A VC in Vacationland

Seeking the next gen supply chain technology breakthroughs

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  • Rifle versus Shotgun? Selling Your Company

    The day inevitably comes for the entrepreneur when he or she will face a decision on whether to sell the company that they have built over the last few years.  Although you may not end up going through with any transaction at that time, it is useful to consider selling strategies and be prepared to choose which one may be best for you.

    Let’s set the stage a bit by saying that you have been approached over the last few months by potential buyers and have developed a relationship with an investment banker to help you decide if this is the right time to sell. And remember that there are a lot of variables in deciding when it is right to sell.  We all want to sell at the peak of the market for our technology, but that is really difficult to predict.  So you will have to decide which selling strategy will work for you, given your readiness and the pulse of the overall market.

    There are two principal selling strategies for most entrepreneurs: the rifle or the shotgun strategy.

    Under the rifle approach, you would focus on buyers who you would really like to acquire you, or are most likely buyers, perhaps Google or Microsoft, for example.  The investment banker would meet with these companies and see if they are interested. If the market is hot, you are a leader in your space and your technology would fit a hole in their portfolio, you may get lucky and have a few high quality bidders, or one that wants to preempt a deal with anyone else.

    Under the shotgun strategy, the investment banker would contact anyone that may be remotely interested in your company and sees if they would like to discuss a deal.  This could yield about 25 parties who request the details on the company, moving down to 5 or so serious parties to negotiate with.  This strategy can maximize value by flushing out all potential buyers.  On the other hand, a protracted process with no sale at the end can make the start up look shop worn.

    Of course, you could get lucky and have a bluebird buyer come along, offer you the big bucks you were seeking, be a great home for your people and solutions and make you a leader in their company.  But this stuff happens only rarely.  You need to face the reality that you sold the company and the buyer can do what they want with it, which may or may not include you.

    Under any circumstances, it is best to discuss potential sales strategies with your Board sooner rather than later.  The processes associated with each strategy are very different and involve varying time frames and levels of management commitment.  Make sure that the Board understands all this in advance so that an informed decision can be made in advance of any serious moves to sell your "baby".

  • A Bonanza of Good Business Books

    There are a plethora of relatively new business advice books that entrepreneurs should consider reading on their next plane flight. I have not read all of them yet, but those I have not have been recommended to me by trusted friends.  Why am I an avid business advice book reader?  Besides filling up unproductive time on airplanes, you can always learn something new, reflect on how bad behaviors affect your life,or discover some new good tactics to help you be more successful.  One word of advice–no business advice book is worth perusing for more than a two hour flight.

    The Power of Nice: How to Conquer the Business World with Kindness by Linda Thaler and Robin Koval

    "They turn most truisms about business inside out, arguing that good deeds are returned, not punished. Warning against a me vs. you mentality, they even suggest helping opponents as a good way to boost a career." Donald Trump loved the book….really. The book reminds entrepreneurs that your poorly paid employees need a lot of emotional support from you to stick it out until they get their options and equity rewards.

    Mavericks at Work: Why the Most Original Minds in Business Win by William Taylor and Pally LaBarre

    The best entrepreneurs are mavericks that constantly question and challenge the established order and traditions.  This book explores why a wide variety of mavericks have succeeded in business.  As the authors put it: "It is not a book of best practices.  It is a book of next practices–a set of insights and a collection of case studies that amount to a business plan for the 21st century, a new way to lead, compete and succeed." Well, not really, but it will give you some new ideas on how to innovate your business thinking.  Worth a couple of plane hours, and then give it to the fight attendant who wants to start their own business (and stop having to fill your wine glass every 10 minutes, dude).

    Wikinomics: How Mass Collaboration Changes Everything by Don Tapscott and Anthony Williams

    We used to have Don speak to our Partners at Andersen Consulting every year or so.  Out of all the speakers we invited–and believe me, we invited everyone who had an interesting perspective on technology–Don was always the one who got the highest marks for content.  His latest book explores a subject near to my heart–collaboration.  Mass collaboration–such as the Human Genome Project and Wikipedia–allow participants to contribute to creating knowledge that, hopefully, advances civilization. The book is very well done, but does not much explore what I believe is a key frontier for business–so called business collaboration networks.  However, entrepreneurs interesting in exploring business networks can gain a lot of knowledge from the social and related collaboration examples in the book.

