Category: Management

Jan 19 2017

The Ideal Financial Reporting Tempo For A VC-Backed Company

Over the past few days, I’ve had a similar conversation about reporting tempo with three different people (2 CFOs and 1 CEO). In each case, we snuck up on the issue, rather than starting with it.

The fundamental question addressed what the reporting tempo to the board should be.

A number of years ago, I decided to shift to quarterly board meetings. Historically, the number of board meetings I had per company was all over the place. Some had four per year, some six, some eight, and some had twelve. This was an artifact of the last 30 years of venture capital, where VCs often would use the board meeting as the way to primarily engage with the company.

I wrote about this in my book Startup Boards: Getting the Most Out of Your Board of Directors. I’ve shifted to a cadence I call “continuous board interaction” which is gated by the desire and need of the CEO as well as the needs of the company. As such, a quarterly board meeting is plenty since I’m having continuous interaction with the CEO and board. This approach was originally stimulated by Steve Blank’s posts Why Board Meetings Suck and Reinventing the Board Meeting – Part 2 of 2 but modified to fit the more varied and flexible reality that I operate in.

This does not mean that quarterly financials work for me. When the financials are tied to the quarterly board meeting, it’s almost impossible to have continue board interaction. There’s just not enough financial context about what is going on in the business. On the other hand, with a few exceptions (hyper-growth cases or ones where you are focusing on specific metrics), daily financing reporting is not helpful either, as is it overly burdensome on the company. It also quickly turns into metric reporting, which is very distinct from financial report, and often extremely helpful, especially in a continuous board interaction approach. However, many board members can’t handle daily anything, especially if they are on ten boards, except for the companies that they need to spend daily attention on.

That’s the context for how we wandered up to the discussion in each meeting. After the second conversation, I thanked the person I was talking to (she knows who she is) for providing the content for today’s blog post. Of course, since the conversation came up again with someone else after that, it sealed the deal that this would be a blog post.

Here is how I like to do board level financial reporting for private companies I’m on the boards of. I don’t force this – if the CEO wants to do something different that’s up to her. But I encourage this, or something like this.

Quarterly board meetings: The financials are decoupled from the board meeting. There is a quarterly financial and metric review in the board meeting, but it’s not the meat of the meeting unless there is a specific set of financial issues that need to dominate, such as the 2017 budget, a big financial miss, or a significant change to the plan for some reason.

Monthly financial package: This is a full financial package distributed to the board and executive team. It includes P&L, Balance Sheet, and Cash Flow statements. It has actuals to budget for monthly, quarterly, and YTD. It also has trailing 12 months of each (P&L, BS, CF). In addition, there is a cover MD&A (hopefully written by the CFO – not a formal SEC one, but a comprehensive management discussion and analysis). I prefer this package to be distributed by the CFO and not the CEO – it then becomes part of the operating rhythm. I also like the Q&A that occurs (in email, or in a Google doc around the MD&A) to be driven by the CFO with support from the CEO.

Optional monthly financial state of the company board call: This is a call with the CEO, CFO, and the board. Ideally it is led by the CFO. It’s limited to one hour, is completely independent of the board meeting, and is optional. The CFO sends out a short (less than 10 page) presentation summarizing the key financials, key metrics, and any topics for discussion at least two days in advance of the call. While I rarely attend these, I find that the board members who don’t engage continuously can use this to keep current on the financials and in the rhythm of the company.

This rhythm works around the monthly financial close cycle. The CFO sets the schedule. An example would be (based on day of the month) that the financials are closed by day 15. The monthly financial package goes out on day 17 with the presentation for the optional monthly state of the board call. The call happens on day 20.

If you’ve got a different, or better, rhythm, I’d love to hear it.

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Jan 17 2017

Is 2017 The Year Of Flat Headcount?

If you are growing at a rate of less than 50% year over year, you should consider viewing 2017 as the year of flat headcount.

