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Man On Wire – Best Startup Movie Ever?

April 1, 2009

I saw Man On Wire for the first time in February; I’d read a snippet somewhere about this being the story of the man who tight-rope walked between the two World Trade Center towers in 1974.  And at a certain level, that’s exactly what this movie is about.  It’s exquisite.  The tight-rope walker, Philippe Petit is almost a caricature, his vision and ambition equal parts boundless and focused.  I’ve seen the movie three times now, and each time it’s more revealing.

What viscerally strikes me is how it tells the story of starting up a company.  This is all about having an idea so audacious it’s almost not believable to someone who hasn’t drunk your kool-aid, yet.  It’s about staying focused on the one reason why you will succeed and not the 10,000 reasons why you will fail.

Man On Wire reveals four super-compelling principles that underscore what it’s like to be in a startup, and if you haven’t been in one, it’s a wonderful way to get a sense for what it feels like to be there:

  • A meticulously constructed plan, discarded.  Philippe Petit spent six years planning this act, including building scale models of the towers’s roofs, constructing a tight-rope the same length as the towers in a field, and on and on.  And guess what?  The day of the “coup” huge elements of the plan had to be thrown out, the real world just didn’t cooperate.  This is “why the numbers in your operation plan are wrong” writ larger than life.
  • Repeated visualizations of the outcome.  This is one of the critical mechanisms to ensuring you’re focused on why you will succeed.  Philippe from the moment he learned of the Towers construction, visualized walking between them.  For years and years visualized walking that wire, how he would do it and succeed. This is critical when you only get one shot at an opportunity, like he had. 
  • Significant emotional toll.  Getting something done that’s ambitious, with a visionary leader means you will do things that are difficult and way outside your comfort zone.  You will find out who the chicken killers are, who can be relied on and who can’t, and most importantly what you can rely upon yourself for.  It’s messy and painful, and you will be different as a result of this experience.
  • The fear of not succeeding.  Philippe’s obsession was on success.  Startups are all about being laser focused on why you will succeed, and your only fear is success NOT happening.  I just can’t say this enough.  People who are afraid of failure may very well get great things done, but just not at startups.

For me the most piercing and fiercely honest confession of the entire movie is when Philippe describes the moment when he committed himself to walking that wire.  A simple shifting of weight from the foot resting on the tower to the foot resting on the wire.  Silent and internally deliberate. 

Compare/contrast this with the article in this April’s Outside Magazine about why people participate in risky sports, and profiles BASE-jumper Ted Davenport.  Neuroscientist Russell Poldrack asserts that there are three ingredients to risk taking: desire for adventure, relative disregard for harm, and acting on your desires without fully thinking them through.  That last factor strays way, way too far into the landscape of recklessness and separates Philippe from Ted.  There was nothing reckless about Philippe Petit.  Deliberate, honest, ambitious, meticulous.

So see this movie for the reasons I outline above.  Also, let yourself ask the other questions.  Like “how can someone afford to spend six years planning this”?  How “real world” is that?  We’re not getting the full story here, but it sure is enjoyable. 

Before your Netflix delivery arrives watch Philippe break Stephen Colbert out of character on the Colbert Report, and you’ll hear Philippe describe that moment when he shifted his weight onto the wire.  Mesmerizing.

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Posted in Business planning, chicken killer, Failure, fear of not succeeding, Intellectual curiosity, meaningful failure, Self-knowledge, Success, Values | 1 Comment »

Failing in Style – Guest post by Jenny Hall, former CEO of Trendi.com

March 16, 2009

Jenny Hall has graciously agreed to a guest post.   Jenny was the CEO of Trendi.com, a social networking destination focused on young women’s fashion that was shut down in October of 2008, and discusses what she learned as a first-time CEO through the startup and eventual failure of Trendi.

This blog focuses on this juncture of success, failure, and finding the meaning from each.  I think you’ll enjoy what Jenny tells us through her first-hand experiences at Trendi.  Thank you, Jenny, for being OpenAmbition’s first guest writer.

——————-

I really don’t like failure, but I know it’s one of the best sources of learning. I learned a lot the past few years working at a startup, and I learned even more as a result of it failing.

I joined Trendi.com in March of 2007 as the head of marketing and I ended at Trendi in October of 2008 as the last employee and CEO. We had investors, a smart team, a fabulous domain name, a popular blog and so much more going for us- so many reasons to succeed– yet we failed. 

