Personal Heroes

October 21, 2013

I have personal heroes – folks who have lived their lives in ways that give me inspiration and a vocabulary to name my own ambitions. People who are unafraid to say what they believe, regardless of what it will cost them.

David Walsh is one of my personal heroes

Few people outside of professional cycling know who this man is, but he’s the journalist who first suspected Lance Armstrong of cheating, and spent 13 years doing the difficult work of uncovering the evidence and speaking the truth. And he became the target of all Armstrong could throw at him.

This Sunday Times article says it all:

When Lance Armstrong won his first Tour de France in 1999, David Walsh wrote in The Sunday Times that he watched the race in sadness. Armstrong’s astonishing exploits, just three years after his successful battle with cancer, did not make sense to him. Rather than joining the unquestioning journalists who lauded the American’s achievements, Walsh called for an inquiry into the Tour de France in July 1999,….”

CTWThink about the context. In 1999 – the first year of Armstrong’s comeback – Walsh calls this out. And for the next 13 years  pretty much everyone else tells him he’s wrong. It costs him his job, professional and personal relationships. How lonely it must have been for him.

I’m not going to re-hash the whole Armstrong crime, but if you want to dig in, look here, and here, and here for a start. David’s books are “Seven Deadly Sins” and “From Lance to Landis”.

I am a huge cycling fan, and my family and I spent five  vacations in the French Alps to watch the race in person. In 2006 through a journalist friend, we struck up a dialogue with David to encourage him to write what became “From Lance to Landis” – his first english language book that laid out the evidence Armstrong was cheating.

David flew to France and spent the weekend with us. I was awestruck at the simplicity of his motivation: to expose a lie. It wasn’t personal, it was about values. This was a man of principle outraged at the crime he clearly saw but was incredibly inconvenient and unpopular to expose.

Over dinner long into the night, and then again at breakfast the next morning, the talk centered on the crime that was happening in plain sight. Incredibly we were sitting with him at that dinner when his phone rang – another journalist  calling him with the news that Floyd Landis had tested positive at the just completed Tour de France. Talk about being at ground-zero at a pivotal moment.

Looking back I can’t believe that weekend actually happened. What brought us together? I would like to think a sense of shared values.

This is a man whose humility, values, and sense of purpose we can all learn from. A true hero. I’ve got a few other people who serve this kind of inspiration, I’ll write about them later. For now, thank you, David.

My User Manual

October 12, 2013

A little over a year ago I started a new job, and a big component of my role was to help the company bring a lot of scale to their marketing, and bring a higher tempo and user focus to the company’s product development. This meant taking three groups of already high performing teams, and leading them into territories unfamiliar to them, while also helping them develop skills and capabilities new to many.

This is the kind of job that comes around in your career rarely. Tremendous, tremendous fun, and the best part is it’s only just beginning. We’re growing like crazy, and are about to enter that phase of the market where we have the right offering at the right time, and are about to see some pretty breathtaking expansion.

transparency

And I found myself explaining how I work, how I manage, and many of my core values as a manager, but also as a person. A lot.

So much of creating the opportunity for the rapid experimentation, fast failure, “iterate to excellence” team performance is based on how you work as a team, not what you work on as a team.

I mentioned this to my wife in a text message while on a train headed to work, and she pointed me to an interview with a CEO about his “user manual” - a one page document that lays out how anyone in the company can easily understand how to work with him. I LOVED it. A combination of approaches, philosophy, and personal values.

By the time I got off the train I had a complete draft of my User Manual. Check it out, I’m on v2.1

By the time I’d plugged in at the office I published it to  everyone on my teams via Chatter, as well as my counterparts on the exec team and a bunch of others I work with frequently.

Folks on my team appreciated the transparency, and it’s made it so much easier to engage with other teams and get to a place of trust and performance that much more quickly.

But the best part was for me. Any time you have to be intentional about something, and write it down, you learn something about yourself.