As budgets are settling down and getting approved for many of the companies I’m on the board of, I’m seeing a general trend of much less headcount growth in 2017 than in 2016. In some cases, companies got ahead of themselves. In others, they need to integrate all the people they’ve added. In some, they feel like they have a critical mass of people and want to march to get profitable on current headcount. And still others are profitable and have realized significant operating leverage in the past two quarters that they want to continue.

While there are different reasons, many of these companies are being a lot more targeted and selective with where they are adding people. These are generally the companies between 50 and 200 people who have growth rates that are 50% or less. But I’m also seeing it in companies with larger growth rates (100% year over year – yup – we can to that and only add 10% new people.)

I hadn’t really thought of it as a trend until I reviewed a board deck this morning and it’s called out as a feature. I agree that it’s a feature. A company with $10m+ of revenue that is growing at 50% or more can often get profitable within 12 months if it focuses on its operating costs. Headcount is almost always the largest increasing operating cost.

I see a nice second order effect in all of these companies. Given the focus on getting profitable, they are now clamping down on other discretionary costs around the system. That money you’ve been wasting on a PR agency – delete. That extra space you thought you might need, but don’t – sublet. The outsourced recruiter you’ve been paying a retainer to – gone. There’s a long list of operational efficiencies that go along with the focus on getting net income and ultimately cash flow positive.

While this isn’t a universal truth, nor should it be, it definitely feels like a trend, especially as companies start putting a lot more focus on ICDC as part of their growth strategy.

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Jan 13 2017

The Three Machines

Lately, I’ve been stewing over increased complexity being generated by companies around their organization approaches. While this activity varies by stage, in many cases the leadership team expands to a large (greater than six) number of people, there become two executive teams (the C-Team and the E-Team), the CEO gets sucked into endless distractions and working “in the company” rather than “on the company”, and I could go on with a 1,000 word rant on the challenges and complexity.

Recently, I saw a structure rolled out by a CEO at a company I’m an investor in that made me pause because of its simplicity and brilliance. I didn’t like the labels the CEO used, but I loved the intellectual approach.

It coincidentally had three categories. Three is my favorite number and has been since I was three years old. While I can carry more than three things around in my head at a time, when there are only three attached to a specific thing I find that it’s second (third?) nature to me and requires no additional processing power to remember and organize my thoughts around three things.

If you recall my post on Three Magic Numbers, this will immediately make sense to you. Or if you’ve ever heard my story about struggling with clinical OCD in my 20s where the number three was one of my key anchor points, you’ll have empathy for my relationship with the number three.

I abstracted the structure I saw from the CEO recently into what I’m currently calling “The Three Machines.” While this can apply to any size company, it’s particularly relevant to a company that is in the market with its first product, or a company that is now scaling rapidly with a set of products.

The three machines are: (1) the Product machine, (2) the Customer machine, and (3) the Company machine.

If you step back and think about all of the activities of a company in the phases I described above, they fit in one of these three machines. However, most leadership teams don’t mirror this. Instead, in a lot of cases, there is a traditional leadership team structure that has a CEO and a bunch of VPs (VP Engineering, VP Product, VP Finance, VP H&R, VP Sales, VP Marketing, VP Customer Care, VP Operations, …) which are often title inflated with CxO titles (CTO, CFO, Chief People Office, CMO, COO, CRO, …) or artificial demarcations between VPs and SVPs (and EVPs.)

Regardless of title structure, the CEO has a span of control that gets wider as the company scales, often with more people being added into the hierarchy at the VP or CxO level. As this continues, and CxOs are added, you end up with the C-team and the E-Team (which includes the non-CxOs). The focus of each person is on a specific functional area (finance, marketing, sales) and traditionally scoped.

In a few cases, big organizational experiments ensue, often after the organization dynamics hit a wall. Holacracy, which is still bouncing around, was a relatively recent trendy one. I disliked holacracy from the first time I heard about it and resisted even experimenting with is, preferring to watch what happened when others tried it. In 2013, Nick Wingfield wrote an often-citied article in the NY Times titled Microsoft Overhauls, the Apple Way that is liked to a now famous graphic of different org charts for Amazon, Google, Facebook, Microsoft, Oracle, and Apple.

