I haven’t written much in the Failure series lately, but I’ve got a doozy or two coming soon. In the mean time, Chip Griffin has a good post up titled Don’t Fear Failure, Learn from It. Definitely worth a click through to hear about his three different kinds of failure (Spectacular Collapse, Death of a Thousand Cuts, and The Land of Lost Opportunity) as well as some lessons from his failures.
I’ve been listening to NPR since I was 7 years old. Whenever my mom or dad drove me to school, NPR’s Morning Edition was playing. Guilty weekend pleasures of mine include Car Talk and Wait Wait… Don’t Tell Me! While I don’t watch any news on TV, I do admit to listening to NPR on my drive to the office in the morning and I occasionally catch Talk of the Nation.
Yesterday I was on NPR for the first time as a guest on the Talk of the Nation segment Who Pays for Our Online Lives? Neal Conan interviewed me, Chris Anderson, and Kevin Rose about the challenges companies face building online businesses when consumers are used to getting information for free. We covered some good ground, including the freemium model, different ways of making money online, issues (and rewards) of scale, and the difference between the potential of a popular site like Digg and JoesCars.com (who will now get some traffic because of this post.) It’s all online (about 30 minutes) if you are interested.
The experience of doing the show was fascinating. I don’t do much live radio (or TV) so it’s not a natural medium for me. I do loads of podcasts and live speaking things, but for some reason live radio felt different.
It started on Tuesday afternoon when my partner Ryan McIntyre got an email inviting him to be on the show. It turned out that he was on a flight to the bay area during the broadcast so he forwarded the invite over to me. I connected via email with the show’s producer who filled me in on the topic. I said I was happy to do it and waited for further instructions.
I got a call early the next morning with a "pre-interview interview." I think the producer was calling to make sure I had at least a partial clue. We had a nice 15 minute talk about the potential content after which I got the thumbs up to be on the show. Then the "where do you need to go" scramble begun. I was at my house in Keystone and I didn’t feel like roundtripping it to Denver for the day. After an hour they came up with a studio in Edwards which was a lot closer. There apparently used to be a studio in Breckenridge (right around the corner) but it’s now a "ghost studio" which I assume means that no one is ever there.
I drove to KZYR (97.87) in Edwards and met up with Steve at the station. He did a great job of orienting me in a nice little studio with boom microphones and lots of computer / audio stuff I didn’t know what to do with. The little clock counted to 1pm and then everything just started working. The audio fidelity was superb – everything "just worked" – probably because all of the equipment was afraid of Steve.
I thought the interview went well (and was fun) although I realize that I have to reorient my brain on live radio (at least on TOTN) to talk in 30 second chunks (rather than my normal 1 or 2 minute podcast / panel chunks.) I got a lot of great feedback from friends that feel into the "cool to hear you on TOTN" category and plenty of encouraging tweets along the way.
While being on TOTN wasn’t on my "100 things to do before I die" list, it certainly is on the "1000 things to do before I die" list if I ever got around to making it!
I was at a board meeting recently and the notion of potentially hiring a COO came up. I blurted out "I don’t believe in COO’s." An interesting conversation ensued, including someone pointing out that I’d recently supported hiring a COO at another company I’m an investor in (never underestimate the contradictory nature of a VC’s brain.)
I’ve modified my statement to be "I don’t believe in COO’s 98% of the time for companies smaller than 200 people."
In almost all cases, you only have a two level executive hierarchy – CEO and VPs. The VPs are often creatively titled (SVP, EVP, CxO, something else) – but they are the direct reports to the CEO and have meaningful span of control over the business. Many of these VPs would report to a COO if one existed, and this is generally a bad idea in a very young company (again – with a 2% exception.)
There are two situations that are common that I think are silly:
Somewhere along the way there was an infomercial that said "if you are a VP and you want to advance in your career, become a COO." I’ve never understood this and it just confuses things. There’s a logical progression here – the VP Sales wants to be VP Sales and Marketing, the VP Sales, Marketing, and Business Development, then SVP of Sales and Marketing, then COO. Huh?
Same drill with the VP of Finance. There’s a logical path to be CFO. Then the CFO wants all HR, legal, and IT. Then the CFO argues "hey – I’m running operations – I should be COO."
Neither of these has ever made sense to me. The VP Sales path is particularly confusing since most great VP Sales suck at managing operations (which is ostensibly what a COO does.) I struggle less with the CFO situation – although by the time a company needs a CFO rather than a VP Finance (usually 100-ish employees), the CFO is going to be slammed with dealing with managing the normal "CFO-ness" of the universe, including dealing with investors; subsequently taking over "operations" usually makes no sense.
The 2% exception holds. In really young companies when the two senior execs "split up the business", a CEO / COO relationship can apply. I’ve even had one co-CEO situation work beautifully (ServiceMagic) even though every time I thought about it I was sure it wouldn’t work long term (I was wrong.)
Overall, titles don’t (and shouldn’t) matter much in an early stage company, other than for helping people on the outside of the company understand who does what to whom. In my experience, the idea of a COO almost always muddies the water.
Terry Gold has a nice long rant up on his blog titled The Auditors are here! Now, some of my best friends are auditors, but the state, dynamics, and incentives of the accounting industry have gone from bizarre to complete utter madness.
As an investor in many private companies, I ask all of my portfolio companies to have an end of year financial audit. Acquirers require them, you need them if you are ever planning on going public, and it’s just good overall corporate governance.
In 14 years of being an investor in private companies, I’ve never had a material accounting, fraud, or legal issue show up in an audit. Yeah – there are occasionally minor accounting changes around the margin, but they are usually for generally irrelevant issues like stock option accounting, minor revenue recognition issues, or expense timing allocation (none of which have an impact on cash or the real financial results of the company.)