The Unfamiliar State of Funding a Startup

March 8, 2012

I work with a lot of startup companies, and am currently involved with three that share the same characteristics: pre-product, pre-revenue, and at the very beginning of fundraising. And I’m having the same conversation with all three. It goes like this:

  1. The cost of getting a company to scale and even to profitability has dropped dramatically in the past ten years.
  2. The nature of venture capital has shifted from an early stage focus to late stage or even growth equity investing.
  3. Angels and experienced high net worth folks have stepped in to fill the role VCs served for early stage investing.
  4. A viable fundraising strategy can default to a path that doesn’t assume VCs participate at all, or perhaps only towards the end.

Let me expand on each of these points.

COST OF GETTING TO SCALE – THE RISE OF THE MACHINES

There are a lot of factors at work here, to the benefit of entrepreneurs. The rise in cloud computing means that fixed infrastructure expense has largely been eliminated from the business plan, and this will only get better (Amazon just announced it’s 19th price decrease in six years). Virtual teams + Google Docs drive OPEX down even further unburdening you from lease costs.

The shift to “inbound marketing” – social media, blogs, SEO, viral – can drive large volumes of traffic at significantly lower costs (60% less or more) than traditional “outbound methods – and at higher conversion and retention rates. It takes a lot less of your marketing budget to reach and acquire users. With the shift to freemium and subscription business models you can also let your most active users decide for themselves to pay for your services through in-app messaging and offers – significantly reducing the cost of sales.

I call this the “Rise of the Machines” because metrics and machine-driven resources/methods do much of the heavy lifting at a fraction of the cost of human-intensive alternatives. Josh Kopleman surveyed his portfolio and found “…that companies today are 3 times more likely to get to $250K in revenue during an eighteen month period than they were six years ago. “

VENTURE CAPITAL IS DEAD – LONG LIVE VENTURE CAPITAL

The money that VCs invest comes from “institutional investors” – pension funds, endowments, insurance companies – and these institutions allocate their investments across a wide range of “asset classes” to manage and diversify risk. They tend to make these allocations based on ten year return performance averages, and beginning in 2009 (as my partners and I found out with unfortunate timing) the ten year return for the VC asset class went negative.

That’s for tough the VC industry overall, but if you look at the top 20-25 firms, the ten year return is quite good. So what institutions did was stop putting money in general into the VC asset class, and only put money into the big, established firms. This caused fund sizes to swell (Accel’s most recent fund was $1.35B+ comprised of $475M “early stage” + $875M “growth equity” funds), which incents those firms to put larger and larger investments to work in each deal (to justify their partners’ time).

So at a macro level, investment into VC funds dried up for all but the top firms (reducing the total number of VC funds) and poured into the top firms, shifting their focus to larger investments in later stage firms.

ANGELS BECOME ANGELS ALMOST LITERALLY

At the same time early stage VCs moved out of the market, a wave of experienced tech executives who had made fortunes building internet companies became very active investors. They brought more than deep pockets, they brought valuable insight and experience and even better – intensive, engaged roles with the companies they funded.

And along the way, incubators emerged as mini-factories where angels could become involved with lots of companies and let the law of large numbers help them there. Overall, angels are investing 40% more than they were even a year ago – now over $700K per round, and there are concerns there’s a bubble happening with incubators. But the headlines are, angels have stepped into early stage investing at a scale and role traditionally reserved for VCs.

STARTUP FUNDRAISING HAS NEVER BEEN BETTER, AND WORSE

What this means for startups is you can get your business to scale with ten times less money that you needed 10-15 years ago. $3M – $5M. If you plan well and are well connected you can do this with individual investors who add a ton of value and will roll up their sleeves to help out. The real benefit is you can also find individuals who share the same expectations you have for the outcome of the business. A 5X return on $3M may be the right outcome for the business and for investors who define success as a financial return coupled with a durable business that solves a problem they care about.

It also means you can liberate yourself from having to map your business and outcome to the trajectory that many of the larger VC firms need their investments to align with – they need billion dollar exits to generate the billion dollar returns they committed to their institutional investors.