I’ve wrestled with hundreds of conversations around this in the past few years. I never have felt satisfied, or even particularly comfortable, until I landed on the three machines recently.

My current hypothesis is that if you are a CEO, focus your organization on the three machines. Product, Customer, and Company. Then, have a direct report own one of them. If you have a sub-scale leadership team (e.g. you are three founders and four other employees), as CEO you can own one, but not more than one. As you get bigger (probably greater than 20 employees), hopefully how you have enough leadership to have one person own each, but recognize that if someone is being ineffective as a leader of one of the machines, you will have to replace them in that role (either by firing them or re-assigning them).

Let’s assume you have enough of a leadership team that you have a key leader who can own each one. Organize the company leadership around each machine. The titles don’t matter, but the hierarchy does. Naturally, you will have a product or engineering leader for Product, you will have a sales, marketing, or operations leader for Customer, and you will have a finance or admin leader for Company.

But, this does not mean that your VP Engineering is your VP Product and Engineering. That rarely works – you want to separate these two functions. But your VP Product, or your VP Engineering, or your CTO could be responsible for the Product machine, with the other VP functions reporting to her. You probably also don’t want to merge your VP Sales and VP Marketing and VP Customer Care function into a VP of Sales, Marketing, and Customer Care. But, if you have a Chief Revenue Officer, you may have done this. While that can work, recognize that it works if the CRO realizes he is in charge of the entire Customer machine.

I’m still in the first few weeks of really building a theory around this so there’s a lot of sloppy thinking on my part so far. For example, I don’t think this necessarily means that the CEO only has three direct reports. But it might. Or, in some cases, at certain scales it might. I haven’t focused on what it means in terms of the overall hierarchy. I haven’t really thought about how multiple different product lines come into play. I don’t know if there needs to be dramatic retitling at the top.

I do, however, have several companies that are very clearly focused on these three machines. Yet, they are at different scale points and have different formal hierarchies. Over the next few months, I’m going to use this lens across every company I’m an investor in as I poke and prod at how it might, can, and should work. And, determine if it’s a valid hypothesis.

Feedback of any type is welcome.

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Jan 5 2017

Empty Out Your Junk Drawer

Everyone has a junk drawer. Or two. Or ten. One of mine is to the left.

So does every company. It’s now often referred to as “Labs” (as an homage to the infamous Google Labs which was disbanded in 2011.)

We’ve seen a lot of companies spin up a Labs as a way to try to create new products. In most cases, after about a year, it’s a junk drawer of random shit.

At a Techstars meeting on Monday, in response to something I said, Jason Seats blurted out “that’s just putting it in the junk drawer.” I love when Seats does that – it makes me stop and think. And, in this case he was absolutely right – it was a lot better to simply delete the thought that I’d had (and the activity around it) then to put it in the junk drawer.

I’ve come to really hate the concept of “Labs.” Fortunately, most of the companies I’m involved with who have done a Labs thing have shut it down and reabsorbed it back into the product organization in a more systematic way.

At some point, I realized that Labs was either (a) a random place to put a founder who is no longer working on the core activity of the business or (b) a place to work on a set of things that product can’t make progress on. Both of these are foundational issues.

If (a) random place for a founder, the CEO may not be dealing with an organizational issue around a founder. Or the founder may not be tuned in to how to work with a now scaling organization. There are situations where you want a founder (or founders) to go work on a new R&D project, and it could be called Labs, but it should be focused on a particular product initiative, not a non-defined grab-bag of randomness. When I think of the success cases here (and I have a few), it’s really “new product R&D” rather than “labs”, even when the new product isn’t clearly defined yet. But that leads to (b).

