Month: January 2013
Evidence of Google Winning The Generational Shift Over Microsoft
An email was forwarded to me this morning that had the following text in it (I’ve anonymized “The College” but it’s a large, well-regarded four year university.)
The College is Going Google! What does this mean? How will it impact teaching and learning at The College? Many K-12 school districts are using Google Apps for Education, providing their students with access to Google productivity tools as early as primary school. Students coming to The College in the next five years may never have opened Microsoft Word, but will be familiar with sharing, collaborating, and publishing with Google tools. Are you ready?
I spend time at a few universities, including MIT and CU Boulder. I’m teaching a class this semester at CU Boulder with Phil Weiser and Brad Bernthal called “Philosophy of Entrepreneurship.” We had our first class last week – Brad Bernthal led so Phil and I sat in the back. I noticed a bunch of students with their email open during class – almost every one of them was using Gmail.
A meme went around a few years ago that kids using Facebook would never use email and that Facebook would replace Microsoft Outlook and Gmail. This never really made sense to me, especially since I’d already heard that text messaging would replace email, and then I heard that X would replace email, and now it was going to be Facebook. As much as email frustrates us, it’s still by far the most ubiquitous comm channel.
But as someone who switched completely from Microsoft Exchange to Google Apps a few years ago, it seemed clear to me that Microsoft was going to come under incredible pressure on this vector. Office 365 was one of Microsoft’s reactions to this, but I still haven’t met any company that uses Office 365 as it’s primary infrastructure, although Microsoft has a nice site called NowOnOffice365.com that lists a bunch.
Now, it appears that Google is taking a page from the Apple playbook and focusing on higher education. Apple did this magnificently in the 1980’s when I was in college and did this again in the past decade. Jobs was always focused on universities – I still remember “computers are bicycles for the mind” and the 50% discount off of retail promotion that MIT had in 1984 or 1985.
I don’t focus on market share dynamics (I’m sure there are teams of people at Microsoft and Google focused on this) but the anecdotal evidence I’m seeing is powerful. And when The College switches to Google Apps because the students coming to The College are already well steeped in it and “may have never opened Microsoft Word”, something really interesting is going on.
If your organization is on Office 365, I’d love to hear from you in the comments to understand how you are using it. Are you using document collaboration via SkyDrive, or just Office 365 as the backend service for Email instead of Exchange?
If you are a college student using Microsoft Outlook instead of Gmail, tell me why.
If you are reading this on Friday, 1/18/13 I’m probably doing one of a couple of things right now. The three most likely are sleeping, laying on my couch reading next to Amy, or just hanging out with her. There’s a chance I’m on a run or having some adult entertainment with Amy (different than hanging out). Or drinking something from my Vitamix monster smoothie maker. And – if it’s in the evening, I’m probably watching a movie with Amy.
One of the things Amy and I discuss in Startup Life: Surviving and Thriving in a Relationship with an Entrepreneur are strategies we use as a couple to reconnect and reset on a regular basis. Since Monday 1/7, we haven’t been together very much. I spent last weekend with Amy at our Keystone house (where she’s been since mid December) but I spent 10 hours on Saturday and 10 hours on Sunday in front of my computer while she watched football, read, and took care of me. We had nice dinners together, but not much time to really connect. We’ve been Facetiming multiple times a day, but these are generally short hit connections.
On Tuesday morning, she asked me how I was doing. She could hear fatigue in my voice. I wasn’t in a bad place, just really tired and feeling off balance from how quickly 2013 started. Since I hadn’t really had a weekend, I hadn’t had a material shift in my weekly cadence, which works for a little while for me, but isn’t sustainable. And I mostly just missed hanging out with her.
I’ve got a lot to do this weekend as well and have the special bonus of a Monday holiday. So – instead of working all day Friday, trying to squeeze in some rest and relaxation in between the stuff on my plate to work though this weekend, I’m taking a day of the grid today (through the magic of time travel – and computers – this was written on Thursday morning) to do a full reset on my brain.
I regularly hear people tell me how amazing the idea of our “quarterly week off the grid” is. They then tell me there’s no way they could do a week each quarter – they don’t have enough vacation, kids get in the way, they can’t imagine a full week disconnected. So – I suggest they do a day instead. Like I am today.