    Stupid, Ugly, Unlucky and Rich: Spike’s Guide to Success by Richard St John

    Well, this one’s a great pick-me-up for all you geniuses out there whose start ups have failed miserably.  What’s the old joke?  "How can you tell a Ph D’s car in Harvard Square?  It’s the one with the Domino’s Pizza sign on the roof".  The basic premise is that smarts are not all you need to succeed.  Duh. The author details eight common sense factors underlying success in start ups.  And you know what?  The factors are on the mark and not found in many other business books.  So, if you are going to pick up one book to peruse next week on your travels, get this one.  At least it’s funny.

    Word of Mouth Marketing: How Smart People Get People Talking by Andy Sernovitz

    Wait, what do the Jaegermeister Girls (actually, the Jagerettes and Jager dudes) have to do with my technology start-up??  Just about everything in the new world of marketing, and it is why you need to read this book.  The proliferation of Blogs, analysts, chat rooms, forums, etc. in the technology world means that people will know about all your start up as it happens.  You can get lots of free publicity if you can better manage the information being created about your company and its products. You can also have a lot of misinformation spread around if you do not check what other are saying about you.  So either way, you need to participate in the revolution.

    The blurb tells it all on this book:  "Master the art of word of mouth marketing with this fun, practical, hands-on guide.  With straightforward advice and humor, marketing expert Andy Sernovitz will show you how the world’s most respected and profitable companies get their best customers for free through the power of word of mouth.  Learn the five essential steps that make word of mouth work and everything you need to get started using them. Understand the real purpose of blogs, communities, viral email, evangelists, and buzz—when to use them and how simple it is to make them work."

    Last, but not least, we have The Starfish and the Spider: The Unstoppable Power of Leaderless Organizations by Ori Brafman and Rod Beckstrom.  How many entrepreneurs worry about their organization structure?  I’ll bet only one or two in ten do to any degree.  If you read this book, however, you may find that, depending on what you need to accomplish in your first two years just may require a different structure than you originally envisioned. "Brafman and Beckstrom, a pair of Stanford M.B.A.s who have applied their business know-how to promoting peace and economic development through decentralized networking, offer a breezy and entertaining look at how decentralization is changing many organizations. The title metaphor conveys the core concept: though a starfish and a spider have similar shapes, their internal structure is dramatically different—a decapitated spider inevitably dies, while a starfish can regenerate itself from a single amputated leg. In the same way, decentralized organizations, like the Internet, the Apache Indian tribe and Alcoholics Anonymous, are made up of many smaller units capable of operating, growing and multiplying independently of each other, making it very difficult for a rival force to control or defeat them. Despite familiar examples—eBay, Napster and the Toyota assembly line, for example—there are fresh insights, such as the authors’ three techniques for combating a decentralized competitor (drive change in your competitor’s ideology, force them to become centralized or decentralize yourself). "  For the entrepreneur, top down management may be less effective that team oriented development in many technology environments.  The authors present lots of examples of success and failures for you to ponder.

    So, enjoy any or all of these books, tell me what you did or did not like and let me know about other business advice book which you have read that might be helpful to entrepreneurs.

  • The SaaS Gold Mine in Supply Chain Software?

    The continued success of on demand software models, especially the big push by Oracle and SAP into these spaces, makes us venture guys push up the valuations on our SaaS investments.  But the hidden value in SaaS environments, and one not shared by all on demand software, is in the data collected and managed by many SaaS software providers, especially in the supply chain space. The tech blog cognoscenti are already lauding the idea, but few of them give us many ideas of how this might apply to the supply chain world. Well, let’s let the tiger out of the bag.

    Procuri in the sourcing space, Apriso in manufacturing execution, Datatrac in courier/express carrier management, Redtail Solutions in retailer sourcing management and Lean Logistics in the transportation execution space (to name a few) all own the data they collect to manage their respective processes in running supply chains. The data sources represented include primary vendor, manufacturer and carrier transaction files, as well as EDI and RFID environments. All this data is generally outside the firewalls of user companies and not available from a single source at present.

    Is the value of the data currently reflected in the valuations of these companies?  The answer is : not yet.  The reason is that the companies that own the data have yet to monetize the value of information contained in these sources to their customers.  There are three possible uses of the information:

    1. Execution–providing better and actionable real time data to ensure transactions complete successfully.
    2. Benchmarking–evaluating supplier costs by industry and region, transportation costs by lane, transit times and delivery performance, to name a very few applications.
    3. Strategic Analysis–evaluating trends in procuring and prices of components by region, availability of back hauls, manufacturing lead times by industry and carrier performance in retail delivery are a few of the many analyses that could be performed.