Don’t get me wrong here. VCs are an important and valuable catalyst to the technology sector and the economy – and many are out there doing what they’ve always done to identify the next great disruptive business. And for your business, a VC can be the exact right fit either at the beginning or once you’ve gotten to scale.

It’s just that now VCs are playing a different role than they have in the past, and for startups this means it’s a brand new, unfamiliar, day out there.

The Brand Value of “No”

March 5, 2012

One of the most valuable lessons I learned as a venture capitalist, and one that my partners and I took super seriously, was how our personal brands and firm’s brand would be built on how we said “no.”

Being in the VC business is being in the business of saying “no.”  We looked at 300-400 deals a year and funded two or three. Every week I had to say “no” to lots and lots of people. Heck, Marc Andreessen said “no” 1,500 times last year at his firm.

It’s hard to tell someone you’re not going to provide the funding to get their company started when the person you’re speaking with likely has put months or years of their lives into the business they’re pitching to you. The easy way out is to avoid it. And a lot of the time that’s what happens.

A surprising minority of VCs just won’t ever get back to the entrepreneur. Others will send a short, frequently cryptic “your business does not fit with our criteria” response. Neither of these is helpful or particularly honest because VCs pass on deals for very specific reasons that they discuss with their partners in Monday meetings.

So my partners and I decided when we said “no” we would do so in a way that passed along the reasons why – that way the entrepreneur would be able to make some use of our collective thinking. If I felt the business model was flawed, the team was weak, or product strategy too broad – then sharing that information might help the entrepreneur make adjustments. But at least I would be straight-up.

Many of these businesses were fundable – just not by us (that’s where the “did not fit our criteria” was true), so I strove to pass along information that might help the entrepreneur have a better shot at the next firm they pitched.

Not only is it hard to be this direct with someone, it also takes a lot more time than going silent or sending a curt generic note. The nature of leading a startup means being tenacious and persistent. So frequently I’d spend an hour or more while the CEO would try and talk me out of my decision, rebut my argument, and bring more data to the discussion.

This is super relevant regardless of what business you’re in. You will say “no” far more often than you will say “yes”, and becoming comfortable and constructively effective at saying “no” is a way for you to build value in your personal brand as well as your company’s. Whether it’s turning down a proposal from a contractor or letting the many people applying for an open position know they’re not going to make the cut, you can distinguish yourself mightily in how you convey your decision.

You have the opportunity to share your personal values – your brand – to the many people you say “no” to and who knows what opportunity that might create down the road. And in an age where personal brands are becoming increasingly essential to your company and your career, learning how to effectively and constructively say “no” is critical.

So, the next time you’ve got five or ten or fifteen candidates for an open position, invest in your personal brand by telling the folks that didn’t get the job why you chose someone else. You’ll be doing each of them a favor, and building a brand for yourself that you’ll be proud to associated with.

Back online

February 29, 2012

Well, that was a long hiatus. But for a lot of good reasons I needed the time away from this and feel ready and enthusiastic about resuming the exploration of technology and startups and how failure critically enables their success.

Next post to follow, and will be on the theme of how user acquisition costs and leverage have dramatically reduced the financing required to get a company to break-even (and to a seven figure user base), and how that’s reshaping not just early stage businesses, but mature enterprises.

Stay tuned, and thanks for your patience these past months.

Pete

SIgning off

July 31, 2010

I hate leaving something undone, unresolved, and I am sorry to tell all of you that I have done exactly that with this blog.

So, this is the last post of OpenAmbition.  I have run out of the space inside me and within my life to keep it alive and vibrant. Which is incredibly sad.  Sad given how much enthusiasm and life so many of you sent my way to start it, and more importantly, to keep it going.

I hope and look forward to returning to this.  It was fun, exciting, inspiring, exploring why we take risks, why the prospect of failing, and the act of failing, can help motivate us and inform our successes.

