Hungry Yet Humble

What is your company's reason for being?  What are you about?

Steve Jobs answers this question better than anyone I've ever seen in this video circa 1997, wherein he introduces the "Think Different" campaign.

Pure badass:

CEO's really do need to translate Vision into Context, so that a team can achieve Alignment.

See how great Steve is at providing background and Context for his Vision.  Wouldn't you be pumped if you were on his team?

NOTE: I first saw this video via the NY Times

My mentor, the one and only Prof. Ed Roberts from MIT is being profiled for Entrepreneur magazine.  I was interviewed to provide some color in terms of how much of an impact he's made in my life and in the life of Visible Measures.  

Ed has mentored, invested in, co-founded, or run more than 50 companies, and he is known by people at MIT as one of the true "godfathers" of entrepreneurship.  He has literally written the books on the subject, co-founded the MIT Entrepreneurship Center, and has been doing his thing since the late 1960's.  He is the man!!!

Today, we did a photoshoot for the magazine in the new MIT Sloan School of Management building.  It is beautiful!!  Go Sloan!  

It was so great to see Ed walking around this building that he helped to create.  

   

Click here to download:

checking-out-the-new-mit-sloan-building-at-100-main-st-wCtCJrlzEHwbeghproEm.zip (1048 KB)

some of the crew - what a good looking group, no??  

   

Click here to download:

visible-measures-corp-team-members-vmcers-at-dim-sum-in-boston-fBpcqlAijitqpfBFbbBD.zip (178 KB)

Feel so lucky to be able to work and hang out with folks like these!

I read this blog post on my friend's startup called Yana.

In it, the author talks about his thoughts on how to really push himself running.

One section is entitled "Never save anything for the swim back" - it talks about how in the movie Gattaca, Ethan Hawk's character is able to beat his genetically-superior brother at a race.  His brother asks him, "How are you doing this?" to which Ethan's character replies, "I never saved anything for the swim back." 

Watching the clip on YouTube sorta gives me chills. To me, this statement is the embodiment of what it takes to be a startup entrepreneur.

The other day, I had the pleasure of moderating a panel on raising capital for a mobile startup, hosted by MITX and The Capital Network at the Microsoft Cambridge research facility.

The panel was great and the audience asked a ton of questions. I was glad to have participated. I tried to follow Guy Kawasaki's advice on how to moderate a panel and I think it went well.

A big bonus from attending the event was to see the new MIT Sloan building from a new vantage point.

Here is a pic of it from Microsoft's offices at One Memorial Drive. Awesome view and the new building is huge! It will be so cool to see it once it's done.

Combined with the new MIT Media Lab building down the road, this new facility will anchor the next generation of the East campus of MIT.

 Entrepreneurship is alive and well in Cambridge and Boston!

Most of you who have seen this person in action would probably agree that Michael Scott, Regional Manager of Dunder Mifflin, Scranton, is one of the top business minds of our generation.  But you might not immediately think of him as one who embodies many of the traits of successful entrepreneurship.  I am writing to show you that at least to me, he is a fantastic entrepreneur role model.

Here are the top 5 Entrepreneurial Lessons that I have learned from Michael Scott:

• Love your customers – there is an old saying about business: “Love your customers, not your customers’ money.”  Michael Scott shows a consistent focus on his customers over the years.  For example, he routinely remembers small details about his customers’ personal lives eg. a daughter’s allergy or a story about a fish that a client caught.  If you look at the success that great customer-centric companies such as Zappos have had, much of it can be traced back to their obsession on customer satisfaction.  In fact, the company that recently acquired Zappos, Amazon, has long had as their key company mantra, “To be the best customer service company in the world.”  That just gives me chills :)

• Love your employees – Michael Scott sincerely loves his team.  With respect to team building in a startup, there are tons of schools of thought ranging from “if they don’t hit their numbers, shoot ‘em!” to “this is a family and we’re in it together forever”.  There are certainly tough decisions to be made along the way as a company grows and evolves, and making changes is hard.  But keeping employees best interests at the center of your evolution as much as possible will help keep the culture and the vibe right. Just ask Michael Scott.
  