    For reasons of confidentiality, I have not gone into detail on how these SaaS providers are planning to monetize their content.  Suffice it to say that the process involves the development of significant data mining capabilities as well as making sure that individual client data and information is well protected in the analysis and reporting process.

    During 2007, supply chain SaaS providers will begin to test the market with their clients on willingness to pay for new information gleaned from aggregated transactions data.  Also, they are beginning the process of designing and testing methods for mining and reporting the data from their files.

    Issues remain about willingness to pay for the new information and also whether the clients have the in house ability and tools to work with the new data.  A number of clients have commissioned SaaS providers in supply chain to do special studies on their own and on aggregated data to, for example, evaluate possible warehouse locations (availability of carrier, outbound rates, etc. by possible site).  This is an important first step in the process of using more real time information from the SaaS data bases to manage supply chain operations.

    A number of non supply chain SaaS vendors who own and manage large data bases are beginning to set up "research groups" to monetize this data.  Taleo Research and Monster Intelligence are data mining the HR space using all their job and candidate databases to evaluate trends in salaries by job and region, for example.  Perhaps the supply chain guys can learn a thing or two from them.

  • Supply Chain Innovators: MetroHorse & Freight Feedback

    In a previous Blog, Where are the Supply Chain Entrepreneurs?, I asked why so few business networks have been started.  Business networks would let companies collaborate on line with their suppliers to find new ways of improving supply chain efficiencies.

    MetroHorse is a B2C network that lets businesses post their profiles, consumers to place bids on their services and allows the consumer to post feedback on the quality of the service which is accessible to any user.

    In a B2B network, the same process could occur, but with customers ranking suppliers on cost, service levels, damage, customer service among other considerations. The only ones I have seen are carefully guarded systems to track supplier performance within companies, such as Wal-Mart uses to shape up their supplier community.  I have not come across any pubic networks where businesses can go on to see ratings of suppliers that they are considering adding to their list.

    Granted, this is only a small part of what Dave thinks a B2B business network should be, but it is an interesting model for part of the offering. It would be great if we had a site where supply chain providers- 3PL’s, carriers, suppliers, etc. could be "rated" by their customers.  Are we thinking liability here?  That is probably a big reason that such sites have not proliferated, besides lack of a business model beyond subscriptions (think Angie’s List), transaction fees ( think eBay) or advertising (think shopwiki ).  An individual small seller on eBay is unlikely to file a lawsuit if he or she gets a lot of bad press from reviewers (no Gold Star Achievement Award from Meg for you!), but a global shipping company might if they were getting consistently poor write ups due to sub standard service.

    There is a nascent site dedicated to recording supply chain professionals feedback on logistics providers, Freight Feedback, but it does not seem to be attracting much feedback or interest.  This is surprising to me, in that picking quality providers is critical to running an efficient supply chain. My guess is that the feedback network is still "informal" in supply chain, where professionals rely on their network of friends to check out carriers and other providers.  It sure would be a lot easier if there was more of a central repository where one could go and find performance rankings based on the feedback from thousands of users.

    Has anyone seen other examples of successful, public, on-line supply chain rating systems?  If so, please send me the links. 

  • The Perfect Pitch: How to Succeed in Selling and Doing Technology Initiatives

    For those of you who are interested in my collective thoughts on how to sell a technology project inside your company, or how to coach your customers on selling a technology project, see ( The Perfect Pitch: How to Succeed in Selling and Doing Technology Initiatives). I have added the article to the News & Resources section of my web site.

    The article outlines the ten key rules any project manager (or project manager’s coach) needs to follow to initially sell and then successfully complete a major software installation.  The article was originally derived from my keynote address at the Procuri User Conference in September 2006.

  • Supply Chain Innovators: Zoom Systems

    Zoom Systems provides automated robotic retail stores in high-traffic area, full of brand name products you want to buy.  Why are they supply chain innovators? Well, the short story is that they bring the right products to the right place at the right time, but at a much lower cost than traditional manufacturer/distributor/store networks, and they eliminate store labor/infrastructure costs in the process.

    Goldman, Sachs and Sierra Ventures are two of the savvy VC’s in on this one, with over $50 million already invested.

    Just think of the possibilities–best sellers at airports, iPods on campus, designer accessories at malls.  The idea is even more intriguing when you get to space constrained cities like Tokyo and London.

    Keep your eyes on these guys.

