As we head into 2017, I have a steady stream of operating plans hitting my inbox. Since many of our investments are companies that are scaling, vs. companies that are just getting started, there are a lot of derivative metrics in these plans.
Q1 is the easiest quarter to make your plan, so most of these companies are getting a free pass for the next three months after fighting the good fight of making or beating plan in Q3 and Q4. For the SaaS and recurring revenue companies, if they missed by more than 5% in 1H16 and didn’t reforecast, they’ve had a particularly grueling uphill climb for the past six months.
While the relief of Q1 was missing last year because of the existential freakout caused by the public markets (anyone remember that?) I know a bunch of people who are hoping Q1 will be nice, calm, and normal. Good luck with that.
Regardless, you can start the year off by being clear on how you calculate your various derivative metrics and make sure that your plan – and the expectations of your board and investors – fit what you are putting out there for the next year. Before you say, “yup – no big deal – we are great at that” go read two posts by Glenn Wisegarver, the CFO at Moz.
If you’ve worked with me, you’ve probably heard me call out CAC as a nonsense metric, since it’s super easy to game. Or maybe you read my post about ICDC (increase conversion, decrease churn). Or, instead of growth rate at a moment in time, you’ve heard me ask for a monthly graph of trailing twelve month growth rate so we can see the actual acceleration or deceleration of growth, which is way more interesting than last months growth number.
There are tens of thousands of words written on the web about SaaS metrics, consumer metrics, recurring revenue metrics, and all kinds of other metrics. Entertainingly (at least to me) there are very few words written about CE / hardware metrics (other than nonsense about how to value CE companies).
As part of getting your metrics together for 2017, I encourage you to go read some of these articles. And think hard about which metrics really matter and where the change in them will impact your business performance in 2017.
I’m not a predictor so you won’t find me participating in the “best/worst of 2016” and “predictions for 2017” lists. But there is a trend that feels inevitable to me: “Startups everywhere.”
While Agent Smith was wrong, I don’t think I am. When the phrase “Startup Communities” started to become mainstream around 2012, I made the strong assertion that you could create a startup community in any city with at least 100,000 people. I used Boulder as a canonical example of it in my book Startup Communities: Building an Entrepreneurial Ecosystem in Your City and have been beating the drum about startups everywhere ever since.
While the meme that the only place to build a company is in Silicon Valley has softened, there’s still a strong belief that the best place to be if you are a first time entrepreneur is Silicon Valley. My argument is, and has never been, against Silicon Valley, but rather for the rest of the planet.
I saw three articles yesterday that reinforced the inevitability of startups everywhere.
When I reflect on where some of our investments are, they are in cities like Portland, Seattle, Los Angeles, Santa Barbara, Minneapolis, Boulder, Denver, Charlotte, Lexington, New York, and Boston. And then there’s Techstars which is now all over the world.
Sure – we have plenty of investments in Silicon Valley, or whatever you want to call it. I’ve asserted for a long time that Silicon Valley is a collection of startup communities, which includes San Francisco, Marin (the first board I was on – in 1994 – was for a company in San Rafael), Oakland, Redwood *, Palo Alto, Mountain View, Menlo Park, and Sunnyvale. Or you can just call it San Francisco, Oakland, and the Peninsula. Or maybe toss SOMA in. Or, well, does it really matter?
As a bonus, I’ve been hearing Amazon referred to regularly by mainstream media (and some people in the tech world) as a Silicon Valley company. Having invested in and spent a lot of time in Seattle over the last 30 years, I smirk whenever I hear this. I love seeing articles like How Amazon innovates in ways that Google and Apple can’t which should prompt entrepreneurs to Think Different (sorry, I couldn’t help myself).
As a bonus, I leave you with Amazon’s patent for a flying warehouse.
While Silicon Valley is an amazing thing, if you are in the rest of the world, you are in a special and interesting place. Don’t lose sight of that.
A snarky person could call the title of this post “the tagline for Facebook and Twitter.” A bitter person could expand this to mean all of media.
I’ve got a cold (it’s a bummer to end the year with a cold, but if it runs its course by January 1st I’ll be happy) so it’s been hard to concentrate this morning. Instead of working on the final draft of the Second Edition of Startup Opportunities: Know When to Quit Your Day Job (being published by Wiley in Q117) I’ve been surfing the web, looking at Twitter and Facebook, responding to email, and drinking apple cider.
I came across three articles this morning that were prompted by an email exchange about truth / fake news / exaggeration, which was stimulated by Fred Wilson’s Headlines post today.