When people ask me “what happened?” I usually say we ran out of money. That’s the cop-out answer- running out of money is a symptom of the underlying issues. I think our underlying issues were communication related (unclear communication with each other, of expectations, and with our customers) and experience related (being young, excited, wanting to do it all and getting nothing done.)

I learned lessons from the mistakes we made as a company and my personal mistakes. Of the many lessons learned, these are the ones that stand out the most to me.

Your target audience should be so excited about your product that they’re pushing you to launch, even if it’s crappy when it launches.

I joined Trendi after the founder received funding for his idea. (I know- that never happens! We were lucky.) I talked to my target market occasionally, but didn’t seek their regular input for 2 reasons- 1) I trusted the investors and founder were right in their beliefs that the idea was a winner and 2) I was afraid of the reaction if I discovered we were wrong and proposed changing the concept.

I should have let my market share what they value, even if it differed from what we wanted to create. Sometimes we get caught up in what we’re building, fall in love with it, and fail to realize other people don’t see it the same way. It’s like parents with ugly babies (hey, there ARE ugly babies) that filter out all negative comments because they’re so in love with what they created. Trendi was, in some ways, my ugly baby.

Launching a product your market is begging to use, even with a few rough edges, will have more success than a fully developed site that doesn’t add any value. Plus, you’ll tie your market emotionally to the product. They feel invested and valued and voila- you have your first product evangelists. Furthermore, their input is the ammunition needed when confronting a team, investors, or a board about why a major change needs to take place.

Keep the focus simple and narrow.

Once you know what your audience values, keep your focus only on the features you need. Trendi started out (on paper) as a simple 8-page design. We quickly escalated the site to include a robust back end, picture management system, full social network, etc.

Extra features added time to our launch, increased the burn rate and made the user experience…fragmented. We assumed the users would like what we built only to find out they didn’t like or use all the features and it was difficult for them to figure out the ‘point’ of the site when they arrived.

We over-built Trendi for one main reason: We didn’t have a plan.

Sure, we had some general milestones, but we didn’t have an actionable, communicated business plan. When there is no plan, startup employees turn into hormonal 13 year olds with severe ADD. Anything catches their attention and can change the intended course of action. What are the competitors doing? Why don’t we have this cool feature? Let’s make it pink! No grey! We need a YouTube video STAT! (Get the idea?)

People often ask where our board was during this process and I’m embarrassed to say we didn’t have a formal board. We had our investors who would give us time when they could and we had some friends we would call on informally…but no board to help us keep focus.

Don’t do it just because all the cool kids are doing it.

There were an onslaught of “social shopping” sites in 2006 and early 2007. We jumped onto that trend and while it’s important to know the trends and competitors, it’s more important to figure out what your substantive differentiation is, how that difference adds value and how to make money because of it.

This is a mistake businesses and people make all the time- doing something because everyone else is doing it. Why do we feel more comfortable when we’re doing what everyone else is doing?

I now know questioning the trends and value proposition needs to be done regularly- at least monthly- to ensure the choices made are in the best interest of the company.

Hire only when it’s absolutely needed.

Everyone should be fully utilized before anyone else is hired and increasing the number of employees doesn’t always speed up the launch. For a company like Trendi, we probably only needed a CEO, two developers, and a designer. Ideally the CEO would have been someone who deeply understood the target market, could raise money, inspire the team, and was a stellar marketer, writer or able to contribute another key skill.

Instead, we were almost a year into the project and 15 employees deep before our Angel (who owned the majority of Trendi at that point) stepped in and made a drastic change that involved laying off most of the employees.

Yowza. Hard lesson learned. The team stayed lean and more productive after that.

If it won’t matter in 3 months, don’t spend too much time on it.

We could spend a whole day talking about how our rating system would look or a week bantering back and forth about a press release. I should have asked myself – will this matter in 3 months? If it won’t matter then, why spend too much time on it now? Time is a precious commodity in a startup and should be spent on what matters the most- quickly building a product your customers love.

——-

Funny how our resumes show our successes and we take full credit, yet we leave off the failures and if they come up, we blame others. I wish I could blame Trendi’s failure on other people and circumstances, but I can’t. No startup has it perfect- we all deal with difficult employees, investors and economic strains. I have to accept that as a company we made mistakes, but I also have to look back and accept my personal contribution to those mistakes.

Accepting the personal mistakes hurt my ego. I screwed up and it made me question my ability to lead others, my knowledge as a marketer and my future ability to start another business. But somewhere in facing my failure and accepting these mistakes, I was able to learn how I can be a better leader, new things I can try as a marketer, and that I do have the strength to try again.