• Love your company – how many of us love our companies as much as Michael Scott?  The guy is a frickin zealot for Dunder Mifflin!  When he served as a guest lecturer at evil Ryan’s business school class, he left the room after saying in response to a doubter of Dunder Mifflin’s viability, “Dunder Mifflin is the future!”  His passion and loyalty to Dunder Mifflin is something to sincerely admire.

• Have a sense of humor – If Michael Scott were not regional manager, he would most likely have had a successful career in standup comedy.  The guy is a comedic genius.  From his use of the words “nebulos” and “prodigal” to him saying that he wants to donate hospital wings someday and be known as a great “philanderer”, Michael shows us that it is critical to not take things too seriously (or to study too hard in school).  I don’t know of an environment that is more cause for roller coasters of emotion than the startup world.  Humor can help take the edge off and Michael certainly tries to keep it light.

And last but not least, especially since in a startup, an entrepreneur (in my opinion) has in fact many bosses, ranging from your board members to your investors to your customers to your team members, the most important lesson that I have learned from Michael Scott is:

•   Don’t sleep with your boss
  

See, Michael Scott is a fantastic entrepreneurial mentor.  This goes to show that you can learn something from anyone and from any situation :)

The other day, I saw this 60 Minutes piece on the potentially world-changing work of Sirtris Pharmaceuticals.  Sirtris is developing compounds that attempt to prevent and even possibly treat various diseases of aging, including diabetes, Alzheimer's, and cancer.  There were acquired by Glaxo Smith Kline in 2008 for $720 mm.  I was fortunate to have played a very small role at this company during the early days, and I wanted to write a bit about it, because it is such a great example of entrepreneurial success.

As I was thinking of writing this post, I was sitting in my hotel room at the Nantucket Conference, a gathering of a small group of entrepreneurs, venture capitalists, and industry professionals, all united by the process of value creation.  Of course it took me a couple extra days to actually get these thoughts down, but here goes.

One of the observations that struck me during my time at this conference is the unique vibe between entrepreneurs and their oft-sought-after investors, the venture capitalists.  For example, there were a few panels that got a little heated when the topic of "common share holder value preservation" came up. 

As with any relationship between groups of people, each is unique.  But at its most general, the dynamic between entrepreneurs and venture capitals can be described in my opinion by one word: imbalance.

What do I mean by "imbalance"?

In general, the relationship going in isn't equally weighted.  Why?

1) Venture capitalists go into to deals with their Eyes Wide Open.  They have likely studied the space and other companies in the space.  They've backed companies before.  Venture capitalists look at more deals in a month than a typical entrepreneur will work on in a lifetime. 

2) It can take an experienced venture capitalist a few minutes to do a first-pass evaluation of a deal (based on team, market, idea, timing, overall opportunity) and get a sense for next steps, but it takes an entrepreneurial team years to build products, hire and shape a company, devise a strategy, and create real sustainable value. 

3) Venture capitalists become EXPERT at evaluating deals.  Few entrepreneurs are "expert" at raising money.

4) Venture capitalists are experts at negotiating venture financing deals.  They've seen many different types of deal structures and have experience with what works and what doesn't work.  Entrepreneurs have some experience and if they are lucky they have a sense of what they'd like to see happen.

5) Deals typically have "down-side risk protection" built in to protect the investors' downside in case things don't go well.  Entrepreneurs' only downside protection is the fact that it's usually not all their money at risk :)

6) The venture capitalist will likely join your board.  The board's main responsibility will be to fire/hire the CEO.  If this position is currently held by you, recognize what you are getting yourself into.


So what can you as an entrepreneur do to get the relationship to point where there is more balance?


1) Go in with the proper expectations.  You are asking someone else to put up the money for you to pursue your dream.  That money isn't free and it's not an obligation that you take it; it's a privilege (as long as you choose the right partner).

