on in the company and could make mistakes advising customers on new product enhancement timetables.
    • Science Advisor–Founders are often the brains behind the technology.  If the founder has remained current in the field, then they can be valuable contributors to product development plans. Let the founder chair a scientific advisory committee, but make sure that management is heavily involved so that the recommendations are in tune with evolving customer needs and marketplace challenges.
    • Institutional Memory–CEO’s need sage advise to make sure that they do not do something stupid.  Founders likely made a lot of mistakes early on and can help the current management team avoid them in the future.  There is a fine line between advising and meddling, however.  A founder should only act as institutional memory when asked, and not run around the management team regaling them with stories of "how I did it in my day".

    It takes a special founder to serve as the right type of adviser to their start up.  Understanding that someone else is now responsible for driving the company forward is a hard transition for many founders to accept.  That is why you see so many of them sitting on the sidelines and stewing about the value of their founder’s shares .  Get over it, founder, and get on with your new life.  Offer to help but don’t be upset if no one calls. And remember, if all is successful, everyone will give big credits to the founder, no matter who made it ultimately happen.

  • Founders: Why You Should Move On

    Let’s get the band back together!

    One of my son-in laws recently revived his band, after a seven year and two grandkid hiatus, to play at a close friend’s wedding.  Since we had never heard him play, we invited ourselves to the post reception party (as in "It’s OK, I’m with the Band"). Let’s just say it was not the best idea to restart the band, but my son-in-law is a terrific drummer, nonetheless.

    In the same week, the founders of two of my portfolio companies approached me about either taking over again or wanting to stay in power longer. So the whole "let’s get the band back together thing" triggered some thoughts about whether founders should continue participating in the management of the companies they have helped found.

    I’ll tell you my "returning founder biases" up front–only in very limited situations should founders stay around in management roles. Unless you are a founder like Steve Jobs ( a clear success) or Michael Dell (jury still out), you are probably better off deciding what you want to do next in your life, rather than trying to relive an earlier success.  Further, everyone is replaceable in this world and you should have already ensured that the right resources are available to carry on what you have begun and nourished. Finally, if someone wants to go through all that start-up misery again, I begin to question their sanity. 

    So, when should founders move on?  Continuing with the overworked music theme, perhaps The Clash (Combat Rock, 1981) have an answer:

    Should I stay or should I go now?
    Should I stay or should I go now?
    If I go there will be trouble
    An if I stay it will be double
    So come on and let me know…..

    Seriously, here are some thoughts on when the founder should consider moving on:

    • Scaling the company–most founders have not lead a company through various stages of revenue growth.  Entrepreneurs are usually great at getting a company going, raising some cash, designing and building the initial product and attracting launch customers.  But many entrepreneurs are not interested in the day-today miseries of running a business, hiring the next round of talent, adding infrastructure, etc. etc. Investors begin to see that the company’s growth potential is limited by the inability of the entrepreneur to scale employees, customer service, channels, development and operations. It is not really the founder’s fault.  If you have not done it before, why should you be expected to understand the process when you have no play book in your mind?
    • Management failure–It is not uncommon, even after a founder has relinquished their C-level roles at his or her company, for a management failure to occur.  An initial reaction by many founders is the urge to run in and save their baby.  It may have been more than a few years since the founder had any direct operational responsibilities, but the urge is there.  They begin to lobby the board about "taking over again", often denigrating current management for screwing up.  Again, unless you are very close to the company and really know the way out of its problems, you are better off spending your time finding new leadership who have a vision forward, rather than try and remake what worked in the past.  Michael Dell was quite clear to his employees on Day 1 of his return to Dell that the old ways were not going to cut it.  We will all see if his new ways work, but looking for new solutions that build on past success is the right way to approach the issues. 
    • Back to the Future–Another related example of why founders should let others move the company forward is that some founders believe it is totally wrong to change how a company worked under their regime. The movie, Back to the Future, may be fun to watch, but it is sure no way to run a company.  Even when things are going well at a company, the founder may not like the version of success being enjoyed by the current management and try and reverse course.  This is always a bad idea, even when management failure is involved.

    Next week, we will look at some reasons founders should stay involved with their companies.