I always hope for success and aim high, but I now face failure with a humility and thankfulness I didn’t have before. Ignoring failure only hurts you later- you can stuff it away and try to pretend it didn’t happen, but it’ll bite you in the butt at some point. I know that if I face failure as a teacher (a harsh one, but still a teacher) I’ll become stronger and smarter.

I like tea, Thai food and good happy hours. If you want to join me in Seattle for any of these, email me at jennymhall@gmail.com.

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Posted in Business planning, chicken killer, Failure, fear of not succeeding, fundraising, meaningful failure, Self-knowledge, Success | 4 Comments »

Guest post coming Monday

March 13, 2009

I wanted to let you know that OpenAmbition will be showcasing its first guest post, from Jenny Hall, former CEO of Trendi.com, which was a social networking destination focused on young women’s fashion that was shut down in October of 2008.  Jenny will be sharing what she learned as a first-time CEO through the success and eventual failure of Trendi.

I met Jenny the first time a little over a year ago, when she was trying to raise a Series A financing for Trendi, and for  reasons I explained to her, my partners and I were not able to fund her company.  Jenny touches on a few of the reasons in her post on Monday, but in many respects, what she describes are what many entrepreneurs wrestle with in an emerging but crowded market, where so much is learned in real-time. 

Like with many of the entrepreneurs I am fortunate enough to encounter, she and I have kept in touch, and when she stopped by my office a few weeks ago to tell me about her next startup idea, the subject of Trendi of course came up.  Jenny talked me through some of what she had learned, and how valuable the failure of Trendi had been for her personally (but not painless for her, for her employees, or for her investors). 

When we moved on to discussing her next startup idea, it was inspiring to see how much was informed by what she had learned through Trendi’s failure, how she had embraced what many would have tried to forget or move on from.  And so it seemed like she had a story to tell that the followers of this blog could relate to, find interesting, and hopefully find some meaning in too.

I hope you all enjoy it, look for her on Monday.

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Posted in Business planning, chicken killer, Failure, fear of not succeeding, fundraising, meaningful failure, Self-knowledge, Success, Values, Venture capital | Leave a Comment »

Google’s iPhone audio search – Newton redux?

March 11, 2009

Up in the attic of our home I have a small “Apple” museum, where I still keep the MacPlus I bought in 1987, the MacII si my wife and I bought in 1992, and most importantly, the Newton MessagePad 110 I bought in 1994.  For years and years, these just took up space, but this year they’ve come back to mind in interesting ways.

On the occasion of the Macintosh’s 25th anniversary, I brought the MacPlus downstairs and set it up.  I had splurged when I bought it, and got the external SCSI floppy drive.  The expression on my 14 year-old’s face was priceless when I turned it on, and he looked at that small screen and said “how did you ever get anything done on this thing?”.  When I explained there was no hard drive, and showed him the single floppy that contained Microsoft Excel, he looked at me as if I’d told him I did my homework as a kid on the back of a shovel with a piece of charcoal (as Abe Lincoln supposedly did).

But the Newton came to mind last weekend, when we were out at a restaurant with our kids along with three of my 15 year-old daughter’s friends.  Nine of us at a table in a bustling restaurant.  Boredom began to take over with the boys (outnumbered), so my 14 year-old son grabbed my iPhone, and downloaded the new Google app.  He discovered it contained “voice based search”, where you could speak a phrase into the phone, and Google would do the speech-to-text conversion, and provide search results.

Before long, this became quite a game.  The phone was passed around the table, and hilarity ensued when someone spoke one phrase, and Google came back with another.  Here are some examples I wrote down:

  • “Steyr A-U-G” (this is an Airsoft BB gun) = “cast iron tub”
  • “Martini, shaken not stirred” = “mikey ticketmaster”
  • “And if you need advice in PawPaw Michigan, there’s only one place to go” = “the wandering sons of anarchy, episode 13, full stream”

We thought that last one, ‘The wandering sons of anarchy” would make a great name for a band.  In defense of Google, the background noise in the restaurant probably didn’t help things.

But then I thought, I’d done the same thing in 1994 with my Newton.  We’d sit around in restaurants and pass it around, writing stuff on the screen and seeing what it came back with.  The tough part for Apple was that so were Gary Trudeau and Matt Groening.  The Newton was just ridiculed in Doonesbury and The Simpsons as a result, which was good sport, but unfortunate. 

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From Doonesbury http://www.doonesbury.com/strip/

All the rest of what made the Newton incredibly revolutionary got swept aside, and to a large degree pronounced a premature death sentence on the product line, and the whole category until Palm, and now the iPhone.

