I mentioned recently that we have a place in Homer, Alaska. A common refrain that we hear from our friends is “where is Homer?”
Well, believe it or not, the New York Times wrote an article on Homer in today’s NY Times (Friday, 7/23) titled 36 Hours In Homer, Alaska. It’s a cute story that hits some of the highlights of this place that we find amazing, fun, therapeutic, and wacky.
In case you were concerned that there’s no actual “culture” up here, we saw Shakespeare’s The Winter’s Tale tonight. It was performed at the Pier One Theater by the Fairbanks Shakespeare Theater. Like all Shakespeare, it took me about twenty minutes to get the rhythm (and a clue about what was going on) but once I did, it was hilarious and extremely well done. The theater was packed (which means about 50 people). The play was set in late 19th century Alaska (surprise). The cast was outstanding.
Now, if we only had a symphony up here…
Yesterday, IAC/InterActiveCorp announced that it acquired ServiceMagic.
ServiceMagic connects homeowners with prescreened and customer-rated residential contractors, real estate professionals and lenders. They are the market leader in this category of local services with over 50,000 active service professionals using their services, having facilitated more than 2.4 million customer request for home services, and generating an estimated $8.4 billion in consumer spending.
We invested in ServiceMagic in the fall of 1999. The co-founders – Michael Beaudoin and Rodney Rice – did an extraordinary job of creating a real company that survived the dotcom implosion, came out the other end with a strong business, did $20m of revenue in 2003, and was profitable and cash flow positive. IAC/InterActiveCorp has assembled a powerhouse e-commerce business through their acquisitions of companies such as Expedia, Hotels.com, Hotwire, Ticketmaster, Match.com, Citysearch, Evite, and LendingTree. ServiceMagic is another great addition to their Local & Media Services segment.
We’re all extremely excited about the transaction. Congrats Mike and Rodney!
I’m an email junkie. As a user, I not-so-fondly remember Compuserve, Novell MHS, and Pine. As an investor, I’ve been involved in Email Publishing (first email service bureau), MessageMedia, Infobeat/Exactis, Critical Path, Postini, and Return Path. Recently there’s been a lot of noise about how email is on the decline. I don’t understand this as I use it more than ever and see its adoption continuing unabated.
Matt Blumberg has a great, thoughtful post on email that’s worth reading if you have anything to do with the email business. Matt’s the CEO of Return Path and he acknowledges that his post is self-serving, but it’s content rich and right on the money.
I live in Boulder, Colorado. However, my wife Amy and I spend as much time as we can in Alaska. She was born in Anchorage, lived in Anchor Point (near Homer) until she was eight, and then lived in Fairbanks until she graduated from high school and moved to Boston to go to college. We’ve been coming up to Alaska together for the last decade and it has become a huge passion of mine. While Colorado is amazing, Alaska is Amazing^10.
We’re spending a good chunk of the summer at our place in Homer, Alaska. I’ve been bumping into some Alaska-centric posts in the blogosphere and smiled when I ran a link that sent me to a story titled Great White North by Ron Sanders. If you like travel or adventure stories, ride a motorcycle, know anything about the Alcan highway, or just want to read a fun story by a software nerd about his motorcycle trip to Alaska, check it out.
I went to the gym today (we have one in Homer – it’s small, but it works) to do my semiweekly (or is it biweekly – twice a week) weight workout that my running coach makes (ok – begs) me to do. I hate weights (my standard reaction to anyone that suggests we go lift weights is that jews don’t do weights), but I capitulate to my coach.
The gym was pretty full (by Homer standards – about ten people). While I was resting between sets, I stretched and looked at the other folks working out (something I never do in a large club – I end up in with my eyes in that “glazed over not looking at anyone or anything mode.”) I was stunned by what I saw. There was a guy on a stairmaster that was literally hunched over at a 90 degree angle to his legs reading a magazine while he lifted his legs straight up. Another guys was riding a bike, but had his chest lying on the bike readout / reading stand thing – again – almost bent over at 90 degrees. Both of these guys looked brutalized after about 10 minutes of jamming their legs up and down at a weird angle to the rest of their contorted body.
In contrast, there was a woman about my age that was doing a workout that was similar to mine. Her form was perfect and it showed – her muscles were well defined, she was calm during her workout, and was moving about twice the weight I was with what appeared to be moderate effort. She noticed the hunchbacks also at some point and nodded to me – pointing at them – as we passed during a break. She was extremely aware of her form – not because anyone was watching her (I don’t give myself that much credit), but because she knew the benefit of perfect form to what she was trying to accomplish.
