Month: October 2011
Last week I was called out on a blog titled Stop Squawking; Embody The Change. In it, Nilofer Merchant (the writer) asserts that while my writing about the lack women in tech / entrepreneurship / computer science is useful, it doesn’t have much impact. Nilofer says:
“Those posts are all “Yeahness”; maybe they are helping educate the few people on this earth who haven’t read the research, statistics that says that diversity of opinions improves the performance of any workgroup. Perhaps they counteract the “women just want to have babies” or “women don’t take risks” posts out there.”
She goes on to make a call to action for me and a few others, saying:
“If Mark, or Fred, or Brad wanted to actually see things change, they have to be willing to be changed. They have to have their networks changed. They cannot stay in their current circles, talking to the same people they already talk with, and then imagine they will run into more women to invest in. They cannot expect things to change by asking “boy, I wish things would change”. That’s a gesture. A politically correct gesture, sure, and maybe it gives the warm fuzzies, but accomplishes little else. It is certainly not embodying the necessary change. To move from impossible and unattainable to possible and attainable is more than chopping off a few letters. It means we need to embody the change.”
I agree strongly with Nilofer that we need to embody the change. Since I don’t agree that all I do is write about the issue, I left a comment with a few examples of the things that I actually do, rather than just write about, to address this issue.
One of the things I do is chair the board of the National Center for Women & Information Technology. It is well documented that there is a significant gender imbalance in IT. Only 18% of computer and information science degrees were awarded to women in 2009 (11% at major research universities), though 57% of college degrees are awarded to women (source: NCWIT By the Numbers 2009.) One of the things I’m especially proud of is the NCWIT Award for Aspirations in Computing.
The NCWIT Award for Aspirations in Computing is designed to reverse this trend by identifying, recognizing and supporting young women interested in and aspiring to pursue a major in computing. It was created in 2007 and has grown to a combined National and Affiliate program with local awards serving 22 states in 2011. To date NCWIT has recognized 855 young women and plans to grow the award program to a reach of 10,000 young women and recognize 1,000 award recipients annually. I wrote about my experience attending the 2010 awards and spending time with the winners, including the college scholarship that Amy and I decided to give each winner in the spur of the moment.
The NCWIT Award for Aspirations in Computing is much more than an award program. Recipients are provided long-term support for their interests in computing through peer networking, mentorship, scholarships and access to opportunities. Applications are now open to any high school young women residing in the US. Please encourage all the young women you know to apply before the end of October.
I heard a fascinating one-liner the other day that I had knee jerk negative reaction to but when I thought about it more thought was deeply insightful, especially in the context of big established companies vs. new entrepreneurial companies.
A CEO of a very large, successful company said “execution is an order of magnitude easier than opportunity.” In the context of young startups, I often feel exactly the opposite. Opportunity is everywhere, but execution in a bitch.
But then I thought about this a little. For a big company that dominates a market, it’s totally focused on execution. The company is built for execution and, assuming it is built well, just cranks things out. What it cranks out might be inspiring, or it might not be, but it’ll keep cranking things out.
For these companies, finding the new opportunity is really difficult. The company is tuned to defend its turf, not go find new turf. Execution is all about defending market position, maximizing profit, expanding market share in existing markets, and allocating resources. In a few extraordinary cases, this activity is massively inspired, usually around companies that love their products (Apple) or their customers (Virgin). So – for most of these companies, “execution” is easy relative to finding the new opportunities. And many of these large companies don’t focus on finding the next opportunity, or expanding their existing opportunity, until their business hits major headwinds, is in decline, or is massively disrupted. I give you Borders, B&N, and Blockbuster as examples here – awesome at execution until what they did became irrelevant and then it was too late for them to do anything about it (other than maybe B&N, who might pull off their transition.)
In contrast, startups are totally focused on the new opportunity. Assuming they find it, and it’s a big one, execution becomes the main challenge in front of them. Their activity is all about scaling up the organization, hiring people like crazy, building a culture of shipping great product consistently, reacting effectively to early customer feedback, and continuing to evolve their products to meet the new massive opportunity they are going after.
From the eyes of a big company CEO, finding the opportunity is hard. From the eyes of a startup CEO, the opportunity is everything – execution is hard.