So, where are the comics ridiculing Google’s voice search for the iPhone?  A search on the following word salad “google audio search mistakes iphone” yielded a single reference to an article mocking its performance.  Revealing it not surprisingly struggles with accents, and illustrates how it does with various British/scotch/welsh accents speaking the word “iPhone.”  But then again, haven’t the British always been ahead of us in terms of humor?

It is notably ironic that it’s on another Apple handheld device that the limits of the human/machine interface are laid so bare.

But what has happened since 1994.  Have we all gotten more accepting of technology shortcomings?  Have we been just accepted being perpetual beta testers? 

Or are we just intimidated/enchanted with whatever it is that Google (or Apple for that matter) present to us? 

What do you think?

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Posted in Failure, Intellectual curiosity, meaningful failure, Success | 4 Comments »

Series-shifting, terms, and fallout

March 4, 2009

The good news in the startup landscape is that companies are getting funded, and the pace and quality of startup activity remains strong, especially here in Seattle.  This seems to be the case in the valley too. 

But the deals that are getting financed are generally “obvious” ones; series A deals where the founders have solid track records or later stage deals that have proven they can acquire customers and most importantly, monetize them.  The deals everyone would like to do. 

What about all the others? 

Well, they’re ruled by the bleak exit landscape for venture-backed companies.  Any investor looking at a good company now is doing a returns analysis using much lower exit valuations than they’d used six months ago.  The economics have to adjust downward to make the numbers (and the risk) workable.  Make no mistake, the obvious deals feel this “compression” effect too, perhaps the fundraising process moves more quickly for them.

The first “compression” effect I call “Series-shifting” – when a company that’s out raising its B round gets valued as if it were on its A.  Or a C round company gets valued as if it were raising a B round. 

Colley Godward reports median Series C valuations dropped almost 40% in 4Q08 compared with the prior 1Q08-3Q08 timeframe.  40% isn’t a bad approximation of the step-up in value you might expect from the Series B post-money valuation to the pre-money Series C valuation, based on the company’s progress in developing the business.  In today’s fundraising environment this means the market is assigning little to no economic value to that progress.  Ouch.

As an aside, this introduces some nuance into your fundraising.  The post on your last round is likely high relative to today’s market.  At an appropriate time, you need to signal that you know this and will be flexible on valuation without prematurely putting a “fire sale” sign up.  If you wait too long to signal, you’ll scare off investors who think you’re out of touch with today’s market.  There’s no rulebook for how to handle this, just experience and good judgment; the goal for both parties is to be fair and realistic, not to take advantage of either party.

There’s a second “compression” effect: terms are getting much more aggressive, reflecting today’s more conservative assumptions on returns and capital recovery.  While not painless to the entrepreneurs and early investors, liquidation preferences can be a way to let the valuation retain some “loft” while enabling the new investor to limit the downside if the outcome isn’t what everyone hoped for.  If everything goes as planned, everyone’s happy, if not, it’s the new investor who gets protected. Ouch again.

Don’t take it personally, it’s just math, not a case of predatory investors.  It’s the messy reconciliation of the business model of the startup and the business model of the investor.  If you choose your investors (or your investment) well, this is a juncture that can be navigated honestly and transparently, but perhaps not painlessly.

So now what?  How many businesses are going to be able to pass through filters that have such conservative assumptions or where new investors need such aggressive forms of protection?  The answer is, not a lot. 

As Andrew Chen also highlights, there are just too many Web2.0 businesses out there, and as with the Web1.0 bubble, a lot of these in hindsight are features of someone else’s platform, or have thin value propositions to begin with.  We’ve seen this before, and lots of companies just won’t get funded, or won’t raise their follow-on rounds.  In the medium term, a good thing for the industry, in the short term a lot of carnage will result.

Paul Holland of Foundation Capital says it well in a BusinessWeek interview “The most healthy thing for this industry would be a clearing out of people who don’t have the stomach for it.”  That applies to both sides of the table, companies and investors.

Healthy, yes.  Pretty?  No.

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Posted in Business planning, fundraising, Success, Venture capital | 1 Comment »

Finding the chicken killers – part two

March 2, 2009

I got a lot of positive feedback and comments on Finding the Chicken Killers, where I explained what the concept of a chicken-killer was but stopped short of providing an example of one.  Let me tell you about someone who was on my marketing team at Vivo.

[This is a longer post than usual; I hope you find it worth it!]