  • Supply Chain Innovators: Freight Rate Shopping

    A few years ago, getting freight rate comparisons from major ocean, air, rail, parcel, express, LTL or TL carriers was a major headache for companies trying to shop for lower shipment costs. And if you were a small shipper, it was difficult to get a return phone call.  Recently, a plethora of Internet-based companies have emerged–FrtRate, carrierstore, ediscountfreight, uship, networkFOB, logisticshq and freight trucking to name a few who are working to provide higher levels of service and better rates to small companies.

    Freightquote is the largest web-based service that provides quotes from over 50 major carriers, along with automated dispatch, tracking and documentation, among other services.  They have attracted serious investors, including a $70 million stock purchase by Great Hill Partners in December 2006. They also have a exclusive deal with eBay to provide shipping services to auction customers and sellers.

    RedRoller is a newcomer to this space, offering a web-based freight rate comparison service like air travel comparison sites, such as Travelocity.  RedRoller’s no-cost service allows shippers to book orders and pay shipping costs on its web site.  They also sell shipping supplies on the site. They have raised $2.2 million from 59 investors since 2004.  Shippers can look up prices and services offered by a variety of regional and national carriers, including the U.S. Postal Service, FedEx, Overnite Express and DHL Worldwide.

    FutureFreight, which is trying to establish a freight futures market in the U.S. (without much luck), is a natural extension of these sites.  Being able to forward purchase capacity at guaranteed rates, with the option of being able to trade these contracts in a marketplace if you needed to decease or increase commitments would provide much needed hedging tools for shippers looking to ensure capacity availability.  Rumors are that the CBOE is also actively looking at developing a futures market for certain types of freight haulage, primarily in the basic commodities space.

    This is all well and good for the shippers, but it got me thinking about whether this space is a good investing opportunity.  Great Hill Partners has a stellar reputation for picking winners. I do think their late stage investment in Freightquote will pay off, as they are likely to be sold or go IPO in the next few years. But I would not invest in any of the new start ups.

    Here’s why.  These services only provide modest savings over base carrier rates. A benefit for sure for many shippers, but it does not give them access to the deeper discounts available to volume shippers. What small shippers need is access to a consolidated purchasing network of shippers that will let them have increased leverage with carriers. There are such networks under development and that’s where I am putting my money.  More on this topic when these companies come out of stealth mode.

  • Sucky Start Ups

    Here’s a web site, sucky startups, on which you better hope you never get a posting.

    I guess it is inevitable in this new world of "everyone’s a critic" that such sites arise.  I did check out some of the sucky start ups and many were not great in present incarnations.  But, hey, start ups are a work-in -process and feedback is critical to their success.  Some of the criticism was well deserved and some was just ranting.

    Pardon my melodramatic rant for the moment, but people have worked hard, perhaps invested a lot of money and have dedicated themselves to bring an idea to market.  All that is worth something, even if the idea is not quite right (or may never be).

    What ever happened to politeness and constructive criticism??

    End of rant…thanks for reading.

  • Helicopter Board Members

    Most of us have now heard about "helicopter parents"–they rush into their children’s lives at school, sports or whatever and attempt to manage their activities.  Not the best learning experience for the child and a real pain in the neck for professionals who have to put up with the parents and their requests.

    I’d like to speak today about my least favorite board member–the helicopter board member.  The helicopter board member has similar tendencies to the helicopter parent.  They rush into the board meeting, often late and without having spent any time reading the board book or speaking to the executive team, turn to the financial pages and start nitpicking the CEO in front of the rest of the Board members and other executives. Now granted, some CEO’s do not do a good job of defending their finances, plans and operations.  But, hey folks, we are talking about start ups here.  It is very difficult to exactly predict revenues and expenses in small businesses when a delayed signing by one client or unanticipated costs can easily screw up a quarter.  Furthermore, valuable board time gets wasted on subjects that are often not that relevant to the overall success of the company.

    Don’t get me wrong.  I am not condoning poor planning or excusing screw ups by the management team.  And I always look at planning and execution mistakes with the CEO to see how we can do it better next time.  My beef is with the method used by helicopter board members–public humiliation and wasting time arguing stuff that should have been addressed prior to the Board meeting–to make their points.