If (b) a place to work on a set of things that product can’t make progress on, this usually appears when the CEO (and potentially a founder) are frustrated with the pace of new product development. This is a recurring theme in my world when a company hits around $5 million of revenue on their first product. It happens at multiple points again in the future and is a good example of the differences between starting a company and scaling a company. It’s easy to blame this on the product organization, but it’s often more complicated than that. Sometimes it’s a single executive; often times it’s the way the engineering and operations organizations (including customer support) interact. And sometimes it’s the CEOs lack of understanding of how to run a maturing / scaling product line while adding in new products.

In either case, the default to creating Labs as a solution to a problem is not a good one. And, when I get home from CES, I’m going to throw all the shit in my junk drawer away.

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Dec 29 2016

Get Your Metrics Together

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.

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Dec 26 2016

CEOs Who Are Pleasers Should Spend More Time With Customers

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.

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Dec 15 2016

Board Seat For Sale

I had lunch recently with a founder. We were talking about current and future board configuration for his company and he said “Up until this point, all my board seats were simply for sale. Whenever a new investor showed up, they wanted – and got – a board seat.”

I loved the phrase “board seat for sale.” It’s exactly the opposite of how I think about how to configure a board of directors, but I recognize that it’s a default case for many VCs and, subsequently for many entrepreneurs and companies.

It’s a bad default that needs to be reset.

I wrote about this a lot in my book Startup Boards: Getting the Most Out of Your Board of Directors.

In the past few years there have been some interesting changes. In pre-seed and seed stage companies, there’s been a trend against having board of directors. Instead, there is no formal board, or no formalism around the board, so it’s just a free for all between the collection of early investors (angels and pre-seed/seed VCs) and the founders. This can be fine, but often isn’t when there are challenging issues that involve founders, financing, execution, or conflicts. And, when things stall out, figuring out what to do is often harder for the founders because of the communication dynamics – or non-communication dynamics – that ensue.

Post seed boards tend to be founder and investor-centric. This is the norm that I’ve seen over the past 20 years. With each round, the new lead investor gets a board seat and all of the other significant investors get either a board seat or an observer seat. The board quickly ends up becoming VC heavy and the board room expands to have a bunch of investors in it since they all have observation rights. Having been in plenty of board meetings with over 20 people in the room, I can assure you that these meetings are ineffective at best and often trend toward useless.

One approach to this is the pre-board meeting, where only the board members meet with the CEO prior to the board meeting (similar to an executive session of the board.) This is an effective way to deal with part of the problem, but it then makes the board meeting, in the words of a good friend and fellow VC, kabuki theater.

I prefer dealing with reality. I have a deeply held belief that as long as I support the CEO, I work for her. Yes, I do have some formal governance responsibilities as a board member which I take seriously and am deliberate around them. But most of my activity with a company is in support of the CEO. When I find myself in a position where I don’t support the CEO, it’s my job to do something about that, which does not mean “fire the CEO.” Instead, I have to confront what is going on, first with myself, then with the CEO, and finally with the rest of the board, in an effort to get back to a good and aligned place with the CEO.

As a result, especially for early stage and high growth companies, I think the CEO and founders should be deliberate about the board configuration. I like to have outside directors on the board early as it helps the CEO and founders learn how to recruit and engage non-investor directors. The CEO can learn how to build and manage the board and get value out of board members beyond the classical dynamics around an investor board member.

Most of all, I hate the notion of board seats for sale. I get that many investors want board seats as part of their investment. I appreciate that some now have strategies of never taking board seats. But too few VCs think hard about what the right board configuration is at the point in time that a company is doing a new financing. I think that’s a miss on the part of VCs and I encourage CEOs to think harder about this.

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Dec 11 2016

Managing New User Satisfaction On A Daily Basis

As we get to the end of 2016, I’m in many conversations about 2016 performance and 2017 budgets. While 2016 isn’t over yet, most SaaS companies know how things are going to end up within a few percentage points. As a result, their focus on 2017 is an extrapolation from how they have been doing in 2016, typically building on month over month activity.