Ann-Marie was responsible for our online marketing, our website marketing, and our demos at Vivo.  She grew up in a large Italian-American family outside Boston; while she was polite and well spoken, she had a nice independent streak.

The situation was this.  We were now 18 months into the turn-around of the company, marketing our internet video product VivoActive.  We’d become the market leader, but internet video was still small compared to internet audio, and RealNetworks was the big gorilla out there.  Oh, and Microsoft was trying to muscle into the market; they’d recently licensed Real’s product and were giving it away for free (but not really marketing it).  How’s that for being neighborly?

We’d aligned ourselves with Microsoft and could create internet video in their format.  VivoActive together with Microsoft’s server made a complete solution, and we had their marketing and sales teams promoting it to their customers. The plan of course was to get Microsoft to buy us.

The bad news was we were running out of cash (we had about six months left), and we needed to sell the company – remember, we were on a Series D financing.  There was no appetite for a Series E.

So, the CEO, my BusDev director, and I got on a plane and went to Redmond to try and move/force the conversation along, but all we got was a tepid commitment to consider an investment.

We came back from that meeting frustrated and depressed.  The three of us were in our conference room, trying to figure out what to do.  It was almost as if a literal light bulb went off when one of us said “Companies buy their enemies to take them off the market… who are we an enemy of?”

RealNetworks.

Holy cow.  RealNetworks.  Were so aligned with Microsoft; we could be a big threat to RealNetworks.  We had at best an arms-length relationship with them (meaning relations were generally frosty).  How could we get them to feel threatened, really threatened, very quickly?

So, I suggested “What if we let all the RealNetworks customers know they could replace the server they bought from Real with the free one from Microsoft?  All they’d need to do is pay us $500 for VivoActive.”  Hmmm… replace your $50,000 RealServer with a $500 alternative.  That sounded workable.

But how to pull this off?  We needed to quickly find out who was using RealServers and then somehow contact enough of them to make this a credible threat.  I got my team together, and Ann-Marie was the first one to come up with an idea.  “We can use Wired’s HotBot search engine to find web pages with the .ram file the RealServer embeds on pages with the media file, and then find out who the company is that owns those pages.  We can look up who the exec team is at the company and send an email offer to them.”  Great idea, but a lot of work.  She agreed to take the lead on pulling this all together.

Working backward from our cash-out date, we’d need to get this done within the next few weeks.  Otherwise, we’d run out of money in the middle of the negotiations.

Ann-Marie showed up at the next war-room meeting and said she’d gone through the process a few times; it was working, but it was going real slowly.  I suggested she have our receptionist, Amy, help her out.  Away she went.

The next day Ann-Marie came back, deflated.  She and Amy had only been able to build a database of about 50 customers.  This was going to take too long.  More brainstorming.  Ann-Marie offered to see if some of the developers could be pulled off their projects to lend a hand.

The next day everyone was looking haggard and tired.  Ann-Marie showed up, looking worse than any of us. “I was up most of last night.  I realized we’re never going to get this done on time, even with the developers.”

What?

Then she said “But I realized we could do this differently.  I wrote an automated script that queried HotBot and wrote the results into a log file, and then I wrote a script to filter out the domain name of the page where the content was hosted.  I wrote another script to take that domain and query the “whois” database, and found out who the system administrator of the site was, and then put the email address and wrote it into another log file.”  The system administrator was a long way from the guy who paid for the RealServer, but it was close enough.

“It’s working really well; I’m up to about 700 names so far, and should be up to about 2,000 by tomorrow.”

Around the table, jaws were bouncing off the floor.  Ann-Marie hadn’t just killed the chicken, she’d plucked it, dressed it, and had it in the oven, roasting.

We got cracking. It was like a commando movie.  We quickly established a launch date for the emails.  Everyone had their task and took off.  I finished off the copy and reviewed the design of the email.  My busdev director made 1000% certain we had the license agreement in place.

Two days later, we were ready to go.  We briefed the CEO and the rest of the exec team on the plan.  Ann-Marie wrote a script (her new core competency) to send the emails out at midnight.

The next morning we came in, eager to see the results.  By mid-morning we had lots and lots of irate emails from system administrators and, as a result of the system administrators forwarding them, a good portion of similar emails from business execs at companies who were loyal to Real.  Irate was good.  Especially when many of the forwarded emails also copied the account manager at Real or even Rob Glaser, Real’s hyper competive CEO.

Lots of tension; everyone ate their lunches at their desks.  A little after 1pm, our CEO came walking down the hallway, a huge, huge grin on his face.