I figured I’d be done after reading Erin Griffith’s The Ugly Unethical Underside of Silicon Valley. There’s a lot of meat in the article but Erin’s writing deserves a better, less clickbait headline. But, we know that’s not going to happen.
I then bumped into ‘How Propaganda Works’ Is a Timely Reminder for a Post-Truth Age which resulted in a one-click Amazon purchase of the book How Propaganda Works.
I still felt sick, but for another reason.
I finished my random reading off with some Garrison Keillor who always makes me happier. Our country is bitterly divided. How ’bout a little small talk? ends with a great punch line.
“They say the country is bitterly divided. Maybe so, but that’s no reason to be rude. My mailman likes to banter, and so do the guys at Lloyd’s Automotive and the cabdrivers. So what’s going on with you? Cat got your tongue? Where’d you get that sweater? What’s that product you put on your hair?”
I’m going to quit stalling and go work on two more chapters of Startup Opportunities and then take an afternoon nap. And that’s the truth.
If you are a regular reader of this blog, you know that my dad Stan is one of my best friends. So is my brother Daniel. Over the last decade we’ve been doing regular things together like an annual trip (me/Dad, Daniel/Dan) and monthly dinners (me/Daniel).
Last month I proposed a new idea – a monthly book club between the three of us. We’d rotate choosing the book of the month. We’d read it separately but talk about it over the course of the month. Then, the next person would pick the next book. We’d iterate on the process – maybe we’ll end up doing a real book club video call for 30 minutes once a month to discuss, maybe we won’t.
I started off with Ben Mezrich’s newest book – The 37th Parallel: The Secret Truth Behind America’s UFO Highway. I’m a huge Ben Mezrich fan and UFOs are fun. Unfortunately, this wasn’t one of Ben’s better books. It was scattered with lots of time shifting back and forth. I never became entranced by the main characters and the backstory was unexpectedly shallow.
Our book club comments were short.
“It was not Ben’s best book. In fact, it was one of his worst. I felt like he mailed it in.” – Brad
“I am almost finished but it is downright boring. It going from one UFO incident to another. Big deal. Brad you are excused.” – Stan
“yep, read it in Cabo. Agree with your reviews.” – Daniel
Oh well – sometimes you start off strong, sometimes not. Daniel was up next and he choose Dark Matter by Blake Crouch. I loved it when I read it in August and I’m going to get to enjoy it again in January!
I woke up this morning thinking about people who have a desire to please. This is not my personality type, but I encounter it regularly. Amy often describes herself as an “approval-seeking people pleaser” and I’ve learned a lot from my 30 years of interacting with her.
With CEOs I often notice the pleaser personality in the context of employees. The pleaser wants everyone around him to be happy. This creates a positive reinforcement dynamic for the CEO – if everyone is happy, things must be good. If employees aren’t happy for any reason, that becomes a priority for the CEO to solve.
This often happens independent of the situation. The CEO is not focused on the root cause of what is going on, but rather the specific activity that is causing an employee to be unhappy, especially in the context of the CEO or another employee. Often, the source of unhappiness, dissatisfaction, or frustration is exogenous to the CEO and the company.
As I was rolling this around in my early morning brain, the thought occurred to me that if you are a CEO and a people pleaser, you should spend more time with your customers.
It’s not that employees shouldn’t be happy. That’s a cultural norm that can be a great goal. But it should be an embedded cultural norm, not the sole responsibility of the CEO. So, the CEO who is a people pleaser runs the risk of misallocating her time to ensuring employee happiness.
There are a plenty of CEOs who spend a lot of time with customers, but I’ve never met a CEO who spent too much time with her customers. Early stage CEOs often do this effectively but as the company grows, the time spent with customers as a percentage of overall time goes down. There are plenty of rational reasons for this, but it ends up in the same place – the CEO steadily spends a lower percentage of time with customers.
If you are naturally a pleaser, spend more time with your customers in 2017. Re-energize yourself by getting in the feedback loop with the users of your product. While they’ll have plenty of negative and critical feedback, you can then filter what matters, solve for it, and stay in a feedback loop that generates positive feedback as you make your customers happier, solving for your pleaser needs.
If you think your customers are uniformly happy, you are deluding yourself. If your employees are happy but your customers are unhappy, you are screwed as a business. And, if you are a CEO who is naturally a people pleaser and you are in this situation (happy employees, unhappy customers) you are likely destroying your business.
You are not going to please all of your employees. That’s not your job as CEO. Instead, channel your need to please to spending time with customers.
I had a great digital sabbath yesterday with Amy and my friends Dave and Maureen. I had a cold so I took a three hour nap in the middle of the day. For the rest of the day, I sat around in my PJs.