[youtube https://www.youtube.com/watch?v=Hp-rF9Qr7KU]
Every year in December and January I go through the same cycle for all the boards I’m on. It’s the annual bonus, next year bonus plan, option grant refresh cycle. For many management teams, especially in rapidly growing, or mature companies, it’s an important part of their existence as culturally we’ve oriented compensation, bonuses, and future compensation around an annual cycle.
I embrace this – my goal is to help these entrepreneurs and management teams win. I know compensation is an important part of the feedback / reward loop. While I’ve occasionally had conflict over compensation, and I’ve had a few CEOs I work with tell me they feel like it’s an uncomfortable discussion, my own perception of my behavior is that I’m a softy. If things are going well, I am supportive of anything that’s reasonable. And, having thousands of data points over the past 17 years, I’ve got a good calibration on reasonable.
One thing, however, has always baffled me. I’ve never really understood why the majority of stock option refresh grants are stacked grants mid-way through the granting process.
Let me give an example. Assume you hire someone and grant them 10,000 options with monthly vesting of four years with a one year cliff. That means that after one year, they get 25% of their options and then start vesting the remaining options monthly at a rate of 1/48 (208.3 options / month, or 2,500 / year.) On day 1 of year 3, the person has vested 50% of their options, or 5,000 of them and still has 5,000 left to vest. This person is doing great so management puts them in the annual option refresh cycle. Now, the company has increased in value, as has the option strike price, so the refresh grant is determined to be 25% of the original grant – or 2,500 options vesting monthly over four years, or 625 options per year.
Now, in year 3 the employee in question vests a total of 3,125 options, in year 4 they vest a total of 3,125 options, in year 5 they now vest 625 options, and in year 6 they vest 625 options. This makes no sense to me. You just changed their first four year vesting package from 10,000 options to 11,250 options (2,812.5 options per year) and then left them with 625 in years 5 and 6. This is a bonus in years 3 and 4 and a refresh in years 5 and 6.
Instead, why not grant them the new 2,500 options that vest in two years – 50% in year 5 and 50% in year 6. So now, they once again have 2,500 options per year for years 1 to 4 and 1,250 options vesting in years 5 and 6. This is a refresh in years 5 and 6.
The key difference is you are separating the “refresh grant” from a bonus, or retrading, of the hire grant. Now, I’m totally supportive of giving people bonus grants – if someone is doing an awesome job and they deserve more options in year 3 and year 4, do that. But that’s separate from a refresh, especially if your goal is to make sure there is always plenty of future options vesting.
The reason companies do the refresh in year 3 instead of year 5 is that – assuming success – the strike price of the option in year 3 will be lower. So the “value” of the option theoretically is higher if you grant it earlier since you get to lock in a lower strike price, especially against the uncertainty of where the strike price will be in two years. So that’s perfectly rational, but the idea of stacking the refresh grant on the old grant is not.
I’m not pushing to implement this in 2013 since I’m at the tail end of the refresh cycle with many of the companies I’m an investor in and just recently realized why the way refresh grants historically have been done didn’t make sense to me. And it shouldn’t make sense to the management team either – their goal and my goal is aligned – get plenty of future option value locked via vesting as a reward and retention tool.
I’m open to hearing why this doesn’t make sense. I just read it again and realize it’s confusing, as is almost every conversation I have with a management team around what, how, and why they are refreshing options. So – tell me what you do – and why – as I try to make this explanation / approach simpler.
I joined my first board of a company other than mine in 1994 (NetGenesis). Since then, I’ve sat on hundreds of boards and been to a zillion board meetings. It crushes my soul a little to think of the number of board meetings I have sat through that were ineffective, poorly run, or just plain boring. I guess that’s part of the motivation I have in writing Startup Boards: Reinventing the Board of Directors to Be Useful to the Entrepreneur (the next book in the Startup Revolution series which should be out sometime this summer.)
In the mean time, over the past two years I’ve done a lot of experiments with the boards I’m on. I’ve tried a lot of different things – some that are awesome, some that don’t matter, some that suck, and some that have been epic fails. For any that aren’t awesome, I’ve tried to kill the experiment quickly so it didn’t hurt anything and when I reflect on everything I’ve tried I think I’ve managed to “do no harm”, which is more than I can say for a lot of the other VCs who I’ve sat on boards with since 1994.
By this summer, I expect I’ll have a very clear view on the best practices from my perspective for making a Startup Board effective. Until then, I’m still running experiments, or experiencing experiments that the entrepreneurs run. And I’m thinking out loud (including in posts like this) on what has worked and hasn’t worked.