“Rob Glaser just called.  They want to talk about buying us.  I’m heading out to Seattle, tonight.”

I kid you not, it unfolded that cleanly.  A little over twelve hours after sending those emails.

By the time the acquisition was complete, our CEO was neck deep in chickens, killed.  But Ann-Marie was the one who so matter-of-factly and so fearlessly got that first chicken out of the way, and made it all possible.

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Posted in Business planning, chicken killer, Failure, fear of not succeeding, meaningful failure, Success, Venture capital | Leave a Comment »

Ask, Tell, Help

February 18, 2009

How often do you encounter a a situation at work where your personal values inform how to solve a difficult/ambiguous situation?

In 1998 I had just joined RealNetworks, and was running the RealSystem G2 launch; it was quite an adjustment professionally.  Real had just acquired Vivo Software where I had been the VP of Marketing, and I now had a much bigger job, with much bigger company ambitions.  G2 was Real’s next generation internet media platform, and was intended to become essentially a multimedia operating system for the web.  We never spoke those ambitions publicly, but they were very, very much the ambitions.

We had the upper hand on the internet a/v market.  Microsoft’s Windows Media Technology (WMT) platform was embryonic and poorly integrated across their vast product/platform landscape.  We routinely pushed the Windows Media guys around like how the New England Patriots pushed their opponents around.

But these were the conditions that provoke a response from Microsoft, and I remember the day we learned that Will Poole had been moved to Windows Media from Internet Explorer 4 – the understanding being the “A” team was now on WMT, the same team that had just crushed Netscape. (The Patriots analogy is eerily relevant here – I’ll save that for another post).

Two years earlier we had licensed RealSystem4.0 to Microsoft, and their players could play back our content up to version 4.0, but not our newest G2 content.  This was intentional and was common practice back then – a way to “provoke” upgrades.  We’d get our broadcast customers to produce audio and video in our newest version, and everyone would need to get the new RealPlayer to access the new content – our players were explicit and helpful about how to do this.

Microsoft saw an opportunity.  They made the Windows Media Player automatically become the default player on someone’s computer for our 4.0 content without telling them, and when it got to our G2 content it stopped and produced an error message.  Microsoft made sure the error message was cryptic (a core competency, apparently), implying there was something wrong with Real’s product, and that was it.  End of the road.

This caused a furor for us and our customers.  Competitive technology geopolitics at Cuban Missile Crisis levels.

So, I got called into a meeting with all the senior execs at Real to sort out what to do.  Our president (at the time) has an incredibly insightful mind, and summarized the problem as if he were explaining it to a child.  “Look, during installation you should ask the user if you can play other media types, then you should tell the user if you encounters one you can’t play, then you should help the user locate a player that can.  Pretty simple stuff.

But he wasn’t talking about a solution to this geopolitical skirmish, he was talking about his values, and applied them to a situation at work.  It was so simple; you ask for something before taking it, you tell people if you have a problem, and you help people.

So, I got tasked with spearheading the Ask, Tell, Help initiative, and spent the next six months rounding up industry support for this, eventually causing Microsoft to sign on.  The legacy is visible today to anyone installing iTunes, Rhapsody, or Windows Media – the application asks you for what media types you would like it to be the default.

I think about Ask, Tell, Help pretty frequently.  It reminds me that my values are my values regardless of whether at work or home, regardless of how charged or ambiguous the situation is.  And keeping clarity about those, and a tight grip on them, enables successful navigation of difficult circumstances.

Don’t you think, or rather don’t you desperately hope, that the folks who had a hand in the mortgage/banking crisis would have made different decisions if they’d have applied their personal values to the ambiguous and charged landscape of credit default swaps?

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Posted in Business planning, Empathy, Intellectual curiosity, Self-knowledge, Success, Values | 3 Comments »

Anticipation and resiliency

February 3, 2009

Big and unexpected changes are frequently less “unexpected” than we would like to admit sometimes, whether they occur in our personal lives or in our professional lives.  Sure, there are true shocks whose probability of occurring are so slim that they’re hard to anticipate, but much more often, the times when you have to confront an unpleasant change is something you knew was coming.

Henry Blodgett wrote a sober and ego-free article about why market bubbles happen, and will continue to happen.  A key point he makes is that bubbles happen naturally, for factors that in the long run will never be fully predicted or avoided, even though they may be anticipated.   He quotes investor Jeremy Grantham who sums it up well.  “We will learn an enormous amount in a very short time, quite a bit in the medium term, and absolutely nothing in the long term.”  The anticipation referred to here is anticipation of a bubble bursting, and the fear of the loss that will result. 