My insight is simple: “context matters immensely.” As young companies grow rapidly, they have to focus on becoming execution machines and recognize that at some point they’ll start struggling with identifying the next evolution of their opportunity space. Assuming the opportunity they are going after is massive, this won’t matter for a while. But the execution dynamics will. And when you find yourself executing well, dominating your market segment, and growing quickly, you’ve got to make sure you keep focusing on expanding the opportunity, especially since that’s going to get harder as you get bigger.
I travel a lot. I’m not a particularly high maintenance traveller as I can sleep from wheels up to wheels down on most flights. When I fly west to east I usually fly at night; east to west I usually fly early in the morning (much to the chagrin of my partners who don’t enjoy getting up at 4:15am to go to the airport quite as much as I do.)
I’m running a marathon on Sunday in Newport, Rhode Island and decided I didn’t want to take a redeye from San Francisco to Boston three days before the marathon. As a result, I’m flying “all day” – leaving SFO at 9am and getting in to Boston around 6pm.
I often fly Virgin America from SFO or LAX to BOS or NY. It’s unambiguously the most comfortable cross country flight and I always feel a little hipper when I’m chilling out in a plane in white seats with purple mood lights. But that’s just the feel good bonus. Here’s how this morning is playing out.
I show up at Virgin and notice that they have a Chromebook kiosk. Neat – there’s a bunch of computers that are connected that anyone can use while waiting for the flight. Then I realize they are giving away free Chromebooks to use on the flight. You only get to use them during the flight, but they are free and include a free WiFi connection. Double neat. Then I sit down, open up my MacBook, and immediately see my Skype WiFi app pop up and tell me I can connect to WiFi for $0.10 / minute. Since I don’t have a Boingo subscription, and there’s not any other obvious free WiFi right here, I just click yes. Oh – and there’s a nice desk area and power.
I have a five hour flight where I expect to get a solid four hours or so of online time. A decade ago, even though everyone was talking about “wireless networking on airplanes”, it didn’t really work. Today, I’m online without much effort for as much time as I want.
Virgin makes this experience seamless. When I think about my United trips, I just cringe. No WiFi on the plane, generally crummy gate setups with no power, and a very predictable “sorry – we have a maintenance problem that we are looking into.” It’s actually kind of enjoyable to be spending the day on Virgin America flying across the country.
Last night I gave a talk hosted by SVB at their Palo Alto office. It was part of the “Never Ending All Old Is New Again Venture Deals Book Tour.” I had a ton of fun talking to and answering questions from about 75 entrepreneurs who – at the minimum – enjoyed eating the great food and wine that SVB provided on a luscious evening in Palo Alto. Oh – and I signed a bunch of copies of Venture Deals.
Several questions came up about Convertible Debt. We touch on it in Venture Deals but realized that we didn’t cover it in enough depth so Jason recently wrote a Convertible Debt series on Ask the VC. The series is now complete – here are the links to the posts in order.
- Convertible Debt Series
- Convertible Debt – The Discount
- Convertible Debt – Valuation Caps
- Convertible Debt – Conversion Mechanics
- Convertible Debt – Conversion In A Sale Of The Company
- Convertible Debt – Other Terms
- Convertible Debt – Warrants
- Convertible Debt – Early Versus Late Stage Dynamics
- Convertible Debt – Wrap Up
If you feel like we missed anything, or got anything wrong, or were confusing in our explanation, please chime in on the comments on the post. If you want to see an actual convertible debt term sheet or the actual legal documents, take a look at the TechStars Open Sourced Model Seed Financing Documents.
As a bonus to the evening, I got some direct, constructive feedback from one of the attendees via email later that night. While the “thank you” and “good job” notes are nice, I only learn when someone criticizes me (hopefully constructively, but I can handle it in any form.) The feedback was:
May I make a constructive criticism regarding your talk tonight? Your answers to audience questions tend to be overly long and rambling…..you “overanswer,” to invent a word. You start strong and respond right to the essence, but then your focus blurs and you keep taking verbal baby steps away from the thought stream. If you trim a minute or two off each answer, you can call on more people and hear more questions, which sends more people home happy. I think if you self-critique a video of yourself in a Q&A session, you’ll arrive at the same conclusion.