One of the things I’ve played around with is the board package. The number of different formats, styles, information incorporated, and distribution methods over the years boggles my mind. I not-so-fondly remember toting around “binders full of board meeting material” in the 1990s. Or pre-Gmail having a “board meeting folder” in Outlook so I could quickly find the upcoming board meeting documents. Or fighting through 19 attachments to an email to figure out where the actual board material was. PowerPoints, PDFs, Word documents, text files, Excel spreadsheets, Prezi docs, videos, email outlines – the list goes on.
Recently, I had a magical moment. I’m a huge believer in distributing the board material a few days in advance, having all the board members comment on it in advance of the meeting, and then having the meeting without going through the board material page by page. No death by endless Powerpoint, no reading a document I’ve already read. My favorite board meetings are the “one slide board meeting” where the only piece of paper allowed in the room is the agenda of the meeting.
When entrepreneurs don’t get this, I suggest that they pretend their board members can read and cognitively process the information in advance. And, if they don’t believe their board members will do this, just start having the board meeting under this assumption and watch how they board members get their shit together and read the material in advance.
In this recent magical moment, rather than receiving anything via email, a Google Doc notification showed up in my inbox. I went to it and the entire board package was in a single Google doc file. The entire management team and the entire board was included on it. As I read through the Google doc, whenever I had a comment or a question, I highlighted the section in question, hit Command-Option-M, and left a comment. Then, as other people read through the package, they left comments. And then the management team responded to the comments.
Voila – an interactive board package. Zero special technology. It wasn’t planned, or assigned. It just naturally happened. When we showed up to the board meeting, everyone had the issues in their mind. We’d already cut out an hour of setup, and probably another hour of discussion. So we got right down to the higher level issues that the board material, and comments, and the responses generated.
In this case, the CEO created a very simple agenda immediately before the board meeting that captured the strategic issues we needed to address. There were a few tactical questions outstanding – they got knocked off quickly. We had a two hour board meeting – 90 minutes of it was intense and fruitful. No one referred to any paper – we looked each other in the eyes for 90 minutes and had a deep, engaged, substantive discussion.
I’ve been describing this as a part of a “continuous board engagement” – similar to “continuous deployment and continuous innovation” in Eric Ries’ The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses. I get information daily from most of the companies I’m involved in. I’m in the flow of a lot of information – some “noise” but a huge amount of “signal.” Then – the week before the board meeting, the current state of things gets consolidated into a dynamic document that allows everyone involved to interact with each other around the content.
I’m going to play a lot with this in the next few months. Any suggested tweaks or changes to this approach? Any obvious pitfalls?
A bunch of the companies we’ve invested in were at CES 2013. Modular Robotics, the makers of Cubelets, were at the Eureka Village (where Startup America was). The first thing I had to do when I got to CES was a panel for Startup America so the Modular Robotics booth was literally one of the first places I stopped after getting to Las Vegas.
It was mobbed. I came back around a few other times and it continued to be mobbed. They were showing Cubelets (which are for sale now) as well as a few new spicy connector things that they are about to release that let you connect Cubelets up to anything you can build with Legos.
TechCrunch did a nice three minute video interview that shows how Cubelets work. We invested last fall – I’m excited to be working with Eric Schweikardt and the team to create a robot construction kit that can really go mainstream.
[youtube https://www.youtube.com/watch?v=CHmzLAA0M_w]
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I’ve been thinking a lot about Aaron Swartz the past few days. I didn’t know him, but knew of him and have a lot of friends who knew him. I’m still processing it, especially the dynamics around his suicide, and expect I’ll have plenty to say in the coming weeks about depression and entrepreneurship. In the mean time, I thought the USA Today article, Activist Aaron Swartz’s suicide sparks talk about depression, by Laurie Segal, is particularly good. I’m quoted as saying:
Investor Brad Feld, who has battled an anxiety disorder all his life, says one the hardest things for those fighting the disease is opening up about it. “Many entrepreneurs don’t feel like they can talk openly about their depression, as they don’t want their investors, employees, or customers to know they are struggling with it,” he says. “For anyone who has been depressed, not being able to be open about it with the people around you makes depression even harder to deal with.”