2) Build the onion.  Get the best advisors to advise you and help you figure things out.

3) Get initial support and be in a strong position to demonstrate progress.  Early angel investors can be great for giving you some headroom while you are prototyping or getting initial customer traction.  More traction = more leverage = more interest in your deal = more competition for your deal (even in this environment, some deals are getting done) = better deal for your company.

4) Realize that if things go well, everyone will (hopefully) be happy, but if things go badly, everyone will lose out.

5) Understand venture capital deal terms and focus on the totality of the deal, not just the valuation (preference, participation, drag along, board voting, board composition, option pool, etc).

6) Have a great lawyer + advisors who can review all your term sheets and deal terms.

7) If possible, be personal friends with a venture capitalist (who you will never pitch for money) so you can ask for inside tips on the process and on deals etc.

8) Consider yourself fortunate to be in the position you're in, and know that the VC's who back you will be lucky to have backed you!

9) Be high-integrity and sincere always.  Depending on which type of entrepreneur you are, you'll likely be seeing these folks again and again. You'll probably have multiple chances at bat.  Entrepreneurs everywhere will be rooting for you!


Not sure if this is helpful, but the imbalance in the relationship between entrepreneur and VC is real.  If you can go in with your Eyes (not) Wide Shut, you'll have a better shot at having a good outcome.


- brian

I was speaking with an old friend the other night about his attempts to get a startup off the ground in what I would gently term as a "cataclysmic" economic environment.  It's been tough for him, as it's been tough for so many of my friends and so many others out there.  I figured that I would write something up and share it to see if it might be helpful for others trying to get things going during this tough time.

As for why I refer to the current climate as "cataclysmic", I would point to the key word of the times: FEAR.  Everyone is afraid of what they don't know, what could happen next, what happened already, what news has come to light, what news has yet to surface, which jobs might get hit next, or worse, which other industries will dramatically change.  People are frozen when it comes to combining FEAR with Money and Decisions.  Investors, angels or institutional, are hesitant to make risky bets in this kind of market. This climate of course causes issues considering that essentially all startups are risky bets (though with potentially outsize returns) in any market.

Why start something now?

This topic deserves its own post, but people are striving to start companies now because of one of several reasons, depending on which Class of Entrepreneur they are seeking to be.  People might see opportunities created by this unique and difficult period in time, or they may recognize a new problem that just has to get solved.  Others are just trying to figure out a way to make money so they can be more independent.  In times like these, sometimes you have to Survive before you can Thrive.

My friend's startup dilemma

This friend of mine is a great guy. He is a brilliant thinker, problem solver and engineer.  I always have thought of him as a bit of a "programmer philosopher".  He has started several very interesting projects and is currently working on several new ones.

As he and I got to talking, I could tell that he was a bit frustrated by how hard it it's been to get any of his projects funded.  Some people have a talent for fundraising.  They can convince people of a vision for a new market or a new tomorrow.  Unfortuantely, my friend is not an expert fundraiser.  He is a fighter though, which is great, and he's already come farther than a lot of people would have come given the circumstances.

 

My friend the fighter

As an example of the 'fight' in him, he had been working for years on a project that had a very grand vision.  He had been banging away on it off hours, weekends, and whatever time he could find.  But after years of hard work, the project hadn't taken off and he was stuck in a bit of rut.  Instead of throwing in the towel, he decided that he needed a change of scenery and a fresh start.  He picked up and moved from Boston to San Francisco.  

We can debate the relative strengths or differences between the Bay Area and The Boston Area for starting companies :) but that aside, I was super impressed that he just picked up and went.  He found renewed energy, met a bunch of new people, and had a chance to explore a new city.  A change was exactly what he needed (in my opinion). 