As I settled into another set, I consciously thought about how I was sitting, what I was doing, and how the various parts of my body were moving to accomplish the task at hand. It’s a good metaphor for so much of life – if you pay attention to your form, you get better results.
I wrote about the merger of EYT and ePartners a few weeks ago.
Today, ePartners announced that Microsoft had named it Global Partner of the Year at Microsoft’s annual Worldwide Partner Conference. While not as exciting as the $32 billion Microsoft dividend announced yesterday, it’s great news for ePartners as the Global Partner award is Microsoft’s highest Microsoft Business Solutions (MBS) award.
Congrats to the ePartners team!
That got your attention, huh? There it is – on page 233 – as our intrepid authors speculate on the title of their upcoming Inc. Magazine interview (which was – thankfully titled – An American Start-Up – subtitled “We’re motivated, passionate, excited, terrified, and, at many times, have absolutely no idea what we’re doing.”)
When I was starting my first company, I read all kinds of books from entrepreneurs and founders of companies that “seemed successful.” Many of these were autobiographical, self-promoting drivel. I eventually gave up and rarely read these today.
Matt Blumberg’s review turned me on to this one. The MouseDriver Chronicles is a great story, well written, fast paced, and has a very “blog-like we’ll share everything” feel. The authors – who co-founded a business to create a mouse that looks like a golf driver immediately upon graduating from Wharton Business School – tell all. They spare no one, least of all themselves.
Since the business was started in 1999, they spend a lot of time reflecting on how their buddies are doing in the dotcom explosion while they toil away in obscurity at a markedly low tech business. A chapter aptly titled Schadenfreude near the end of the book allows our fearless entrepreneurs a small measure of satisfaction to have created a successful, albeit modest, business in the midst of what became the dotcom implosion.
This is a must read for any entrepreneur – first time or otherwise. Their stories are great and their lessons are clear. For example, the chapter titled Darkness, Darkness, Darkness, Darkness is about – well – when everything completely goes to shit early in the life of the business. It’s an experience that any entrepreneur that has survived the creation of a company will recall clearly (possibly with glee that it’s in the rearview mirror, it’s happened a bunch of times since, and Mr. Entrepreneur has survived). Out of this, our fearless leaders realize that “Making and Selling – that’s all any business is, really, from Boeing to the corner lemonade stand. The rest is dreaming, description, and distraction.”
Great stuff. I wish there were more books in the world like this one.
Amy agreed to move to Stepford with me tonight.
We saw the priceless remake of the classic The Stepford Wives in our little town’s theater (the other movie was Spiderman 2).
“This place does something to people – all of the women are always smiling,” said Joanna (Nicole Kidman). “That’s a problem because?” queries her husband Walter (Matthew Broderick). “That’s not normal Walter!” exclaimes Joanna.
I finally lost it when Claire (Glenn Close) says “I wondered where we could put a town of robots and no one would notice and I thought – Connecticut!”
Heh heh.
I wrote the following article for The Kauffman Foundation’s Entreworld web site some time in the late 1990’s. Someone reminded me of it the other day and I looked it up. It’s especially relevant today after all the major public company scandals of the past few years, the passage of Sarbanes-Oxley, and the renewed attempts at activism by boards of directors. A few of the comments – such as the one on D&O insurance – are dated (D&O insurance for private companies is economical, although not often that useful). I’ve sat on plenty of boards and when I reflect on them am sad to say that they are spread equally between the first two categories I list below (I’ve been on lame duck boards, but have resigned quickly after realizing that’s what they were). I wish I could say they have all been (and are all) working boards, but I can’t. I guess it’s up to me to continue to be vigilant about changing that in the future.
Every large public company has a board of directors. The news is filled with stories about prominent people joining boards, about boards kicking out presidents and founders, and about personal liability of members of the boards. In a large public company, the board plays an incredibly important, and often controversial role in the governance and development of a company.
Given this, should a startup or small entrepreneurial company have a board of directors? I say, emphatically, YES!
By definition, every corporation has a board of directors. The minimum legal size of the board varies by state. In some states, the minimum size is three people (typically a president, secretary, and treasurer–also referred to as the officers of the company). In other states, the minimum size is linked to the number of shareholders–if there is only one equity holder in the corporation, there only needs to be one board member. Of course, there are several different types of companies, such as partnerships or sole proprietorships that do not require a formal board.