I’ve been lucky in that I’ve had a few people incredibly close to me that I could talk openly about my depression with. The two closest are my wife Amy Batchelor and my brother Daniel Feld. In Amy’s case, she’s my early warning system for my depression. She knows me better than anyone on this planet and is able, in a way that doesn’t set me off, make observations about what she is seeing in my behavior whenever it shifts toward a depressive episode. She goes into a mode that I call “observer” – she’s not critical, doesn’t tell me to “snap out of it”, but also doesn’t get overly concerned. She watches, gives me feedback, and observes. Usually this is all I need since I’ve learned that with my own struggles, merely knowing that I am struggling is often enough to start a shift back to normalcy.
As part of this, I’ve set up a monthly cadence with Amy and Daniel. In the case of Amy, we have “Life Dinner” on the first night of every month. We talk about this in our new book, Startup Life: Surviving and Thriving in a Relationship with an Entrepreneur, but I missed that nuance that in addition to a monthly reflection both backward and forward, it also serves as a touch point on “how I’m feeling.”
Daniel and I do something different. We love the relationship our dad (Stan Feld) has with his brother Charlie Feld. A number of years ago we committed to each other that we’d never get hung up on bullshit between us and if anything came up, we’d clear the air each month. So – we have an “almost monthly” dinner (probably six to nine times a year). I can’t remember the last time we actually had any emotional dissonance of any sort. It’s a casual couple of hours for us to check in on each other.
This morning I was emailing with Fred Wilson about some stuff. He asked me how it was to have Jerry Colonna living part time in Boulder. Jerry is now chairman of Naropa University and is one of my closest friends. He and Fred used to be partners at Flatiron Partners and are still very close. My response was “It’s awesome to have Jerry here. I love every minute I get with him.” Fred responded “i do a monthly lunch with him and its awesome.” There’s that monthly cadence thing again.
Yesterday, I had my monthly meeting with my partners at Foundry Group. We have a quarterly offsite where we spend a day and half together and have recently instituted a monthly day long meeting ending with dinner to go deep on our portfolio now that it’s about 60 companies. We spend the day on the portfolio and the evening on ourselves. It’s yet another version of the monthly cadence that let’s the four of us check in with each other.
I’ve always found rhythms like this to be extremely helpful to me, especially around my depression. Amy, Daniel, and my partners are safe people to talk to about it. They don’t judge me, or coddle me, but they listen and, if nothing else, give me empathy. And, in many cases, they check in regularly to make sure I’m in an ok place, until the phase passes.
Being an entrepreneur, or anyone pressing the boundaries of society, can be incredibly lonely. Make sure you are surrounding yourself with people who can help. And don’t be afraid of being open about being depressed, or anxious, down, or sad. There is no crime or shame in that.
TechStars New York City has just been a great program. With close to 200 awesome mentors, investors, and seasoned entrepreneurs that roll up their sleeves and dive in, it’s no surprise that we’ve already seen an exit from the 2011 class, and the average company raises over $1.5M after the program. Foundry Group has an investment in SideTour, a 2011 TechStars grad, and I’m personally planning on spending quite a bit of time in the spring to hang out with the program’s participants.
This year, the program is being run by TechStars CEO David Cohen, and six-time Managing Director Nicole Glaros. If you’d like to meet them in person and learn more about the program, you can attend an informational event on Tuesday, Jan 15th (virtually, or live).
Application deadline is Friday, January 18th at 11:59:59 – so get your applications in!
This first appeared in the Wall Street Journal’s Accelerator series.
A few our entrepreneurial heroes work on more that one company at a time. Steve Jobs (Pixar, Apple), Elon Musk (Tesla, SpaceX), Jack Dorsey (Twitter, Square), and Reid Hoffman (LinkedIn, Greylock). And we regularly hear of entrepreneurs who are working at companies that acquired their first company who are now working on new companies while still at their acquirer.
It’s takes an extraordinary talented entrepreneur to be able to do this. So, should you try to emulate this? “Mostly” no.
If you are working on your first company or you don’t have a clear track record of success, put all of your energy into your first venture. Go all in, unambiguously. Your employees will expect, and respect this. Your customers will hope for this. Your investors will require this. And, the likelihood of your success will increase.
