Category: Entrepreneurship
Lots of little things go into building a great company over the long term. Rally Software is one that I’m proud to have been involved in from the beginning. I remember when Ryan Martens, the founder, would sit for entire days in a small conference room near my office covering the white boards on the walls with his scribblings.
Today Rally is a 150 person company that plans to add another 75 people in 2010 on the heels of Rally’s $16 million financing led by Greylock. And – since their birth in 2002, Rally has had 17 babies (well – people that work for Rally have had the babies, but you probably figured that out.) Recently, Rally’s leadership team decided to do something about this.
Nicely done Tim, Ryan, and everyone else at Rally. Now you’ve just got to get these kids using software from Kerpoof at an early age. I wonder how Agile Parenthood works?
Sometimes a person says one sentence that just sticks with you and is so perfect that it defines a whole category of behavior. Mark Pincus, the CEO of Zynga, riffed on the phrase “be the CEO of your job” in a board meeting a year or so ago. It stuck with me and I’ve thought about it many times since.
On Sunday, the NY Times did a great “Corner Office” interview with Mark titled Are You a C.E.O. of Something? Among other things it explored the idea of being the CEO of your job. Fred Wilson – also an investor in Zynga – wrote a post on Sunday titled Empowering Your Team which talks about one aspect of this. But Fred left out a great example from one of Mark’s earlier companies (Support.com) which really nails this concept.
“We had this really motivated, smart receptionist. She was young. We kept outgrowing our phone systems, and she kept coming back and saying, “Mark, we’ve got to buy a whole new phone system.” And I said: “I don’t want to hear about it. Just buy it. Go figure it out.” She spent a week or two meeting every vendor and figuring it out. She was so motivated by that. I think that was a big lesson for me because what I realized was that if you give people really big jobs to the point that they’re scared, they have way more fun and they improve their game much faster. She ended up running our whole office.”
Think about the conceptual progression. First, the CEO (Mark) had to have to courage to make the young, motivated, smart receptionist “be the CEO of her job.” Then, when the problem was put to him (“Mark, we’ve got to buy a whole new phone system”), Mark resisted doing something so many entrepreneurs (and executives, and managers) do – namely to “manage” the problem. Instead of spending a lot of his time solving the problem, or setting up a committee to spend a month figuring out the phone system, or asking someone more senior to the receptionist to figure it out, he gave her the responsibility of solving the entire problem. He anointed her “CEO of her job” – as the receptionist, she was the one that felt the most pain from the inadequate phone system and was probably in the best position to figure out a solution.
In this case, the notion of “be the CEO of your job” was in the culture of the organization so the receptionist – who was in Mark’s words young, motivated, and smart – took this seriously, spent real time figuring out the solution, and then solved it. I’m sure the early culture of Support.com was “don’t spend a lot of money” so the financial constraint, while vague, was probably understood. While there’s plenty more behind the scenes in the story, the young reception clearly “leveled up” (it’s impossible not to use game-speak when talking about Zynga) and ended up running the whole office.
I work with CEO’s every day. So I’m naturally wired to encourage them to be CEO of their own job. While this is pretty meta, it’s an important starting point as I already think this way all the time. I’m certainly not perfect and have moments where I just jump in and try to solve a specific problem, but most of the time I let the CEO’s be CEO. However, when I contemplate this, I realize I haven’t done a good job of encouraging the CEO’s to make everyone in their organization CEO of the job. Some CEO’s do this naturally and – not surprisingly – these are generally the highest achieving companies.
Pause and ponder the idea. Assuming you are in an entrepreneurial organization, are you being the CEO of your job? Is this culturally (and functionally) acceptable? Do you get rewarded for taking risks and succeeding (or failing) like your CEO does? If not, would you be more effective if you did?
Now, if you are the CEO of an entrepreneurial organization, do you encourage everyone in the company to be CEO of their job? Is this culturally (and functionally) acceptable? Do they get rewarded for taking risks and succeeding (or failing) like you do? If not, would they be more effective if they did?
If you applied the lens of “be the CEO of your job” to you job, would you behave any differently?
Steve Bell of Startup Trek came to Boulder about a month ago and did an interview with a bunch of Boulder people, including me. Following is part one (12 minutes) of the interview where I talk some about my history, my first company Feld Technologies, and the Feld Technologies’ motto (“we suck less.”)
I also spend some time talking about how I first learned how to do deals, acquire companies, and make angel investments. You get to learn how I met Fred Wilson, Rich Levandov, and Jerry Colonna. And, as a special bonus, you get to see a reasonably tired version of my avatar sitting in one of the chairs in my office.