Thank you, all of you, for the help and encouragement to breath some life into this idea.  This blog brought me together with so many friends, introduced me to new ones, and brought the best out of all of us.

Thanks again,

Pete

You miss 100% of the shots you don’t take

December 15, 2009

Something I have just loved about being in the venture capital business is the people I’ve met, running businesses I did not fund.  And of those there are a few I found so relevant to my own interests, and with founders who had such passion and integrity, that I continued to meet with them well after saying “no.”  Trying to be a productive sounding board, making introductions, passing along knowledge or experience where it seemed helpful.

It’s always been such a pleasure to get the updates from these CEOs, they arrive when you least expect them and it’s exciting to see how things are developing, where the connection is no longer the possibility of financing, but a genuine interest in the business and a relationship with the CEO/team.

Dustin Hubbard of Paperspine is one of these.  His company offered a subscription service for books.  Physical books.  He  had the idea for his company after finishing a book, and having no room for it in his already jammed bedside table.  So, he planned and planned, left his job at Microsoft, started and ran Paperspine out of his garage.

Paperspine worked really well, and solved problems that people cared about.  It probably saved my family hundreds of dollars, just with my 16 year-old daughter, a voracious reader, and who routinely dropped tens of dollars at bookstores, only to read the books once.  She loved Paperspine.  She was on a five book out at once subscription at one point, and it enabled more massive reading without bankrupting her.

And while Dustin had gotten Paperspine off the ground with funding from friends and family, he couldn’t raise his next round of financing – in a market where raising money is almost impossible anyway.  But he applied himself to solving this problem with every ethical means imaginable.  Cut costs to get to break even, went back to work at Microsoft, tried to expand into ebook rentals.

Dustin and I spoke every 45-60 days, where he would walk me through his latest set of challenges, his ideas to address them, and we’d then spend the next hour testing his assumptions, plans, and brainstorm solutions.  But he always arrived prepared and ready to dive into a meaningful discussion, and sometimes I could help, other times I think he just valued the opportunity to have someone outside the company to run his thinking by.

But for many reasons, some within in his control, many outside it, he was unable to get his next round of financing.  And he seemed to be reaching the limit of how much this business was encroaching on his life, quality of life, and family.

So, last night I was truly saddened but not necessarily surprised to receive an email from Dustin, saying that he was closing the doors.  I can only imagine how hard this was for him, how heartbreaking.

And he closed off his dreams for Paperspine with the kind of grace and thoughtfulness that we should all take note of, and admire.  You should read his final blog entry, a real fitting testimonial to a worthy business, and an incredibly decent founder.  And you can see pictures of his “warehouse” in his garage, and learn more about how he took his idea and brought it to life.

His wife framed this so well, reminding him that “you miss 100% of the shots you don’t take.”

That phrase captures the essence of what it means to take an idea that crossed your mind, and have the courage to start a company to bring that idea to life.  And you bring it to life focused on why it will and should succeed, while also keeping, in a separate place, the knowledge that there are many reasons why it could fail.

Dustin, you should be very proud of what you accomplished and learned these past two years, but you should also be very proud of how you ran your company, and how you finished.  Well done, not painless, but well done, indeed.

Dealing with equality, invisibility

November 10, 2009

In the past two weeks I’ve had a series of conversations with friends and colleagues about women in the technology workforce, provoked by of all things, water pollution.  The commonality being we’ve moved past the point where the problem is what is visible, and where we’re now facing the challenge of what you can’t see.

Here’s the water pollution angle:  A week or so ago I heard an interview with Charles Duhigg of the NY Times about how the cleanliness of the nation’s water supply is perhaps at greater risk than it’s ever been.  More so than back in the ‘70s, where the pollution was severe: rivers that caught fire, bore multi-colored hues of industrial waste, had detritus floating in them.

Today’s water pollution is microscopic, requiring sophisticated filtering that’s too expensive for water utilities to install.  Charles suggested the most practicable solution is for people to filter their own water, and take personal responsibility to ensure it’s clean and safe. 