    So what’s a CEO to do?  A CEO has only minimal control over who joins his or her board, given the need for investors, et. al. to have a place at the table.  And even if you pick one yourself, you really cannot tell up front whether a board member will behave in this manner. However, you can take steps to ensure that they are not given a load of ammunition to allow them to misbehave at the meeting.

    1. Communicate in Advance–I know that pre board meeting communications by executives to board members is a highly charged topic in the start up guru community. So much so that I wrote a Prep the Board!? post on it last year.  But I still believe that CEO’s must clearly communicate with all board members prior to meetings, not to go over the entire agenda, but to make them aware of issues that may come up at the meeting and/or to explain how mistakes may have been made. This helps avoid overlong explanations at Board meeting for members who do not prepare up front for the session.
    2. Put Financial/Business Updates at the End–I can hear the screams even in Maine.  Heresy, you say.  How can you even suggest that??  My feeling is that unless there is a financial crisis that needs to be dealt with immediately, then you should end not begins with business and financial updates.  Does this screw up the flow of the meeting, since current business conditions may affect decisions about spending, strategy, etc.?  Absolutely, but you can go over plans and strategies up front and leave any decisions until after business and financial updates are complete.  I am a firm believer that board meetings ought to help start ups look ahead to the next challenges and that more time should be spent looking ahead than at prior performance.  I’d rather hear about these before I make decisions around how we plan so spend our money next quarter.
    3. Take the Long View–Finally, work hard to win over the helicopter board member to your side.  Frank discussions about their issues and hot buttons, as well as your efforts to deal with these in a timely manner is usually enough to satisfy them.  I have been on boards where this is never true, but that is a rarity.  Most board members want you to be successful.

    But do beware of the helicopter board member who may want your job.  This is not as uncommon as you might think.  I have served on a number of boards where it was clear that the rabble rouser’s thought that they could do a better job than the CEO.  In one case, this was true.  But the rest of the board could not stand the "helicopter" behavior on his part and went outside for a new CEO, in spite of the fact that the person was well qualified for the job.

  • Start Up Strategy: Keep it Simple

    I have just sat through another 65 page PowerPoint presentation on the strategy for one of my portfolio companies.  It was the the second one in as many months.  This one was facilitated by an outside strategy consultant and was requested by a number of board members, who seemed very satisfied with the results.  I wasn’t.

    I was a supply chain strategy consultant for over 30 years and admit to more than a little bias on the subject.  It was not that the presentations were not well done, or that the executives did not work hard on finishing them.  The problem was the "strategy" proposed in both cases was way too complex for small, resource challenged companies to ever think of executing.

    I won’t go into the details of why the strategies ended up being overly complex.  I will offer a few suggestions to other start ups on how to craft a strategy that matches capabilities and resources.

    1. Business Model Centric–You presumably have a developed a business model that works well. Start any strategy discussion about how to strengthen that model and make it richer in revenue potential as well as clearly differentiated from competitors.
    2. Customer Focused–Both presentations had substantial customer input.  But you know a little secret I learned in many years of consulting?  Most customers have no idea of what they should want in terms of additional, value creating services and products.  Getting feedback from customers can easily lead you down some wrong paths.  For example, few customers in one of the companies indicated any interest in outsourcing functional activities, while many others in the industry are embracing BPO as the next big thing. You need to set the strategy ahead of your customers and then develop the marketing, sales and operational capabilities to deliver it. Otherwise, you will not be a market leader.
    3. Structured Priorities–I am a great believer in the "keep it simple" strategy.  Assuming my portfolio company is executing well against current initiatives and keeping customers happy, I would rather see just one new straetgy initiative a year.  Pick one out of the many proposed and do it well.  Multiple strategic initiatives, like developing new products and opening indirect channels, generally do not get the resources they need to both be successful.  I know many of you are thinking that start ups have to have many new initiatives going at the same time to be successful.  Planting many flowers and seeing which ones grow is a great strategy for a garden, but not for a small company.

    So keep the strategy simple, customer focused and all one one page.  It makes it easier for your professionals to know what’s going on and to help the CEO develop perfomance metrics to judge the effectiveness of the new initiative. Put the other 64 pages of market and customer analysis in an appendix, if you must. But, most importantly, make sure that your senior team understands the new strategy and is able to communicate it effectively to your customers, partners and employees.

