A VC in Vacationland

Seeking the next gen supply chain technology breakthroughs

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  • Supply Chain Innovators: MooBella (update)

    Last October, MooBella was featured in a Supply Chain Innovators Blog posting. Now, eighteen months from launching its self-contained premium ice cream vending machine, MooBella reports it has accepted its first round of institutional funding, with a $25 million infusion from W. Health LP, a venture fund managed by Inventages Venture Capital Investment, Inc.

    The funding will be used to increase the number of locations of the company’s machine–hopefully, one nearer me–and to build distribution and strategic partnerships.

    I could not help but notice the irony of a "health" fund investing in super premium ice cream, but most everything in moderation is apparently good for you (remember Woody Allen in Sleeper).

  • The Changing Role of VC’s

    Anyone seeking to understand the role of venture capital in creating and nurturing new companies should read Bill Janeway’s seminal piece in Sandhill.com.

    Bill is one of the nicest and most brilliant people I have ever met.  He has a great sense about what types of people and ideas will produce great companies.  He taught me a lot of what I know about investing in supply chain companies. And he is very good at calling turns in the venture capital market.

    To oversimplify his major point, VC’s today are betting on the "front end" of start-ups–looking for the right idea, right platform(perhaps replatforming an existing company), right team and fast market acceptance to allow an early exit via acquisition, generally after a Series B round. Hanging around to wait for $100 million in revenue and a possible IPO just takes too long to accomplish (as well as too much capital).

    What does this mean for today’s start-up entrepreneur?  Unless you have an absolutely killer idea and the team to make it happen, the VC community will likely put you far down the funding priority list. You are left with the options of raising money from friends and family, the fast-growing angel community(which are increasingly acting like VC’s), or find a way to quickly go cash flow positive with an innovative revenue model.

    Does the prognosis sound grim for funding?  Based on my limited observations of a variety of start up business plans, today’s entrepreneur will have to engage in more self funding and perhaps look at very different growth paths, including acquisition by a larger player in their space.  Usually, this behavior is not on the entrepreneur’s radar screen.  The typical entrepreneur wants to hold onto their idea and ownership share much longer than they should in today’s capital environment.

    My recent feedback to entrepreneurs has been to focus on developing a revenue model that will enable more self funding via innovative revenue models and spend more time getting to know larger players in their space to preview possible exit partners.  That was the strategy we used in selling Vtrenz to Silverpop.  The permission-based marketing space was growing so fast that we knew that scale mattered more than preserving founder’s equity.  Vtrenz ran the risk of being marginalized because they could not grow as fast as the marketplace demanded. Our on-demand model was generating good cash flow, but we needed more indirect channels and sales power to really capture the B2B space.  Acquisition was the best route.

    So spend a little time reevaluating your idea about how you company will be most successful. You may be able to make the traditional angel/VC funding model work, or you may need a different approach. The important point is that you know what your funding and exit strategies are up front so that your business model supports your capital requirements.

  • New Tools for Entrepreneurs

    Psst…want to avoid getting hosed by my fellow VC’s?  try Venture Hacks.

    Psst again…want to check out if your potential investors are nice guys?  The Funded.com is the web site for you.

    For years, the angel and venture capital communities operated as their own club, with a firm set of rules that started with the most important one–don’t tell outsiders how we do business!  This worked for a long time as few people broke ranks.  Those that did were labeled malcontents and ignored.

    But times have changed and entrepreneurs can get all sorts of advice for free on the web, including insights on how to deal with VC’s.

    I have mixed feeling on many of these new sites.  For one thing, some of the advice on Venture Hacks is just bad, like never trust the lawyers. Similarly, who are the folks who are ranking the VC firms on the funded? The funded, or the unfunded?

    These are beta sites for the most part and time will tell if they turn out to be useful tools for the entrepreneur.

    One site that does show promise is vator.tv. Although Bambi Francisco, former Internet commentator and Blogger on DJ’s MarketWatch, resigned in disgrace over her new company–due to potential conflict of interest with her reporting duties, the site is a great improvement over having to read business plan PowerPoint attachments to an email or attending a webex meeting. Entrepreneurs and venture capitalists can post videos on-site, either describing their start up or letting entrepreneurs know what vc’s are thinking/investing in.