So here’s where women in the technology workforce comes in.  Much visible change has happened.  Women are in the workforce, and are increasingly taking leadership positions.  Just not enough.  And what is the right number?  I have no idea, I’d like to think it’s the number that exists when everyone selected for a job is done so on the basis of merit.  The whole point is that it’s the product of an ongoing balancing act. 

I have faith that women’s pay will increase as more and more compensation and performance review processes are made transparent.  But unless they are listened to as equals, then all the process in the world still won’t address this fundamental form of discrimination, affecting the information that feeds performance reviews.  Will women ever get to parity unless their ideas are considered on an equal basis as men’s?

In the technology sector, ideas are what fuels business, so unless women’s ideas are given the same consideration as men’s, they will suffer when it comes time for reviews, and that will affect their compensation.  It won’t address why the women make $0.77 compared to every $1 their male counterparts make, but it won’t hurt.

So, who’s responsible to fix this?   We all are, and we fix it in the moment, calling it out and challenging it in the moment, when it happens. 

I was involved as a member of the board of a public-private entity where we were trying to determine the site of a new facility.  We’d spent weeks and weeks trying to figure out how to secure a really great site, and were running into all sorts of problems.  It was getting frustrating, and I made a suggestion about putting it in a less attractive, but more pragmatic location, which we quickly agreed to do. 

A female staff member pulled me aside after the meeting to thank me, saying she’d been making the same suggestion for weeks, but her superiors hadn’t listened to her.  I can tell you my suggestion was not all that insightful or magnificently made, but I was the male and it was listened to.

Rather than call this out, I spoke to her separately.  I was concerned about creating conflict between her and her superior.  So I let her know I realized how frustrated she must have been to not be listened to, and that at least I saw this.  How will the other male members of this board know how to listen differently if they aren’t shown where they haven’t done so?  I didn’t correct this in the moment, and in doing so I failed the woman who thanked me. 

And this is where the water analogy comes back.  The way to deal with this is to take personal responsibility, and to make what is invisible, visible. 

It is as much women’s responsibility to be louder and less convenient as it is men’s responsibilities to listen more actively.  In either case, everyone has an obligation to call out inequality when they see it.  And it won’t be convenient. 

That’s where I screwed up, and won’t do that again.

A sizable share of the readers of my blog are women.  What’s your experience?

Startup advice brilliance

October 21, 2009

A friend pointed me to a superb summary of advice for startups, specifically calling out the ways that advice can be flawed, along with some perceptive insights into how to identify advice that’s actionable and useful.  The post is by Eric Reis, and is appropriately titled The 10 Ways Startup Advice is Flawed

Eric’s pov is appropriately snarky, and at a macro level he calls out various ways that being lucky and being smart are frequently confused with each other.  Snarkiness aside, the really valuable point he makes is how important it is to be a critical thinker, in general.  The value of making your own assessment of the information you’re consuming, and not just accepting it.

I especially liked his point #6: Maybe the thing they did used to work, but it doesn’t anymore

I think about that a lot in my own context.  I was at RealNetworks back when it truly was pioneering this new phenomena of sending audio and video over the internet, and we owned that market.  In public we said we had 85%+ share of the market, but in reality it was closer to 95% for a good long time.

We called the shots, named the prices, dictated terms.  We muscled into and out of markets we cared about, aligned ourselves with titans of the technology landscape.

And then Microsoft showed up and we fought them tooth and nail.  It was a hard and ugly fight, which they eventually won (once they started paying attention).

Well, they won, sort of.  It was epic, and in a start-up kind of way, it was epic fun.  I remember picking a big fight with the Windows Media team on an internet media list-serve, where I’d just published some user research showing how people preferred our new video to Windows Media’s.

And Microsoft’s head of a/v technology posted to the list, accusing us of fluffing up the research, and he included a three page outline of the ways you could falsify/skew consumer surveys.  And it was so much fun to respond to the list , asking “how was it that Microsoft knew of so many ways to distort research?”