I love Henry Blodgett 2.0 (his role Merrill Lynch analyst was version 1.0).  He’s honest and humble, in a “serious scar tissue” kind of way.  I found his article refreshing because he was so direct about knowing the housing bubble was there, but that awareness provoked only a messy and clumsy understanding about what he should personally do about it that was best made sense of only with hindsight.  But by anticipating it he was able to see beyond the here and now, to the more pleasant and hopeful medium term, regardless of his near term decision making or consequences.

Early in 2008 we were advising our companies to expect a very hostile fundraising and operating environment in the second half of the year.  All we knew was something bad was coming, didn’t know the magnitude of the shock or the timing, just that it was coming.  What did we do differently?  Well, a lot, and nothing. 

Our companies applied a lot of scrutiny on expenses and revenue, for sure.  But they also continued to sell aggressively and keep product development schedules tight. 

So when October happened?  That was beyond bleak, but the companies in our portfolio methodically revised 2009 plans, optimized around a different set of variables (cash conservation, getting to profitability), and they addressed the very unpleasant tasks of expense and headcount reductions.  The entrepreneurs I was meeting with who were incubating new companies or raising money? They had a tough time of it, but by November, they were back, also with revised plans, showing how they could envision success even with so much less of everything to count on in their plans and assumptions.

Anticipation of an unpleasant outcome didn’t inhibit the responses of those of us in the startup community, anticipation enhanced the response.  It helped sharpen the focus more firmly on the fear of not succeeding, and fostered the resiliency we all need so very badly now, and enabled us to see beyond the near term. 

Over the holidays I confronted an earth-shattering shift in my personal life, and an unpleasant one I’d anticipated for many months.  What did I do?  Well, I focused myself on how to work through this, and to understand that the medium and long term are where to apply my focus.  Did the anticipation affect me or my response?  I think it did, I think it helped me move more quickly to focus on where success could be found beyond the near term. 

I find life in the world of startups fascinating and inspiring, where productively making use of anticipating an unpleasant outcome, having it serve as a means to provoke adaptability, provide a “stretchiness” to your thinking and ability to respond all comes so naturally.  We’re in a world where resiliency will matter a lot, and where for the foreseeable future there will be much to anticipate, a lot of it unpleasant.  But in the medium term there is much inspiration and excitement to be found, and resilience will help speed us from here to there.

[the holidays and ensuring rapid start to the year took me off line, blog-wise, so I am glad to get this first post off for the year, and look forward to resuming the active pace of November and December.  Thanks to all of you for your patience!].

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Posted in Business planning, Failure, fear of not succeeding, Intellectual curiosity, meaningful failure, Success | 1 Comment »

Shaping your sense of giving

December 18, 2008

Where does our sense of giving come from? How is the act of giving shaped and sized?

One of my family’s holiday traditions is an open house we put on in the second or third week of December. It’s an opportunity to bring our family’s “community” together; all walks of life, people who normally might not run into each other. This followed us from Boston to Seattle, and when we moved to the small town in the Midwest we live in, it found a home here too.

With a backdrop of a worldwide financial crisis and looming hardship in the New Year we asked ourselves “what would be appropriate this year?”. So, my wife rolled up the expenses for last year’s holiday activities and we called a family meeting to talk this through. As we walked through the numbers we saw our party accounted for 20% of the holiday budget last year.

It was gratifying to see our children balance what they knew was happening in the economy with their own fondness for the party. Our fourteen year old son was the first to verbalize what they all seemed to be thinking: “Let’s not have the party and donate the money to the food pantry”. There was a lot of back and forth, but that’s essentially where everyone ended up.

So, instead of sending out an invitation, my wife created an “Un-Invite” in the same invitation format as in years past. It told people we wouldn’t be holding our holiday party this year due to the hardship many are or would be facing and we’d be donating to the food pantry instead. We put instructions on the back letting folks know that they could drop off their own donations with us and we’d deliver these to the food pantry as well.

We got interesting responses. The people at the upper end of the income brackets seemed to hear “You can’t afford to put the party on this year” – and told us so either outright or indirectly. The people on the lower end of the income bracket seemed to hear “You’re focusing on the needs of others” and mailed us checks or dropped off food. Those who gave generally have little to begin with – but found a way to mail $10 or $20.

This range of responses shocked us.