  • The Shoe Shine Guy

    We had very different office perks when I was living in London and developing Andersen Consulting’s Supply Chain Consulting Group across Europe.  Coffee and biscuits delivered to you desk four times a day, a partner breakfast, lunch and dinner room with a private chef (unfortunately shared with Arthur Andersen’s partners), office supplies brought to your desk within minutes of a call, and the shoe shine guy. Those days are long gone, but it was nice while it lasted.

    I got to thinking about the shoe shine guy the other day, after the third call from a newbie entrepreneur with another wild scheme to make money in the supply chain space.  The shoe shine guy showed up every day to shine your shoes. Free, but really paid for out of partner profits. Almost every day he had a new scheme to make money.

    He was Russian, in the UK on some sort of work visa (the Brits don’t like to shine their own shoes). The whole glasnost thing was happening in Russian and he had a myriad of friends who had access to the "private" auctions of state companies, including a number of logistics companies.  I used to listen daily to his stories, his pleas for money to invest in all these sell offs , and most of all his desire to join his wife and kids back in mother Russia. I never went for any of his schemes as they all sounded too risky–such as suitcases full of dollars being the "currency" of the auctions. Last I heard, he had made it big in Russia after buying one of these public enterprises.

    But I realized that he did have a big influence on my venture capital mindset.  His daily diet of new deals, some of them turning out to be very lucrative for him and his friends, made me realize that you never know where the next good deal may come from.  You have to keep looking among the unknowns to find interesting new ideas.  Their business models may be bad for the moment, but you know in your heart that the idea will work, and work big time, some day .

    I have a couple of those deals percolating right now, one in the freight futures market and one in business networks.  When I first met the entrepreneurs, I knew the initial business models were wrong.  But I am continuing to help them refine the models, with the hope that we will get it right in the next few iterations. 

    That’s what early stage venture capital is all about some days.  Listening to the shoe shine guy.

  • Grow or Die

    Otto Eckstein, founder of Data Resources, Inc, one of the first econometric forecasting companies, used to shout "grow or die!" at executive meetings when we all complained about the aggressive revenue targets set for our divisions.  I founded and ran the Transportation & Logistics Forecasting Group for DRI for many years. Otto was one of my early and best mentors in the start up world.

    And you know, he was right.  Start ups can be nice little niche businesses that support a few partners, have a few clients, but may have minimal exit opportunities.  Or they can continue to add good people and customers and create value for everyone, including the investors. It is really your choice.

    But do not think that you can build that nice little business and then expect to sell it for any reasonable profit in a few years.  I get at least a call a week from entrepreneurs who have "hit the growth wall", decided it is too tough to climb over the wall and now want to sell, or worst yet raise capital to jump over the wall.  Not.

    Any good venture guy wants to buy into a growth story that YOU have devised, not devise one for you. First, they personally do not have the time, no matter how good the underlying idea may be, and they may send you away. This is called the "too hard" theory of venture capital, implying that if they wait a while an equally good, but easier to do, idea will come along in your space. Or they may fund the idea and then replace you with a CEO who can devise the growth story. In either circumstance, you will be left out of the industry because you did not have the right growth story.

    So, if you run a start up and want a fair payoff at exit, grow or die!

    Did it work for Otto, Dave and the other founders?  It sure did.  We sold DRI to McGraw Hill for thirty-three times earnings in 1979.  Not a bad payoff for following the grow or die advice.

    It also makes a nice Post-it Note strategy for a start up(see my previous post on this subject).

  • Supply Chain Innovators: eCourier & Pizza Pilot

    In a post last week, we reviewed the emergence of the newest type of supply chain innovators– LARTE’s–Location Aware Real Time Enterprises. This week, we will look in depth at two emerging players in this field–eCourier and Pizza Pilot.

    Logispring, one of my investing partners, has just completed funding the international expansion plans of eCourier, a two year old London-based express parcel and post delivery company. The firm’s founder’s have put the whole customer-courier interaction process on line, so that the courier can use his or her PDA to find the next pickup or delivery, using route optimization software powered by GPS location to best route the numerous couriers running around a city.

    Why is this such a big innovation?  Anyone who has witnessed the chaotic process of moving documents by van, bicycle or on foot in any big city across the globe knows how inefficient the process is from a supply chain perspective.  Gaggles of couriers sit around drinking bad coffee waiting for a call on their cell phone, then arguing with the dispatcher that they need to take a lunch break and why not give some less than desirable delivery to another guy. Customers are left wondering when someone is going to show up and whether the person will delivery the documents on time, since the dispatcher does not know the location of the courier unless he calls the courier’s cell phone to find out the status of the delivery.