    In the interim, my best advice is to find someone you can trust who has done what you want to do already and use them to as a mentor.  They can direct you to the right capital, legal, PR, etc. resources you will need to get going. Don’t try to do it at home on the web.  You will get hosed.

    Instead, spend your time networking to find some good people with the skills to help you do what you need to do.  We may be a web-enabled society now, but don’t think that Second Life is equivalent to your first life, and get out and meet the right people.

    But beware of free advice.  Reputable mentors will want a piece of your business for helping you. That’s fine and acceptable.  But run away from guys who want cash or "finder’s fees" for bringing investors to your door.  They rarely do and if they do the investors will probably want your first born as collateral.

  • Paranoia, The Destroyer?

    Just the opposite is often true in startups. Entrepreneurs should embrace paranoia. It’s the juice that fuels the creativity engine.

    It can also be a serious mental disease in some people and I am not trying to make fun of those afflicted by it.

    As Andy Grove often stated, paranoia is good in business.  They could use a lot more of it at Intel these days. But be careful that paranoia does not make you go after every potential competitor to your space.  Hollywood Entertainment, Blockbuster’s big competitor, learned this lesson the hard way by buying Reel.com in the dot com boom, and investing hundreds of millions in trying to peddle VHS format on the web, instead of investing in the new digital push movie technologies we now take for granted five years later. However, focused paranoia does have an important role in managing startups.

    With apologies to Tom Evslin, I would like to offer the following thoughts on the positive aspects of being a bit paranoid in startups:

    • Understand what is going to make you successful
    • Question daily if the underlying conditions driving success still exist
    • Don’t assume the past is predictive of the future
    • Make a new plan before the old one fails.

    If you are not capable of being paranoid, at least become a "worry wart" as I outlined in my previous Blog On Leadership: Managing Transitions. Remember that, in the end, no one but you will be more responsible for the overall success of your start up, not you advisors, not your investors and not your employees.

  • Sell to the CEO!

    Most start ups, sometime in their early strategy discussions, say that they are going to sell their products to the potential client CEO’s or other C-level executives.  The arguments are compelling–C-level executives run the ship, control all the budget decisions and can make underlings do what they want.

    Sometimes, their story does get the attention of the C-level executive.  Introductions are made, meeting are held, promises passed back and forth.  And then, nothing.  A number of things can go wrong.  Underlings resent the intrusion in their decision processes, competitors get asked to the party, and the deal time stretches way out. Often, the C-level executive, having delegated the decision to his lieutenants, has moved onto other issues

    So, is it worth going the C-level route ? If so, how do you avoid getting marginalized as the process moves into the organization? And what is the key success factor to penetrating the C-level?

    Here are a few suggestions:

    Is it worth it?  Often, the best C-level executive to approach is one who has market/competitive problems, or has just taken over a troubled company and you have a solution that can help him or her reduce cost, increase revenue, whatever. But remember that every consultant worth their pay check will have the same idea. You need to be creative in your approach, play on your ability to recognize the intricacies of their business and provide unique solutions which yield competitive advantages. 

    How can you avoid getting trapped in a non-response cycle? Here are four things that have worked for me in the past:

    • Establish a good communication path to the C-level executives
    • Work early and often with the influencer’s in the organization
    • Develop a "penetration" work plan with timetables, and
    • Execute with quality and precision at all levels in the organization.

    Finally, what is the key success factor in penetrating the C-level in organizations? The universal rule is to know someone who knows a C-level executive and can introduce you.  Your probability of success increases dramatically when an executive hears about you from a trusted friend.  This has long been the secret behind the success of world-class consulting companies–knowing the people in power. Don’t know someone who knows an executive?  Here’s where your Linkedin or Plaxo networks come into play.  I can usually find someone in my network or extended network who knows an executive I want an introduction to fairly easily.

    Selling to the C-level requires quite different strategies from a traditional sale. Make sure that you exploit the people networks to get the right introductions.  Blind emails or calls to the executives are usually a waste of time and energy. 

  • IP=Insurance Policy?

    IP stands for Intellectual Property.  Intellectual property is also an important "Insurance Policy"(another form of IP) for startups.

    I have seen numerous startups who do a good job initially of protecting their IP, but then do not follow through and continue to protect new developments.