Since there are plenty of variables, the conversations are generally quantitative. In the midst of one last week, I said “why aren’t we talking about increasing conversions and lowering churn?” This was in response to a CFO who had modeled conversion rate and churn at a fixed percentage each month throughout the year.

The CEO responded by defending the CFO, who he’d worked with on the model. The CEO said “we are going to model conservatively, but we think we have lots of room for upside.”

I’ve been in this particular type of conversation 5,371 times over the past 20 years. I’m still nice, but I’m no longer patient with it.

I said, “If we don’t have a plan for increasing conversions and lowering churn, by June when we are on or slightly off plan, we’ll be happy, will have forgotten this conversation, and will not be doing anything to execute on the upside. Let’s stop the budget discussion ten minutes before the end of our scheduled time and talk about ways we can increase conversions and decrease churn.”

If you are wondering why I’m repeating the phrase “increase conversions and decrease churn” I point you at the John Lilly New York Times Corner Office article On The Role of Simplicity and Messaging.

We talked for more than ten minutes on the topic of increasing conversions and decreasing churn. We spent most of it on increasing conversions and tabled a discussion on decreasing churn for the next budget call (which was to finalize the budget). In either case, the modeling for the year was to include both an increase in conversion month over month (modest) and a decrease in churn month over month (also modest). There was acknowledgement that if we didn’t have a change in the number, no one would focus on it.

We came up with a very simple operant conditioning loop framework. We used a binary measurement for each new user – they are either healthy or unhealthy.

On day one, every user is healthy since they just signed up.

On day two, there is a specific attribute measured for each member of the cohort. In this company’s case, let’s call it “create a record in the system.” Any user that creates a record is heathy and goes to day 3. Any user that doesn’t is unhealthy and gets an operant conditioning action, which in this case is an email with instructions on how to create a record. The user stays at the day two level, but they are now in category b. On day three, if they still haven’t created a record, they get a phone call from customer care asking if they’d like some help creating a record.

I’m keeping the examples “create a record” super simple so you can follow along. But until a user creates a record, they stay at day two. We have a category c option, category d option, and category e option. If by category e they still haven’t created a record, they drop out of the funnel.

On day three, another attribute is measured. If a user has achieved the attribute, they go to day four. If they don’t, they get the operant conditioning action, stay at day three, and are now in category b. The loop continues.

The free trial period for this company is 14 days long. There are several operant conditioning actions that can extend it by a week or two weeks. For example, if someone is on their 13th day of the trial but is only on the 7th day of the process, they automatically get another week on the trial.

Recognize that these are not drip campaigns or email triggers. Instead, it’s a very deliberate operant conditioning process. And, as part of any system that involves operant conditioning, there are a significant set of measures by cohort and across the system so the operant condition elements can be A/B tested and modified as we get more data.

Now, this might seem complicated on the surface, but it turns out to be more complicated to explain than it is to work out on a whiteboard. Putting the system in place varies based on the underlying tech you are using, but it’s not that difficult if you approach it with a clear framework.

The goal is deep and immediate engagement by new users. So many companies talk about increasing the number of prospects at the top of the funnel, but they spend remarkably little time making sure actions are taking – on a daily basis – to make sure these prospects convert into paid users.

We have many rapidly growing SaaS companies in our portfolio. Over the past decade, I’ve observed too many companies see their growth rates decelerate, or even stall, because they didn’t focus enough on increasing conversion and decreasing churn, which henceforth I will refer to as ICDC.

2017 is the year for ICDC in my world.

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Nov 27 2016

John Lilly On The Role of Simplicity and Messaging

Yesterday I talked briefly about taking a break from media. However, I wasn’t precise, as the one thing I read each week is the New York Times Sunday paper. When Amy and I lived in Boston we started reading it every Sunday morning and continued whenever we travelled. Several years ago I started having it delivered to our house on Sunday morning and it is a delightful Sunday morning ritual for us.