    The eCourier technology eliminates the uncertainty associated with inefficient communications and poor routing decisions. Using PDA based tracking lets the dispatcher know exactly where the couriers are and what they are doing, e.g., not moving because they may be chatting with friends. In addition the technology provides lots of data on transit times by time of day, letting the software give more accurate delivery times to customers.  Courier performance can also be tracked and compared, allowing better management of a difficult work force. Customer can also track the progress of their delivery on the eCourier web site.

    International expansion is an obvious next step for eCourier.  My take is that their technology can also be used in a variety of related businesses, such as scheduling vans for agencies working with the elderly and schoolchildren, as well as critical blood and drug delivery operations.  It is great to see product-focused supply chain management technologies be increasingly adopted by services industries to improve operations efficiency.

    Pizza Pilot is a GPS and web service solution with a goal of transforming the economics of managing delivery fleets.  It tracks driver locations and its proprietary route optimization software eliminates the dispatcher, improving overall delivery productivity by 20 percent, the company estimates. Pizza is a $35 billion market in the U.S. alone, with pizza delivery representing over $10 billion.  About $3 billion per year is spent on delivery fleets, labor, management and fuel.  As anyone who has ordered out pizza lately knows, it is a poorly managed service, with low wages, over 100% driver turnover in a month at times, and slow deliveries.  All the same comments detailed above regarding courier bad behavior also apply to this business.

    There are competitors, such as Pi Star Communications and QStar.net  ( I especially like the picture on the Qstar web site of the driver eating your pizza as he leaves to store for a delivery–gotta change that one) who have launched related products.  This will be a hot space in the next few years(excuse the pun, but I have yet to get a hot pizza delivery).

    Pizza Pilot is privately held–they discontinued an angel round last week–and is likely to be an industry leader in this brand new space very shortly.  They are reportedly in final negotiations on a major contract with Domino’s Pizza, the leader in pizza delivery in the U.S. market.

    One of my supply chain innovation predictions for 2007 is that LARTE’s will be a fast growth area as many service supply chain can benefit from enhanced, GPS based management tools. 

  • LARTE: A New Breed of Supply Chain Innovators

    No, LARTE is not the latest Starbuck’s drink…but more on that later.

    Location Aware Real Time Enterprises (coined LARTE by the TechBlog cognoscenti) refer to companies who use GPS, RFID, wireless, among other technologies as an integral component of their business models. Think of FedEx and UPS who use these technologies to optimize pick up and delivery on a real time basis for their trucks on the road.   Sears Home Services , among other technology and appliance service companies, use wireless communications to schedule technician repairs, notify customers of delays, access warranty record and service manuals and create/charge bills immediately to credit cards. Similarly, Frito Lay has used wireless technologies for years to compile store shelf inventory to ensure optimal truck stocking for next day delivery.

    MA News recently reported on a deal that may signal faster growth in another emerging LARTE space–machine to machine (M2M) communications. QUALCOMM, Inc has acquired nPhase, a developer of M2M products that enable companies to manage fixed machine assets. nPhase, formed in 2003 as a spin out of Professional Consulting Services, offers a tailored remote management product that enables companies to develop what they call "smart services".  For example, ABB Robotics uses nPhase’s wireless monitoring products to deliver key data about it’s robots to service technicians via the Web.

    Datatrac, in a related B2B LARTE space, is teaming with Sprint to improve wireless handset capabilities for couriers and delivery fleet drivers, including better handset navigation and continuous notification processes.

    The big question is whether we will see LARTE start ups in the next few years among traditional businesses.  Any industry that relies on a mobile work force–warehouses, military, couriers, home/office delivery, vehicle operation & repair, computer hardware maintenance, etc. are all likely to benefit from a detailed look at potential LARTE based solutions in their businesses.

    Can a LARTE business model also provide a competitive advantage to other industries, such as personal computers, for example?  Besides using LARTE based solutions in a variety of internal operations, such as manufacturing and distribution, finding ways of having suppliers interact with internal operations on a LARTE based platform is a strategy worth exploring to enhance supply chain efficiency across channel partners.

    But Starbucks is an example of a LARTE based company in the B2C space, even if it has not named a drink after the concept.  Availability of wireless communicantion in the stores, management of the type of music and location of sound systems to maximize customer satisfaction and sponsoring in store events all contribute to making ‘Bucks a preferred destination for techies.  They do not even mind me buying Dunkin Donuts coffee and bagels next store and then camping in their comfy chairs to explore the Web in the early morning, especially since my wife buys multi skinny mochas there every day.