    This can come back to haunt you when you go to sell the company.  Buyers want to know that all they are buying is protected as much as it can be.  If you do not, then your valuation drops.

    Here are a few suggestions on how to make sure IP remains your insurance policy and not a huge liability:

    • Put it in the Board agenda-this is an effective way of reviewing IP strategy at least 4 times or so a year.
    • Offer incentives to key employees–set a bonus pool around IP filings, sharing small cash bonuses with those that bring good ideas forward and work with the patent attorneys to get them protected.
    • Keep track of competitor filings–in this way you will know what they are up to so that you can be sure that they do not end run you.

    Finally, make sure that you have a top-notch IP lawyer doing your filings, someone with substantial experience in your IP space.  Don’t rely on lawyers who need education from you in your IP space, unless you want an expensive lesson in how not to protect your assets.

  • The Emergence of Mobile Enterprises

    Disruptive, real time technologies will enable new revolutions in supply chain strategies and management. The ability to design mobile enterprise capabilities into new business models is one of the most interesting.  Al Delattre of Accenture first introduced many of the new supply chain design concepts around mobile enterprises in a presentation to the Stanford Global Supply Chain Management Forum in 2004. Al and Dave have since presented these ideas at numerous other meetings.  In addition, a white paper, The Evolution of Enterprise Mobility–Five Predictions for the Future, is available on the Supply Chain Ventures web site.

    The fundamental idea is that a whole new ecosystem is emerging, based on the mobility of people, inventory, knowledge capital and assets–now available anytime at any location.  Wireless capabilities, coupled with smaller, hand-held devices and wider networks will enable people to work more effectively out of the office, better track shipments and inventory, enhancing revenue growth through channel optimization and driving greater productivity as well as enabling greater collaboration with supply chain partners.

    The white paper details five predictions on how mobile enterprises will evolve in the coming years and discusses how companies can take advantage of the new business models.  Here is a summary of the predictions, which are explained in detail in the white paper:

    Prediction 1: Enterprise adoption of mobility will be driven primarily by people who have increasingly personal experience as consumers.

    Prediction 2:  Winning companies will be those that "design for mobility" as the standard, not the special case.

    Prediction 3:  The power is in the packaging–bundled solutions(and "ease of use") will drive adoption and commoditize most sub-components.

    Prediction 4:  Winners will be those who use mobility to fundamentally transform the way commerce happens, not just "work unplugged".

    Prediction 5:  The source of demand for mobility will likely come from unexpected sources as new value creation opportunities occur.

    Enterprise mobility is an idea that is not going away anytime soon.  Figuring out how to mobility-enable a supply chain should be on the mind of executives looking to prepare for the next generation of supply chain innovations.  Check out the paper and let me know what you think about enterprise mobility and whether it can be the basis for future supply chain strategies.

  • The Power of Networking

    Booz Allen Hamilton’s Strategy + Business newsletter contains interesting articles dealing with corporate strategy, but is usually aimed at major companies (read: their current/potential clients).

    A recent article, The Craft of Connection by Tim Laseter and Rob Cross, focuses on how companies have built internal networks to foster innovation and growth:

    "Article Summary: A growing number of companies, including Chevron, Halliburton, and Whirlpool, are seeking new methods to stimulate innovation and streamline global practices. By mapping the relationships between key thought leaders within a company, executives can bolster innovation by building connections between critical employees — those who offer specific expertise or deep knowledge about the company and industry. By creating a database of these employees and their respective specialties, leaders can draw on the experience of these individuals to help solve problems, increase productivity, and share domain knowledge with others in the firm."

    It is an article worth reading by anyone interested in more effective corporate management, but it also got me thinking about the power of networking in start ups.  Let’s face it, in a 10 person start up, there is a lot of internal networking going on as you get the products and services ready for market.  This is critical to your success, but your most important networking is with external people, and not just your customers.

    Venture capitalists, investment bankers, analysts, industry gurus, to name a few, are examples of people you need to reach out to in your early years.  Getting the buzz going early about what you are doing is critical to long term success.  If they don’t know about you, they cannot talk about you with others, nor give you any advice.