Jon Hansen from PI Window on Business had so much fun with me a few weeks ago that he asked me to do another interview – this time on the dynamics around foreign investments. We covered plenty of ground, including what country, state, and local governments do to slow down investments, along with a bunch of my own philosophy around why I only make VC investments in the US and Canada. Buried deep in the interview is my track record making VC investments in European companies (hint: not pretty).
Entrepreneur Magazine made a swing through Boulder recently and did short interview videos with a bunch of the Boulder entrepreneurs. If you aren’t exhausted after listening to an hour of me (or if you punted), take a quick two minute tour with Ari Newman of Filtrbox.
Ari finishes strong with a great line – “If you aren’t doing something you love, life’s too short – there’s an opportunity cost.” As a special bonus, Matt Galligan – the man who manages to be everywhere – is hanging out over Ari’s left shoulder.
I was at a board meeting recently where the board and management was discussing the company’s market position. This is a strong company that leads its market and, as a result, one of the board members stated that we were “the 800 pound gorilla in the market.” In my world view, the market was still relatively small so I suggested that we were the 12 pound gorilla. While this got a chuckle, it was instructive and moved the conversation down an interesting path.
If the 800 pound gorilla comment had stuck without any discussion, I expect the management team and board (me included) would have leaned back in our chairs, smiled, and indulged ourselves in a moment of self congratulation. And it’s warranted, as this company has been around for a while and has built a strong, profitable business that is in fact the leader in its market.
However, the market is still relatively small. It’s growing – and growing quickly now – but it took five years for it to really mature into an interesting market. We lead the market and continue to be very effective at winning the vast majority of the new business that is out there. But to view ourselves as an 800 pound gorilla would be an error in my book.
Instead of relaxing, we reset the conversation and said “well – if we are a 12 pound gorilla, what do we need to do to become a 100 pound gorilla on our way to becoming the 800 pound gorilla?” We decided we could easily become a 24 pound gorilla just based on the growth of the market. But this isn’t interesting to us, so we’ve got to do more. What the “more” is started to come out of the discussion we had which I expect will be continued over the next month as the company determines which new products to invest in during 2010.
I find myself in many situations where the words matter a lot. I enjoy quirky phrases (like Todd Vernon’s “chocolaty goodness”) that help focus the discussion. The next time you start talking about the gorilla in the market (whether it is you or someone else), make sure you determine whether it’s 800 pounds or 12 pounds – I expect your actions will be very different depending on the answer.
Every day I get emails from entrepreneurs that make me think. In this case, it’s from a friend who is on the fundraising trail. He started off the email with “I felt compelled to share this with you as someone who would appreciate it.” I thought it was dynamite and asked him if I could share it since – in its unedited form – it captured so nicely what I expect many entrepreneurs feel. And, just as importantly, it’s something I hope VC’s realize that entrepreneurs – even very experienced ones – feel.
I am fortunate to have successfully raised venture capital from top tier investors before.
I have been a failed and successful CEO and know the difference.
I have earned my CEO stripes by being a successful operator in startups and big organizations.
I can lead, problem solve and think strategically. I am technically adept, I can sell. I work hard.
Yet, as I set out to raise money, I still have a great feeling of unease of the result. I guess I have humility as well.
I’ve noticed, or maybe more accurately, I’ve become aware of the ether that is between a venture investor and entrepreneur. In the ether, all things that can make or break a deal exist: idea, market risk, technical risk, team competence, economy, deal flow, competition, VC mood that day, entrepreneur pitch that day, first impression, gut feel, blog post for or against the idea read that morning, breakfast/no-breakfast, bias for or against, smarts or not-so-smarts of the VC and entrepreneur.
In my pitch experience, VCs I have been convinced hated me and my company after my pitch have invested. VCs I am sure as shit loved me and my company after my pitch blew me off. I have also been right that VCs I thought hated me and my company told me they in fact did; and, those who loved me and my company did in fact invest. It’s been a crap shoot at best.
Assuming there is something of merit in the idea, market, team and company, somewhere in the ether is a term sheet and a kick to the curb. Coalescing just the right combination of elements in the ether at the right time has proven to be more art than science. Anti-portfolios highlight how successful companies didn’t get it coalesced with one investor but did with another.
If I get it right and a financing comes together for my new company, I hope to have learned something that tips the scales of randomness in the scrum.