 

Struggling to raise funding

So he's in this new environment and he's meeting all these new people.  He has been working on all these new ideas, and as I was saying before digressing, he shared some of them with me.  I listened to his description of his ideas and I took a look at some of his presentation materials.  What he had to say was quite interesting and I think he could be on to something with some of the stuff.  As we were talking though, he was expressing some frustration about the fundraising process.  I could tell that it's been tough on him.  He said, "It's the classic chicken and egg problem.  We can do so much if we just had the funding.  But we need to show progress to get funding."  He is essentially working on 4 concepts and was hoping to raise enough funding to try a bit of each to see which one got the most traction.

There is only Chicken 

I completely sympathize with my friend's situation.  It's so hard to try to play the movie forward to try to predict what will happen with your various startup ideas.  And, it can be very frustrating to try to raise funding.  Fundraising for a startup is a little like prepping and hosting a big dinner party for a bunch of guests.  You put a lot of time into it and you try to figure out what people might want to eat or if there are any dietary restriction.  Then when the big day comes, many of the guests do not show up!  And the guests that do come often complain about the food :) 

 

When you have been deep in the analysis and planning around your startup for weeks/months/years, it's incredibly painful to have people poke holes at it after hearing about it for just a few minutes.  But it's critical to try to detach yourself from the situation and try to write down the key themes of the concerns.  Often times there might be a few gems to think through.

As I listened to my friend explain to me his ideas, I felt that it was critical to lay it on him straight.  I told him that though it may feel like a Chicken and Egg situation to him with respect to fundraising, it's really not.  Not in this kind of cataclysmic environment.  There is ONLY the Chicken.  Why?  Because in order to attract interest from investors in this kind of environment, you have to be able to demonstrate progress of some sort:

- Your idea has to be thought out

- You have to have spoken with some prospective (or better yet current) customers

- You have to have a prototype (or better yet, Beta Users)

It's all about Building the Onion, and in order to attract funding, the pre-funding onion has to be a lot more built out than before.

So what can he do?

If you are like my friend and are faced with the reality that it may be very difficult to raise outside capital (other than from close friends and family) in the current economic environment, you may have to make some tough decisions.  In the case of my friend, I suggested that he narrow down his efforts to focus on the best ideas (ideally, 1) behind which he can apply more muscle.  I tried to walk with my friend through the ideas he's working on to look for a few critical screens:

1) Which idea has a big potential market?

2) Which proposed solution could attack a clear and straightforward SINGLE problem?

3) Which concept can I get off the ground in Phase 1 with relatively little money?

4) Which one has had the best reaction from potential customers or people knowledgeable about the industry?

5) Which is most timely and is attachable to big moving trends in the market?

6) Which project has the most chance to be a Chicken and not just a shiny egg?

 

Can he scrape by?

I personally think that if my friend could scrap for a little longer and focus totally on one of his ideas that passes most of the above screens, he could demonstrate enough progress and learn enough about the market to be able to raise money in a few months.  It's tough to have to give this type of advice, and I know firsthand how hard it is to live with the uncertainty of a future without a safety net of a salary and healthcare.  For the most part, people who have been able to take a chance and start something have had a few things in common:

- Incredibly low personal burn rate

- Supportive family or a partner/spouse with a steady job and healthcare

- If you're lucky, at least 1 year of savings to live off of while you're trying to work on your idea

- Insatiable drive to succeed

 

My friend has a low burn rate and he's got the drive, but he is hurting for money.  I suggested that he accept a job offer that he has to work at a finance company while he hacks at night. 

 

This may sound like a cop-out, but when you are dealing with real people and real lives, it's so hard to give the kind of advice that some of the big guys have given.  To paraphrase these big guys, "Grow some cojones, and go for it".  In this case, my friend has been going for it for years now and he's been struggling.

 

All I can tell him is 1) be smart about where he's focusing his energy 2) lower his expectations about fundraising 3) build something 4) learn from the market/users 5) demonstrate some progress 6) hang in there

 

I wish that I had something more inspiring to say to him, but in this case, as I've said, There is only chicken.  Fortunately, despite this environment, I think that he's the kind of person who can get something really interesting hatched.