For many companies, the board of directors ends up being the founders of the company. However, I believe there is huge value in expanding the board to include “outside” directors–those that do not work for the company, but offer their time and advice to help shape and guide the company. These outside directors serve a similar function to those of a public company, but often with a much different approach.
It is important not to get a board of directors confused with a board of advisors or a strategic advisory board. These other boards are incredibly valuable tools for a company, but they serve a dramatically different purpose which I will discuss in a separate article.
I have been a member of many boards of directors and I have come to classify each board as one of three different types:
- Working Boards: These are boards that role up their sleeves and help the founders and management team of the company get the job done. They meet frequently, have animated, engaged discussions, and offer significant ongoing support and help to the key owners and managers of the company.
- Reporting Boards: These are boards that meet four to six times a year for a status report on the company. If everything is going well, they tend not to have much to say. If there are problems or issues, they are often critical of the CEO and the management team. If things continue to go poorly, they often take action of some sort.
- Lame Duck Boards: These are boards that have no influence on the company. In many cases, they are simply rubber stamp exercises for the CEO or founders.
The only type of board that I believe is useful for a small, entrepreneurial company is a working board. The pressures in an entrepreneurial company are great enough that the founders and the management team need everyone involved doing everything they can to make the company successful. This does not mean that everyone agrees on everything, or the members of the board are not critical of the management team. But, it does mean that there is an active, open commitment to work with the founders and management team to make the company succeed wildly.
Board members come in many shapes and sizes. In my experience, a good size of a board is five to seven people, including the insiders. If there are only one or two insiders on the board, a total board size of five is plenty. If there are more than two insiders on the board, seven board members is more appropriate. I recommend that several of the outside board members be highly experienced entrepreneurs in the market that the company is going after. The rest of the board members should be experienced entrepreneurs in other business segments, but with a particular interest in something about the company.
The chairman of the board is often one of the insiders, such as the president or CEO. However, in many cases, you may want the chairman to be one of the outsiders, especially in a situation where one of the outsiders helped start the company by putting up some of the initial seed capital. The role of the chairman varies dramatically, but it often raises the level of commitment of the individual board member that is the chairman and the overall board in general.
Significant outside investors, especially venture capitalists, will want board seats. I recommend you limit the number of outside investors on your board, unless they fit the criteria listed above. A venture investor only needs one board seat – if you have a syndicate of venture investors (several different venture capitalists that invested together in the round), consider offering one board seat and extending observer rights (e.g. the right to attend any board meeting) to the other investors. These rights should be negotiated as part of the investment.
In addition to functioning as a regular sounding board for the management team, board members can contribute substantially to the business, both as a group and individually. Board members can be incredibly useful during financings, merger and acquisition activity, general corporate strategy, and executive recruiting. Do not overlook the experiences and skills of each of the individual board members–they can often play high value, short term consulting roles as needed.
Board members should be compensated for their efforts. At the minimum, their travel expenses should be paid. Most entrepreneurial companies should set up an option package for the board members – depending on the level of effort requested of the board, this could be as little as 0.25 percent of the company or as much as 2 percent of the company vesting over four years. In addition, many board members are interested and willing to invest in the company. I always believe that it is in the best interest of a company to have the board members have a meaningful equity stake in the company.
In some cases, the directors that you recruit will have a substantial personal net worth. In these cases, they might ask if the company has “Director and Officers Insurance” (D&O Insurance). This is insurance that protects the director from having personal liability in case the company gets sued. Small companies cannot afford D&O insurance (in fact, most private companies cannot afford this), while most public companies must have this as a requirement of the underwriters in an initial public offering. So, when confronted with the question, the best solution is to make sure that the articles of incorporation of the company provide the directors with the highest limitation on liability afforded by the state the company is incorporated in. Don’t waste your time investigating D&O pricing – it won’t be economical.
Finally, take good care of your board members. These are busy folks that are making a substantial time and energy commitment to you. They share in the rewards if you are successful, but their time and energy is at risk since their primary form of compensation is equity in your company. Feed them. Make them comfortable. Have fun together! You’ll be pleasantly surprised how much faster the relationships evolve and how much more valuable they become when everyone is working hard, but having a good time together. Don’t ever let your board get bored.
This article can be found on the Kauffman Foundation’s Entreworld web site at the following link.