    How do you go about meeting all these people? Networking via your current investors and board members is an obvious first step, assuming they are connected in the industry.  Just emailing or calling people is often effective, some will not want to speak and others will be open to your thoughts and ideas.  You never know until you call or write.

    As the article suggests, you may want to create your own external networking map, as a way to see your current network as well as to see the areas where you need to establish new or additional relationships to make sure you cover all the networking bases: 

    • Industry gurus, market analysts, venture capitalists in your space, academics should all be on the external networking map you develop.  Review it with a trusted board member or adviser to get additional ideas. 
    • Next, use Linkedin or other business networks to see if your friends and associates have any connections to these people or others in their organization. Don’t be afraid to ask for an introduction and be sure you follow up and contact the person.
    • Finally, have something to offer these potential new contacts when you do get connected–I spoke with someone the other day who wanted me in his network, and offered to introduce my investments to supply chain leaders in companies he knew well, such as P & G and Unilever. This was a great offer, made me happy to help him with his request, and was much appreciated since it could create value for my companies.

  • Smile

    My oldest grandson, Brandon(age 8) was fooling around with my wife’s computerized labeling machine–yes, she is a label junkie.

    He printed out the word SMILE, walked down to the front door of our house and pasted it at eye level so that anyone coming in the door would see it.

    It reminded me that everyone should smile at the other person when speaking. Why not? I do even when I am angry as it helps me remember not to say the wrong words and calm my inner feelings.

    You are also much more likely to buy something from someone who is looking you in the eye and smiling at you.  This is a lesson that many software sales people need to take to heart.  Everyone likes to do business with a happy person, rather than a neutral or grumpy one.

    Smiling is also important when you are dealing with your staff on various matters.  You will come across as a more genuine person if you say it with a smile.  It is also important in recruiting.  I never hire people who do not smile a lot in interviews.

    OK, OK, you are saying enough of the smile stuff.  But think about it.  Don’t you really prefer to be with people who are smiling than those who appear eternally unhappy?  Ha, caught you smiling, didn’t I?

  • Wal-Mart Bags RFID??

    Wal-Mart’s Radio Tracked Inventory Hits Static by Gary McWilliams in the February 15, 2007 edition of the Wall Street Journal details the well-known litany of problems that the world’s largest retailer is having with RFID.  Not a lot of new news here–no savings for suppliers, difficulty with roll outs because of technology problems, human reluctance to figure out out the hard bits to make the programs work–we have all heard these before many times.  We already have the boo birds saying that RFID is doomed and Wal-Mart is going to abandon the program.

    Not.

    As Mark Roberti points out in a follow-up article in the RFID Journal, Understanding the Wal-Mart Reality, the article may have missed some important developments at Wal-Mart.  He notes that Wal-Mart buying teams are now working with suppliers on which SKUs to tag, and that suppliers are anxious to cooperate with Wal-Mart to use RFID data to increase sales.

    Wal-Mart buyers are now working with suppliers to tag product as a way of improving on-shelf availability, looking at ways to predict emerging stock outs and get product from the back room or DC to the store in time to avoid stock outs.  I suspect that the TrueDemand pitch about managing shelf-back supply chains is finally getting more attention from Wal-Mart and its suppliers.

    In addition, a number of suppliers, especially Gillette (recently added to P&G’s stable of superb brands), who was an early adopter of the technology, but even Campbell’s Soup, are leveraging the RFID data to improve sales at Wal-Mart stores.  Campbell’s, a low-value product company, initially thought that RFID was too expensive and had few benefits. Now, Campbell’s is tracking promotions and seeing a sales rise when using RFID data to better plan and restock products at RFID-enabled stores.

    RFID is hear to stay.  There is not "better" technology coming available in the near term to replace RFID.  Sure, there are technical problems, like there are with any new technology.  Wal-Mart needs to reduce supply chain expenses.  There are precious few technologies out there today that can do this and none have more of a longer term cost promise than RFID.

    So, don’t believe the boo birds on this one.  But don’t go whole hog on exotic RFID investments like a number of suppliers have, only to discover that Wal-Mart is only using the tags in a few facilities. Have the guys slap on the tag in the warehouse for now, adding only a marginal labor cost.

    Trust me, Wal-Mart has no Plan B on this one.  They will make it work and when it does everyone will be saying how great this stuff is.