I did some digging and it looks like this is more the norm than not. A paper on charitable giving in America written for Google’s philanthropic foundation makes some interesting observations:

  • “Average” income folks (<$100K) are generally the greatest dollar givers or the most active givers as a percentage of the population, representing 36% of total giving.
  • “Above Average” income folks ($100K – $200K) are the least giving and least active givers than any other income group, representing 8% of total giving.
  • “Average” income folks contribute 49% of the giving to meet basic needs of the poor, while “Above Average” folks contribute 13% of the total. “Wealthy” folks ($200K – $1 million) contributed 28% of the total given.

How does one’s giving “call to action” get shaped and sized? Do some people see a need and respond with an action shaped by the nature of the need? Or do some people see a need and shape their response by their own circumstances (budget, social status,…)?

Why is it that folks closest to feeling the needs of the poor found it easiest to hear the rationale for canceling our party? Is it as simple as realizing they could be there too if circumstances changed? Are folks on the next rung up on the ladder more cognizant of the distance they’ve created? Is that why the focus shifted to “affording a party or not” – which is really a social status issue that has little to do with the needs of the poor.

If it was gratifying to see how our children realized we should cancel our party this year. It’s been equally gratifying to see them ask these questions with us – none of us know the answer.

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Posted in Empathy, Intellectual curiosity, Self-knowledge, Success | 1 Comment »

Why the numbers in your operating plan are wrong

December 9, 2008

Startup companies begin life with operating plans – the spreadsheets that outline how revenue will be generated and expenses will be allocated. But in the end it’s all a very well calculated guess. So much is unknown.

A phrase I use a lot when I meet with startup companies is “the only thing we know for certain about your plan is that the numbers in it are wrong”.   It’s a disarming statement, it generally sets everyone at ease.  How could you possibly know what your revenue will be in month 33, when you haven’t even shipped your first product?

And it’s true, in a good way. It’s not the values in the cells that are important, but the set of assumptions and principles that underpin the numbers in the cells that are. I mentioned this in my first post. It sounds and is obvious.

Why bother with the plan? Some CEOs I meet take this path, and use their operating plan as a “check off the box” deliverable on the way to getting funded. But if you go there I think you blow right by critical insight about your business. You need that plan, even when you are far off it, to help you understand which assumptions are still valid, and which may need to change.

An example of an assumptions is “we’ll have larger companies distribute our product for us, and each company will deliver 50,000 end users to us”. That’s important to remember, especially if after six months, they’re only delivering 5,000 users.  It’s even more important to understand if this is just a factor of how long it takes to ramp demand (in which case that assumption needs scrutiny) or of it’s because that’s all the demand these companies can produce for you (ditto).

Your plan is a tool that has a limited useful life, at some point your business (and assumptions) change so much you need to pull out (or rather create) a new one. The right tool, for the right circumstances matters, a lot.

If the right tool is critical, the right mindset produces it. Successfully running a startup requires a resilient open mind and cultivating a sense of intellectually curiosity. You need to want to understand the “why” and “how” the numbers in the cells fail to match reality.

So, examining the failure of your plan, and finding the meaning in the failure, enables you to construct new, more valid assumptions, so you can discard the old plan and create a new one. This can be harder than you think, the plan you have now is was slaved over, polished, and is so “done”. But this new plan has a clearly defined lineage connecting it to the old one, and is the new “right tool” for your business.

Missing your plan is different. Plan “failure” is fundamentally different from missing your plan. Missing your plan comes from poor execution, poor discipline and poor vigilance about understanding why you’re not performing to your plan.  It’s still failure, but failure where no meaning has been examined or made use of.  It’s where you end up using the wrong tool, and not understanding, or even knowing, why you need a new one.

Missing your plan is like trying real hard to use that shovel that worked so well to dig the foundation of a house you’re building to hammer the nails into the framing. Sure it might work, for a while, but over time it’s just not going to do the job you need done. Missing your plan is insisting that you just hit the nails harder and faster with the shovel, and not realizing you hold the wrong tool to begin with.

This is why one of my partners coined the phrase “teams that miss plans generally continue to miss plans”. It’s because they don’t realize its their tool that’s wrong, not their intentions or efforts.

The best CEOs I work with are wonderfully disciplined about creating and appropriately discarding their plans. They measure their performance relative to their plan, and they’re vigilant about clearly delineating the key assumptions supporting the plan. When they’ve measured enough to know the assumptions are no longer valid, they revise their plan, and gladly leave that old plan behind. It becomes all about their new plan, and new tool.

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Posted in Business planning, Failure, Intellectual curiosity, meaningful failure, Success | 7 Comments »

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