I read Philip K. Dick’s The Man in the High Castle. Amy and I loved Season 1 of the Amazon series but struggled with the first episode on Season 2 (I’m sure we’ll fight through it and watch it this week.) Since we got off to a slow start on Season 2, I decided to read the book, which I had resisted reading because I didn’t want it to confuse the TV series with the book.
Not surprisingly, I thought the book was better than the TV show. Since we loved Season 1, that’s high praise for the book. I’m a huge PKD fan and have been gradually reading all of his books.
I’ve started to be more open about my potential support of the theory that there are an infinite number of parallel universes. Reading books that cover different parallel universes, like the one where the Germans and the Japanese win World War II and split the US with the Japanese controlling the “Pacific States of America”, the Germans occupying the East Coast, and the Rocky Mountain States being a neutral buffer zone between the two countries, is – well – mind-bending.
It’s haunting, it’s challenging, it’s upsetting, and it’s enlightening.
In the evening, we chose Thirteen Days as our Christmas Eve movie. As the US and Russia walk to the edge of nuclear war during the 1962 Cuban Missile Crisis, we sat rapt for two and a half hours even though I’ve seen this movie before. I woke up this morning to World War Three, By Mistake in the New Yorker, talking about the continued existential risk of nuclear war because of a computer error, system failure, or a hack. As part of that, I discovered that there is a Windows for Submarines (get it?) product from 2007 from Microsoft that is still in use today.
If there are an infinite number of universes, imagine what has happened in them.
Thanks to the 75+ people who have reached out about being willing to help me with writing and WordPress stuff. I’ve read all the emails, answered some of them, and will get responses out to the rest on Sunday after I have a nice digital sabbath starting in a few minutes.
On my run today, I thought more about what I was looking to do and decided that my approach wasn’t right.
I’ll put this in the MVP / fail fast category. While many of the responses were from people who are clearly talented and would be able to tackle the stuff I’m said I was looking for help on, I realize that my premise around what I need may be flawed when I think harder about what I really want.
So, for now, I’m going to rescind my previous post titled Looking for a Writer and a WordPress Goddess and keep pondering things.
I’ve decided to hire two people for 2017: a full time writer and a full time WordPress Goddess (or God – I’m good with either gender …)
I’ve been very reticent to add people to our team. However, at this point it’s clear that I can get a lot of leverage from two very specific people.
Writer: I’m looking for a full time non-fiction writer. This is not a research function, but rather a writing / editing / coordination function. The amount of writing I do is significant, but there is 5x more to do than I can handle. I’m turning down a lot of stuff that I’d like to write and putting off stuff into an infinite backlog which doesn’t feel good. So, having someone writing first drafts, editing stuff I slap together, writing some primary content, and helping get it posted in the right places would be a big help.
WordPress Goddess: I contribute to four – soon to be five – blogs that my best assessment of is a hot mess of different configurations. Every time I fiddle around with something on one of them I break something else. Ideally I’d be able to normalize everything into one configuration, but I accept that this will always be changing. The person I’m looking for here has a mix of design skills and WordPress programming / config skills. In addition, there’s a bunch of other stuff in the infinite backlog of goodness to work on.
Each of these people would work directly for me. Optimally they’d live in or move to Boulder, but that’s not a requirement. They must be interested in entrepreneurship and be able to deal with lots of ambiguity. They must be comfortable with a lack of daily structure and reporting. They must be able to work remotely at times.
I’m willing to make a two year commitment to them, so they need to be willing to make a two year commitment to me.
If you are interested, just email me at firstname.lastname@example.org. If you know someone who might be a fit, please forward this post to them.
Venture Deals v3 (the third edition) is now shipping in both hardcover and Kindle.
If you are looking for a last minute holiday gift for your favorite entrepreneur (or lawyer, VC, or angel investor), we’ve got you covered.
Jason and I wrote the first edition of Venture Deals in 2011. When we were updating it for v3, I read every single word several times. It’s pretty cool how much it has held up over the last five years and we are delighted that it continues to be at the top of the Amazon bestseller list for Venture Capital books.
We added some new things in v3 and fixed a few things that were either unclear or wrong. This includes:
Jason and I finally sprung for the VentureDeals.com domain and moved all the old AskTheVC posts over. We’ve got a lot of cleanup and updating to do on the site – that’ll happen over the next month. Then, around the end of January we’ll start rolling out the teaching guide to Venture Deals on the site along with a bunch of ancillary materials for this.
For everyone who has supported us along the way, either by purchasing a book, giving us feedback, or just helping us get smarter about doing deals, thank you.