But I digress.

We each became so obsessed with each other we quit paying attention to what Macromedia was doing with Flash and what Apple was doing with the tight coupling of iTunes and the iPod.  So, while we were both wrestling in the mud pit, Apple and Macromedia left the building and started more interesting and lucrative businesses elsewhere.  And until that point the thing we did at RealNetworks really did used to work.

Eric’s “ten ways” are simple and insightful.  The hard part is putting them into action, in the moment.  My experience at RealNetworks is valuable to the startups I work with and talk to if and only if both of us are cognizant of its context.  And it takes discipline and a good dose of humility to walk the talk Eric is alluding to.

I know there’s a ton of stuff I did that was a product of luck and timing, and a lot that was a result of deliberate hard work and applied intelligence.  The hard part is being honest enough with myself to examine where those boundary lines are, to strip out the specific circumstantial knowledge from the generalized, truly durable knowledge.

So, let’s all get a good laugh out of Eric’s list, but also remember how hard it is to actually do what he’s suggesting.

Performance and an opportunity to explore it

October 2, 2009

The underpinning principle of this blog is “meaningful failure”, and what you can learn when you examine this critical juncture of where you fail and embrace what you can learn through that failure.

I’ve been seeking out others who share this interest, and last year I discovered Ross Bentley who runs a consulting business, Bentley Performance Systems, that focuses on improving performance for executives and interestingly, professional race car drivers.  That latter constituency intrigued me.  Failure on a race track has specific tangible implications that failure in business does not:  bent metal, physical harm, or worse.

Ross spends his time working with his clients on very personal elements of improving performance, along with more straightforward tools and techniques of planning and analysis.  His focus on who you are as a person I find interesting, the examination about what emotionally or psychologically may be holding someone back from achieving their potential is an area like failure where people are less comfortable speaking plainly and openly.

In the case of the racers and the executives the conversation goes in the same direction:  how can you best prepare yourself to be constantly improving, learning from success and failure?  He engages them in relevant and specific conversations focused on getting them to do to what they do differently and better.

And after this discussion, examination, and hard work the racers go to the track and the CEOs go to their offices.  In both cases they’re in environments where the information is flowing by, fast, and they need to make decisions and situation assessments rapidly.  And each ends up with a quantifiable data set telling them how well they performed: lap times & finish order, income statements & balance sheets.

Ross and I got together yesterday so he could share a research project he’s starting called Performance in the Workplace. He wants to to better understand how executives assess their own performance, and what affects their performance over time.

The research is nice and simple:  he’s asking them to fill out a short survey, once a week, and tell him how well they feel they’ve performed, and why.  You can participate in the project by signing up here.

What I like about his approach is that he’s not defining “performance” for the participants.  He’s letting them define it for themselves.  When he first told me about this my reaction was “that’s pretty subjective, why not quantify performance with metrics”?”.  But then I realized, that really misses the point.  When you’re trying to help people do better every day, metrics are the product of your performance, not the measure of it.

We run businesses based on a set of milestones, KPIs (key performance indicators) – “dashboards” – and these are important measures of the recent past.  And they’re critical – I’ve written about why a well documented operating plan and the corresponding assumptions are essential to managing your business.

But executives spend their days making decisions, asking questions, analyzing and assessing – and of course this results in metric-based results.  But not in the moment.  How do you assess the effectiveness of your performance while you’re making those decisions, asking those questions, digging into those numbers?

I think Ross is onto an interesting topic here.  What causes you to feel you’re performing well one day, and not so well the next?  Will the act of self-assessing performance help you, in and of itself, to become more effective and cause you to be closer to the top of your game?

I’m going to participate, because in my business, at best I get monthly or quarterly metrics from my companies in terms of valuations I can apply to rates of return – on paper – and it takes years to get to the point where you can convert the paper value to cash or stock you can sell for cash.  Daily performance is not at all quantifiable with metrics, but matters oh so much.

I’m sure I can learn something from this, and am eager to see how what he finds.


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