David Cohen has a great post up about the failure of one of his startup – iContact. Even though iContact failed, David and his partners still managed to return 78% of the investment to their investors. His two lessons: (1) control the distribution of your product and (2) start small and prove something before you start to scale up.
David Cohen (who I have done a few angel deals with – including ClickCaster and Solidware) recently spent a couple of weeks building a cool new tool called earFeeder. earFeeder scans your music collection and automatically creates a single RSS newsfeed containing news about your favorite artists including new releases on iTunes, concert dates and ticket availability, Rolling Stone articles, etc. He got a graphics designer (Brad Searle) to do the look and feel in exchange for a share of the company. Then David introduced earFeeder for the first time in public at the New Tech Meetup on October 3rd and opened it up to a public beta on that day. He told me that he really built it for himself but since some of his friends (including me) had given him good feedback on it, he decided to throw it out there and see what people thought and then improve it from there.
Two weeks later, TechCrunch covered earFeeder, followed shortly by LifeHacker. David estimates that about a million people have now seen a story about earFeeder, and many thousands of feeds have been created.
Here’s what’s really interesting: A Silicon Valley company called SonicSwap acquired earFeeder this past Friday and David is now an investor in that company. This happened just 39 days after he first showed it in public, and David says he spent a total of about three weeks and $600 on the project. That’s a pretty neat way to get some real value out of some experimental technology.
Fred Wilson has a superb post up today titled How To Build A Good Board. If you run a company and have a board, or sit on a board, go read it now.
One of my portfolio companies recently put together a short video for a recent company meeting. The video consisted of a series of questions for each board member and a few key advisors and clients. One of the questions was “what could they improve?” Following is my answer:
The pretzels were tasty.
As I slowly work my way through State of Denial: Bush at War, Part III, the phrase “trust but verify” has appeared at least once. Now that Rumsfeld is no longer Secretary of Defense, I guess I don’t have to finish the book. However, the phrase jumped out at me after a conversation I had earlier this week with an entrepreneur that I’ve worked with in the past.
In the conversation, something came up that happened three years ago. A third person made an attribution to the entrepreneur about me and a set of assumptions about what I was thinking at the time about the company’s situation. These attributions came from a fourth person. The entrepreneur processed this information, assumed it was true, and acted on it.
He never asked me about it. He never confronted me about it. He never questioned it. We have a direct relationship – but I was entirely clueless that this was going on behind the scenes. As a result of this information, the entrepreneur set off a chain of events based on the conclusions he had drawn.
His conclusion was wrong. His assumption was wrong. The data being attributed to me and my behavior was wrong. Fortunately, the outcome of the situation resolved appropriately independent of the bad assumptions. However, a lot of time and energy was wasted by several people – although – ironically – not by me. It all might have been avoided if the entrepreneur had simply confronted me with “hey Brad – I just heard this – is it true? Can you explain what’s going on and what you are thinking?”
I literally just found out about this earlier this week. It caught me completely off guard – it was too long ago for me to remember whether I was aware of any “noise in the system”, but I don’t recall noticing anything.
Trust, but verify.
A few days ago I wrote about the transition from a small to medium to large business. I had a few people write to me with additional questions, including requests to define the sizes, talk more about the issues during the transition, and make suggestions about how to address things. One of the notes came from a long time friend – Barry Culman – who is currently the president of SPADAC (Spacial Data Analytics Corp.) I’m not involved in SPADAC, but Barry shared a framework that he used recently at a management retreat to explain his view of the evolution of a company. Following is a quick summary of the stages according to Barry.
Birth
Teenager
Young Adult
Adult
Senior Citizen
While I don’t necessarily agree with every aspect of this and would likely cast some of it differently – especially based on the type of company (e.g. bootstrapped or venture backed), I think Barry’s framework is great and I appreciate him letting me share it with you.
Congrats to my friend (and world traveler) Ben Casnocha for being highlighted in BusinessWeek as one of the best entrepreneurs under 25.
I was at a board meeting on Friday for a company that is doing great and growing quickly. This will be their second year of revenue and – for a software company – it’s far ahead of its peers for being in its second year of having products in the market. I’m really impressed with and proud of what the founders and leadership team have built to date – and they are good at being introspective about what is working vs. what is not working.
One of the board members – who is also an entrepreneur – made the observation that we’ve built an “excellent small business.” The challenge now – especially as we look at some of the things we are uncomfortable with – is making the transition to an “excellent medium sized business.” While a few companies blast through this barrier, the vast majority of the ones that I’ve been involved with or observed that have made this transition have struggled to get there as they were faced with numerous challenges, including many that were new to the leadership team – either due to experience or to the growth vector they were on.
I’m currently involved in a few companies that are excellent small businesses that are now in their transition to a medium sized company. I’ve experienced this a lot over the last decade and have plenty of views on it – both around what succeeds and what fails. One of the neat things about being on my side of the table (e.g. the investor) is having lots of data points – time to put that to work again.
Failure can be “positive” – John Funk at Evergreen IP is about to start writing about a project he and his partners just killed. Understanding why things don’t work – and then doing something about it – has always been a key part of the entrepreneurial process (at least mine.) Part of the premise of John’s business is that a lot of projects that they take on will fail – I expect he’ll have some powerful insights to share.