It’s a good suggestion. I often try to provide additional context to the question, but it sounds like – at least for one person – I went off on a few space jams that weren’t additive. I love the phrase “overanswer” – it’s a lesson from TV interviews 101 (e.g. just answer a question – any question – quickly). Something to ponder as I continue the Never Ending All Old Is New Again Venture Deals Book Tour.
Are you building a cloud startup? If so, apply to TechStars Cloud today!
Earlier this month TechStars announced its newest accelerator program, TechStars Cloud, and we are looking for the best cloud startups we can find to go through the inaugural program.
We’ve gotten a lot of questions about what constitutes a “cloud startup”, so here is a discussion of what we think are cloud startups. We think we can do something special with this program and have big expectations for the results we’ll see when we connect early stage cloud startups to the best cloud mentors and companies.
If you haven’t heard, we have upped the initial funding in the program to 118k.
Put this in the pet peeve rant category. I’m tired of “Revenue” being referred to as “Income.”
Yes – I know Quickbooks defaults to “Income.” I know it’s technically correct when referring to “Income accounts” in a company’s “Chart of Accounts.” But it’s confusing, and it baffles me.
I spent a few minutes tonight trying to figure out the origin source of this but got bored. I did find a fun explanation in the source of all truth (Wikipedia).
Income is the consumption and savings opportunity gained by an entity within a specified time frame, which is generally expressed in monetary terms.
For households and individuals, income is the sum of all the wages, salaries, profits, interests payments, rents and other forms of earnings received.
For firms, income generally refers to net-profit: what remains of revenue after expenses have been subtracted.
I’ve decided this is a confusion being promulgated by Quickbooks. Since many first time entrepreneurs use Quickbooks before they learn basic accounting, they end up referring to “income” (instead of revenue) and “net income” as “income minus expenses.” Factually true, but confusing, especially when “net income” is often referred to by many as simply “income,” since those same people will refer to “income” as “revenue.”
Confusing? You bet. Whenever I ask “do you mean your bottom line or your revenue” I’m often surprised by which answer I get, including “I’m not sure what you mean.”
Help stop the madness. Call the thing at the top of the P&L “Revenue,” not “Income.”
Rant off.
I am completely wiped out. It’s noon on Saturday in Colorado. I just had five days in a row of 18 hour days. I started the week in San Francisco and flew back home on Friday night from New York (with a red eye in between). It was awesome, but exhausting.
In addition to all the work, there was plenty of ambient emotion last week including some around mortality (Steve Jobs died and a close friend’s father died). In between everything, I spent a had a lot of meals with people I haven’t seen in a while, or whom I’m really close to. On top of that, there were hundreds of emails a day, plenty of telephone calls, and lots of random stuff to deal with. And plenty of running, coming off a weekend of back to back long runs (14 miles on Saturday, 16 miles on Sunday). And the Imperial March rang on my phone several times a day when Amy called, which always gave me a nice positive emotional charge.
I slept 12 hours last night. Amy made me a great breakfast and I’ve spent an hour catching up on unread emails from yesterday. But I’m just fried. And I’m going to crawl back into bed for a nap, go to a movie this afternoon, and then have a quiet dinner with Amy somewhere.
When I reflect on last week, I consciously spent very little time thinking deeply about anything. My runs were mostly mental garbage collection times, I slept on the airplanes, and I was in the moment the rest of the time dealing with the present. Sure, some of the discussions were longer term, strategic type things, but all the thought processes were surface level vs. deep discovery.
I’m working on a book called Entrepreneurial Communities. It’ll be done by the end of the year. I’ll likely self-publish this one as I don’t perceive any benefit to having a publisher now that I’ve done two books the traditional way. I also don’t want to introduce an additional six months into the writing to publishing cycle. I spent exactly zero time working on the book last week, although I had no expectation that I would.
But when I think about what I learned this week, and what I talked about, plenty of it pertained to the book. While I consciously spent very little time thinking about entrepreneurial communities, I unconsciously spent a lot of time thinking about it. And while my surface level discussions about longer term things didn’t impress me as deep thinking, by talking out loud about complicated issues I continued to modify the way I talk and think about them.
This is a style of mine. While I don’t “think out loud” like some do, I “refine my thought process” by talking about – and doing – things around the topics that I think deeply about. The development, creation, and sustaining of entrepreneurial communities is one of those topics that I’ve been doing a lot of thinking about lately, and anyone who knows what I spent my time on knows that many of the things I work on pertain directly to the activities around these, rather than just the thoughts around these.