Talking about scale and growth is hard. Many people talk in percentages in pre-determined time periods (e.g. let’s grow revenue 100% next year). I find this to be relatively useless. Instead, I like to challenge people to think on a bigger scale over a variable time period. My favorite line of late is “add another zero – you pick the metric and the time frame.”
I used to call this “increase X by an order of magnitude” until I realized that lots of business people don’t actually know that an increase in an order of magnitude is equal to multiplying by 10. While it’s silly, there’s no ambiguity when you talk about “adding a zero to the end of a number.”
For example, I’m an investor in a company that is growing its user base as they had planned. However, they are coming up far short on a variety of measures, including daily active users (DAU’s) and virality measures (they have several that are good, well defined, and easy to measure.) So, my simple statement to them is “Nice job on user growth. How do you add a zero to the number of DAU’s and the virality measures – you pick the time frame?”
In another case, I’m an investor in a company that had a great year on all accounts. They are the clear market leader in their segment, well funded and – while still losing money on a monthly basis – have a very clear path to being cash flow positive in 2010 on the cash they have in the bank. We are no longer worried about them becoming a relevant company – our attention is now shifting to how to grow to be a very big and important company. The question I asked them was “How do you add a zero to your annual revenue number – you pick the time frame?”
This question can apply to any metric. If you have one customer, how do you get to 10 customers? If you have 10 customers, how you get to 100? If your users are on your site for 1 minute a day, how do you get to 10 minutes a day? If you are generating $100,000 per customer, how do you get to $1,000,000 per customer? If your largest customer has 1,500 seats of your software (or service) deployed, how do you get to 15,000? Add another zero – you pick the time frame.
While there are natural limits to this when you approach it top down, it becomes very powerful when you approach it bottom up. I call this cascading leverage. For example, if you focus on individual user behavior and try to add zeros to key user-based metrics, you’ll increase the metrics all the way up the chain. If you happen to find two metrics that impact each other (e.g. you get value out of the growth of X multipled by the growth of Y), you can actually get 100x impact on higher order metrics if you can add a zero to both of them. Understanding the linkage from the bottom up also helps create better clarity on what to measure and where to invest to grow the business dramatically.
The variable time period is a key aspect of this. I tend to match the time period up to the natural rhythms so I can remember them – daily, weekly, monthly, quarterly, annually, two years, five years, ten years. But this isn’t necessary – any time period is fine. The key is to let the time period vary by metric to which you are adding a zero as this changes the texture of the conversation (e.g. you tend to have a very different conversation when you talk about adding a zero to a metric over the course of a month vs. over a course of a decade.)
So – as you go into your annual planning cycle for 2010, try the “add another zero” approach on some of your numbers. Or, get granular, and try it today on some of your underlying metrics. Just don’t default into “let’s grow revenue 100% in 2010”.
On the heels of the FCC doing what everyone expected them to do today with regard to Net Neutrality, I thought I’d remind you of the awesome Ask a Ninja on Net Neutrality from 2006.
Yesterday I mentioned my strong support of Net Neutrality. As part of this, I signed on to a letter from a bunch of VC’s and entrepreneurs to Julies Genachowski, the chairman of the FCC. Fred Wilson reprinted the letter (he also signed it along with his partners at Union Square Ventures) in his post Net Neutrality.
Not surprisingly I received some emails and had a few conversations with folks that amounted to “I don’t really know anything about this Net Neutrality thing – can you explain it.” I did my best but after the third time decided to pull together a few public posts that might provide some perspective on the debate.
First, Ivan Seidenberg, the Verizon CEO slamming Net Neutrality. I have trouble reading this stuff (and am glad I wasn’t at the Supercomm speech) as I just violently disagree with his perspective. But – it’s useful context. One thing you’ll notice if you read across a bunch of this is that it’s pretty consistent language from the CEO’s of broadband providers, which is usually a clue as to how politicized this stuff is.
Next, you get a very interesting post from Eric Schmidt (Google CEO) and Lowell McAdam (Verizon Wireless CEO) titled Finding common ground on an open Internet. I’m not sure this post actually resolves anything, but it does a useful job of setting up the conversation and reinforcing the key principles being discussed and debated. It’s also ironic (or perplexing) given McAdam’s statements given the position that Seidenberg takes.
The best article is My chat with Google’s Vint Cerf in the Washington Post. If you don’t know Vint Cerf, he’s also commonly referred to as “the father of the Internet” It’s a great, clear interview that expresses the position I support.
I expect there will be an incredible amount of rhetoric around this over the coming months. Buckle up.