Yet – every year companies pay real money ($20k for a startup, over $100k for a real operating business) to go through a mind bending time consuming process that results in a very long rep letter that the CEO has to sign.
Terry does a good job of highlighting the problems with this rep letter. Basically, it’s a cover your ass letter for the auditors. Ironically, this just gives the bad people another opportunity to lie and be bad. Terry sums it up nicely.
"I’m not picking on my auditors, or any auditors for that matter because they aren’t the ones making up all the new regulations. At their heart, I think they are trying to do a good thing by holding people accountable to a high standard, it’s just that I’m not convinced (and neither are they) that much of this is really making companies more transparent. It’s really just making it harder for the good people to comply and easier for the bad people to claim they actually did comply or that they misunderstood the rules.
In the end, nothing has really changed for me. If something is wrong, I should have known about it and I’m going to be held accountable for it. What can we do to keep the world from becoming a quagmire of ineffective laws, regulations and rules? Don’t assume that a new regulation will fix a problem. Work to fix the problem. Don’t enact a new rule and say, "there, problem solved" because you only get credit if the problem is actually solved. Focus energy on good people who will do their damnedest to make the right decision, because it is the right decision, and don’t tie their hands with bureaucracy that the bad people will just walk right through without a second thought."
I’m not picking on the auditors either (remember – some of my best friends are auditors.) But the meta issue – the one of the way the whole process works – is stupid.
Alan Shimel has a fantastic post up titled Do they have to grow up? As I read it, I thought of some of the great lessons my dad taught me when I was a little kid and how hard they must have been for him to carry out.
Amy and I have a regular discussion about whether or not it is helpful to tell a child "you can do or be anything you want." Amy’s reply is that she could never be an NBA center and neither could I. While the metaphor is a good one (e.g. "don’t let anyone limit your aspirations or dreams"), accomplishing things – especially amazing ones – requires a huge amount of hard work, perseverance, drive, skill, genetics, timing, and luck. Alan nails it:
"At some level I guess it is part of growing up and realizing that you are not the next Nolan Ryan or Josh Beckett. It is similar to a truth I come to grips with every day. That is as I get older with each day, there are going to be some dreams and hopes that are going to go unfulfilled in my own life. There are going to be mountains I am not going to climb. As I have gotten older I have come to grips with this reality and even accepted it. "
I must be brutal to be a father and have to teach this lesson to your child. My first reaction to Alan’s approach was probably similar to some of the parents in attendance – namely – "make the madness stop." But there’s a big part of it that is brilliant. It’s one thing to be told something, it’s an entirely different thing to experience it.
I’ve just read Alan’s post for the third time and it gets better with each read.
"But I felt I had to do this. I think they had to learn this lesson, I just wish it were not the hard way. After the game I gathered the team and told them baseball is a team sport. Each member of the team contributes in their own special way. They each possess a unique set of talents and skills that allows them to help the team, but not everyone is cut out to be a pitcher or a catcher. I think they all realize it now. Some of the kids accepted this and told me they did not want to pitch anymore. Other kids said they would practice and try to get better. "
I’ve had my share of lessons I’ve learned the hard way – say Interliant, my biggest failure and the source of some of my greatest lessons, or my first 8.01 (MIT freshman physics) test which I got 20 (out of 100) on. Failure is when you really learn things. I just keep practicing and trying to get better.
My long time friend Ben Neumann has a detailed post up titled Network Outage. Ben is CEO / owner of Globat, a successful web hosting company. I met Ben through an acquisition in the late1990’s when Interliant bought his previous company Icom (also a web hosting company.)
Ben’s company had a tough day yesterday. Multi-hour critical failure is a way of life in any rapidly growing SaaS / hosting / web business. It’s nice to fantasize that it will never happen, but virtually every high growth company has "its moment of fun." It’s all in how you deal with it, how you treat and communicate with your customers, and what you learn from it.
Part of dealing with it is being open about what happened and what you are doing about it going forward. Ben does a nice job of setting an example here of how to do it.
On top of the outage, it was Ben’s wife Andrea’s birthday. Andrea – I hope you gave Ben a raincheck and decided to celebrate your birthday this weekend! Ben – hint – flowers, chocolate, jewelry, and a trip to Hawaii.
Mitchell Ashley has an excellent post up titled Fail Early, Fail Often. I’m seeing a little more chatter about failure, introspection about how it feels, and suggestions about how to turn it into a positive (or at least effective) experience making the rounds.
As someone who has experienced a lot of success and failure, I’m glad to see more people talking about failure in the blogosphere. It’s a key part of the entrepreneurial experience. It’s also an integral part of life that cannot be denied. While it’s a lot more fun to succeed, it’s important to understand how to deal with failure.
My friend Bruce Wyman – who is the Director of Technology at the Denver Art Museum – turned me on to Gordon Ramsay‘s Kitchen Nightmares. Early this morning I discovered that Micah Baldwin – who runs Business Development for Lijit – is also a huge fan. Micah has a great post up for all entrepreneurs titled 5 Lessons Learned From Gordon Ramsay. Sometimes broccoli soup is just broccoli is a line I’ll be using for the next few weeks (until I discover a better one.)
While we are thinking about Lijit, Alex Iskold over at AdaptiveBlue just wrote about the integration of Lijit into the latest version of AdaptiveBlue’s BlueOrganizer. You can now Search Lijit Right From the Context Menu. I’m an investor in both Lijit and AdaptiveBlue and love how they fit nicely together like chocolate and peanut butter.
My partner Seth Levine has a cathartic post up titled Failure where he describes failure from a VC’s point of view.