Some Sundays I read it quickly – other Sundays I savor it. I generally spend most of my time in The New York Times Book Review, Sunday Business, Sunday Review, and The New York Times Magazine. I turn all the other pages, only stopping when I find a headline that interests me. For example, I learned today from “Jogging the Brain” that running increases neurogenesis, the creation of new brain cells, which is good for recovering from a night of too much drinking. I’m not drinking alcohol right now so this doesn’t apply, but it reminded me of something that I know from experience for some day in the future when I drink too much.

One of my favorite sections is the Sunday Business Corner Office by Adam Bryant. I read them all and almost always learn something or have an idea reinforced. I also learn about people I often know – either directly or by one degree of separation.

Today’s Corner Office is with John Lilly, a partner at Greylock Partners, is titled Simplify the Message, and Repeat OftenI’ve only met John once in person (for breakfast at the Hotel Gansevoort in NY) but have long followed him on Twitter and occasionally exchanged messages with him. From this near distance, I respect his thinking a lot.

Under the question “Early leadership lessons for you?” he reinforced something I strongly agree with.

“So my big lesson was the importance of a simple message, and saying it the same way over and over. If you’re going to change it, change it in a big way, and make sure everyone knows it’s a change. Otherwise keep it static.”

I think it’s worth repeating.

“So my big lesson was the importance of a simple message, and saying it the same way over and over. If you’re going to change it, change it in a big way, and make sure everyone knows it’s a change. Otherwise keep it static.”

Did you see what I did there?

When we raised the first Foundry Group fund in 2007 we took over 100 first meetings. We told our story several hundred times. As part of it was a slide called “Strategy.” I still repeat the elements of that slide regularly, a decade later, as our core strategy has not changed. Sure – we’ve modified the implementation of parts of the strategy, and learned from what has worked and what hasn’t worked, but the fundamental strategy is unchanged.

When I wrote Startup Communities in 2012, I came up with a concept I call The Boulder Thesis. I have described it in similar language over 1,000 times in various talks and interviews I’ve given since then. If you want the three minute version, just watch the video below.

While I’ve learned a lot about startup communities over the past four years, my fundamental thesis has not changed. When I come out with the book Startup Communities – The Next Generation (or whatever I end up calling it) in 2018, it’ll incorporate all of these new ideas and things I’ve learned, but will be built on a simple message that I expect I’ll say another thousand times.

I regularly see leaders change what they say because they get bored of saying the same thing over and over again. It’s not that they vary a few words, or change examples, but they change the message. As John says so clearly,

“So my big lesson was the importance of a simple message, and saying it the same way over and over. If you’re going to change it, change it in a big way, and make sure everyone knows it’s a change. Otherwise keep it static.”

Enough said, for now.

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Aug 30 2016

Post Acquisition – It’s Business as Usual Except Better

Recently I wrote about how I think about private company acquisition strategies using FullContact as the example of one where it is working well.

Last week I was at a board meeting for a different company which did an acquisition a month ago. I heard a fantastic line from the founder of the company that had been acquired.

It’s business as usual except better.

Now, it’s only a month in. But this is what an investor loves to hear after a month.

Usually, the first three months post acquisition are up and down. The acquirer and the acquiree are trying to figure out how to interact. The founders of the acquiree are usually tired from the deal process and adjusting to their new reality. The acquirer is trying to be helpful, which is often precisely not helpful, especially as the acquirer integrates the acquiree’s people into its structure and processes.

I know a lot of companies that have a very well defined post-acquisition process. However, many of them don’t take into consideration the dynamics and personalities of the acquiree. Instead, they assume that everyone will happily be assimilated.

Other companies have a very hands off approach for a period of time, sometimes up to a year. But, after that period of time, the mechanical integration often begins. In situations where there has been little to no interaction, followed by too much interaction, pain often follows.

There’s something in between. This is especially important when younger private companies (50 to 500 employees) acquire another smaller (1 – 25 employees) private company. There is no one way. But your goal should be simple: “It’s business as usual except better.”

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