  • eBay & Micro Finance

    eBay has moved into the peer-to-peer lending space with the purchase of pre-launch, San Francisco-based MicroPlace. It will face startup competitors Kiva, Zopa, and Prosper.

    eBay is spinning this as part of its good corporate citizen programs: "MicroPlace is an eBay-like platform for individuals to find and invest in micro finance organizations around the world and was acquired in May 2006 as part of eBay Inc.’s efforts to build out our Global Citizenship and Development initiative. This ongoing initiative is focused on maximizing our corporate resources to continue to drive social good through a variety of innovative programs. Examples of these programs include the successful Giving Works program available on the eBay Marketplace, which has generated millions of dollars for thousands of charities since 2000 and the eBay Foundation, which has contributed more than $13 million to non-profit organizations."

    MicroPlace’s CEO and founder is Tracey Pettengill, who was CFO at ApproTEC/KickStart and Founder and CEO at 4charity.

    Will eBay drive more people to consider investing in the micro finance space?  This is the unanswered question.  It all depends on whether eBay chooses to integrate MicroPlace into day to day operations, like having the option of adding a note to the sale of your grandmother’s china that a portion of the proceeds will go to MicroPlace.  Otherwise, this is just another notch in the good corporate citizen belt for eBay.  We’ll see how it goes after launch.

  • Supply Chain Innovators: Segetis & Mirel

    One of the uglier aspects of supply chain operations is the huge amount of waste created by packaging materials.  The following innovators are trying to "reverse the curse" of packaging disposal by using green, biodegradable materials.  My thanks to the guys at Alarm Clock for scouting them out for me. Unfortunately, they will be competing for the same crops as the ethanol boys, so expect to pay a premium for these products. They are true candidates for Dave’s supply chain, marketing and sales innovators Hall of Fame:

    Khosla Inserts $15M More Into Organic Plastic’s Segetis

    segetis.png
    When we last posted on Plymouth, MN-based Segetis, we called the stealth mode startup a "friendly chemicals" company. It had just closed $5M in funding from Khosla Ventures. Today we learn that Khosla has invested a full $15M in Series A. We think this is has brilliant marketing hook. Every product maker that sells in Whole Foods would love to be able to say that even its packaging is organic.

    The company’s CEO Sergey Selifonov, gives us some more to chew on: "For decades, the production of many products of every day life from plastic table tops to shampoo bottles to car seat cushions has been dependent on fossil materials such as petroleum, gas and coal. Green chemistry can deliver novel cost-competitive products that perform at par with or better than the existing petrochemical goods."

    Segetis says its bio-based chemical products from renewable agricultural and forestry feedstocks can be used for production of surfactants, plasticizers, adhesives, coalescent solvents and other compounds for specialty chemical applications.

    New Biobased Biodegradable Plastic Hits Market

    Mirel Natural Plastics, a family of high performance natural plastics that are biobased, sustainable and completely biodegradable will be produced by ADM and Metabolix Inc. the companies announced earlier this month.

    The companies formed a joint venture, Telles (named for the Roman goddess of the Earth), to produce the natural plastic which will manufactured at a plant in Clinton, Iowa. This plant is expected to start up in 2008 and will produce Mirel at an annual rate of 110 million pounds.

    "We are now commercializing biobased, renewable alternatives to petroleum-based plastics that will reduce our reliance on oil and the impact petroleum use has on climate change," said Jim Barber, CEO of Cambridge, Mass.-based Metabolix.

    Mirel is produced from renewable resources like corn sugar which can biodegrade harmlessly back to nature in a wide range of environments such as soil, compost, rivers and oceans. It can provide an alternative to traditional, oil-based plastics. More than 350 billion pounds of plastic is produced each year and nearly 10% of total U.S. oil consumption — about two million barrels a day — is used to make plastic each year.

    Mirel can be used as an alternative in a wide variety of conversion processes, including injection molding, paper coating, cast film and sheet, blown film and thermoforming. Metabolix is currently working on more than 60 applications, including consumer products, packaging, single use disposables, and products used in agriculture and erosion control.