That said, I encourage every entrepreneur to have their own equivalent of Google 20% time, where you spend 20% of your time on something other than your primary company. If you are a first time entrepreneur, invest this energy in things that directly benefit your company. Find a peer group like Entrepreneurs Organization and invest time and energy in learning from and giving to your peers. Invest some of your 20% time in your local startup community, taking lessons from my book Startup Communities: Building an Entrepreneurial Ecosystem in Your City, which will have immediate positive impacts on you and your company’s reputation in your local ecosystem. Or invest actively in your own personal development as an entrepreneur through reading, spending time with other entrepreneurs, and actively engaging with accelerators like TechStars.
Once you’ve had some success, even if you are still running your first company, start expanding the definition of what “mostly no” means. I encourage every CEO I work with to serve as a director on another entrepreneur’s board. If you’ve made some money, don’t be afraid to make some angel investments in other companies. But stay focused on your business or else you might find yourself in a position where you suddenly don’t have the success you think you do.
Once you’ve sold your first company, or taken it public, you can start diminishing the definition of the word “mostly.” Some entrepreneurs love to be involved at the inception stage but don’t want to run companies. Others like to have a portfolio of companies they are working on at the same time, with one being the primary company. An example of this is my long-time friend and entrepreneurial collaborator Rajat Bhargava. We’ve now done nine companies together, with four of them currently active. Rajat is CEO of one of them (StillSecure) and a major shareholder and board member of three others that he’s helped co-found that I’ve funded (Yesware, MobileDay, and SafeInstance.) But this is an exception, build on a collaboration between entrepreneur (Rajat) and investor (me) over almost 20 years.
While it’s often tempting to start multiple companies, especially as you start to have some early success with your first company, resist this temptation, mostly.
I’ve been in three board meetings in the last month where it was painfully apparent that there wasn’t a person in the company who owned the UX philosophy of the product. I’m explicitly saying “UX” (user experience) rather than “UI” (user interface) as each company had an excellent designer and the application looked great. But the UX broke down quickly, especially as you went from novice first time user to experienced user.
Now, it’s not that the apps sucks. In each case, the apps ranged from good to great. They had huge amount of functionality, did unique things that other apps didn’t do, and solved a clear set of problems in a compelling way. They were fast, pretty, used nice fonts, and had good screen layouts.
But each had a jumble of different ways of doing things. As you went from one set of activities to another, the approach quickly became inconsistent. I kept noticing that my when I was doing a different set of things in the app, the user flow would change. Or when I switched modalities, I would have different ways to do things that were dependent on where in the app I was.
Sometimes I’d click on a label to take an action; other times I’d click on a text description of the action. In some places I cared a lot about the Tab key; in others it was the Enter key. In some screens data was automatically saved after I exited a field; in others I had to take an explicit action. In some situations all the actions I could take were exposed; in others I had to search a menu tree for them. Orientation of the iPhone mattered in some cases and didn’t in others. Sometimes the key set of data that I was working on was the focus on the screen; in others it was only part of the screen.
When I start feeling uncomfortable with UX, I start counting extra key and mouse actions. When I think I should be able to do something with one action and it takes three or more, there’s a problem. When I realize in one part of the app that I can do something with one action, but in the other it takes four, there’s a problem.
In each of the companies, there is an excellent VP of Engineering. They each have a strong design / UI person. Two of the three had founder/CTOs. And the CEOs in each are excellent. They are each obsessed about the product, but they are approaching it from an engineering perspective. What are the features that the user needs? What is the feedback we are getting about what individuals want to do? Each of these things ends up being a story or a task – a feature – but there is no unifying UX philosophy.
In each case, when asked, no one in the company owned the UX. In one case, no one felt qualified. In one case, no one really knew what I meant and kept conflating UX with UI. And in one case it was a revelation that users were struggling with a chaotic and inconsistent UX.
I’m noticing this more and more in the different apps I use, especially at the early stage. Some are crafted beautifully from a UI perspective, but once I start using them on a daily basis I want to scream. Others have acceptable UIs and a layer of UX consistency that breaks down immediately when I become an advanced user. And others are radically different UX experiences across devices.
I’ve come to appreciate the important of a single person in the company owning the UX with this person being the arbiter of discussion around how to implement the UX. There’s nothing wrong with lots of different perspectives, but a single mind has to own it, synthesize it, and dictate the philosophy. But first, they have to understand the difference between UI and UX, and – more importantly – the product-oriented execs who approach things from an engineering perspective need to understand this.
I’ve decided it times to up our game significantly on this. I’m curious about what resources you rely on, thing are amazing, and would give to an executive team that is struggling with this.