By being insanely busy in areas that I think (and care) deeply about, I’m actually engaged in an “active deep thinking” rather than a passive deep thinking. It’s easy to end a week like the last one (which is a pretty typical week for me) with the reaction of “wow – that was intense and insane, but I didn’t really have any time to think about what I wanted to think about.” That’s wrong – I spent the entire week actively thinking, which makes my ability to deeply think about topics I care about even more powerful and effective.
I’m sure there is some philosophy, or psychology, about how a human links passive and active around the formation of thoughts, ideas, and theories. I’m not going to think deeply about that, especially since it’s meta in the context of this post, but I’m certain that the answer the my question that I posed in the title is a resounding yes when you combine active and passive thinking.
Since last checking in with the SayAhh team, they have spent a few months consumed with building an early version of the product and speaking to potential customers, all the while watching their cash balance steadily diminish. They realize the clock is ticking and have decided that it is time to create a robust set of financial projections in order to provide themselves with a better sense of when they will need to raise more money.
The co-founders decided to divide-and-conquer, with Dick tackling expense projections and Jane tackling revenue projections. Their plan was to combine the two in order to predict their cash burn over the next two years (with a focus on the next twelve months). Jane asked Josh, who provided SayAhh with solid advice on setting up their accounting systems, for help in creating the revenue side of their financial forecast. Josh told Jane to take a first shot and he would comment. Here’s a snapshot of what Jane produced:
Josh worded his feedback carefully:
“Jane, this is a good start. I am glad to see that you are forecasting revenues based on business drivers. In this case, the # of users and the average monthly revenue per user. That’s what you should be doing. However, do you really understand the key underlying drivers of your business? Based on the drivers you chose, I am not so sure you do.
Certainly the # of users matters. But take it a step further. What drives the # of users? Presumably you will have new users, return users, and lost users each month. Decomposing users into these three component parts is important because it will allow you to better understand what is going on with your business, which will in turn allow you develop actionable strategies for improving your business.
For example, assume the # users remains flat for four months in a row. If you only track monthly users, you might assume that you are not attracting any new users and you need to change your marketing approach. However, what if it turns out that your marketing approach is just fine and you are bringing in lots of new users every month, but at the same time you are losing an equal number of existing users? In that case, the problem is that users don’t like your product. You need to fix that problem, not adjust your marketing approach. Take another shot at this and come back to me with a model that you think drills down to the key drivers of your business.”
Jane did some research, had a nice glass of wine, and really thought through their business model. Then she came back to Josh with a revenue model built on a set of key business drivers:
Josh told Jane that her second effort was much better and Jane in turn felt that she now had a much better understanding of SayAhh’s business model. A skeptic might assert that it is a waste of time for a pre-customer startup to forecast revenues since they are guaranteed to be incorrect. When I look at a startup’s revenue projections, I don’t pay much attention to the actual numbers for just that reason. However, I do look at the structure of the model to see if they really understand their business and are actively tracking their key business drivers.
In the next post, we will see how Dick fares with the expense forecast.
Note that Jane’s second attempt is a step in the right direction, but by no means perfect. Tying the number of new users to advertising spend seems particularly questionable, for example. What other problems do you see? What has been your experience/advice in developing revenue projections?
Last night, during dinner with the Return Path board, Fred Wilson interrupted the discussion we were having to tell us that Steve Jobs had just passed away. All of us were stunned silent for a minute as we reflected on the amazing impact that Steve has had on our lives. While I don’t have a personal relationship with Steve, he’s been a hero of mine since I was a teenager when I bought an Apple II computer with 16K of RAM in 1978 with my Bar Mitzvah money. To this day I still remember the sound the disk drive made when I typed PR#6 and how excited I was when I got a Silentype printer.
After dinner, as I reflected on what I knew about Steve and watched as my Twitter stream revealed link after link in tribute to him, I thought about the contemporary moment that meant the most to me. I recalled watching his Stanford Commencement Speech from a few years back and having chills. So – in tribute to the passing of this amazing man, I encourage you to spend 15 minutes and hear something powerful, in his own words.
Steve – while you didn’t know me, thank you for everything you’ve done that has inspired me and impacted my life.
One more thing…